Why the Social Security Earnings Penalty Should Be Repealed
Table of Contents
Loss of Benefits
According to the Social Security Administration, 3.5 million people between the ages of 62 and 69, about 37 percent of all retirees under the age of 70, have some earned income.6 As Figure I shows:
- In 1995, 743,000 workers ages 65 to 70, or 8.5 percent of all retired worker beneficiaries, had their Social Security benefits reduced because their earnings exceeded the allowed amount.
- About 214,000 or 29 percent of those losing benefits received no Social Security benefits at all that year.
The total amount of benefits lost was $4.3 billion and the median benefits lost per recipient was $3,596.7
It should be noted that the earnings test also creates a kind of marriage penalty, because earnings by the primary Social Security recipient above the threshold can also reduce the benefits of auxiliary recipients. In 1995, secondary recipients losing benefits were primarily female. Only 2,000 males receiving secondary benefits lost benefits, while 62,000 females did.
"62,000 women lost benefits because a husband or parent exceeded the earnings limit."
Inclusion of secondary beneficiaries raises the number of those losing benefits in 1995 to 806,000. And because 154,000 other family members - nonworking spouses and children - are also affected by the reduction in benefits, the total number of people harmed by the earnings test rises to 960,000. But even this number understates the impact of the earnings test, because about 152,000 additional workers did not apply for benefits because their earnings were above the threshold.8