In Part I of this article we wrote about the first four crucial stages of federal employee retirement planning. Today I will address the final four stages.
Age 60 is when Federal Employees are able to retire with 20 or more years of service. If you’re FERS and thinking of retiring at age 60, make sure you have someone calculate what you would receive at age 62 before you decide to leave at 60. In some cases, holding on for two more years could be worth several hundred dollars more pension benefit per month due to a higher computation. Knowing those figures will help you decide the best age to retire.
You can ask yourself if it is worth hanging on for two more years to get a higher pension for the rest of your life. If you retire at age 60 with 20 or more years of service under FERS, you will also be able to draw the FERS special supplement until age 62.
At 60, your FEGLI premiums are a little more than double what they were in the previous age band. Remember, they doubled at age 55 and now they have doubled again. If you did not look at your life insurance options at age 55, this might be a time to take a very close look at your life insurance choices, and make sure you look at your survivor benefit options also as you are likely close to retirement.
At Age 62 a lot happens and needs to be considered. A Federal Employee is able to retire at age 62 with five or more years of service.
If you’re a FERS employee and you have 20 or more years of service, then you get a slightly higher computation of 1.1% instead of 1% for each credible year of service. That might not sound like a lot and in some cases it isn’t, but in some cases it can be a significant amount. For example, if you have 30 years of service when reaching age 60 that means 3% more of your High-3 for the rest of your life.
Age 62 is also when a Federal Employee is first eligible for Social Security. For FERS Social Security is a big part of your retirement.
Although you’re eligible to take Social Security at 62 you do not have to take your benefit. You can delay your Social Security until an older age and receive a higher benefit. What I recommend to everyone is to go to www.ssa.gov and create an account. On their site you will be able to see what benefit you would receive at each age, and that will also assist in your planning.
At age 65, most Federal Employees are eligible for Medicare and you will automatically be enrolled in Part A of Medicare. There is no premium for Part A, if you paid Medicare taxes over your career. Part B is the part where you will have to pay a premium if you elect to get it. See www.medicare.gov for current premiums for Part B.
One of the most common questions I get when my clients reach this age is why do I need Medicare when I already have FEHB?
If you elect Medicare Part A and Part B, then Medicare becomes your primary insurance and your FEHB is your secondary. In many cases, your current FEHB plan will have even lower out of pocket costs to you. For example, there could be lower or no cost for deductibles or co-pays. There are a few important disclaimers here though. The first is if you are retired and you elect not to get Part B of Medicare, you will pay a penalty later on if you elect to receive it at an older age. Secondly, if you’re still working at 65 or older with health coverage, you can elect not to get Part B and acquire it when you retire with no penalty.
My final disclaimer is one I see too often, if you want to keep your FEHB with your Medicare do not sign up for another Medicare Health plan like Medicare Advantage or Part D prescription coverage. Almost all of those automatically kick you out of your FEHB, so only sign up with one of those plans if you’re sure that is what you would like. An even safer route is to speak with someone who knows your options before making an important decision.
Age 66 is potentially your Full Retirement Age with Social Security, depending on your year of birth. Your full retirement age is when you can receive a higher Social Security benefit but also when you do have not have a wage earnings test. That means if you do not plan on retiring or you have earned wages from somewhere, you are able to earn whatever you want without reducing your Social Security.