Ask The Experts: Retirement

By Reg Jones

Value of CSRS annuity

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Q. How can I find out the total value of my CSRS pension? Is there a methodology or interactive tool online where I enter my annual earnings throughout my career and a value is produced? I am a few years away from retirement and, from my annual personal benefits statement, I see my estimated monthly annuity based on options for when I retire and what survivor benefit I choose. But what is the total value today: past contributions + interest? My situation: totally CSRS (no FERS), no break in service, no extra contributions or withdrawals, just a straight 30 years of CSRS deductions from paycheck.

A. Perhaps my colleague, Mike Miles, will have a better answer to your question. As far as I know, there isn’t any reliable way to determine the present value (or the total value) of a CSRS annuity. The reason is that there is no direct correspondence between what you contribute to the retirement fund and what you receive in benefits. While you can know how much you’ve put in, unless you know when you’ll retire, what the annual cost-of-living adjustments will be, and the day on which you’ll die, you’ll only be fiddling with numbers that have no basis in reality. P.S. If you were to leave government and request a refund of your contributions, you wouldn’t receive one cent of interest on them.

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Special retirement supplement

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Q. I retired on a FERS pension in August 2008. I also began receiving the FERS special retirement supplement as of the payment made Jan. 4, 2010.

I obtained a job in the private sector on April 12, 2011, but was laid off on Feb. 28, 2012. I will have received unemployment insurance benefits from mid-March through this month.

My special retirement supplement was offset by earnings over the annual exempt amount in 2011. (The “overpayment” is being deducted from my current FERS supplement payment.) My earnings in 2012 are well under the annual exempt amount. Is the special retirement supplement offset by unemployment insurance benefits over the annual exempt amount?

A. No, it isn’t.

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Government pension offset

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Q. My wife and I are retired. My wife has both a small civil service pension and Social Security. I had 30-plus years of Social Security earnings when I retired in 1998. If I survive my wife, will the reduced amount I would receive from her government pension affect my Social Security payment? I am asking about Government Offset Pension rules.

A. The government pension offset applies only to the spousal Social Security benefit of someone receiving an annuity from a retirement system where he or she didn’t pay Social Security taxes, such as CSRS. It doesn’t apply to the earned Social Security benefit of someone entitled to a CSRS survivor annuity.

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Buyout questions

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Q. I qualify for a buyout with 25-plus years of service. If I take the buyout, it is my understanding that I must wait until my normal minimum retirement age of 56 to begin receiving the Social Security supplement. Would this prevent me from receiving increases in Social Security supplemental benefits that I would have received had I waited until 56 to retire? I believe I would get the increases at 62, in any event, when I could first draw reduced SS benefits.

Also, what happens to my Thrift Savings Plan account? May I purchase an immediate annuity and/or take a lump sum at the time even though I am below the MRA? Would this cause me to have to wait until I was 59½ to begin being able to access TSP if I took an early-out? Do you believe the $25,000 buyout and the extra six or so years of retirement payments I would receive with an early-out would make up for the growth in my TSP and the loss of the extra 1 percent a year I would have received for staying until my MRA? I am at about the top of the GS-12 scale. I have been contributing the maximum allowed to my TSP and will be eligible to make catch-up contributions soon. I know you may not want to make a prediction, but I would love your opinion based on what you have observed with others in this situation.

Reg: You can estimate what your special retirement supplement would be at age 62 by multiplying your estimated Social Security benefit at age 62 by your years of FERS service (rounded up to the next higher year) and dividing the product by 40. Your actual Social Security benefit at age 62 would be determined by the Social Security Administration based on such factors as your average indexed monthly earnings.

Mike: Once you retire, you are free to access your TSP in any way usually allowed for retirees. The MRA does not apply to the TSP. You do not have to wait until you reach age 59½ to take money from your TSP once you are retired, but withdrawals taken before reaching age 59½ might be subject to the early withdrawal penalty if you retire before the calendar year in which you reach age 55. It’s impossible to say whether the early-out income will be enough to offset the potential TSP gains in the future without knowing how you’ll invest the TSP money along the way.

I think that accepting the buyout/early-out offer will substantially reduce your maximum standard of living in retirement if you don’t continue to work, though. I think it’s reckless to make such a big, irreversible decision without a clear understanding of the financial implications. Based on your questions, I suggest that you keep working and skip the buyout offer. This is the safer bet without the right decision analysis and support.

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CSRS Offset

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Q. I plan to retire Nov. 2, 2013. I will be 66 years old, with 37 years of service. I am CSRS Offset for 30 of those years. I withdrew approximately $9,000 in 1982 (CSRS earnings) and will not be repaying it. (It’s now about $55,000 with a penalty of about $300 per month.) I know my retirement will be “offset” by about $800 in Social Security. My Social Security is estimated to be about $1,460 before the offset. Will I be able to collect the Social Security difference of approximately $600, or is my CSRS offset all that I’ll get? I do not have other substantial Social Security earnings. When I talk to my human resources department, they just shake their head and refer me to the Office of Personnel Management. I was told an estimate of my retirement would take five to six months. I can hardly wait to see how long it takes to get a check when I retire.

A. Your CSRS annuity will be offset by the amount of Social Security benefit you earned while covered by CSRS Offset. The amount you receive in total will be approximately the same; it will just come from two different places, OPM and the Social Security Administration. Any additional Social Security benefit to which you are entitled through non-CSRS Offset employment will be added to your Social Security benefit payment.

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CSRS Offset

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Q. Having read the Office of Personnel Management’s Retirement Fact 13, I am still somewhat confused. If I retire at 62 with over 32 years of service under CSRS Offset, and the CSRS calculation comes out to $5,000 per month with a Social Security amount with federal earnings (Computation 2) being $500 per month, and the Social Security Administration indicates my Social Security benefit with federal service is $1,500 and $800 without federal service (Computation 1), what would my monthly annuity be from CSRS and what would be the benefit amount from Social Security?

A. The closest you’ll be able to get to an accurate estimate of how your CSRS annuity will be offset to account for your Social Security benefit is by using this simple formula: Take your Social Security benefit estimate for age 62, multiply it by your total years of CSRS Offset service (rounded to the nearest full number) and divide it by 40. In the long run, however, this is just an academic exercise because the total amount of money you’ll receive will be the same; it will just come from two different places, OPM and the Social Security Administration. Any other Social Security benefit to which you are entitled as a result of nonfederal employment will be in addition to that.

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Annuity reduction

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Q. I am eligible to retire in July (CSRS). In the event I retired and subsequently went to work in private industry, would my pension be subject to any form of offset based on those earnings?

A. No.

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Spousal benefits twice

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Q. Can my wife and I use spousal benefits twice? I am a much higher earner and 3½ years older than my wife. My wife starts collecting benefits on her earnings at age 62. I simultaneously start collecting spouse benefits at age 65½. I start collecting benefits on my earnings at age 70 and my wife switches to spouse benefits at that time. Does this work? Will the earlier benefits based on wife’s earnings reduce the benefits based on my earnings at age 70?

A. You’ll need to ask the Social Security Administration. Call them at 1-800-772-1213 and talk to one of their benefits specialists.

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Benefit reductions from home sale

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Q: A friend told me that her monthly Social Security benefit was reduced by $250 because of the profits made from the sale of a house that she inherited from her mother. Can this be true?

A: The Social Security earnings limit only applies to earnings from wages or self-employment, and then only for those individuals who haven’t reached full retirement age. In the ordinary course of events, income received through the sale of a home wouldn’t be considered to be earnings. However, if she reported any portion of the proceeds as earnings on her federal income tax return (because she served as a real estate agent, for example) that amount would be subject to the earnings limit.

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Special Extra Earnings for military service

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Q: On www.ssa.gov/retire2/military.htm#2002 it states that between the years 1957 and 2001 Special Extra Earnings can be credited to your Social Security benefit for active-duty military service between the above mentioned years. Will this affect an adjustment to a CSRS annuity? My Post 56 payment was paid in full in 1986 to avoid interest payments.
A: No, it won’t.

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