Q. I retired last April 2016 as a FERS U.S. Postal Service employee with 32 years at 56 (my minimum retirement age) years old with the special retirement supplement. Am I subject to the Social Security earnings limit of $16,920 in 2017 until age 62? I will not be working through full retirement age (66) for Social Security purposes. Will my Social Security benefit become less than what it is projected to be now since I am not putting money into Social Security?
If a start monthly TSP payments, should I elect fewer than or more than 10 years? I realize there is a tax advantage; but I don’t quite understand which one to set up. Will these TSP payments, which are ordinary income (for tax purposes), be a part of that $16,920 Social Security earnings limit?
Also, I will be selling my home for sale by owner at an approximate value of $230,000. Since the sale is not earned income, will I have to pay income taxes on the sale since I will be acting as agent?
A. Your FERS SRS will be subject to the earned income offset as if it were a Social Security benefit. Whether, or not your Social Security benefit will be less than currently estimated when you claim it will depend upon your particular earnings history. The formula used to compute your benefit is based on your highest 35 years of inflation adjusted earnings.
While the withholding requirements are different for TSP payments that are expected to continue for more than 10 years, the tax implications are basically the same. All money distributed from your TSP account (except for tax-exempt combat pay or Roth TSP money) will be added to your tax return as ordinary income. You will find more information about the withholding requirements in this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.
Your TSP payments will not be counted as earned income for the purpose of computing any offset.
Your question about the taxability of the proceeds from the sale of real estate is a question for your tax accountant.
