By Reg Jones
Q. I am a CSRS Offset retiree. I attended more than one pre-retirement seminar and was given examples of my retirement situation, along with reassurances that my retirement would closely follow the examples and that I was very fortunate to be CSRS Offset, and would be very happy.
I was told to check with Social Security to find out about my offset. Neither the Office of Personnel Management nor Social Security could know the exact amounts until I retired.
Following my retirement, everything, except Social Security, was in disorder for six months. OPM explained that they had to check with SS about the calculation of my offset, and that took some time. When I contacted SS, they said there was no offset for me because of my lengthy employment history and more than 30 years of SS payments (and I paid both CSRS and SS amounts since 1983).
The bottom line is, at the pre-retirement seminar, I was shown and walked through one method for calculating the offset and told that there was also another and that the one with the lowest amount would be used to determine my offset. My eventual monthly OPM payments were about $1,000 a month less than those demonstrated in the example based on all that was known about my salary and SS payment history at the pre-retirement seminar. I realize that the pre-retirement amount could be off a little, but $1,000/month is a lot. Each time I tried to sort this out, I was told by SS that there was no offset, and I was told by OPM that they used the offset given to them by SS.
To this date, this matter has never been satisfactorily explained and resolved. SS even sent me a letter stating that I was not subject to any offset, and OPM continues to state that my pension offset was based on the information supplied to them by SS. Can you supply me with someone to walk me through the calculations that were apparently so far from real?
Q. I worked for the government (Department of Defense Dependents Schools) as a teacher overseas in Germany from January 1969 to June 1984. I am receiving a government pension (my retirement) of $629 per month.
I was told at the Social Security office that my Social Security benefits would be reduced by two-thirds because I worked for the government. Until 1984, DoDDS employees were not allowed to pay into Social Security. I have paid into Social Security by working at other teaching positions and other types of work.
Is what the Social Security administrator said correct? Am I penalized because I worked for the government, and is my pension considered part of my Social Security, and after 15 years, am I to get just $800 a month (including Social Security) to live on for the rest of my life?
Q. I am a 51-year-old with 32 years of service under CSRS. I am eligible to retire in 2016 when I reach age 55. I have also worked and paid into Social Security for about the same number of years. Am I eligible to receive both Social Security and my civil service retirement pension?
I would also like to know how a buyout works. If one is offered before I reach age 55, what is the payout, and will I receive my current benefits such as life and health insurance coverage?
Q. I retired in 2009 with 37½ years under CSRS. I had no break in service. I started in 1973. I worked part time for a period while a federal employee and I had a job (short time) before federal employment.
After retirement, I went to work full time (private) and have been paying into Social Security. I got a statement from Social Security last year that shows that if I keep working at my current salary, I will collect about $680 a month at age 62 or about $1,200 a month at age 66.
I don’t believe I fall into the offset category but would like to know how/if I will be affected in both my CSRS monthly pension and Social Security.
November 21st, 2013 | annuity reduction Benefits Creditable service: CSRS CSRS annuity computation CSRS Offset EMPLOYMENT Government pension offset PAY Re-employment RETIREMENT SOCIAL SECURITY spouse benefits SURVIVOR BENEFITS Windfall elimination provision
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.
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.
November 13th, 2013 | annuity reduction Benefits Creditable service: CSRS CSRS Offset Earnings test EMPLOYMENT High-3 PAY Postal Service RETIREMENT SOCIAL SECURITY substantial earnings Windfall elimination provision
Q. I will be 63 this month. I worked at the Postal Service from 1969 to 1981 as a letter carrier. I took the CSRS money out when I left in 1981. I worked in the private sector from 1981 to 1989. I came back to USPS in 1989, paid back the CSRS money and am now in CSRS offset.
I have about 37 years in USPS and plan to work here another three years. Where can I find some info to help me decide whether to retire from USPS now and work in private sector or keep working at USPS?
A. The only info I can give you is about what your benefits would be if you retired now. With 37 years of service, your CSRS annuity would be 70.25 percent of your high-3. However, because you are a CSRS Offset employee who would be retiring at or after age 62, your CSRS annuity would be automatically reduced by the amount of Social Security benefit you earned while a CSRS Offset employee. The amount you received would be the same; it would just come from two different places, the Office of Personnel Management and the Social Security Administration. You could, if you wished, apply for a Social Security benefit at that time, which would give you credit for all of your Social Security-covered employed. Because you would have over 30 years of substantial earnings under Social Security, you wouldn’t be subject to the windfall elimination provision.
Q. Regarding the recent Supreme Court case that determined that the Affordable Care Act penalty for not having health insurance was a tax. May the reduction in a Social Security retirement benefit due to the application of the windfall elimination provision penalty be characterized as a tax?
Q. I have 34 years of service in CSRS and still work. I have 17 years of substantial payments in Social Security and starting collecting at age 66. Is there a maximum amount that my Social Security can be reduced by the windfall elimination provision, or is it possible to lose my entire Social Security payment upon retirement from government?
October 23rd, 2013 | Creditable service: CSRS CSRS annuity computation CSRS Offset Government pension offset RETIREMENT SOCIAL SECURITY spouse benefits SURVIVOR BENEFITS Windfall elimination provision
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)?
Q. Husband, age 54, is retiring under Voluntary Early Retirement Authority on Dec. 31. He has 31 years with the Postal Service under CSRS and three years with the military and did not pay back his military time. He has 19 quarters earned for Social Security. He does not intend to earn the full 40 quarters of Social Security prior to age 62. If he earns the full 40 quarters after age 62 — say, at age 64 — what will happen?
Q. I am under CSRS. My service computation date is Nov. 13, 1983. I have 34 Social Security quarters paid. Can I pay the remaining Social Security quarters in lump sum, or do I have to work to contribute? Will this be to my advantage?
Q. My wife receives Social Security benefits under my contributions and from hers. She is not a federal retiree, but a retired teacher who had 20 calendar months uncovered, which was credited by the teachers’ pension as eight school months. The government pension offset was applied against her whole Social Security benefit. Does the GPO get applied in this manner, or should it be similar to the windfall elimination provision, which goes against only the portion of pension dependent upon the uncovered months?
September 24th, 2013 | annuity reduction Creditable service: CSRS CSRS annuity computation Government pension offset Military service deposits RETIREMENT SOCIAL SECURITY Windfall elimination provision
Q. I am a CSRS employee who has been working for 33 years plus four years of military credit gives me 37 years of service. I also have more than 40 credits to qualify for Social Security. I will be 62 this month. What is my classification in terms of government pension offset, windfall, etc.? I know that since I will receive a government pension, my Social Security will be reduced, but by how much and how can I figure it out? I plan on retiring ay the end of this year or next year.
Q. When determining the number of substantial years of contribution for Social Security purposes, is it when one actually enrolls for benefits or when one is eligible for benefits? I will be subject to the windfall elimination provision due to a small pension from CSRS. At age 62, I will have 28 years of substantial contributions. If I wait until my full retirement age, I will have 34 years of substantial contributions. Will there be any reduction of Social Security benefits?
Q. I am a CSRS Offset employee who retired in 2007 from the Postal Service. I just turned 62 and the Office of Personnel Management started reducing my annuity due to eligibility to SSA. I also applied for Social Security. After receiving one full check, they too have reduced my check under the windfall elimination provision for the same exact amount as the OPM reduced it. Is this possible?
Q. I retired in June 2011 at age 56 with 32 years at the Postal Service under CSRS. When I turn 62, will I be able to apply for Social Security benefits without reducing CSRS benefits? I have enough quarters to draw a small amount from Social Security.
Q. I retired in 2006 after 39+ years of federal service. I’m still working and have the necessary time to qualify for Social Security benefits. If I apply for Social Security benefits, will the amount I receive reduce my CSRS retirement amount?
Q. I am a 62-year-old CSRS Offset retiree receiving Social Security survivor benefits. I have been informed that my annuity will be reduced by $773 per month since I am now eligible for Social Security benefits.
When I applied for Social Security benefits on my own earnings, I was told that I could not receive both my benefit and the survivor benefit I was already receiving. It was my understanding that I would receive a reduced Social Security benefit equal to the amount of the offset to my annuity and that I was also entitled to keep my Social Security survivor benefit since I had more than the five years of CSRS Offset service required to avoid the government pension offset. Am I wrong?
Q. I have retired after 42 years of federal service. I was on CSRS with no offset. How does Social Security affect my benefits? Before starting my career with the federal government, I had amassed enough quarterly hours to qualify for a small Social Security benefit. Am I still entitled? Will my CSRS be subjected to offset? Or does Social Security really not affect my CSRS benefit but because I received much more than I would as a recipient receiving SSI benefits, SSI really doesn’t exist as far as I am concerned?