Why Patience May Pay Off For Federal Employees Under The FERS Program

If you are a federal employee under the Federal Employees Retirement System (FERS), then you have many crucial decisions to make when the time comes to retire.

The decision of when to take Social Security, for which FERS employees qualify and pay, is probably one of the most challenging retirement decisions you’ll make. If you’re like most FERS participants, your TSP account is much larger than what you will get from Social Security, although you typically won’t get TSP inflation catchups until you reach age 62. However, waiting to receive your Social Security check is an option that can result in a significant increase in your retirement income.

Here is a hypothetical situation that illustrates the power of waiting to take Social Security. Carl is a recently retired 60-year-old federal employee. In the last three years of service, Carl’s annual salary averaged $70,000. Carl decides to do what many working Americans do and take his Social Security benefits the first year he’s eligible. (Age 62) His monthly check will be an estimated $2,109 per month.

What if Carl waits until age 66 to start getting his SS benefit? How could that impact his financial situation? Well, if he puts off taking Social Security until age 66, Carl’s monthly benefit goes up to around $2,812 per month.

But, this is where it gets interesting. If Carl waits eight years after he is eligible to start taking Social Security, his monthly check will grow to an estimated $3,712 per month, a 68% increase! For some retirees, this bump will make retirement less stressful and a lot more fun.

Even with the eye-popping 68% increase in income garnered by waiting until age 70, deciding when to start your Social Security is still a tough choice for many people. Waiting isn’t much of an issue for those with other assets who don’t need their Social Security benefits yet. However, many people need their Social Security income stream as soon as they retire due to health, family, or other issues. There are other factors you must consider before choosing your ideal time to begin Social Security payments.

That’s why it’s prudent to sit with an advisor who specializes in retirement income planning and who thoroughly understands the federal benefits system. The last thing you need is to make a mistake with your benefits from which you won’t have time to recover.

The Bottom Line: Social Security is a critical component of a successful retirement. For some federal employees, waiting longer to begin their Social Security payouts could mean an income bump of as much as 68%. However, not everyone is in a position to wait. The wise course of action is to partner with an advisor who can outline the pros and cons of waiting and help you discover