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Understanding Social Security: I have a government job and a small pension. I’m planning to work a few more years. Should I file for Social Security now or wait?

A recent reader email introduced the very common question: Should I file for Social Security now or wait? Here’s the email:

I am turning 66 in June, approaching full retirement. I am a federal employee, I am blessed with a great job, low stress, highest income, approximately $100k +, with lots of overtime. I am saving approximately 20% in a TSP, and thinking about working three to four more years. I have only 10+ years of government work, therefore a small retirement if I retire.

My monthly Social Security benefits at 66 and 4 months are $2,478, at 70 it’s $3,386.

My question is, should I file for Social Security payments at 66 and 4 months while working, or at 70, at retirement?

As I’ve mentioned in other articles, there’s no right or wrong answer to this question, especially if the emailer is a single person with no dependents. The way Social Security benefits are calculated, from a “total benefits over your expected lifetime” perspective, filing at any age (for a single person) will result in a similar outcome for you.

Read: Financial Face Off: When is the best time to claim Social Security retirement benefits — sooner or later?

One factor that is working in the favor of person who wrote in is that if he chooses to take benefits early — after Full Retirement Age (FRA) — there is no limit to the amount of income he could earn while collecting Social Security benefits.

Read: As Social Security’s finances teeter, Congress could make it worse with this rule change

But back to the main question: If you live longer than about age 80 (this varies by filing age, of course, but 80 is a good round number to use as the target), then delaying your filing will result in a larger lifetime total benefit received. Living less than approximately age 80 generally indicates filing earlier as the better option. Not knowing how long you’ll live, we just use the average of around age 80, which leaves us with either option working out about the same.

Read: 6 things to consider before you move in retirement

If the writer had a health condition that could be expected to reduce his lifespan somewhat, the earlier filing option looks better. On the other hand, if he is healthy and his ancestry indicates a longer lifespan, delaying might be the better route.

Read: I took Social Security at 62 and now I regret it. Is there a way to increase my benefit?

Now, if the circumstances are a bit different — say for example there is a spouse who is a bit younger than the emailer, and this spouse has a lower Social Security benefit of his or her own, then it might be better to delay filing. By delaying, you’re increasing your benefit (by 8% per full year of delay past Full Retirement Age). This increased benefit will be paid not only to you, but also to your spouse if he or she survives you, once you’ve assumed room temperature.

Read: Why are Social Security disability rolls declining?

There’s a possible fly in the ointment for the surviving spouse, if the writer’s spouse is receiving (or will receive) a pension from a government job where Social Security taxes weren’t applied. In a case like this, the Social Security survivor benefit could be dramatically reduced or even eliminated, depending on how large the government pension will be for the surviving spouse. For more information and examples on the application of this reduction, see this article about the Government Pension Offset for Social Security.

Note that the Government Pension Offset (GPO) only applies if the pension being received by the surviving spouse is from employment by the surviving spouse. If the government pension being received is also a surviving spouse benefit, it is not based on the surviving spouse’s employment and therefore the GPO would not apply.

Another factor to consider is the timing of the writer’s pension. Since he is currently working in a government job where presumably he’s not subject to Social Security, once he does start receiving the government pension, his Social Security may be reduced by the Windfall Elimination Provision. This might prompt an earlier filing for Social Security benefits choice. If he filed earlier, the writer would receive the full (unreduced) benefit for the years up to his ultimate retirement from the government job.

This is because the Windfall Elimination Provision (WEP) doesn’t start to apply until you start receiving the WEP-triggering pension. He indicates that the pension is small, so the WEP impact may not be enough to tip the scales toward early Social Security filing.

Of course, if he’s had 30 or more years of substantial earnings subject to Social Security, then WEP won’t apply, which eliminates that factor in favor of earlier filing.

Rounding out the discussion, as I wrote at the beginning of this column, there’s really no right or wrong answer. But one or more of the factors outlined (and there are probably more factors, but these are the most common) might tip the scale one way or the other.

Readers, do you have a Social Security question? Email us at HelpMeRetire@marketwatch.com and we may use your question in a future column.

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