Retirees receiving a Social Security benefit are always checking to see if their income has exceeded the earnings limit. The same is true of FERS retirees who are receiving the special retirement supplement (SRS), which approximates the Social Security benefit they earned while covered by FERS, and is payable until age 62 when they become eligible for a Social Security benefit. Each group is concerned because exceeding the limit will cause their Social Security benefit or SRS to be reduced or eliminated.
If you are under the Social Security full retirement age (65 and 10 months), the reduction is $1 for every $2 in earnings above the limit, which is $12,960 in 2007 and will be $13,560 in 2008. In the year you reach your full retirement age, it’s $1 for every $3 above a different limit, $34,440 in 2007 and $36,120 in 2008. Beginning in the month in which you reach full retirement age, there is no limit. You can earn as much as you want.
What most retirees don’t realize is that the earnings limit applies only to earnings from wages or self employment. Income from other sources, such as your annuity, investment earnings, interest and capital gains don’t count.
Further, there’s a special rule for those of you who retire before the end of a calendar year. It’s called “the first year rule.” No matter how much you earn before you retire from your job, you’ll still get a full Social Security check or SRS payment for any whole month in which you are retired.
Of importance to those who retire at the very end of the year is the fact that the Social Security Administration doesn’t count income earned in that year but paid out in the following year against the earnings limit. In effect, income counts when it is earned, not when it is received. Examples of what wouldn’t count against the earnings limit include a final salary check, a bonus, or a lump-sum payment for unused annual leave.
