Ask The Experts: Retirement

By Reg Jones

Postponed annuity and end of leave year

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Q. I will be retiring this year from FERS under MRA +10. I plan to select an immediate annuity postponed for payment to start Dec. 12, 2014, when I turn 62. I want to have my sick leave used to calculate my annuity based on full amount so I will select a date of Jan. 1, 2014, or later. To ensure I can cash out maximum annual leave, what is the last day of the 2013 leave year so that I can take a lump sum for unused annual leave of around 340 hours?

A. For most agencies, the 2013 leave year ends Jan. 11, 2014. Check with your own agency to be sure.

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Sick leave and annuity computation

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Q. I plan on retiring June 28. I have a service computation date of Sept. 14, 1978. I will have 795 hours of sick leave. Are my calculations correct that I will have 35 years and two months for retirement?

A. To confirm how much service time you’ll have for annuity computation purposes, go to www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c050.pdf and scroll to Section 50A3.1-4.

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Annuity calculation for Postal Service VERA

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Q. I work for the Postal Service. I have 34 years and five months under CSRS. I will be 55 in October. If I What percentage would I receive, retiring with the Voluntary Early Retirement Authority?

A. Get out your pencil and paper (or calculator). Here’s the formula:

.015 x your high-3 x 5 years of service, plus

.0175 x your high-3 x 5 years of service, plus

.02 x your high-3 x all remaining years and full months of service

If you retire before age 55, deduct 1/6 percent for every month you are under age 55.

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Leave without pay and high-3

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Q. When doing an online search about leave without pay during the high-3 years for annuity calculation, I found the FedExperts response from Nov. 30, 2012. It stated that less than six months LWOP per calendar year does not count against time in service, nor does it reduce one’s salary calculation for the high-3 years.

However, on my CSRS Personal Benefits Statements for 2011 and 2012, it appears that it does reduce the retirement annuity.

In September/October 2011, I took 79 hours of LWOP. My Jan. 2, 2011, CSRS PBS shows a high-three of $110,657, and an annuity of $6,982 a month. My Jan. 1, 2012, CSRS PBS shows a high-3 of $113,372, and an annuity of $6,964 a month. How is it that my high-3 went up in 2012 but my annuity dropped by $18 a month?

A. I should have said that it rarely has any effect on a high-3. That’s because it is the average of an employee’s highest three consecutive years of average basic pay. Since there haven’t been any across-the-board pay increases in the past few years, the only time that a high-3 could be affected would be if an employee had a within-grade increase or a promotion. To see how the high-3 computation is done, go to www.opm.gov/retire/pubs/handbook/C050.pdf and scroll down to Section 50A2.1-4A

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Annuity calculation

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Q. How many years of federal service does one have to work before retiring and receiving the exact amount of pay they are getting while working? Someone said you had to work until 35 years of service to receive your full retirement pay.

A. Regardless of which retirement system you are in, it would be impossible to retire and receive an annuity that equaled what you were earning as an employee. Under FERS, even if you worked for 50 years, your annuity would only equal 55 percent of your highest three years of average salary (.011 x your high-3 x 50). Under CSRS, you would receive the maximum earned annuity of 80 percent when you completed 41 years and 11 months of service. Of course, under both retirement systems, unused sick leave would be added and allow you to receive additional annuity. And if you were a CSRS employee who continued working after 41 years and 11 months of service, you could use your excess retirement contributions to purchase additional annuity, just as you could if you had participated in the Voluntary Contributions Program. However, it’s unlikely that they would get you close to the exact amount you were earning when you retired.

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VERA and annuity calculation

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Q. I am 54 and have 28½ years in with the Postal Service. My first official retirement date is July 9, 2014. However, I am being told that if I retire now with the Voluntary Early Retirement Authority, my annuity will be higher than if I wait until 56 due to the 5 percent penalty for each year I am under 62. That would give me a 30 percent penalty on my annuity. Is this correct? I just want to go the way I will have the most in my annuity.

A. The person you talked to was confused. If you retire under the VERA, your annuity will be computed using the standard formula based on your high-3 and your 28½ years of service. If you wait to retire until your official retirement date, your annuity would be calculated using the same formula and your 30 years of service. In neither case would you be subject to the age penalty.

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High-3 calculation

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Q. I am a Postal Service level 21 employee, and will retire with about 41 years and 11 months in early 2013 with my high-3 close to my frozen level 21 value. When I retire, I will have been detailed to a level 23 position for about a year and a half, with a modest increase in pay during that time. Will the Office of Personnel Management use only my level 21 pay for annuity calculations or will the detail/higher level pay be considered?

A. A high-3 is based on the highest three consecutive years of average salary from which retirement deductions are taken. If retirement deductions were taken out of your pay while you were detailed to a level 23 position, it would be included in your high-3.

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Annuity calculation

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Q. I began federal employment at age 55. I hope to reach age 70 with 15 years of service. My goal is to add federal retirement with Social Security for maximum retirement. Could I potentially earn $1,666 per month, or 30 percent, with a base salary of $65,000?

A. Your FERS annuity would be 15 percent of your high-3 (.01 x your highest three years of average salary x your years and full months of service). To get an estimate of your Social Security benefit, go to http://ssa.gov/planners/benefitcalculators.htm and click on Quick Calculator.

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Postal Service resignation

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Q. I am about to resign from the Postal Service as a carrier after 21 years. At my minimum retirement age of 56 years and six months, can I draw my retirement without penalty? Can I draw it early with a penalty?

A. If you resign from the government, you can apply for a penalty-free deferred annuity at age 60. Your annuity will be calculated using the standard formula, with your high-3 being the one you had when you left.

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Social Security disability and annuity calculation

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Q. I retired in December 2011 from the Bureau of Prisons, after almost 22 years. I did the normal retirement as a law enforcement officer. I am planning to apply for Social Security disability. If I get approved for SSDI, could the award affect my annuity in any way?

A. Being approved for SSDI wouldn’t affect your FERS annuity. However, it would affect any Social Security benefit you were entitled to. For more information on the interaction between the two benefits, call 1-800-772-1213 and talk to a Social Security benefits specialist.

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Deferred annuities

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Q. If I were to have 20 years of creditable FERS service at age 50; then resign and wait until age 62 to claim the FERS annuity, which formula would be used to calculate my annuity:  the standard one (0.01) or the alternative one (0.011)? My confusion on this matter is whether I must be continuously employed until age 62 (for the 0.011 calculation), or can I resign from federal service at 50, wait until 62 to claim annuity, and still have it figured at the 0.011 formula?

A. All deferred annuities are calculated using the standard formula, not the enhanced one.

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CSRS Offset annuity calculation

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Q. My retirement plan is CSRS Offset. I will have 32 years of civil service time in December. I have been a GS-6, Step 10 for the past seven years. Before that, I was a GS-7, Step 9, and before that, I was a GS-5, Step 10. If I work until I have 35 years of service, what will be the percentage of my high-3. Some people say 60 percent, and 80 percent if I work until I have 40 years of service. Is that correct?

A. Nothing those people told you is correct. Stop listening to them. To receive a CSRS annuity that would equal 80 percent of your high-3, you’d have to have 41 years and 11 months of creditable service. If you retired with 35 years of service, your annuity would be 66.25 percent of your high-3.

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Special retirement supplement calculation for firefighter

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Q. I have 27+ years as a federal firefighter (72-hour weekly shifts) and planning retirement Nov. 30 (at age 54). My date of hire was July 1985, which gives me 27 years and four months. For calculating my estimated Social Security supplement, I was told that 1985 would not count because it wasn’t a full year and 2012 would not count because I am not working a full year also. My credible time for federal Social Security supplement = 26 years even though I have 27 1/3.

For example, Social Security estimate $1400 divided by 40 = $35.

$35 x 26= $910 monthly vs. 27 x 35= $945. Is that statement correct?

A. Yes. To see how the special retirement supplement is calculated, go to www.opm.gov/retire/pubs/handbook/C051.pdf.

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Want to retire this year

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Q. Current age: 56

Entered U.S. Navy active duty: May 1978

Active-duty military time: 11 years, four months

Retired reservist after 26 years as an O-5

Entered civil service: November 1997

Current paygrade: GS-9, Step 8

Received a $30,000 severance pay when released from active duty in January 1989

Points accumulated, active and reserve, for retirement: 5,245

What do I need to do to retire at the end of this year? I know you can’t tell me what I should do, but if you could give me guidance as to what I need to do so I can make an informed decision I would greatly appreciate it.

A. Here’s the deal. Because you have already reached your minimum retirement age and have at least 10 years of service, you can retire under the MRA+10 provision. If you do, your annuity would be calculated using the following formula: 0.01 x your highest three consecutive years of average salary (your high-3) x your years and full months of creditable service. However, that annuity would be reduced by 5/12 percent for every month you were under than age 62. You could reduce or eliminate that penalty by postponing the receipt of your annuity to a later date. Now all you have to do is put pencil to paper and see what your annuity would be under different scenarios.

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CSRS Offset

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Q. I retired after 31 years of government service at age 62. Prior to retirement, I applied for Social Security and was granted, allowing me to receive my benefits. I should add that I was under CSRS. When my annuity was calculated, I was told that they would deduct/offset a certain amount for Social Security because I decided to receive Social Security at age 62. Once I reach 65, will that money stop being deducted? Can I count on it monthly after I reach 65?

A. The reduction is permanent.

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Gross or net?

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Q. I am in FERS with 18 years of federal service. Will my FERS pension be calculated on base pay (gross) or net pay after TSP contributions?

A. It will be calculated on basic pay. To see what’s included in basic pay, go to www.opm.gov/retire/pubs/handbook/C030.pdf and scroll down to Section 30A.1-2.

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Annuity calculation for part-time work

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Q. I was hired in 1985 as rural carrier relief, then converted to rural carrier associate. I became full time in January 1995. I was allowed to buy back time for 1985-89. Do I receive full credit for four years toward retirement? How is the time from 1985-89 counted?

A. You’ll find the method used to compute an annuity that includes part-time service at www.opm.gov/pubs/handbook/C055.pdf.

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FERS annuity calculation

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Q. To calculate a FERS annuity supplement, do you use the Social Security estimate for age 62, or your full retirement age estimate?

A. Age 62.

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Service computation date and break in service

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Q. I worked as a GS clinical nurse from Sept. 12, 1999, to Sept. 24, 2005 — a total of six years. On May 10, 2010, I returned to federal service as a GS clinical nurse. My service computation date was determined to be Feb. 8, 2008. How was this date arrived at? I previously worked from February 1991 to January 1996 as a GS worker and foolishly took my retirement monies out. I know I have lost that time. But that should not cause me to lose three years of service time, should it?

A. Unless you re-deposit the refund you took when you left government, with interest, you’ll get no retirement credit for it in determining your length of service and in your annuity computation. On the other hand, your agency appears to have given you some credit for leave accrual purposes. However, why they haven’t given you credit for all of it is something you’ll have to ask them.

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Annuity calculation

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Q. I have been working with the federal government for eight years. I am vested in a retirement program. I earn $69,000 a year. How much will my retirement income be after I retire?

A. FERS employees can retire when they meet one of the following age and service combination: age 62 with five years of service; 60 with 20; at their minimum retirement age with 30; and at their MRA+10 (at least 10 years of service but fewer than 30) with a reduction of 5 percent for every year they are under age 62. MRAs range from 55 to 57, depending on your year of birth.

Now I’ll give you the formula and you can use the above options plus estimates of your highest three years of average salary and length of service to come up with some possible outcomes: 0.01 x high-3 x years and full months of service (use 0.011 if you retire at age 62 with at least 20 years of service). Obviously, the further you are from retirement, the less reliable the outcome.

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