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Earnings Limitations After Retirement
(Posted October 19, 2004)
Question 523: I retired on October 1, 2004 under 60/30. I plan to start working part-time in January 2005. Am I limited to $970 a month for the entire year or can I earn more (not to exceed $11,640)?
Answer: There are two post retirement earnings tests: annual and monthly.
The annual test applies until you reach your "normal retirement age." If you were born in 1944, your normal retirement age is 66. Until then, you will lose $1 in benefits for every $2 you earn over the annual earnings limit, which is $11,640 for 2004. Because you are going to start working in 2005, there will be a slightly higher earnings limit (it is adjusted annually based on the growth in workers' average earnings). The limit for 2005 should be announced later this month.
The monthly earnings test permits you to earn up to $970 per month without penalty. (It's actually 1/12 of the annual limit; it changes each year as well.) But this test is more restrictive than the annual test; it only applies to the first calendar year in which your monthly earnings fall below the limit.
There is a substantially higher earnings limit for the calendar year in which you become 66 (your "normal retirement age"). It only applies in the months up to your 66th birthday. After that, you can earn any amount without loss of benefits.
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