What age is ideal for retirement? Your own needs and situation will determine how to answer.
Retirement improves both health and life satisfaction, according to a study by the National Bureau of Economic Research, but the quality of your retirement depends on when you take it. Your annuity from the Federal Em
Employees Retirement System (FERS) may increase by 10%. It is always astonishing how frequently and unnoticed this crucial distinction between FERS pension annuity income is neglected.
When calculating their FERS annuity, federal employees who retire at age 62 or later with at least 20 years of service benefit from a 1.1% multiplier. This is equivalent to a 10% increase over the typical 1% multiplier.
But, retiring on an instant annuity at age 62 or later is the only method to collect the 1.1% or an additional 10% on your pension. The increase does not apply to delayed or postponed retirements. Disability and special category workers are exceptions to the general rule.
Is this a major issue? It can be because every environment and every person’s objectives are different. Let’s take an EXTREMELY SIMPLIFIED example of a worker who is debating whether to retire at age 60 or wait until age 62.
| Age | 60 | 61 | 62 |
| High-3 Salary | $150,000 | $151,500 | $153,015 |
| Years of service | 25 | 26 | 27 |
| Annuity multiplier | 1% | 1% | 1.1% |
| Annual pension $ | $37,500 | $39,390 | $45,445 |
The 1.1% multiplier or 10% rise can also be used to consider compensating for the 10% of your benefit that a full survivor benefits on your annuity costs. Keep in mind that a survivor benefit is necessary for a surviving spouse to continue receiving FEHB.
COLAs normally aren’t credited to your FERS annuity until you turn 62. COLAs start immediately unless you resign due to a disability, are a member of the Civil Service Retirement System (CSRS), or are required to retire as a special category employee.
As a result, if you retire earlier, you won’t start getting the yearly raises that are given to adjust for inflation until you’re 62 years old. Also, you run the risk of locking in a considerable decline in the purchasing power of your annuity benefits if inflation is high during these years.
Take the previous scenario and imagine that you retire at age 60 with a $37,500 annual pension and that you do so in a climate with higher inflation, similar to the one we’ve been experiencing.
For the sake of simplicity, we’ll use a 6.5% annual inflation rate throughout the two years leading up to the age 62 COLA. I know that the real equation heavily depends on YOUR spending habits, as inflation varies greatly by expense category.
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Best Age to Claim Social Security Benefits
Age 62 also marks the start of Social Security eligibility. Yet, there is a cost in the shape of diminished advantages. Did you know that if you apply for benefits at age 62, your benefits will be permanently reduced by 30%?
In addition, between the ages of 67 and 70, the maximum benefit age, Social Security benefits grow by 8% annually for each year you wait to begin receiving them. The thing about Social Security, though, is that it gives you options. It is up to you to decide what is best for your particular circumstance.
One of the keys is to decide how this money will fit into your overall strategy well in advance of turning 62 or retiring.
Social Security Full Retirement Age (FRA)
| Age | Benefit |
| 62 | 70% |
| 63 | 75% |
| 64 | 80% |
| 65 | 86% |
| 66 | 93% |
| 67* | 100% |
| 68 | 108% |
| 69 | 116% |
| 70 | 124% |
*Assumes age 67 is the full retirement age
It depends on your plan, your assets, your income options, and your goals for your retirement lifestyle whether taking Social Security at age 62 or any of the other years in the above table is ideal.
Also, the Social Security calculation is based on the average of your best 35 years of earnings (if you don’t have 35, years without earnings are deducted from your calculation, and you receive a zero), up to an annual maximum wage of $160,200.
(FY2023). Your ending benefit may increase if you add additional years at your peak earning level.
Look out for the SSA’s estimations, but keep in mind that they aren’t sufficiently adjusted for potential income rises.
A lot of this is also unknown, with longevity ranking highly. The ideal scenario would see Social Security acting as a supporting character to annuity and investment income, securely in the background. That gives you even more discretion.
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