By Jay Shareef ChFEBC℠ and Chris Rhoads ChFEBC℠
For federal employees, the Special Retirement Supplement, also known as the SRS, is a useful tool that bridges the income for employees who retire after meeting their years of service requirement but are not yet eligible for Social Security. For employees under the federal employee retirement system, commonly called FERS, you receive SRS as a stand-in for your Social Security benefit, in addition to your basic annuity, if you retire before the age of 62.
SRS calculations can be complicated and oftentimes confusing for FERS employees who are planning for retirement. Additionally, it is important to understand how your SRS will be impacted by other income as you begin transitioning into retirement. Below, we have outlined a few major points that address SRS basics.
A federal employee must have at least 30 years of creditable service and meet their minimum retirement age in order to qualify for the SRS. You may also qualify to collect the SRS if you are 60 years old and have at least 20 years of creditable service. As a reminder, an individual’s minimum retirement age depends on their birth year and varies between the ages of 55 and 57.
For Special Provisions employees, such as firefighters, air traffic controllers, or police, eligibility looks a little different. In some cases, the SRS can kick in at age 50 with 20 years of service. Veterans and returned Peace Corps Volunteers can apply their years of service to their creditable service requirement as well.
Who Doesn’t Qualify?
Deferred retirees or disability employees don’t qualify for the SRS. Additionally, employees who retire under the MRA+10 provision do not qualify to receive the supplement.
While not exact, a FERS employee can estimate what their SRS will be using their years of creditable service and what their age-62 Social Security benefit will be. If you retire at age 60 after 30 years of service and your Social Security benefit is projected to be $3,000 per month, the SRS calculation would look something like this:
- 30/40 = .75
- .75 x $3,000 = $2,250
This means that you will have approximately $2,250 in supplemental income until age 62.
Keep in mind that the SRS is set from the time you retire until you start collecting Social Security, meaning there are no cost-of-living adjustments to the SRS. The supplement is also considered taxable income.
Additionally, if you are planning on turning your hobby into a post-retirement career, remember that the SRS is subject to the earnings test. Specifically, this means that for every $2 you earn above the annual earnings limit, your SRS will be reduced by $1. The earnings limit for 2021 is $18,960. Income subject to the earnings limit includes income reported on a W-2 or earned through self-employment. It does not include investment income, rental income, or retirement account distributions.
We’re Here For You
SRS is designed to build a bridge between retirement and collecting Social Security benefits for federal employees so that they can enjoy their retirement without worrying. However, if you are planning on starting a new career or your own business, you should consult with a financial advisor to see how your SRS will be impacted. Working with Certa Advisors can help you design a wealth management strategy that will allow you to maximize your SRS benefit. If you don’t already have an advisor helping you do that, reach out to us at (301) 798-5250 or schedule a phone call now.
Jay Shareef is vice president, financial advisor, federal benefits consultant, and co-founder at Certa Advisors. As a U.S. Army veteran, Jay is passionate about helping federal employees create a bulletproof plan for retirement and navigate the often confusing and complicated federal benefits landscape. He spends his days educating and providing clients with unbiased insurance benefits and retirement strategies to help his clients create guaranteed income for life. As a problem-solver and trustworthy resource, Jay always puts his clients and their needs first so they can find financial peace of mind. He holds the Chartered Federal Benefits consultant (ChFEBC℠) credential. To learn more about Jay, connect with him on LinkedIn.
Chris Rhoads is a co-founder and vice president of Certa Advisors. As a registered investment advisor and independent financial professional, Chris is committed to helping his clients in retirement and he takes a holistic approach to financial planning that includes insurance and risk management, investments and wealth management, retirement income planning, and estate and tax planning. He is a Chartered Federal Employee Benefits Consultant (ChFEBC℠) and he is currently pursuing the Chartered Financial Consultant® (ChFC®) designation through the American College of Financial Services. Chris has been married to his wife Tia since 2009 and they live in Frederick, MD together with their two young daughters. In his free time, Chris enjoys traveling, watching sports, and being active in causes he cares passionately about. To learn more about Chris, connect with him on LinkedIn.