Q: I was born December 7, 1938. I originally retired at age 62, but re-entered the work force in 2003. It was my understanding that because I would turn 65 this December 2003 I was allowed to earn up to $30,700 without penalty. Just recently I learned that my “full retirement age” is no longer on my 65th birthday (12/7/03) but 65 plus another two months —kicking me into 2004 for my full retirement age. How does this change what I can earn, and if I am penalized, it appears that I will lose the benefit of having a year in which I can earn $30,700.
A: Seniors who return to work after starting retirement benefits should be wary of Social Security earnings restrictions. If you are under full retirement age one dollar in benefits will be withheld for every $2 in earnings over the limit. The limit changes annually. A relatively recent law allows seniors to earn more the calendar year in which they attain full retirement age, but complicating matters, “full retirement age” is rising from age 65.
As you learned, the full retirement age for seniors born in 1938 is 65 and two months. Since you were born December 7, 1938, you did not achieve full retirement age until February 7, 2004. In 2003, you could earn just $11,520 because you did not attain full retirement age in the 2003 calendar year. You are correct about losing the benefit of having a year to earn $30,700 since you turned full retirement age in February 2004. Now that you have reached full retirement age, however, you may earn as much as you want to without reduction of benefits.
If you earned exactly $30,700 in 2003, your income would have been $19,180 over the earnings limit of $11,520. That would mean $9,590 in benefits should have been withheld in 2003. You should report this to Social Security as quickly as possible to set up a repayment plan.
Full retirement age continues to rise in 2004. For seniors born in 1939, full retirement age is 65 and four months. Seniors whose birthdays fall in September, October, November or December, may lose most, if not all, the advantage of the special earnings rule. In 2004, seniors under full retirement age may earn $11,640 before a reduction in benefits. If you are lucky enough that your 65th birthday falls January through August 2004, you may earn $31,080, this year or ($2,590) per month. If your earnings exceed $31,080, one dollar in benefits will be withheld for every $3 in earnings above the limit.
To learn more about what you are allowed to earn while drawing benefits call Social Security (800)-772-1213 or visit online at http://www.ssa.gov.
April 2004
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