If you’re working for a paycheck and taking Social Security benefits, here’s some news you can use.

This week, The Social Security Administration made its big pay raise announcement. The nation’s 60 million Social Security recipients will all get a 3.6% cost of living increase in their benefits for 2012, the first such increase since 2009.

Here’s the dope:

•You can take reduced benefits at age 62, but the earnings limit for workers who are younger than “full” retirement age (age 66 for people born in 1943 through 1954) will be $14,640, or $1,220 per month, up from $14,160 this year, or $1,180 monthly. You lose $1 from benefits for each $2 earned over $14,640.
•The earnings limit for people turning 66 in 2012 will be $38,880 without losing benefits, up from $37,680. You lose $1 from benefits for each $3 earned over $38,880 until the month you turn 66.
•There is no limit on earnings for workers who are “full” retirement age or older for the entire year.
•It is important to note, though, that these benefit reductions are not truly lost. Your benefit will be increased at your full retirement age to account for benefits withheld due to earlier earnings, according to SSA.
I find it confusing. But the math matters for lots of retirees who are working and relying on both sources of income. And there are plenty, with more on the way.

According to the 2011 EBRI Retirement Confidence Survey, many workers are planning to rely on income from employment to support them in retirement. Three-quarters of workers say that employment will provide them (and their spouse) with a major (24 percent) or minor (53 percent) source of income in retirement (77 percent total, up from 68 percent in 2001. Full details of the 2011 Retirement Confidence Survey are here.

Delayed gratification. One of the most important retirement decisions you will make is when to begin receiving Social Security benefits. For most people, it pays to delay receiving Social Security benefits until at least their full retirement age. (For boomers, that’s 66 to 67.) While the Social Security program lets you tap into payments as early as age 62, it doles out full benefits at age 66 and increases payouts for those who wait to age 70. Individuals can pop up their payments by 7% to 8% each year until age 70. For more, go to ssa.gov.

Show me the money. Even though many financial planners and retirement pros counsel holding up on taking benefits, nearly three-quarters of individuals dip into payouts before age 65, according to a recent study from the Government Accountability Office. (To read the full-blown 79-page report, Retirement Income: Ensuring Income throughout Retirement Requires Difficult Choices, Click here.)

And the number of Americans choosing to take Social Security at 62 — currently the youngest age allowed — is going up. In 2009, 42% of 62-year-olds claimed benefits, up from 38% in 2007, according to economists at the Brookings Institution in Washington, D.C.

Why? Job loss is the culprit, according Economists Courtney C. Coile and Phillip B. Levine, authors of Reconsidering Retirement: How Losses and Layoffs Affect Older Workers (Brookings Institution Press.)

There are other reasons to tap in early, too. Your savings/investments may have taken a hit during the recession. Or you’re worried that lawmakers will soon increase the retirement age required to draw on Social Security or reduce benefits.

Nonetheless, if you’re relying on cash flow from Social Security and supplementing that with part-time paid work, you need to be aware of the SSA’s earnings limits to avoid any surprises.

Run your numbers. For help with figuring out when to take Social Security, you might check out the AARP Social Security Benefits Calculator. It shows you what will happen if you work and claim Social Security benefits at the same time. The calculator proclaimed I would get maximum benefits if I claim Social Security at 70 versus my full retirement age of 67. The difference between receiving benefits at age 62 and age 70 was nearly $1,000 a month.
There’s a section that explains how to maximize your benefit if you’re married, too. In my case, my husband is older, so he should apply at 70 for his own Social Security payment, and then when I’m 67, I apply for spousal benefits. At 70, I apply for my own. I think I have that straight. The calculator provided the specific monthly benefits.

What if I claim and keep working? “If you claim and work before age 67, your benefits may be reduced or withheld. However, your benefits will be returned to you after age 67,” the calculator explained. You can click on an interactive chart and see what happens to your earnings when you claim earlier or later while you work.

It’s an educational calculator. This is meant to give you a sense of what might be best for you. You still need to do a plan that’s best for your situation. (For my full review of the calculator, click here.)

. To learn about great jobs for retirees, check out my column on AARP. Follow me on Twitter, @KerryHannon