By Mike Miles
12 questions on VERA
March 19th, 2013 | Uncategorized
Q. I am a letter carrier, age 52, started in 1985 and have 28 years of creditable service.
If I understand what I’ve gleaned from the posts here and the Postal Service were to offer me a Voluntary Early Retirement Authority this year,
1. Would I begin my annuity immediately?
2. Would I have no reductions in calculations of my annuity? (average high-3 x 1 percent x 28)
3. Would I receive credit for half of my sick leave and all of my annual leave? (How are these applied?)
4. Would I receive the special retirement supplement beginning at age 56 (my minimum retirement age), and receive it until I reach age 62?
5. Would I be able to continue carrying my current health and life insurance at non-USPS rates? (I couldn’t find how long these could be carried. Until death?)
6. Could I begin receiving Social Security as early as age 62?
7. Any withdrawal from my Thrift Savings Plan prior to age 59½ would be penalized 10 percent as per Internal Revenue Service regulations? (Can I continue to contribute to TSP after retirement?)
8. As a FERS annuitant, is there no limit to what I can earn after separation from the Postal Service as it pertains to my annuity payment?
9. At age 56 (my MRA), the special retirement supplement from Social Security would begin and would be subject to yearly income limits. Would supplement payments be reduced by approximately $1 for every $2 I earned above that year’s Social Security income limit?
10. At age 65, I’d be eligible for Medicare parts A and B? (Would this affect my health insurance coverage through Federal Employees Health Benefits?)
11. Would there be cost-of-living increases at any point for my annuity?
12. Is there a date during the year that maximizes the benefits of retirement?
Did I get this right, and are there any other things I should know before considering a VERA if it is offered?
A. Reg: 1. Yes.
2. Yes.
3. Yes. Half of your unused hours of sick leave would be added to any hours of service that were left over when your annuity was computed. Any additional months created would increase the amount of your annuity. Any unused annual leave would be paid to you in a lump sum at your current hourly rate.
4. Yes.
5. Yes. And those enrollments would continue until your death.
6. Yes.
Mike: 7. You will be subject to the early withdrawal penalty until you reach age 59½ unless you can qualify for one of the exceptions listed on Page 7 of the notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. You may not contribute to the TSP after you retire, but you may transfer eligible balances into the TSP from other retirement accounts such as IRA, 401(k), 403(b), etc.
Tags: 401(k), 403(b), age, annual leave, annuity, catch-up contributions, cost-of-living adjustment, early withdrawal penalty, FERS, health insurance, income, IRA, IRS, life insurance, lump-sum, Medicare, Minimum Retirement Age, Postal Service, sick leave, Social Security, Special Retirement Supplement, TSP, VERA
Early retirement, penalty, SRS and TSP
March 18th, 2013 | Uncategorized
Q. I have 27½ years in the Postal Service and I am 52½ years of age. If an early-out comes in the next few months, will I get a penalty for leaving? Do I get my special retirement supplement, or do I have to wait for that? Also, do I get to take my Thrift Savings Plan now, or do I wait for that?
A. Mike: The early-out has no effect on the Internal Revenue Service early withdrawal penalty. You will be subject to the penalty until you reach age 59½ unless you qualify for one of the exceptions listed on Page 7 of this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf
Reg: If you were offered an opportunity to retire early, you have the age and service needed to accept it. If you did, you wouldn’t be subject to the age penalty and you’d be entitled to the special retirement supplement when you reach your minimum retirement age, which is 56.
Tags: early retirement, IRS, Minimum Retirement Age, penalty, Postal Service, Special Retirement Supplement, TSP
FERS firefighter retirement
January 14th, 2013 | Uncategorized
Q. I am a federal firefighter and a FERS employee. In 2022, I will have 21 years of creditable service and four years of bought-back active military time and be 48 years old.
1. Will I be able to retire under the provisions of 25 years of service at any age?
2. Will I receive the special category retirement percentages (1.7 x high-3 x creditable service, etc.)?
3. Will I receive the special retirement supplement until 62?
4. Will I not be able to withdraw any Thrift Savings Plan annuities until 62?
A. Reg: 1. No, you won’t be able to retire. Only actual service as a firefighter — not active duty for which you’ve made a deposit — counts toward the 25-year requirement.
2. When you are eligible for retirement and do so, your annuity would be computed using the special category percentage for the first 20 years; the remaining time would be computed using the standard multiplier.
3. When you retire, you would receive the special retirement supplement, regardless of your age, until you reach age 62.
Mike: 4. You will have access to your TSP assets, for withdrawal or to purchase an annuity, as soon as you retire.
Tags: age, annuity, FERS, firefighter, military buyback, retirement, Special Retirement Supplement, TSP, withdrawal
Special retirement supplement
January 9th, 2013 | Uncategorized
Q. If I cash out my Thrift Savings Plan now that I am retired, will that income disqualify me from getting the retirement supplement? I am 61 years old and had 27 years in.
A. No.
Tags: age, Special Retirement Supplement, TSP
Earnings limit and special retirement supplement
December 3rd, 2012 | Uncategorized
Q. I will be eligible to retire Dec. 4 with both minimum retirement age and years of service under FERS. I would like to wait until Jan. 31 to retire to complete a project. I will have 240 hours of annual leave going into 2013. The combination of my lump-sum payment for my annual leave and my January wage earnings would exceed the Social Security earnings limit for 2013. Since the Social Security earning limit is the same as the FERS annuity supplement earnings limit, would this make me ineligible for the special retirement supplement for 2013?
If I put all of my January wage earnings for 2013 into the Thrift Savings Plan and just receive the lump-sum payment, which by itself is less than the earnings limit, would I be able to collect the special retirement supplement for the rest of 2013 when I retire at the end of January?
A. In general, the earnings limit is based on gross earned income, before deductions for things like TSP contributions, so you can’t reduce the income counted for the limit by deferring it into the TSP. Amounts you are paid after retirement, but that were earned before retirement, are usually considered special payments, which do not count against the Social Security earnings limit. The rules can be complicated, though, and you should consult a qualified tax preparer — preferably the one who will actually complete and stand behind your tax return for the year — before proceeding.
Tags: annual leave, contributions, FERS, income, lump-sum, Minimum Retirement Age, Social Security, Special Retirement Supplement, taxes, TSP
SEPP
November 14th, 2012 | Uncategorized
Q. I am a federal employee with the Department of Justice, non-law enforcement, and will have 30 years of service at age 54, approximately two years before my minimum retirement age. Can I leave the government before MRA with 30 years and still be eligible to receive my special retirement supplement and my FERS retirement without a penalty at my MRA? Would I still be able to collect my Thrift Savings Plan, without penalty at my MRA, or would I be required to wait until age 59½?
A. Mike: If you separate from service before the calendar year in which you reach age 55, the early withdrawal penalty rules will apply to your TSP account. You may avoid the penalty by taking a series of Substantially Equal Periodic Payments, however.
Reg: If you left government before reaching your minimum retirement age, you could apply for a deferred retirement. Because you have at least 20 years of service, you could apply for that benefit at age 60. However, as a deferred retiree, you wouldn’t be eligible for the special retirement supplement.
Tags: deferred retirement, early withdrawal penalty, FERS, Minimum Retirement Age, SEPP, Special Retirement Supplement, TSP
Roll over TSP without penalty?
October 22nd, 2012 | Uncategorized
Q. When I retire under FERS, can I get all of my Thrift Savings Plan monies, Social Security and my annuity? Can I roll over my TSP monies without paying 30 percent of the total to the Internal Revenue Service? If so, what amount of tax-deferred monies, once rolled over, can I take out monthly without a penalty or have to pay taxes?
A. Mike: Once you retire, you may withdraw your TSP money. If you retire during or after the calendar year in which you reach age 55, your TSP withdrawals will be exempt from the early withdrawal penalty. There is no withholding or tax due for TSP money rolled over to an IRA. If you are under age 59½, you will be subject to the early withdrawal penalty for withdrawals from an IRA. There are exemptions from the penalty, however, and they are spelled out in IRS Publication 590.
Reg: Yes, you can receive an annuity and, unless you retire under the MRA+10 provision, the special retirement supplement, when you reach your minimum retirement age. Unless you exceed the Social Security earnings limit from wages or self-employment, the SRS will continue until age 62 when you will be eligible for a Social Security benefit.
Tags: annuity, early withdrawal penalty, FERS, IRA, IRS, Minimum Retirement Age, retirement, Social Security, Special Retirement Supplement, taxes, TSP, TSP withholding
Early withdrawal penalty?
October 22nd, 2012 | Uncategorized
Q. I am a FERS employee, and I’m considering a June 1, 2013, retirement date. I will be 57 years old and have 29 years of service on that date. I understand that I would take a 5 percent reduction on my FERS pension for each year under age 62. Will I be eligible for the special retirement supplement? Can I take monthly withdrawals for my Thrift Savings Plan account without being liable for the early withdrawal penalty?
A. Mike: If you retire during or after the calendar year in which you reach age 55, your TSP withdrawals will be exempt from the early withdrawal penalty.
Reg: No one who retires under the MRA+10 provision is eligible to receive the special retirement supplement.
Tags: annuity, early withdrawal penalty, FERS, retirement, Special Retirement Supplement, TSP
Buyout questions
July 25th, 2012 | Uncategorized
Q. I qualify for a buyout with 25-plus years of service. If I take the buyout, it is my understanding that I must wait until my normal minimum retirement age of 56 to begin receiving the Social Security supplement. Would this prevent me from receiving increases in Social Security supplemental benefits that I would have received had I waited until 56 to retire? I believe I would get the increases at 62, in any event, when I could first draw reduced SS benefits.
Also, what happens to my Thrift Savings Plan account? May I purchase an immediate annuity and/or take a lump sum at the time even though I am below the MRA? Would this cause me to have to wait until I was 59½ to begin being able to access TSP if I took an early-out? Do you believe the $25,000 buyout and the extra six or so years of retirement payments I would receive with an early-out would make up for the growth in my TSP and the loss of the extra 1 percent a year I would have received for staying until my MRA? I am at about the top of the GS-12 scale. I have been contributing the maximum allowed to my TSP and will be eligible to make catch-up contributions soon. I know you may not want to make a prediction, but I would love your opinion based on what you have observed with others in this situation.
Mike: Once you retire, you are free to access your TSP in any way usually allowed for retirees. The MRA does not apply to the TSP. You do not have to wait until you reach age 59½ to take money from your TSP once you are retired, but withdrawals taken before reaching age 59½ might be subject to the early withdrawal penalty if you retire before the calendar year in which you reach age 55. It’s impossible to say whether the early-out income will be enough to offset the potential TSP gains in the future without knowing how you’ll invest the TSP money along the way.
I think that accepting the buyout/early-out offer will substantially reduce your maximum standard of living in retirement if you don’t continue to work, though. I think it’s reckless to make such a big, irreversible decision without a clear understanding of the financial implications. Based on your questions, I suggest that you keep working and skip the buyout offer. This is the safer bet without the right decision analysis and support.
Reg: You can estimate what your special retirement supplement would be at age 62 by multiplying your estimated Social Security benefit at age 62 by your years of FERS service (rounded up to the next higher year) and dividing the product by 40. Your actual Social Security benefit at age 62 would be determined by the Social Security Administration based on such factors as your average indexed monthly earnings.
Tags: catch-up contributions, early retirement, early withdrawal penalty, FERS, lump-sum, maximum contribution, Minimum Retirement Age, Social Security, Special Retirement Supplement, TSP
Retiring before vs. after VERA
June 7th, 2012 | Uncategorized
Q. I’m 57 years old, started with the Postal Service in June 1987, bought back five years and nine months of military time. What would be the difference in benefits between retiring if a VERA is offered and retiring before a VERA is offered? Would I be penalized on my Thrift Savings Plan? Can I get the Social Security supplement? Would I be able to collect Social Security supplement either way?
Mike Miles: Since you’d be retiring during or after the calendar year in which you reached age 55, you would have access to your TSP account without incurring the early withdrawal penalty.
Reg Jones: There wouldn’t be any difference. Since you already have the right combination of age and years of service, you can retire whenever you want to. Voluntary Early Retirement Authorities are only useful for those who wouldn’t otherwise be able to retire on an immediate annuity.
Tags: early withdrawal penalty, military buyback, Postal Service, Social Security, Special Retirement Supplement, TSP, VERA