Understanding the earnings limit for Social Security and the FERS Supplement can help you make smarter decisions as you transition into retirement. In 2025, that magic number is $23,400 — and crossing it can result in reduced benefits if you’re under 62. Image: Lane V. Erickson/Shutterstock.com
By: Dallen HawsIf you’re a federal employee planning to retire before age 62, there’s one benefit you’ve probably heard a lot about — the FERS Supplement. It’s designed to act like a bridge, covering some of what you’d receive from Social Security until you become eligible for the real thing at 62. However, there’s a lot to unpack when it comes to working in retirement, the 2025 earnings limit, and a growing concern in the federal community: a potential legislative change that may eliminate or restrict the FERS Supplement altogether by 2028.
Let’s dive into what you need to know — both about how the current rules work and what might be changing in the near future.
What Is the FERS Supplement?
If you retire under the Federal Employees Retirement System (FERS) before age 62 with an immediate retirement (i.e., you meet your age and service requirements), you may be eligible for the FERS Annuity Supplement. This benefit is designed to bridge the gap between your federal retirement and the time you become eligible for Social Security at age 62.
It’s based on your Social Security earnings from federal service only and is paid monthly in addition to your FERS basic pension. However, there’s a catch — if you earn too much from work after retirement, this supplement can be reduced or even eliminated.
Warning: Potential Elimination of the FERS Supplement by 2028
Before we go too deep into our discussion, it’s important to notice potential changes that might take place. In recent years, several federal budget proposals have included language that would eliminate the FERS Supplement for employees who retire after a certain date — with some proposals suggesting the change could take effect as early as 2026 or 2028. These proposals typically aim to reduce government spending on retirement benefits and would likely still allow current retirees, and those who retire before the cutoff, to keep their supplements. In most cases, special provision employees (like law enforcement officers and firefighters) would be exempt from the change and continue to receive the benefit.
As of now, no legislation has officially passed, and the supplement remains available in 2025. However, the fact that this proposed change continues to appear in multiple budget drafts signals that it is a serious possibility. Federal employees planning to retire in the next few years should be aware of the risk, even though nothing is guaranteed. Until a law is passed, eligibility for the FERS Supplement remains unchanged — but it’s wise to start preparing now in case the benefit disappears for future retirees.
The 2025 Earnings Limit: $23,400
Each year, the Social Security Administration sets an earnings limit — the amount of earned income (wages from a job or self-employment) you can make before your benefits begin to decrease.
In 2025, this limit is $23,400.
This same earnings limit applies to both:
- The FERS Supplement (until age 62)
- Social Security benefits (if you start before your Full Retirement Age, or FRA)
How the Reduction Works
Here’s the formula:
For every $2 you earn over the $23,400 limit, your benefit is reduced by $1.
Example 1: Reducing the FERS Supplement
Let’s say you’re a federal retiree receiving the FERS Supplement and you earn $33,400 from a part-time job in 2025.
- You earned $10,000 over the limit.
- Your supplement will be reduced by $5,000 for the year.
If your annual FERS Supplement was $12,000, after the reduction, you’d only receive $7,000 that year.
Now imagine you earn $63,400 — that’s $40,000 over the limit. Your supplement would be reduced by $20,000 — which would completely wipe out a supplement that pays less than that annually.
Important: The reduction never affects your FERS pension.
Your basic pension is not subject to this earnings test, no matter how much you earn in retirement.
What About Social Security?
Once you turn 62, your FERS Supplement stops, and you may choose to claim Social Security. If you do so before your FRA, the same earnings limit applies — $23,400 in 2025 — with the same reduction formula:
$1 reduction for every $2 over the limit.
However, in the year you reach your FRA, the reduction changes slightly — you’re allowed to earn more before benefits are reduced, and the reduction rate softens. Once you reach full retirement age, this reduction no longer applies, regardless of your income.
Special Provision Employees: A Unique Twist
If you’re a special category employee — such as a law enforcement officer, firefighter, or air traffic controller — and you retire before your Minimum Retirement Age (MRA) (typically around 56–57 depending on birth year), there’s an added benefit.
The earnings limit doesn’t apply to your FERS Supplement until you reach your MRA.
Example:
- You retire at age 55 with full special provision eligibility.
- Your MRA is 57.
- You can earn unlimited income from work between ages 55–57 without reducing your FERS Supplement.
- After 57, the $23,400 earnings limit kicks in.
What Income Counts Toward the Limit?
Not all income affects your FERS Supplement or Social Security benefits. The earnings limit only applies to “earned income”, which includes:
- Wages from employment
- Net earnings from self-employment
But does NOT include:
- Your FERS pension
- TSP withdrawals
- FERS Supplement payments themselves
- Investment income (e.g., dividends, interest)
- Rental property income (unless it’s your primary business)
This means if your additional income comes from TSP distributions or passive investments, you don’t have to worry about the earnings limit.
How Reductions Are Applied
Every year, the Office of Personnel Management (OPM) will send you a form asking for your earned income from the previous year. Based on that information, they’ll adjust your FERS Supplement starting in July of the following year.
If your earnings drop in a future year, and you fall back below the $23,400 limit, your FERS Supplement can be reinstated, provided you’re still under age 62.
Should You Avoid Working?
Not necessarily. If you’re earning enough to offset the reduced benefits, you may still come out ahead financially. But it’s critical to plan strategically and understand how your income affects your overall retirement picture.
Final Thoughts
Understanding the earnings limit for Social Security and the FERS Supplement can help you make smarter decisions as you transition into retirement. In 2025, that magic number is $23,400 — and crossing it can result in reduced benefits if you’re under 62.
If you’re planning to work during retirement, consider:
● Timing when to start Social Security or receive the FERS Supplement
● Structuring your income to stay below the limit (if possible)
● Delaying Social Security until full retirement age if you’re still earning significantly
With the right approach, you can navigate these rules confidently — and make your retirement both productive and financially rewarding.
Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.
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