Real Question from a Federal Employee
I’m currently retired from the postal service and have been receiving postal supplements. At the age of 61. I will be working full time. I will be over the allowed reduction amount. However the same year I will turn 62. So my question is since my supplement stops at age of 62 and I’m over the same year. Will I still be penalized? I am not taking my social security until my FRA. I watched a video that said supplement is not the same as social security. I just wanted to know who OPM will reduce if it ends the same year and forms are not sent out to next year to record previous year earnings. Thank you for your time.
Does the Earnings Limit Still Apply When Your FERS Supplement Stops at 62?
For many federal retirees, one of the most common early‑retirement questions is how working part‑time, or even full‑time, affects their pension and FERS supplement. This is especially important for retired federal employees who are receiving the FERS supplement and considering earned income in retirement.
Understanding the FERS Supplement
Under the Federal Employees Retirement System (FERS), retirement income is generally built on three components: a FERS pension, Social Security, and the Thrift Savings Plan (TSP). The FERS supplement, sometimes called the “Social Security bridge,” is an additional benefit available to certain retirees who leave federal service before they are eligible to claim Social Security and is intended to approximate a portion of the Social Security benefit earned under FERS service.
You can get the supplement if you retire with an immediate, unreduced FERS pension. This usually means retiring at your Minimum Retirement Age (MRA) with at least 30 years of service, or at age 60 with at least 20 years, according to OPM’s FERS eligibility rules. Since the supplement is meant to act like a temporary Social Security benefit, it is also subject to an earnings test similar to Social Security.
The Social Security Earnings Limitation
The FERS supplement follows the same earnings limit as Social Security benefits before full retirement age, as required by law. In 2025, the earnings limit is $23,400 for people who have not reached full retirement age. If you earn more than this amount, $1 in benefits is withheld for every $2 you earn over the limit.
OPM uses a similar rule for the FERS annuity supplement: it is reduced by $1 for every $2 you earn above the Social Security earnings limit for that year. So, if your wages or self-employment income go over the limit while you receive the supplement, some or all of your supplement may be withheld during that time.
When the FERS Supplement Stops
The FERS annuity supplement ends when you become eligible for Social Security at age 62. OPM says the supplement will stop at the end of the month before you turn 62, no matter if you choose to file for Social Security then or not.
You do not have to claim Social Security when the supplement ends, and some retirees wait to increase their future benefit. However, even if you delay, the supplement stops before you turn 62, so it is important to plan for this change in income.
Timing, Retroactive Adjustments, and Notices
The supplement is not reduced for excess earnings during your first calendar year of receiving it. After that, OPM checks your earnings from the previous year against the Social Security earnings limit. Your supplement for the next year may be reduced based on this review.
If earnings exceed the limit, the supplement is reduced by 1 dollar for every 2 dollars of excess earnings, and OPM may later determine that the supplement was overpaid. In that case, OPM can contact the retiree and require repayment, which may be handled through a reduction in future FERS payments or other repayment arrangements.
Why Earnings Limits Matter for Retirees
For retirement planning purposes, what often matters most is net retirement income, how much actually arrives in your bank account after reductions and adjustments. Even “light” or occasional part‑time work can add up over the course of a year and may push earnings over the limit, especially if you work regularly during the year while receiving the supplement.
Retirees receiving the FERS supplement and considering work may want to:
- Monitor total earned income relative to the Social Security earnings limit for the year.
- Review annual updates to the earnings thresholds to stay up to date on changes.
- Confirm when their supplement will stop at age 62 and verify that OPM has discontinued it accurately.
Understanding these rules can help you make informed decisions about working in retirement and how it may affect your FERS supplement and overall retirement income.
Micah Shilanski (00:00)
Have you ever wondered if you’re gonna be penalized for working full-time in retirement? Well, if so, then stay tuned for this FERS Federal Fact Check. Hi, I’m Micah Shilanski from Plan Your Federal Retirement, and welcome to this FERS Federal Fact Check. Today we have a great question that comes in from Darryl. It’s a bit of a long question, so I’m gonna paraphrase some of this. Darryl says that he is currently retired from the United States Postal Service, and he’s receiving his pension plus a supplement.
At the age of 61 is when he retired, but he was working full time in the year. And his question is, am I going to be penalized because I was working full time while being retired, but I’m turning 62 later in the year? When does OPM know to stop the supplement, to reduce the supplement, et cetera? Daryl, that’s an excellent question. As you guys know, with most retired federal employees, you get that social security bridge, that FERS supplement, right? Remember your pension’s based on three things.
FERS pension coming in, Social Security and your TSB, your Thrift Savings Plan. But because you can retire before Social Security comes in, you’re eligible for that supplement. Now remember, you only get that supplement if you are retiring under the full un-reduced pension. Generally, MRA, Minimal Retirement Age in 30 years of service, or age 60 with over 20 years of service. So if you’re getting that supplement coming in, unfortunately, because it’s like a Social Security benefit, the Social Security earnings limitation kicks in.
That limitation from 2025 is $23,400. For every $2 you make above that 23,000, they take $1 of your supplement, or actually your social security, if you’re getting social security, away. So that’s that earnings limitation. So Darryl, will this apply to you? Absolutely it’s going to apply to you because you are getting that supplement and you’re working. Now, I can’t quite tell based on your question, how long have you been retired? There’s a little bit of a window when it may not apply.
but it looks like you’re working long enough where this is going to apply. Now the downside is they don’t know what your earnings are until one or two years after they’ve been reported. So let’s say you were retired all in 2025 and you were working in 2025 collecting your retirement check, your first supplement and a paycheck. Well, probably in 2027, maybe in 26 if they’re on the spot, but 26 or 27, OPM is gonna find out that you made excess earnings. They’re gonna send you a love letter.
that says you made too much money, they’re either going to reduce your pension dramatically to make up for it, or you could back pay the supplement, the choice is gonna be yours. So yes, that is going to happen. The second part of your question, do they turn the supplement off at 62? Absolutely, as soon as you’re eligible for 62, which is the month you turn 62, they are gonna be turning your fers supplement benefit off. That happens pretty automatically. I haven’t seen them continue that on.
In any cases, of course, that could always happen. So watch for that because if they do keep paying you, you will owe that money back. So why is this important to our listeners? Well, your net pension is what matters, right? We don’t care about the gross. We care about the net. How much are you going to take home? So really important to understand the supplement. If you go out and work part time, how much can you work and have good earnings before you get that limitation on your supplement? PRN, my nurses, this affects a lot. They’re like, oh, Mike, I’m going to go back to work two or three days a month. It’s not a problem.
They don’t realize that two or three days a month all of a sudden can be in excess of 23, $25,000 a year. And now they owe that money back to the government because they made excess earnings. So be really careful in understanding what that net pension is. Be careful in understanding what these rules are so you get all of the money you’re supposed to get in retirement. If you more questions like this, then make sure you hit the like button, hit the subscribe button, send this out to a friend and jump in and visit our website at planyourfuturetirement.com. Until next time, happy planning.
The content and plan your federal retirement is for general informational purposes only and should not be considered individualized advice. Investing involves risk, including possible loss of principal and past performance does not guarantee future results. Guests are not affiliated with CWM, LLC, Investment Advisory Services offered through CWM, LLC and SEC Registered Investment Advisor.
ABOUT THE AUTHOR
Micah Shilanski, CFP®, is a distinguished financial planner known for his deep commitment to providing exceptional advisory services to his clients. As the founder of Plan Your Federal Retirement, Micah has dedicated his career to helping federal employees understand and optimize their benefits to ensure a secure and prosperous retirement. His experience is widely recognized in the industry, making him a sought-after speaker and educator on financial planning and retirement strategies.
Micah’s approach is client-centered, focusing on creating personalized strategies that address each individual’s unique needs. His work emphasizes the importance of comprehensive planning, incorporating aspects of tax strategy, investment management, and risk assessment to guide clients toward achieving their financial goals.