For year 2013, the Social Security tax rates are a total of 12,4%, half paid by the employee and half paid by the employer. If self-employed, you are required to pay in full the 12.4% SS tax.

The Social Security Administration has stated that:

“Social Security is the largest source of income for most elderly Americans today, but Social Security was never intended to be your only source of income when you retire. You also will need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire.”

Eligibility to get Social Security retirement requires both reaching a certain age and earning enough Social Security "credits." Credits are earned by working and paying Social Security taxes.

If you were born in 1929 or later, you need 40 credits (10 years of work) to qualify. If you stop working, you stop earning credits until you return to work. No matter what your age is, you cannot get Social Security retirement benefits until you have earned 40 credits.

Your retirement benefit is based on your average earnings over your working career so, obviously, higher lifetime earnings result in higher benefits.

In general, to qualify for old-age benefits, a person must work for ten years while earning at least $4,520 per year.

Each year the amount of earnings needed for a credit rises as average earnings levels rise. In 2012, you received one credit for each $1,130 of earnings, up to the maximum of four credits per year.

The main social security benefit, called the primary insurance amount, is calculated according to a complicated process that looks at your entire work history. Your earnings from early years are adjusted for inflation, so that all years are roughly comparable. The 35 highest income years are selected (including years with zero earnings if you have fewer than 35 years with earnings) and the average indexed monthly earnings is determined.

This number goes into a three-tiered formula designed to provide a higher percentage benefit to people with lower earnings, but a higher total benefit to people with higher earnings.

Your full retirement age (also called normal retirement age) is a few years later than age 62, depending on your birth date. For instance, if you are born in 1959, your full retirement age is at 66 and 10 month; if you are born in 1960 or later your normal retirement age is at 67.

You can begin receiving Social Security benefits before your full retirement age, as early as age 62. However, if you retire early, your Social Security benefit will be less than if you wait until your full retirement age to begin receiving benefits.

Your retirement benefit will be reduced by 5/9ths of 1 percent for every month between your retirement date and your full retirement age, up to 36 months, then by 5/12ths of 1 percent thereafter. For example, if your full retirement age is 67, you'll receive about 30% less if you retire at age 62 than if you wait until age 67 to retire. This reduction is permanent and you won't be eligible for a benefit increase once you reach full retirement age.

On the other hand, if you wait to retire beyond your full retirement age, your Social Security benefit will automatically increase by a percentage based on your year of birth. For example, if you were born in 1943 or later, Social Security will add 8% per year to your benefit for each year that you delay signing up for Social Security beyond your full retirement age.

Here are a few numbers, if you retire at your full retirement age in 2013, your monthly maximum benefit would be $2,533.  But if you retire at age 62 in 2013, your maximum benefit would be $1,923. If you retire at age 70 in 2013, your maximum benefit would be $3,350.

If you cannot work because of health problems, you should consider applying for Social Security disability benefits. The amount of the disability benefit is the same as a full, unreduced retirement benefit. If you are receiving Social Security disability benefits when you reach full retirement age, those benefits will be converted to retirement benefits.

You can claim a Social Security benefit based on your work record or your spouse’s work record. The maximum spousal benefit is 50% of what your husband or wife will receive.

You can never collect your benefit and your spousal (or survivor’s) benefit at the same time. If you’re entitled to both benefits and are under the full retirement age, you will always receive the larger of the two.

You can’t apply for a spousal benefit until your husband or wife has filed for Social Security.

With this system, the lower-earning spouse files for Social Security at age 62 and the higher earner delays until age 70.

If you decide to continue working full-time beyond retirement age you can increase your Social Security benefit in two ways:

• Each additional year you work adds another year of earnings to your Social Security record, so higher lifetime earnings may result in higher benefits when you retire;
  

• Your benefit will be increased by a certain percentage if you delay retirement; these increases, called delayed retirement credits, will be added in automatically from the time you reach full retirement age until you start taking benefits or reach age 70.
  

If you receive SS benefits and earn income before you reach full retirement age, it may affect the amount of benefit that you receive. If you're under full retirement age, $1 in benefits will be deducted for every $2 in earnings you have above the annual limit ($15,120 for 2013).

In the year you reach full retirement age, $1 in benefits will be deducted for every $3 you earn over the annual limit (a different limit applies here, $40,080 for 2013) until the month you reach full retirement age.

Once you reach full retirement age, you are no longer subject to the annual earnings limit; you can earn as much as you like without incurring a reduction in your social security benefits.

If you work and collect early benefits and receive a penalty, Social Security will recalculate your benefits when you reach full retirement age, adjusting for those penalty months in your favor. You may receive slightly more benefits after recalculation.

For any life-changing decision as important as retirement, professional financial advice is always a wise and worthwhile expenditure.