By Reg Jones
Q. I am a FERS-covered firefighter with a retirement date of Dec. 30.
I have been on the job since Dec. 30, 1984 (at retirement, I will have 29 years and one day) and I am 49. I have easily met the FERS firefighter retirement requirement of 25 years, any age.
I know the mandatory retirement age is 57 (I don’t need to concern myself with that).
I have been informed to be prepared for three to four months (potentially up to six months) before I would receive a “full/normal” retirement check.
I have recently started a small business which will be my self-employment after the fire department retirement.
I have read that I would be exempt from the “earnings test” as it pertains to the special retirement supplement reduction until I reach the minimum retirement age.
1. Is there a minimum retirement age for firefighters? If so, what is that age?
2. Have I already passed that age?
3. Is there a limit on what I can make in my self-employment and still draw the Social Security supplement?
4. Is three to four months (or more) to receive a “full/normal” retirement check a true/realistic time frame?
5. Is it true that “scheduled/mandatory” overtime is to be included along with the high-3 calculations?
Q. My planned retirement date is Jan. 11. Will I forfeit my use-or-lose leave?
Q. I will have 448 hours of annual leave accrued when I plan to retire on Jan. 3. By retiring after Jan. 1, will I lose 208 hours and not be paid for it? If so, would Dec. 31 be a better bet?
Q. I always thought retiring Jan. 3 was a good idea, but let’s assume I plan to retire in 2014. If there is a retiree cost-of-living adjustment in 2015, and I retire Dec. 3, 2014, will my annuity increase in January by the 2015 COLA percentage? (If not, how far back into 2014 would I need to retire to get the next COLA?) Is it 1/12 of COLA per month prior to the January increase?
Q. I plan to retire May 31, 2014.
1. How soon can I submit my retirement package?
2. If a Voluntary Separation Incentive Pay is offered before my retirement date, can I amend the date to get the VSIP?
Q. I have 174 hours of sick leave. I’m 62 under FERS. Should I retire Dec. 29, where I’d only get half of my unused sick time to add to my annuity but get the 1 percent cost-of-living adjustment in January? Or should I retire Jan. 3, 2014?
Q. My official retirement date is Dec. 28. I need to take leave on Dec. 27 (Friday). If I complete the station clearance process on Thursday, is there a rule/reg that would prohibit me from taking leave (sick leave, annual leave or compensatory time) on my last scheduled work day before retirement?
Q. I am nearing 20 years of service and am over 56 years old. As of March 6, 2014, I will have 20 years of federal service and, as of March 31, a total of 20 years, five months and 16 days counting all of my creditable sick leave.
To apply for Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay, do I first have to be retirement eligible? Am I able to adjust my retirement date and still keep 20 years service by applying unused sick days, or are they only attached to the end of my total federal service time?
Q. I am 58 years old and under CSRS, have 27 years with 1,200 hours of sick leave and 350 hours of annual leave. I want to retire under the Early Volunteer Special Option. I understand that I have to retire on or before Dec. 31 to qualify for this special option. I want to maximize my annual leave lump sum.
Q. I will be retiring on Jan. 3 with 41 years and two days of creditable service under CSRS. In addition, I have 3,519 hours (approximately 20 months) of unused sick leave. I am under the belief that my unused sick leave would be added to my years of service which would allow me to receive 80 percent of my high-3 years of salary. Would this be an accurate statement?
My employee and labor relations department is telling me that I would only receive 78 percent of my high-3 because I needed 41 years and 11 months of actual service to receive 80 percent. If my unused sick leave is added to my years of service, what happens to my unused sick leave (approximately nine months) after I reach 41 years and 11 months?
Q. I have selected a retirement date of June 28, 2014. I will be 59½ years old with 33½ years of government service. I have been FERS my whole career. If I were to marry after retirement, what is the policy for covering my future spouse on my Federal Employees Health Benefits? If I choose to want a survivor benefit for my future spouse, is it possible to change from a self-only pension to one with survivor benefits?
November 18th, 2013 | annuity reduction Benefits CSRS annuity computation FEHBP FERS annuity computation Government pension offset HEALTH INSURANCE LIFE INSURANCE Military service deposits PAY RETIREMENT Retirement date SOCIAL SECURITY substantial earnings Tricare Windfall elimination provision
It’s easy to make mistakes when you are planning to retire. Some of the biggest mistakes apply to all employees; a few apply only to CSRS or FERS retirees. All can be costly. Here they are and what you can do to avoid them:
Retiring on the spur of the moment. It can be disastrous, for two reasons. First, if you hand in your retirement application at the last minute, it may contain errors that delay processing or even cause it to be rejected. Second, decisions made in haste often come back to bite you. Once committed to a course of action, it’s hard to undo it if you change your mind. If you do change your mind before you actually retire, you won’t be able to withdraw your application if your job has been abolished or it’s been offered to someone else. If you’ve already retired and want to cancel your retirement, your agency has no obligation to bring you back on board.
Confusing a salesperson with an adviser. The two are not the same. Actually, they’re opposites. One is paid to convince you to buy what they have to sell; the other is paid a fee to conduct analysis and provide you with decision support. One is your ally. The other is your adversary. Why would you trust an adversary for advice? Be skeptical of any source of “advice” that might be influenced by a conflict of interest. This is single mistake probably costs the American public more than any other when it comes to financial decision making.
Losing your health or life insurance. Make sure you are enrolled in the Federal Employees Health Benefits or Federal Employees’ Group Life Insurance programs for the five consecutive years before you retire. If you aren’t, with few exceptions, you won’t be able to carry that coverage into retirement. Here are the exceptions: you are covered by your spouse’s FEHB policy; you have been covered by Tricare of CHAMPVA, enroll in the FEHB program before retiring and the total equals five years; you enrolled in the FEHB at your first opportunity and retire in less than five years; or you accept an early retirement offer and were enrolled before the latest offer of early retirement was made by your agency.
Before you retire, check with your personnel office to be sure that you’ve met either the five-year rule or one of its exceptions.
Not getting credit for active-duty service in the military. If you served on active duty in the military, you can get credit for that time in determining your years of civilian service and have it used in the computation of your annuity. If you are a FERS employee, you’ll have to make a deposit to get credit for that time. If you are a CSRS employee, the rules differ depending on when you were first hired. If it was before Oct. 1, 1982, you will only have to make a deposit if you retire and are eligible for a Social Security benefit at age 62 (or when you retire, if it’s after age 62). If you were hired on or after that date, you’ll get credit for that time only if you make a deposit for that service. Whether you are a CSRS or FERS employee, if you’ll be eligible for or receiving military retired pay, in most cases you’ll have to waive that pay when you retire from your civilian job. You won’t have to do that if you are eligible for or receiving reserve retired pay.
Check with your personnel office to make sure that any active-duty service is recorded in your Official Personnel Folder and find out if a deposit will be required to get credit for that time.
Getting caught by “Catch-62.” If you are a CSRS employee who served on active duty in the armed forces after Dec. 31, 1956, and haven’t made a deposit for that time, you could be in for a rude awakening. If you retire and are eligible for a Social Security benefit at age 62 (or when you retire if it’s after age 62), your annuity will be reduced by 2 percent for each of those years of military service for which you haven’t made a deposit.
Determine whether you’ll be eligible for a Social Security benefit at either of those points in time. If you will, you may want to make a deposit for that time. If you won’t, don’t waste your money. Your CSRS annuity won’t be affected.
Rolling over Thrift Savings Plan assets. This mistake is usually caused by either trusting the wrong source for advice or failing to think “outside the box” a little when it comes to planning for your cash flow needs. Financial salespeople generally have to gain custody of your assets in order to be paid their commissions or fees, so naturally, their advice always includes rolling over any significant TSP sums into an IRA or other investment vehicle with higher costs. This is a formula for diminished investment performance. If the reason for leaving the TSP isn’t to enrich a financial salesperson, it’s often to gain more freedom in withdrawing TSP assets. While this is sometimes a valid reason to leave, it can often be dealt with through a combination of a lump-sum withdrawal or a series of fixed monthly distributions that will create and maintain a slush fund outside the TSP that is sufficient to meet your cash flow needs.
Focusing on wealth instead of cash flow. Speaking of cash flow, this mistake is propagated by financial professionals and journalists all the time. Much of what you’ll read and hear from financial and investment experts is aimed at maximizing economic wealth — basically your net worth. The mistake is in assuming this is your retirement goal. It’s probably not. And managing to this goal can cause serious problems for you in retirement. Paying off a fixed-rate, low-interest-rate mortgage is an example. It is often proposed that saving the interest over 10, 20 or 30 years will dramatically increase your net worth. While the validity of this proposal will vary from case to case, and is certainly debatable, it also completely misses the point that your retirement standard of living is not dependent upon your net worth but rather on your ability to generate cash flow. Having massive amounts of equity in a piece of real estate is of little use to you in making a car payment or paying for a cruise if you can’t sell the property or borrow against the equity on attractive terms.
Getting hit by the windfall elimination provision. If you are a CSRS retiree who will be eligible for a Social Security benefit, it may be reduced by the windfall elimination provision. That will happen if you have fewer than 30 years of “substantial earnings” under Social Security. The difference between the amount needed to earn four credits under Social Security and the amount considered to be substantial earnings is significant. In 2013, you would only need to earn $4,640 to get four credits; however, you would have to earn $21,075 for it to be considered substantial. (Since the Social Security Administration doesn’t know which retirement system you are in, if you are a CSRS employee, any estimate of future Social Security benefits they give you will very likely be wrong, often very wrong.)
If you’ll be affected by the WEP, know in advance how much less your Social Security benefit will be. You can get started by reading the Social Security Administration’s publication at ssa.gov/pubs/EN-05-10045.pdf.
Getting hit by the government pension offset. If you will be receiving a CSRS annuity, any spousal Social Security benefit you may be entitled to will be reduced or eliminated by the government pension offset. The GPO will reduce those Social Security benefits by $2 for every $3 you get in your CSRS annuity.
If you’ll be affected by the GPO, you need to find out how great the impact will be. That’s because it isn’t uncommon for the GPO to wipe out those benefits. You can learn more at ssa.gov/pubs/EN-05-10007.pdf.
Relying on emotion instead of reason. This mistake is so common, it’s the norm. It also has the potential to cause disaster. There have been books written about this mistake and how to avoid it, yet the behavior continues to be rampant. If you’re going to get the most of what you want from what you have, you need to realize that markets have evolved to take advantage of your fear and greed, which are amazingly predictable, and turn them against you. The investment markets aren’t fair; they’re like poker games, and trust me, you’re not the best player in the game. If you want to survive and, better yet, enjoy the game, you need to rely on a strategy that acknowledges the odds you face, accepts them and uses reason to turn them to your favor.
Failing to account for inflation. Inflation is a pervasive threat to any retirement plan. Not so much inflation in general, but differential rates of inflation among the various incomes and outflows that affect your plan. Your expenses will inflate, over time, at varying rates, while your income may or may not keep pace with that inflation. CSRS annuity and Social Security income increase with the Consumer Price Index (for now), FERS annuity income increases less than the rate of inflation, and many other pension and annuity income streams either don’t increase at all or increase at a fixed rate. Differences in these inflation rates can have a profound impact on your financial picture in retirement and failing to properly account and plan for this impact can leave you without the resources you’ll need to live the life you’ve been expecting years, or decades, down the road.
When it comes to retirement, planning is everything.
If possible, it should begin at least one year ahead of the date you have set to retire. However, events can conspire to force a quick retirement decision, such as the offer of a “buyout” or a RIF. In those cases, use whatever time you have to plan ahead. Even a little time, wisely spent, can produce a big payoff.
Here’s a checklist for you to follow:
* Sign up for a preretirement counseling seminar at your agency. If your organization doesn’t have one at a convenient time (or offer one at all), consider enrolling in one offered by an outside firm. In some cases, your agency will pay for the course.
* Set up a meeting with an agency benefits counselor to go through your Official Personnel Folder and make sure it includes complete documentation of all of your federal employment (including any military service), the effective dates of each adjustment to your pay, and records of your health benefits and life insurance coverage, plus any designations of beneficiaries you may have filed.
* Verify when you will be eligible to retire and whether you will be able to carry your health and life insurance into retirement.
* Ask for an estimate of your retirement annuity. If you owe any deposits or redeposits to the retirement system, find out the effect on your annuity of making or not making them. If you decide that it’s worth it to make a deposit or redeposit, ask your counselor to show you how to do that.
* Ask for two copies of the necessary retirement forms. Fill one out for your benefits counselor and one for yourself. Your benefits counselor will review the forms and contact you to clear up any questions or problems that may arise.
Once the paperwork is done and you’ve confirmed your retirement date, you can relax.
Q. I am an employee under FERS. How will my approximately 700 hours of unused sick leave count toward my total service when I retire in 2014? My service computation date is March 3, 1994, and I will be 62 years old when I plan to retire in March. If I retire Jan. 10, will my 700 hours of unused sick hours count toward my desired target of 20+ years of service, or must I wait until March 3 to hit the 20-year threshold?
Q. I am a FERS employee and plan on retiring March 31, 2014. Can you provide any guidance on whether this would be a good date to retire, or do you advise earlier in the year?
Q. I plan to retire in May 2014 with 30 years (April 28) with the Postal Service under FERS. I will be 60 in September 2014. Can I receive the special retirement supplement in May or September?
Q. I will turn 55 on March 10, 2014, and plan on retiring that day. I have always understood that my last day of work would actually be the preceding workday (Friday, March 7). My local human resources people have told me I am incorrect and that I must work March 10. I cannot find the specific detail in writing, but I believe I have read it previously. Do you know where I can find the details to ensure I am following the requirement?
Q. I plan to retire at the end of 2013. From what I am reading, if I retire on Jan. 3, the effective date of my retirement would be the next day, Jan. 4. Since the 4th is not within the first three days of the month, would my first retirement annuity payment be made in February? Should I plan to retire on Jan. 2 instead? I realize I will not receive annual or sick leave accrual for this pay period, but that should be offset by four days of pay including the holiday, right?
Q. I was told to retire on the last day of the month. However, that day falls during the middle pay period. Which would be most financially beneficial: Stay with that day and lose eight hours of annual cash in pay or complete the pay period and retire the first week of the next month, thus getting the eight hours of annual pay but losing the benefits of retiring at the previous month’s end?
November 7th, 2013 | Annual leave Creditable service: FERS Deferred retirement EMPLOYMENT FERS annuity computation LEAVE Military service deposits Re-employment Resignation RETIREMENT Retirement date Sick leave
Q. I joined the military Sept. 12, 1978, and retired Oct. 1, 2008, with just over 30 years of active military service (no broken time). I began working for the federal government under FERS on Jan. 4, 2009.
I’ve been told that I can resign after five years of government service (Jan. 3, 2014) and collect retirement benefits from the federal government once I reach the age of 62. Is that correct?
If I have 40 hours of annual leave and 40 hours of sick leave, what is the earliest I can retire? Would it be two weeks prior to Jan. 3? Or one week? And if it is 2 weeks, will I be paid for both weeks or just one week (annual leave)?
Once I reach the age of 62, if I qualify for retirement benefits for my federal service, what will I need to do to begin collecting that benefit?