Bill asks for improvements on Social Security and pension plan penalties for late retirement

More and more Americans are deciding against sitting around and watching TV upon retirement and deciding in favor of continuing work. For many, the choice to keep working is a financial one, but for just as many the choice to stay an active part of working society is based on the need for health: emotional health, physical health and mental health. It is well known that the body, brain and emotional health of a person are improved with regular use.

If you are thinking about staying on part-time at your current job to supplement your income, taking on a new and interesting part-time job or beginning to consult or freelance, there are a few things to know to keep from experiencing financial penalties.

Unfortunately, United States Social Security and pension laws do not support or reward older Americans for contributing to society after retirement. Instead of creating incentives, there are several different penalties that can occur. Depending on your circumstances, Social Security benefits can be cut and pension payments can be decreased.

It’s best to check your pension plan thoroughly before deciding to continue working for your current employer for a reduced amount of hours and pay. Some pension plans base their payments on the last years of employment. You could find yourself getting a much lower pension payout, simply due to continued work.

Although it may seem that continuing to work and delaying Social Security benefits would be an excellent way to ultimately increase your payments, you must be sure that you do not bear consequences. If you happen to retire early and then decide you would like to return to work, you may be penalized.

Currently, if you return to work you may see a large cut in Social Security – as much as $1 out of every $2 you earn over the$13,560 yearly limit will be taken from your Social Security payments.

The Incentives for Older Workers Act, introduced by U.S. Sen. Herb Kohl (D-Wis.), addresses both pension plan and Social Security penalties, but has not gained support thus far. The bill, which seeks to ban pension penalties for those continuing to work part-time and increases the Social Security cut to $1 for every $3 earned, also asks that retirement credits for Social Security be able to be delayed until age 72, up from the current 70 year limit.

While the bill offers improved changes that are a step in the right direction and could certainly help many, advocates are asking for a total reform that prohibits penalties and creates incentives for older Americans to continue working after the retirement age.



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