Posted on Friday, 12th April 2013 by

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A site visitor to one of our forums stated that she was 66 and still working and was CSRS offset. A colleague suggested that she think about drawing social security now versus waiting until she retires. Once you reach age 66 you can earn unlimited amounts without reducing your Social Security benefit. She had been giving the matter some thought in terms of the pros and cons.

She stated, “It seems to be the obvious pros would be to have the money now since none of us know how many years we will be able to collect and having the extra money now would enable me to increase my contributions considerably to the TSP.  The obvious con seems to be that if left untouched, the social security will increase 8% each year until I reach age 70.  It’s difficult to find any savings vehicle that would match 8%; while some of the funds in TSP have had years of growth larger than 8%, it’s still the stock market (except for the G fund which has growth of under 5%) and therefore there is no guarantee that the extra money invested would gain 8% or more and could just as easily lose money, depending on the economy & world events.

Any thoughts or pros and cons I’ve overlooked?  I realize it comes down to a personal decision but I’m trying to study all facets of the issue before deciding one way or the other.  I know, of course, that I don’t have to make a decision right now.  I am not sure how much longer I will work before retiring – at the earliest, January 2014 but I may delay it until 2015 or later.  I’m just not sure.”

Reply: Since you are at the full retirement age, the decision is basically whether to receive funds now or a greater amount later.  If we knew how long the retirement funds needed to last this would be an easy answer.  I would estimate each annuity amount (payable at 66 and at 70) and how long you would have to live to make up the difference if you wait until you are 70 to collect the higher benefit.

Sometimes the decision is not about us alone, but also about a spouse’s income as well.  For example, a married couple may elect for the lower wage earner to receive Social Security early and the higher wage earner who is still working and adding significant income to the calculation to wait.  This way if the person earning more money retires at age 66 or older the spouse can then elect the higher spousal benefit or if they die, the spouse can opt to receive the larger annuity of the higher earner.

One other thing to consider is if this would allow you to put more away in your TSP account.  After you retire, you cannot contribute money to a 401k or an IRA because deposits must come from wages.  Your beneficiaries can inherit an IRA or 401k, but usually only the spouse can receive Social Security benefits.  If you are already contributing the maximum to your TSP, this may not be a consideration.

You may want to hire a certified financial planner to review your situation in detail to provide more specialized advice in your situation.  They can look at the cost of your debt, your contribution amount to TSP, your Social Security income and your life expectancy.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Last 5 posts by Dennis Damp


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