What if You Retire Later Than The Usual?

What if You Retire Later Than The Usual?

One of the perks of federal employment is the possibility of an earlier than usual retirement. We even covered this topic in our blog last month. But some federal employees choose to retire later than average, too. There could be many reasons behind this decision, such as:

  • You started your career with the federal government later than usual; you had another career first, you spent your younger years caring for children, or some other reason
  • You don’t need to retire yet, because your excellent health benefits have helped you to stay healthy
  • You truly enjoy your job, and aren’t ready to give up the personal fulfillment you find in it
  • You aren’t financially ready to retire, so you want to keep saving money
  • … and many others

Your reason probably doesn’t matter all that much. The important thing is understanding how a longer career could affect your Social Security benefits.

If you claim your Social Security benefits early… Let’s say you continue to work, but decide to claim your Social Security benefits before full retirement age (65 to 67, depending upon your birth date). Your benefits could be taxed, depending upon how much you earn annually. However, once you reach full retirement age, you will receive your full Social Security benefits without any tax reduction.

But, there’s a catch… If your Social Security benefits are taxed, because you claimed then before your career ends, you will be repaid that money when you reach full retirement age.

If you decide not to claim your benefits… You might also decide to continue working, but not claim your Social Security benefits until later. In that case, your benefits due will increase by about 8 percent for each year that you delay your claim. This provision only lasts until age 70, at which point there is no upside to waiting.

There is no “correct” time for anyone to retire. And since federal employees enjoy a three-tiered retirement plan, you might have more options than most people. Just remember that the longer you keep working, generally speaking, you can save more money and potentially increase your eventual Social Security benefits. Call us for a consultation and we can discuss this issue in more depth, and help you find the right time to say goodbye to your federal service.