Micah Shilanski 00:04
You’ve retired, you’re getting that pension check coming in, and then one day you get a letter from OPM that says, Oops, you are paid a little too much, and they want their money back. If you want to know how to avoid this, then stay tuned for this FERS Federal Fact Check. Hi, I’m Micah Shilanski with Plan Your Federal Retirement, and we have a good question that came in today, there’s so many great questions that come in, but we’re talking about Chris’s question today, how about that special retirement supplement, that FERS supplement in the earnings limitation that it has, let’s find out what Chris’s question is. If you have a birth month of January or April, and the year you obtain 60 age 61 you exceed the earnings limit, how is the overage paid since you will have obtained 62 by the reporting time of the special retirement supplement has ended. Thanks for the great podcast, and I’m claiming 1 million Federal Employees reached right along with you. Well, thanks, Chris. I appreciate that. We love doing the podcast, as you know, so smash that like button, send this out, we want to help another 1 million Federal Employees with their retirement, we can only do it with your help and your great questions. All right, Chris, so the answer your question is, it’s pro rata, that’s the way that this is going to work, right? Same as if you were to retired mid year, if I retired mid year, and I know the earning limitation changes for my simple math, we’re going to call $20,000 is our earnings limit, yes I know it’s not exactly that, but it’s going to make my math super easy, and what the earnings limitation says if you retire to get your full pension coming in, which is great, in addition to your pension, if you’re eligible for that special retirement supplement, that FERS supplement, it’s tied to Social Security, and if you claim Social Security early a 62 to your FRA your full retirement age, it has an earnings limitation right along with it, which is around $20,000 and what that says is, for every $2 you make, about 20 grand, they’re gonna take $1 of your Social Security away, Micah, this isn’t Social Security, it’s a special retirement supplement, I know, but since it’s tied to Social Security, it’s calculated the same way, with the same earnings limitation, so you get your pension, which doesn’t count include as earnings, what is earnings? Go get a job, you work, self employed, it’s not rental property, it’s not your permanent fund dividend, you live in Alaska, it’s not your TSP withdrawal, it’s not rental income, it’s earned income if you go get a job after retire, so if you go get a job and you’re making $30,000 a year, and their earnings limitation is $20,000 a year, then you have $10,000 of excess earnings, they’re going to take two of every $1 above and so half that’s a $5,000 reduction in special retirement supplement, of course, that’s an easy example, because we’re going to give it for an entire year, but what happens when your birthday is mid year, or you retire mid year, and then answer we’re going to go back to is pro rata. So in our example, I’m going to make to a simple example, then we can go to yours, let’s say if you retire, or your birthday is going to be in June, what’s going to happen? So if you retire in June, or if your birthday is and this is the last day of the month, then what happens is your earnings limitation, instead of being 20,000, can’t do my fingers right, instead of being $20,000 because six months has passed, now your earnings limitation is $10,000 and they’re only going to include earnings that you’ve earned after that date of retirement, right? So now if you get your last paycheck, by the way, two weeks after you retired, that doesn’t count in your earnings limitation, because the money was earned in that previous cycle, you’re just now getting paid for it, it doesn’t count against you, but if you go get another job, it would, and Chris that going to bring us to your point of the pro rata side about how does it shut off, it’s going to shut off that same way, so even though your birth date is going to be, let’s say that January through April, and the reporter period is afterwards, you’re still subject to it in that period in time. So I like to disclose what your income is going to be, most of my clients don’t like that love letter from OPM that says, Oops, you’ve made too much money now give us it back, so I like to be a little bit closer to that, especially for tax reasons. So Chris, I hope this answers your question, if you need help with more of a detailed example of saying, hey, this is my exact numbers, this is how we need to break it down, etc, then give us a call, reach out on our website, fill out the form, sit down with one of our financial advisors, and let’s see if we can answer your questions directly for you. Until next time Happy Planning!
