Is Working after Retirement Worth the Costs?

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By on July 12, 2018 in Q&A, Retirement with 0 Comments

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Q. How many people know that there is an earnings limit on their pension if they retire under FERS? It’s my understanding that if you plan to retire after 30 years and at your full retirement age of 55 or 56 and keep earning money so that you do not have to dip into your TSP too soon, think again. Is it true that the earnings limit is under $16,000 per year, and if you go over that, you must pay $1 back for every $2 you go over the limit?

A. Your conclusions are close, but not entirely accurate. Close may not be suitable enough when determining what you want your retirement to look like, so let’s iron this out a bit. 

According to the Office of Personnel Management (OPM) “Information for FERS Annuitants” booklet (Section 8, Employment in the Private Sector) your outside employment will not affect your FERS pension. 

However, you are partially correct. It’s not your pension that could get reduced. Your FERS pension/annuity does not receive a haircut due to additional earnings after retirement. Instead, it is the Special Retirement Supplement (SRS) “bridge payment” that would be prone to taking a hit!

Special Retirement Supplement

If you are a FERS employee and you’re receiving SRS benefits, those benefits are payable from the date you retire until age 62. It approximates the amount of Social Security benefit you earned while working as a FERS employee. 

Since the SRS approximates Social Security benefits, it is subject to some of the same rules. The Social Security Administration (SSA) puts a limit on income until you reach your full retirement age. That range is 65-67 years of age depending on when you were born. Therefore, because the SRS (in this case) is treated the same as a Social Security benefit, it can be reduced or eliminated if you exceed the earnings limit.

The limit for earnings before impacting either SSA or SRS payments is $17,040 in 2018. The $2 to $1 aspect you mentioned is correct. Once the $17,040 limit is reached, the SRS benefit is reduced by $1 for every $2 earned (over $17,040) in 2018. 

Example

A retired FERS employee is receiving $1,000 per month from the SRS benefit. They decide to take a job outside the federal government, earning $25,040 annually. Since this amount exceeds the limit, they will experience an SRS benefit reduction of $4,000 for the year or approximately $333 per month. ($25,040 – $17,040 = $8,000. $8,000 ÷2 = $4,000. $4,000 ÷12 = $333). 

This means the original SRS payments of $1,000 per month will be penalized down to a real benefit of $667 per month ($1,000 – 333 = $667).

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. Silverlight Financial, Infinity Financial Services and its affiliates do not provide tax, legal or accounting advice. This material is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Securities offered through Infinity Financial Services, member FINRA, SIPC. Third party posts have not been reviewed by Infinity Financial Services. For a list of states in which I am registered to do business, please visit www.silverlightfinancial.com.

Silverlight Financial donates free/no obligation Federal Retirement Readiness Reviews. These reviews culminate with a no cost phone consultation with founder, Randy Silvey. To personally request your FRRR email: [email protected]

© 2018 Randy Silvey. All rights reserved. This article may not be reproduced without express written consent from Randy Silvey.

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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 14 years, he’s been educating and guiding Feds in pursuing wealthier retirement lifestyles. Randy can be reached at 816-524-1515, [email protected] or visit his website at www.silverlightfinancial.com. Securities offered through Infinity Financial Services. Member FINRA/SIPC.

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