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For Some, Retirement Just Means a Different Kind of Work

One path to financial security is to continue earning money after your federal career ends.

What are you going to do after you retire? For some federal employees, the answer is, “I’m going to work!” If you’re fortunate to be eligible to retire from federal service in your 50s, you might be able to continue working for a decade or two. And bringing home a paycheck while you’re still in your “go-go” years could reinforce your financial security for your later “slow-go” and “no-go” years. 

Your earnings could allow you to delay withdrawals from your Thrift Savings Plan account so you don’t run the risk of depleting your balance too early. Or you might be able to delay claiming your Social Security benefit, increasing its value. Everyone has the same eight years, from 62 to 70, to file for Social Security. But there’s a 20% to 30% reduction to your benefit if you take it at 62, and a 24% to 32% boost if you wait until 70 to begin receiving it.

Retirement is a time when you can stop doing what someone else wants you to do and do what you want. So, if what you want is to keep working, but on your own terms, maybe that means starting your own consulting business or taking on a few paid assignments that can be completed in a short period of time. Or maybe you could become a coach or teach classes at the local community college. 

These things are all work, but as the saying goes, “If you love what you do, then you’ll never work a day in your life.” 

Earnings Limits

I’ve heard some people joke that when you retire from the federal government you’ll receive your retirement benefit “just for waking up.” Of course, you earned every dime of that benefit. And you can earn as much as you like in a post-retirement job without risk of losing your benefits under either the Federal Employees Retirement System or the Civil Service Retirement System. There is no offset because of earned income to your government pension benefit. It is paid every month regardless of whether you have stopped working or have a lucrative second career. 

There are a few exceptions, however. One applies to disability retirees. If you earn more than 80 percent of the current value of your final salary as a federal employee, you run the risk of being deemed recovered and your disability terminated. It is important to report your earned income to the Office of Personnel Management and Social Security if you have returned to work while receiving disability retirement benefits.

Another exception applies to FERS retirees who are entitled to receive the FERS Special Retirement Supplement, which  represents what they would receive from Social Security as if they were eligible to receive benefits when they retired. The supplement is subject to an earnings limit patterned after the Social Security earnings test. For 2022, the limit is $19,560. For every two dollars earned over the annual limit the FERS supplement is reduced by one dollar.

The supplement is payable until age 62, so if your supplement has been terminated because you were making too much income to continue to receive it, it’s important to report to the Office of Personnel Management if you stop working while you’re still entitled to this benefit. 

If you claim Social Security retirement benefits, you might also find you have to pay some or all the money back if you return to work before your full retirement age and earn more than the annual limit. Just as with the FERS supplement, the earnings limit for 2022 is $19,560.

After you’ve retired from federal service or when your supplement stops at age 62, it might take you awhile to decide whether you want to return to paid employment. If so, it might be best to delay filing for Social Security until you make a decision or have reached your full retirement age—when the earnings limit goes away.

If you realize within a year of filing for Social Security that your earned income will exceed the limit, you can withdraw your application and pay back the amount you received up to that point. Later, you can reapply with a clean slate.

If it’s been more than a year since you applied for benefits, you can decide to suspend your benefits starting at your full retirement age. You can keep your benefits suspended until age 70, when you will be entitled to delayed retirement credits. If you work past your full retirement age, it might be worth adding delayed credits to increase your lifetime benefit.