History

• Social Security early retirement benefits are subject to income limits. Social Security encourages employment while collecting benefits by recalculating benefits at full retirement age. Full retirement age has changed over the years, particularly with the Social Security reforms of 1983. Reforms in 1983 made changes that are occurring in 2010. Full retirement age was age 65, but it changed to 66 and 67, depending on the birth date of the recipient.
  
  

Significance

• The age of early retirement has remained at age 62 since 1961, but with the extension of full retirement age to 66 or 67, more seniors are taking retirement in those years before they reach 66 or 67. If a person who has reached full retirement age seeks employment, there are no restrictions on income. A person who is between 62 and 66 collecting early retirement through Social Security is subject to a penalty, according to the Social Security Administration.
  
  

Effect

• In 2010, an early retiree can make $14,160 in income before the penalty applies. For each $2 over this amount, Social Security imposes a $1 penalty. The $14,160 figure is subject to change each year, so it is important to check to see the current income limitation.
  
  

Considerations

• The amount of money you can make the year you reach full retirement age of 66 or 67 is not the same as the prior years. If you reach full retirement age in 2010, you can make $37,680 before imposition of a penalty. Other years may be different, as this figure is subject to change. Only employee wages count for penalty calculations, and net employment counts for self-employed retirees. Pensions, annuities, interest or other government benefits do not count. If one of your early retirement years is a high-income year, Social Security will use that year to recalculate your full retirement benefits when you reach full retirement age.
  
  

Benefits

• Social Security reduces benefits for income that exceeds the limit, but for every month there is a reduction, there is a credit given for full retirement age calculations. Once you reach full retirement age, new calculations may increase your benefits. Social Security adjusts your benefits for the months you did not collect because you were over the income limit.