Most federal employees know the FERS Retirement Supplement stops at age 62. Fewer realize it can shrink years before that — the moment you take on part-time work, consulting, or a second career that pays too well.
The mechanism is called the earnings test, and it catches a lot of early retirees off guard because the rules are borrowed almost exactly from Social Security, but applied to a benefit most people think of as separate from Social Security entirely.
The 2026 Limit
For 2026, the earnings test threshold is $24,480. If your earned income for the year stays under that amount, your supplement is unaffected — full stop. Cross it, and OPM reduces your supplement by $1 for every $2 you earn above the limit. Earn enough over the threshold, and the supplement can be reduced to zero for that year.
What Counts as “Earned Income” — and What Doesn’t
This is where the confusion usually starts. The test only looks at wages and net self-employment income. It does not count:
- TSP withdrawals
- Your FERS pension itself
- Social Security (once you’re receiving it)
- Investment income, dividends, or interest
- Rental income
- A spouse’s earnings
A rough rule of thumb: if the income is subject to FICA or self-employment tax, it almost certainly counts toward the limit. If it isn’t, it almost certainly doesn’t. That distinction matters most for retirees weighing how to structure post-retirement income — for example, choosing to lean on TSP withdrawals rather than a part-time job if preserving the full supplement is a priority.
The Timing Lag Nobody Mentions
The reduction isn’t applied in real time. OPM mails an earnings report each spring, and if your prior year’s earnings exceeded the limit, the reduction to your supplement doesn’t start until July of the following year — roughly 12 to 18 months after you actually earned the money. That lag cuts both ways. It gives you a window to plan around a high-earning year before the reduction hits. But it also means the consequences of a decision made today may not show up in your check for well over a year, which makes it easy to lose track of what triggered what.
What This Looks Like in Dollars
Here’s how the math plays out for three common post-retirement income scenarios, assuming a $1,650/month ($19,800/year) supplement:
Scenario 1: Part-Time Retail or Seasonal Work — $15,000/year
Under the $24,480 limit. No reduction. Full supplement continues.
Scenario 2: Consulting Income — $40,000/year
Earnings exceed the limit by $15,520. Half of that ($7,760) is deducted from the annual supplement. A $19,800 supplement drops to $12,040 for the affected year — a reduction of nearly 40%.
Scenario 3: A Second Full-Time Job — $70,000/year
Earnings exceed the limit by $45,520. Half of that is $22,760 — more than the entire $19,800 supplement. The supplement is reduced to zero for that year.
In each case, the FERS pension itself is untouched. Only the supplement is at risk.
Does It Come Back?
The reduction applies to that specific benefit year and isn’t retroactively repaid — you don’t get the withheld amount back later just because a future year comes in under the limit. But the test resets annually: if your earnings drop below $24,480 in a later year (and you haven’t yet turned 62), your full supplement can be reinstated for that year.
Who’s Exempt
Special-provision retirees — law enforcement officers, firefighters, and air traffic controllers — are exempt from the earnings test until they reach their regular FERS Minimum Retirement Age (typically 57), even if they retired earlier than that under their special provisions.
Why This Matters for Planning, Not Just Awareness
The earnings test isn’t a reason to avoid working in retirement — for many retirees, some post-retirement income is exactly the plan. But it changes the math on how that income should be structured:
- A part-time role that stays under $24,480 preserves the supplement entirely.
- A lump-sum consulting contract that pushes you well over the limit may cost more in lost supplement than it’s worth, once you run the numbers.
- Drawing from TSP instead of taking on paid work — even temporarily — sidesteps the test altogether, since TSP withdrawals aren’t earned income.
- Because of the 12–18 month lag, a high-earning year early in retirement can produce an unexpected pay cut well after the fact, so it’s worth flagging on a calendar rather than assuming “no news is good news.”
Retirees who model this before choosing a retirement date — rather than after taking on work and discovering the reduction on a July annuity statement — are in a much better position to decide whether the extra income is actually worth it.