Some of you retirees have been wondering just how much you can earn through wages or self-employment and still receive a Social Security benefit. By law there are limits on how much you can earn, and the rules vary depending on your age.
If you are under full retirement age – which ranges from 65 to 67, depending on your year of birth – your Social Security benefit will be reduced by $1 for every $2 you earn over the limit, which is $12,960 in 2007. In the year that you reach your full retirement age, it will be reduced by $1 for every $3 you earn above a different limit, $34,400 in 2007. The good news is that there won’t be any limit on your earnings beginning with the month in which you reach full retirement age.
That’s all pretty straight forward. However, I’ve been getting a lot of questions from FERS employees who are planning to retire at the end of the year and are eligible to receive the special retirement supplement. The SRS approximates the amount of Social Security benefit they earned while covered by FERS. And it is payable from the date of retirement until age 62. However, because it is treated the same as a Social Security benefit, it can be reduced or eliminated if they exceed the earnings limit.
Because some of these employees will be receiving substantial lump-sum payments for their unused annual leave in the calendar year after they retire, they wonder if that money will count against the annual limit and reduce or eliminate the SRS. The answer is no.
As mentioned above, the only thing that the Social Security earnings limit applies to is earnings from wages and self-employment. Further, income only counts when it is earned, not when it is paid. And such things as annual leave and bonuses fall into that category.
One further piece of good news. If you retire mid-year, you will undoubtedly have earned more than the earnings limit. Don’t worry. There’s a special rule for you. You can receive an unreduced SRS payment for any whole month you are retired regardless of your earnings in that calendar year. Of course, the earnings limits will apply in the following calendar year.
While I have focused on the concerns of FERS employees, the rules are identical for CSRS employees who retire and are eligible for a Social Security benefit. Note: Their benefit will be affected by the windfall elimination provision, which reduces the Social Security benefit of anyone who has fewer than 30 years of substantial earnings under Social Security. But that’s a topic for another time.
