Private sector workers have only one source of guaranteed income when they retire: their Social Security benefit. As a federal employee covered under FERS, you have a second source of income you can count for life: your monthly annuity (pension).
This gives you the flexibility to file for Social Security at age 70 instead of your Full Retirement Age (FRA). Then again, why should you delay benefits? It’s your money, isn’t it? Why wait longer than necessary to start collecting Social Security? For FERS participants, there are three very good reasons to wait.
1. Your Social Security Check Is Bigger At Age 70
When you delay filing for benefits beyond your FRA, you earn credits that continue to increase your benefit by 8% each year up until age 70. For example, if you were born in 1960 your FRA is age 67. When you wait the extra three years and file at age 70, you’ll receive 124% of your earned benefit. Of course, since you can’t earn delayed credits after your 70th birthday, there’s no reason to wait any longer to file for benefits. But earning delayed credits before you turn 70 is certainly worth the wait.
“With thresholds this low, you’ll likely owe taxes on your Social Security benefits in addition to taxes on your FERS annuity (pension) and Thrift Savings Plan (TSP) distributions.”
2. Waiting Till 70 Lowers Your Federal Income Taxes
When your retirement income exceeds yearly thresholds established by the IRS, waiting till 70 to collect Social Security can lower your tax burden. For example: if your combined income is $25,000 to $34,000 (single taxpayer), or $32,000 to $44,000 (couple filing jointly), up to 50% of your Social Security may be taxed. If your combined income is above $34,000 (single) or $44,000 (couple), up to 85% may be taxed. With thresholds this low, you’ll likely owe taxes on your Social Security benefits in addition to taxes on your FERS annuity (pension) and Thrift Savings Plan (TSP) distributions.
3. Your Retirement May Be Longer Than You Realize
According to the Social Security Administration, upon reaching age 60, on average, men could live another 22 years while women can live 25 more years. Other studies indicate that genetics can account for as much as 25% percent of your chances of living to age 85 or 90. If longevity runs in your family, waiting until 70 for Social Security means you’ll receive a larger check over a longer-than-average retirement. Let’s face it, living longer simply costs more money. A larger Social Security check can help cover the rising cost of living over the next 30-plus years.
To learn more, connect with an FRC® trained advisor who can help you crunch the numbers.
Sources:
https://www.ssa.gov/oact/progdata/nra.html
https://www.ssa.gov/benefits/retirement/planner/1960-delay.html
