Social Security benefits provide an important source of income for many Americans in retirement, and most federal employees are no exception. However, while most federal employees’ Social Security benefits are calculated in the same way as those for private-sector workers, there are some unique nuances to consider. This article will walk you through the essential steps to calculate your Social Security benefit and highlight specific factors that federal employees should keep in mind.
Social Security Eligibility for Federal Employees
Federal employees fall into one of two retirement systems: the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). This distinction is critical when discussing Social Security eligibility:
FERS Employees: As a FERS employee, you contribute to Social Security through payroll taxes. This means you are eligible for Social Security benefits as long as you meet the general qualification requirements.
CSRS Employees: CSRS employees generally do not contribute to Social Security. Instead, they rely on their CSRS pension. If you are a CSRS employee, Social Security benefits may only apply to you if you worked in other jobs covered by Social Security during your career.
To qualify for Social Security, you must have at least 40 quarters (10 years) of earnings where Social Security taxes were paid.
How Social Security Benefits Are Calculated
Social Security benefits are determined by a formula that considers your lifetime earnings. Specifically, your benefits are based on your highest 35 years of earnings. If you do not have at least 35 years of work experience, some years will be counted as zeros in your social security calculations.
Timing: When Should You Start Social Security?
The age range that you can begin to receive social security is from age 62 to 70.
Age 62: This is the earliest age you can start receiving benefits. However, claiming early results in a permanent reduction of your benefit—approximately 5-6% per year before your Full Retirement Age (FRA).
Full Retirement Age (FRA): FRA ranges from 66 to 67, depending on your birth year. If you start social security at FRA, you’ll receive your “full” social security benefit.
Age 70: Delaying benefits beyond your FRA increases your benefit by 8% per year until age 70. This results in a significantly larger monthly payment.
For example, suppose your FRA benefit is $3,000:
– If you start your social security benefit at age 62, it would be around $2,000/month
– If you start your social security benefit at age 66 or 67, it would be around $3,000/month
– If you start your social security benefit at age 70, it would be around $3,700/month
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Please note: These are rough numbers to give you a general idea of your benefit at different ages. You can see your specific social security benefit at different ages at the social security website (SSA.gov).
When deciding when to start social security, consider your financial needs, health, life expectancy, and other sources of retirement income. If you would like to see other income sources that might impact your decision, check out this article: https://hawsfederaladvisors.com/maximizing-federal-employees-3-legged-stool-of-retirement-income/
Bonus Section: The FERS Supplement – A Unique Benefit
If you are a FERS employee and retire with a full retirement before age 62 with full eligibility for your federal pension, you may qualify for the FERS Retiree Annuity Supplement (commonly called the FERS Supplement). This benefit is designed to bridge the income gap between your retirement and when you become eligible for Social Security at age 62.
The calculation for your FERS supplement is different from your social security. Here is the FERS supplement calculation:
If you would like to learn more about the FERS supplement, check out this article: https://hawsfederaladvisors.com/the-fers-supplement-the-ultimate-guide/. Knowing whether or not you qualify for the FERS supplement can affect your retirement.
Don’t Be Scared To Reach Out
If you don’t know whether you qualify for social security or how much your social security benefit could be worth, feel free to reach out. We meet with so many different federal employees with unique situations. You can schedule a one-on-one meeting with us through this link: https://app.hawsfederaladvisors.com/whatservicemakessense
