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A. Increases in the Social Security Earnings Limit for Individuals Who Have Attained Retirement Age |
Senior citizens age 70 and older receive full Social Security benefits regardless of the amount of earnings they have from wages or self employment. Those between the full retirement age (currently age 65) and age 70 receive full benefits only if their earnings are lower than an earnings limit amount determined by law. In 1998, the limit for those age 65 to 69 is $14,500. The limit is gradually raised to $30,000 by the year 2002. After 2002, the annual exempt amounts are indexed to growth in average wages.
Year Present law earnings limit
1998 $14,500
1999 $15,500
2000 $17,000
2001 $25,000
2002 $30,000
2003 $31,231
2004 $32,463
2005 $33,806
2006 $35,149
2007 $36,604
2008 $37,948
Senior citizens between the age of full retirement (currently age 65) and 70 who earn more than the earnings limit lose $1 in benefits for every $3 in wages or self-employment income they earn over the limit. |
The proposal would raise the earnings limit for those between full retirement age (currently age 65) and age 70 in calendar years 1999 - 2008, as follows:
Year Proposed earnings limit
1998 $14,500
1999 $17,000
2000 $18,500
2001 $26,000
2002 $30,000
2003 $31,300
2004 $34,000
2005 $35,400
2006 $36,800
2007 $38,350
2008 $39,750
Senior citizens between full retirement age (currently age 65) and 70 who earn over the given earnings limit for the year would continue to lose $1 in benefits for every $3 earned over the limit. After 2008, the annual exempt amounts would be indexed to growth in average wages. |
Effective for the taxable years ending after 1998. |
FY 1999 $-175 million
FY 2000 -225 million
FY 2001 -150 million
FY 2002 -25 million
FY 2003 10 million
5 yr. est. $-565 million
(Preliminary and unofficial estimates provided by the Congressional Budget Office) |
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B. Recomputations of Benefits after Normal Retirement Age |
Social Security benefits are based on the average of an individual's "high" years of earnings. For workers born in 1929 or later, 35 "high" years of earnings are averaged. For those born before 1929, the number of "high" years averaged is proportionately fewer (for example, for those born in 1919, 25 "high" years are averaged).
If a retiree continues to work after entitlement to benefits, his or her monthly benefit may be increased if the new yearly earnings are greater than one of the years used in the initial determination of benefits. Currently, recomputations of benefits are effective in the year immediately following the year of the earnings. However, because of the lag between when wages are earned and when they are reported and recomputations are processed, most recomputations are actually paid in a lump-sum payment near the end of the year that they are effective. Subsequently, the adjustment is reflected in the new regular monthly benefit amount. |
Recomputation of benefits resulting from earnings in the year after a worker reaches normal retirement age (currently age 65) and later would be reflected in the recipient's benefit check, effective with the January of the second year after the year of the earnings. An exception would be provided for recipients who have one or more "zero" years of earnings in their wage averaging computation. Earnings would continue to be credited as under current law for purposes of establishing entitlement. |
Effective for earnings beginning in 1998. |
FY 1999 $10 million
FY 2000 140 million
FY 2001 140 million
FY 2002 140 million
FY 2003 140 million
5 yr. est. $570 million
(Preliminary and unofficial estimates provided by the Congressional Budget Office) |
