If you retire under FERS before age 62 and qualify for the FERS annuity supplement, going back to work can reduce — or even eliminate — that supplement. The mechanism is called the earnings test. OPM uses the Social Security earnings-test limit and generally follows its definition of earnings, but applies those rules to the separate FERS annuity supplement. For 2026, the earnings test threshold is $24,480. If your earnings exceed that amount, your FERS supplement is reduced by $1 for every $2 you earn above the limit.
That sounds straightforward. But there are several details that can make a significant difference: what counts as earnings, when the reduction actually occurs, what happens if your income changes from year to year, and why some retirees aren’t subject to the test right away.
How the FERS Supplement Earnings Test Works
The basic formula is:
Annual earnings − $24,480 = excess earnings
Then:
Excess earnings ÷ 2 = reduction in your FERS supplement
The reduction applies only to the FERS annuity supplement. It does not reduce your regular FERS pension.
Here’s an example.
Suppose your FERS supplement is $1,650 per month, or $19,800 per year, and you earn $40,000 from a job after retirement.
Your excess earnings would be:
$40,000 − $24,480 = $15,520
Your supplement reduction would be:
$15,520 ÷ 2 = $7,760
Instead of receiving $19,800 in FERS supplement payments, you would receive approximately $12,040 after the earnings-test reduction.
Your regular FERS pension is unaffected.
Now suppose you earn $70,000.
$70,000 − $24,480 = $45,520
$45,520 ÷ 2 = $22,760
Because the calculated reduction exceeds your $19,800 annual supplement, the supplement can be reduced to zero.
Again, your regular FERS pension itself is not reduced.
What Counts as Earnings?
This is where the earnings test is often misunderstood.
The test generally looks at compensation for work you perform — primarily wages and net earnings from self-employment.
Examples of income that generally counts include:
- Salary or wages from a job
- Overtime
- Bonuses
- Certain other compensation for work
- Net earnings from self-employment
- Pay for work performed in the United States even when that employment isn’t covered by Social Security
OPM’s instructions make an important point: income doesn’t necessarily have to be subject to Social Security taxes to count. If it is actually compensation for services you performed or net earnings from self-employment, it generally needs to be considered under the earnings test. On the other hand, many common sources of retirement income aren’t treated as earnings. These generally include:
- Your FERS pension
- TSP withdrawals
- Social Security benefits
- Interest
- Dividends
- Capital gains
- Most rental income that isn’t considered self-employment income
- Inheritances
- Insurance proceeds
- Unemployment compensation
Your spouse’s income also doesn’t count against your individual FERS supplement earnings limit. A useful rule of thumb is this: compensation for work you perform generally counts. Retirement income and most passive investment income generally do not. That distinction can become important when deciding whether to return to work after retiring.
The Reduction Doesn’t Happen Immediately
One of the most confusing parts of the FERS supplement earnings test is the timing. OPM generally looks backward at your earnings from the previous calendar year.
Retirement Services mails the Annuity Supplement Earnings Report, Form RI 92-22, to applicable retirees in April and May. Retirees use the form to report wages and self-employment income from the previous tax year. If your earnings exceeded the applicable limit, the resulting reduction generally applies to your supplement in the following year. Under the statutory process, the adjustment takes effect July 1. That means there can be a substantial delay between earning the income and seeing the effect on your supplement.
This lag can make the earnings test easy to overlook. Income you earn this year may not affect your supplement until well afterward, so retirees should track their earnings as they occur rather than assume that an unchanged monthly payment means they are safely below the limit.
What If You Retire During the Year?
The rules can become more complicated during the year you retire. OPM’s earnings-report instructions distinguish between income earned before and after retirement and, where applicable, before and after reaching your Minimum Retirement Age.
For example, income earned before you became subject to the supplement earnings test isn’t necessarily treated the same as wages earned afterward. This is one reason someone retiring in the middle of a high-income year shouldn’t simply look at the total wages shown on a tax return and assume that entire amount will count against the supplement.
Special-Provision Retirees Get an Important Exception
Certain FERS employees can retire earlier than most federal workers and receive the supplement before reaching their regular Minimum Retirement Age. These include certain:
- Law enforcement officers
- Firefighters
- Air traffic controllers
For qualifying retirees under these special provisions, the earnings test generally doesn’t apply until they reach their applicable FERS Minimum Retirement Age. That can be a valuable planning window.
A qualifying law enforcement officer or firefighter, for example, might retire in their early 50s, receive the FERS supplement and take another job without having the supplement reduced under the earnings test during those pre-MRA years. Once the retiree reaches MRA, however, the earnings test can begin to apply.
Does the Supplement Come Back If Your Earnings Drop?
Potentially, yes. The earnings test is applied year by year. A reduction caused by high earnings in one year does not permanently reduce your FERS supplement.
Suppose your earnings are high enough one year that your supplement is reduced to zero. If your earnings later fall below the applicable limit while you are still otherwise eligible for the supplement, the earnings-test reduction can end.
But don’t assume a previously reduced supplement will automatically correct itself. OPM instructs retirees whose supplements were reduced in a previous year to continue reporting their earnings even when their current earnings fall below the exempt amount. If a supplement needs to be reinstated, OPM may require information supporting the lower earnings. Also remember that the FERS supplement itself ends at age 62, regardless of whether you actually claim Social Security at that point.
Why This Matters for Retirement Planning
The earnings test can make the decision to work after federal retirement more complicated than simply comparing a new paycheck with your retirement income. Consider three retirees, each receiving a $1,650 monthly FERS supplement.
Retiree A: Part-Time Job
Earned income: $20,000
Because earnings are below the $24,480 limit, there is no earnings-test reduction.
Annual supplement: $19,800
Retiree B: Consulting Work
Net self-employment earnings: $40,000
Excess earnings:
$40,000 − $24,480 = $15,520
Supplement reduction:
$15,520 ÷ 2 = $7,760
Remaining annual supplement:
$19,800 − $7,760 = $12,040
Retiree C: Full-Time Job
Earned income: $70,000
Excess earnings:
$70,000 − $24,480 = $45,520
Potential reduction:
$45,520 ÷ 2 = $22,760
Because that exceeds the retiree’s $19,800 annual supplement, the supplement could be reduced to zero.
The important point isn’t necessarily that Retiree C shouldn’t take the job. A $70,000 salary may obviously be worth considerably more than the FERS supplement being lost.
But the reduction should be part of the calculation before accepting the job.
TSP Withdrawals Don’t Count as Earnings
This creates another potentially important distinction for retirees who need additional income before age 62. A withdrawal from your TSP isn’t earned income for purposes of the FERS supplement earnings test.
For example, suppose you need an additional $20,000 during retirement. Earning that money through employment could potentially affect your supplement depending on your total earnings for the year.
Taking $20,000 from the TSP would not itself count toward the earnings limit. That doesn’t necessarily mean withdrawing money from the TSP is the better financial choice. TSP withdrawals can have income-tax consequences and reduce the amount remaining invested for later retirement. But for purposes of the FERS supplement earnings test specifically, TSP withdrawals themselves aren’t counted as earnings.
The FERS Supplement and Social Security Earnings Tests Aren’t Identical
The FERS supplement earnings test is based heavily on Social Security’s earnings-test rules, but retirees shouldn’t assume every Social Security rule carries over to the FERS supplement.
One major difference is age. Social Security has separate earnings-test rules for the year a beneficiary reaches full retirement age, and the Social Security earnings test eventually disappears at full retirement age.
The FERS supplement doesn’t last that long. It generally ends at age 62, regardless of when you claim Social Security. As a result, Social Security’s special full-retirement-age earnings limit isn’t a separate higher limit you can use for the FERS supplement. For FERS retirees, the relevant annual earnings limit for 2026 is $24,480.