Social Security is one of the most important retirement assets for many people. You started paying into the system when you got your first job. Your employer made a matching contribution. If you are self-employed, you must pay both shares.

Many people underestimate how important Social Security is to their financial well-being. It is one of a few retirement income sources that comes with a cost-of-living adjustment. If your monthly benefit is $2,000 per month and if there is a 2% COLA, you will receive $276,032 over 10 years. If you are fortunate enough to live 30 years, you will receive over a million dollars.

That total is for just one person. For a couple, it could be much more. There are several different ways to collect retirement benefits. The Social Security Administration will always look at a worker’s own earnings record first. Your benefit is calculated based on your earning for the highest 35 years of your working time. If you do not have enough years, they use zeros earning for the shortfall. Social Security will calculate what your benefit would be at your full retirement date. This varies based on the year you were born. Everyone born after 1960 must be 67. If you were born in 1955 to 1959, it is 66 and goes up two months for each year.

If you begin taking your benefits before reaching full retirement age, you will be assessed a penalty. It is about 6 1/2% per year. You will receive this lower amount for the rest of your life. You will receive cost-of-living adjustments but will receive less additional dollars than if you would have waited.

People who do not have a paid work record on their own may be able to collect benefits based on their spouse’s work record. If the second person has reached his or her full retirement age, they may be eligible to receive half of their spouse’s benefit. If they later divorce, they can still receive spousal benefits as long as the marriage was at least 10 years and they had not remarried. You cannot collect spousal benefits from the other worker’s record if they have not started to receive benefits. The only exception is if you have been divorced for more than two years.

Normally, to maximize a couple’s Social Security benefit, the one with the higher benefit would try to wait longer to begin Social Security because their benefit is what the survivor would receive after the first death. Some of the other twists and turns with Social Security will be explained in a future column.

The increase in inflation could make the COLA increase larger than it has been in several years. Every October it is determined how much benefits will go up for the following year. While we do not know yet, historically increases have been near 2%. This year it might be possible to get an increase that is larger. We will keep you posted as things develop.

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to

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