Understanding the FERS Earnings Test

Sep 4, 2019 | Retirement, Retirement Income

One benefit enjoyed by federal employees is the ability to retire and claim their annuity payments after reaching 30 years of service and their minimum retirement age (56 or 57 for most FERS current employees). For many individuals this could translate into an earlier retirement than most workers in the public sector.

However, there is a potential downside to this early retirement. Those who earn above the annual earnings limit will have money withheld from their annuity supplements until age 62. And, if Social Security is claimed at age 62, some money will be withheld from those payments until the retiree reaches his or her full retirement age according to that agency (66 or 67 for current workers).

If you work during these time periods, both the OPM and Social Security will examine your earnings. While earnings limits can and do change, just to give you an idea of those limits we’ve included the 2019 earnings limits here:

  • From your FERS minimum retirement age until your Social Security full retirement age, the earnings limit is $17,640. This means your annuity supplement or Social Security will be reduced by one dollar for every two dollars you earn above the limit.
  • Then, for the year in which you reach full retirement age according to Social Security, the reduction drops to one dollar for every three dollars you earn above $46,920.
  • Beginning in the month you reach Social Security’s full retirement age, and going forward, there will be no more reductions in payments no matter how much you earn.

Keep in mind that withholding of Social Security payments isn’t actually a loss of benefits. Once you reach full retirement age, your benefit payment will be recalculated to include the previously withheld amount.

The earnings limit only applies to earned income, and some types of income will be excluded. For more information on withholding from FERS annuity supplements and Social Security benefits, please schedule a meeting with us so that we can help you learn what to expect when you retire.

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