Earnings Test


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Earnings Test

In Social Security in the United States, a test to determine whether a person under normal retirement age (between 62 and 67) is eligible for reduced benefits. The test sets two levels of income (which vary year to year); if one's own income is above the lower level but below the upper level, one may receive benefits at a $1 reduction for every $2 in wages. One receives full benefits in later years after one has passed proper retirement age.
References in periodicals archive ?
Seniors working past the retirement age of 67 should not be subject to the payroll tax, and the retirement earnings test should be eliminated, so that seniors can work full-time without losing out on Social Security benefits.
A report from the New York State Bar Association Tax Section, Report on Proposals for Guidance With Respect to Passive Foreign Investment Companies, at 26-40 (5/22/01), has a series of proposals for adopting the unreasonable accumulation of earnings test to PFICs.
3) Jonathan Gruber and Peter Orszag, however, found opposite results, with little or no significant effect of the earnings test among men, but some evidence of an effect for women.
Key changes in Social Security--reductions in the earnings test tax and the gradual increase to actuarially fair levels of adjustment for postponing acceptance of benefits past age 65--and the profound shift from defined-benefit to defined-contribution employer pension plans in the private sector led to substantial increases in employment by older Americans in the 1990s.
Volume 23 includes studies of the effects of the Social Security earnings test on labor supply; the meaning of U.
The retirement earnings test reduces the Social Security benefits of those who earn more than a minimum amount (in 2005, the limit is $12,000 per year), by deducting $1 for every $2 or $3 earned above the annual limit (depending on age).
In recent discussion about the retirement earnings test in Congress, many agreed with the following perspective: "Social Security, when it was created in 1935, sought to achieve two goals--moving older workers out of the workforce to make way for younger workers, and to partially replace lost income due to retirement" (Testimony of Honorable John J.
Today, companies qualify on financial standards and distribution; for a long time before that, there was an earnings test.
Increase their awareness of the Social Security Earnings Test Elimination Act, which did away with the tax that Social Security recipients formerly paid on earnings over $17,000.
Retroactively effective January 1, 2000, it eliminated the retirement earnings test for beneficiaries between the ages of 65 and 69.
By age seventy, however, the earnings test would lapse; and they would thereafter receive their full SSA retirement benefits, regardless of how much they earned.
The inclusion of part of social security benefits as taxable income, together with the earnings test in social security, diminishes work incentives to almost zero among those who are subjected to these rules.