Will Part-Time Income in Retirement Lead to Social Security Penalties?

I am planning to retire from federal service soon and will being collecting Social Security as well as my federal pension. I also plan to work part time. Will the income from working penalize my Social Security income?

Q: I am a 62-year-old FERS employee with 31 years of federal service. I am planning to retire in 6 months. I will start collecting my Social Security and Federal pension, and I will also go to work with my brother in a part-time capacity. My part-time income would be $32,000 per year. All three incomes would keep me financially comfortable, however, I recently heard from a co-worker that if I work part-time while collecting Social Security income that I will be penalized. Is this true?

A: Your co-worker may very well be correct. It depends on a few factors.

If you meet the following 3 criteria, you will likely be subject to SSA benefits reduction:

  1. You have not reached your full retirement age (you can find this age on your annual SSA statement).
  2. You earn more than the “yearly earnings limit” (for 2016 that limit is: $15,720).
  3. You received Social Security retirement income benefits.

The reduction is $1 of SSA benefits for every $2 you earn above the earning limit. In your case, that would be a reduction in SSA benefits of $8,140 per year. ($32,000 – $15,720 = $16,280 ÷ 2 = $8,140).

Note: After you reach your full retirement age, SSA will not penalize your income, no matter how much you earn.

I know this is not the answer you were looking for, however, with a couple of small adjustments, you may still be able to retire and work for your brother. If you are interested in receiving some thoughts and insights on your situation by a Federal Retirement Specialist, I invite you to take advantage of my office’s free (no obligation) Federal Retirement Readiness Review.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  Investing involves risks, including the loss of principal.  No strategy assures success or protects against loss.

Securities offered through LPL Financial, member FINRA/SIPC.  

About the Author

Randy Silvey is the published author of You FIRST, Federal Employees Retirement Guide, one of the bestselling books of its kind on Amazon and Kindle. For over 18 years, he’s been educating and guiding Feds in pursuing wealthier retirement lifestyles. Randy can be reached at 816-524-1515 or visit his website at www.silverlightfinancial.com. Securities offered through Infinity Financial Services. Member FINRA/SIPC.