The Social Security Earnings Test

By on June 9, 2016 in Current Events, Retirement with 271 Comments

 

The Social Security earnings test will affect any Social Security recipient from the age of 62 until they reach their Social Security Full Retirement Age (FRA).

There is also an earnings test on the FERS Special Retirement Supplement that applies to FERS retirees between their FERS Minimum Retirement Age and the age of 62.

For every dollar earned above the earnings test amount, there is a reduction to an individual’s FERS Supplement or Social Security.

The tables below show the Social Security Full Retirement Age and the FERS Minimum Retirement Age.

Full Retirement Age for Social Security

Year of Birth Full Retirement Age
Before 1938 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943 – 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

 

Minimum Retirement Age for FERS

Year of Birth Minimum Retirement Age
Before 1948 55
1948 55 and 2 months
1949 55 and 4 months
1950 55 and 6 months
1951 55 and 8 months
1952 55 and 10 months
1953 – 1964 56
1965 56 and 2 months
1966 56 and 4 months
1967 56 and 6 months
1968 56 and 8 months
1969 56 and 10 months
1970 and later 57

 

So, if an individual was born in the year 1954, they would face an earnings test, on either their FERS Supplement, or their Social Security for a period of ten years (between the ages of 56 and 66).

Let’s define what is meant by the word “earnings”. Earnings refer to what is known as “earned income”, as opposed to “ordinary income”. In other words, it is money you make by working; investments, pensions, etc. are not considered earnings for the purpose of the test. An easy way to define earned income for the purpose of the earnings tests is gross wages and net self-employment income.

The earnings test that applies to the FERS Supplement is the same as the one that applies to Social Security benefits for those Social Security recipients from the age 62 of up to the year they reach their full retirement age. The 2016 earnings test amount is $15,720 ($1,310 per month).

Sally is a Social Security recipient who is age 62 and will turn 66 (her full retirement age) on October 15, 2018. She has been subject to this earnings test from the time of her FERS retirement at her Minimum Retirement Age of 55 years and 10 months, and will remain subject to it through the end of December 2017. For every $2 she earns above the earnings test (which is adjusted annually by inflation), her SS benefit will be reduced by $1.

The second level applies to Social Security recipients in the year in which they reach their full retirement age. The 2016 earnings test amount is $41,880 ($3,490 per month).

Bill is a Social Security recipient who is age 65 and will turn age 66 (his full retirement age) on September 21, 2017. He will be subject to the first earnings test (described above) through December of 2016. Beginning in January of 2017, through the end of August 2012 he becomes subject to the higher earnings test. During that period of time, for every $3 he earns above the earnings test amount, his SS benefit will be reduced by $1. On September 1, 2017 Bill is no longer subject to any earnings test.

The monthly earnings test amounts apply only in the year in which an individual applies for Social Security. If, for example, an individual began collecting Social Security at the age of 62 in July of 2016, their 2016 earnings test would be $1,310 per month for the remainder of the year.

John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. The book is written in an easy to understand question and answer format and covers all areas of federal benefits from the perspective of an employee at various stages of their career. Order your copy at shoplrp.com.

© 2016 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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