Wages, salaries and commissions count toward Social Security's earnings limits when earned NOT when paid. If you are self-employed, only your net earnings from self-employment count towards the earnings limit, when paid NOT when earned.

Exception: Net self-employment does not count toward the earnings limit if paid in a year after the retiree became eligible for Social Security, and it was earned before the retiree became eligible for Social Security benefits.

When people retire in mid-year, they may have already earned more than the yearly earnings limit before they retire. A special rule applies to earnings in the first calendar year of retirement. Full Social Security benefits can be received for any month in which earnings do not exceed the monthly limit, regardless of your yearly earnings.

For 1999, a person is considered retired if:
1. Monthly earnings are less than:
   • $800 if under age 65;
   • $1,292 if ages 65-69.
2. Self-employed and does not perform "substantial" services in the business. In general, if you work more than 45 hours a month in self-employment, you are not retired; if you work less than 15 hours a month, you are retired. Work between 15 and 45 hours a month may be considered substantial if involved in management or a highly-skilled occupation.

A portion of Social Security benefits is taxed if substantial income is received in addition to Social Security benefits.

Single return: If combined income is between $25,000 and $34,000; up to 50% of benefits are taxable. If combined income is above $34,000; 85% of benefits are taxable.

Joint return: If combined income is between $32,000 and $44,000; up to 50% of benefits are taxable. If combined income is above $44,000, 85% of benefits are taxable.

Married filing separate return: If the taxpayer lived apart from spouse all year, taxation of benefits is computed the same as for a single person. If the taxpayer lived with the spouse at any time during the year, the taxpayer will probably pay tax on benefits regardless of income.

Social Security benefits are based on a person's earnings averaged over most of his or her working career. Thus, higher life time earnings result in higher benefits and years of no earnings or low earnings result in lower benefits. Benefits are not, as some people think, based on the last five years of a person's employment; nor does 40 credits (quarters) make a person eligible for the maximum Social Security benefit. Earning 40 credits simply makes a person eligible for retirement benefits at a certain age; it has nothing to do with the amount of his or her benefits. The benefit amount is affected by the age at the time a person starts receiving benefits. If you start your retirement at age 62, the earliest possible retirement age, your benefit will be lower than if you waited until a later age.

The usual retirement age for people retiring now is age 65. Social Security calls this "full retirement age" and the benefit that is payable is considered the full retirement benefit. Because of longer life expectancies, the full retirement age will be increased in gradual steps until it reaches age 67. This change starts in the year 2003, and it affects people born in 1938 and later. If you take early retirement, your benefits will be permanently reduced based on the number of months you will receive checks before you reach full retirement age.

If your full retirement age is 65, the reduction for starting Social Security at age 62 is about 20%; at age 63, it is about 13 1/3%, and at age 64, it is about 6 2/3%. If your full retirement age is older than 65 (born after 1937) you still will be able to retire at age 62, but the reduction in benefits will be greater. If your full retirement age is 67, the reduction for starting your Social Security at age 62 is about 30%, at 63, it is about 25%, at age 64, it is about 20%, at age 65, it is about 13 1/3%; and at age 66, it is about 6 2/3%.

If you continue working full time beyond full retirement age, you can increase your Social Security benefit in two ways:
1. Each additional year you work adds another year of earnings to your Social Security record.
2. In addition, your benefit will be increased by a certain percentage each year until you retire or reach age 70.

*If you decide to delay your retirement, be sure to still sign up for Medicare at age 65 (sometimes medical insurance can cost more when you delay applying for it).

Since your Social Security benefit is based on your earnings averaged over your working lifetime, it is essential your Personal Earnings and Benefit Estimate Statement (PEBES) be correct. It is a good idea to contact Social Security and review your PEBES periodically for accuracy to receive a personalized benefit estate. Call Social Security at 1-800-772-1213, and ask for a Form 7004, Request for Earnings and Benefit Estimate Statement; or visit their Website at www.ssa.gov to request a PEBES. In October, the Social Security Administration will begin mailing earnings and benefits statements each year to all workers age 25 and older who are not already receiving money Social Security benefits.

To apply for Social Security benefits call 1-800-772-1213, or make an appointment to visit any Social Security office to apply in person. When planning to retire you should be thinking about making an application with the Social Security Administration.

Information needed:
1. Social Security number
2. Birth Certificate
3. W-2 forms or self-employment tax return for last year
4. Military discharge papers (if had military service)
5. Spouse's birth certificate and Social Security number if he or she is applying for benefits.
6. Children's birth certificates and Social Security numbers, if applying for children's benefits
7. Proof of U.S. citizenship or lawful alien status if not born in the U.S.
8. Name of bank and account number so benefits can be directly deposited.

Social Security requests you submit original documents or copies certified by the issuing office. Social Security will make photocopies and return original documents. Don't delay in applying for benefits because you don't have all the information; the Social Security Administration can help you get it.

Monthly income for an insured worker who becomes disabled for an extended period of time. Disability benefits are computed as if you had retired at age 65 in the year the disability began. You are considered disabled if you have a physical or mental condition that prevents you from doing substantial gainful work which is expected to last at least 12 months or resulting in death. Benefit payments begin after a waiting period of five full calendar months after the onset of the disability.

1. Hospital Insurance - Medicare Part A
2. Medical Insurance for doctor's bills and related expenses - Medicare Part B

To be sure that your coverage starts promptly, get in touch with your Social Security office three months before your 65th birthday. You will then receive a health insurance card showing your Medicare claim number.

Medicare provides only for care that is "reasonable and necessary" for the treatment of an illness or injury. It pays nothing, for example, toward the cost of a routine physical checkup. Nor will it pay for hospitalization if your illness does not require hospital care. Furthermore, Medicare only pays for treatment in the United States and only pays for services provided by a "participating" organization.

Information for People on Medicare

Quick Chart of Social Security - Family, Survivor, Disability Benefits

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