Federal Retirement Milestones: Social Security Payments by Age: Pros and Cons of Waiting to Claim
This guide is designed to help federal employees approach retirement with clarity, focusing on key retirement milestones that impact your social security retirement benefits. Understanding these milestones is essential for effectively planning your retirement and ensuring a stable retirement.
Understanding Social Security: What are Key Retirement Milestones?
Key retirement milestones are specific ages or events that significantly affect your retirement plan and the amount of social security benefits you receive. These milestones often trigger important decisions about your social security benefit, retirement accounts, and other financial resources. For federal employees, recognizing these key retirement milestones as you near retirement helps maximize your retirement savings to achieve your retirement goals.
The Importance of Social Security for Federal Workplace Retirement Plans
Social Security plays a vital role in providing retirement income for federal employees. These monthly Social Security benefits are designed to supplement your CSRS or FERS annuity and other retirement savings, such as TSP and IRA assets, ensuring a more comfortable and secure retirement.
Milestones as Federal Employees Near Retirement
Several milestone ages significantly impact your retirement income. Understanding these milestone ages as you near retirement is crucial for effectively planning your retirement. Some key ages and their impacts are outlined below:
| Age | Impact on Retirement Income |
| 50 | Federal employees can make catch-up contributions to their retirement accounts. |
| MRA | If retiring between your MRA (minimum retirement age) and age 62 with an immediate unreduced FERS pension, you are eligible for the FERS special retirement supplement (SRS). If retiring under special provisions, you are eligible for this benefit sooner. |
| 59.5 | Can begin making in-service withdrawals from TSP without penalty |
| 62 | Eligible to start receiving social security retirement benefits (reduced monthly benefit) and possible 10% boost to FERS pension. |
| 65 | Eligible for Medicare on your 65th birthday. |
Reaching your full retirement age, which varies depending on your birth year, allows you to receive full Social Security benefits. Delaying until age 70 maximizes your monthly Social Security benefit, but that is not always the best move. We’ll explore this further.
Withdrawal Options for Taking Social Security at Different Ages
Many feds have misconceptions when it comes to claiming retirement benefits from the SSA. They think the benefit grows by 8% every year claiming is held off, starting at 62. This is not the case.
At one’s full retirement age (FRA), they are eligible for their full benefit. Withdrawing beforehand results in a reduced monthly payment. If you wait until 70, the benefit does grow 8% for each year between FRA and 70, an age that if you wait until, resulting in a 0% return on investment at that point. Remember, Social Security strategy for federal employees is different from the common advice usually given to the general public.
| Withdrawal Age | Benefit Impact | Notes |
| 62 | Lower monthly benefit | Start receiving income immediately, at a reduced rate. which could be as high as 30% and may be subject to earnings test. |
| FRA (age 67 if born in 1960 or later) | Full benefit amount | Before applying PIA or AIME, the benefit is the average of the highest paying 35 years of covered earnings. |
| 70 | Enhanced benefit | If you reach age 70 without claiming benefits, there is no advantage to continue waiting. You reach your maximum amount, but have given up 8 years of collecting benefits. |
Withdrawing at Age 62: Benefits and Drawbacks
Deciding to withdraw Social Security retirement benefits at age 62 is a pivotal early retirement milestone, offering immediate access to retirement income. However, this choice comes with a significant reduction in your monthly benefit compared to waiting until full retirement age.
This early withdrawal can impact your overall retirement plan, potentially limiting your financial security throughout your retirement years. While it provides immediate financial relief, federal employees should carefully weigh the long-term consequences on their Social Security payments and retirement savings before opting for this early Social Security benefit.
Benefits at Your Full Retirement Age (FRA): What It Means
Full Retirement Age (FRA) represents the age at which federal employees can receive their full, unreduced Social Security benefits. The specific FRA depends on your year of birth, typically falling between age 65 and age 67. Claiming Social Security retirement benefits at FRA ensures you receive 100% of the calculated monthly Social Security benefit.
Collecting Your Benefit at Age 70: Maximizing Your Benefits
Delaying Social Security retirement benefits until age 70 represents the peak of potential Social Security payments. By waiting until the year you turn 70, federal employees can significantly increase their monthly Social Security benefit, as the Social Security Administration provides an 8% increase for each year you delay beyond your full retirement age. This strategy is particularly beneficial for those who anticipate a longer lifespan or seek to maximize their retirement savings. Delaying to age 70 is a key consideration for a stable retirement, offering a meaningful difference in your retirement.
Healthcare Costs and Retirement Planning with FEHB
FEHB and Medicare play a significant role in managing finances after retiring from the federal government. One of the milestones you need to know: Medicare eligibility begins at age 65.
Medicare Eligibility and Enrollment
Enrolling in Medicare involves several parts (A, B, C, and D), each covering different aspects of healthcare. As you approach retirement, familiarizing yourself with the enrollment process, coverage options, and associated costs is vital. Proper planning ensures a seamless transition into retirement, providing access to necessary healthcare services when you start retirement without significant gaps in coverage.
Required Minimum Distributions (RMDs) and Retirement Age
For the TSP and traditional IRA funds, required minimum distributions (RMDs) are required when you reach age 73 (thanks to the SECURE 2.0 Act). Roth accounts were funded with post-tax dollars and are not subject to RMDs. The RMD amount must be calculated for the current year’s amount due using the account’s ending balance on the last of the calendar year before. You are required to take the calculated amount, which will be subject to income taxes.
Understanding RMDs Starting at Age 73
Understanding Required Minimum Distributions (RMDs), which typically begin at age 73, is crucial as you approach retirement. RMDs mandate that you withdraw a certain amount from your retirement accounts, such as 401(k)s and traditional individual retirement accounts, annually. The amount is determined by your account balance and life expectancy, potentially impacting your retirement income and income taxes. Awareness of these rules is crucial for effectively planning your retirement to avoid penalties associated with failing to meet RMD requirements.
Learn about FERS, the TSP, and Social Security income for federal retirement at a free FERS Webinar.
