Understanding the earnings test for both social security retirement benefits and the FERS special retirement supplement (SRS)
For both Social Security and the FERS special retirement supplement (SRS), there is an earnings test that can reduce or eliminate either benefit. For social security, it applies to those who claim social security before their full retirement age. As the SRS is for feds who retire before with an immediate pension before reaching age 62, the earnings test applies to any federal retiree who is in between their minimum retirement age and 62. If they didn’t retire under special provisions, the earnings test applies no matter what age they are collecting the SRS benefit.
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Here is information about both types of earnings test.
The FERS Supplement
The earnings income limit for the SRS is $21,240 for 2023 and will increase to $22,320 in 2024. For earned income (which does not include pension or investment income) that is over the limit, the SRS benefit is reduced $1 dollar for every $2 that exceeds the limit. This is important to remember for federal retirees who plan to work in the private sector after leaving federal service before the age of 62. Also, the SRS stops when the federal retiree is eligible for Social Security retirement benefits (62) but that does not mean the FERS annuitant has to start collecting Social Security at that age.
Social Security Retirement Benefits
For social security, the earnings test has a different threshold. Like the SRS, $1 dollar is withheld for every $2 dollars of earned income that is between $19,560 and $51,959.99. For earned income over $51,960, $1 dollar is withheld for every $3 above that amount. It is important to remember that the earnings test applies to those collecting spousal benefits as well. The maximum taxable earnings for Social Security is currently $160,200 and will increase to $168,600 in 2024. Unlike the SRS, the money is withheld and not lost. The funds will be distributed back to the recipient proportionally upon reaching their full retirement age, which is when their social security benefits are recalculated.
Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.