|
This is the first sunrise of the New Millennium.
Medicare and Social Security
When you become 65 the SS needs to verify your identity, which
you can do in person (take your birth certificate) or via the phone. When
you are eligible for Medicare that cost will be deducted from your SS
payment. There is also a limit on how much you can earn without losing your
benefit if you want to get SS payments before you reach 65. You lose one
dollar for every two that you earn over the limit.
If you have a social security number and your earnings have
been covered by social security then you can get a benefit starting as
early as age 62. Depending on the date of your birth you have a nominal
retirement date in your 65th year. If you take your retirement benefits
early, the benefits are reduced. If you postpone taking your benefits you
will get an increased benefit up to age 70 where you no longer have a
further choice of deferral. If you go to the social security page (goggle
SS benefits) you will find more detailed discussion and a calculator that
is very well done.
However let me give you an example that I hope helps give you a general
feeling for the way the numbers can spinout. My wife Bonnie became 65
on Mar. 3, 2006. She was born in 1941. Her nominal retirement date in Nov
or 2006. If she retires then she will receive 1000 dollars per month. If
she had retired at age 62 she would have received 800 dollars per month. If
she postpones her retirement a year she will get 1075 dollars per month.
And for each additional year she will get an additional 7.5% more in her
monthly retirement benefit.
A key question is how long will it take you to break even, starting at a
later time but earning more. Another question is how much more will you
earn after break even with a higher monthly earnings. Let me work a few
examples, which give you an idea of how to make these comparisons. Remember
that the results are dependent on you specific age and earnings.
If you retired early at age 62 you pay a 20% penalty for retiring early.
For three years you would get 800 dollars per month or 9600 dollars per
year for three years that would be 28800. So how long does it take to make
this amount up. The equation is the number of months (n) to break-even
times the difference in monthly pay set equal to 28,800.
nx200=28800. Then n=144 months or 12 years
Beyond 12 years every year the later retiree would make $2400 more. So
guess how long you expect to live and do the arithmetic.
After the 65th year retirement you get a 7.5% added monthly payment. So
using the same equation:
nx75=12,000 Then n=160 or 13 years
Beyond 13 years you get 900 dollars more per year.
Again these examples are just intended to be examples to give someone just
beginning to think about retirement an idea what the tradeoff are. If this
wets your appetite to consider your specific case I urge you to visit the
Social Security online.
http://www.ssa.gov/OACT/quickcalc/
Full retirement age
depends on the year you were born. Basically the age you can
get full retirement is being moved higher over time.
Your full retirement age is 66. There are also
what I would consider to be extreme limits of
what you can earn if you are retired
early. After the full retirement age there is no limit.
The information below is copied from the Social
Security website.
|
Earnings Limits
Under federal law, people who are receiving Social Security
benefits who have not reached full retirement age are entitled to
receive all of their benefits as long as their earnings are under the
limits indicated below. In 2006, the full retirement age is 65 and 8
months. The full retirement age will increase gradually each year until
it reaches age 67 for people born in 1960 or later.
|
|
|
2005
|
2006
|
|
At full retirement age or older
|
No limit on earnings
|
No limit on earnings
|
Under full retirement age
|
$12,000 / For every $2 over the limit, $1 is withheld from
benefits.
|
$12,480 / For every $2 over the limit, $1 is withheld from
benefits.
|
|
In the year you reach full retirement age
|
$31,080 / For every $3 over the limit, $1 is withheld from
benefits until the month you reach full retirement age.
|
$33,240 / For every $3 over the limit, $1 is withheld from
benefits until the month you reach full retirement age.
|
Return
to GoldenWatch Home Page
|
