We often talk about the perks of federal employee retirement, with one of the major benefits being the possibility of an earlier (than usual) retirement. At least compared with the private sector, federal employees stand a greater chance of retiring before their “full retirement age” according to Social Security (defined by your date of birth, and currently ranging between 65 and 67 years old).
On the other hand, plenty of federal employees choose to retire later than the average. There could be several reasons behind this decision, but some of the more common ones are:
- You began your employment with the federal government later than usual, due to caring for children or working another job in your younger years (or some other reason)
- You enjoy your position and find fulfillment in your work
- You’re in excellent health and don’t feel a need to retire yet
- You don’t feel financial ready to retire
As long as you’re happy with your decision, the reason probably doesn’t matter too much. Of course, if you want to retire but don’t feel financially ready, we should schedule a meeting.
Otherwise, let’s take a look at what happens to your Social Security benefits, because those will comprise an important part of your retirement income (along with your pension payments and TSP distributions).
You might continue to work, but claim Social Security early. Some people feel this is a good idea, and believe it will help them better prepare for retirement. Your benefits will be reduced by as much as 25 percent in exchange for the early claim, of course. But be forewarned that some of your benefits could be taxed, depending upon how much you earn annually. However, once you reach full retirement age you will receive credit for benefits withheld during this time.
Or, you continue working while postponing benefits. In this case, your Social Security benefits will continue to grow by about 8 percent for each year that you delay your claim beyond full retirement age. At age 70, this growth will cease, meaning there’s no point to delaying your claim beyond that time. This can be a good strategy for those who enjoy their careers and want to continue to work, because it allows for a larger benefit amount when you eventually do retire.
The bottom line is that there is no one-size-fits-all retirement plan that works for everyone. Due to your federal employment benefits, you might have even more options than the average person. So as you weigh those out and decide upon the right time to retire, stay in touch with us. We will help you anticipate the consequences of each possible route, and choose a path that suits you best.
