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Will you pass the earnings test?

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Is it worthwhile to earn money while you’re receiving Social Security benefits? If you’re already at the full retirement age, the answer is “yes,” because earnings aren’t limited for those at full retirement age.

But the answer isn’t as clear if you’re in your early 60s, receiving Social Security benefits and still working. Your Social Security checks will shrink if your income rises above a certain earnings limit.

For 2006, the “earnings test” for early retirees is $12,480 a year. That means the government will withhold $1 in benefits for every $2 in earnings above that limit. If you reach full retirement age in 2006, the annual earnings limit is $33,240, meaning you lose $1 of benefits for every $3 above the limit.

Strategy: Run the numbers to see whether the earnings will sap your Social Security benefits and whether it’s worthwhile to continue working.

Note the age for receiving full retirement benefits gradually increases. It tops out at age 67 for those born in 1960 or later.

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