Back in the good old days, everyone became eligible for Social Security at age 65 and starting your benefits was a straightforward decision. Today, “turning on” your Social Security retirement benefit is far more complicated.
As a FERS participant, Social Security is an important source of guaranteed retirement income and understanding all your options can help to increase your lifetime benefit. Here are the basic steps in developing a strategy that works for you.
Step 1. Decide On Your Social Security Filing Status
If you’re married, you can claim benefits on your own work record or your spouse’s (or ex-spouse’s) Social Security account. If you’re widowed, you can claim your deceased spouse’s benefits. Then again, you may be able to claim your deceased spouse’s benefits while delaying your own benefits. If you’re single, deciding on your filing status can be easier but you still have to decide when to file.
Step 2. Decide When To File for Social Security: Early, At Your FRA Or Delayed?
You’re eligible to receive 100% of your earned benefit based on the year you were born. This is called your Full Retirement Age (FRA). Back in 1983, the FRA was increased and currently scales up to age 67 for everyone born in 1960 or later. You have the option to start benefits as early as age 62 however the amount will be reduced for each month before your FRA. Or, you can choose to earn credits for delaying your retirement and increase your benefit by 8% for each year up until age 70 (when credits stop).
“On the other hand, you need to take income taxes into consideration if your Social Security income moves you into a higher bracket.”
Step 3. Coordinate Social Security With Your TSP Distribution Strategy
As a FERS participant, all three of your income sources are subject to federal taxes: your FERS annuity (pension), Social Security, and your Thrift Savings Plan (TSP). Since you can choose when to file for Social Security, you can coordinate your benefit with your TSP distribution strategy to help minimize taxes.
Other Factors To Consider
Your Social Security strategy completely depends on your personal situation —health wise and financially. If you have a health condition that can impact your longevity, delaying benefits to age 70 may not make sense. On the other hand, you need to take income taxes into consideration if your Social Security income moves you into a higher bracket.
Feeling confused? You don’t have to tackle it alone. Connect with an FRC® trained advisor who understands your federal benefits and can help weigh all the pros and cons to develop the best Social Security strategy for your needs.
