Early Federal Retirement and Social Security

Federal employees who retire early under FERS and do not continue earning wages need to be aware of the impact to their Social Security benefits.

Congress created the Federal Retirement Employee Retirement System (FERS) FERS in 1986 and on January 1, 1987, it became effective. It is a retirement plan that provides future benefits from three different sources. Employees covered will retire with payments from a FERS Basic Benefit Plan, Social Security, and the Thrift Savings Plan (TSP).

Human Resources at your federal agency can provide you with an estimate of your FERS pension. The TSP has various calculators and resources to help you project future income options from your TSP account balance, but what about your Social Security benefit?

Your MRA and Social Security 

The my Social Security website provides a forecast of your Social Security pension, but the forecast assumes something important for those retiring at their Minimum Retirement Age (MRA). This article will examine why those retiring at their MRA need to be aware of how their decision to work or not work after federal service affects their Social Security pension.

FERS employees can have a full (unreduced) immediate annuity at age 62 with at least 5 years of service. When they attain their MRA with at least 30 years of service or are age 60 with 20 years of service, they are also eligible for a full, immediate FERS pension.

The FERS MRA is age 55 – 57, depending upon the birth year. Those born before 1948 have the lowest MRA of age 55, while those born in 1970 or later are at the high end of the MRA spectrum with an age of 57.

If you retire from the federal workforce with enough years at your MRA or any age before age 62 to qualify for their retirement, the good news is you will also receive the Retiree Annuity Supplement (RAS). The Office of Personnel Management (OPM) pays the supplement in addition to your FERS annuity, and you are entitled to receive it providing any wages after FERS retirement do not exceed $19,560 for 2022. For every $2 over the limit, your supplement will be reduced by $1. 

The RAS stops the month you turn age 62 regardless of whether you start drawing Social Security at age 62. The OPM dedicates an entire chapter in its CSRS and FERS Handbook to these and other details on the RAS. The OPM also provides Frequently Asked Questions on the supplement. The RAS has no impact on your eventual Social Security annuity. However, by receiving the supplement for not working, you are also not paying FICA tax which means your Social Security account is without inflows from any wages during this period. 

The My Social Security online account provides visibility of your wage earnings history which is used in a formula to generate your projected pension. However, the projection reflects an annuity based on if you continued working to age 62, your full retirement age, or age 70. These projections assume you will continue to annually earn roughly the same amount as your most recent year. 

Will you have a 35-year history of paying Social Security taxes at your MRA? Remember Social Security takes the highest 35 years of your earnings to construct your retirement benefit. Since your annual income tends to rise over time, delaying retirement usually lets you replace some low-income years with higher-income years, which boosts your benefit. If you have less than 35 years of earnings, however, you are credited with no income for each year you did not work when computing your pension.

If you intend on retiring at your MRA and not continuing to earn wages, a workaround is to use the Social Security online calculator for a customized assessment. Be advised this option involves extensive time and detailed data entry.

I suggest you avoid the calculator challenge and get professional help. Explore telephonically contacting Social Security for personalized assistance to obtain an accurate of your Social Security pension if you will stop working before age 62. Make sure all the information on your my Social Security account is correct. Then, use the toll-free phone number, 1.800.772.1213. It is available from 8 am to 7 pm on business days. 

I spoke with a Social Security representative recently and was informed their telephone lines are less busy during the early morning from 8 am to 9 am and in the late afternoon and evening from 5 pm to 7 pm. The representative suggested avoiding calling them early in the week and early in the month.

About the Author

Francis Xavier (FX) Bergmeister retired from the USMC and the F.B.I. Consider following him on LinkedIn as he shares articles from others about retirement and other financial topics. He also provides retirement seminars thru Federal Career Experts.