Ask The Experts: Retirement

By Reg Jones

Special category employee retirement and new income

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Q. I am 51 and retired with 22 years with the Federal Bureau of Prisons. In our agency, we could retire at age 50 with 20 years of service or at any age with 25 years of service. Our maximum retirement age is 57. I thought I understood from retirement training that in our special circumstances, earnings rules did not apply until we reached age 57, or when we would have been forced to retire. In other words, after early but full eligibility retirement, we could work and we would not be penalized or limited with new income, in that it would negatively affect our current retirement annuity. That includes a Social Security supplement that law enforcement retirees receive. A retired co-worker/friend says I am wrong about that. He says we actually are limited until age 57, at which time we can earn as much as we are able without it affecting our retirement and Social Security. Please advise. I am being offered a job with which I would really like to be involved, but I am concerned that it will pay me too much if my co-worker is correct.

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Earnings limit

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Q. I’m getting close to my FERS retirement, and I have a second job that I love. If I refuse my special retirement supplement from the Office of Personnel Management, will I still be financially penalized from my FERS retirement for making too much money from my second job? If so, how can I still continue to work without being penalized?

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Special retirement supplement

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Q. I retired under FERS with over 30 years of service in May 2009 and began receiving the special retirement supplement. The SRS was eliminated when I exceeded the Social Security earnings limit working in the private sector for the next three years. I fully retired in May 2012, after I again exceeded the $15,000 earnings limit for 2012. Do I need to contact Social Security to let them know I am no longer working? If so, is there a form I need to submit? Also, when can I expect my SRS to be reinstated? I won’t be 62 until May 2015.

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Earnings limit

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Q. I retired from federal government Dec. 31 2011; signed up for Social Security on Jan. 24, 2012; and started drawing benefits in February 2012. I did not go back to work until July 2012 and worked until December. In some of those months, I exceeded the $1,200 threshold. Does Social Security average the 11 months, or will they penalize me for each month separately?

A. The earnings test is applied when you earn more than the annual limit during a calendar year. In 2012 that limit was $14,640.

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Resuming special retirement supplement payments

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Q. I retired after more than 30 years of service (FERS) and started receiving the special retirement supplement and my annuity as expected. I went to work and exceeded the earnings test so SRS went away. I will be out of my job shortly and would like to receive SRS again until I am eligible for full payments when I turn 62 in February 2014. I am assuming I can start this up again. Yes? What would the effective date be (date unemployed, one month later, etc.)? I also expect that if it starts again, it would not fall under the first-year rule so it is subject to the earnings test. Is that true, as well?

A. Once your earnings have fallen below the Social Security earnings limit, the special retirement supplement will be reinstated. The reinstatement is automatic. However, it only happens after the Office of Personnel Management has done a file match with the federal income tax return that shows you are now qualified for a partial or full reinstatement.

P.S. You’re right. It wouldn’t fall under the first-year rule.

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Voluntary vs. mandatory retirement

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Q. I am eligible for retirement March 21 as a law enforcement officer under FERS. I will have 20 years of law enforcement experience and am age 56. Because I turn 57 in October (seven months later), I will be forced to retire Oct. 31.

Aside from the extra approximately $8.56 per month I will get in my annuity for each month I stay after March and the benefit of having a full salaried job for seven more months, is there any advantage to me retiring under mandatory retirement age versus voluntary?

The combination of my projected annuity and special retirement supplement provides me with a net of approximately $500 per month less than what I currently take home.

My intention is to get a part-time job to bridge the $500 gap not to exceed the maximum allowed wage of $14,640 so as not to affect my Social Security.

Also, I heard from a retirement counselor who said if you wait until you are forced out, you might qualify for unemployment benefits depending on your state.

A. While the final decision is up to your state, it’s unlikely that you’d be eligible for unemployment benefits.

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Special retirement supplement

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Q. I am a FERS retiree who was RIF’d into retirement in October 2009 with 27 years of service. I reached my minimum retirement age of 56 on Jan 4. I understand I will receive the special retirement supplement for first year regardless of my employment income. Will that continue for the 12 calendar months from February through January 2014? Or is it only until Dec. 31, which would be 11 months?

After that first year, I understand that the Office of Personnel Management will evaluate my previous year’s income (I assume total 2013) and then cut off my supplement or at least adjust it based on how much over the $14,160 earnings limit I made. I will have made more than three times the $14,160, so I assume, in my case, they will cut me off. Will they cut me off for 12 months and evaluate me again on Jan. 1, 2015, looking at my 2014 income? Or will they look at each month of 2014 to see if I exceed the prorated allowable income during 2014?

A. Start your search for answers at www.socialsecurity.gov/retire2/rule.htm.

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First year rule

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Q. I understand that if you exceed the special retirement supplement earnings limit for the year you retire, you will not be eligible for the special retirement supplement for the rest of that year. Is this correct?

I will be eligible to retire Jan. 22, 2015. I would like to carry into the 2015 year 240 hours of annual leave. There are two pay days in 2015 prior to Jan. 22. Most likely, the lump-sum payment for 240 hours of annual leave and January wage earnings will exceed the special retirement supplement earnings limit for 2015. If I put all of my January 2015 earnings into the Thrift Savings Plan and only collect the lump-sum payment, which by itself is less than the earnings limit, would I be eligible to get the special retirement supplement for the rest of 2015?

A. Relax. You’ll be covered by the so-called “first year rule.” That’s a special rule that applies to earnings during the first year of retirement.

This special rule lets the Social Security Administration pay a full Social Security check for any whole month they consider you retired, regardless of your yearly earnings. If you will be under full retirement age for all of that year, you are considered retired in any month that your earnings are $1,220 or less and you didn’t perform substantial services in self-employment. It also applies to those who have reached full retirement age and are considered retired in any month that your earnings are $3,240 or less and you did not perform substantial services in self-employment.

Note: The dollar amounts cited above are for 2012. They will likely be higher when you retire.

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Earnings limit

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Q. I am a retired Marine veteran with 27-plus years of service. I have been employed since in 2004 (the same year I retired from the Marine Corps). I am employed with the Federal Bureau of Prisons.

Am I allowed to draw Social Security benefits since I retired from the military? And can I still work at my present employment while collecting Social Security? I enlisted in the Marine Corps in November 1975 and retired in February 2004. I am 55 years old.

A. While you could apply for a Social Security benefit at age 62 while still working, you would be subject to the Social Security earnings limit.

That limit would reduce your Social Security benefit by $1 for every $2 you earned above the annual limit. In 2012, that limit is $14,640.

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Offset payment denied

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Q. Since retirement and receiving pension from CSRS Offset at age 59, the offset was applied at age 62. Can I be denied payment of the offset amount by Social Security? Denial was based on my current self-employment with an income higher than the minimum level for early retirement. I am qualified for other retirement benefits at age 66.

A. Yes, if you exceeded the Social Security annual earnings limit. It reduces your Social Security benefit by $1 for every $2 you earn above the limit, which is $14,640 in 2012. If you had reached your full Social Security retirement age, the reduction would have been $1 for every $3 above a different limit, $38,880.

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Special retirement supplement

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Q. I am a foreign service officer and plan to retire at age 51 under FSPS (similar to FERS). FSOs may retire as early as age 50 if they have at least 20 years of service. I had understood that the Social Security earned income limit (currently $14,160) would be applied to my annuity supplement (like FERS supplement) after my first year of retirement.

However, another FSO who is already retired told me that her tax accountant told her that income over the $14,160 earned income limit does not reduce the FSPS annuity supplement until the retiree reaches 56 years old. In essence, then, a retiree receiving the FSPS annuity supplement should be able to earn as much as he wants in another job without fear of reducing their FSPS annuity supplement, as long as he is under age 56. Is this true? I cannot find confirmation of this information on any State Department or other federal government website. My retirement counselor at the State Department is not aware of this issue.

A. The special retirement supplement isn’t subject to the Social Security earnings limit, which only applies to earnings from wages or self-employment. The 2012 limit is $14,640.

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CSRS Offset

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Q. I retired as a federal employee in 2007. I took an early-out and am receiving my pension. I was CSRS Offset. I am working full time at a local school district and am 58 years old. The way I understand what I’ve read so far is that when I turn 62, using the formula that has been in your other responses, Social Security will be paying about $550 of my annuity payment.

I will have 28 years of Social Security payments when I reach 62. My Social Security benefit at that point, should I retire, will be 20 percent less than full payment minus the $550 that goes toward my annuity, plus I would be hit with a percentage for the windfall elimination provision? If that’s correct, it sounds as though it would be to my advantage to work until at least age 64, when I’ll have 30 years of paid Social Security, so as to not have to pay the windfall, or until full retirement at 66. Is that right?

A. There’s a calculator at www.ssa.gov/retire2/anyPiaWepjs04.htm that can help you determine the amount of the offset in your CSRS annuity that will occur when you are eligible for a Social Security benefit at age 62.

Three things to keep in mind: First, that reduction will happen even if you don’t apply for a Social Security benefit.

Second, the reduction will be based solely on the Social Security benefit you earned while a CSRS Offset employee.

Third, if you are still working and under full Social Security retirement age, your Social Security benefit will be subject to the annual earnings limit. If you exceed that amount, your Social Security benefit will be reduced by $1 for every $2 above the limit. In 2012, that limit is $14,640.

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Social Security computation

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Q. I’m a CSRS/FERS hybrid federal retiree receiving Social Security and working part time. My earnings come close to but do not exceed the $14,000 limit. My employer withholds Social Security taxes from my earnings. Will my Social Security benefits ever increase because of my earnings? What if I earn in excess of the applicable yearly amount?

A. If you are under full Social Security retirement age, your Social Security benefit would be reduced by $1 for every $2 you earn through wages or self-employment. In 2012, that limit is $14,640. In the year you reach full retirement age, your benefit will be reduced by $1 for every $3 earned above a different limit. In 2012, that limit is $38,880. There won’t be any limit beginning in the month you reach full retirement age.

Even if you are subject to the earnings limit, the amount of Social Security benefit you are entitled to will grow every year based on your earnings and contributions to Social Security.

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Earnings limit

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Q. I am retired from the Postal Service. I am turning 66. If I pick up Medicare Part B, can I claim it on my taxes? How much in yearly salary can I earn if I go back to work?

A. If you have reached your full Social Security retirement age, there is no limit on the amount you can earn. However, if you were to return to work for the federal government, in most cases your salary would be reduced by the amount of your annuity.

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Social Security quarters

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Q. I’m 59 years old and have 38 years government service under CSRS. I have 39 quarters Social Security paid in. Do I only have to work one more quarter to qualify for Social Security by the time I’m 62? Someone told me I had to work so many quarters in the last 10 years.

A. You only have to have 40 credits under Social Security to qualify for a Social Security benefit at age 62. Just be aware that if you are still working when you apply for that benefit, it will be affected by the annual earnings limit, which will reduce that benefit by $2 for every $3 you earn above the limit. In 2012, that limit is $14,640. If you are retired, you’ll be subject to the windfall elimination provision, which will reduce but not eliminate your Social Security benefit if you have fewer that 30 years of substantial earnings under Social Security.

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CSRS Offset

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Q. I am under CSRS Offset. My retirement plan has always been to retire and get a non-civil-service job. My idea was that the CSRS, even Offset, pension would be my bread and butter and the other job, probably part time, would be a supplemental. What I have read about CSRS Offset seems to indicate that it won’t work. As of age 62, I will get some money from CSRS and some from Social Security. But if I am working, won’t that stop me from getting the Social Security?

A. If you are retired before age 62, when you reach age 62, your CSRS annuity will be reduced by the amount of Social Security benefit you earned while a CSRS Offset employee. If you receive earnings from wages or self-employment that exceed the annual Social Security earnings limit, your Social Security benefit will be reduced by $1 for every $2 you receive above the limit. In 2012, that limit is $14,640. In the year you reach your full Social Security retirement age, the reduction will be $1 for every $3 you earn above a different limit. In 2012, that limit is $38,800. There is no reduction beginning in the month you reach full retirement age.

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Air Reserve Technician and special retirement supplement

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Q. I am retiring with 30 years at age 56 as an Air Reserve Technician. I have been told that ARTs can make as much money as they want without affecting the special retirement supplement, because they are retired due to high year tenure. Is that true? Also, if an ART retires early, but is 56 and has 30 years in, can they make more than the $14,160 limit without losing their supplement?

A. Whoever told you that was mistaken. Only retiring law enforcement officers, firefighters and air traffic controllers can receive the special retirement supplement before they reach their minimum retirement age. However, that right ends the minute they reach their MRA. Then they and everyone else who retires under FERS are subject to the Social Security earnings limit, which in 2012 is $14,640.

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Earnings limit

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Q. As a CSRS Offset employee for retirement purposes, what are the dollar limits on either federal employment or private employment after retirement and receiving your pension? Are there tax implications?

A. If you return to work for the federal government, in most cases your annuity will be reduced by the amount of your Social Security benefit. On the other hand, working in the private sector would have no effect on it. Note: When you are eligible for a Social Security benefit at age 62, two things will happen: First, your CSRS annuity will be reduced by the amount of Social Security benefit you earned while a CSRS Offset employee, whether or not you apply for that benefit. Second, if you were receiving a Social Security benefit, it would be subject to the Social Security earnings limit. Your benefit would be reduced by $1 for every $2 you received in earnings from wages or self employment that exceed the limit, which, in 2012, is $14,640.

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LEO retirement

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Q. I am a GS-1811 law enforcement officer in FERS who is scheduled for mandatory retirement in December 2013. If I retire then or, say, retire before 62 (in the event I get another federal position), is there an earnings test on the Social Security supplement payable to me before I reach 62?

A. If you retire before your minimum retirement age (not age 62), you’ll be able to earn as much as you want without it affecting your special retirement supplement. However, as soon as you reach your MRA, the earnings test will apply. MRAs range between 55 and 57 depending on your year of birth. In 2012, the earnings limit is $14,640.

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Social Security

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Q. I retired on an early-out offer on Dec. 31, 2011, with 29.5 years of service at age 52. As a self-employed individual, I am paying both the employer and employee share (slightly reduced) to Social Security. Assuming another 15 years of work, that’s a tremendous amount to be paying into a retirement system with little or no benefit. I also have quarters from pre-CSRS employment. What, if any, Social Security benefit can I receive down the road?

A. At age 62, you’ll be eligible for a Social Security benefit. Whether or not you apply for it at that time or wait until later is up to you. When you are retired and apply for that benefit, it will be based on your total years of Social Security-covered employment. However, because you are receiving an annuity from CSRS, a retirement system where you didn’t pay Social Security taxes, you’ll be affected by the windfall elimination provision. The WEP will reduce but not eliminate that Social Security benefit.

If you apply for that Social Security benefit before you retire, you’ll be subject to the Social Security earnings test. Your Social Security benefit would be reduced by $1 for every $2 you earned above the limit, which is $14,640 in 2012. In the year you reach your full Social Security retirement age, the limit changes and your benefit is reduced by $1 for every $3 over the limit ($38,880 in 2012).  There isn’t any limit after you reach your full retirement age. Note: The WEP will still apply if you have fewer than 30 years of substantial earnings under Social Security.

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