The Impact of Repealing the Retirement Earnings Test on Rates of Poverty

Summary

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This article summarizes an analysis of the poverty implications of repealing the retirement earnings test (RET). Repealing the RET at the normal retirement age or older is unlikely to generate large poverty effects. Removing the test at age 62 or older, however, could lead to large increases in poverty.

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The Impact of Repealing the Retirement Earnings Test on Rates of Poverty

This article summarizes an analysis of the poverty implications of repealing the retirement earnings test (RET). Repealing the RET at the normal retirement age or older is unlikely to generate large poverty effects. Removing the test at age 62 or older, however, would possibly lead to large increases in poverty.

*The authors are with the Office of Retirement Policy and the Office of Research, Evaluation, and Statistics, respectively, within the Office of Policy, Social Security Administration.

Acknowledgments: The authors would like to thank Dan Durham, Keith Fontenot, Steve Goss, Tim Kelley, Mike Leonesio, Joyce Manchester, David Pattison, and Paul Van de Water for helpful comments.

Summary and Introduction

On April 7, 2000, President Clinton signed into law the Senior CitizensTM Freedom to Work Act of 2000 (Public Law 106-182). Specifically, it:

L Eliminates the Social Security retirement earnings test (RET) in and after the month in which a person reaches the normal retirement age (NRA)Scurrently age 65. That change is in effect for taxable years ending after December 31, 1999.

L Applies permanently the earnings limit for those at the NRA through age 69 ($17,000 in 2000; $25,000 in 2001; and $30,000 in 2002) and the corresponding reduction rate ($1 for $3 offset) to all months before beneficiaries reach the NRA in the calendar year in which they do so.

L Permits retired workers to earn a delayed retirement credit for any month for which they request that benefits not be paid even though they are already on the benefit rolls. That provision is in effect beginning with the month in which the beneficiary reaches the NRA and ending with the month before the beneficiary turns 70.

The Commissioner of Social Security was in favor of the legislation. It repealed the ...

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