Q attained age 65 in June 1961. She applied for old age social security insurance benefits in January 1962. She had the option of having her benefits begin twelve months prior to her application date. Or, she could elect to restrict the retroactivity of her benefits.
Her primary insurance amount (PIA), the amount a person receives in social security benefits at full retirement age, was $88.00 per month. If a person elects early retirement, their benefits are reduced by 5/9 % per month, rounded down to the nearest dime.
If Q began her benefits in January 1961, rather than June 1961, her benefits would be reduced by 2.78%, rounded down to the nearest $.10 interval. Thus, her benefits would be $85.60 per month, as opposed to $88 per month if she elected benefits beginning at her full retirement age.
However, Q worked from January through September 1961, earning a total of $1,895. At the time, earnings of more than $1,200 per year, or $100 per month, subjected social security retirement benefits to work deductions. For the first $500 earned above this amount benefits were reduced at a rate of $1 for every $2 earned. Earnings above this amount reduced benefits dollar for dollar.
Excess earnings were charged only for months in which the worker’s was entitled to benefits, was under age 72, and earned more than $100. The amount of the deduction equals the amount of the benefit each month, except the last month charged with excess earnings.
For example, because Q earned $1,895 in 1961, she had earnings $695 above the exempt amount. The first $500 reduced her benefits by $250. The next $195 reduced her benefits dollar for dollar. Thus, she had a benefit reduction of $445.
If she elected to receive her benefits in June 1961, her benefits her benefits from June through September ($88 per month) would be reduced to zero. Because she did not render services after September, she would receive her full benefit amount of $88 per month the remaining 3 months of the year.
If she elected to begin her benefits in January 1861, her benefits for the months of January through June ($85.50 per month) would be reduced to zero and her benefit for June would be reduced by $17.
However, social security rules require recalculating the benefit amount by excluding any month during the 5/9% reduction period for which work deductions were required. Thus, excluding the months January through May 1961, Q’s benefits would be recomputed as of June 1961. Her benefit amount would then be $88 per month. Because of the work reduction of $17 that month, Q would receive $71 for June 1961, and $88 each month thereafter.
Q wisely elected to begin her benefits in January 1961.
See Social Security Ruling (SSR) 62-26.
This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.
