How much can you expect from Social Security?

At the heart of the retirement planning process is this important question: How will you pay for retirement? Unfortunately, the answer is not obvious. Certainly, the individuals who expect to fund their retirement with Social Security payments may be in for a disappointment.

According to figures from the Social Security Administration, a lower-income worker who retirement at age 62 (reducing the benefits received) in 2001 would have received $541 per month from Social Security, an annual income of only $6,492. The average worker who claimed benefits at age 65 in 2001 received $1,051 per month, which translates to just $12,612 per year. Even those who had earnings at or above the maximum amount subject to Social Security taxes and retired at age 70 (maximizing the benefits received) could expect only $1,879 per month ($22,548 annually).

One reason Social Security typically only provides a fraction of the amount that you will need during your golden years is the growing number of Americans who will be dependent on the Social Security system in the years ahead. Beginning in 2008, the first of the 77 million baby boomers will become eligible to receive benefits. From that point forward, one baby boomer will become eligible to receive benefits every eight seconds for 18 years, while the nation's workforce -- those Americans that pay Social Security taxes -- is expected to decline.