Reg Jones Expert's View

Social Security increases, like cost-of-living adjustments (COLAs), are based on annual changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI/W). However, unlike COLAs, which I wrote about last week, eligible FERS retirees get the same increase as those who retired under CSRS, and they get it at the same time. In 2013 that increase is 1.7 percent. If you’re eligible for that increase, you should have already received it in your January 2013 Social Security payment.

If you are a CSRS retiree (or a FERS retiree with a CSRS component in your annuity) and have fewer than 30 years of substantial earnings under Social Security, you’ll be subject to the windfall elimination provision. The WEP will reduce – but not eliminate – that Social Security benefit.

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The full retirement age for Social Security benefits depends on the year in which you were born. It ranges between 65 and 67. While you can sign up for a Social Security benefit as early as 62, the earlier you begin receiving it the smaller that benefit will be. For example, if your full retirement age is 65 and you sign up for a Social Security benefit at age 62, the reduction will be about 20 percent. If it’s 67, then the reduction will be around 30 percent.

If you are under full retirement age and continue working when you apply for a Social Security benefit, your benefit may be reduced or eliminated. That’s because of the Social Security earnings limit. In 2013 the limit is $15,120. If you exceed that limit, your Social Security benefit will be reduced by $1 for every $2 you earn from wages or self-employment. That limit continues until the year in which you reach your full retirement age. In 2013, the earnings limit is $40,080 for that year, when the offset will be $1 for every $3 above that limit.

Earnings limits no longer apply beginning with the month in which you reach your full retirement age.