Ask The Experts: Retirement

By Reg Jones

FERS and Social Security

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Q. I am 66 years old, which is my full retirement age. I worked from 1966 to 1970 for the federal government. I was in CSRS. My credit was three years and 11 months. I stopped working in 1970 to raise a family. I withdrew the money I had paid into CSRS. Between 1970 and 2001, I held a few non-government, small, part-time or intermittent jobs in which I paid into FICA. I returned to work for the Army in December 2001. I was automatically put into FERS, so began paying into FICA and FERS. I have paid back with interest the amount I withdrew from CSRS in 1970. This will give me 16 years and three months of FERS.
I have submitted my retirement packet and applied for my Social Security pension. When I applied for SS, the form asked if I had worked at any time without paying any FICA. I said yes. The next question was “Was it government?” I said yes. Is this going to affect my SS pension? I do not really understand the Offset and Windfall rules. Read the rest of this entry »

Social Security benefits for survivor of CSRS retiree

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Q. I am a federal employee who will get only CSRS benefits after retirement. I will make sure there are survivor benefits for my wife if I pass away first. My wife has Social Security. Will I get any survivor benefits from Social Security if she passes away before I do? Maybe I will get some benefits after any windfall deduction is made from survivor benefits. Read the rest of this entry »

Social security and civil service pensions

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Q. I have worked for the postal service since 1982, so I will not get social security because I do not have any credits. I was told though that if my husband passes away, I cannot receive any of his social security benefits because I have a civil service pension. Is this correct? Read the rest of this entry »

Social Security

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Q. My husband is a retired federal employee receiving a CSRS pension. I have been paying Social Security taxes based on my own employment earnings since before we were married.

1. As the wife of a federal employee who is receiving a federal pension, will I receive my full Social Security benefit when I reach retirement age?

2. If I outlive my husband, how much of his federal pension would I receive, and would I also continue to receive my full Social Security?

3. Will he receive Social Security benefits based on employment earnings in nonfederal jobs he held prior to and after his federal employment?

4. If, as a retired federal employee, he will never be eligible for Social Security benefits, should he be paying Social Security taxes — which he has in the past and is doing in nonfederal jobs?

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Government pension offset

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Q. I have worked 39 continuous years as a CSRS employee and am in the process of getting divorced from my wife of 37 years. We will be dividing the CSRS pension. My wife has sufficient Social Security quarters in the private sector that she will receive a Social Security retirement benefit based on her own record. Her lawyer and the Social Security office in Alabama say that she will incur a government pension offset because she is receiving a pension from which she didn’t pay Social Security. I think they are actually calling this a Social Security Offset. I’ve explained that this shouldn’t apply as she didn’t earn this pension and the GPO only applies to me. I contacted the Office of Personnel Management and have read your blogs on this question and both say her Social Security retirement wouldn’t be affected. What is the correct answer, and is there any direction or publications I can reference to steer us to the right answer?

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Social Security for spouse

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Q. My wife is retired under CSRS and does not have the 40 credits to qualify for Social Security on her own. Can she qualify for Social Security benefits as my spouse? If she does, will the Social Security simply offset her CSRS annuity?

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CSRS Offset

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Q. I am CSRS Offset. It is my understanding that when I apply for Social Security, a portion of my CSRS Offset retirement will be SS. My question involves my husband’s collection of his SS.  When he passes, will I be eligible for his SS? I know his is more and we are making retirement plans for him.

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Survivor annuity

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Q. Will I be able to receive survivor benefits based on my deceased husband’s Social Security benefit? I am a retired government employee.

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WEP vs. GPO

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Q. Recently, a colleague and I were reading your Dec. 2 article “Don’t let these 5 mistakes disrupt your plans.”

Your statement on number 5 (not accounting for the government pension offset) leaves us wondering.

We are under CSRS and retiring this month. Her husband is still working and will be eligible to draw Social Security benefits when his time comes to do so.

Your statement indicates that when he draws Social Security, her CSRS annuity will be reduced. REALLY?  I know that if he draws Social Security and dies, she eligible to receive his Social Security, but her pension with CSRS will be reduced due an offset/windfall.

This is his retirement, when he is eligible. Even though he is drawing Social Security while he is alive, this will be an offset/windfall to HER CSRS pension?

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Survivor benefit and annuity reduction

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Q. I am a FERS employee with a CSRS spouse who is retired. When I retire, in the event of my death, will her retirement pay be reduced when she gets my Social Security monthly survivor benefit? She has no Social Security eligibility.

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WEP and GPO

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Q. I worked for 35 years with the Postal Service. I am 64 years old. My 40 quarters are fully paid up from work prior to the USPS job and being a military reservist and active duty. I understand the reduction that the windfall elimination provision and government pension offset takes. After my federal retirement, however, I have continued working. I have not applied for Social Security yet. I still work, landing a job at a military base as a New York state employee. So I have now been making “substantial” payments into Social Security ($100 per pay period). I am in my 12th year with New York state. I have been receiving Social Security statements these past 12 years, and every year, my “estimated” Social Security payment has increased, from $368 to the current $1,000 per month. Is this Social Security “estimated payout” including the WEP and GPO legislative thievery? I have paid thousands into Social Security but am very concerned that I will never get back what I have paid into it.

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CSRS Offset

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Q. I worked in CSRS from 1972 to 1988 and returned in May 1990 as a CSRS Offset. I was a reservist on active duty from March 1991 to March 1992 during Desert Storm. I also have been drawing Social Security since May 2006. My husband passed away in September 2008, and I am receiving the survivor benefit. I want to retire this year, and I have no idea what I will receive. I think my total Social Security is about 27 or 28 years for paying.

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Social Security

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Q. Will I be able to draw Social Security if my husband is retired military and retired CSRS? I have work for more than 30 years paying Social Security tax and have been told I can’t draw. Will my husband be able to draw because he has paid Social Security tax as a self-employed contractor?

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Reduction in spouse’s Social Security?

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Q. I plan to retire in 2014 with a CSRS pension. Will my spouse’s Social Security benefits be reduced when I begin to receive my CSRS pension?

I do not have sufficient quarters to qualify for Social Security. My wife has never been employed by the federal government and has only held jobs in the private sector where she has paid into Social Security. She meets the eligibility requirements to receive Social Security benefits, and she intends to apply to receive her Social Security benefits this season.

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CSRS Offset

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Q. I am a retired federal employee under CSRS Offset, where my Social Security kicks in at age 62 and my CSRS is reduced. Am I allowed, or is it beneficial for me to file for Social Security benefits at age 60 since my husband is deceased?

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Government pension offset

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Q. My husband died on Nov. 8, 2012. I am a retired federal employee. I applied for survivor benefits and received a letter of approval that states I cannot be paid because two-thirds of the amount of my government pension is equal to or larger than my monthly Social Security benefit. Please contact me so if I can appeal this issue.

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CSRS Offset

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Q. I am a CSRS Offset employee. I had seven years and 10 months of CSRS service when I left and took my funds out. I returned as CSRS Offset after a 15-month break, did not make a redeposit and now have an additional 26 years of service.

I am looking at retiring in 4½ years at age 60. In addition, I am divorced (married 28 years and one month, not remarried). My ex-husband has always made substantially more. Based on the scenario stated, I am of the opinion that:

1. The windfall elimination provision will not apply since I will have 30½ years of paying into Social Security.

2. The government pension offset does not apply since I am CSRS Offset, and

3. I can collect Social Security based upon my spouse’s earnings since his income was substantially more than mine.

I need to know whether these assumptions are correct, and whether there are any other “offsets” as it will make the difference on whether or not I can afford to retire or need to keep working until full (Social Security) retirement age.

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Government pension offset

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Q. I am a retired Postal Service FERS employee. I took the early-out in February with reduced pension. I am going to marry a Postal Service CSRS employee retired on postal disability. He has little Social Security time, which he is not collecting. We would like to know if one of us will lose our postal pension. If so, how much and why?

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Avoid these mistakes when planning to retire

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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.

CSRS Offset and survivor annuity

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Q. I am a CSRS Offset employee who will be retiring in January. My spouse is a full CSRS retiree receiving an annuity. I am trying to decide if I should provide a survivor annuity for him on my retirement.

1. Because he is a full CSRS and affected by the windfall elimination provision, I was told by Social Security that he would not be eligible for Social Security spousal benefits on my Social Security account. Is this correct?

2. If I take the full 55 percent survivor annuity for my spouse and he does not apply for Social Security, is he entitled to the full 55 percent survivor annuity?

3. When I turn 62, my annuity will be reduced for the Social Security offset. Will the survivor annuity be reduced at that time, as well?

4. Would my spouse incur a reduction to his survivor annuity if he files against his own small Social Security account (affected by WEP)?

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