One of the most significant aspects of Social Security benefits is that you can choose when to claim them. You’re entitled to your total monthly benefit at full retirement age or FRA. That age is 66, 67, or somewhere between, depending on your birth year.
You may, however, petition for Social Security benefits outside of FRA. The earliest age for enrollment is 62, although filing before FRA results in a decreased benefit.
On the other hand, if you postpone your filing beyond FRA, your monthly payment will increase by 8% for every 12-month period you wait. And that incentive is valid until 70 (which means you can’t grow your benefits past age 70, but any increase you secure will be yours to enjoy permanently).
However, a new proposal on the table would boost the earnings-test limit. And if it passes, seniors on Social Security might get a lot more discretion and may be able to avoid losing out on benefits they’d prefer to take.
Could the earnings-test threshold increase?
This year, Social Security recipients can earn up to $1,630 per month, or $19,560 per year, before their benefits are affected. If your earnings surpass the maximum for the current year, Social Security will withhold $1 for every $2 of earnings.
On the other hand, Rep. Bill Posey has filed the Senior Citizens Inflation Relief Act, which asks for an immediate raise in the earnings-test ceiling for 2022 and 2023. If the bill is enacted, the existing earnings-test maximum would be raised from $1,630 to $2,046.67 monthly, or $24,560 annually. (It’s worth adding that the earnings-test limit is greater for seniors who’ll reach FRA this year.)
This reform would make it easier for seniors to generate income at a time when inflation is skyrocketing. Even during more modest periods of inflation, seniors often struggle to keep up with living expenses. However, costs are currently out of control for both employees and the elderly. Rep. Posey’s idea is intended to give temporary relief so that seniors do not have to resort to excessive debt merely to make ends meet.
A real lifeline
Some seniors are astonished to hear that their wages affect their Social Security benefits if they file before attaining FRA. The good news is that benefits withheld under the earnings test are not forfeited; they are simply returned later after FRA kicks in. However, that’s not really helpful for seniors who need the funds right now.
Raising the earnings-test limit might provide much-needed relief to many seniors today. So, seniors should hope that Posey’s idea gathers support and becomes a reality.
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Bio:
Carl Wyllie is an advisor focused in areas of Medicare, retirement, estate planning, and crisis planning. Carl works with individuals of all ages in planning for their retirement. He is uniquely effective in building working relationships between their families and elder care law attorneys to assist them in avoiding a healthcare crisis. Carl is particularly sensitive to helping provide the means for his clients to maintain their independence and dignity when a change in their health occurs due to the natural aging process.
