Ask The Experts: Retirement

By Reg Jones

Don’t let these 5 mistakes disrupt your plans

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During turbulent times, the thoughts of many employees turn to retirement. If you are one of them, I want to alert you to some of the mistakes you can make on your way out the door. Fortunately, most of them can be avoided.

1. Not being able to carry your FEHB or FEGLI coverage into retirement.

To carry your health benefits coverage into retirement, you must have been enrolled in the Federal Employees Health Benefits program for the five consecutive years before you retire (or from your first opportunity to enroll). If you don’t meet that requirement, you’ll be out in the cold unless you are offered an early retirement opportunity and were enrolled in the FEHB program before the latest authority was approved for your agency.

To carry your life insurance into retirement, you must have been enrolled in the Federal Employees Group Life Insurance program for five consecutive years before you retire (or from your first opportunity to enroll). Unlike the FEHB program, the law doesn’t provide for a waiver.

2. Not getting credit for all service.

Whether you are covered by the Civil Service Retirement System or the Federal Employees Retirement System, your eligibility to retire and the amount of your annuity will depend on how much creditable service you have on the day you retire.

Don’t overlook credit for less common periods of civilian service. Among these are service in the Peace Corps, serving as a volunteer under the Economic Opportunity Act of 1964, working as a substitute carrier for the Postal Service and having a temporary appointment. You’ll usually have to make a deposit to the retirement fund to have it included in your annuity computation, but it may be worth it.

Active-duty military service is considered creditable service if you follow the rules. If you are a FERS employee, you’ll only get credit if you make a deposit to the retirement fund. The same is true if you are a CSRS employees who was hired on or after Oct.1, 1982. If you were hired before then, you can decide if you want to make a deposit. If you don’t and are eligible for a Social Security benefit at age 62 (or when you retire if it’s after age 62), your annuity recomputed without your military service.

3. Not taking age-reduction penalties into account.

If you are a CSRS employee who is offered an opportunity to retire early, your annuity will be reduced by 2 percent for every year you are under age 55. There isn’t any penalty if you are a FERS early retiree. However, if you retire under the MRA+10 Provision (minimum retirement age with at least 10 but fewer than 30 years of service), your annuity will be reduced by 5 percent for every year you are under age 62, unless you have 20 years of service and retire at age 60 or later.

4. Not accounting for the WEP.

If you are covered by CSRS (or FERS and will have a CSRS component in your annuity) and will also be eligible for a Social Security benefit, you’ll be subject to the windfall elimination provision. The WEP reduces the Social Security benefit of anyone receiving an annuity — in whole or part — from a retirement system where he didn’t pay Social Security taxes and has fewer than 30 years of substantial earnings under Social Security.

5. Not accounting for the GPO.

If you are going to be receiving an annuity from a system where you didn’t pay Social Security taxes, such as CSRS, and your spouse has been working in the private sector, when he or she becomes eligible for a Social Security benefit, the government pension offset will cause your Social Security spousal benefit to be reduced by $1 for every $3 in your CSRS annuity.

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