Social Security: How Changes Affect Retirees
Wondering how the Social Security changes approved Wednesday by the Senate might affect you?
The legislation is expected to result in about 800,000 working retirees getting bigger Social Security checks because earnings limits will be repealed.
If President Clinton signs the bill promptly, as expected, working retirees not only would see their government retirement benefits increase in the next few months but they would get refund checks for any benefits lost because of the earnings test this year.
“Many, many people believed that the retirement earnings test created a real disincentive to work,” said Social Security Commissioner Kenneth Apfel. “This clearly removes that obstacle. To be able to work and still receive Social Security benefits is good for individuals and the economy.”
How will the changes be implemented? Here’s a question-and-answer look.
Q: What exactly is being repealed, and how does it affect my Social Security benefits?
A: At present, there are two Social Security earnings limits. One applies to individuals who receive benefits before so-called normal retirement age (currently 65, but rising gradually to 67) and the other affects those 65 to 69. Only the latter is being changed.
Under that restriction, workers 65 to 69 now lose $1 in Social Security benefits for each $3 they earn over set limits. The earnings limit in 2000 is $17,000. As a result, an individual who earns $20,000 would lose $1,000 in annual Social Security benefits--$83.33 per month--because those wages exceed the cap by $3,000. Under this current phaseout, those who earn more than $52,532 annually lose all Social Security retirement benefits.
The earnings cap would be eliminated retroactively to the start of this year. Workers 65 and older would get full Social Security benefits, regardless of how much they earn.
Q: When should working seniors expect to see their monthly benefits rise as the result of this measure?
A: That depends on when the legislation is signed into law. Apfel estimates that it will take about two months from that point before implementation. If the measure remains on a fast track, Social Security checks received in June (which reflect May benefits) likely would reflect the change.
Q: What about the benefits seniors might have lost during the first few months of 2000? How will their refunds be handled?
A: Refund checks likely would go out a touch sooner--possibly in May. They would reflect any reduction in Social Security benefits because of the earnings test this year. The average refund is expected to range between $3,000 and $4,000. Those who have had their benefits completely eliminated because of the earnings ceiling--roughly 400,000 people--are likely to get the largest checks.
Q: Do I need to call or write the Social Security Administration to get it to boost my benefits and/or send me a refund?
A: Not if you have applied for Social Security or Medicare already. The agency already has records of three types of retirees who qualify for relief under this law, and it is prepared to pay them automatically.
The three types: those receiving reduced benefits because of the earnings limit, those who signed up for Social Security but have had their benefit payments eliminated as the result of the earnings limit and those who have applied for only Medicare--not Social Security--because they continue to work and assumed that they would not qualify.
Social Security says that it has records of about 800,000 such individuals, who will be notified of the change automatically. If you are in one of these categories, you need to call only if you have not heard from Social Security more than two months after the measure is signed.
Q: What if I have never applied for Social Security, even though I’m over 65, because I’m working and figured I should not apply until I retired?
A: Consider applying now. There is an incentive for delaying Social Security past normal retirement age. Delayed retirement credits can add about 6% to your monthly benefit checks for each year you do not claim Social Security after age 65--but you lose thousands of dollars in benefits. This trade-off probably only makes sense if you expect to live considerably longer than the average American or if you fear that you would somehow squander the extra money.
Q: How do I apply for Social Security?
A: The easiest way is to call the administration’s hotline at (800) 772-1213 and set up an appointment at your nearest Social Security office.
Q: What about those of us who are affected by earnings limits but are under 65? Does this law give us any relief?
A: No. If you are between 62 and 65, or if you are receiving widow’s benefits or spouse’s benefits under the Social Security disability program, your monthly checks are reduced by $1 for every $2 your annual income exceeds $10,080 in 2000. These earnings restrictions remain in place, although they are indexed for inflation annually. About 255,000 people are affected.
*
Times staff writer Kathy M. Kristof, who covers personal finance, can be reached at kathy.kristof@latimes.com or at Personal Finance, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, Calif. 90053.
