Tony Duno retired from the Air Force in 2016 after seven decades of service.

Tony Duno retired from the Air Force in 2016 after seven decades of service. U.S. Air Force photo

Work Long and Prosper

The benefits of staying on the job past age 65.

Over the years, I’ve met many people who continue to work past their 65th birthday. In fact, in a few more years, I may be one of them. One notable federal employee, Millie Parsons, retired from the FBI at age 88 after more than 62 years of service. She lived to 99, enjoying 11 years of retirement. I also remember reading the obituary of Emil Corwin, who went to work at the Food and Drug Administration at age 74 and retired 22 years later at 96. He died a month shy of turning 108.

Not everyone works as long as these two, but it’s becoming more common for people to stay in the workforce past the traditional retirement age of 65.

One reason for working longer is people are living longer. There were more than 53,000 Americans over 100 years old at the time of the 2010 census. A recent Northwestern Mutual study found that 46% of Americans expect to work past 65. Nearly one out of five Baby Boomers (18%) and an equal percentage of Generation X (18%) expect to work even longer—past age 74. More than half say they will do so by choice.

There were more than 104,000 federal employees aged 65 and older in 2018, compared to 30,227 only 20 years ago. 

Staying employed longer allows for continued accumulation of retirement savings and typically provides a larger monthly income from Social Security and federal employee retirement benefits. 

Social Security

If you work longer, you can put off taking Social Security benefits and take advantage of delayed retirement credits. If you were born in 1943 or later, Social Security retirement benefits increase by 8% percent per year if you delay them until your full retirement age. The benefit increase no longer applies when you reach age 70, even if you continue to delay taking benefits. 

You could also claim your Social Security benefit and continue to work. If you have reached your full retirement age, you can collect Social Security with no earnings limit. If you are under full retirement age, $1 will deducted from your benefit payments for every $2 you earn above the annual limit. In the year you reach full retirement age, Social Security will deduct $1 in benefits for every $3 you earn above a different limit.

A special provision for federal workers covered under the Civil Service Retirement System allows them to receive their Social Security retirement, spousal or widows benefit without the impact of the Windfall Elimination Provision or the Government Pension Offset, if they aren’t receiving their federal retirement benefit and are continuing to work past full retirement age. 

Health Insurance

Working past 65 allows you to contribute tax-free money to a health flexible spending account. The 2020 limit for contributions to a health care FSA or limited expense FSA will increase by $50 to $2,750.

You can also delay enrolling in Medicare Part B without incurring a penalty of 10% for every 12 months that you could have been enrolled in Part B but weren’t. If you’re covered by group health coverage based on current employment (or covered by the health insurance of a spouse who is currently employed), then you qualify for a special enrollment period when the health coverage through current employment ends. During this period, you have eight months to sign up for Part B without penalty. 

Life Insurance

While you are employed, regardless of your age, you can increase your level of Federal Employees Group Life Insurance when you experience a qualifying life event and during open enrollment periods. In addition, when your salary increases, the amount of Basic FEGLI and Option B coverage will also increase.

The premiums for optional FEGLI coverage will increase with your age, but coverage will also continue regardless of age. If you are 65 or older at retirement, then your post-retirement FEGLI reductions begin immediately following your separation.

Thrift Savings Plan

If you are 591/2 or older, you can make age-based withdrawals TSP account while you are still employed. You must pay income tax on the taxable portion of your withdrawal unless you transfer or roll it over to an IRA or other eligible employer plan.

As long as you continue to be employed, regardless of age, you can contribute to your TSP account. Once you've reached age 70½ and are separated from federal service, you will be subject to the IRS’s required minimum distribution rules. These rules require you to receive a certain portion of your account each year based on your life expectancy. 

One final note: It’s important to pay attention to tax planning issues before your retirement, to understand the consequences of your choices regarding TSP distributions, lump sum annual leave payments, retirement benefits and Social Security.