Understanding The Changes To Social Security For Early Retirees

(KMDL-FM) Under a new plan, millions of Social Security recipients across the nation, including retirees in Louisiana, could see an increase in immediate benefits. The new proposal would repeal the existing Social Security policy that delays a portion of benefits for those who are below full retirement age but still in the workforce.

The new proposal is called the Senior Citizens' Freedom to Work Act. That legislation, sponsored by Florida Senator Rick Scott and Representative Greg Murphy of North Carolina, was introduced in April of this year.

What Are the Main Points of the Senior Citizens' Freedom to Work Act?

According to a Press Release from Congressman Murphy's office, the main bullet points of the legislation are:

**The Retirement Earnings Test (RET) reduces Social Security benefits that early retirees are eligible to receive by nearly fifty percent for earning more than $21,240 annually.

**Although the reduction in benefits is returned to seniors upon reaching Full Retirement Age (FRA), many seniors are unaware of this and choose to earn below the income threshold.

Here's What the Changes Would Mean For Social Security Recipients

If passed, the legislation would repeal the Social Security Retirement Earnings Test. That legislation delays a portion of benefits for people who are still working and are below full retirement age.

The conundrum that the new legislation hopes to resolve is the "cap on earnings" that workers who receive Social Security benefits must consider while still in the workforce. The Senior Citizens' Freedom to Work Act would remove that "cap" and allow early retirees, those who are between the ages of 62 and their full retirement age, to earn income without seeing their Social Security benefits withheld completely or, in some cases, reduced.

If this all seems confusing, it is. Social Security uses a lot of terms that don't have an actual definition that is the same for everyone. For example, full retirement age, that is different for different individuals. Full Retirement Age as defined by Social Security is based upon your birth year and could be anywhere from 66 years ten months to age 67.

To give you an idea of how the new legislation might affect income, you have to understand what the RET limit happens to be. RET is "Retirement Earnings Test," so you understand the acronym. Under current RET guidelines, an individual may earn up to $24,480, and their benefits are not affected.

Working Retirees Could Lose Benefits if They Earn Too Much Money

USA Social security cards laid on dollar bills — BackyardProduction

However, for every two dollars earned over that limit, one dollar in Social Security benefits is withheld. Those reaching FRA in 2026, which is Full Retirement Age, can earn up to $65,160. But once that limit has been breached, there is one dollar of benefits held for every three dollars earned.

The new legislation, if approved, would remove those caps and allow individuals working past full retirement age the opportunity to earn money without an earnings cap in place.

The legislation is still being debated in Congress. It's being debated in the Senate in the Finance Committee, and in the House, the Ways and Means Committee is taking up the debate. It's estimated that some 54 million retirees could be affected by these proposed changes.