On October 14, Social Security released its numbers for 2027. Most of the coverage is about the 3.6% cost-of-living adjustment. But if you’re a federal employee planning to retire before 62 and keep working, a different number matters more to you: $25,560.
In my work as a financial planner for federal employees, the FERS Supplement earnings test is one of the most misunderstood rules I see. It catches people every year, usually right after they’ve accepted a second-career job. Here’s what changed for 2027 and how to plan around it.
The 2027 Numbers
Here’s what the Social Security Administration announced for 2027:
- Cost-of-living adjustment: 3.6%
- Earnings test limit, under full retirement age: $25,560 (up from $24,480)
- Earnings test limit, the year you reach full retirement age: $67,920 (up from $65,160)
- Maximum wages taxed for Social Security: $192,300 (up from $184,500)
One quick clarification before we go further: your FERS Supplement does not get the 3.6% COLA. The Supplement looks like Social Security, and it’s calculated from your Social Security earnings, but it’s paid by OPM as part of your FERS benefit. It’s not Social Security. What it does share with Social Security is the earnings limit.
Why the Earnings Limit Hits Your FERS Supplement
If you retire before 62 and receive the FERS Supplement, the Supplement is subject to an annual earnings test. It uses the same limit as Social Security’s under-full-retirement-age test. For 2027, that’s $25,560.
For every $2 of earned income over that limit, your Supplement is reduced by $1.
The key word is earned. Only two things count:
- Wages from a job
- Net earnings from self-employment
These do not count toward the limit:
- Your FERS annuity
- TSP withdrawals
- Social Security benefits
- Interest and dividends
- Rental income (unless it’s a business)
- VA disability compensation
- Military retired pay
So you can draw from your TSP, collect rent on a property, and earn interest on savings without touching your Supplement. It’s paychecks and self-employment income that trigger the reduction.
A Real Example: The $40,000 Job
Let’s say you retire at your Minimum Retirement Age and take a $40,000-a-year job in 2027.
- $40,000 − $25,560 = $14,440 over the limit
- $14,440 ÷ 2 = $7,220 reduction to your Supplement for the year
- That’s about $600 a month
The reduction can’t take your Supplement below zero, but it can wipe out a large share of it.
And here’s the part that surprises people: unlike Social Security’s earnings test, where withheld benefits are factored back in later, Supplement reductions are gone for good. You don’t get that money back at 62.
That doesn’t mean you shouldn’t work. Sometimes the job is still worth it. Sometimes a part-time role that keeps you under the limit is the better deal. The point is to run the numbers before you say yes.
When the Reduction Hits
The Supplement earnings test runs on a delay. Each spring, OPM mails Form RI 92-22, asking you to report the prior year’s earnings. For 2027 earnings, you’d get that form in spring 2028, and any reduction would run from July 2028 through June 2029.
That delay is why people get blindsided. They take the job in 2027, nothing changes for over a year, and then the Supplement drops.
One helpful detail for the year you retire: only earnings after your annuity starts count. Your last federal paychecks don’t count against the limit.
Who’s Exempt
If you retired under the special provisions (law enforcement officers, firefighters and air traffic controllers), you’re exempt from the earnings test until you reach your MRA. After that, the same rules apply.
And for everyone, the FERS Supplement stops at 62, whether you’re working or not.
One More Number: The Wage Base
Social Security tax (6.2%) applies to wages up to $192,300 in 2027, up from $184,500. For most retirees this won’t matter, but it’s worth knowing if you’re a higher-paid fed still working or have a working spouse.
Final Thoughts
The 3.6% COLA gets the headlines, but for federal employees retiring before 62, the $25,560 earnings limit can have a bigger effect on your income. If you’re planning a second career after you retire, run the earnings test before you take the job. A few minutes of math can save you thousands, and it may change which job makes the most sense.
If you’re a federal employee within 12 months of retirement, or already retired, with $1 million or more invested, book a free 15-minute Fit Call to see if we can help: https://app.hawsfederaladvisors.com/whatservicemakessense
Dallen Haws, CFP®, is the founder of Haws Federal Advisors, which helps federal employees plan their retirement. This article is educational only and is not tax, investment or legal advice. HawsFederalAdvisors.com