Saturday, July 22, 2000

Social Security back in the hands of seniors

Repeal of Earnings Test means more freedom for retirees

By Amy Higgins
The Cincinnati Enquirer

        Get a job and lose money? That just didn't make sense, at least not to Anna Montgomery. To avoid losing anything, she ended up putting most of her $40,000 salary in a deferred compensation plan.

        Tom Curran, meanwhile, had just decided to work fewer hours — all because of an anachronistic provision in the Social Security regulations that said someone 65 to 69 could lose some benefits if they earned too much.

        But Mrs. Montgomery, 66, now keeps what she earns, and Mr. Curran, 65, works as much as he wants to. And they both still get a full Social Security check every month — all because of a recent repeal of what had been called the Social Security Earnings Test.

        Just months after the repeal, seniors and employers alike are already reaping its benefits.

        “It's a good thing,” Mrs. Montgomery said. “I think seniors deserve that break.”

        That break means those 65 to 69 can for the first time since 1935 earn more than $17,000 a year without losing some Social Security. Until a few months ago, a working senior would lose $1 for every $3 earned above that limit.

        To Mrs. Montgomery, that meant losing about $7,700 a year if she accepted her full salary from the Cincinnati Metropolitan Housing Authority, where she started working last year as a clerk. Hence the deferred compensation.

        But the limit's repeal whizzed through the House of Representatives and Senate in March without a negative vote and was quickly signed by President Clinton in April.

        By early May, $1.4 billion had been returned to 400,000 working seniors who had had payments withheld in the first four months of the year.

        “I think it's the greatest thing in the world that you don't have to worry about it, giving all the money back to the government,” said Mr. Curran, who had planned on working just enough to keep his earnings under the limit when he retired after 40 years at William Powell Valve Co. and started working for Star Systems.

        Social Security recipients under 65 still are limited this year to $10,080 from earned income (savings and retirement plan disbursements are not counted). Benefits are reduced $1 for every $2 of earnings above $10,080.

        Older workers in Ohio had an average of $5,238 withheld from their Social Security in 1996. Kentucky's working seniors lost $4,913, while Indiana's lost $5,013. Workers over 70 were not limited on what they could earn.

        Some employers already are feeling the effect of adding 65- to 69-year-olds to their ranks.

        “It makes so much sense that you should not punish senior workers,” said John Phillips, director of the AARP Foundation's senior employment program in Cincinnati. “They want to work and, in many cases, need to work.”

        Mr. Phillips said he has seen a few more people using his office's services since the earnings test repeal.

        Jeri Wenzel, acting public affairs specialist for Social Security in Cincinnati, said more people also have been coming through her office since the repeal was enacted. She attributes a 35 percent increase in the numbers of people enrolling in Social Security from May 1999 to May 2000 largely to the earnings test repeal and a greater awareness of it.

        Some could also be because of the aging population: According to the Bureau of Labor Statistics, there are about 3.85 million Americans working past the official retirement age — more than half of them under 70. By 2006, there will be more than 4.22 million.

        The Social Security earnings test was enacted in order to define retirement: If you earned too much, you weren't retired and should be participating in the new retirement system.

        But primarily, it was a reaction to the high unemployment of the Great Depression. It was supposed to encourage older workers to retire and make way for younger folks to get jobs.

        But today, unemployment hovers at record lows. And employers are desperately looking for such experienced, motivated workers. Argosy Casino in Lawrenceburg, for example, has about 3 percent of its 1,100 jobs open at any one time. Human resources manager Pat Farrell said the earnings test repeal will help employers like him fill such positions.

        Indeed, at least some of his employees would quit every August — as soon as their earnings had reached the ceiling.

        “It truly offers people more opportunities to earn more money,” he said. “It makes it easier for them to stay.”


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