The FERS Supplement: Bridging Your Retirement

Check out my courses here: https://planyourfederalbenefits.com/courses-main-page/ Check out my articles on FedSmith here: https://www.fedsmith.com/author/dallen-haws/ Federal employees under the FERS system enjoy a benefit that is rare and relatively unknown. Even the CSRS system doesn’t have anything comparable. It is called the FERS supplement, the Social Security Supplement, or even the Special Retirement Supplement. Let’s dig into how it works.  Because the earliest age you’d be eligible for social security is age 62, this supplement is meant to bridge the gap of retirement income for those who retire before age 62. For example, Bobby retired at age 57 and started to receive his pension income, but it was not enough to cover all his living expenses. The earliest he could start drawing social security is 5 years away at age 62. If Bobby was eligible, he would receive this supplement during those 5 years to bridge the gap. However, not everyone is eligible.  To qualify for this benefit, you must: -Be under FERS -Retire with an immediate annuity (not a MRA+10). -Be younger than age 62 Basically, the two groups that would qualify are those that retire with 30 years of service at their MRA (minimum retirement age) or with 20 years of service at 60 years old. You would be eligible for an immediate annuity at age 62 with at least 5 years of service but you would not be eligible for this supplement because it stops at age 62. Now, the big question is, how much does this supplement pay out? While the real calculation is quite complex, you can get a good estimate with this formula: (Years of Creditable Service /  40)    x    (Your Social Security Benefit at age 62)    As you can see, you will need to have an estimate of your years of service at retirement as well as your age 62 social security benefits. At the top of your social security statement (if you don’t have one you can get one from the SSA.gov) is your benefit amount at your full retirement age (between age 65-67) but your age 62 benefit will be a lower amount found on page 2 of your statement.   Let’s do an example. Let’s say you have 30 years of service and your age 62 SS benefits will be $1,200. The formula would look like this: (30/40)  x  $1,200     =     $900   As you can probably tell, unless you have 40 years of service, this supplement will not fully replace your full social security benefits. You will want to make sure that you have other sources of income (ie your TSP) to cover any other needs that your pension or this supplement doesn’t. You will want to be careful however to not deplete your TSP balance too much especially so early in retirement.  Using this supplement does not force you to start social security right at 62. You can still choose when to turn it on (between ages 62 and 70)  and it is a whole other conversation to decide when is the best time to start for you. Suffice it to say that it makes a big difference when you start it and that decision should not be taken lightly. I also have to note that this supplement is treated in very similar ways as regular social security benefits. Meaning, it is subject to reductions and taxes. In efforts to keep this article digestible, I won’t go into the weeds too far but just know that if you earn income over certain amounts while receiving this supplement, your supplement can be reduced and a portion of it can be taxable income.  Conclusion Just like all of the FERS benefit, The Social Security Supplement can be a great benefit especially if you understand how it works well enough to get the most out of it. A little pre-retirement planning can go a very long way in setting yourself up for success down the road.