Working After You Retire Examples

Example 1 - FAC-based earnings limitation:

When Belinda retired in June 2006, ORS determined that her final average compensation (the average of her highest three years of consecutive earnings) was $45,000. She's thinking about going back to work in September 2008.

We increase Belinda's FAC by 5% each year after her retirement effective date. 

	2ND YEAR EARNINGS LIMITATION $ 45,000.00 Initial FAC + 2,250.00 Add 5% of $45,000 47,250.00 Increased FAC ÷ 3 1/3 FAC $15,750.00 Year 2 earnings limitation  (beginning Jan 1, 2007) 3rd YEAR EARNINGS LIMITATION  $47,250.00 Previous year increased FAC + 2,362.50 Add 5% of $47,250 49,612.50 Increased FAC ÷ 3 1/3 FAC $ 16,537.50 Year 3 earnings limitation  (beginning Jan 1, 2008)

If Belinda earns less than $16,537.50, she's eligible for her full pension. Her annual pension must be reduced by one dollar for each dollar she earns over her earnings limitation.

Example 2 - Social Security-based earnings limitation: 

Juanita, who was born in 1947, is thinking about returning to work as a part-time teacher aide. The job pays $8,000. 

According to the Social Security Administration, Juanita's full retirement age (FRA) is 66, and the social security earnings limit in 2008 for someone who is below normal retirement age is $13,560.

Assuming that 1/3 of Juanita's final average compensation is less than $13,560 (see example above; we count the greater of the two statutory limits), she can earn up to $13,560 and still draw her full pension.

Example 3 - Disability earnings limitation:

Teresa is a 52-year-old disability retiree who has been offered a job that pays $12,000 per year. 

When Teresa retired under a disability two years ago, ORS determined that her final average compensation (the average of her highest three years of consecutive earnings) was $36,000. Her pension equals $13,500 a year. 

	2ND YEAR EARNINGS LIMITATION $ 36,000.00 Initial FAC + 720.00 Add 2% of $36,000 36,720.00 2nd year increased FAC +734.40 Add 2% of $36,720 = 37,454.40 3rd year increased FAC

The difference between Teresa's adjusted FAC of $37,454.40 and her annual pension of $13,500 is $23,954.40. Assuming she has gained approval of the retirement system board, she can earn up to that amount-her earnings limitation-without affecting her pension. For each dollar she earns over her earnings limitation, her pension will be reduced by a dollar. 

Note: If Teresa hadn't become disabled, she would have met the eligibility requirements for a full retirement at age 55. Beginning January 1st of the year she reaches age 55, the regular age and service (nondisability) limitation applies.