Over the last decade, Congress has passed legislation that has affected Social Security recipients. This legislation has changed when recipients should file for their Social Security monthly retirement benefits and how long they should work in order to maximize their monthly retirement benefit.
This column presents 10 strategies for federal employees and retirees to maximize their lifetime Social Security retirement benefits.
10 Ways for Federal Employees to Maximize Social Security Benefits
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1. Delaying the start of one’s monthly retirement benefit as long as possible, ideally until age 70.
Delaying the start of one’s monthly Social Security retirement benefit will permanently increase the amount of benefit. A fully insured individual (an individual who has earned a minimum 40 credits of Social Security) can elect to take their Social Security monthly retirement benefit starting at age 62. However, starting to receive their benefit at age 62 will result in a permanently reduced monthly benefit (30 percent reduction) compared to the individual’s postponing the start of his or her monthly benefit until the individual reaches full retirement age (FRA) (age 67, for individuals born after 1959). If the individual is seeking the maximum monthly benefit, then individual is advised to wait until the month they reach age 70 to start receiving their monthly retirement benefit.
Delaying the start of an individual’s monthly benefits past FRA will result in a permanent increase of 8 percent per year for every year postponed past the individual’s FRA until age 70. An individual who has an FRA of 67 and who waits three years until age 70 to start drawing will receive 124 percent increase in their monthly benefit compared starting to draw at FRA .
For many federal retirees who are in their early to middle 60s, it makes financial sense for them to start withdrawing their traditional Thrift Savings Plan (TSP) account in order to allow them to postpone collecting Social Security benefits. The reason: Social Security benefits are guaranteed to increase by 8 percent per year (“delayed retirement credits”). On the other hand, there is no guarantee that the traditional TSP account balances will grow from year to year. Another reason for traditional TSP participants to start withdrawing their accounts starting in their middle 60’s is that it will allow them to reduce their traditional TSP account balance by the time the participant reaches age 73 at which time the participant is subject to the TSP required minimum distribution (RMD) rules. The larger the RMD, the more federal and state taxable income the TSP participant will have to pay.
2. Taking advantage of the fact there is no “marriage penalty” when it comes to Social Security benefits.
Contrary to a common misconception, there is no “marriage penalty” or offset for married couples when it comes to overall Social Security benefits. When both spouses are entitled to their own monthly Social Security benefit, each spouse can collect his or her own full benefit with no offset or reduction to either souse’s benefit. However, there is an alternative way of collecting Social Security called the “dual entitlement law.” If one spouse has a much higher benefit from that of the other spouse (the lower earning spouse’s monthly benefit is less than the higher earning spouse’s full benefit), then under the dual entitlement law, the spousal benefit is set at 50 percent of the higher earning spouse’s benefit.
For example, if the higher earning spouse’s annual benefit is $30,000 a year and the lower earning spouse’s annual benefit is $10,000, then the lower earning spouse is entitled to an increase of $5,000 in benefits to bring it up to 50 percent of the higher earnings spouse’s benefits, or $15,000 per year. The requirement for this to happen is that the higher earning spouse has to be receiving his or her benefit and the lower earning spouse has to be at least age 62.
3. Continue to work additional years – even after starting to receive Social Security monthly retirement benefits
While the average individual cannot work forever, an individual who works additionally after retiring (even working part-time) can increase the individual’s monthly Social Security retirement benefit. The reason: The Social Security Administration (SSA) every year recalculates an individual’s monthly benefit based on the individual’s 35 years of highest Social Security earnings (wages) were highest. The years need not be consecutive. This is important because if an individual works in retirement, then the higher wages the individual is earning (as indexed to inflation) will likely be higher than what the individual earned 25 to 35 years ago.
4. Individuals who initially claim their monthly Social Security benefit before reaching their FRA should consider suspending their monthly benefit when they reach FRA.
Individuals between age 62 and FRA who elect to start receiving Social Security monthly benefits before reaching FRA receive a permanently reduced monthly retirement benefit. They can voluntarily suspend their benefits once they become FRA. In so doing, their suspended (reduced) monthly benefit will earn delayed retirement credits (DRC) equal to 8 percent per year until the individual becomes age 70. The DRC will result in an increase in the reduced individual’s monthly benefit. There is, however. a downside to suspended benefits at FRA. The downside is that any family benefits (such as to a spouse or children younger than age 18) will also be suspended.
5. Maximizing Social Security earnings (especially before retirement) can lead to larger lifetime Social Security benefits.
One way for an individual to maximize lifetime Social Security benefits is to earn more during their working years. The Social Security Administration uses a formula that is based on what an individual has paid (via the FICA tax) through the years into the Social Security trust fund. The more an individual has paid into the system, the larger the individual’s future benefits will be. The Social Security payroll tax (the FICA tax, equal to 6.2 percent) is imposed on an employee’s wages, and the individual’s employer pays another 6.2 percent up to the maximum Social Security wage base ($184,500 during 2026). An individual who for at least 35 years earned in salary at least the maximum Social Security wage base will likely receive the highest possible Social Security lifetime retirement benefit.
6. A widow/widower can collect a widow/widower monthly benefit on their deceased spouse’s Social Security account as early as age 60 and then later switch to their higher monthly benefit later.
This filing option for a widow/widower benefit was not changed by the 2015 Social Security “deemed filing rule”. However, there is a restriction that a widow/widower should be aware of when they elect to collect on their deceased spouse’s Social Security benefit. If the widow/widower is younger than FRA, working and collecting on the deceased spouse’s Social Security monthly benefit, then the Social Security benefit is subject to the annual Social Security “earnings test.” Violating the Social Security annual earnings test (a result of having earned income (salary/wages) above the maximum allowed – $24,480 during 2026) will result in a temporary loss of monthly Social Security retirement benefits.
7. Social Security monthly benefits and the law.
Social Security monthly benefits (including disability benefits and retirement benefits) are protected by law from most creditors. But monthly benefits are not protected from debts owed to the IRS, federal student loans, other federal government claimants, and from alimony or child support payments. Affected Social Security beneficiaries should be aware of who they owe money to before deciding to file for their monthly benefit.
8. Social Security benefits continue to be taxable but there are ways to minimize the tax.
Since 1983, Social Security benefits (both retirement and disability benefits) have been potentially subject to federal income tax and in some states with income taxes, state income tax. Single individuals with annual adjusted gross income (AGI) less than $25,000 or married couples will annual AGI less than $32,000 do owe federal income tax on their Social Security benefits. An AGI above those thresholds will result a portion of their benefits (as much as 85 percent of the benefit included in their taxable income and subject to federal income tax). Since qualified distributions from a Roth IRA and the Roth TSP are not included in adjusted gross income, it can be advantageous to start withdrawals from traditional (non-Roth) retirement accounts before starting to receive Social Security benefits. Also, because qualified Roth TSP withdrawals are not included in AGI, Federal employees are encouraged to contribute more to their Roth TSP accounts. If possible, both employees and retirees should consider converting portions of their traditional TSP accounts to Roth TSP. .
9. Marriage, divorce, death and remarriage.
Social Security offers benefits to individuals in many different scenarios, and some of the most complex choices occur if an individual is married or is divorced. Spouses and ex-spouses should carefully consider their options and what works best for them with respect to when and whose Social Security benefit to receive. This is especially important when it comes to a widow/widower benefit. As an example of some of the complexities involved, individuals who divorce and then remarry cannot collect on an ex-spouse’s Social Security. But there is an exception – individuals who remarry after age 60 can collect on a deceased ex-spouse’s Social Security benefit.
10. Work with a financial advisor who is knowledgeable on the issue as to when to claim Social Security benefits.
As discussed above, there are several options for individuals to claim their Social Security retirement benefits. Many Americans claim their Social Security benefits with little knowledge about their filing options (including the optimum age to file) and how choosing the wrong option can result in a loss of thousands of dollars of lifetime benefits). In fact, only four percent of Americans choose the optimum claiming strategy that would maximize their Social Security monthly retirement benefits. For this reason, federal employees and retirees are advised to work with a financial advisor who is knowledgeable in assisting clients claim their Social Security benefits and answering their claiming questions. This is especially important if an employee or retiree has complicated family issues, such as formerly married and divorced or formerly married and their spouse has died.