Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, May 31, 1993 TAG: 9306020269
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Long
Despite these factors, said James Harris, more people are opting for retirement at 62, the earliest age to collect Social Security unless you are disabled.
Harris, assistant manager of the Roanoke office of the Social Security Administration, hasn't kept statistics.
But, based on his observations over the years, Harris said well over half the people choose to leave work at the first possible moment -- the month after they reach their 62nd birthday.
It is a costly decision.
That's because retirement income is permanently lowered by 20 percentage points.
Harris said that people who retire at 62 get 80 percent of the normal benefit had they retired at age 65.
The figure rises to 87 percent at age 63, 93 percent at age 64 and 100 percent at age 65. When you reach 65, benefits can begin in your birthday month.
In short, lifetime monthly income rises five-ninths of one percent for every month that retirement is delayed after 62.
Many people believe that getting all that income between 62 and 65 offsets the permanent reduction in the monthly benefit.
Depending on individual circumstances, Harris said, it takes 12 to 14 years to make up that difference.
So anyone who doesn't expect to live much more than a dozen years beyond 62 could get more money from Social Security by accepting the penalty.
"But none of us knows how long we're going to live," Harris said. Retirement date becomes a matter of individual choice, and Social Security gives no recommendation to its clients.
There is, however, a way to get around the early retirement quandary if you are widowed.
The way to do this is to file at age 62 for benefits on the record of the deceased spouse, reduced by the 20 percentage points.
Then at the age of 65, Harris said, switch to your own record. You will receive the full retirement benefit.
No such break exists if both spouses are living.
But 65 is the standard retirement age only for people born before 1938.
People born after that year will be affected by an upwardly mobile retirement age. Starting in the year 2000, the age to attain full benefits will increase in gradual steps from 65 to 67.
If you were born in 1940, for example, full retirement will be available to you at the age of 65 1/2. The age is 66 if you were born in 1950 and 67 for everyone born in 1960 or later.
But standard retirement age is not the end of the story about higher income.
Those who attain the age of 65 this year will increase their benefits at the rate of 4 percent a year if they keep working.
That rate will gradually increase in the future until it reaches a gain of 8 percent a year for those who turn 65 in the year 2008 and later.
Harris pointed out that the benefit usually gains as well from higher earnings during those additional years.
Benefits can be figured two ways, Harris said.
One method is to average all years between 1937 and retirement. This is done after dropping out the five lowest-income years.
The second way is to average all years starting in 1951, also dropping out the five worst years. Harris said this method is generally used because it gives the most favorable result. More recent year are generally more lucrative.
Because most people get at least a cost of living raise most years, Harris said, working more years usually produces a slightly higher average.
The highest monthly benefit this year is $1,128 a month or $13,536 a year.
You must be 65 to qualify for Medicare, Harris said, so people who retire early must provide their own medical coverage.
He advised people who continue working past 65 to come to the office three months in advance of that birthday to sign up for Medicare. Working isn't a bar to claiming that benefit.
Continuing to work, except for a part-time job, should disqualify most people from monthly benefits until the age of 70. At 70, you can work without restriction and draw full Social Security.
People who are 65 and older this year can earn up to $10,560 (or $880 a month) and receive full benefits. After that amount, you lose a dollar for every $3 you earn.
Between the ages of 62 and 65, you are limited to earnings of $7,680 or $620 a month. After that you lose a dollar for every $2.
Does it pay to earn over the minimum? Harris said it depends on the situation, but the law requires filing an annual report with Social Security detailing all earned income.
Anyone with a question about Social Security can call toll-free to 1-800-772-1213 between 7 a.m. and 7 p.m. any business day.
You can ask for a form that will let you apply for an estimate of your Social Security benefit at whatever age you choose.
Harris said that about half of all claims for benefits are handled by telephone, either through the toll-free number or by the local office.
You can call the same number to arrange an appointment at the district office if that proves necessary.
The Roanoke office at the Poff Federal Building handles the counties of Roanoke, Montgomery, Botetourt, Rockbridge, Craig, Franklin and Floyd, plus the cities within their borders.
An office in Wytheville serves people in Wythe, Carroll, Grayson and Pulaski counties.
by CNB