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Ask Mary Jane Archives
- Social Security
- Social Security and Government Employees
- Early Retirement
- Social Security Disability
- Dependent Children
Social Security
Q. I will be 65 in October, 2006. My understanding is that I cannot collect full benefits until 65+8 months. Can I however, collect benefits at age 65 while continuing to work or do I have to wait until 65+8 to collect at all.
A. Benefits can begin as early as age 62 (subject to early retirement reduction) but until the month full retirement age is reached, an earnings limitation applies. Beginning with the month you reach full retirement age, you will be entitled to a full Social Security retirement benefit regardless of earnings.
Social Security has two separate earnings limitations – one that is applicable to everyone under full retirement age and a second, higher limitation applicable only in the year that full retirement age is reached. In 2006, the lower, general limitation is $12,480 with a $1 offset in benefits for each $2 in excess earnings. The 2006 higher limitation is $33,240 with $1 in benefits withheld for each $3 of excess earnings. Earnings limits for 2007 will be announced in October at the same time as the annual cost of living adjustment (COLA) is announced.
Should you choose to begin benefits when you reach age 65, an alternate monthly retirement test would be used. Retirees who begin benefits in mid-year can receive a monthly benefit without regard to total annual earnings if monthly earnings after benefits begin do not exceed 1/12 of the annual limitation ($1,040 in 2006). After benefits begin, if monthly earnings exceed the monthly limitation, no benefit is payable for that month.
Next year you will be subject to the higher limitation. If you wish to take advantage of the higher limitation and maximize the number of months of benefits you can receive, apply late this year for benefits to begin in January. Provide the Social Security Administration with your best estimate of 2007 earnings for the months before you reach full retirement age. If your estimated earnings from January through May were less than the annual limitation, your benefits would begin in January. If estimated earnings through May exceed the higher limitation, benefits would begin in whatever later month they were due.
Regardless of when you apply for benefits to begin, you will be eligible for Medicare in October 2006. Apply for Medicare about three months before you reach age 65. If you are in the work force and have health insurance and creditable prescription drug coverage from your current employer (or from a spouse's current employer) you can defer enrolling in Medicare Part B Supplemental Medical Insurance or Medicare Part D Prescription Drug Insurance without risk of a future premium penalty when you do enroll. Medicare is secondary to current-employer coverage and the extra protection afforded (if any) may not justify enrolling in Parts B or D until you cease work (or your spouse ceases work). When work ceases or, if earlier, when employer coverage ends you have only 63 days to enroll in a Medicare Prescription Drug plan to avoid delayed-enrollment premium penalties. You will have seven months to enroll in Medicare Part B insurance without risk of penalty, but if you don't enroll in the first month you could face a month of no health insurance protection. If you do not enroll in either Part B or D during the prescribed time limits, you will have to wait for a future open season to enroll.