Friday, February 19, 2010

Baby Boomers Tempted to Draw Early Social Security

According to Social Security records, an increased number of early retirement claims have been filed in the past year. It isn't necessarily that baby boomers, those born during the years 1946-1964, are retiring, they are just starting to tap into their benefits. Many baby boomers who are lucky enough to have jobs are collecting benefits while continuing to work. For some baby boomers, they may continue working as long as they are physically and mentally able.
Early forecasts called for an increase in applications for retired worker benefits to increase 15% from 2008 to 2009 due to the aging of America. They report actual increases in the neighborhood of 25% through the first 6 months of 2009. Some theorize that the difference is due to the economy.
Once a worker turns 62, a worker can collect a reduced social security benefit and can continue to work. The benefit for a worker at 62 is about 75% of what he or she would receive if they retired at full benefits at 66. Why are they doing this? The most likely reason is the reduction of their retirement portfolios, 401K plans, and other plans. They have also seen their home equities shrink. They need to do something to replenish their income and net worth prior to retiring.
There is a catch, however, those who continue working while receiving benefits, are limited in how much they can earn without being penalized. Earnings are capped at $14,160 per year and anything over that results in 50 cents being deducted from the Social Security payments for each dollar earned. Once the worker reaches full benefits, 66 in this example, there is no reduction of benefits. The other factor is that the worker continues to pay into Social security while working. Fortunately, there is a recalculation of the rates once the person stops working.  All baby boomers need to be concerned about ways to supplement retirement income.

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