Delaying Social Security by David Fielder of Postal Benefits Group
When you’re considering your Postal Benefits – The choice of when to start drawing Social Security is significant, and Postal employees have to take several factors into consideration. In this article I will illustrate a popular method many employees are using to get the most out of their postal retirement benefits.
Let’s look at some basics before we get into making any choices. As a postal employee, if you draw your Social Security at 62, you are penalized for drawing it early. Social Security considers full retirement age as 66. Social Security raises your benefit 8% per year for each year over 62 you wait. We get questions all the time asking how to calculate your SSI benefit if you choose to draw between 62 and 66. If your SSI statement says you will draw $1250 at age 62 and you are looking at drawing at age 64 you would calculate:
$1,250 x 1.08% = $1,350 at age 63
$1,350 x 1.08% = $1,458 at age 64
Now lets look at the choice to delay Social Security. After counseling thousands of Postal employees we know that if you wait until 66 to draw Social Security, it will mean approximately $500 more a month in benefit. Let’s use that number to evaluate our options.
If Joe chooses to draw SSI at 62 and their benefit at 62 is $1,250 he will draw 4 years of income more than if he started at 66. The total amount he would draw over this period would be $60,000.
Now let’s look at Sue who waited until 66 to draw her SSI. She will get $500/more a month than Joe. This means that Sue will need to live to at least 76 to match what Joe has drawn out. However, every year that Sue lives past 76 will be profit over what Joe will draw the rest of his life.
Let’s put a couple of things in perspective here. Five hundred dollars a month is a lot of money. For the average postal employee this is the equivalent of working 10 years more for the Post office. Most will agree that waiting until 66 is a good choice. However, life happens and most people have to start drawing at 62 out of necessity.
As a postal employee you have some tools at your disposal you can use to increase your overall retirement income. One of these tools is your TSP and if used correctly can dramatically increase your retirement income.
Joe is retiring at 62 and needs $1,200 a month on top of his FERS pension to live comfortably. He has $150,000 in his TSP at retirement. Our suggestion to Joe at 62 is to draw the $1,200/month from the TSP and wait to draw his SSI at 66. Joe will draw $57,600 from his TSP from 62-66. As long as Joe lives to 76 any income he will draw past 76 will be pure profit from deferring his SSI. Because people are living longer these days. ;if Joe lives to age 90 he will profit $84,000 on his SSI.
Not only does delaying SSI to 66 help the employee but, when the employee passes away the Survivor Benefit is higher as well. All things considered, the difference is almost always over $100,000.
The decision to delay SSI is a big decision. In order for you to make the right choice we encourage you to let us conduct a benefit review. We will calculate your pension, estimate deductions from your check-stub and advise you on the retirement process and what to expect. The review is free and in most cases done over the phone.
Postal Benefits Group
Other David Fielder Articles
About David Fielder of Postal Benefits Group