Earnings limit and special retirement supplement


Q. I will be eligible to retire Dec. 4 with both minimum retirement age and years of service under FERS. I would like to wait until Jan. 31 to retire to complete a project. I will have 240 hours of annual leave going into 2013. The combination of my lump-sum payment for my annual leave and my January wage earnings would exceed the Social Security earnings limit for 2013. Since the Social Security earning limit is the same as the FERS annuity supplement earnings limit, would this make me ineligible for the special retirement supplement for 2013?

If I put all of my January wage earnings for 2013 into the Thrift Savings Plan and just receive the lump-sum payment, which by itself is less than the earnings limit, would I be able to collect the special retirement supplement for the rest of 2013 when I retire at the end of January?

A. In general, the earnings limit is based on gross earned income, before deductions for things like TSP contributions, so you can’t reduce the income counted for the limit by deferring it into the TSP. Amounts you are paid after retirement, but that were earned before retirement, are usually considered special payments, which do not count against the Social Security earnings limit. The rules can be complicated, though, and you should consult a qualified tax preparer — preferably the one who will actually complete and stand behind your tax return for the year — before proceeding.


About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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