Timing Is Everything

By Tammy Flanagan

December 7, 2012

More than 20,000 federal employees are projected to retire at the end of 2012, according to the Office of Personnel Management. When they do, they will start as many as three engines of income. More than half of those who are planning to retire will be entitled to both a federal retirement benefit and Social Security benefits. They also will be able to withdraw funds from their Thrift Savings Plan accounts.

The median age of a federal employee added to the retirement rolls in 2011 was 61. That means half of those who retired were older than 61, and many of them were eligible for Social Security. They faced a decision on whether to begin receiving Social Security benefits at the same time as their benefit under the Civil Service Retirement System or the Federal Employees Retirement System. A few weeks ago, I wrote a column called “Getting the Most From Social Security” and received many comments and emails on this subject. I’ve been considering the questions, so here are some additional thoughts on the topic.

In the end, it all depends on your age. Let’s look at three different groups.

Younger Than 62

For these folks, it’s a nonissue. They’re too young to apply for Social Security and will do one of the following things:

Between 62 and 70

Here’s an email I recently received:

I am retiring Dec. 29 at the age of 61 years and five months. Next July, at age 62, I would be eligible to receive Social Security but at a reduced rate that is 25 percent less than what I would receive if I waited until 66 to apply. According to my last Social Security statement, I would receive about $1,555 at age 62, $2,187 at age 66 and $3,031 if I waited until age 70. Someone in my office suggested that I might want to consider next July at 62 to start drawing from my TSP an amount equal to what I would get from Social Security versus waiting until I am 70 to start drawing from Social Security since I would get almost twice as much at age 70. I have enough money in my TSP to do this, but of course by 70 it would be depleted.

The decision regarding when to take Social Security retirement generally is based on the answers to the following three questions:

Older Than 70

These folks are entitled to (and may already have applied for) the maximum Social Security benefit, which includes as much as a 32 percent increase in their benefit as a result of delayed retirement credits. In addition, this group will be required to take minimum payments from their tax-deferred retirement savings (such as TSP funds and individual retirement accounts).

These people potentially have the most comfortable stream of retirement income, but the least amount of time to enjoy it. Then again, if you’re in good health, you could live for a long time.

Millie Parsons worked for the FBI for nearly 63 years and retired at 89. She worked more than 20 years beyond earning the maximum CSRS retirement benefit of 80 percent of her highest three years of average salary. She enjoyed her retirement for 10 years before passing away in October at the age of 99. Millie never used an hour of sick leave during her entire federal career and was the longest continually serving employee in the history of the FBI.

Emil Corwin retired from the Food and Drug Administration at age 96 after serving for 26 years. (He wasn't hired until he was 70.) He died in March 2011 at the age of 107.

By Tammy Flanagan

December 7, 2012