The SRS earnings test is the federal retirement system’s quiet little surprise. Most federal employees don’t know it exists until their first month of SRS arrives reduced — or doesn’t arrive at all. The test works exactly like the Social Security earnings test, with one important wrinkle I’ll explain in a moment.

For 2026, the annual exempt amount under the SRS earnings test is $23,400. Earned income above that triggers a $1 withholding of SRS for every $2 above the limit, until the SRS is wiped out for the year.

The mechanics of the 2026 limit.

The exempt amount in 2026 is $23,400. The withholding rate is 50% — meaning $1 of SRS is withheld for every $2 of earned income above the limit. The annual limit is set by the Social Security Administration using a formula tied to average wage growth, and OPM applies it as published.

Important: the SRS earnings test only applies through the year you reach full retirement age under Social Security. The full retirement age for most current FERS employees is 67. In the year you reach 67, the limit and the rate change — but for the SRS, the benefit has already ended at 62, so this rarely matters in practice.

What counts as “earned income.”

The SRS earnings test uses the same definition as the Social Security earnings test. Earned income includes:

  • Wages from a job (W-2 income).
  • Net self-employment earnings.
  • Certain other compensation for personal services, including fees, commissions, and similar pay.

Notably, it does not include:

  • Investment income (interest, dividends, capital gains).
  • Pension payments, including the FERS annuity itself.
  • TSP withdrawals and IRA distributions.
  • Rental income in most cases.
  • Social Security benefits.

This is the wrinkle. A retiree who relies on a paycheck is going to see the SRS shrink. A retiree who relies on TSP and investment income is not — even if their total income is much higher. The test is on earnings, not total income.

The 2026 numbers in plain dollars.

If your monthly SRS is, say, $1,000 — $12,000 a year — and you earn $33,400 from a post-retirement job in 2026, you are $10,000 over the $23,400 exempt amount. The withholding is 50%, so $5,000 of SRS would be withheld for the year. That’s roughly $416 per month in SRS gone for the months you were subject to the test.

Earn $50,000 from a post-retirement job and the math is more punishing: $26,600 over the limit, $13,300 of SRS withheld. If your annual SRS was only $12,000, the entire annual SRS is gone, and you may have additional withholding carried into later months.

How withholding is reported.

OPM uses the earnings estimate you provide on the retirement application to set initial SRS withholding. Each year, you can update your earnings estimate. OPM reconciles actual earnings against withholding, so over-withholding in one year can come back to you as a refund or a smaller withholding in the next year.

This is one of the rare federal benefits where being honest about your post-retirement plans — rather than optimistic — works in your favor.

The exception for the year you turn 62.

The SRS earnings test does not apply in the month you reach full Social Security retirement age or later. Since the SRS itself ends at 62, this is more of a logical footnote than a practical one. But it is the reason that the highest-earning year for an SRS retiree is often the year they turn 61, and the year they turn 62 the SRS is gone regardless.