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Retirement Earnings Test

The method for determining benefits to people taking Social Security payments while they continue to work before reaching the full retirement age. Earnings above a specified yearly threshold cause the beneficiary to lose $1 in benefits for every $2 earned over that limit. In the year of full retirement age, a different test applies: the beneficiary loses $1 for every $3 in earnings over a higher yearly earnings threshold. Starting in the month of full retirement age, benefits are not subject to the earnings test, regardless of employment earnings. After the beneficiary reaches full retirement age, benefits are adjusted to recover the amount that was previously withheld.

Only wages from a job or self-employment trigger the Social Security earnings test; investment income, pension benefits, and money withdrawn from an IRA or 401(k) are not considered in the test.

See the Retirement Earnings Test Calculator at the website of the Social Security Administration.

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