SOCIAL SECURITY GETS A SMALL BOOST
Low inflation might be a plus for the economy in general, but when it comes to Social Security benefits, low inflation means a small "pay" raise. That's somewhat the case for the coming year, as benefits will jump a just 2.3 %. Benefit recipients will see the raise beginning with the checks to be issued the first week of January 2007. Even though Social Security benefits will increase 2.3%, some of the increase will be offset by the increase in the Medicare Part B premium that is automatically deducted from Social Security check. However, for the vast majority of beneficiaries, the amount of the Social Security cost of living increase will be much greater than the additional Medicare Part B premium they will pay. That premium is jumping from $93.50 to $96.40 per month for the vast majority of senior citizens. For the first time, however, seniors with higher incomes will pay higher Medicare Part B premiums. Seniors with “modified adjusted gross income” of at least $82,000 ($164,000 for couples) a year will be subject to this new Medicare premium surcharge.
As a result of the new Social Security adjustment, the 2008 maximum retirement benefit for a worker retiring at full retirement age in will be a lofty $2,185 per month. Remember, however, that full retirement age is now more than age 65. For those born in 1940, full retirement age is now 65 and 6 months. For those born in 1941, full retirement age is 65 and 8 months, for those born in 1942 it’s 65 and 10 months, and for those born in 1943 through 1954, it’s 66. Full retirement will gradually increase so that it will eventually become age 67 for those born in 1960 or later. The earliest a person can start receiving Social Security retirement benefits will remain at age 62. The 2.3% cost-of-living-adjustment means that the average monthly benefit for all retired workers in 2008 will rise to $1,079.
THE 2005 EARNINGS LIMITS
SENIOR CITIZENS' FREEDOM TO WORK ACT OF 2000
When this article was first posted in 2000, there were limits on the amounts
retirees between ages 65 and 69 could earn without sacrificing any benefits.
Thanks to the Senior Citizens' Freedom to Work Act of 2000, those who have
reached full retirement age (full retirement age is 65 for those born in 1937;
65 and 2 months for those born in 1938; 65 and 4 months for those born in 1939,
65 and 6 months for those born in 1940; 65 and 8 months for those born in 1941,
65 and 10 months for those born in 1942, and 66 for those born 1943-1954) can
continue to work and have unlimited earning without causing a reduction in
their Social Security benefits. This change became effective as of
Unfortunately, there is still an earnings limit for those who elect to start receiving Social Security benefits before reaching age full retirement age. Social Security retirement benefits are reduced at the rate of $1 for every $2 over the limit. For the year 2008, the earnings limit is $13,560 (that's up from $12,960 in 2007.) In addition, if your spouse is receiving benefits based on your earnings, their benefits are also reduced due to your excess earnings. However, in the year you reach age full retirement age, $1 in benefits will be deducted for each $3 you earn above a different limit, but only counting earnings before the month you reach full retirement age. For 2008, this other limit is $36,120 (that's up from $34,440 in 2007.) Once you hit full retirement age, it's truly the golden years as you can earn as much as you want thereafter without having your Social Security benefits reduced. For more on these rules check the Social Security website.
Those under full retirement age should keep in mind that its only earnings from self-employment and wage income that are considered in determining whether your earnings exceed the limits. That is, interest, dividend and other so-called passive income is not counted. Neither are capital gains or most forms of rental income. The bottom line is that investment income won't cause you to lose your Social Security benefits.
Those receiving Social Security who are still in the work force should be aware that their current earnings may actually entitle them to a larger Social Security benefit. This would be the case if their current earnings are greater than their earnings in earlier, pre-retirement years. If your post-retirement earnings have increased significantly, you should ask the local social security office to recalculate your benefits.
Finally, those still in their working years should check the annual statement that you receive from the Social Security Administration to make sure they have kept an accurate record of your earnings. If you detect errors in your Social Security record or need to request a statement, simply call (800) 772-1213 or visit the Social Security Administration's web site at http://www.ssa.gov/mystatement/index.htm.
Last Revised
All contents Copyright © Robert Clofine 1998-2007