The average life span of a human being has increased dramatically over the past couple of hundred years. Once upon a time, age 50 was considered “old”, but nowadays we tend to continue working until well past age 60. In fact, full retirement age – the age at which you receive full Social Security benefits – was set at between 65 and 67 years old, depending upon your year of birth.
Of course, that might appear to put federal employees in a bit of a bind. What if you reach retirement eligibility under the FERS system at, for example, age 60? Social Security comprises one third of your three-tiered retirement plan, but how can you retire if you can’t claim those benefits yet?
The FERS system actually takes that situation into account, and that is why the FERS annuity supplement was devised. If you retire before the first age of Social Security eligibility (age 62) then you annuity supplement will provide extra income to tide you over until you claim that third leg of your retirement income (your Social Security benefits). You will, of course, access your basic annuity and your Thrift Savings Plan (if you choose) during this time.
It’s important to note that the annuity supplement lasts until age 62, not full retirement age. You can claim your Social Security payments as early as age 62, although they will be permanently reduced from the full amount you would have received by waiting until full retirement age.
If you want to retire before your full retirement age, or if you need to retire due to health or other reasons, your annuity, annuity supplement, and Thrift Savings Plan might provide the income you need until you can claim Social Security. However, your annuity supplement will be means tested, meaning if you take another job during this time your supplement could be reduced.
Also, once you claim your Social Security benefits, you won’t be able to change your mind and receive your full scheduled benefits unless you repay the money you have received. There is a way to cancel your claim, but it is rarely used due to its difficulty. So the bottom line is that you should conduct very careful calculations, and compare the different potential scenarios, before you make this decision. Call us with any questions you might have about early retirement or your FERS benefits, and we can help you decide if you are really ready to retire early.
