Just one or two generations ago, the average person retired around age 60, lived a few more years into retirement, and then passed away after enjoying a typical lifespan. Today, however, our fifties are no longer considered “old”! And our lifespans have grown longer than ever, with many of us living into our eighties and nineties.
Because of these factors, we will enjoy longer retirements as well. Social Security currently sets the “full retirement age” at 65 to 67, depending upon your year of birth. So, most of us assume we will work until about that age, retire and draw Social Security benefits, and combine that with other retirement savings or a pension.
Federal employees face a slightly different situation than most, with regard to retirement timing. Many can easily reach retirement eligibility in their late fifties, at least with regard to their annuity payments. However, since you’re not yet eligible for Social Security, you probably don’t feel ready to retire based on your annuity payment (and your Thrift Savings Plan, if you want to begin withdrawals).
This is why the FERS annuity supplement was created. Let’s say you want to retire before you’re eligible for Social Security benefits; the annuity supplement would provide extra income to help you cover living expenses until you claim Social Security benefits (at age 62, taking the early benefit option).
We should note that the annuity supplement lasts until age 62, not full retirement age, meaning you will then switch to your Social Security benefits earlier than planned. They will be permanently reduced by about 25 percent, as compared to your full benefit at age 65-67.
The annuity supplement can come in handy if you need to retire due to health reasons, or certain other factors that might cause you to need an earlier retirement. However, the supplement will be means tested, so if you decide to take another job, your payments could be reduced.
Retiring earlier than 62, and claiming the annuity supplement, should be carefully researched before you take the leap. Give us a call to schedule an appointment, and we will explain all of the potential consequences of this decision so that you know what to expect from an early retirement.
