Ask The Experts: Retirement

By Reg Jones

Military buyback and annuity

Bookmark and Share

Q. My husband had 16 years of military service (no retirement received). He is now 65 and may soon be employed in civil service. At age 70, he would have about 21 years of federal employment and military combined. Is he then eligible for retirement at age 70?

Read the rest of this entry »

Tags: , , , ,

Resignation and pension

Bookmark and Share

Q. I am 45 years old with 13 years of service under FERS and will be resigning this month to pursue other activities. I understand that I would eligible for a full pension (computed on my high-3) at age 62. That is 17 years away and, in the meantime, my defined benefit pension would remain static and thus be seriously eroded by inflation. Is there a way to protect myself against this within the pension system, or can I take a lump sum on separation and roll that into an IRA? If I take the lump sum, must I do it as of my separation, how is it computed, and does it represent only my contributions to the basic pension, or also those of the government? I have a separate Thrift Savings Plan, which I plan to roll into an IRA.

Read the rest of this entry »

Tags: , , , , , , , , ,

Withdraw or defer

Bookmark and Share

Q. I have a little over 13 years of FERS service. I am 51 years old. I originally planned on retiring at 56 (MRA+10) but I have recently been contemplating retiring now under a deferred retirement.

1. If I retire now (deferred), will I be able to draw the retirement at 56, or will I have to wait until age 62?

2. If I choose to withdraw my retirement versus defer it, is there a calculator somewhere that can give me a general idea of how much I would get?

A. You can’t retire. What you can do is resign from the government, leave your retirement contributions in the fund and apply for a deferred annuity at age 62. There isn’t any calculator that would tell you what you’d receive if you took a refund of your retirement contributions. What I can tell you is that you’d receive every penny you contributed to the fund plus accrued interest based on variable market rates set by the Department of the Treasury.

Tags: , , , , , , ,

Buying back retirement credits

Bookmark and Share

Q. I worked for the Postal Service from late 1979 until about 1991. I had a lot of personal and work-related problems and was also given a letter of termination. I decided to quit. I also tried to pursue a disability, but I dropped that because of stress and depression.

I withdrew my retirement to pay an accumulation of four months of bills and rent that I was behind in. I vaguely recall reading that there was a buyback of retirement. Is this true? I am applying for Social Security benefits. I am only 58, but, due to health concerns, am not able to work. I have 31 Social Security credits and need 40 for full benefits. If I could buy back those years of retirement, I would have the full number of credits.  I honestly don’t know how all this works.

A. If you took a refund of your retirement contributions when you left, you wouldn’t be entitled to any retirement benefit nor could you redeposit that money, plus interest, to get credit for that service unless you returned to work for the government. If you left your contributions in the retirement fund, you’d be eligible for a deferred annuity at age 62.

Tags: , , , , , , , , , ,

Buyback

Bookmark and Share

Q. I am 54 years old and was employed with a federal agency for 17 years from 1979 to 1996. Upon resignation to enter the private sector, I withdrew 100 percent of my CSRS contributions. If I return to full-time federal employment this year, do I have the option of buying back the creditable service of 17 years for the same amount that I withdrew in 1996? Secondly, would I be able to continue with CSRS rather than FERS upon re-employment? Would I be eligible to retire after eight more years of federal employment service?

A. If you returned to work for the federal government, you’d be placed in CSRS Offset (CSRS and Social Security) with the option of transferring to FERS. On your return, you would be able to redeposit the money you took out and get credit for your prior service. However, it wouldn’t be the amount that was refunded to you; it would be that amount plus accrued interest. If you made the redeposit, you’d get credit for your prior service in determining your total service and in your annuity computation; if you didn’t, you’d only get credit for it in determining your length of service. Either way, you’d be able to retire at age 62.

Tags: , , , , , , , , , , , , ,

CSRS retirement withdrawal and annuity

Bookmark and Share

Q. I am with the USPS and am in CSRS. I began working in 1973 and quit in 1977, at which time I withdrew my retirement money. I returned to the USPS in 1983 and am still there. Do I need to redeposit the money I withdrew to get credit for 33 years of service? If I do not redeposit the money, will my annuity be decreased?

A. Because you got that refund before Feb. 28, 1991, you’ll get credit for that time in determining you total years of service. However, if you don’t redeposit that money, plus accrued interest, your annuity will be actuarially reduced based on the amount you owe and your age when you retire.

Tags: , , , , ,

Redeposit

Bookmark and Share

Q. I started employment with the Defense Department in September 1981 under CSRS. In 1995, I took advantage of a Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay because my organization was downsizing. I also took a refund on my retirement account, which I tried to invest in buying a home and lost it. I was reinstated in the government in 2004 and came back as CSRS Offset.  I also rolled my 401(k) from the job I had outside the government into the Thrift Savings Plan. I will be 65 on March 7, and was planning to retire in May. Because I did not put my retirement back into the CSRS account, will that hurt my plans for retirement? Will my annuity be greatly reduced because I did not redeposit the funds? If so, by how much?

A. If you don’t redeposit the retirement contributions that were refunded to you, plus accrued interest, you’ll still get credit for that time in determining your total years of service. However, it won’t be used in your annuity computation. In effect, your annuity would be based solely on the time between when you returned to work for the government and when you retire.

Tags: , , , , , , , , , , ,

Value of CSRS annuity

Bookmark and Share

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.

Tags: , , , , , ,

Calculating interest on redeposits

Bookmark and Share

Q. I left federal service in 1988 after 13 years of service and took out my CSRS money, which was about $20,000 at that time. I have decided to return to federal service and want to be in CSRS Offset. I was told that repayment would include yearly interest and would be about $80,000. How is interest calculated? May I roll over either an IRA, Roth or my personal 401(k) into the CSRS Offset account to repay my debt and avoid paying taxes? What about the taxes on the $20,000 that I paid in 1988? Would they eliminate at least taxes on $20,000 of my IRA, etc., repayment if I cannot roll it over?

A. To find out how interest on redeposits is calculated, go to www.opm.gov/retire/pubs/handbook/C021.pdf.

Tags: , , , , , , ,

Return to federal service and retirement money

Bookmark and Share

Q. I worked from October 1985 to April 1991 for the post office and was part-time flexible for 13 months of it. I cashed out my retirement when I left. If I took a federal job, would I be allowed to buy that time back for retirement? Also, if that job was not with the Postal Service, would this affect retirement benefits?

A. If you return to work, you could redeposit that money, plus accrued interest. It doesn’t make a difference whether you work for the Postal Service or any other federal agency. They’re all under the same retirement system.

Tags: , ,

Payroll deductions after maxing out

Bookmark and Share

Q. I am a under CSRS. I maxed out (41 years, 11 months) in January. I am aware that CSRS deductions will continue and will be returned to me with interest upon my retirement. However, my leave and earnings statement does not indicate how much is being put into this account. The L & E statement also indicates that the government is also still contributing. Is this normal, or should I be seeing how much is in this account?

A. Nothing changes when you reach the number of years and full months of service that would produce the maximum earned CSRS annuity. Your agency will continue to deduct the same amount of retirement contributions from your salary as it did before you reached that level. Only after you retire will you find out exactly how much money will be refunded to you and the interest that has accrued.

Tags: , , , , , ,

Service withdrawal payback

Bookmark and Share

Q. I withdrew $4,000 after leaving federal service. I returned and plan on retiring after 30 years of service. I intend to pay back the withdrawal. Can I repay after I retire to regain the years I lost when I withdraw? Or do I have to repay while I’m still employed in federal service?

A. You have to complete the redeposit, plus accrued interest, while you are employed by the federal government.

Tags: , , , , ,

CSRS Offset, re-employment and beneficiaries

Bookmark and Share

Q. I worked for the federal government from January 1981 to November 1990. I pulled my money from CSRS retirement and worked in the private sector until September 2010. Upon returning to federal service in September 2010, I paid Social Security and put money into my 401(k), which I have rolled into my Thrift Savings Plan. I am in CSRS Offset, I declined the FERS option and stayed with CSRS. I am trying to find out whether to pay back the CSRS money I pulled in 1990?

I also recently got married, so how will my benefits be paid once I pass away? For TSP, I have my husband at 20 percent, and both my kids at 40 percent each. I want my husband to get whatever benefits he can, and my kids to get most life insurance.

A. Because you took a refund of your retirement contribution s before March 1, 1991, you can either redeposit that money, or decline to do so and have your CSRS annuity actuarially reduced at retirement based on the amount you owe, including accrued interest. In either case, you’d get credit for the time in determining your total years of service.

By law, you are required to provide a full survivor annuity for your husband when you retire, unless he agrees in writing to a lesser amount or none at all. A full survivor annuity would be 55 percent of your unreduced annuity. No children’s benefits are available unless a child is unmarried and under age 18 (22, if a full time student) or incapable of self support because of a disability that began before age 18.

Tags: , , , , , , , , , ,

Interest and resignation versus retirement

Bookmark and Share

Q. I am a federal employee under CSRS. If I resign, instead of retire, and withdraw all of the money I have contributed to my retirement, will I receive interest on that amount?

A. No.

Tags: , , ,

Military buyback and annuity reduction

Bookmark and Share

Q. My husband was in the Naval Reserve from June 1971 to June 1976. He was not called to active duty, although I believe the two weeks of training every year and six months of boot camp/school may be classified as active duty. If that’s correct, he had about 36 weeks of active duty subject to buyback. For his six years in the reserve, he was paid a grand total of $2,165.45, according to military records he has in his file.

He was under CSRS but had a brief break in service in 1987 and came back into the federal government as a CSRS Offset employee. He retired from the Department of Energy in 2005 as a GS-14, with about 30½ years offset credit plus a year of sick leave. As he was requested to do, in July 2005, he paid $576.49 to the Defense Finance and Accounting Service to pay his military service deposit computation. He has the letter instructing him where to send the check, as well as the endorsed and canceled check.

He turned 62 in December 2011 and has received notice that his annuity will be reduced by $509.36, an amount that should now come from Social Security upon his application for those benefits. This was expected as part of the Offset retirement system.

What is unexpected is the Office of Personnel Management telling him his annuity will be reduced by an additional $609 a month because he has not made a deposit for his military service. They don’t have a record of the amount paid to the Defense Department in 2005. He was in the reserve, so there was little active-duty time. He bought that time. Even if he hadn’t bought the military time, how can a $609-a-month reduction for the rest of his life possibly be logical for 36 weeks of active duty.

Of course, he will follow the appeal process and send documentation of what OPM doesn’t seem to have regarding his military service. But I’m wondering if you can offer an opinion as to how $2,165.45 in Naval Reserve compensation translates into a $609 monthly reduction in a federal annuity for the rest of his life? Is there any scenario where the math on this situation makes any sense, or is there some major human or computer error we must address?

A. If an employee receives credit for any periods of active duty service on or after Jan. 1, 1956, he would need to make a deposit for that time. Otherwise, if he retired before age 62 and was eligible for a Social Security benefit at age 62 (or when he retired, if it was after reaching age 62) any periods of active duty service for which he got credit would be eliminated and his annuity recomputed downward. That deposit would be based on the basic pay he received for that active-duty service, including accrued interest. Prior to Jan. 1, 1984, the interest rate was 3 percent; thereafter, a variable interest rate was charged. When you see the interest rates that were charged you’ll see how even a small owed deposit can mushroom into a large one: 1985 – 13%, 1986 – 11.125%, 1987 – 9%, 1988 – 8.375%, 1989 – 9.125%, 1990 – 8.75%, 1991 – 8.625%, 1992 – 8.125%, 1993 – 7.125%, 1994 – 7%, 1996 – 6.875%, 1997 – 6.875%, 1998 – 6.75%, 1999 – 5.75%, 2000 – 5.875%, 2001 – 6.375%, 2002 – 5.5%, 2003 – 5%, 2004 – 3.875%, 2005 – 4.375%, 2006 – 4.125%, 2007 – 4.875%, 2008 – 4.75%, 2009 – 3.875%, 2010 – 3.125%, 2011 – 2.75%.

Tags: , , , , , , , , , , , ,

Repaying CSRS as a retiree

Bookmark and Share

Q. I have 22 years of federal service: 10½ years in the Air Force and 11½ in the Defense Department, leaving as a GM-14 in 1990. I was under CSRS and took the small lump sum when I left. Can I repay into the system and qualify for an annuity? I am 62½ years old.

A. No, you can’t. You would only be able to redeposit that money, plus interest, if you were a current employee of the federal government.

Tags: , , , , , ,

Service computation date and break in service

Bookmark and Share

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.

Tags: , , , , , , ,

Catch-62

Bookmark and Share

Q. I moved to another base due to a base realignment and closure in 1994. I was told by my personnel office several years ago that it would be to my advantage to pay back my military time. So, trusting their advice, I paid it back. And because the interest accrued since 1986, the dollar amount tripled. I served in the Navy from 1974 to 1978.

However, I attended a retirement class for CSRS employees and was told by the instructor I didn’t need to pay it back. I do not have 40 quarters and I will not be eligible for Social Security at age 62. Is there any way I could be refunded the money I paid in? I was told no by the personnel office, but they are the same people who gave me the wrong information. Is there any advantage to my paying back my military service if I fall into the “Catch-62” scenario? I had not planned on getting another job to make up the quarters. Should I reconsider?

A. Many CSRS employees who were (or still are) subject to the post-1956 deposit option (or Catch-62) made the same payments you did because they wanted to be protected if they retired and were eligible for a Social Security benefit at age 62, or when they retired if it was after age 62. That’s because the effect was something to be avoided — having those years of active-duty service for which they got credit in their CSRS annuity computation eliminated and their annuity reduced. For some, like me, it was a gamble. I lost. As it turns out, I didn’t need to make the deposit. However, neither I nor you are eligible for a refund.

Whether you decide to go back to work in a job that will earn you enough Social Security credits to get a Social Security benefit is up to you. Because you will be retiring from CSRS, a system where you didn’t pay Social Security taxes, you’ll be subject to the windfall elimination provision. The WEP will reduce, but not eliminate, any Social Security benefit to which you are entitled.

Tags: , , , , , , , , , ,

Military buyback

Bookmark and Share

Q. I am a 54-year-old federal government employee with 18 years of service (come October). I plan to retire at age 62, and am curious about whether or not to buy back four years of military time. I got out of the military in November 1980 and am curious how much this would cost.

A. To find out how much you would owe, complete Form RI-20-97, Estimated Earnings During Military Service, and mail it to the finance office for your branch of service along with a copy of your DD 214, Report of Transfer or Discharge. When you get a reply, take that letter and a copy of your DD 214 and Standard Form 2803 (CSRS) or 3108 (FERS) to your local payroll office. They can estimate the amount of your deposit, including interest. Then you can decide if what you would gain in the form of additional annuity would be worth making the deposit. Note: the RI and Standard Forms are available at www.opm.gov, click on Find Form(s).

Tags: , , , , , ,

Sick leave and the 80 percent limit

Bookmark and Share

Q. I have 44 years of civilian service under CSRS and 2,400 hours of unused sick leave. Will the year of sick leave be added to my years of service and give me 82 percent annuity or just 80 percent annuity?

A. Sick leave isn’t subject to the 80 percent annuity limit, which applies to any retiree who has reached 41 years and 11 months of service. Your unused sick leave will be added to your actual service and used to increase the amount of your annuity. Therefore, your 2,400 hours would add one year and one month to your earned annuity and increase it by 2 and 1/6 percent. Note: Because you have actual service beyond 41 years and 11 months, you’ll be given the option of receiving a refund of your excess contributions, plus interest, or purchasing additional annuity which, like unused sick leave, isn’t subject to the 80 percent limit.

Tags: , , , , ,