Social Security, best day to retire and other life questions
By Mike Causey |
August 10, 2016 1:00 am
People in the federal HR business often cringe when someone comes in with a "simple" question. Because in most cases there is rarely a one-size-fits-all answer. For instance:
A couple of weeks ago we got a "simple" question from a reader who is under the CSRS Offset retirement system. She asked three things: At what age should she take her Social Security benefit, what is the best date to retire and should she work after leaving government to build up her Social Security benefit?
Fearing that the answer to all three was a solid "it depends" I passed it on to John Grobe. He's president of Federal Career Experts and makes his living by conducting pre-retirement seminars at federal agencies. For money. It's not a hobby, its how he gets to eat.
John took the "simple" questions, as a favor to me and the reader. But you can see why he — like most of us with jobs — doesn't do pro bono work on a regular basis. John is one of my guests today on Your Turn at 10 a.m. here on FederalNewsRadio.com or 1500 AM in the D.C. metro area. Listen if you can. Meantime, here are his answers to those three not-not-so simple questions which you may find helpful:
Mike Causey forwarded your inquiry on CSRS Offset to me. My answers will be slightly hypothetical because I know nothing of your particular situation.
Question 1: Do you need to take your Social Security at the earliest date possible because of the offset?
Answer 1: Only you can tell if you "need to". It depends on the size of the offset and your other sources of income. Your CSRS pension will be offset at age 62 (or when you retire, if you retire at an age older than 62). The offset is calculated by dividing your years of offset service by 40 and multiplying your Social Security benefit by the resultant fraction; the more years of offset service you have, the greater the offset to your CSRS pension will be. If the amount of the offset is large and you need more money to live on, then you would be likely to take your Social Security right away. However, if you take your Social Security at age 62, there is a permanent reduction of 25 percent to 30 percent from what it would be at your "Full Retirement Age". There is also an earnings test on any Social Security benefits received before you reach your full retirement age. For this year, the earnings test would reduce your Social Security benefit by $1 for every $2 you earn over $15,720. Some retirees who can afford to live on the CSRS pension after the offset has been applied choose to delay applying for their Social Security so that it can grow. Some others will choose to supplement their CSRS pension with part-time work, or choose to take distributions from other retirement accounts such as the TSP and IRAs to allow their Social Security to grow.
Question 2: If you work after retirement at a non-government job, could you increase your retirement?
Answer 2: I'm assuming that by "retirement" you are referring to your Social Security retirement benefit. The answer to this question depends on how many years of Social Security covered employment you have and how much you will be making at the post-retirement job. Your Social Security retirement benefit is based on your highest 35 years of employment that was covered by Social Security; these years are indexed for inflation up until you reach the age of 60. If you have less than 35 covered years, the answer to your question is an unequivocal YES. If you already have 35 years of covered service, whether you would increase your benefit would depend on whether the money you earn in your post-retirement job was greater than the earnings you had in any of those 35 years. If it's higher, the answer is YES; if it isn't, the answer is NO.
Question 3: What is the best date to retire?
The answer to this question for 2017 (and for most years) is Jan. 3, whether or not it is at the end of a pay period. However, in some years the leave year ends on a date before Jan. 3. For example, a few years ago the leave year ended on Dec. 31; a person who waited until Jan. 3 to retire would have lost all of their use or lose leave. In that year, the best day to retire would have been Dec. 31. As long as you leave before the leave year ends, you will be paid for all of your leave including use or lose. The example I use in my classes shows an retiree getting paid for 440 hours of A/L (the 240 they carry over and the 200 they accumulate).
I hope this answers your questions. If your agency offers pre-retirement seminars, I would encourage you to attend one. My company, Federal Career Experts, offers pre-retirement seminars for agencies. " J.G.
Simple, right?
Posted by: sarah_oz@yahoo.com
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