Author Topic: FERS deferred retirement - has anyone here actually done it?  (Read 28007 times)

sol

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #50 on: June 04, 2015, 01:54:31 PM »
I'm not really comfortable with promoting the strategic use of sick leave.

You do you and I'll do me.

I wouldn't ever take sick leave for no reason, but there are lots of opportunities for legitimate sick leave use that I don't currently use because I have extra work to do.  As a salaried employee, every time one of my kids has a doctor's appointment, I'm entitled to a full day of sick leave.  And I've been postponing a surgery that would lay me up for at least a month, which I should probably do before retiring rather than after.

I assure you that your employer would have no qualms about screwing you out of your accrued leave any way they could. They used to just take it, now they offer feds a token payment for it through the pension calculation.

How do you feel about abandoning your sick leave?  That they pay you for, but they withhold it from your pension calc.  Would you take the payout rather than just taking annual leave to get the same payout plus the pension benefit?
« Last Edit: June 04, 2015, 01:57:34 PM by sol »

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #51 on: June 05, 2015, 04:11:09 AM »
Attempting to pull this back toward the original topic...

It appears that no one posting on this board has actually implemented deferred FERS retirement, or if they have, they aren't willing to share their experience.  So, my question to my FERS fellows: How comfortable are you with your FIRE plan?  Would you be able to FIRE on your preferred FIRE date without accounting for your FERS pension?

[edited to supply a couple of missing words]
« Last Edit: June 06, 2015, 04:13:51 AM by Monkey Uncle »

Can't Wait

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #52 on: June 05, 2015, 06:35:47 AM »
I haven't done too much research on this so someone will have to correct me if I'm wrong, but I believe you can elect to receive a lump sum refund of all of your FERS contributions if you become separated from service (retire).

Since our FERS retirement payment is based on years of service, my deferred retirement payment won't be very much since I will have only done 13-15 years by the time I retire. So one would have to calculate how much your lump sum refund would be vs. deferring your retirement and weigh the benefits of getting your lump sum up front when you leave or waiting until you reach the appropriate age to collect the retirement payment.

localfed

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #53 on: June 05, 2015, 09:41:28 AM »
I recently put some thought into doing this as well.  However as a LEO, the numbers aren't too good from my analysis.  I played around on EBIS and tried running the numbers leaving at 42 with 13 years (3 military buyback) vs. 52 when I have my 20 for retirement, and there is a significant difference, plus if I choose the deferred retirement, I have to wait until 62 from my understanding.  The rough numbers was almost a $32,000 year difference between going at 42 (and waiting 20 years) or 52 (and collecting immediately).  I also will have two children entering college around the time I would FIRE at 42, which factors into my decision to stay until 52. 

Maxing out one's TSP might help soften the blow, but even with me doing that, the numbers concern me.

Obviously, if my pension was something that I wasn't not counting on, then my thoughts might be different, but for the time being my pension is part of my retirement plan. 

I have never personally heard of anyone deferring their retirement as a Federal LEO to retire early but more to go to a different employer for a new job outside of FERS.

sol

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #54 on: June 05, 2015, 10:17:50 AM »
It had never really occurred to me that deferral, being such an obvious plan, was something that I had never seen anyone actually do.

But the government loves overly complicated paperwork procedures, and I have no reason to believe that this one will be any different.  The OPM website spells out pretty clearly the steps required, and I believe they'll follow through on their end if I follow through on mine.

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #55 on: June 05, 2015, 07:35:29 PM »
I haven't done too much research on this so someone will have to correct me if I'm wrong, but I believe you can elect to receive a lump sum refund of all of your FERS contributions if you become separated from service (retire).

Since our FERS retirement payment is based on years of service, my deferred retirement payment won't be very much since I will have only done 13-15 years by the time I retire. So one would have to calculate how much your lump sum refund would be vs. deferring your retirement and weigh the benefits of getting your lump sum up front when you leave or waiting until you reach the appropriate age to collect the retirement payment.

You can get the lump sum payout. But it is a very small amount of money (relatively speaking) if you are under the 0.8% contribution system. I would be surprised if it was anywhere close to the net present value of your expected pension payments, especially with 13 years of service. Just to make the numbers simple, if you made $100k the last 3 years, that's $13k/year starting in 62, adjusted for inflation beginning the year you hit 62 and take it. Your contributions would probably be quite a bit less than $10k. I don't know what a $13k/year annuity starting at 62 and adjusted for inflation would cost you, but it would be a lot more than $10k.

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #56 on: June 05, 2015, 09:46:32 PM »
Thought this would be of interest to all of you. Your SSN and other data was possibly stolen.

http://www.nytimes.com/2015/06/05/us/breach-in-a-federal-computer-system-exposes-personnel-data.html

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #57 on: June 06, 2015, 04:23:42 AM »
I haven't done too much research on this so someone will have to correct me if I'm wrong, but I believe you can elect to receive a lump sum refund of all of your FERS contributions if you become separated from service (retire).

Since our FERS retirement payment is based on years of service, my deferred retirement payment won't be very much since I will have only done 13-15 years by the time I retire. So one would have to calculate how much your lump sum refund would be vs. deferring your retirement and weigh the benefits of getting your lump sum up front when you leave or waiting until you reach the appropriate age to collect the retirement payment.

You can get the lump sum payout. But it is a very small amount of money (relatively speaking) if you are under the 0.8% contribution system. I would be surprised if it was anywhere close to the net present value of your expected pension payments, especially with 13 years of service. Just to make the numbers simple, if you made $100k the last 3 years, that's $13k/year starting in 62, adjusted for inflation beginning the year you hit 62 and take it. Your contributions would probably be quite a bit less than $10k. I don't know what a $13k/year annuity starting at 62 and adjusted for inflation would cost you, but it would be a lot more than $10k.

I did a very rough run of these numbers some time back and reached a similar conclusion.  I'll have around 15-16 years in at my projected FIRE date.  I'm under the 0.8% contribution system, so my lump sum would be nothing compared to a lifetime annuity starting at 62 (or even the reduced annuity starting at 57).  My annuity starting at 62 would be somewhere in the $13-$14k range.  Adjusted for inflation it works out to around $11k per year in todays dollars.  That's about a quarter of my projected spending in retirement. 

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #58 on: June 06, 2015, 04:29:14 AM »
Thought this would be of interest to all of you. Your SSN and other data was possibly stolen.

http://www.nytimes.com/2015/06/05/us/breach-in-a-federal-computer-system-exposes-personnel-data.html

This is at least the third time in my federal career that my personal data has been compromised.  The previous times were all because some bozo in my agency's HR department left his/her laptop lying around where it could get stolen.  This incident seems to be a little more sinister.

Can't Wait

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #59 on: June 06, 2015, 08:22:31 AM »
I haven't done too much research on this so someone will have to correct me if I'm wrong, but I believe you can elect to receive a lump sum refund of all of your FERS contributions if you become separated from service (retire).

Since our FERS retirement payment is based on years of service, my deferred retirement payment won't be very much since I will have only done 13-15 years by the time I retire. So one would have to calculate how much your lump sum refund would be vs. deferring your retirement and weigh the benefits of getting your lump sum up front when you leave or waiting until you reach the appropriate age to collect the retirement payment.

You can get the lump sum payout. But it is a very small amount of money (relatively speaking) if you are under the 0.8% contribution system. I would be surprised if it was anywhere close to the net present value of your expected pension payments, especially with 13 years of service. Just to make the numbers simple, if you made $100k the last 3 years, that's $13k/year starting in 62, adjusted for inflation beginning the year you hit 62 and take it. Your contributions would probably be quite a bit less than $10k. I don't know what a $13k/year annuity starting at 62 and adjusted for inflation would cost you, but it would be a lot more than $10k.


I am also under the .8% contribution system so you are absolutely correct in saying that it wouldn't make sense to take the lump sum refund in that situation. However, someone under the new 3.xx% contribution system might have to evaluate that option. I think employees hired in 2014 have to contribute 4.4% now. Folks in those situations should definitely run their numbers and see how the lump sum option (invested over the period it would take for you to reach 62, of course) would work out for them.

DonkeyGirl

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #60 on: June 06, 2015, 11:15:50 PM »
Thought this would be of interest to all of you. Your SSN and other data was possibly stolen.

http://www.nytimes.com/2015/06/05/us/breach-in-a-federal-computer-system-exposes-personnel-data.html

This is the second time for me. The contractors that did my periodic background reinvestigation got hacked. I hope Uncle Sam will extend my credit monitoring service.

DonkeyGirl

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #61 on: June 06, 2015, 11:49:43 PM »
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.

I'm trying to lateral into a different job series within my agency. Can an employee get this changed retroactively if OPM or the Hiring Center try to pull a fast one? I'm guessing this would only show up after the fact in eOPF or NFC EPP?

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #62 on: June 07, 2015, 04:33:34 AM »
I haven't done too much research on this so someone will have to correct me if I'm wrong, but I believe you can elect to receive a lump sum refund of all of your FERS contributions if you become separated from service (retire).

Since our FERS retirement payment is based on years of service, my deferred retirement payment won't be very much since I will have only done 13-15 years by the time I retire. So one would have to calculate how much your lump sum refund would be vs. deferring your retirement and weigh the benefits of getting your lump sum up front when you leave or waiting until you reach the appropriate age to collect the retirement payment.

You can get the lump sum payout. But it is a very small amount of money (relatively speaking) if you are under the 0.8% contribution system. I would be surprised if it was anywhere close to the net present value of your expected pension payments, especially with 13 years of service. Just to make the numbers simple, if you made $100k the last 3 years, that's $13k/year starting in 62, adjusted for inflation beginning the year you hit 62 and take it. Your contributions would probably be quite a bit less than $10k. I don't know what a $13k/year annuity starting at 62 and adjusted for inflation would cost you, but it would be a lot more than $10k.


I am also under the .8% contribution system so you are absolutely correct in saying that it wouldn't make sense to take the lump sum refund in that situation. However, someone under the new 3.xx% contribution system might have to evaluate that option. I think employees hired in 2014 have to contribute 4.4% now. Folks in those situations should definitely run their numbers and see how the lump sum option (invested over the period it would take for you to reach 62, of course) would work out for them.

And we should all be paying attention, because there is a plan afoot in Congress that would make us all contribute at the higher rate (while simultaneously decreasing our benefit by raising the MRA and applying a high-5 average to the annuity calculation).  If that happens, I may leave earlier than I planned just out of spite.  But of course, that's what the fed-haters want me to do.  Fucking bastards.

Can't Wait

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #63 on: June 07, 2015, 06:02:08 AM »
I haven't done too much research on this so someone will have to correct me if I'm wrong, but I believe you can elect to receive a lump sum refund of all of your FERS contributions if you become separated from service (retire).

Since our FERS retirement payment is based on years of service, my deferred retirement payment won't be very much since I will have only done 13-15 years by the time I retire. So one would have to calculate how much your lump sum refund would be vs. deferring your retirement and weigh the benefits of getting your lump sum up front when you leave or waiting until you reach the appropriate age to collect the retirement payment.

You can get the lump sum payout. But it is a very small amount of money (relatively speaking) if you are under the 0.8% contribution system. I would be surprised if it was anywhere close to the net present value of your expected pension payments, especially with 13 years of service. Just to make the numbers simple, if you made $100k the last 3 years, that's $13k/year starting in 62, adjusted for inflation beginning the year you hit 62 and take it. Your contributions would probably be quite a bit less than $10k. I don't know what a $13k/year annuity starting at 62 and adjusted for inflation would cost you, but it would be a lot more than $10k.


I am also under the .8% contribution system so you are absolutely correct in saying that it wouldn't make sense to take the lump sum refund in that situation. However, someone under the new 3.xx% contribution system might have to evaluate that option. I think employees hired in 2014 have to contribute 4.4% now. Folks in those situations should definitely run their numbers and see how the lump sum option (invested over the period it would take for you to reach 62, of course) would work out for them.

And we should all be paying attention, because there is a plan afoot in Congress that would make us all contribute at the higher rate (while simultaneously decreasing our benefit by raising the MRA and applying a high-5 average to the annuity calculation).  If that happens, I may leave earlier than I planned just out of spite.  But of course, that's what the fed-haters want me to do.  Fucking bastards.


I definitely agree, we all should be paying attention to what's going on. I also read somewhere that there is legislation that could be passed that would essentially eliminate all Federal employees rights to appeal in termination cases. Granted, most federal employees who are being terminated truly deserve to be but I can see this opening up a can of worms. One of the reasons I've stayed a Federal employee is because of the stability. I thought I would never have to worry about some overzealous manager/boss on a power trip like I did when I was in the private sector.

The pension never really entered into my mind either. I already knew going in that I would never work long enough to receive it in the normal fashion so I have not included it in my FIRE calculations. We just have to max our contributions to the TSP and ensure that we save enough. There are a lot of fed-haters these days but most of the private sector/contractor people that I work with or know would trade places with me in a heartbeat haha. Unless they are making a ridiculous amount of money as a contractor.

wenchsenior

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #64 on: June 07, 2015, 07:37:25 AM »
I haven't done too much research on this so someone will have to correct me if I'm wrong, but I believe you can elect to receive a lump sum refund of all of your FERS contributions if you become separated from service (retire).

Since our FERS retirement payment is based on years of service, my deferred retirement payment won't be very much since I will have only done 13-15 years by the time I retire. So one would have to calculate how much your lump sum refund would be vs. deferring your retirement and weigh the benefits of getting your lump sum up front when you leave or waiting until you reach the appropriate age to collect the retirement payment.

You can get the lump sum payout. But it is a very small amount of money (relatively speaking) if you are under the 0.8% contribution system. I would be surprised if it was anywhere close to the net present value of your expected pension payments, especially with 13 years of service. Just to make the numbers simple, if you made $100k the last 3 years, that's $13k/year starting in 62, adjusted for inflation beginning the year you hit 62 and take it. Your contributions would probably be quite a bit less than $10k. I don't know what a $13k/year annuity starting at 62 and adjusted for inflation would cost you, but it would be a lot more than $10k.


I am also under the .8% contribution system so you are absolutely correct in saying that it wouldn't make sense to take the lump sum refund in that situation. However, someone under the new 3.xx% contribution system might have to evaluate that option. I think employees hired in 2014 have to contribute 4.4% now. Folks in those situations should definitely run their numbers and see how the lump sum option (invested over the period it would take for you to reach 62, of course) would work out for them.

And we should all be paying attention, because there is a plan afoot in Congress that would make us all contribute at the higher rate (while simultaneously decreasing our benefit by raising the MRA and applying a high-5 average to the annuity calculation).  If that happens, I may leave earlier than I planned just out of spite.  But of course, that's what the fed-haters want me to do.  Fucking bastards.

True, but there's has been a plan in Congress exactly like this every few years since the 1980s. One of the federal news sites ran a brief official news blurb about Congress' 'current plan' which read pretty much like what you've stated, sounded like it came out of the Tea Party group in the current House. But then they revealed that the date was 1982 or some such.

I'm always prepared for something to happen, but when they've been threatening for 30+ years and it hasn't come to pass, I'm not going to get TOO terribly worried about it until it does.

kimmarg

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #65 on: June 07, 2015, 10:12:30 AM »

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.
2 kids at 12 weeks maternity leave each is 960 hours without even getting the sniffles.


sol

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #66 on: June 07, 2015, 12:16:28 PM »

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.
2 kids at 12 weeks maternity leave each is 960 hours without even getting the sniffles.

Sure, except that you can't possibly have two 12 week maternity leaves in one calendar year, can you?  Maybe you're biologically gifted.

At best, I think you might manage to take two 12 week maternity leaves over a 24 month period.  Over those 24 months you would earn an additional 208 hours of sick leave, or potentially 416 hours of sick leave if you're a senior employee.  So if you had 1000 hours to start with and had two kids back to back, you would still have at least six additional weeks of sick leave available to you.

Not to mention all of your annual leave which continues to accrue when you're on sick leave.  Or the 11 federal holidays you get without even touching your leave. 
« Last Edit: June 07, 2015, 04:50:52 PM by sol »

mcneally

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #67 on: June 07, 2015, 02:44:49 PM »
There doesn't seem to be much talk of FERS deferred retirement in this thread. You have to make some big assumptions about life expectancy, investment returns and inflation in order to say say what your pension is worth, but when I estimated the net present value  of my FERS pension at the time of retirement if  I were to retire at 40 (29 now, started at 23), I came up with about $67k. At age 57 I got about 10x that (including health benefits and the SS supplement that early retirees don't get). That's in inflation adjusted dollars. That's certainly nice to have, but pretty much just an extra safety margin towards early retirement rather than a significant source of income.


kimmarg

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #68 on: June 07, 2015, 07:28:24 PM »

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.
2 kids at 12 weeks maternity leave each is 960 hours without even getting the sniffles.

Sure, except that you can't possibly have two 12 week maternity leaves in one calendar year, can you?  Maybe you're biologically gifted.

At best, I think you might manage to take two 12 week maternity leaves over a 24 month period.  Over those 24 months you would earn an additional 208 hours of sick leave, or potentially 416 hours of sick leave if you're a senior employee.  So if you had 1000 hours to start with and had two kids back to back, you would still have at least six additional weeks of sick leave available to you.

Not to mention all of your annual leave which continues to accrue when you're on sick leave.  Or the 11 federal holidays you get without even touching your leave.

Touché, yea certainly two kids in one year doesn't work biologically. I was more thinking of people even having 1000 hours of sick leave in general. Most mothers of small children I know have very low sick leave, while the 50-something men tend to have 2000+

Would still like to know about differed FERS, although I've got some years to go even for differed.....

starbuck

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #69 on: June 08, 2015, 10:52:30 AM »
2 kids at 12 weeks maternity leave each is 960 hours without even getting the sniffles.

For FMLA/maternity leave, OPM says you're limited to using sick leave for the first 6 weeks (240 hours) out of the 12. And the 6 weeks of sick leave is for the mother, rather than the baby (as long as the baby is a healthy newborn.) The same rule applies to fathers/spouses - they can use 6 weeks of THEIR sick leave for the beginning of their FMLA, with the justification being that it's to take care of the mother. Six weeks is the OPM sanctioned amount of recovery from normal childbirth. After that it's annual leave or LWOP or some other magic. (It changes if there are complications, like a C-section or NICU stuff.)

If you're the mother, you can take 6 weeks of sick leave for yourself, and THEN start your 12 weeks of FMLA, which is what I plan on doing later this year. But for the FMLA I won't be able to use any sick leave unless there's a doctor's appointment or something of that ilk. Only annual leave, and then LWOP when I run out.

Drifterrider

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #70 on: June 08, 2015, 12:17:31 PM »


Sure, except that you can't possibly have two 12 week maternity leaves in one calendar year, can you?  Maybe you're biologically gifted.[/quote]

Have one in January and the other in December. 

SomedayStache

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #71 on: June 08, 2015, 01:18:36 PM »
I'm trying to lateral into a different job series within my agency. Can an employee get this changed retroactively if OPM or the Hiring Center try to pull a fast one? I'm guessing this would only show up after the fact in eOPF or NFC EPP?

If you are staying within your same agency I doubt you'll have any problems.

But pay attention and be ready to yell loudly if somebody f***s up. 

I had a two week break in service in 2008 when moving from one of the big 3  civil service branches to the other.  Somehow there was a mixup regarding whether or not I was eligible for matching government  contributions into the TSP.  I spent over a year calling the EBIS hotline every single week and finally convinced them that I was eligible and was owed a year of matching contributions.  But some dimwit fat-fingered my data entry. Instead of getting back that lost year of matching contributions all of my personal TSP contributions for that year were removed from the TSP and paid out in my paycheck (and of course heavily taxed because of the large lump sum). 

It took a few more months of phone calls to get somebody to admit THAT was a mistake.  Then a few more years of retroactive contributions to finally even out.  Though I'll never get back the substantial gains that I could have gotten if my 2008-2009 contributions hadn't been summarily removed from my TSP account.

So, yeah, you are the only one watching out for you.  Watch closely.

Full Beard

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #72 on: June 08, 2015, 01:43:42 PM »
Quote from SomedayStache

"Somehow there was a mixup regarding whether or not I was eligible for matching government  contributions into the TSP.  I spent over a year calling the EBIS hotline every single week and finally convinced them that I was eligible and was owed a year of matching contributions."

Not everyone is eligible for immediate matching contributions to the TSP?  I started working for the government in December of 2008 and my contributions were matched immediately.

This is off topic but can anybody tell me how to copy and paste quotes so they appear with the blue shading.

SomedayStache

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #73 on: June 08, 2015, 02:02:33 PM »
I think around 2008 was when they instituted immediate matching.  Before then you had to have a year in service.

SomedayStache

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #74 on: June 08, 2015, 02:06:56 PM »
This is off topic but can anybody tell me how to copy and paste quotes so they appear with the blue shading.
If you are creating the quote using the clickable icon to the upper right most of the work is already done for you. 
The quote should be preceded by "quote" in square brackets and some other junk regarding who you are quoting.  The end of the quote should be followed by "[/quote]" in the editor. 

Do a preview before you post.
« Last Edit: June 08, 2015, 02:08:27 PM by SomedayStache »

DoubleDown

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #75 on: June 09, 2015, 12:06:40 PM »
To answer the original topic, I retired early (age 47) from the Federal government with a FERS deferred pension (18 years of service) that I'll start in about 8 more years. My basic plan is as follows:

- Live off taxable assets until about age 54, when they'll start to run out
- Start withdrawing TSP and IRAs at age 54 (will use either Roth conversions, annuity, or just take the 10% "penalty")
- Start drawing pension at MRA (56.4 years)
- Start Soc. Sec. whenever it makes sense at the time (minimum is age 62)

I'm not concerned about the plan. I've gone over it hundreds (thousands??!) of times, there's lots of buffer, and it all works out even using the most dire assumptions.

Since my Soc. Sec. payout will be substantially higher than the pension, I think the optimal play is to withdraw the pension as early as possible, and defer Soc. Security until later. Say you get 8% more for every year you defer: living off the lower benefit (pension) and letting the higher benefit (Soc. Sec.) accrue more results in a much higher payout. Of course, you could let both sit, but you've got to live off something, and plus I see taking the pension earliest as a hedge against mortality risk (i.e., dying early).

mcneally

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #76 on: June 09, 2015, 05:23:22 PM »
I retired early (age 47) from the Federal government with a FERS deferred pension (18 years of service) that I'll start in about 8 more years. My basic plan is as follows:
...
- Start drawing pension at MRA (56.4 years)
So your pension would be reduced 28%, right? (62 - 56.4 =5.6 * 5% = 28%)?  If inflation averages 3% in the 9.4 years between your quit date and drawing the reduced pension, that reduces the value ~25% [1/ (1.03^9.4)]. So your pension will be worth 18% * 72% (28% reduction) * 75% = ~9.8% of your salary in inflation adjusted terms.

Where as someone in the same position who stayed to MRA+30 would get 28.4%, plus the SS supplement until 62 plus retiree health benefits plus you get to count unused sick leave towards years of service (as well as the salary being higher for any grade and step increases). They really make you give up a big part of your pay package to retire early. If DoubleDown's 18 year career ended at 62, I toss out a sample salary figure of 80k, and you estimate a 5% annuity factor (higher than 4% since there is guaranteed to be no residual value), I'd estimate the NPV at his retirement date to be $288k plus whatever value you want to put on retiree health benefits. In DoubleDown's actual scenario using my made up 80k salary figure, [(80k * 9.8%) / 5%] = $156.8k is an estimate of the FUTURE value 9.4 years after his retirement date. So if you assume 4% REAL investment returns, the value at the time of retirement would be [156,800 / (1.04^9.4)] = ~$108.5k. Pension for a 47 yo with 18 years of service is worth $108k. Pension for a 62 yo with 18 years of service is worth $288k plus whatever value you put on health benefits (or do you have to have 30 years for health benefits?). 

The value of retirement benefits becomes exponentially larger as you get closer to MRA. In my salary range, I figure by the time I'm 10 years out from MRA, the incremental retirement benefits alone are worth at least as much as being paid an extra $30k per year (i.e.  at 10 years before MRA, calculate the FV of pension if staying til MRA, then calculate the NPV of a deferred pension for retiring 10 years early- you would have to invest >30k per year for 10 years to make up the difference). If you compare retiring at MRA vs one year before MRA, the amount you get paid for that last year is well into 6 figures just in retirement benefits (not counting salary). I'm not trying to persuade anyone into working until MRA, just trying to quantify what you have to give up.

My agency is probably unusual in that they allow us to go part time. You can still retire at MRA+30 with an unreduced pension. Working half time for a year just counts as half a year for the pension calculation, but still counts as a full year towards the MRA+30. So my tentative plan is to go part time when I get closer to FI. I still expect to be FI by my early 40s, but I think I'll still want to work part time, and I'm not someone who would agree with the statement "If you're FI and want to work part time, it doesn't matter whether it pays $10k/yr or $50k". But if 45 yo me decides he wants to quit and travel full time or whatever else, he'll still have that option. Again, not trying to persuade anybody to work to MRA, just saying what MY plan is.
« Last Edit: June 09, 2015, 09:00:46 PM by mcneally »

kendallf

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #77 on: June 09, 2015, 09:25:24 PM »
I'm currently planning to stay a federal employee (in some capacity, not necessarily the one I'm in now) until MRA.  I'm 48, I have less than 8 years left, and the benefits I'd leave on the table are very substantial.  Being able to stay in the FEHB system and having my health insurance premium share paid is worth at least $10k a year right now, increasing with age.

Having said that, I'm working toward being able to take a totally different position wherever we decide would be enjoyable; our thoughts right now are to look at European job postings in a couple of years.  I think I'd enjoy finishing out my career overseas, and as long as our basic living expenses were covered, I could take a job in a base exchange and not worry about the salary drop (this is unlikely; I'm probably not qualified to work in the exchange..  :-) )


mcneally

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #78 on: June 09, 2015, 09:56:32 PM »
Kendallf- I'm curious, what sort of European job listings are you looking at? I'm at the IRS and I know there are international tax jobs but the work itself sounds awful and I don't think I'd be qualified.

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #79 on: June 10, 2015, 04:28:13 AM »
You guys make a compelling case for staying on until MRA.  A big part of what worries me about my ER plan is the health insurance thing.  If I can't count on an ACA subsidy, my plan is in serious jeopardy due to health insurance alone running in the $10k - $15k/yr range.  At this point, though, I really, really don't want to hold on for another decade.

Doubledown, thanks for sharing your experience.  The plan that you are implementing sounds similar to what I am planning, though I will be ER'ing a few years later than you.  What are you doing for health insurance?  And for God's sake, don't take the 10% penalty on qualified plan withdrawals!  There are plenty of ways to get at those assets without paying the penalty.

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #80 on: June 10, 2015, 06:30:06 AM »
Working half time for a year just counts as half a year for the pension calculation, but still counts as a full year towards the MRA+30.

Thanks for sharing that tidbit of info, as I spent seven years part-time and never knew that until now. OPM does not do a good job of spelling that out on their main FERS information pages, but by googling FERS+annuity+part-time I was able to confirm that indeed part-time work is prorated in terms of the calculating the pension amount. I'll need to update my FI numbers to account for that.

kendallf

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #81 on: June 10, 2015, 08:03:40 AM »
Kendallf- I'm curious, what sort of European job listings are you looking at? I'm at the IRS and I know there are international tax jobs but the work itself sounds awful and I don't think I'd be qualified.

I've looked at some general engineering positions, both at military bases and working for DCMA (I am an electronics engineer and currently a DOD employee).  As I mentioned above though, I could happily go teach school or something for a few years if I felt it was a valuable contribution; I won't need the salary as much as just the time to reach MRA.

silente

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #82 on: June 10, 2015, 09:43:13 AM »
I am posting mostly to follow but will be in the same situation.  I have been a federal employee since age 16 so I already have 28 years of service. 

I am a FERS employee and fall into what they call the bridge years - meaning I can go at 57 and they will kick in what I would get from Social Security until age 62 when SS actually starts.  I really don't "want" to stay until even 57, but there are a lot of variables we are working with right now.  We want to move to Georgia and there is a possibility to transfer with my Agency.  If that happens, there is a good chance I will enjoy my job more (and the lower cost of living) and I will definitely stay at least another 4 years.


DoubleDown

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #83 on: June 17, 2015, 12:13:10 PM »
There is absolutely no disagreement from me that leaving before MRA leaves substantial pay and benefits on the table. I was a GS 15 Step 9 when I left, so salary alone was a big deal. The draw to stay and continue all those benefits is big. But for me there's no amount of money to be placed on time/freedom.

Doubledown, What are you doing for health insurance?
At present I'm on my wife's health insurance since she wants to continue working. Which is somewhat unfortunate if the ACA subsidies hold up, because there are much better and less expensive alternatives on ACA than my wife's employer offers!

And for God's sake, don't take the 10% penalty on qualified plan withdrawals!  There are plenty of ways to get at those assets without paying the penalty.

That may not end up being the case for me. Since my wife continues to work, I may not find any advantage to doing Roth conversions (total taxable income may be too high to convert tax-free). That leaves buying an annuity with pretty abysmal return rates, setting up 72t withdrawals with much more restricted withdrawals, or just biting the bullet on the 10% tax/penalty. That 10% penalty for just a couple of years may not be that big of a deal in exchange for greater flexibility and likely greater returns. If I do no tax avoidance whatsoever, I'm looking at maybe $10k in total penalties to cover 4-5 years prior to 59.5, so not too much of a concern.

dramaman

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #84 on: June 17, 2015, 12:46:29 PM »
That may not end up being the case for me. Since my wife continues to work, I may not find any advantage to doing Roth conversions (total taxable income may be too high to convert tax-free). That leaves buying an annuity with pretty abysmal return rates, setting up 72t withdrawals with much more restricted withdrawals, or just biting the bullet on the 10% tax/penalty. That 10% penalty for just a couple of years may not be that big of a deal in exchange for greater flexibility and likely greater returns. If I do no tax avoidance whatsoever, I'm looking at maybe $10k in total penalties to cover 4-5 years prior to 59.5, so not too much of a concern.

Why not calculate what you think the minimum 72t withdraw that you would likely need and then move whatever portion of your TSP to an IRA to make the 72t IRA withdrawal calculations work. Then if it turned out that you needed more, you would only need to take the 10% hit on whatever extra you needed.

DoubleDown

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #85 on: June 19, 2015, 05:33:37 PM »
Yes, I've considered that, thanks for bringing it up. One thing to consider with this strategy is that the TSP only allows you one partial withdrawal (ever), so you have to make sure you want to use it for this purpose. Fortunately for me I already have an outside IRA, so I can use that in lieu of moving money out of TSP.

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #86 on: June 19, 2015, 05:35:52 PM »
Yes, I've considered that, thanks for bringing it up. One thing to consider with this strategy is that the TSP only allows you one partial withdrawal (ever), so you have to make sure you want to use it for this purpose. Fortunately for me I already have an outside IRA, so I can use that in lieu of moving money out of TSP.

Is there a reason to not just move the whole TSP into an IRA? Vanguard offers a broader selection of funds, and the difference in ER is 0.02% for many of them.

sol

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #87 on: June 19, 2015, 05:44:44 PM »
Is there a reason to not just move the whole TSP into an IRA? Vanguard offers a broader selection of funds, and the difference in ER is 0.02% for many of them.

The usual reasons are lower expense ratios and access to the G fund, which you can't get anywhere else.  Neither of which is terribly convincing for people in this crowd.

Monkey Uncle

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #88 on: June 23, 2015, 04:32:21 AM »
Thanks for sharing your experience, Spartana.  I think it is instructive, even if it isn't the typical federal case I was inquiring about.  Cobbling together various sources of income over the years is pretty similar to what I am planning to do.

And thanks for telling us what you did for health insurance.  Personally, I'm counting on the Supreme Court to leave the ACA subsidies intact.  If those get thrown out, I'm going to have to do some recalculating.

GoldenStache

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #89 on: June 23, 2015, 08:08:22 AM »
Where as someone in the same position who stayed to MRA+30 would get 28.4%, plus the SS supplement until 62 plus retiree health benefits plus you get to count unused sick leave towards years of service (as well as the salary being higher for any grade and step increases). They really make you give up a big part of your pay package to retire early. If DoubleDown's 18 year career ended at 62, I toss out a sample salary figure of 80k, and you estimate a 5% annuity factor (higher than 4% since there is guaranteed to be no residual value), I'd estimate the NPV at his retirement date to be $288k plus whatever value you want to put on retiree health benefits. In DoubleDown's actual scenario using my made up 80k salary figure, [(80k * 9.8%) / 5%] = $156.8k is an estimate of the FUTURE value 9.4 years after his retirement date. So if you assume 4% REAL investment returns, the value at the time of retirement would be [156,800 / (1.04^9.4)] = ~$108.5k. Pension for a 47 yo with 18 years of service is worth $108k. Pension for a 62 yo with 18 years of service is worth $288k plus whatever value you put on health benefits (or do you have to have 30 years for health benefits?). 

I agree the closer you get to MRA the bigger the golden handcuffs become (health insurance), but if you know you are not going to work until MRA (hell no) the decision to start collecting at MRA vs 62 can be huge.

Say $100k (average high 3) 15 years of service, MRA 57 - you take a 25% hit (5 years * 25%) to start at 57 but you start collecting $11,250 a year and when you hit 62 you start getting inflation adjustments

If you wait until 62 you get $15k but you missed out on the $56,250 that could already be in your pocket, throw in a little interest and it could be higher (not counting for taxes).   

Having a 5% deduction makes it much later (you have to live longer) to cross the breakeven threshold.
You could always get hired again after your MRA (if you can) and then retire again shortly after gaining the health insurance for your retirement.     

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #90 on: June 23, 2015, 08:39:37 AM »
Where as someone in the same position who stayed to MRA+30 would get 28.4%, plus the SS supplement until 62 plus retiree health benefits plus you get to count unused sick leave towards years of service (as well as the salary being higher for any grade and step increases). They really make you give up a big part of your pay package to retire early. If DoubleDown's 18 year career ended at 62, I toss out a sample salary figure of 80k, and you estimate a 5% annuity factor (higher than 4% since there is guaranteed to be no residual value), I'd estimate the NPV at his retirement date to be $288k plus whatever value you want to put on retiree health benefits. In DoubleDown's actual scenario using my made up 80k salary figure, [(80k * 9.8%) / 5%] = $156.8k is an estimate of the FUTURE value 9.4 years after his retirement date. So if you assume 4% REAL investment returns, the value at the time of retirement would be [156,800 / (1.04^9.4)] = ~$108.5k. Pension for a 47 yo with 18 years of service is worth $108k. Pension for a 62 yo with 18 years of service is worth $288k plus whatever value you put on health benefits (or do you have to have 30 years for health benefits?). 

I agree the closer you get to MRA the bigger the golden handcuffs become (health insurance), but if you know you are not going to work until MRA (hell no) the decision to start collecting at MRA vs 62 can be huge.

Say $100k (average high 3) 15 years of service, MRA 57 - you take a 25% hit (5 years * 25%) to start at 57 but you start collecting $11,250 a year and when you hit 62 you start getting inflation adjustments

If you wait until 62 you get $15k but you missed out on the $56,250 that could already be in your pocket, throw in a little interest and it could be higher (not counting for taxes).   

Having a 5% deduction makes it much later (you have to live longer) to cross the breakeven threshold.
You could always get hired again after your MRA (if you can) and then retire again shortly after gaining the health insurance for your retirement.     


Do you know what the breakeven age is?

GoldenStache

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #91 on: June 23, 2015, 09:19:37 AM »

Do you know what the breakeven age is?
[/quote]

Yes, it depends.  ;)

I have ran it several different ways: 5%, 7%, 9%, 11% growth, 1%, 2%, 3% inflation - and it is usually in the 75-85 range

Without calculating interest and pay increases - 80
$11,250 = $258,750
$15,000 = $270,000

forummm

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #92 on: June 27, 2015, 06:15:35 PM »
Quote
Do you know what the breakeven age is?

Yes, it depends.  ;)

I have ran it several different ways: 5%, 7%, 9%, 11% growth, 1%, 2%, 3% inflation - and it is usually in the 75-85 range

Without calculating interest and pay increases - 80
$11,250 = $258,750
$15,000 = $270,000


I did a quick and dirty simple spreadsheet and have a similar finding. Since it's a government pension I just assumed that the comparable interest rate is the risk free rate. And just I assumed that was equal to inflation. It could use another tweak or two. But basically it looks like breakeven is around 77. So if you're worried about longevity risk, it makes sense to delay to 62. If your portfolio is running out of gas as you hit 57 it doesn't hurt you too much to take it early.

Attaching for interest and criticism/improvement if people are into a better analysis.
« Last Edit: June 27, 2015, 06:37:43 PM by forummm »

Widget

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #93 on: July 05, 2015, 07:20:49 AM »

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.

Don't forget that federal employees don't get maternity or paternity leave, which sick leave can be used for. In my organization, aside from a few chronically or severely ill individuals, most people use their sick leave for birth events. Additionally, it can be used for scheduled Dr appts, which is helpful for certain practices that are only open during business hours.

CheapskateWife

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #94 on: July 06, 2015, 10:55:59 AM »

I did a quick and dirty simple spreadsheet and have a similar finding. Since it's a government pension I just assumed that the comparable interest rate is the risk free rate. And just I assumed that was equal to inflation. It could use another tweak or two. But basically it looks like breakeven is around 77. So if you're worried about longevity risk, it makes sense to delay to 62. If your portfolio is running out of gas as you hit 57 it doesn't hurt you too much to take it early.

Attaching for interest and criticism/improvement if people are into a better analysis.

I have performed a similar analysis and came up with the same results.  Having the flexibility to take it early is excellent, but I am planning to wait until 62...its there if I need it though, and there is a good bit of emotional security tied to that idea for me.  DH has a mil pension too so FIRE success is really going to completely hinge on our control of our expenses. 

Just turning 40 this year and hoping to walk away from my golden shackles and FIRE by 45. 

Drifterrider

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Temporary Federal time
« Reply #95 on: July 14, 2015, 11:58:42 AM »
Anyone who is a permanent federal employee that had temporary time prior to January 1989 may buy back that time (just like buying back military time).  It takes a long time for the paperwork to circulate (on 10th month now) but it is probably worth your time (for us old timers here).

enigmaT120

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Re: Temporary Federal time
« Reply #96 on: July 14, 2015, 04:47:38 PM »
Anyone who is a permanent federal employee that had temporary time prior to January 1989 may buy back that time (just like buying back military time).  It takes a long time for the paperwork to circulate (on 10th month now) but it is probably worth your time (for us old timers here).

I did that a long time ago.  Basically you are paying the money (with interest, I think) that you would have paid into your pension had you been full-time then.  It gave me another 3 years of credited full-time service.

Off topic, but I found out that if I get fired I can start drawing my pension.  That happens after 25 years in, and I have about 28.  But my boss won't fire me.  I would still have to wait until age 56 to start drawing that Social Security Supplement, so my income (GS9 step 10 for a long time now) would be pretty lean.  Jacob from ERE could live on it, I don't know that I would want to.  I guess I can wait 4 years 3 months more.

Blonde Lawyer

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #97 on: July 15, 2015, 08:03:50 AM »
For any FEDS that are LEO w/ mandatory retirement - there is a bill that just passed (I think) that will also you early access to your TSP w/o penalty. I'm not sure how it impacts FERS. 

Blonde Lawyer

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Re: FERS deferred retirement - has anyone here actually done it?
« Reply #98 on: July 15, 2015, 03:11:34 PM »
For any FEDS that are LEO w/ mandatory retirement - there is a bill that just passed (I think) that will also you early access to your TSP w/o penalty. I'm not sure how it impacts FERS.
http://forum.mrmoneymustache.com/welcome-to-the-forum/big-fire-news-for-fed-leoff's-39344/msg717087/#msg717087

Thanks! I missed that post.