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Delaying Social Security Benefits

Helping close possible retirement income gaps

At OPERS, we talk about the “four-legged chair”, or the four sources of retirement income you need to replace your current income. The two primary sources people rely on the most are employer-sponsored retirement plans like OPERS and Social Security. The other two legs being personal savings/investments and working in retirement.

Did you know you have the option of postponing Social Security to increase your benefit and help fill income gaps in retirement? Depending upon your age, you can receive a benefit increase of up to 8% for every year you postpone drawing Social Security benefits past your full retirement age, until the age of 70 (or a maximum of 132% of full benefits under Social Security). Furthermore, delaying Social Security does not impact your eligibility for Medicare at age 65.

How it all adds up

Social Security benefits are calculated based on how much you earned and paid into the Social Security system during your working career. Generally speaking, Social Security benefits were designed to replace a larger portion of pre-retirement income for lower wage earners and a smaller portion for higher wage earners.

2008 Replacement Ratio Findings
Pre-Retirement Income
Social Secuirty

Aon Consulting and Georgia State University have become an industry standard in the measurement of retirement income needs. The table to the left comes from their 2008 Replacement Ratio Study™.

The amount of your income Social Security replaces in retirement is unique to each person. However, using the table provided, we are assuming a family in which there is one wage earner earning $40,000 annually, who retires at age 65 with a spouse age 62. The expected Social Security income replacement will be approximately 54%. If this person delays taking their Social Security benefits one year past their full Social Security retirement age they would increase their benefit by approximately 8% for a total of 62% income replacement.

Now, let’s assume this same person was a member of OPERS. Your OPERS pension replaces 2% of your income for every year of service you have with an OPERS-participating employer. If this person had 15 years of service in an OPERS-covered position, he/she would replace roughly an additional 30% of their income for retirement.

The Final Word

As you can see, Social Security combined with your OPERS pension provides a good estimate of what your income replacement will be in retirement.

 62% (Social Security)
 30% (OPERS)
 92% income replacement

In this example, the member has nearly replicated their pre-retirement income by delaying their Social Security benefit by only one year in conjunction with their OPERS pension. They could maintain their current standard of living in retirement with minimal adjustments to their spending habits.

As currently designed, Social Security will account for a significant portion of overall retirement income for many members. The ability to increase this income can be extremely helpful. This flexibility, combined with your OPERS pension and personal savings, can help give you more options when replacing your income in retirement.

The important thing to be aware of is that income replacement in retirement comes from multiple sources, with OPERS being just one.

For additional information:

Social Security -


This article was first published in the Summer 2012 edition of the Retiring Right newsletter. Click here to view other newsletters. Not receiving your newsletter, update your address by completing the Change of Address form.


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