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Working While Collecting Social Security

Depending on your age, what you earn might impact the benefits you receive

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En español | Q. I'm turning 66 on July 1. I want to find out how much I can earn in the first six months of this year without losing any of my Social Security benefits.

Social Security for Dummies: The easy way to get a handle on it

A. Your question tells me you're worried about the impact the Social Security earnings limitation may have on your benefits in the final months before your important birthday. Well, there's some good news for you and some not-so-good news.

The good news is that on July 1, when you reach age 66, you'll no longer have to worry about the earnings limitation. It will disappear and thereafter you'll be able to earn as much as you want without any loss of benefits. The not-so-good news is that if you earn more than $40,080 in the first six months of this year, you'll lose some or even all of your benefits — but only temporarily.

As you may know, there are two parts to the earnings limitation, which applies to people who are between age 62 and full retirement age and receive Social Security benefits while continuing to work. Under the first part, which applies from age 62 until the end of the year before you reach full retirement age, Social Security will withhold $1 in benefits for every $2 you earn above an annual limit, $15,120 for 2013.

The second part of the earnings limitation comes into play for the year in which you reach full retirement age, applying to the months before the month of your birthday. In 2013, you'll be able to earn up to $40,080 in those months without penalty. But if you earn more than that, Social Security will withhold $1 in benefits for every $3 you go over the limit. Generally speaking, if your earnings in those months are likely to exceed the limit, you'll have given Social Security an estimate of the figure the year before. Based on that estimate, Social Security will pare your benefit in those final months.

Perhaps the best news is that after you reach full retirement age, Social Security will recalculate your benefits and give you credit for any benefits that were withheld because you earned more than the limit. Thus, your monthly payments will increase, generally starting in the year after you reach full retirement age.

It should be noted that Social Security has its own definition of the word "earnings" when it calculates benefit reductions. If you're self-employed, the agency will count only your net earnings from that self-employment. If you work for someone else, only your wages are counted. Equally important are things Social Security does not count as earnings. These include other government benefits, pensions, annuities and investment earnings.

For more information, see "How Work Affects Your Benefits."

Stan Hinden, a former columnist for The Washington Post, wrote How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. Have a question for the Social Security Mailbox? Check out the archive. If you don't find your answer there, send a query.

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