Retirement & Financial Planning Report

Many federal employees who retire from the government continue to work, at least on a part-time basis, and need to be aware of a provision in law that affects how much you can earn through wages or self-employment and still receive a Social Security benefit. 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 – currently it’s 66 – your Social Security benefit will be reduced by $1 for every $2 you earn over the limit, which is $18,960 in 2021. 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, $50,520 in 2021, until you reach that age. There won’t be any limit on your earnings beginning with the month in which you reach full retirement age.

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If you are a FERS employee who is receiving the special retirement supplement, that benefit is payable from the date you retire until age 62. It approximates the amount of Social Security benefit you earned while a FERS employee. However, because it is treated the same as a Social Security benefit, it can be reduced or eliminated if you exceed the earnings limit.

FYI. If you retire mid-year, and have earned more than the Social Security earnings limit, there’s a special first-year rule covering that. You can receive an unreduced SRS payment for any whole month you are retired regardless of your earnings in that calendar year.

The rules are identical for CSRS employees who retire and are eligible for a Social Security benefit. However, that benefit will also 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.

Note: Lump-sum payments for your unused annual leave do not count against the limits. The Social Security earnings limit only applies to earnings from wages and self-employment.

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