Thursday, August 14, 2008

WSJ financial columnist writes about Social Security's Annual Earnings Test

I’ve written a lot about Social Security’s Annual Earnings Test on this blog. That is a rule that applies to people who start collecting benefits, at actuarially determined lower amounts, before full retirement age. Though determined by law and even though Social Security is required to administer it to the letter, I’ve always thought it was silly and a waste of resources. If Social Security were viewed as an annuity (which is what Republicans generally propose as part of reform), the beneficiary would be able to control when to start it, no strings attached (other than the amount, given life expectancy). It is true that since people now live longer, it can be unwise to start receiving benefits early, but employers tend to push the idea.

Kelly Greene wrote about this in the Wall Street Journal during the weekend addition of June 28-29. I picked this up at a convenience store this morning, not noticing that it was an old paper until I got home. I can’t find that now on WSJ, but I did find it on the San Diego Union-Tribune, on July 13. The article starts with a straightforward question from a Massachusetts reader. Here is the link. The article also explains how Social Security recoups overpayments.

Social Security online allows beneficiaries to check their benefit levels, and whether they owe any money back. It also provides Medicare premium information (for Part B). The site says when income was last reported, and in practice I find that day very far behind. There are some cosmetic display problems in the information page that many private companies would fix. The site is supposed to be up except from 1 AM to 5 AM Eastern time, but it is often down for maintenance on weekends and often around 8 or 9 PM on weeknights. When it is down, it will let you log on and then tell you that your request cannot be completed, as if something were wrong with your account. There is not; it is just sloppy error reporting. I have gotten database errors sometimes in Mozilla, and found that it will work in Internet Explorer. I don’t see how this can happen. I think Social Security has its information in IBM mainframes (for employees) and replicates it to other servers for online access from home.


Bill Boushka said...

A visitor (anonymous) emailed to me directly:

What a wonderful web site!!!

I am turning 62 May 1st. I went to the ss office last week and signed up for ss benefits.I am having second thoughts since I signed up. I work full time,I will have to cut my hours which I really want to do that.My question is the 14,000 dollar figure that I was given as the amount I can earn, is that for the rest of this year or for the total 12 months.Do you know if I can change my mind about drawing if I decide to?

Bill Boushka said...

First the disclaimer. I’m a writer and blogger, not a lawyer. So if you must have a 100% definitive answer, you might need an attorney (and even then you might not get one).

But I went through this myself in 2005. Until the end of the calendar year that you start benefits at 62, the amount is prorated per month (to make “non service months) and if you go over any month, your benefit is reduced. The same is true the year you reach full retirement age.

And in general, you can stop benefits and collect more later if you reach full age (I’d have to take the time to look up the reference in Tomkiel’s book). You can even pay back the money and take more later, after full retirement age, or even wait until age 70-1/2. This would normally happen if you found a good job that would exceed earnings limits.

It is still to your advantage ultimately to work full time, put more into the kitty, and wait until later to retire if you can.

I’ll go back and review all this soon and write a new detailed posting. I still get questions.

Bill 3/29/2009