SOCIAL SECURITY GETS A BOOST IN 2001
Social Security benefits increased in 2001. In fact, the 3.5% increase that retirees saw in 2001 is the biggest increase in nine years before 2001. As a result of the new adjustment, the maximum retirement benefit for a worker retiring at age 65 in January 2001 will be $1,536 per month. The average monthly benefit for all retired workers will rise to $845.
THE 2001 EARNINGS LIMITS
SENIOR CITIZENS’ FREEDOM TO WORK ACT OF 2000
Before year 2000, there were limits on the amounts retirees between ages 65 and 69 could earn without sacrificing any benefits. Thanks to the Senior Citizens’ Freedom to Work Act of 2000, those who have reached full retirement age (currently 65) can continue to work and have unlimited earning without causing a reduction in their Social Security benefits. Although the law wasn’t signed until April 7, 2000, it was effective as of January 1, 2000. Prior to this change, those between ages 65 and 69 saw a reduction in their benefits if they had earnings above $17,000.
Unfortunately, there is still an earnings limit for those who elect to start receiving Social Security benefits before reaching age 65. Social Security retirement benefits are reduced at the rate of $1 for every $2 over the limit. For the year 2001, the earnings limit is $10,680 (that’s up from $10,080 in 2000.) In addition, if your spouse is receiving benefits based on your earnings, their benefits are also reduced due to your excess earnings. However, in the year you reach age 65, $1 in benefits will be deducted for each $3 you earn above a different limit, but only counting earnings before the month you reach age 65. For 2001, this other limit is $25,000 (that’s up from $17,000 in 2000.) Once you hit age 65, it’s truly the golden years as you can earn as much as you want thereafter without having your Social Security benefits reduced. For more on these rules check the Social Security website.
Those under 65 should keep in mind that its only earnings from self-employment and wage income that are considered in determining whether your earnings exceed the limits. That is, interest, dividend and other so-called passive income is not counted. Neither are capital gains or most forms of rental income. The bottom line is that investment income won’t cause you to lose your Social Security benefits.
Those receiving Social Security who are still in the work force should be aware that their current earnings may actually entitle them to a larger Social Security benefit. This would be the case if their current earnings are greater than their earnings in earlier, pre-retirement years. If your post-retirement earnings have increased significantly, you should ask the local social security office to recalculate your benefits.
Finally, those still in their working years should periodically check on the government to make sure they have kept an accurate record of your earnings. This can be done by simply requesting a Social Security Statement from the Social Security Administration by calling (800) 772-1213 or by visiting the Social Security Administration’s web site at http://www.ssa.gov/mystatement/index.htm.
Understanding passive income tax advantages is an important part of learning how to create wealth. If you want to avoid as much taxation as possible, passive income is a good way to do so. Here are a few of the tax advantages that come with passive income.
The general description of passive income is income that comes from investments or from business interests. You don’t go to work each day to earn passive income, although managing your investments may still require work. Retirement, however you define it, is achieved when you don’t have to work to earn a living, but instead can count on reliable sources of passive income.