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The Social Security program is simple. When you work you pay taxes to Social Security. Upon retirement or when you become disabled or die, you and your family can receive benefits. Although Social Security is the most popular program of the federal government, most people know nothing about it especially for those people who continue to work after becoming Social Security beneficiaries.

When you reach the age of sixty-two, you can begin receiving your retirement benefit and Medicare benefits can begin at age sixty-five. The Social Security Administration applies the so called earnings test to know if a worker can receive benefits even if he still works after retiring. However, if you earn too much the amount of Social Security benefits are reduced. So if you are a beneficiary receiving benefits before your normal retirement age, the earnings test requires that your benefit be reduced by one dollar for every two dollars in earnings over a threshold of $10,080 in 2000. This limit rises annually.

The percentage of benefit reduction for individuals retiring before the normal retirement age depends on the months prior to the start of the normal retirement age. So for workers with normal retirement age of sixty-five, the reduction is twenty percent if benefits start at age sixty-two. The reduction in benefits are rather permanent but not in the case wherein the benefits are lost because of the retirement earnings test. Normally, Social Security benefits are recomputed annually to reflect additional earnings. Workers who delay in filing for benefits receive delayed-retirement increases ranging up to eight percent per year of delay. The increase will of course depend on the year of birth and annual recomputations based on the earnings.

Medicare, on the other hand, is not affected if a worker goes back to work or continuous working. It is only affected if a worker is also under an employer who is covered by health insurance. In this case, the employer covered by the health insurance pays first before Medicare pays. But if the Medicare beneficiary is under an employer covered by health insurance as a retiree or spouse of a retiree and is not working for that employer, Medicare pays first followed by the employer. Additionally, workers who makes a late enrollment for Medicare Part B, that is enrolling three months after their 65th birthday are required to pay higher premiums than those who enroll at age 65. However, this penalty for late enrollment can be waived for the reason that you are also being covered by an employer with health insurance.

So, if you decide to retire at an early age or continue working after retiring you must be aware of the pros and cons of your decision. If you want to enjoy leisure activities then retire early but at an expense – less benefits. But if you want higher benefits retire later. The only sad thing is there is a chance that you might not have enough time to enjoy your benefits. So it’s up to you to decide. Whatever you decide on make sure that it is an informed decision.
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