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Taking Care of Mom and Dad: Working and Getting Benefits

Some parents don't ever want to retire. If your parents choose to keep working, they still collect full Social Security benefits once they reach full retirement age. If your parents are under full retirement age but have started to collect retirement benefits, there are limits on how much they can earn without losing some or all of their benefits. These limits change each year.

To reflect longer life expectancies (and to save the system money), the definition of full retirement age was changed in the 1980s by increasing from age 65 to age 67. This change went into effect in 2003, increasing the full retirement age for people born after 1937.

The following is a formula to determine how much your parents' Social Security benefits are reduced by money they earn:

If your parents are under full retirement age when they start getting their Social Security payments, $1 in benefits will be deducted for each $2 they earn above $11,520. In the year they reach their full retirement age, $1 in benefits will be reduced for each $3 they earn above $30,720.

These are the 2003 numbers. They increase slightly each year to reflect inflation.

Put another way: If your parents decide to keep working past the earliest Social Security qualifying age (62 in 2003), they might as well commit to working until they reach their full retirement age.

Starting with the month your parents reach full retirement age, they'll get all of their Social Security benefits with no limit on how much they earn. This provision is a recent change to the way that Social Security benefits are paid. It's a great plus for older people who enjoy work and wish to continue -- and whose health is good.

Earnings counted toward all of the annual limits I've described in this section apply only to pay your parents get for work they do. Pensions, annuities, investment income, interest or monies from other government programs don't count as earnings for Social Security.

The Social Security Web site contains a retirement planning tool that can help you calculate your parents' benefits and find out how certain types of earnings and pensions can affect Social Security benefits. You can access the site at www.ssa.gov or call the toll-free number at 1.800.772.1213.

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