5 Questions You Should Ask About Social Security

A small church near where we live posted the following on their roadside marquee awhile back: “Jesus: The Only Social Security You Can Depend On.”

At the risk of being accused of blasphemy, I really question that claim — not on its religious merits (I wouldn’t dare get into that), but rather with the oft-heard complaint that our federal Social Security system is going to disappear faster than a football fan after a Sunday church service during the playoffs.

And it’s not just the church down the road that’s confused on that issue: A 2010 Gallup Poll found that six in 10 Americans who are not currently retired are convinced that by the time they do stop working, Social Security will be unable to pay them any benefits.

While our current Social Security system faces some financial challenges going forward, it’s important for everyone — regardless of age — to understand what they can and can’t expect from Social Security when planning for their retirement. Here are the key questions you need to ask and the answers you need to know.

Related: 26 Unsettling Truths About Social Security

1. How Secure Is Social Security?

Despite all of the dire political rhetoric, the Social Security system is sick, but far from terminally ill. At its current pace, the Social Security Administration predicts its trust funds will run out by the 2030s, at which point the benefits that are paid out will be cut by about a quarter.

That’s not good news, but keep in mind: The worst-case scenario is that future Social Security benefits may be reduced by about 25 percent — not eliminated entirely. Current tax revenues paid into the system are projected to be sufficient to fund reduced benefits at that level on an ongoing basis, even if the Social Security trust funds (i.e., big bank accounts generated from excess tax revenues since the mid-1980s) are exhausted.

And there are no shortage of viable, semi-painless plans to “fix” the system in order to avoid even that rollback in benefits, which is part of the reason politicians seem to be having such a hard time agreeing on one. In the end, that fix is likely going to involve some policy changes, both on the expense side (e.g., adjustments to the annual cost-of-living increase in Social Security benefits) and the revenue side (e.g., raising or even eliminating the cap on wages that are not subject to Social Security tax).

2. Can I Retire Comfortably on Social Security Alone?

It’s important to realize that the Social Security system was never intended to be the sole source of income for retirees. In fact, the system is designed to replace only about 30 to 40 percent of most people’s pre-retirement income. So, unless you’re a cheapskate like me and living on only 30 to 40 percent of what you currently earn, making ends meet on Social Security alone once you’re retired is going to be difficult.

Regrettably though, according to the Center on Budget and Policy Priorities, 65 percent of older Social Security beneficiaries receive the majority of their income from Social Security benefits; more than a third receive upwards of 90 percent from it.

So, the prudent plan is develop other sources of income to supplement your Social Security benefits during retirement, including individual retirement savings, employer pensions, and the possibility of continuing to work part-time or start a small income-generating venture of your own once you’re retired. The “cheapskate model” for retirement planning is to reduce your “essential costs” (e.g., food, housing, insurance, etc.) to the point where your monthly Social Security benefits will pretty much cover them, and then rely on other, more variable, sources of retirement income for discretionary spending.

3. At What Age Should I Begin Collecting Social Security?

That’s the question on a lot of people’s minds, and there’s no one “right answer” to it that applies to everyone. Knowing the correct answer would largely depend on knowing exactly how long you’re going to live. The conventional wisdom is to hold off as long as possible before you start collecting Social Security benefits, since the amount of those benefits increases if you start withdrawing them later (up until the age of 70, under current policies) rather than earlier. If you’re healthy and can afford to wait, a number of studies have shown that, statistically, you’re more likely to come out ahead — in terms of total lifetime payout — by waiting to withdraw Social Security benefits.

For example, if you start claiming benefits at age 62 (currently the earliest age one can claim benefits) at, say, $1,000 per month, that will increase to about $1,333 per month if you wait until you’re age 65, and to about $1,750 per month — a whopping 75 percent increase — if you wait until the maximum age of 70. But again, it all depends on your individual situation. My wife turned 62 earlier this year (don’t worry, she’s rightfully proud of her age), and because she wants to continue to work part-time and we’re in a position to invest rather than spend her Social Security benefits, it made sense for her to start withdrawing Social Security now.

Related: 28 Retirement Mistakes People Make

4. How Can Stretch My Social Security Checks?

Giving advice on getting the most bang for your Social Security bucks has become almost a sport among many retirees, something I call “Social Security Stretcher’s Syndrome.” Beyond penny-pinching tactics like scoring senior discounts and clipping coupons, some of the most effective ways to really maximize and leverage Social Security benefits include:

• Retiring debt free, including a paid-in-full home mortgage
• Working to maintain good health
• Having a spouse — or housemate — who also receives benefits
• Living in a state that doesn’t tax Social Security benefits (there are currently 36 such states) and a locale with a lower cost-of-living (see the Bureau of Labor Statistics website)
• Working part-time or starting a small business of your own once retired

On that last point, under current policies you can earn about $15,000 per year while withdrawing Social Security without experiencing any reduction in benefits.

Related: 9 Ways to Deal With Debt in Retirement

5. Where Can I Find Out More About Social Security and My Benefits?

The website of the Social Security Administration is incredibly robust and user-friendly (read: “especially for a government website”). It offers both a wealth of general information on Social Security and how it works, as well as specific information on your Social Security account and projected benefits. Start at http://ift.tt/1JWnETd for an overview of the information and resources available on the Social Security Administration website, and then check out http://ift.tt/Tkm9Zp for a calculator tool that allows you to enter a few personal facts and your Social Security number to get projections of your benefits based on different retirement ages.

When it came time for my wife to actually apply for benefits, I anticipated a bureaucratic nightmare and tons of paperwork. But we logged onto the Social Security Administration’s website, and within five minutes, the simple application process was complete; a month later, her first benefit payment arrived as scheduled by direct deposit in our checking account. Seeing the amount deposited in our account, my wife was perhaps the first person in history to exclaim, “Wow! That’s so much more than we’ve been spending all these years — can we spend more now that I’m living on a fixed income?”

Ah, the joys of life when you’re married to a cheapskate.

This article originally appeared on GOBankingRates.com: 5 Questions You Should Ask About Social Security

This article by Jeff Yeager first appeared on GoBankingRates.com and was distributed by the Personal Finance Syndication Network.