Last week, I answered some of your recent questions about calculating retirement benefits under the Federal Employees Retirement System and the Civil Service Retirement System. This week. I'll wrap up the topic by taking on a few more questions.
Social Security
How much of my Social Security check will be cut when I retire from the government or how much will be added from Social Security to my veterans benefit?
If you receive an annuity for work not covered by Social Security, such as a CSRS benefit, then you could be affected by the Windfall Elimination Provision. This would cause your Social Security benefit to be computed under a modified formula. Note my column on the provision, Gone With the Windfall (Sept. 1, 2006).
Social Security has information about military service on its Web site that might help you with your question about veterans benefits: Disability Benefits for Wounded Warriors and Military Service and Social Security.
Can my wife draw Social Security benefits from my work record? I am 54; she is 62 and has never had a job outside the home.
Your wife will be eligible for dependent spouse benefits and will begin receiving them when you retire. She is old enough now, but will have to wait until you've applied for your benefits. If you die before her, she also will be entitled to widows' benefits. Here's a fact sheet on such issues from Social Security: What Every Woman Should Know.
I think you should point out that CSRS folks can collect full Social Security benefits under certain conditions. I reached my full retirement age -- 65 years and 8 months -- in January 2007, and have my full 40 quarters through pre-federal employment. I am still employed by my agency but can collect my full Social Security benefit because at full retirement age there is no cap on earnings. Fortunately, I don't need the cash right now, so I'm having it deposited into my savings account and using it to make my full contribution to my Individual Retirement Account. Win-win.
Good point. There is an earnings limit until you reach full Social Security age, which restricts how much of your benefit you can receive if you are still working. Once you reach full retirement age -- 65 to 67, depending on when you were born -- you can continue to work and receive your Social Security benefit at the same time. If you are going to retire under CSRS, the Windfall Elimination Provision will not be applied until after you have retired, so essentially you will receive more Social Security retirement benefits while you are still working and less after you retire. Here is a Social Security fact sheet about the earnings limit: How Work Affects Your Benefits.
What happens when your child turns 16 and your spouse is no longer entitled to spousal benefits?
According to the Social Security Handbook, the adjustment for the family maximum is made by proportionately reducing all the monthly benefits subject to the family maximum on the Social Security earnings record (except for retired or disabled worker's benefits). All benefits subject to the family maximum are reduced in order to bring the total monthly benefits within the limit for the particular case. The total benefits payable to the family group are not necessarily reduced when monthly benefits are not payable to one member of the family group.
CSRS vs. FERS
If you were in CSRS for five years and then converted to FERS, those five years under CSRS would be computed at 7.5 percent of your high-three salary. But if you had less than five years in CSRS and converted to FERS, your years under CSRS would be worth only 1 percent of your high-three for each year (five years under FERS is computed as 5 percent of your high-three average). Is this true?
If you transferred to FERS with more than five years of creditable service under CSRS, you would maintain a frozen CSRS benefit that would become part of your FERS retirement. If you transferred with less than five years of CSRS time, then that service would be credited under the FERS computation rules. As you've discovered, five years of prior service would be worth 7.5 percent of your high-three at retirement (the first five years at 1.5 percent of your high-three). But four years, 11 months and 29 days would be worth 4.91666 percent of your high-three (four years and 11 months at 1 percent of your high-three). If your high-three average salary was $65,000, this would be a difference of about $1,680 per year, or $140 per month.
I have 28 years of service with the government. In 1998, I switched to FERS, after accumulating more than 18 years under CSRS. I am planning to retire in September 2010 when I will be 59 and have 30 years. I'm hoping to return as a rehired annuitant. What would be the consequences of taking supplemental Social Security? Can I waive it and not draw on it if I am rehired as an annuitant? Also, if I am rehired and I work only one or two years, can I then draw on the supplemental if I previously waived it?
The FERS supplement is subject to an earnings limit similar to the one applied to Social Security for those who apply before they reach their full Social Security retirement age. A reduction in the retiree annuity supplement in a given year is based on excess earnings in the previous year. OPM asks each retiree who has reached the minimum retirement age for a statement of earnings each year he or she is eligible to receive the annuity supplement. Earnings must be reported by retirees in a form prescribed by OPM. If you no longer report earnings and you are still eligible for the supplement, the benefit will be restored.
Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.