Social Security has been around for about 85 years. While many adjustments have occurred over the years, the basic concept remains unchanged: a system meant to supplement income for retired people and their families.
The Social Security Administration estimates that benefits replace approximately 40% of a person’s income in retirement, making them a crucial component of any retirement income strategy. Today, we will discuss what federal employees can expect from the Social Security program and answer frequently asked questions regarding how and when Social Security benefits are distributed in retirement.
Breakdown Social Security
Before we get into when to collect benefits and other frequently asked topics, let’s take a quick look at Social Security and how it works. All of this information will assist you in calculating your predicted benefit and providing insight into how the system operates.
Social Security is supported by a payroll tax shared between you and your employer; you pay 6.2%, and they pay 6.2%, which is up to $137,700. Keep in mind that this is not an individual’s long-term savings strategy. What you put in does not equal what you get back. Your contributions are now helping those who are now receiving benefits.
So, how are your benefits calculated?
Social Security benefits are based on your work history, and to qualify, you must have at least 40 work credits or 10 years of employment.
Your Social Security payout is computed based on your lifetime earnings. Using their specific methodology, the Social Security Administration (SSA) calculates your primary insurance amount (PIA) by averaging your monthly salary over your 35 highest-earning years.
Your PIA is the amount you are eligible to receive when you reach full retirement age, which varies according to the year you were born. The maximum monthly benefit for filing in 2022 is $2,364 at age 62, and $3,345 at full retirement age.
When are you eligible for Social Security?
Workers can obtain Social Security benefits as early as age 62. Surviving spouses can receive as early as 60, while those with impairments and dependents are free from age limitations. While you can theoretically begin collecting benefits early, retirees who take this route should expect a 30% drop in benefits over their lifetime. This significant reduction may create a large gap in your retirement budget. However, while collecting early reduces benefits, there are rare cases where it is justified. Consider your income, retirement lifestyle, tax burden, health, and longevity.
Are you still Eligible for Social Security if you are a Federal Employee?
In a word, yeah. Federal employees registered in the FERS pension program are eligible for Social Security benefits beginning at age 62. All federal employees who were paid and hired after 1984 contributed to Social Security through their usual tax withholdings and are eligible for retirement benefits. No federal employee is free from this; even the President contributes to the Social Security program.