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What happens if you work while receiving Social Security?

Dear Savvy Senior: I started drawing my Social Security retirement benefits back in 2021 when I was forced to retire early, but I’m now interested in going back to work part time. Will this affect my benefits, and if so, how much? — Back to Work

Dear Back: You can collect Social Security retirement benefits and work at the same time, but depending on how old you are and how much you earn, some or all of your benefits could be temporarily withheld. Here’s how it works:

SSA earning rules

The Social Security Administration says that if you’re under your full retirement age and won’t reach it this year, and are collecting benefits, then you can earn up to $21,240 in 2023 without jeopardizing any of your Social Security. But if you earn more than the $21,240 limit, you’ll lose $1 in benefits for every $2 over that amount.

Full retirement age is 66 for those born between 1943 and 1954, but it rises in two-month increments every birth year to age 67 for those born in 1960 and later. You can find your full retirement age at SSA.gov/benefits/retirement/planner/ageincrease.html.

In the year you reach your full retirement age, a less-stringent rule applies. If that happens in 2023 you can earn up to $56,520 from January to the month of your birthday with no penalty. But if you earn more than $56,520 during that time, you’ll lose $1 in benefits for every $3 over that limit. And once your birthday passes, you can earn any amount by working without your benefits being reduced at all.

Wages, bonuses, commissions and vacation pay all count toward the income limits, but pensions, annuities, investment earnings, interest, capital gains and government or military retirement benefits do not. To figure out how much your specific earnings will affect your benefits, see the Social Security Retirement Earnings Test Calculator at SSA.gov/OACT/COLA/RTeffect.html.

It’s also important to know that if you do lose some or all of your Social Security benefits because of the earning limits, they aren’t lost forever. When you reach full retirement age, your benefits will be recalculated to a higher amount to make up for what was withheld.

For more information on how working can affect your Social Security benefits, see SSA.gov/benefits/retirement/planner/whileworking.html.

Be mindful of taxes, too

In addition to the Social Security rules, you need to factor in Uncle Sam. Because working increases your income, it might make your Social Security benefits taxable.

Here’s how it works: If the sum of your adjusted gross income, nontaxable interest and half of your Social Se­curity benefits is between $25,000 and $34,000 for individuals ($32,000 and $44,000 for couples), you have to pay tax on up to 50% of your benefits. Above $34,000 ($44,000 for couples), you could pay on up to 85%, which is the highest portion of Social Security that is taxable. About a third of all people who get Social Se­curity have to pay income taxes on their benefits.

For information, call the IRS at 800-829-3676 and ask them to mail you a free copy of publication 915, “Social Security and Equivalent Railroad Retirement Benefits,” or you can see it online at IRS.gov/pub/irs-pdf/p915.pdf.

In addition to the federal government, 12 states — Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia — tax Social Security benefits to some extent, too. If you live in one of these states, you’ll need to check with your state tax agency for details.

Jim Miller is a contributor to NBC-TV’s “Today” program and author of “The Savvy Senior.” Send your questions to Savvy Senior, P.O. Box 5443, Norman, OK 73070; or visit savvysenior.org.

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