Social Security (Alternative) DROP

Many people know about the DROP Program and the many benefits of it, but did you know anyone can do DROP?

 

For those who are unaware, DROP is where you elect to retire (from the pension plan) and continue to work for up to 5-8 years, all while collecting your pension tax deferred into a trust fund that is released to you when you decide to terminate service.

 

What most people don’t realize is that you can do the exact same thing with Social Security, and you don’t even need to be part of a pension program. Here’s how it works: Once you reach your full social security age (between ages 66 & 67 depending on the year you were born) you can begin taking social security and earn as much as you’d like without a penalty. You can then take these Social Security payments and defer them into a tax deferred retirement account (401(k), 403(b), 457, etc.). This offsets the tax liability from Social Security and builds a nice lump sum amount available to you or that you can leave to beneficiaries if desired, just like the pension DROP program.

 

The downfall of doing DROP with Social Security are the same as doing DROP with the pension program, if you wait and take your Social Security at a later date then you’ll get a higher monthly amount.

 

If this is something you or someone you know is interested in, feel free to contact our office and we will walk you through the process.