A:  Once you start benefits, Social Security has special rules about how much you may earn without reduction to your benefits.  Seniors who are under full retirement age in 2007 are allowed to earn $12,960 for the year or $1,080 per month.  If you earn more than that, $1 in Social Security will be withheld for every $2 above the limit.

A special rule, however, allows you to earn substantially more in the calendar year in which you attain full retirement age.  Full retirement age is not so easy to figure out though, because it's rising.  For retirees born in 1942 like you, full retirement age is 65 and 10 months.  That means you will not reach your full retirement age until April 2008.  Thus in 2007 if you earn more than $12,960, your social security benefits would be reduced $1 for every $2 over the limit.

In 2007 the special rule allows retirees to earn $34,440 for the year, or $2,870 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.  In your case you will be able to earn the higher amount from January through March of 2008 or  $8,610  (3 x $2870) for these 3 months.  The month you reach full retirement age, April 2008, you can start earning as much as you want with no reduction in benefits.  The amounts are adjusted annually.

Because of the wording of this provision, and rising eligibility ages, however, some seniors who turn 65 in 2007, those who turn 65 in March 2007, will derive no benefit from this special rule.  The extra earnings are allowed only in the calendar year one reaches full retirement age.  Persons who are born in March 1942 will not reach full retirement age until January 2008.  Those persons will be able to earn as much as they want to in 2008, but their earnings will be restricted in 2007 to $1,080 per month. 

The same does not hold true for persons who turn 65 in 2007 during other months, however.  Depending on when they were born, they may get one to ten months of benefit out of the rule. 
Seniors who are working after starting to receive benefits should call Social Security toll - free at 1-800-772-1213 or visit www.ssa.gov to learn more about Social Security's earnings restrictions and how the special rule may apply to you.

Sources:  "Social Security Announces 3.3% Benefit Increase for 2007," Social Security Administration, October 18, 2006.  "2006 Social Security Explained," Avram L. Sacks, J.D., CCH Incorporated.

March 2007