WASHINGTON - Hundreds of thousands of Americans age 65 through 69 will be able to earn as much money as they want without losing Social Security benefits under a bill signed Friday by President Clinton repealing a Depression-era penalty.
The elimination of the so-called earnings test will mean a bonanza averaging an additional $6,700 in payments this year for some 800,000 recipients who are working and another 100,000 who haven't sought benefits because they have jobs, the Social Security Administration says.
In addition, the repeal was retroactive to Jan. 1, meaning that about 415,000 seniors who lost Social Security benefits this year will receive a refund. It will average $3,500 and be mailed out in May.
''Conventional wisdom says that nothing important happens in Washington in an election year,'' Clinton said at a ceremony Friday. ''Today we have proved the conventional wisdom wrong.''
The measure repealed a law in which people age 65 to 69 lost $1 in Social Security benefits for every $3 in wages above an annual limit of $17,000. The cost of the repeal was estimated at $22 billion over 10 years.
The earnings penalty was a remnant from an era of high unemployment when policy-makers wanted to encourage older Americans to retire and make room for younger workers.
But today's booming economy and tight labor market have changed the picture. Clinton said the repeal would benefit workers and companies alike.
''It means companies with labor shortages will have a fresh supply of experienced workers, increasing our ability to grow without inflation,'' Clinton said. ''In the future, it will mean more baby boomers working longer, contributing more to the tax base and to the Social Security trust fund.''
With Democrats and Republicans both eagerly courting the senior vote, the repeal sailed through Congress without dissent, approved by a 100-0 vote in the Senate and by 422-0 in the House.
''Common sense has finally prevailed,'' said House Speaker Dennis Hastert, R-Ill. ''For too many years, America's working seniors have been getting penalized. Starting today they will get the paycheck they deserve.''
Clinton said that one in four Americans between 65 and 69 has at least a part-time job, and that 80 percent of the baby boomers say they intend to work past 65.
Social Security is the largest federal benefit program, sending checks to 44 million Americans. Besides payments to retirees, Social Security also makes payments to disabled people and to survivors of workers who die young.
Clinton also unveiled a new Internet service offered by the Social Security Administration for younger Americans who want to get an online estimate of future retirement benefits.
The simplest estimate, ''quick calculator,'' asks only for a person's age and current-year earnings. The most sophisticated requires users to download software onto their home computers and allows them to try out various retirement scenarios.
The new online retirement calculators will not tap into private records that Social Security keeps about individuals' work and earnings histories. They rely solely on information provided by online users.
Clinton used the signing ceremony to press Congress for legislation that would use interest savings on the debt to extend the life of the Social Security trust fund to 2054.
''Some of us would like to do more,'' Clinton said. ''We may not be able to do more in an election year where there are genuine and honest differences between the two parties and even within the parties about how to proceed.''
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On the Net: Social Security's new benefit calculator: http://www.ssa.gov/retire