Q. I am currently a full-time federal employee. My most recent Social Security Statement estimates my full retirement age payment at about $712 a month. I intend to continue working until about age 67. My question is, since, as a federal employee I will be subject to the Windfall Elimination Provision when I retire, should I start collecting Social Security now or should I wait until my full retirement age? I understand that if I’m younger than my full retirement age and still working, there are limits on how much I can earn without affecting my benefit amount. What are the limits?
A. The annual Social Security earnings limitation is totally eliminated at full retirement age. Beginning with the month full retirement age is attained a benefit is payable regardless of earnings. Before full retirement age, the limitation essentially functions as a test of whether or not the wage earner has substantially left the work force. If the wage earner is out of the work force, retirement benefits are payable. If earnings suggest continued full or substantial employment, benefits are partially or fully withheld.
There are two earnings limitations. In 2011 the basic annual limitation applicable to persons less than full retirement age is $14,160 with $1 in benefits withheld for each $2 of excess earnings. The second limit is $37,680 with $1 withheld for each $3 of excess earnings. The higher limit is applicable only to the calendar year full retirement age is reached and applies to income earned in the months prior to the full retirement age month. For example, if you will reach full retirement age in September 2011, you could receive benefits for all 12 months of the year if you did not earn more than $37,680 in the months of January through August. For each $3 of excess earnings through August, $1 in benefits would be withheld.
Since you will be subject to the Windfall Elimination once you become entitled to a Civil Service Retirement annuity, it is to your advantage to begin benefits in the first month they can be paid. If you will reach full retirement age next year, I suggest you apply now asking that benefits begin in January 2011. Provide the Social Security Administration your best estimate of how much you will earn during the year. The Social Security Administration will determine how many months of benefits can be paid next year in spite of earnings over the limitation. Benefits will begin in the month they are due.