Your FERS retirement benefits are often referred to as the 3-Legged Stool. The first leg is your annuity (pension) while the second is the Thrift Savings Plan (TSP). However, the 3rd leg of your FERS retirement is also important: Social Security. Since this benefit provides you with a guaranteed stream of income for life, timing your Social Security can work to your advantage.
Who Is Eligible For Social Security?
Since all federal employees enrolled in FERS or the CSRS Offset contribute to the Social Security program through payroll taxes, they’re eligible for the benefit when they retire. However, regular CSRS employees may be eligible for Social Security through any non-federal positions they’ve held before or after their career with the government. Add to this, spouses of federal workers who have held private sector jobs are also eligible for Social Security.
When To File For Social Security
You have three options for when you choose to file for Social Security benefits:
- Full Retirement Age (FRA) is the age at which you’re eligible to receive 100% of your earned benefit. For those born in 1960, the FRA is now age 67 and it will remain at age 67 for everyone born in 1960 or later.
- Early Retirement is age 62 and results in early filing penalties that permanently reduce your benefit for the rest of your life. For example, if your FRA is 67, and you file at 62, you’ll only receive 70% of your earned benefits.
- Delayed Retirement means filing for benefits beyond your FRA which earns credits that continue to increase the amount of your Social Security by 8% each year up until age 70 (when credits stop). For example, if your FRA is 67 and you delay until age 70, you’ll receive 132% of your earned benefit.
(Block quote): “Since living longer costs more money, the extra money you get because you earned delayed retirement credits helps cover rising costs in the future due to inflation.”
Why Waiting Till Age 70 May Make Sense For You
When your combined income in a given year exceeds thresholds established by the IRS, 50% to 85% of your Social Security benefit is taxable as income. As a result waiting till age 70 lowers your income taxes for a few more years.
Delaying your Social Security benefits also makes sense if there’s longevity in your family. Since living longer costs more money, the extra money you get because you earned delayed retirement credits helps cover rising costs in the future due to inflation.
Consider working with an FRC® trained advisor who can help you crunch the numbers and develop a Social Security strategy that works for your financial situation.
