Many federal employees have the opportunity to retire before they are eligible to start Social Security (aka before 62).
And in many of these situations, these feds are eligible for the FERS Supplement that will help fill the income gap between when they retire and age 62 (when the supplement ends).
To learn more about who is eligible for the FERS Supplement go here.
And as the FERS supplement ends at age 62 it almost seems natural to then start Social Security so there is no income gap. But is this really the best thing to do?
In many cases, it is not.
Income Gap
If someone takes Social Security right at 62 as their FERS supplement ends then their income sources may look something like this:
But of course if they chose to delay Social Security then there will be years/months that their fixed income will be lower which would create a “gap” that would have to be filled with the TSP (Thrift Savings Plan) or other savings.
And in some cases it is simply the best to take Social Security right away but here are some things to consider.
Increased Amount
As most of us know, the longer you wait to take Social Security the more you will get every month. Here is an example of what this would look like:
Source: Social Security Administration Sample Statement
This screenshot from a sample Social Security statement shows that if one was to take Social Security at 62 then they’d receive $1,113 per month and would receive $2,023 per month if they delayed all the way until age 70.
And for those that like to see the numbers, your benefits have a reduction of about 6.6%/year for the first 3 years you take your benefits before your Social Security full retirement age and then you’d receive about a 5% reduction for every year after that.
But for every year you delay benefits past your full retirement age you get an increase of 8%.
So if your full retirement age is 67 then you’d receive about 70% of your full retirement age benefit if you take benefits right at 62 and 124% at age 70.
But honestly, the easiest way to figure out your numbers is by looking at your Social Security statement which you can request here if you haven’t already done so.
So by delaying Social Security you enjoy guaranteed rates of return 5%, 6.6%, and then 8% depending on your age.
Because of this (assuming you can afford to) it can often make a ton of sense to draw a little extra from your retirement savings in efforts to delay Social Security for high payments in the future.
Survivor Benefit For Spouse
When a couple is making plans for Social Security the decision gets a little more complicated. This is because when one spouse passes away the only benefit that continues on is whichever one was higher.
So for example, if one spouse gets $2,000/month and the other spouse gets $1,000/month then regardless of which spouse passes first the benefit that will continue is the $2,000/month.
Because of this, it can often make a ton of sense for the higher earner (who will have the higher Social Security benefit) to delay Social Security in efforts to make sure their spouse has enough income if they pass away.
You will want to run your own numbers to see what income you or your spouse would need in the event of one of you passing away to see what makes sense for you.
When You Should Take Social Security at 62
But of course there are times that it does make sense to take Social Security right as your FERS supplement ends.
You Need It
There are some situations where it makes sense to take Social Security right away because you simply can’t afford to delay it.
This might happen if you don’t have enough retirement savings to comfortably fill the gap.
Lower Earning Spouse
A few paragraphs ago, we discussed how it often makes sense for the higher earning spouse to delay Social Security to make sure the surviving spouse keeps a much higher benefit.
And because of that we know that the lower earning spouse’s benefit will only last until one spouse passes away because the higher benefit is always the one that sticks around.
Therefore, it can often make a lot of sense for the lower earning spouse to take benefits right away at 62 to get benefits right away because they won’t last for both lifetimes anyway.
