Q: Would an age 65, full-time employee's monthly Social Security check be reduced based on yearly income? We have received conflicting information. The Social Security Office advised us that we would receive the full benefit, even though working full time, no matter how much the employee made. People we know have stated that they can only make a certain amount working part-time, to avoid reductions in their checks. Who is correct?
A: The answer depends on the year and month in which you turn full retirement age. To make matters really complicated, full retirement age is rising. Social Security earnings rules restrict the amount you may earn when working after starting benefits, but once full retirement age is attained you may earn as much as you want.
In 2006, seniors who are under their full retirement age are allowed to earn only $12, 480 for the year or $1,040 per month. If you earn more, $1 in Social Security will be withheld for every $2 above the limit. There’s a special rule that applies to the calendar year in which you reach your full retirement age. In 2006 the special rule allows retirees to earn $33,240 or $2,770 per month in the months prior to turning full retirement age. If you earn more than that, $1 in Social Security will be withheld for every $3 in earnings above the limit.
The full retirement age of retirees born in 1940, for example, is 65 and 6 months. Thus, retirees whose 65th birthday was in July through December of 2005 did not reach full retirement age until January through June of 2006. If you were born in July 1940, and you turned 65 and 6 months in January of this year, you reached full retirement age, and thus may earn as much as you want to with no reduction in benefit. If you turned age 65 in August through December of 2005, the special rule applied to you this year.
Full retirement age for persons born in 1941 who turn age 65 in 2006, however, is 65 and 8 months. These rules are complicated and mistakes can significantly reduce your Social Security benefits. For more information, call Social Security toll free at 1-800-772-1213 or visit www.ssa.gov to find out what you are allowed to earn without reduction.
July 2006
