One of the provisions of the “senior citizens” Freedom to Work Act of 2000 is that the Social Security retirement earnings test is eliminated in the calendar year in which the person reaches his or her full benefit retirement age for the month of, and after, such attainment. However, the earnings test continues to apply to benefits received prior to the month the applicant reaches his or her full benefit retirement age.
Social Security beneficiaries under the full benefit retirement age who have earnings in excess of the annual exempt amount are subject to a $1.00 reduction in benefits for every $2.00 earned over the exempt amount ($12,000 in 2005, and $12,480 in 2006), for each year before the year during which they reach the full benefit retirement age. However, in years where the person reaches the full benefit retirement age, earnings in excess of the annual exempt amount ($31,800 in 2005, and $33,240 in 2006) are subject to a $1.00 reduction in benefits for every $3.00 earned over the exempt amount. Social Security benefits are not affected by earned income beginning with the month the person reaches his or her full benefit retirement age.
It is important to note that for any Social Security beneficiary who is under full retirement age, the earnings test determines whether their benefits are going to be reduced based on their earned income. This is earned income and not unearned income, which has the adverse effect on the benefit amount. There are significant and substantial other tests to make relative to the year, month of birth date, etc., when applying for benefits, and it is very important to contact the Social Security office at least six months prior to retirement, especially if continued employment is considered.
By: Hyman G. Darling, Esquire
Comments