Author Topic: FERS deferred retirement - has anyone here actually done it?  (Read 28033 times)

Monkey Uncle

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There are a number of US federal employees who post regularly on this board.  It seems like many of us are planning to leave well before minimum retirement age and then collect a deferred FERS pension when we reach MRA or full retirement age.

My plan is to leave about 12 years before full retirement age (7 years before MRA), live mostly off of savings until FRA, then start collecting my pension.  DW's small SS benefit will kick in about 2 years into FIRE, which will help out some.  My SS will kick in a few years after my pension starts (assuming I start collecting around 65).  At that point, when the pension and both SS benefits are going, our projected living expenses will be mostly covered with our remaining savings serving mainly as a supplement/back-up. 

I've run the numbers six ways to Sunday using cFiresim, Firecalc, Monte Carlo simulators, etc., and all say that this is a sound plan.  But I can't help having some anxiety about that first 12-15 years when I will be pretty much on my own.  So I'm wondering, have any of you feds actually executed a similar FIRE strategy?  What went right?  What went wrong?  Did you have any issues getting your pension after being out of the federal work force for a while?  I'd love to hear your stories.

Thanks!

CheapskateWife

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #1 on: June 01, 2015, 07:32:50 AM »
Following because I have a very similar plan and have had the same results in Firecalc and Cfiresim.  However, I am about 5 years behind you so really don't have a whole lot of insight....

I will say that hitting the 10 year mark was hugely liberating.  Not that our pension is enough to really live on, but it is something that is guaranteed*.

I am still seeing CSRS employees retiring out of the system at my office and a good deal of misunderstanding amongst other FERS employees about what the pension benefits really entail, so it would really be good to hear from someone who has actually made the deferred retirement work.  Like SS, this is a tiny piece of our FIRE puzzle but I do like to have some assurance that my plan is reasonably likely to succeed.

*barring the zombie apocalypse or some other global disaster that completely dismantles our government. 

Killerbrandt

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #2 on: June 01, 2015, 09:12:17 AM »
Same situation! But I am currently 27, but plan on getting out way earlier than my MRA! Also, I heard that once they approve your retirement, you can start withdrawing from TSP before 59.5 without penalty? is that true?

CheapskateWife

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Killerbrandt

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #4 on: June 01, 2015, 09:54:49 AM »
Really?! Wow! So to be clear, if they approve early retirement at 50, then I could start taking TSP? That is awesome! And I just saw that if you leave to another job (no federal) you can still contribute to the TSP account! That is awesome!!

CheapskateWife

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #5 on: June 01, 2015, 10:07:07 AM »
From what I am reading there, you can withdraw your TSP in chunks or all at once once you separate from Federal service.  However, there is the question of the 10% IRS Penalty for withdrawls prior to the age of 59-1/2.  From the TSP publication:

Additional 10% Penalty Tax
If you receive a TSP distribution before you reach age
59, in addition to the regular income tax, you may have
to pay an early withdrawal penalty tax equal to 10% of
any taxable portion of the distribution not transferred or
rolled over. The additional 10% tax generally does not
apply to payments that are:
Paid after you separate from service during or after
the year you reach age 55;
Annuity payments;
Automatic enrollment refunds;
Made as a result of total and permanent disability;4
Made because of death;
Made from a beneficiary participant account;
Made in a year you have deductible medical expenses
that exceed 10% of your adjusted gross
income (7.5% if you or your spouse is 65 or over);4
Ordered by a domestic relations court; or
Paid as substantially equal payments over your life
expectancy.

Would you please share the source on your information about continuing to contribute to TSP after leaving federal service?
« Last Edit: June 01, 2015, 10:10:42 AM by CheapskateWife »

partgypsy

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #6 on: June 01, 2015, 10:09:45 AM »
I would really check with HR about early withdrawal. I've always heard you have to wait until 59.5 to withdraw without penalty for FERS.

 I think waiting to collect your pension until later is pretty straightforward. I knew someone at the VA who retired first from VA, but then continued to work full time elsewhere. He was going to wait till he hit 60 or 62 before starting his VA pension. I hadn't heard they had any issues with that.

Or you can post your question here
https://forum.federalsoup.com/

Killerbrandt

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #7 on: June 01, 2015, 10:16:09 AM »
https://www.tsp.gov/planparticipation/withdrawals/accountOptions.shtml 

That is the where I saw about contributing to the TSP even after leaving Federal Service. (Am I misunderstanding it?)

Yeah I should call HR about the early withdraw without penalty. Because I read the same thing that CheapskateWife posted about the 10 percent, but several people that retired here in their early 50s were able to withdraw without penalty, but I wonder if they misunderstood?

CheapskateWife

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #8 on: June 01, 2015, 10:55:37 AM »
Now that is interesting, Killerbrandt....I think you are correct.  The TSP will clearly allow you to rollover funds from an existing IRA or employer plan into the TSP.  So one could contribute the 5500 annually to a Traditional IRA and roll it over to the TSP right away.  There is no mention of a limitation to this so I'm naturally curious if that is a reasonable invetment strategy. 

If you were rolling over from another employer, I would imagine that requires you leaving that employer first.

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #9 on: June 01, 2015, 11:00:08 AM »
I'm also one of those with a possible scenario of doing deferred retirement, seeing as I won't qualify for voluntary early retirement (if it was even offered) for another 6.5 years. All my research has shown that even under VERA I wouldn't be able to access my TSP penalty free until 59.5. My only recourse is to roll part of it over into IRA(s) and use roth conversions and/or 72T.

Runrooster

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #10 on: June 01, 2015, 12:12:02 PM »
[quote
r=Killerbrandt link=topic=38060.msg680618#msg680618 date=1433175369]
https://www.tsp.gov/planparticipation/withdrawals/accountOptions.shtml 

That is the where I saw about contributing to the TSP even after leaving Federal Service. (Am I misunderstanding it?)

Yeah I should call HR about the early withdraw without penalty. Because I read the same thing that CheapskateWife posted about the 10 percent, but several people that retired here in their early 50s were able to withdraw without penalty, but I wonder if they misunderstood?
[/quote]


I am a separated federal employee, and I have a Roth 401k with next employer and a Roth IRA and current employer is not offering 401k.  I am allowed to rollover the 401k, not the IRA, and cannot contribute to tsp without 401k for the year.  I could open a traditional IRA, contribute to that and roll it into the tsp.

Killerbrandt

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #11 on: June 01, 2015, 12:25:15 PM »
This is all very interesting! Thank you guys for your help!

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #12 on: June 01, 2015, 02:03:10 PM »
Following because I have a very similar plan and have had the same results in Firecalc and Cfiresim.  However, I am about 5 years behind you so really don't have a whole lot of insight....

I will say that hitting the 10 year mark was hugely liberating.  Not that our pension is enough to really live on, but it is something that is guaranteed*.

I am still seeing CSRS employees retiring out of the system at my office and a good deal of misunderstanding amongst other FERS employees about what the pension benefits really entail, so it would really be good to hear from someone who has actually made the deferred retirement work.  Like SS, this is a tiny piece of our FIRE puzzle but I do like to have some assurance that my plan is reasonably likely to succeed.

*barring the zombie apocalypse or some other global disaster that completely dismantles our government.

Or if Congress changes the law to void pensions. Is there any protection against that?

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #13 on: June 01, 2015, 02:07:21 PM »
Regarding withdrawing before 59.5, there are many options to do this. IIRC, with any 401k, you can withdraw starting at 55 if you retire from that company at 55 and worked there at least 5 years continuously prior to your retirement. This is probably the case for the TSP as well. Plus there's the Roth IRA Pipeline (just roll the traditional TSP funds into a traditional IRA and the Roth TSP funds into a Roth IRA) and the option of Substantially Equal Periodic Payments.

In sum, you can get your funds out of the TSP very easily without penalty.

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #14 on: June 01, 2015, 02:20:27 PM »
Following because I have a very similar plan and have had the same results in Firecalc and Cfiresim.  However, I am about 5 years behind you so really don't have a whole lot of insight....

I will say that hitting the 10 year mark was hugely liberating.  Not that our pension is enough to really live on, but it is something that is guaranteed*.

I am still seeing CSRS employees retiring out of the system at my office and a good deal of misunderstanding amongst other FERS employees about what the pension benefits really entail, so it would really be good to hear from someone who has actually made the deferred retirement work.  Like SS, this is a tiny piece of our FIRE puzzle but I do like to have some assurance that my plan is reasonably likely to succeed.

*barring the zombie apocalypse or some other global disaster that completely dismantles our government.

Or if Congress changes the law to void pensions. Is there any protection against that?

No absolute protection, but there never really is any absolute guarantee of anything. Considering even congresses that think government is too big still opt to pay government employees for time they were furloughed during a shutdown after the fact, I seriously doubt lawmakers would suddenly pull the rug out from under folks who have already been invested in the current retirement plan. The more likely scenario is that if they wanted to make changes, the changes would only apply to new employees, kind of like the switch from CSRS to FERS.

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #15 on: June 01, 2015, 02:23:44 PM »
Regarding withdrawing before 59.5, there are many options to do this. IIRC, with any 401k, you can withdraw starting at 55 if you retire from that company at 55 and worked there at least 5 years continuously prior to your retirement. This is probably the case for the TSP as well. Plus there's the Roth IRA Pipeline (just roll the traditional TSP funds into a traditional IRA and the Roth TSP funds into a Roth IRA) and the option of Substantially Equal Periodic Payments.

In sum, you can get your funds out of the TSP very easily without penalty.

Yes, the funds can be gotten to, but I wouldn't call it easy. The Roth IRA Pipeline requires, moving funds to a Roth and then planning withdrawals that are only accessible five years after the fact. The 72T/SEPP remove any kind of flexibility of distributions once they are setup until you turn 59 or 5 years, whichever is longer. Neither of these I would describe as easy nor convenient.

partgypsy

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #16 on: June 01, 2015, 02:24:19 PM »
Regarding withdrawing before 59.5, there are many options to do this. IIRC, with any 401k, you can withdraw starting at 55 if you retire from that company at 55 and worked there at least 5 years continuously prior to your retirement. This is probably the case for the TSP as well. Plus there's the Roth IRA Pipeline (just roll the traditional TSP funds into a traditional IRA and the Roth TSP funds into a Roth IRA) and the option of Substantially Equal Periodic Payments.

In sum, you can get your funds out of the TSP very easily without penalty.

It looks like you can take either a lump sum payout (1 time), or equal payments starting at age 55 as long as you have retired from service by that time. However! I would again check with HR as it also depends on your minimum age of retirement, other things, and I would hate to give you wrong advice. I have to admit when I went to the retirement seminar a year ago, I wasn't listening to the few exceptions prior to 59.5 (that don't involve penalties), as I am not planning to retire before that point so it wasn't relevant to me.

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #17 on: June 01, 2015, 02:34:58 PM »
Regarding withdrawing before 59.5, there are many options to do this. IIRC, with any 401k, you can withdraw starting at 55 if you retire from that company at 55 and worked there at least 5 years continuously prior to your retirement. This is probably the case for the TSP as well. Plus there's the Roth IRA Pipeline (just roll the traditional TSP funds into a traditional IRA and the Roth TSP funds into a Roth IRA) and the option of Substantially Equal Periodic Payments.

In sum, you can get your funds out of the TSP very easily without penalty.

Yes, the funds can be gotten to, but I wouldn't call it easy. The Roth IRA Pipeline requires, moving funds to a Roth and then planning withdrawals that are only accessible five years after the fact. The 72T/SEPP remove any kind of flexibility of distributions once they are setup until you turn 59 or 5 years, whichever is longer. Neither of these I would describe as easy nor convenient.

I guess I find that pretty easy. Just have enough money in any combination of taxable savings, Roth IRAs, or Roth TSP to live on for 5 years, and then start the pipeline. Contributions to Roth TSP are like contributions to Roth IRAs. You can withdraw the contributions at any time penalty free, once you have separated from service.

Regarding withdrawing before 59.5, there are many options to do this. IIRC, with any 401k, you can withdraw starting at 55 if you retire from that company at 55 and worked there at least 5 years continuously prior to your retirement. This is probably the case for the TSP as well. Plus there's the Roth IRA Pipeline (just roll the traditional TSP funds into a traditional IRA and the Roth TSP funds into a Roth IRA) and the option of Substantially Equal Periodic Payments.

In sum, you can get your funds out of the TSP very easily without penalty.

It looks like you can take either a lump sum payout (1 time), or equal payments starting at age 55 as long as you have retired from service by that time. However! I would again check with HR as it also depends on your minimum age of retirement, other things, and I would hate to give you wrong advice. I have to admit when I went to the retirement seminar a year ago, I wasn't listening to the few exceptions prior to 59.5 (that don't involve penalties), as I am not planning to retire before that point so it wasn't relevant to me.

The HR people won't tell you about any of the things I just mentioned. What people retiring before 5.9.5 should do is just roll everything over to a Vanguard IRA (or 2 IRAs if you also have TSP Roth contributions) and then go from there. Of course that doesn't apply to you.

CheapskateWife

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #18 on: June 01, 2015, 02:58:06 PM »
Following because I have a very similar plan and have had the same results in Firecalc and Cfiresim.  However, I am about 5 years behind you so really don't have a whole lot of insight....

I will say that hitting the 10 year mark was hugely liberating.  Not that our pension is enough to really live on, but it is something that is guaranteed*.

I am still seeing CSRS employees retiring out of the system at my office and a good deal of misunderstanding amongst other FERS employees about what the pension benefits really entail, so it would really be good to hear from someone who has actually made the deferred retirement work.  Like SS, this is a tiny piece of our FIRE puzzle but I do like to have some assurance that my plan is reasonably likely to succeed.

*barring the zombie apocalypse or some other global disaster that completely dismantles our government.

Or if Congress changes the law to void pensions. Is there any protection against that?

No absolute protection, but there never really is any absolute guarantee of anything. Considering even congresses that think government is too big still opt to pay government employees for time they were furloughed during a shutdown after the fact, I seriously doubt lawmakers would suddenly pull the rug out from under folks who have already been invested in the current retirement plan. The more likely scenario is that if they wanted to make changes, the changes would only apply to new employees, kind of like the switch from CSRS to FERS.

The most recent round of sequestration legislation made an additional change to the FERS pension system, mandating that new employees from that point on would be contributing to their pensions at a rate of 3.8% in lieu of the .8% that current employees contribute.  This makes it necessary for folks who are transferring between agencies or even quit and start up later to have to stand up and yell loudly to be reinstated, not rehired.  Rehired means the 3.8% pension contribution; being reinstated means you make 0.8% contributions.

Catbert

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #19 on: June 01, 2015, 03:04:35 PM »
Retired Navy HR Manager here.  I can't contribute too much to this conversation since I retired under CSRS and what little I knew about FERS has long since been forgotten.  I will say that you'll have a hard time finding an HR person who knows all the ins-and-outs of TSP.  Your TSP contributions go directly to the central TSP fund.  When you take it out/roll it over you'll deal directly with TSP.gov not your agency HR office.  I'd guess that even those in local offices who deal with retirement will have limited knowledge of TSP exceptions.

sol

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #20 on: June 01, 2015, 04:59:45 PM »
I will say that you'll have a hard time finding an HR person who knows all the ins-and-outs of TSP.

This was my experience as well.  I've had much better luck finding this information on the internet than by calling our retirement people at work.

When you separate from federal service (at any age), you can make two withdrawals from the TSP.  They call the first one your partial withdrawal and the second one your full withdrawal, which has to empty the account.

Most of us here are planning on taking at least a partial withdrawal when we leave federal service, and rolling that amount into a traditional IRA (which incurs no taxes or penalties) and then from the tradIRA into a RothIRA in a series of yearly installments (which incurs taxes in the year of conversion, which is why you want to spread it out over your zero-income years to minimize/avoid income taxes).

Other options include waiting until age 55, as forummm mentioned above, which avoids the penalty (but not the taxes) for cash withdrawals, or angling for a VERA.  My federal career has been too short to have seen very many rounds of that, but my understanding is that VERAs are targeted by geography and position and then within each position the most senior people get first shot, which means an early retiree is very unlikely to get one.  You'd have to convince an older employee to refuse it so that it rolled down to you, and I don't think I could do that.

I will say that hitting the 10 year mark was hugely liberating.  Not that our pension is enough to really live on, but it is something that is guaranteed*.

What happens at 10 years?

Full Beard

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #21 on: June 01, 2015, 05:44:38 PM »
At 10 years you can collect your pension at your minimum retirement age opposed to collecting at 62 with just 5 years of service.  If you collect at your MRA with at least 10 years but less than 30 it will be reduced by 5% for every year under age 62.

http://www.opm.gov/retirement-services/fers-information/eligibility/

sol

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #22 on: June 01, 2015, 06:21:20 PM »
At 10 years you can collect your pension at your minimum retirement age opposed to collecting at 62 with just 5 years of service. 


Riiiiight, MRA+10.  I sort of always figured I would wait to collect my deferred retirement until at least age 62, so I haven't been so worried about hitting the 10 year mark. 

The only other 10 year milestone I know about has to do with survivor benefits, and it seems like a pretty minor benefit.

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #23 on: June 01, 2015, 07:01:28 PM »
At 10 years you can collect your pension at your minimum retirement age opposed to collecting at 62 with just 5 years of service. 


Riiiiight, MRA+10.  I sort of always figured I would wait to collect my deferred retirement until at least age 62, so I haven't been so worried about hitting the 10 year mark. 

The only other 10 year milestone I know about has to do with survivor benefits, and it seems like a pretty minor benefit.

Isn't that only if you retire at MRA while still in service? So someone in their 30's with 10 years of service wouldn't have anything special--unless they intended to work another ~20 years in federal service. Or quit and get rehired at some point.

Full Beard

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #24 on: June 01, 2015, 08:31:13 PM »
Yeah you're right, Forummm.  The pension amount is based on your average 3 highest salary years.  So if you leave in your 30s then your pension will be significantly less than if you were to retire right at your MRA.  I know a lot of people that have come back to work about 3 years or so before their MRA and then retire with that higher average salary.

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #25 on: June 01, 2015, 09:02:20 PM »
my understanding is that VERAs are targeted by geography and position and then within each position the most senior people get first shot, which means an early retiree is very unlikely to get one.  You'd have to convince an older employee to refuse it so that it rolled down to you, and I don't think I could do that.

My experience is that a number of prospective retirees hold off on applying for VERAs in hopes that if the government doesn't get enough takers they will be offered a VSIP (Voluntary Separation Incentive Payment). That certainly has been the practice of several coworkers of mine, who didn't take VERAs but did retire with subsequent VSIPs.

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #26 on: June 02, 2015, 04:33:37 AM »
Regarding withdrawing before 59.5, there are many options to do this. IIRC, with any 401k, you can withdraw starting at 55 if you retire from that company at 55 and worked there at least 5 years continuously prior to your retirement. This is probably the case for the TSP as well. Plus there's the Roth IRA Pipeline (just roll the traditional TSP funds into a traditional IRA and the Roth TSP funds into a Roth IRA) and the option of Substantially Equal Periodic Payments.

In sum, you can get your funds out of the TSP very easily without penalty.

It looks like you can take either a lump sum payout (1 time), or equal payments starting at age 55 as long as you have retired from service by that time. However! I would again check with HR as it also depends on your minimum age of retirement, other things, and I would hate to give you wrong advice. I have to admit when I went to the retirement seminar a year ago, I wasn't listening to the few exceptions prior to 59.5 (that don't involve penalties), as I am not planning to retire before that point so it wasn't relevant to me.

Be careful with the lump sum payout - if you don't roll it over into another qualified plan, you'll have to pay taxes + penalty (unless you're over 55 and retired, in which case you'll just have to pay the taxes, which could still be substantial if you're withdrawing a big lump sum).

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #27 on: June 02, 2015, 04:36:59 AM »
Following because I have a very similar plan and have had the same results in Firecalc and Cfiresim.  However, I am about 5 years behind you so really don't have a whole lot of insight....

I will say that hitting the 10 year mark was hugely liberating.  Not that our pension is enough to really live on, but it is something that is guaranteed*.

I am still seeing CSRS employees retiring out of the system at my office and a good deal of misunderstanding amongst other FERS employees about what the pension benefits really entail, so it would really be good to hear from someone who has actually made the deferred retirement work.  Like SS, this is a tiny piece of our FIRE puzzle but I do like to have some assurance that my plan is reasonably likely to succeed.

*barring the zombie apocalypse or some other global disaster that completely dismantles our government.

Or if Congress changes the law to void pensions. Is there any protection against that?

No absolute protection, but there never really is any absolute guarantee of anything. Considering even congresses that think government is too big still opt to pay government employees for time they were furloughed during a shutdown after the fact, I seriously doubt lawmakers would suddenly pull the rug out from under folks who have already been invested in the current retirement plan. The more likely scenario is that if they wanted to make changes, the changes would only apply to new employees, kind of like the switch from CSRS to FERS.

The most recent round of sequestration legislation made an additional change to the FERS pension system, mandating that new employees from that point on would be contributing to their pensions at a rate of 3.8% in lieu of the .8% that current employees contribute.  This makes it necessary for folks who are transferring between agencies or even quit and start up later to have to stand up and yell loudly to be reinstated, not rehired.  Rehired means the 3.8% pension contribution; being reinstated means you make 0.8% contributions.

And there are proposals being floated in Congress right now that would apply the higher pension contribution to everyone, raise the MRA, apply a high-5 average instead of a high-three, and probably other various mischief.  Who knows how likely any of this is to become law.  I feel pretty sure that the bulk of my pension benefit will be there when I need it, but this kind of anti-federal employee politicking does make me nervous.

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #28 on: June 02, 2015, 04:39:59 AM »
my understanding is that VERAs are targeted by geography and position and then within each position the most senior people get first shot, which means an early retiree is very unlikely to get one.  You'd have to convince an older employee to refuse it so that it rolled down to you, and I don't think I could do that.

My experience is that a number of prospective retirees hold off on applying for VERAs in hopes that if the government doesn't get enough takers they will be offered a VSIP (Voluntary Separation Incentive Payment). That certainly has been the practice of several coworkers of mine, who didn't take VERAs but did retire with subsequent VSIPs.

In the last round of VERA that occurred in my agency, seniority was not a factor.  However, the agency had to agree to abolish the vacated positions, so many people who applied were turned down.  VSIPs were not offered.  I think that depends on how desperate the agency is to get rid of people and how much cash they have on hand to pay the VSIPs.

Killerbrandt

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #29 on: June 02, 2015, 05:00:19 AM »
Regarding withdrawing before 59.5, there are many options to do this. IIRC, with any 401k, you can withdraw starting at 55 if you retire from that company at 55 and worked there at least 5 years continuously prior to your retirement. This is probably the case for the TSP as well. Plus there's the Roth IRA Pipeline (just roll the traditional TSP funds into a traditional IRA and the Roth TSP funds into a Roth IRA) and the option of Substantially Equal Periodic Payments.

In sum, you can get your funds out of the TSP very easily without penalty.

That is very good to know! Thank you!

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #30 on: June 02, 2015, 06:48:32 AM »
Yeah you're right, Forummm.  The pension amount is based on your average 3 highest salary years.  So if you leave in your 30s then your pension will be significantly less than if you were to retire right at your MRA.  I know a lot of people that have come back to work about 3 years or so before their MRA and then retire with that higher average salary.

And if you take deferred retirement (separating from service before MRA) and take the annuity before age 62, even if you're MRA+10, your annuity is reduced by 5% per year you're under 62. So that's even more of a killer. For an early retiree, inflation and taking it at 57 would make the pension about enough to pay the electric bill or something else non-substantial. If you have 20 years of service you can take it starting at 60 without reduction.

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #31 on: June 02, 2015, 06:49:58 AM »
my understanding is that VERAs are targeted by geography and position and then within each position the most senior people get first shot, which means an early retiree is very unlikely to get one.  You'd have to convince an older employee to refuse it so that it rolled down to you, and I don't think I could do that.

My experience is that a number of prospective retirees hold off on applying for VERAs in hopes that if the government doesn't get enough takers they will be offered a VSIP (Voluntary Separation Incentive Payment). That certainly has been the practice of several coworkers of mine, who didn't take VERAs but did retire with subsequent VSIPs.

In the last round of VERA that occurred in my agency, seniority was not a factor.  However, the agency had to agree to abolish the vacated positions, so many people who applied were turned down.  VSIPs were not offered.  I think that depends on how desperate the agency is to get rid of people and how much cash they have on hand to pay the VSIPs.

Do you have to have 20 years of service and be 50+ for a VERA?
http://www.opm.gov/retirement-services/fers-information/eligibility/ (early retirement section)

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #32 on: June 02, 2015, 07:40:03 AM »
Do you have to have 20 years of service and be 50+ for a VERA?

http://www.opm.gov/policy-data-oversight/workforce-restructuring/voluntary-early-retirement-authority/

Mostly yes - 20 years service and at least 50 OR 25 years service. I'll qualify in 6.5 years, but there's no way to know how soon a VERA will be offered once I am qualified. It would be really sweet to retire immediately with my pension, but if I manage to save enough to do without, I may not have the patience to wait.

CheapskateWife

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #33 on: June 02, 2015, 08:15:27 AM »
And there are proposals being floated in Congress right now that would apply the higher pension contribution to everyone, raise the MRA, apply a high-5 average instead of a high-three, and probably other various mischief.  Who knows how likely any of this is to become law.  I feel pretty sure that the bulk of my pension benefit will be there when I need it, but this kind of anti-federal employee politicking does make me nervous.

I hear you on that...it is interesting as both a veteran and a federal employee to see that benefits are sacrosanct for Vets, even if they don't make fiscal sense anymore; but somehow federal employees are perceived by the public as "wasteful bureacrats" who deserve to have their benefits ripped apart.  Don't know about many of you, but I could make much more money on the economy, but the benefits (for me and my family) keep me willing to stay here and serve.  The furloughs were an excellent example of how we are used as pawns in the political/budgetting games. 

Running the numbers after just 10 years of federal service reveals admittedly a tiny, tiny pension...likely less than my estimated Social Security benefit.  But even if I defer and have a 20 year break before I claim it...its still mine :)  It's the short leg of the retirement stool, but at least it's there.  And I consider my personal taxable and Traditional IRA investments a 4th leg....

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #34 on: June 03, 2015, 04:39:05 AM »
Running the numbers after just 10 years of federal service reveals admittedly a tiny, tiny pension...likely less than my estimated Social Security benefit.  But even if I defer and have a 20 year break before I claim it...its still mine :)  It's the short leg of the retirement stool, but at least it's there.  And I consider my personal taxable and Traditional IRA investments a 4th leg....

Yes, if I execute FIRE as planned, I'll have about 15 - 16 years of service (depending on whether I still have all my unused sick leave intact, which gets counted toward creditable service).  So my pension will be considerably less than my SS benefit, assuming I can hold out until 62 to claim my pension and 65 or later to claim SS.  And, as in your case, my taxable savings and IRAs outside the FERS system will be crucial - no way could I fire (or maybe even retire in the normal manner) without those.  Even if I worked until full retirement age, the traditional pension portion of FERS would amount to less than 30% of my salary.

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #35 on: June 03, 2015, 04:46:22 AM »
Do you have to have 20 years of service and be 50+ for a VERA?

http://www.opm.gov/policy-data-oversight/workforce-restructuring/voluntary-early-retirement-authority/

Mostly yes - 20 years service and at least 50 OR 25 years service. I'll qualify in 6.5 years, but there's no way to know how soon a VERA will be offered once I am qualified. It would be really sweet to retire immediately with my pension, but if I manage to save enough to do without, I may not have the patience to wait.

It should also be mentioned that agencies do have the option of offering VSIPs to employees who merely resign without qualifying for VERA.  It's totally up to the discretion of the agency, so it depends on how desperate they are to get rid of people.  A VSIP is capped by law at $25,000, so it isn't going to make or break you, but it would be a nice parting gift. 

You can also time your departure to maximize your payment for unused annual leave.  This is non-discretionary - your agency must pay you for any unused annual leave when you leave (either through retirement or resignation).  If you carry the maximum 240 hours over from the previous year, then work until Dec 31 without taking any annual leave, in theory you can get paid for 448 hours of annual leave (assuming you're in the 8 hour leave category).

Killerbrandt

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #36 on: June 03, 2015, 09:30:53 AM »
Wow this is great information that I could never find at my job! Thank you guys!

Yeah, it is shocking how so many think we are just losers and that our pay makes up the entire US Budget somehow. I believe about 30 percent of people here are useless, but the rest are really hard workers trying to do their best to help save the taxpayers money. I could also be making a lot more in the private world, but the work/life balance is too great to give up at the moment.

Sorry for getting off topic. Just needed to rant a little with people like me.

sol

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #37 on: June 03, 2015, 10:28:08 AM »
You can also time your departure to maximize your payment for unused annual leave.  This is non-discretionary - your agency must pay you for any unused annual leave when you leave

I think a better option, if you can swing it, is to use up all of your annual leave before you retire.  Take two whole months off. You still get paid for it, plus it counts toward your accumulated years of service.

Similarly, unused sick leave is normally credited toward your service time but not paid.  Better to use all of that up if you can, too.

CheapskateWife

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #38 on: June 03, 2015, 11:27:08 AM »
Yet another reason why the MMM forum rules. 

I don't get sick, so the leave just builds and builds...I never thought of it as a real asset until this conversation. 

Sojourner

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #39 on: June 03, 2015, 02:06:48 PM »
I think a better option, if you can swing it, is to use up all of your annual leave before you retire.  Take two whole months off. You still get paid for it, plus it counts toward your accumulated years of service.

Similarly, unused sick leave is normally credited toward your service time but not paid.  Better to use all of that up if you can, too.
Yes, if my calc below is close to being correct, you come out way ahead using your sick leave during your working years.  Also, while you're using up sick and annual leave, you'll be accruing TSP matching 5%.

Example...if you have say 1000 hrs sick leave on the books, you will be credited approx 6 months of time towards your retirement calc.  So, if a person retires earlier than 62, the calc is .01 x high 3yrs salary ($100K example) x #yrs service (15.5 yrs example) = $15,500/yr pension.  If the person earns about $48/hr and uses up the 1,000 sick leave hours while working = $48,000 income.  Whereas, the extra $500/yr in pension income would take 96 years to break even ($48,000 / $500).  No?

Also, I'm fairly certain it's not necessary to roll the TSP to IRA in order to do the 72t/SEPP thing.  Just need to submit IRS form 5329 with taxes to claim exemption for the 10% penalty.

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #40 on: June 03, 2015, 02:34:07 PM »
I have long thought that I would attempt to time elective surgery for my FIRE departure to just such an effect.  That goes out the window if I actually need it in the next 5 years, but in the mean time, I'll just watch that balance grow :)

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #41 on: June 03, 2015, 07:50:37 PM »
Also, I'm fairly certain it's not necessary to roll the TSP to IRA in order to do the 72t/SEPP thing.  Just need to submit IRS form 5329 with taxes to claim exemption for the 10% penalty.

The advantage of rolling over to an IRA is that you can choose to rollover just enough of your TSP balance to give you the exact annual 72t/SEPP distributions that you need, as opposed to having them based on the entire amount of your TSP. That way you are not receiving (and potentially paying taxes) and more than what you need.

Sojourner

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #42 on: June 03, 2015, 09:03:08 PM »
Also, I'm fairly certain it's not necessary to roll the TSP to IRA in order to do the 72t/SEPP thing.  Just need to submit IRS form 5329 with taxes to claim exemption for the 10% penalty.

The advantage of rolling over to an IRA is that you can choose to rollover just enough of your TSP balance to give you the exact annual 72t/SEPP distributions that you need, as opposed to having them based on the entire amount of your TSP. That way you are not receiving (and potentially paying taxes) and more than what you need.

Ooh, I like that.  Thanks.

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #43 on: June 04, 2015, 04:21:08 AM »
I think a better option, if you can swing it, is to use up all of your annual leave before you retire.  Take two whole months off. You still get paid for it, plus it counts toward your accumulated years of service.

Similarly, unused sick leave is normally credited toward your service time but not paid.  Better to use all of that up if you can, too.
Yes, if my calc below is close to being correct, you come out way ahead using your sick leave during your working years.  Also, while you're using up sick and annual leave, you'll be accruing TSP matching 5%.

Example...if you have say 1000 hrs sick leave on the books, you will be credited approx 6 months of time towards your retirement calc.  So, if a person retires earlier than 62, the calc is .01 x high 3yrs salary ($100K example) x #yrs service (15.5 yrs example) = $15,500/yr pension.  If the person earns about $48/hr and uses up the 1,000 sick leave hours while working = $48,000 income.  Whereas, the extra $500/yr in pension income would take 96 years to break even ($48,000 / $500).  No?

If you're an honest person, this assumes you are actually sick enough to use the 1,000 hrs of sick leave.  Federal employees earn 13 sick days per year.  The only people I know who use all their sick leave are either chronically ill, caring for a sick relative, or dishonest.  You also need to push your RE date out by six months for the $48k to actually be "extra" money.

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #44 on: June 04, 2015, 06:46:20 AM »
I think a better option, if you can swing it, is to use up all of your annual leave before you retire.  Take two whole months off. You still get paid for it, plus it counts toward your accumulated years of service.

Similarly, unused sick leave is normally credited toward your service time but not paid.  Better to use all of that up if you can, too.
Yes, if my calc below is close to being correct, you come out way ahead using your sick leave during your working years.  Also, while you're using up sick and annual leave, you'll be accruing TSP matching 5%.

Example...if you have say 1000 hrs sick leave on the books, you will be credited approx 6 months of time towards your retirement calc.  So, if a person retires earlier than 62, the calc is .01 x high 3yrs salary ($100K example) x #yrs service (15.5 yrs example) = $15,500/yr pension.  If the person earns about $48/hr and uses up the 1,000 sick leave hours while working = $48,000 income.  Whereas, the extra $500/yr in pension income would take 96 years to break even ($48,000 / $500).  No?

If you're an honest person, this assumes you are actually sick enough to use the 1,000 hrs of sick leave.  Federal employees earn 13 sick days per year.  The only people I know who use all their sick leave are either chronically ill, caring for a sick relative, or dishonest.  You also need to push your RE date out by six months for the $48k to actually be "extra" money.

I think that now under FERS you don't have to use your sick leave to make it count towards your time in service. According to the OPM, unused sick leave hours will be credited towards annuity computation at 100% for anyone retiring after January 1, 2014.

https://www.opm.gov/policy-data-oversight/pay-leave/leave-administration/fact-sheets/sick-leave-general-information/

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #45 on: June 04, 2015, 09:32:55 AM »
I think a better option, if you can swing it, is to use up all of your annual leave before you retire.  Take two whole months off. You still get paid for it, plus it counts toward your accumulated years of service.

Similarly, unused sick leave is normally credited toward your service time but not paid.  Better to use all of that up if you can, too.
Yes, if my calc below is close to being correct, you come out way ahead using your sick leave during your working years.  Also, while you're using up sick and annual leave, you'll be accruing TSP matching 5%.

Example...if you have say 1000 hrs sick leave on the books, you will be credited approx 6 months of time towards your retirement calc.  So, if a person retires earlier than 62, the calc is .01 x high 3yrs salary ($100K example) x #yrs service (15.5 yrs example) = $15,500/yr pension.  If the person earns about $48/hr and uses up the 1,000 sick leave hours while working = $48,000 income.  Whereas, the extra $500/yr in pension income would take 96 years to break even ($48,000 / $500).  No?

If you're an honest person, this assumes you are actually sick enough to use the 1,000 hrs of sick leave.  Federal employees earn 13 sick days per year.  The only people I know who use all their sick leave are either chronically ill, caring for a sick relative, or dishonest.  You also need to push your RE date out by six months for the $48k to actually be "extra" money.

Yes, providing care for a family member, such as a parent, would be one instance that a person might easily use 6 months of sick leave, either all at one time or distributed.  The example calc, in case someone had not already thought that through, just shows that financially a person is better off using their sick leave days during their working years than accruing them in order to receive a larger pension.  The honesty aspect, well that's a separate issue.  Note that there are requirements for evidence, such as documentation from a doctor, for extended periods of sick or family-related leave.
« Last Edit: June 04, 2015, 10:15:51 AM by Sojourner »

Sojourner

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #46 on: June 04, 2015, 09:52:34 AM »

I think that now under FERS you don't have to use your sick leave to make it count towards your time in service. According to the OPM, unused sick leave hours will be credited towards annuity computation at 100% for anyone retiring after January 1, 2014.

Yes, it now counts 100% in the computation of the pension amount; however, not towards time in service.  This may be confusing.  For example, if a person has the equivalent of 6 months of sick leave, it doesn't mean their 29.5 actual years of service will be regarded as 30 years, only that OPM will use '30 years' in the annuity calculation.

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #47 on: June 04, 2015, 09:55:33 AM »

I think that now under FERS you don't have to use your sick leave to make it count towards your time in service. According to the OPM, unused sick leave hours will be credited towards annuity computation at 100% for anyone retiring after January 1, 2014.

Yes, it now counts 100% in the computation of the pension amount; however, not towards time in service.  This may be confusing.  For example, if a person has the equivalent of 6 months of sick leave, it doesn't mean their 29.5 actual years of service will be regarded as 30 years, only that OPM will use '30 years' in the annuity calculation.

Thanks for the clarification on that.

sol

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #48 on: June 04, 2015, 11:02:23 AM »
I think that now under FERS you don't have to use your sick leave to make it count towards your time in service. According to the OPM, unused sick leave hours will be credited towards annuity computation at 100% for anyone retiring after January 1, 2014.

Right, but if you could actually use your sick leave it would still count towards your time off service, plus you would get paid for those hours.

Six months of time on your pension calc is okay, but not a nice as six months of salary.

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #49 on: June 04, 2015, 11:29:43 AM »
I think that now under FERS you don't have to use your sick leave to make it count towards your time in service. According to the OPM, unused sick leave hours will be credited towards annuity computation at 100% for anyone retiring after January 1, 2014.

Right, but if you could actually use your sick leave it would still count towards your time off service, plus you would get paid for those hours.

Six months of time on your pension calc is okay, but not a nice as six months of salary.

I'm not really comfortable with promoting the strategic use of sick leave. I realize that some folks might have a legitimate need to use prolonged amounts of of sick leave, but absent that need I don't like the idea of abusing sick leave to get a few months extra salary.