Social Security & Medicare Questions: Early Retirement and Health Insurance Premiums

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Social Security & Medicare Questions: Early Retirement and Health Insurance Premiums

Q: I was born on July 7, 1940 and turn 65 this year. I took early retirement at age 62, but my health insurance premiums have gone up so much, that I’m considering going back to work. I understand that I may earn as much as I want to without losing benefits now that I’m 65. Is this correct?

A: Although you turn 65, you will continue to be subject to Social Security earnings restrictions in 2005. That’s because full retirement age is rising, and with it, the age at which you can earn more without reduction to your benefits. In 2005 full retirement age for a person born in 1940 is 65 and 6 months. Because you were born on July 7, 1940, you will not reach full retirement age until January 7, 2006. Therefore your benefits would be reduced should you earn over $12,000 or $1,000 per month in 2005. Earn more than that and $1 in benefits will be withheld for every $2 in earnings above the limit.

There’s a special rule for the calendar year in which a person reaches full retirement age. In 2005, seniors who reach full retirement age can earn $31,800 or $2,650 per month before benefits would be reduced $1 for every $3 in earnings over the limit. This rule applies only to the months in the calendar year prior to attaining full retirement age.

In your case, because you do not attain full retirement age until January 2006, you won’t be able to take advantage of the special earnings rule. Other seniors who were born from January 2, 1940 through June 30, 1940, however, might be able to take advantage of the special rule because they would attain full retirement age this calendar year. In addition, other seniors who were born in 1940 after July — for example, those born from August through December — might also be able to take advantage of the special earnings rule for one or more months next year.

Once you attain full retirement age you may earn as much as you want to without reduction to your benefits. Keep in mind, however, that the additional earnings will still be subject to taxes and may subject a portion of your Social Security benefits to taxation as well.

For more tips about protecting your benefits while working after retirement request a copy of TSCL’s booklet The Senior Survival Guide on Getting the Most Out of Your Social Security. To download a free copy visit www.tscl.org/xxx or send $1.00 to cover postage and handling to: [John, are checking with TSCL about how this will be handled.]

For more information about earnings restrictions or questions about the special earnings rule and how it may apply to you, call Social Security toll free at 800-772-1213 or visit online at www.ssa.gov.

February 2005