Financial Planning for May 2000

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Social Security Tax Relief
Social Security Tax Relief - Finally, It Pays To Work Again

"Gold m' boy. There's gold in them thar hills!"

Sound like an old prospector back in the gold rush days? Well, it could be, except it isn't.

It's you and me looking toward the day we retire when we can head out for the hills and enjoy our golden years in peace and quiet. Unfortunately, that's not quite the way it is for many people of retirement age.

Many folks 65 and over can hardly make ends meet with just their Social Security checks and with corporate sponsored retirement plans placing the emphasis on employee responsibility, they can hardly expect their employers to provide for their future.

As a result, many have been forced to become criminals. That's right, criminals!

For many years, now, the only way those seniors could make ends meet was to come out of retirement. Sometimes, they would agree with their employer to take less income on the condition it was paid in cash and not reported to the Social Security Administration. That constituted a crime under the various income and employment tax laws.

The reason? A law most of us didn't know about until we started dealing with Social Security for either our parents or ourselves. It was a law that required the seniors to pay back $1 for every $3 earned over a specified amount. More than one of my clients received the dreaded "You have earned too much…" letter from the Social Security Administration in the past.

Thanks to the recently enacted "Senior Citizens' Freedom to Work Act of 2000", people over 65 no longer have to risk jail time to make ends meet. If you are 65 or over, you are no longer limited in the amount you can earn before losing benefits. In fact, the Social Security Administration would rather you keep working and paying into the system.

This is great news!

The bad news is that the way the law reads, all this good stuff doesn't start at age 65, it starts at the Normal Retirement Age. If you think there is no difference between the two, think again.

For example, Bill and Joe work at XYZ Steel Mill and have been there 20 years. Joe started working when he was 20 years old and is now 40. Bill, however, worked at various jobs until he found the plumb job working in the mill. He is now 60 years old. Because of his age, Joe's Normal Retirement Age is 67, but Bill's Normal Retirement Age is 65 ½ years old.

"All this stuff is great," you say, "but I am 64 and retired when I was 62 years old. Do I get any breaks?"

At least, I hope that's what you ask because I have an answer. Unfortunately, the answer is no. Even though this bill has passed and been signed into law, until you reach normal retirement age, you will still be limited in the amount you earn before you have to pay some money back to Uncle Sam.

For your information, that amount is $10,080 in the year 2000. If you are under the normal retirement age and you do not turn the normal retirement age in 2000, you will pay back $1 for every $2 you earn over $10,080. That changes in the year you reach normal retirement age and a higher earnings rate ($17,000 in 2000) until the month you reach normal retirement age. Then, of course, the earnings limit disappears.

Form more information on this and other Social Security issues, you can go to

So, if you are nearing retirement age and want to slow down but not quit entirely, you no longer have to worry about losing your benefits if you keep working. Work the hours you wish and keep strengthening the Social Security system while living the way you want to live.


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