Disability Retirement

Welcome, good question, I recently read about this with those OPM articles but they leave you wondering what you actually just read? The annuity should be restored at a certain point, the OPM have their special formula. You should be ok though, just don't go above the 80%, and besides you have the IRA to enjoy as well! Wages & certain 1099 R's would only apply to the 80% figure of what your former position currently pays. I never worked again

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What Does The Term "Earned Income" Mean?
1. Any salary or pay you received working for someone else (including overtime, vacation pay, bonuses, and
severance pay, etc.)
2. If you are self-employed, any net profit you made from working or managing your own business.
3. Deferred income (income you earned but didn't receive during this calendar year).
4. If you are reemployed in Federal service, the gross income before your employing agency offsets your salary.

file:///home/chronos/u-15a08f437b2f7b4472274f3cb7bc10de57d9ae89/MyFiles/Downloads/RI30-002_January2012.pdf

*NOTE: This is an old form which instructs users not to submit if you have no income. Now if you don't return the form, they mess with you!

Edited by user Tuesday, August 17, 2021 8:39:31 PM(UTC)  | Reason: Not specified

First of all, Disibility retirement means very different things for different people. Everyones situation is extremely different and unique. As to your question, and assuming you are not on Social Security disability, still qualify as being disabled, and are not reemployed in the Federal Gov; here is some insight.

The type of income that apply to the FERS 80% income limit is most often found on a W-2; in Box 3 (Social Security Wage) and/or Box 5 of a W-2 (Medicare Wages). Or your personal income if you are self Employed. Most other types of income, not from Earned WAGES, do not count toward the FERS income limit; including rental property, IRA, 401k, and inheritance (there is an entire detailed list).

Going over the 80% income limit for any particular year is not recommended, because you will lose monthly disability payments starting June 30th of the year following the year you reported on. And not see them again until after the year on July 1st (paid the following month) that you under-report your wages. (Ex. Over 80% wage reported for tax year 2021, lose disability payments starting June 30th, 2022). (Ex. Under 80% limit reported for tax year 2024, gain disability payments starting July 1st,2025).

And additional loses include; loss of OPM health care coverage, optional vision, dental, life insurance coverage. As well as loosing out on a year (1%) that would have counted toward a year worked for your age 62 retirement re computation.

These loses also make reemployment in Federal service very unattractive.

If you are fortunate enough to work, here are some helpful hints:

1. 401k and IRA deductions still count toward your 80% limit (Not in Box 1, but still in Box 3 and 5)
2. Health care, HSA, and FSA deductions DO NOT COUNT toward your 80% limit. (Not in Box 3 and 5)

Edited by user Thursday, August 26, 2021 5:58:36 AM(UTC)  | Reason: Spelling

That's a handy list, TheRealOrange! Thanks for sharing, helpful for all of us.

For ET1, did you mean Medicare wages box 5 (which represents gross earnings minus any non-taxable income)? I ask because SS wages box 3 is capped at a certain amount... so you can make "too much" money but your box 3 won't go above a certain amount; it's currently capped at $142,800. Now I realize that's a high number and most likely above anyone's 80% threshold, but for accuracy purposes don't we mean box 5?

Can you share your source? I'd love to understand and read more.