Baby boomers will be retiring by the millions over the next two decades, which leaves many of them wondering about Social Security. They have questions such as...

We've heard for decades that Social Security won't be there when we need it. Millions of Americans are counting on Social Security to help cover living expenses during retirement, so this is obviously a great worry. Is there any truth to the warnings about Social Security going under?

The 2009 Social Security Trustees Report forecasts that Social Security benefits paid to retirees will surpass Social Security taxes paid in by workers (and earnings on the funds in the trust) beginning in 2016.  In addition, the trust fund could be drawn down by 2037.  When the money in the trust fund is gone, benefits will still be paid to workers who are already withdrawing retirement benefits, but there will only be enough revenue (from taxes collected from people still working) to pay 76% of the benefits promised.

We will probably see several reforms in the future, including a higher retirement age, decreased benefits for future retirees, etc.  Social Security may not look the same as it does now for future generations, but it's too important to our country to let it fail.

An important part of planning for retirement is understanding what resources you will have to help cover living expenses once you retire. Many people will depend solely on Social Security to live on during retirement; others will have pensions and/or investments to help cover living expenses. Whatever your situation is, you need to have a good understanding of how much income you will receive from all sources so you can adequately plan for your retirement years.

Your retirement benefits will vary based on a number of factors, such as when you retire, how much you earned during your working years, and how much you contributed to Social Security (some government employees do not contribute to Social Security and therefore may not be eligible for benefits).

Generally, your benefits are calculated by applying a formula to your top 35 years of earnings, indexed for inflation. If you take your retirement benefits early, they will be reduced by up to 25%; on the flip side, if you wait until after your full retirement age to start collecting benefits, your benefits will increase by 8% for each year you wait.

The Social Security website has several calculators to help you estimate your retirement benefits.

Probably one of the most commonly asked Social Security questions is "when should I apply for retirement benefits"? By now, you're aware that you will receive lower benefits if you apply for Social Security before your full retirement age. The question is, are you better off applying early and receiving benefits for more years, or will you benefit more if you wait until age 66 or later to apply?

Your parents probably never asked this question, but you should: "How can you maximize your Social Security retirement income?"

Because it's a lifetime income, and because it is increased each year for inflation, Social Security is much more valuable than most people understand. There are many rules regarding Social Security, and there's nothing wrong with using those rules to your advantage.

The purpose of Social Security was never to support someone completely during retirement. It was intended to supplement other income streams (pensions and annuities) as well as your retirement savings.  So you should not expect Social Security to be enough to cover all of your living expenses in retirement. For most people, Social Security makes up about 40% of a retirees income.

However, Social Security is still a very valuable income stream - whether it makes up 40% or 90% of your retirement income - and you should do careful planning to maximize your benefits and coordinate them with the rest of your retirement plan.