Wednesday, October 11, 2000
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Wednesday, October 11, 2000 |
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CPAs offer Social Security answers There's good news for most retired workers, says the Georgia Society of CPAs. Now many retirees can work all they want and still receive full Social Security benefits. The Senior Citizens Freedom to Work Act of 2000, signed into law earlier this year, allows seniors between the ages of 65 and 69 to earn a paycheck and claim Social Security benefits without penalty. The change is retroactive to January 1, 2000. Under the new law, your annual earnings affect the amount of your Social Security benefits only until you reach full retirement age - currently 65. Once you reach age 65, you can receive your full benefits no matter how much you earn. (Be aware that for those born after 1937, the full retirement age is scheduled to rise above 65 in two-month steps.) For those below the full retirement age, the earnings test still applies. In 2000, individuals taking reduced benefits at age 62-64 will lose $1 of benefits for every $2 of benefits over $10,080. For individuals attaining age 65 this year, the earnings limit is $17,000 for the period before reaching age 65. While those who have reached full retirement age no longer need to worry about the earnings limit, there are other issues to consider in deciding when to start collecting benefits. Before you can make a knowledgeable decision, you should understand how your benefits are calculated and how much you can expect to receive. The size of your monthly retirement benefit is based on a number of things, including how much you have earned during your lifetime and how much you paid into the Social Security system. If you earned higher wages and paid more into the system, you will receive a higher monthly check at retirement than if you had lower earnings. The best place to calculate your benefits is to go to the Social Security Administration's (SSA) Web site at www.ssa.gov/retire This site features an online retirement planning calculator to estimate your benefits based on your projected earnings and other information. All online benefit estimates are based on your input. Also, the Social Security Administration is now automatically mailing out statements showing projected benefits at age 62, your full retirement age, and age 70. Expect to receive your first statement about three months before your birthday. Keep in mind that you decide when to start collecting Social Security benefits. Basically, you have three options. The earliest you can start collecting monthly checks is age 62 and that will not change as the normal retirement age increases. However, if you start collecting this early, your benefits will be reduced for life. The exact amount of the reduction depends on how early you begin collecting. Bear in mind that although starting early means you'll get smaller checks, it's likely that you will be getting more of them. At your "full retirement age" (as defined by SSA), you can begin collecting full benefits. Although the current age for full retirement is 65, this age will gradually increase to age 67 by the year 2022. If you delay applying for benefits beyond full retirement age, you'll receive significantly larger monthly checks when you ultimately decide to call it quits. Social Security benefits are increased by a certain percentage each year up to age 70 depending on a person's date of birth. For example, people born in 1943 or later, who must be 66 in order to retire with full benefits, will get an extra 8 percent a year of their full benefit amount for each year they delay claiming benefits. However, once these individuals reach age 70, there are no benefit increases. A word of caution: If you decide to delay collecting Social Security benefits, be sure to sign up for Medicare at age 65. In some circumstances, medical insurance costs more if you delay applying for it. When it comes to paying taxes on your Social Security payments, age is not a factor. According to the Georgia Society of CPAs, the amount of benefits that is taxable depends on the total amount of your Social Security benefits and other income. Some people will not need to pay tax on their benefits. However if your income exceeds certain base amounts, up to 85% of your benefits may be taxable. The GSCPA is the premier professional organization for CPAs in the state of Georgia. With over 10,000 members throughout the state, the purpose of the GSCPA is to promote the study of accountancy and applicable laws, provide continuing professional education, maintain high ethical and work standards, and provide information about accounting issues to the membership and the public. For more information, access our web site at www.gscpa.org. |