Social Security is a big part of your retirement as a federal employee. Getting it right often leads to a confident and comfortable retirement. Getting it wrong can cause a lot of stress and many missed opportunities.
In an effort to avoid common pitfalls, here are 3 ways you could lose your Social Security benefits (and how to avoid them).
Double Dipping?
If you take Social Security before your full retirement age (FRA, normally between 66-67), then the Social Security Administration will be watching to make sure you aren’t still working at a job or a business.
If you are and make more than $19,560 (for 2022), then your Social Security benefits will be reduced by $1 for every $2 you make over the limit.
For example, if you make $29,560 at a job ($10,000 over the limit) then your Social Security will be reduced by $5,000.
So if you are working a full time job you can easily reduce your Social Security benefits down to $0 if you are not careful.
But remember, the SSA only looks at the income from a job or business. You can receive your pension and take money from your TSP without reducing your Social Security at all.
Note: The rules for reducing your Social Security benefits do change in the year you hit your FRA and once you hit your FRA then there are no more reductions.
Early to The Party?
One of the most common reasons people get a reduced Social Security benefit is when they take benefits before their FRA (full retirement age).
With a FRA of 67, this is the percentage of your benefit that you get depending on the age you start it.
Social Security Benefit By Filing Age
| 62 | 70% |
| 63 | 75% |
| 64 | 80% |
| 65 | 86% |
| 66 | 93% |
| 67 | 100% |
| 68 | 108% |
| 69 | 116% |
| 70 | 124% |
As the chart shows, if you take Social Security at 62 then you will only get 70% of your full benefits.
But there are times when it does make sense to take it early despite the reduction. Here are 4 good reasons to take Social Security at 62.
Wait There’s More
Fortunately, Social Security is relatively safe from creditors, but there are a few things that can be withdrawn straight from your Social Security. Here are a few:
- Government Debt
- SBA Loans, Overdue Taxes, Student Loans etc.
- Child Support, Alimony
Bonus
And if you didn’t know already, Social Security benefits are often taxed (at least on the federal level if not on the state level as well).
How much of your Social Security will be taxed will depend on your income in retirement, but for most federal employees 85% of it will be taxable.
This article will go through the specifics of Social Security taxation.
