I was approached by an NC State Employee who had worked for the State of NC for 30 years but was only 56. They had talked with the State Retirement System and were told that they had the option of starting Social Security early. Now let me clarify that this was probably not exactly what they were told, but what they understood. In fact, the State of NC does offer a plan for those that retire before they are eligible for Social Security where the state provides more benefits from the State early and reduces them when the employee is eligible for Social Security at age 62. I work with lots of State employees and help them understand how and when to file for both State Retirement benefits and Social Security. The reality is that no two employees are the same and the needs can be dramatically different depending on the variables of each person. I usually caution people about taking the leveling option because it can have unintended consequences. First, the leveling option is based on an expected amount from Social Security. If the employee were to truly stop working more than likely the Social Security benefit would be overstated. This is because the calculations used to determine the benefit is based on the person working until either full retirement, age 62 or age 70 at the current salary. If you want an accurate calculation I have software that I use to give a more accurate estimate of benefits. The second trap is if the employee chooses to work somewhere after retirement from the state. This can impact the amount they would receive at 62 from Social Security because there is an earnings test. It is always frustrating to be expecting a certain amount and suddenly receive less. The State Retirement System will stop the leveling payment at age 62 even if you do not elect to start receiving benefits from Social Security. The final downside of taking the leveling option is that your Social Security benefit will be the lowest you could possibly receive. If you are the higher earner in your household it not only effects your benefit but could significantly impact your surviving spouses benefit for the rest of their life too.

For some, this may be an option to consider if poor health is an issue, but for most I would pass on this option. If you want unbiased advice on either the State Retirement plan or Social Security give me a call and we can schedule a consultation.