Social Security Timing Strategies for the Federal Employee

Retirement Benefits Institute - Social Security CardsWhen planning for retirement, FERS federal employees depend on their federal pension, social security, and savings accounts such as their Thrift Savings Plan (TSP). A common question often asked is “Will Social Security be there for me in retirement?” The answer is yes, but the amount of Social Security you will receive is dependent on the age you choose to begin drawing these benefits. Below is important information you should consider as you are nearing retirement.

Currently, there are a staggering 81 withdrawal options for married filing jointly couples and 9 options for singles. You are first eligible to draw Social Security at age 62; however the benefit will be reduced by 25%-30%. At your Full Retirement Age (FRA – typically between age 66 and 67), you are eligible to receive 100% of your benefit. If you choose not to draw your social security at FRA, the benefit amount will increase by 8% per year until you reach age 70. The chart below provides Social Security retirement age options.

Retirement Benefits Institute - FRA Chart

Timing strategies are critical to maximizing your potential benefit. In this example referred to as file and suspend, we will look at Bob (the higher-earning spouse) and Sherry (the lower-earning spouse). Bob applies for benefits at his full retirement age and then suspends his benefits. This allows Sherry to begin drawing the spousal benefit while also allowing Bob’s benefit to continue growing until age seventy.

Retirement Benefits Institute - Spousal Benefits Example

Strategies such as these can be complex, and there are many rules that need to be considered to ensure maximum benefits. There are many options and permutations; we highly recommend seeking out a professional’s advice when considering your Social Security benefit options.

There are five major points to consider when making the decision of when to draw your social security: personal health, life expectancy, income needs, working after retirement, and survivor needs:

Personal health. Are you healthy enough to continue working past age 62?

Life expectancy. When looking at your family history do you expect to live well into your 70’s and 80’s?

Income Needs. Can you afford to delay social security until full retirement age and draw on outside assets as needed? Or will you need social security income at age 62?

Working after retirement. To make ends meet in retirement, do you need to pursue a job in the private sector? If so, this income has the potential to reduce your social security benefit. Please see our video Social Security Earnings Test to learn how.

Survivor needs. Will your spouse be solely dependent on your social security if you were to pass away? Plan to leave them the maximum benefit if at all possible.

As you have seen, there are numerous possibilities in drawing your Social Security benefit. These five points may seem simple, but how they fit into your overall financial picture can be complex and confusing. As with all retirement decisions, everyone has their own specific pros and cons to consider in determining the best strategy. Plan now to maximize this benefit and create for yourself a sound financial plan for retirement.

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Evaluating Your Retirement Needs:
The first step in planning for a sound financial picture in retirement is having a strong understanding of your Federal benefits.

Allow us to assist as you plan for retirement by requesting a No-Cost Federal Benefits Analysis. We will personally evaluate and discuss your individual requirements and assist you in understanding the retirement benefits available to you through the Federal government.

About Us
Retirement Benefits Institute provides benefits and retirement training to federal employees. Our trainers and sponsors have provided training to thousands of federal employees. The team includes former federal management staff (CSRS & FERS), CPAs, and retirement planners ready to assist you.

Many of our sessions are free of charge to all Federal employees and spouses unless otherwise indicated. Please join us at one of our upcoming training events.

The information contained in this article should not be used in any actual transaction without the advice and guidance of a tax or financial professional who is familiar with all the relevant facts. The information contained here is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for the individuals’ specific circumstances or needs and may require consideration of other matters. RBI is not a broker-dealer, investment advisory firm, insurance company, or agency and does not provide investment or insurance related advice or recommendations. Brandon Christy, President of RBI, is a registered representative of Christy Capital Management, Inc. (CCM), an Investment Advisor registered with the state of Georgia and in compliance with the current registration requirements of the states in which the firm maintains clients.

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