Scenarios about Determinants of Benefit Levels
Scenario
Retirees who are full retirement age or older will not have benefits reduced if they reenter the workforce. Retirees who have not yet reached full retirement age, however, will have their Social Security benefits reduced until they reach their full retirement age. The amount of this reduction depends on the total amount of new earnings each year. For example, your godfather is a 70-year-old man who retired 5 years ago with Social Security as his only source of income. Rising property taxes, however, are making it difficult to make ends meet, so he is considering getting a part-time job to supplement his income. Since he has already reached full retirement age, any outside income he earns will not reduce his Social Security retirement benefits.
Scenario
Individuals who begin drawing Social Security retirement benefits before reaching their full retirement age receive a reduced monthly benefit for as long as they draw benefits. For example, your uncle is a 61-year-old man who would like to retire next year and begin drawing his Social Security retirement benefits early. If he does so, he will receive a lower monthly benefit than he would if he waited until his full retirement age to being drawing benefits.
Scenario
Individuals who begin receiving Social Security benefits before reaching full retirement age will have their monthly benefit permanently reduced. For example, your 60-year-old aunt has been anxiously counting down the months until she can retire. She recently discovered that she won’t be eligible to receive full Social Security retirement benefits until she is 66. She is considering retiring early, at age 62, and taking a reduced monthly Social Security retirement benefit for the duration of her life.
Scenario
The “Windfall Elimination Provision†reduces the amount of Social Security retirement benefits that can be received by individuals who have worked at one job covered by Social Security and at another job that is not. For example, your mother has been working for the state government for 20 years. Money is not withheld from her paycheck for Social Security taxes. When she retires, any Social Security retirement benefits she may qualify for (e.g. from employment more than 20 years ago) will be offset by the pension she receives from the state government. Only if she has at least 30 years of “substantial†earnings from her job covered by the Social Security system would she be able to receive her Social Security benefits in full along with her state government pension.