Social Security Matters August 28th

Ask Rusty - For Advice on When to Claim Social Security

Dear Rusty: I could use some advice on whether or not I should start collecting my Social Security benefits now. I am 67 and 3 months old, and plan to continue working for at least for the next year or two. Signed: Seeking Answers

Dear Seeking: Deciding when to claim Social Security is, indeed, an important decision, as it will affect you for the rest of your life. Mainly, deciding when to claim your SS retirement benefit should consider your financial needs, but your life expectancy and marital status are equally important.

At your current age (past your full retirement age of 66 years & six months) you are already earning Delayed Retirement Credits (DRCs) at the rate of .677% higher benefit for each month you continue to delay. That adds up to an additional 8% benefit for each full year you wait beyond your FRA to claim, and that growth will continue until you are 70 years old. At that point, your benefit will be 28% higher than it would have been at your full retirement age (FRA). If you expect to achieve about "average" life expectancy (about 84 for a man your current age), then waiting until 70 to claim will get you both a higher monthly amount and the most you can get in cumulative lifetime benefits. Waiting, however, only makes sense if you expect at least average longevity. If your health is poor and you have reason to believe you won't live to the "average," then claiming earlier makes more sense. FYI, you may find this tool helpful to determine your potential life expectancy: https://socialsecurityreport.org/tools/life-expectancy-calculator/.

You can, of course, simply delay claiming for as long as you are still working, and then file for benefits at that time. When your paychecks stop is frequently the best time to start your SS benefits (to supplement the lost work income). And, if you are married and your wife will be entitled to a survivor benefit from you, then waiting longer to claim enhances the benefit your surviving spouse receives at your death (your surviving spouse would get your benefit amount, instead of her own smaller amount). If that is a consideration, then waiting - at least until you stop working (or age 70 if feasible) is often a prudent choice.

So, the choice is yours to make, considering your financial needs, life expectancy, and marital status. You no longer need to worry about Social Security's annual earnings test (for those collecting benefits before their FRA) but, if it is financially feasible, waiting still longer will mean a higher monthly benefit for the rest of your life.

Ask Rusty - Retiree Asks About His Social Security

Russell Gloor, AMAC Certified Social Security Advisor

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Dear Rusty: I retired with a (gross) $4600 per month Civil Service Retirement System (CSRS) annuity from the US Postal Service in December 2022. I am 66 and will attain full retirement age in November of this year. I know at that point I will not be subject to the "earnings" test, but I will be affected by the dreaded "government offset." I HAVE earned enough quarters and will be eligible for a small social security benefit. First question: will my Social Security benefit just be reduced, or will it be eliminated? Second: will it make a difference if I apply in November or when I turn 70? I am currently working part-time and paying Social Security FICA taxes. Third: if my SS is being eliminated, do I even have to apply? Fourth and last: I am married, filing jointly and my wife is currently receiving SS benefits (only). Could I also be affected by the "windfall" provision if my wife predeceased me?

Thank you in advance for your service as a Social Security Advisor.

Signed: Upset to Offset and Downfall to Windfall

Dear Upset: You are correct that when you reach your full retirement age (FRA) in November you will no longer be subject to Social Security's "earnings test," which limits how much you can earn while collecting early benefits. But if you apply for your Social Security to start in November, your SS benefits will be affected by the Windfall Elimination Provision (WEP) due to your non-covered CSRS pension (because you didn't pay into SS while earning your CSRS pension). As you may know, only those federal employees who retired under CSRS (Civil Service Retirement System) are affected by WEP; newer Federal employees who retire under the more recent FERS (Federal Employee Retirement Program) program are not affected.

Because of your CSRS pension, your Social Security benefit will be reduced, but not eliminated. The amount of reduction will be based on the number of years of non-government employment you had (where you paid into Social Security). Usually, those who have spent a lifetime earning a pension without contributing to SS, but who have a separately earned SS pension, will see their SS benefit cut approximately in half.

To answer your second question, your benefit will, indeed, continue to grow if you wait until you are age 70 to claim Social Security. Benefits taken after one's full retirement age earn "delayed retirement credits" (DRCs), which add to your final benefit amount. Your benefit will still be reduced by WEP, but your final amount will be more because you waited longer to claim.

Re your third question, your SS benefit will only be reduced (not eliminated), so it's always worthwhile to apply. Otherwise, you are forfeiting Social Security money you are entitled to.

And lastly, if your wife dies before you, your CSRS pension will also cause another provision called the Government Pension Offset (GPO) provision to apply. The GPO will reduce your surviving spouse benefits by 2/3rds of the amount of your government CSRS pension, which will likely eliminate any spousal benefit you are entitled to (except the so-called "death benefit" - which is a one-time lump sum $255 benefit paid to a surviving spouse).