Retirement-age workers accept lower wages or part-time employment to avoid earning so much that they lose Social Security benefits, a study released last week said.
Workers over age 65 and under 70 must give up $1 in Social Security benefits for every $2 they earn over the $8,160 limit. Interest payments, return on investments and other unearned income are not counted toward the allowed sum.
Social Security spokesman John Trollinger said this amounts to a 50 percent tax on earned income.
He said the cap also presents administrative headaches, forcing the Social Security Administration to track the earnings of those over 65, and make adjustments and corrections where earnings exceed expectations.
"It's very complex administratively," costing $200 million a year to enforce, Trollinger said. He said that eliminating the earnings limit would cost $7.5 billion in the first five years, but would pay off in income tax receipts in the long run.
A 1983 national survey released in the November issue of the Social Security Bulletin showed that slightly more than 20 percent of Social Security beneficiaries continue to work, but usually work shorter hours or at lower wages than they earned earlier in their careers.