As a FERS participant, you’re eligible to collect Social Security retirement benefits because you’ve paid into the program through taxes deducted from your paychecks. The question you need to ask yourself is this: what is the best strategy for turning on my Social Security benefits in retirement.
A Quick Review
When you delay filing for Social Security benefits beyond your Full Retirement Age (FRA), you earn credits that continue to increase your benefit by 8% each year up until you turn age 70.
For people born in 1960 their FRA is 67. If they decided to file early at age 62, it will result in a reduction of as much as 30%. Though losing that money is not good news, you also have to consider that, when you file at 62, you’ll receive Social Security payments for the next five years leading up to your 67th birthday.
What Is The Break-Even Point?
The Break-Even Point is the age at which you start to come out ahead because you delayed your Social Security benefit to earn 8% more each year. Let’s look at an example of someone with an estimated Social Security benefit of $1,500 per month if they claim at age 67 (their FRA).
If they claim early at 62, their payment would be about $1,050 per month (approximately 30% less than their full benefit). Between the ages of 62 and 67, they would receive around $63,000 in benefits ($1,050 for 60 months).
“Of course, delaying your benefits is a strategic way to maximize your Social Security check. But only if you live past your Break-Even Point.”
If they wait until 67, they lose that initial $63,000 yet their benefit check will be around $450 more per month ($5,400 more per year). It would take about 140 months (11 years and eight months) to reach their Break-Even Point at around age 78 and 8 months. This is when their total benefits surpass the amount they would have received between ages 62 and 67.
If they delay until age 70 to maximize their benefit they would receive approximately $1,860 per month. It would take 10.4 years to reach their Break Even-Point putting them a bit over age 80. This is when they would start coming out ahead.
Consider Longevity In Your Family
Of course, delaying your benefits is a strategic way to maximize your Social Security check. But only if you live past your Break-Even Point. Consider working with an FRC® trained advisor who understands your federal benefits and can help you estimate your longevity, health, and other factors, to develop the best Social Security plan for your needs.
