Legal News Alert #101

Changes in Social Security Benefits

As a large portion of the American population nears retirement age, the rules of Social Security are changing. The normal retirement age is being increased and Social Security recipients will no longer be penalized for working beyond normal retirement age.

Normal Retirement Age on the Increase

Under present Social Security regulations, normal retirement age is 65, at which time you are eligible to receive full benefits. However, the normal retirement age will be incrementally increased until it will top out at age 67 for those born in 1960 or later. The effect of this change is twofold.

First, since you cannot receive full benefits until you reach normal retirement age, you may want to continue working until then. Second, this change will affect individuals seeking early retirement. If you choose, you may still begin receiving Social Security reduced benefits at age 62. However, the longer the period between when you begin receiving Social Security benefits and your normal retirement age, the more your annual benefit is reduced. This will become an even greater factor as the normal retirement age increases.

If you begin collecting Social Security at age 62 and your normal retirement age is 65, your annual benefit will be reduced by 20%. If you begin collecting benefits at age 62 and your normal retirement age is 67, your annual benefit will be reduced by 30%.

The loss of future benefits due to early retirement underscores the advantage of staying in the working world for as long as possible.

Earnings Limit Eliminated for Social Security Recipients Ages 65 to 69

Until recently, if you worked while receiving Social Security, your benefits were subject to a reduction. Now, only those who are age 62 to 64 and who have earned income above $11,520 will have Social Security benefits reduced. After age 65, there is no reduction in benefits for those with earned income.

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