According to the Social Security Administration, the system takes in more in taxes than it pays out in benefits, with the excess going to trust funds that will grow until they're needed. Because people are living longer and 76 million "baby boomers" will reach retirement age in 2010, the system will begin to pay out more in benefits than it collects in taxes by 2015, and by 2037 the trust funds will be exhausted and the taxes collected will only pay roughly 72% of benefits owed. Clearly steps need to be taken to ensure that Americans paying into Social Security now will be able to take their benefits at retirement.

Like health insurance, which was never intended to pay all of our medical expenses, but rather to share the cost and prevent financial hardship caused by catastrophic illness, Social Security was never intended to be the only source of retirement income. In fact, for the average person, Social Security benefits will be approximately 40% of what you were earning before retirement, so it's important to plan now to supplement your Social Security benefits with private pensions, 401(k) plans, IRAs or other investments.

That said, Social Security is still an important part of your retirement income, and in order to plan how much you'll have to save in addition to these benefits, you need to know what you can expect to receive from Social Security.

The federal government has made this easier than ever with its online retirement planner that allows you to compute estimates of your future benefits or download a program to your personal computer to make these calculations. The planner provides information on the factors that affect your retirement benefits. You can also request a Social Security Statement showing your earnings and your expected benefits.

Social Security Calculator

Social Security Statement