Author Topic: Any FERS + TSP FIRE folks out there?  (Read 54253 times)

frugalecon

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Re: Any FERS + TSP FIRE folks out there?
« Reply #150 on: December 14, 2017, 06:42:49 AM »
Correct.  Upon separation from service at any age you can roll the Roth portion of your TSP to a Roth IRA.  I am unsure of the 5 year aging rule for rolledover money so you'll have to research that.  You could contribute to a Roth IRA as suggested above and if there is an aging requirement, at least the money you put in now will have aged by the time you need it.

I may be wrong here, or the TSP modernization law may have changed this, but I don't think one can just roll over their ROTH portion of the their TSP.  I understood that any withdrawal must be proportionate to the account balance.  So you'd have to roll over the entire TSP balance to a Traditional and Roth IRA respectively.

I seem to recall that this is true, but I think that the way around this is to roll almost all of it out, leaving a token amount in, and then reroll the Traditional portion back in. I will be looking into this as I decide whether to shift my contributions to Roth, but that is at least my recollection.

DebtFreeinPhilly

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Re: Any FERS + TSP FIRE folks out there?
« Reply #151 on: December 14, 2017, 09:49:43 AM »
Why won't a Roth ladder work?  You shouldn't be in a high tax bracket once you quit, unless you're spending a buttload of money.


As a Fed LEO with 20+ years of service, it's almost a guarantee that he'll have too much income from his pension (and SRS) to make a Roth conversion ladder work.

This is why a Roth conversion ladder won't work. In today's dollars, I would receive a $47k pension + $12k SRS ($59k total). As far as I know, there is no way to not receive this money. As a LEO I don't have the option to defer acceptance. I'm still new to the Roth Conversion Ladder concept so correct me if I'm wrong, but converting anything more than $20k would put me into the same tax bracket I am now (25%).

DebtFreeinPhilly

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Re: Any FERS + TSP FIRE folks out there?
« Reply #152 on: December 14, 2017, 09:53:04 AM »
Correct.  Upon separation from service at any age you can roll the Roth portion of your TSP to a Roth IRA.  I am unsure of the 5 year aging rule for rolledover money so you'll have to research that.  You could contribute to a Roth IRA as suggested above and if there is an aging requirement, at least the money you put in now will have aged by the time you need it.

I may be wrong here, or the TSP modernization law may have changed this, but I don't think one can just roll over their ROTH portion of the their TSP.  I understood that any withdrawal must be proportionate to the account balance.  So you'd have to roll over the entire TSP balance to a Traditional and Roth IRA respectively.

I seem to recall that this is true, but I think that the way around this is to roll almost all of it out, leaving a token amount in, and then reroll the Traditional portion back in. I will be looking into this as I decide whether to shift my contributions to Roth, but that is at least my recollection.

Yes, you can take all of your money out of the TSP (Roth and Trad) and roll it into a private sector account. The private sector accounts would separate out the Roth and Trad amounts into the proper Roth IRA and Trad IRA for you. Then, as long as you left some money in your TSP ($2k or so), you can roll the Trad IRA back into the TSP.

DebtFreeinPhilly

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Re: Any FERS + TSP FIRE folks out there?
« Reply #153 on: December 14, 2017, 09:55:55 AM »
Correct.  Upon separation from service at any age you can roll the Roth portion of your TSP to a Roth IRA.  I am unsure of the 5 year aging rule for rolledover money so you'll have to research that.  You could contribute to a Roth IRA as suggested above and if there is an aging requirement, at least the money you put in now will have aged by the time you need it.

As I understand it, rollover Roth IRAs don't reset the clock on the 5 year aging rule on existing Roth IRAs. I found an article by Mike Kitces that explained it really well.

Fomerly known as something

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Re: Any FERS + TSP FIRE folks out there?
« Reply #154 on: December 19, 2017, 08:22:54 AM »
I have 13 years in as a FERS LEO. I am 36. At 43, I'll have 20 years but cannot access my pension until age 50, limited in my TSP options (72t, annuity, or wait until 59 1/2). At age 48, I'll have 25 years and get my pension right away but still limited in TSP options as at age 43. Backdoor ROTH conversion, IMO, won't work out well because my tax bracket will be too high. Does anyone know if the ROTH TSP can help get around that issue?

At age 50, I get my pension and TSP penalty free. Yes its 14 more years, yes it sucks, and yes I am looking for other options....buuuuuut...until then I'm here because the benefits are too good as the sole income earner and it looks like ACA will change not making it wise to depart FEHB.

I hope someone smarter than me can come up with a better method to get out.

Fellow LEO.  I'm 4 years ahead of you.

Check out the FERS guide from Dan Jamison.  https://fersguide.com/

He's a former FBI SA and for $15 for the year he does a guide for LEOs at the GS 13 journeyman level and another aimed at the GS 9 journeyman.

On Roth his opinion is no unless you are going to roll thing out of TSP.

Fomerly known as something

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Re: Any FERS + TSP FIRE folks out there?
« Reply #155 on: December 19, 2017, 09:23:00 AM »
Just got this update from previously referenced Dan Jamison.

"There was a BIG surprise in the TSP's most-recent Fact Sheet publication!  On 12/14/2017, the TSP released a publication (TSP Fact Sheet 10) answering questions about the TSP Modernization Act of 2017. Near the beginning of the document, which you can view here, the TSP states that in addition to the changes required by the Act, "we're also adding the ability to specify how much of your withdrawal should be Roth and how much should be Traditional; withdrawals currently come out pro rata from both sources." 

Dragonswan

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Re: Any FERS + TSP FIRE folks out there?
« Reply #156 on: December 20, 2017, 07:26:31 AM »
This is great news!  But to answer the other question about rolling over just your Roth, yes you can do that under current rules.  You don't have to do any tricky manipulations.  When you separate you specify you would like to rollover your Roth balance to your Roth IRA.  You can do this because it's a direct rollover or transfer and is not considered a withdrawal for purposes of the one withdrawal rule.  Just make sure you have the money transferred directly from TSP to Roth IRA (do not take the money yourself then deposit into the Roth IRA, that counts as a withdrawal or indirect rollover).

DebtFreeinPhilly

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Re: Any FERS + TSP FIRE folks out there?
« Reply #157 on: December 20, 2017, 09:04:07 AM »
Check out the FERS guide from Dan Jamison.  https://fersguide.com/


I already subscribe to the FERSGUIDE. Its a huge wealth of knowledge in there. I also saw the most recent update as well. It seems like it will remove the need for the Roth conversion ladder if we can withdraw amounts from specific accounts.

Now the question is this: I have $300k in my TSP ($275k in Traditional & $25k in Roth) and I currently max out the Traditional ($18k). With 14 years left, do I start contributing to the Roth instead of the Traditional? The idea being that I use my traditional when I retire at age 50 and then switch to Roth at 59.5.

The theory is that the Traditional TSP would reach $700k in the next 14 years ($275k at 7%) and the Roth TSP would reach $913k in the next 23 years. Does this sound good?   

dude

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Re: Any FERS + TSP FIRE folks out there?
« Reply #158 on: December 20, 2017, 01:11:02 PM »
Couple thoughts -- how big will the tax hit be if you are no longer contributing pre-tax dollars?  The MadFientist has shown that the Traditional is generally the better way to go. Also, rather than tap the Roth at 59.5, I'd want to hang onto it until 70.5, when RMDs on your traditional might push you into a higher tax bracket. Might be better to draw down your traditional account before age 70.5, then use the Roth to manage your tax situation. Also, Roth a much better deal for passing on to heirs than traditional.

Dragonswan

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Re: Any FERS + TSP FIRE folks out there?
« Reply #159 on: December 21, 2017, 06:53:02 AM »
Or you could think of it as when will you need the tax break most during your career.  At the earlier stages of your career you make less money and are typically in the lowest tax bracket you'll ever be in ('cause your pension will be hefty) so you might want to do Roth early on then as your salary increases and you need the tax break more, you could switch to Traditional.  The new higher standard deduction also comes into play if you won't be itemizing anymore or never itemized. With double the standard deduction you could hedge your bet and put $6000 into Roth and the rest traditional and break even with current year taxes while still setting up some future tax free income.  Lots of options.  You really can't go wrong just so long as you do continue to contribute to the TSP.

DebtFreeinPhilly

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Re: Any FERS + TSP FIRE folks out there?
« Reply #160 on: December 21, 2017, 07:05:41 AM »
Soooo many options....sooo confusing!! Who designed this anyway?! LOL!

Thanks for the help. I will have to find a tax professional that knows the Federal system to figure out the best route. My initial feeling is that Traditional will be the way to go for now since my salary is $125k +/-.

dude

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Re: Any FERS + TSP FIRE folks out there?
« Reply #161 on: December 21, 2017, 12:36:09 PM »
Soooo many options....sooo confusing!! Who designed this anyway?! LOL!

Thanks for the help. I will have to find a tax professional that knows the Federal system to figure out the best route. My initial feeling is that Traditional will be the way to go for now since my salary is $125k +/-.

Consider fully funding a Roth IRA too if you're below the income phaseout limits, or a backdoor if you're over.

Cycling Stache

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Re: Any FERS + TSP FIRE folks out there?
« Reply #162 on: December 22, 2017, 07:27:40 AM »
Our office just told us to adjust our TSP withholding for 2018 because there will be 27 pay periods in calendar year 2018.  Anyone else receive that advice?

Came up when I bumped up my withholding to $18,500 to new max.

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #163 on: December 22, 2017, 08:25:49 AM »
Our office just told us to adjust our TSP withholding for 2018 because there will be 27 pay periods in calendar year 2018.  Anyone else receive that advice?

Came up when I bumped up my withholding to $18,500 to new max.


Yes, we will also have 27 and they will each be 1/26 smaller than average.  I think it depends on what day of the week your agency does payroll, because some still have 26 next year.

dude

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Re: Any FERS + TSP FIRE folks out there?
« Reply #164 on: December 22, 2017, 12:46:14 PM »
Yep, for NFC, it's 27 because the official pay date for PP25 2018 falls on the Monday EFT payday of Dec. 31. Very confusing because my E&L statement always lists the Thursday after the payroll processing weekend as the official pay date.

For GSA and some other payroll providers, there's 26.

frugalecon

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Re: Any FERS + TSP FIRE folks out there?
« Reply #165 on: December 29, 2017, 01:21:57 PM »
Our office just told us to adjust our TSP withholding for 2018 because there will be 27 pay periods in calendar year 2018.  Anyone else receive that advice?

Came up when I bumped up my withholding to $18,500 to new max.


Yes, we will also have 27 and they will each be 1/26 smaller than average.  I think it depends on what day of the week your agency does payroll, because some still have 26 next year.

Sol,

I believe that you are incorrect that your paychecks will be 1/26 smaller than average. I believe that they will be exactly the same as before. In years with 26 paychecks, your actual wages are slightly less than what is listed in the GS table, because of the extra work day. You basically get that back every 9 or 10 years. Thus, in a year with 27 paychecks, you will earn more than is listed for your grade and step in the GS table. Plus you will get an extra day of leave! (or however many hours you earn per pay period)

I hope that this information improves your holiday weekend.

Regards,
FE

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #166 on: December 29, 2017, 01:29:47 PM »
Thanks for the optimistic update.

Unfortunately, I'm far enough along my FI journey that it won't matter.

frugalecon

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Re: Any FERS + TSP FIRE folks out there?
« Reply #167 on: December 29, 2017, 01:59:24 PM »
Thanks for the optimistic update.

Unfortunately, I'm far enough along my FI journey that it won't matter.

Unfortunately!?!

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #168 on: April 28, 2019, 01:33:44 PM »
Generally, MRA means MRA and you can't collect any sooner, regardless of length of service.

alohaKane

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Re: Any FERS + TSP FIRE folks out there?
« Reply #169 on: April 28, 2019, 07:02:34 PM »
Following   

coffeefueled

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Re: Any FERS + TSP FIRE folks out there?
« Reply #170 on: April 29, 2019, 10:47:33 AM »
following

x02947

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Re: Any FERS + TSP FIRE folks out there?
« Reply #171 on: April 30, 2019, 07:22:04 AM »
Any chance of dropping to part time?  The final pension is calculated as a ratio of hours worked vs hours worked if you were full time, so for a few years at least the extra 1% per year more than offsets the lowered ratio thanks to the majority of your career being full time.  Leave is prorated as well, so you would still be getting the equivalent of 8 hours every pay period (assuming top bracket).

So no, not full FIRE, which might get me lambasted, but if you've only got a couple years left and are feeling chained to making it to MRA it might be worth exploring.

Johnny Aloha

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Re: Any FERS + TSP FIRE folks out there?
« Reply #172 on: April 30, 2019, 07:59:39 AM »
PTF.

Johnny Aloha

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Re: Any FERS + TSP FIRE folks out there?
« Reply #173 on: April 30, 2019, 08:22:14 AM »
Has anyone heard of tips or advice on "engineering the layoff", kinda like Financial Samuri did?

In other words, can you specifically target organizations that are downsizing in order to be offered VERA?  I have no idea of how you would know which organizations are downsizing or affected, but that could be some very useful information.

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #174 on: April 30, 2019, 08:40:29 AM »
Has anyone heard of tips or advice on "engineering the layoff", kinda like Financial Samuri did?

Just for starters, I should mention that FS is not terribly popular around these parts.  Some of his financial advice is questionable, and his ethical advice is pretty seriously fucked up.

Quote
In other words, can you specifically target organizations that are downsizing in order to be offered VERA?  I have no idea of how you would know which organizations are downsizing or affected, but that could be some very useful information.

This is significantly more difficult in the federal government than elsewhere.  Most agencies go under a hiring freeze for several years first, because upper management sees the coming crunch well ahead of time.  And then the hiring process is usually slow and cumbersome, so it's not like you can just see a news story about problems with EPA and then run out and get an EPA jobs real quick before the VERAs come out.

Then on top of that the VERA offers are not available to everyone.  It's not like a typical corporation's headcount where they do last in first out.  VERAs are targeted at people who are already near retirement, and to be eligible to receive a VERA offer you need to have already achieved the specified time of service requirements before the window opens.  Those requirements are typically 20 years.  They're trying to give a little push to people who are already close to retirement.

But if you're already a long-serving fed and have enough management seniority that you can transition between agencies with relative ease, it's probably not too hard to put yourself in a position to get the offer.  The rats don't usually swim toward the sinking ship.

Johnny Aloha

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Re: Any FERS + TSP FIRE folks out there?
« Reply #175 on: May 01, 2019, 09:45:59 AM »
Has anyone heard of tips or advice on "engineering the layoff", kinda like Financial Samuri did?

Just for starters, I should mention that FS is not terribly popular around these parts.  Some of his financial advice is questionable, and his ethical advice is pretty seriously fucked up.

I haven't read enough of his stuff to have an opinion one way or the other.    But I do know he wrote a book about organizing your own layoff.

Quote
The rats don't usually swim toward the sinking ship.
Agree - which makes it an opportunity!

dude

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Re: Any FERS + TSP FIRE folks out there?
« Reply #176 on: May 02, 2019, 09:07:29 AM »
For feds with a job that allows for an MRA of 50 with 20 years of service, does anyone know how it works if you hit 20 years at a younger age?

For example, I understand the deferred/postponed difference for the regular FERS option.  But I wondered if the deferment still had to be to age 62 if you otherwise qualify for a FERS pension at 50? 

For example, if you hit your 20 years of service at age 44, would you be able to quit working at 44 and begin to collect your pension immediately at 50?  Or are the options to work until 50 to get the pension at 50 or quit at 44 and wait to collect until age 57 (MRA with reduction) or 62 to avoid a reduction?

I just was unclear on if one had to work through the date for those eligible for a FERS pension sooner.

Or is this a situation where even the varieties of retirements at 50 with 20 years (LEO, Foreign Service, etc...) would all answer this differently?

Edit: I realized I had the wrong age which undercut my fundamental question of whether completing the 20 would allow for collecting beginning at 50 even if I stopped working at 44 or whatever age I hit 20 years of service at.
 

You cannot collect the pension immediately or even at age 50 if you're 44 and haven't reached your MRA. You'd be eligible for a deferred pension, which would be a monumental waste of 20 years. Assuming you're a LEO/Air Traffic/FF (based on your 20 at 50 question), what you can do is get out of the higher stress LEO/AT/FF job after you do your 20, and take a regular FERS position elsewhere, ideally an easy, low stress job close to home. There are lots of opportunities out there. Then you'd just have to stick around until your MRA. There is another, riskier option too -- and that's to leave your job after 20 years, do whatever in the interim, then get re-hired into a FERS position right before your 50th birthday. You could then retire as soon as you hit 50, and begin to immediately collect your LEO/AT/FF pension since you've now fulfilled the age (50) and service (20) requirements.
« Last Edit: May 02, 2019, 09:09:18 AM by dude »

Mathew675

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Re: Any FERS + TSP FIRE folks out there?
« Reply #177 on: May 03, 2019, 09:10:13 PM »
Interesting thread, thanks for all the great info. Quick question - could those looking to retire very early simply leave the government at say 45 and then come back in to a FERS position at say 60 even at a much lower grade and get all the benefits back? My question is based on the idea that my family stops now and travels for several years before coming back when the kids are high school age and re-establishing ourselves for just a few years.

For instance, if I leave now and am making 6 figures but then come back and make much less would my high three be based on a cola adjusted wage from 10 years ago? Assume no.

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #178 on: May 03, 2019, 09:13:34 PM »
could those looking to retire very early simply leave the government at say 45 and then come back in to a FERS position at say 60 even at a much lower grade and get all the benefits back?

Yes.  It's a risky play, but that would technically qualify you for immediate benefits. 

What those benefits are, exactly, isn't always clear.  You can already take a deferred pension and collect age 60, so getting rehired before doesn't get you all that much.

marion10

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Re: Any FERS + TSP FIRE folks out there?
« Reply #179 on: May 04, 2019, 01:30:50 PM »
Also- I would never count on being able to get rehired.

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #180 on: May 04, 2019, 07:45:36 PM »
A few years of really high inflation in the interim could render the pension not so helpful.

Even at normal inflation rates, the lack of inflation protection on a federal pension absolutely eviscerates the early retiree.  I retired at 41 and am expecting roughly 20 years of inflation erosion on my pension.  That eats almost half of it, even if inflation stays at 2%.

DoNorth

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Re: Any FERS + TSP FIRE folks out there?
« Reply #181 on: May 05, 2019, 03:21:23 AM »
I'm a military medical retiree (40 years old) and current term Fed serving overseas.

Did a year as a Fed in DC back in 2014, withdrew my FERS-FRAE contributions and put them in my IRA; I'll have about two years on this position and plan to do the same with my contributions after this assignment is up.

The lack of inflation protection from the time I'm 41 to ~60 almost certainly means those contributions are better sitting in my IRA than waiting almost 20 years for a devalued pension (even if I do over 5 years).

FIRE is next year, will roll TSP to traditional IRA and then over the next several years of retirement, will do the Roth conversion ladder until all the TSP funds have been converted.  Will probably look at another Fed term position sometime around then.

DoNorth

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Re: Any FERS + TSP FIRE folks out there?
« Reply #182 on: May 05, 2019, 07:04:05 AM »
Interesting thread, thanks for all the great info. Quick question - could those looking to retire very early simply leave the government at say 45 and then come back in to a FERS position at say 60 even at a much lower grade and get all the benefits back? My question is based on the idea that my family stops now and travels for several years before coming back when the kids are high school age and re-establishing ourselves for just a few years.

For instance, if I leave now and am making 6 figures but then come back and make much less would my high three be based on a cola adjusted wage from 10 years ago? Assume no.

you're assumption is correct.  I left as 14 step 2 in 2015, (perm position) restarted in 2018 as a 12, step 5(term position), but living in Europe this time.  my high 3 would still count my time as a 14, but none of it would be inflation adjusted.  the pension model is still counting on the fact that you work right up until retirement and that you're highest earnings are usually your last 3.

afox

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Re: Any FERS + TSP FIRE folks out there?
« Reply #183 on: May 06, 2019, 10:47:10 AM »
Interesting thread, thanks for all the great info. Quick question - could those looking to retire very early simply leave the government at say 45 and then come back in to a FERS position at say 60 even at a much lower grade and get all the benefits back? My question is based on the idea that my family stops now and travels for several years before coming back when the kids are high school age and re-establishing ourselves for just a few years.

For instance, if I leave now and am making 6 figures but then come back and make much less would my high three be based on a cola adjusted wage from 10 years ago? Assume no.

The problem with this plan is that in order to get the the FEHB benefit (basically group insurance with 50% of premiums paid by gov) you need to have been enrolled in FEHB for the 5 years prior to retirement (correct me if im wrong). If you retire at MRA with immediate annuity you can continue FEHB benefit for life (generally only needed till medicare eligibility but invaluable for the period between retirement and medicare age). At least monetarily, the FEHB benefit could be more valuable that the FERS  benefit at least until medicare eligibility age for all but the highest wage earners. Seems like going part time until you reach MRA could be a good compromise so that you retain eligibility for FEHB.  Also, note that in most states COBRA entitles you to 18 months of group insurance after you leave your job for any reason. You pay 100% of the premiums but just having access to the FEHB group plans is a massive benefit especially, even more massive the older you are.

Fomerly known as something

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Re: Any FERS + TSP FIRE folks out there?
« Reply #184 on: May 06, 2019, 06:51:06 PM »
For feds with a job that allows for an MRA of 50 with 20 years of service, does anyone know how it works if you hit 20 years at a younger age?

For example, I understand the deferred/postponed difference for the regular FERS option.  But I wondered if the deferment still had to be to age 62 if you otherwise qualify for a FERS pension at 50? 

For example, if you hit your 20 years of service at age 44, would you be able to quit working at 44 and begin to collect your pension immediately at 50?  Or are the options to work until 50 to get the pension at 50 or quit at 44 and wait to collect until age 57 (MRA with reduction) or 62 to avoid a reduction?

I just was unclear on if one had to work through the date for those eligible for a FERS pension sooner.

Or is this a situation where even the varieties of retirements at 50 with 20 years (LEO, Foreign Service, etc...) would all answer this differently?

Edit: I realized I had the wrong age which undercut my fundamental question of whether completing the 20 would allow for collecting beginning at 50 even if I stopped working at 44 or whatever age I hit 20 years of service at.

Generally the 50/20 rule is for special categories (LEO, Firefighters, air traffic controllers.)  It comes with a out at 25 years with any age.  I'm under this, I get out at 47.

dude

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Re: Any FERS + TSP FIRE folks out there?
« Reply #185 on: May 07, 2019, 08:17:08 AM »
Interesting thread, thanks for all the great info. Quick question - could those looking to retire very early simply leave the government at say 45 and then come back in to a FERS position at say 60 even at a much lower grade and get all the benefits back? My question is based on the idea that my family stops now and travels for several years before coming back when the kids are high school age and re-establishing ourselves for just a few years.

For instance, if I leave now and am making 6 figures but then come back and make much less would my high three be based on a cola adjusted wage from 10 years ago? Assume no.

The problem with this plan is that in order to get the the FEHB benefit (basically group insurance with 50% of premiums paid by gov) you need to have been enrolled in FEHB for the 5 years prior to retirement (correct me if im wrong). If you retire at MRA with immediate annuity you can continue FEHB benefit for life (generally only needed till medicare eligibility but invaluable for the period between retirement and medicare age). At least monetarily, the FEHB benefit could be more valuable that the FERS  benefit at least until medicare eligibility age for all but the highest wage earners. Seems like going part time until you reach MRA could be a good compromise so that you retain eligibility for FEHB.  Also, note that in most states COBRA entitles you to 18 months of group insurance after you leave your job for any reason. You pay 100% of the premiums but just having access to the FEHB group plans is a massive benefit especially, even more massive the older you are.

afox, that's a good question, and yes, you're right about the 5-year requirement -- I wonder if there's wiggle room in the language that would allow the break in service to be disregarded so long as you were in FEHB for the requisite time before leaving fed employment and then enrolled immediately upon re-employment, thereby constituting being enrolled for 5 years prior to retirement.

dude

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Re: Any FERS + TSP FIRE folks out there?
« Reply #186 on: May 07, 2019, 08:19:47 AM »
And whaddya know, my question answered by OPM:

https://www.opm.gov/faqs/QA.aspx?fid=fd635746-de0a-4dd7-997d-b5706a0fd8d2&pid=86c7b3a5-d614-42eb-8070-9f3d3f5068dd

So the 5-year FEHB requirement is not a hindrance to the leave/get re-hired just before retirement strategy!

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #187 on: May 07, 2019, 08:59:35 AM »
So the 5-year FEHB requirement is not a hindrance to the leave/get re-hired just before retirement strategy!

It's not really in my plan, but it's good to know this particular safety is there if I ever need it.  As a retired fed with many years to wait until traditional retirement age, it's good to know I could theoretically regain FEHB for life by getting another federal position right before my MRA.  Losing lifetime access to heavily subsidized federal health insurance was one of the hardest parts about retiring at age 41.

afox

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Re: Any FERS + TSP FIRE folks out there?
« Reply #188 on: May 07, 2019, 12:14:56 PM »
thanks dude, good to know, i did not realize this distinction...

Sugaree

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Re: Any FERS + TSP FIRE folks out there?
« Reply #189 on: May 07, 2019, 01:23:57 PM »
Has anyone looked into using a postponed pension as a way to open up space for a Roth conversion ladder?  Apparently, once you hit MRA+10, you can not take the pension for a few years.  If you had enough in taxable accounts to cover living expenses for the years that you weren't getting the pension, it would free up some room to do the Roth ladder.

Mathew675

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Re: Any FERS + TSP FIRE folks out there?
« Reply #190 on: May 08, 2019, 01:49:53 PM »
A few years of really high inflation in the interim could render the pension not so helpful.

Even at normal inflation rates, the lack of inflation protection on a federal pension absolutely eviscerates the early retiree.  I retired at 41 and am expecting roughly 20 years of inflation erosion on my pension.  That eats almost half of it, even if inflation stays at 2%.

Thanks Sol, that is essentially what I am looking to avoid but I don't think there is any way around it. I should be ready to retire in a few years savings wise and wanted to know if my pension would be an extra layer of safety on top of my plan. From the retirement formula with close to 20 years of inflation I was trying to see if I should even include it or cash out my FERS. Will need to run some extra numbers on this.

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #191 on: May 08, 2019, 06:33:30 PM »
I was trying to see if I should even include it or cash out my FERS.

When were you hired?

If you're under the old 0.8% FERS pension contributions (aka prior to 2012), you should definitely keep it because you only get back your contributions, not the total contributions made by you and the government.  Most of the value of your pension is government contributions you can not get back out in any way, except by one drawing a pension.

If you were hired in 2013 or later then you're paying 4.4% of your (after tax!) salary into the pension, and then suddenly the idea of withdrawing your contributions as a lump sum payment starts to look a whole lot more attractive to an early retiree.  If you take that lump sum today and put it in the stock market for 20 years, its' virtually guaranteed to be worth more than your pension after 20 years of inflation losses.

Mathew675

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Re: Any FERS + TSP FIRE folks out there?
« Reply #192 on: May 09, 2019, 10:30:22 AM »
I was trying to see if I should even include it or cash out my FERS.

When were you hired?

If you're under the old 0.8% FERS pension contributions (aka prior to 2012), you should definitely keep it because you only get back your contributions, not the total contributions made by you and the government.  Most of the value of your pension is government contributions you can not get back out in any way, except by one drawing a pension.

If you were hired in 2013 or later then you're paying 4.4% of your (after tax!) salary into the pension, and then suddenly the idea of withdrawing your contributions as a lump sum payment starts to look a whole lot more attractive to an early retiree.  If you take that lump sum today and put it in the stock market for 20 years, its' virtually guaranteed to be worth more than your pension after 20 years of inflation losses.

I was hired under the new system in 2018. I was planning on buying back a little over 6 years of previous military time and working for another 6 or 7 years. Fairly well paid in my current position with locality area boost of almost 30%. Would have 16-17 years until 62 though when I leave. The biggest reason I wanted to do this was for the ability of my wife to have a steady paycheck should I check out.

However, from what I am reading now, it looks like I will take a 10% hit when I start collecting and then my wife only gets 50% if I die. So the real safety net I am looking at is taking a hit due to the following:
-17 years or so of inflation (make it worth only about 60% in today's dollars)
-10% hit for signing up for spousal benefits
-then the 50% cut on top of that when I pass. Doesn't sound very appealing now.


sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #193 on: May 09, 2019, 10:51:40 AM »
If it helps push you over the edge, you should also know that your family gets significantly reduced death benefits if you die after leaving federal service.  From some old notes of mine:

Quote
You need to work 10 years for your spouse to have the option of taking an annuity from your federal pension.  If you work 9.9 years they get a lump sum payout instead.

Survivor benefits are complicated.  If you die after separation but before starting your retirement annuity, your surviving spouse should still get the basic death benefit of 50% of final salary plus 15k, as a one time payment.

The monthly survivor benefit is available (if 10 years of creditable service) if you are still an employee when you die, but if you are already separated when you die before reaching retirement age?  The rules suggest the surviving spouse still gets a survivor benefit lump sum described above (if 10 years of creditable service) but children do not, and it only begins on the date the dead spouse would have been eligible for an unreduced annuity or on the day after death at a reduced rate.  That's age 60 if 20 years of service, and age 62 if not, with 10 years of service already done before death.  If employee dies while still employed, the full annuity begins immediately.  Additional benefits are available due to children, up to age 22 if in school or age 18 if not, only if you were were employed at the time of death.  No child benefits are paid if you die after separation.

This was all part of the cost calculation when I early retired.  I had to accept that my pension would become worth roughly half as much as it is today due to the lack of inflation protection (though military pensions DO get inflation protection), and I had to accept the loss of life insurance coverage forever and the federal death benefits described above until I reach age 62.  All of that was ultimately small potatoes, though, compared to the loss of future years of income flowing into my retirement accounts. 

As soon as you retire you start drawing down your nest egg, instead of building it up.  So if you make $100k per year and spend $50k per year, each additional year that you work means $150,000 of differential between your hypothetical net worth in the retire vs don't-retire scenarios.  This is why so many people spend year and years slowly slogging towards their early retirement financial goals, and then suddenly seem to slingshot past them in a hurry.

Peachtea

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Re: Any FERS + TSP FIRE folks out there?
« Reply #194 on: May 12, 2019, 11:50:26 AM »
I’m on FERS FRAE and imo it’s a horrible deal, especially for those who are either planning on retiring early or don’t end up spending their entire career with the gov. If I’ve done my math right, my 4.4% contribution would be better invested rather than put in the pension in every scenario except staying until MRA at 57. If we were able to opt out or even better opt out for an extra TSP match, I would do it in a heartbeat. I plan on withdrawing my contributions when I leave and rolling them over into my TSP.

15 years of service, full deferred annuity at 62 is $20,887/year not accounting for 23 years of inflation then eating away at it. My 4.4% contribution if invested instead would be $647,709 or 4% yearly draw of $25,908 - and this takes inflation into account.

20 years of service, full deferred annuity at 60 is $29,139/year not accounting for 16 years of inflation. My 4.4% contribution if invested: $679,444 or $27,177/year - accounts for inflation.

25 years of service, full deferred annuity at 60 is $37,714/year not accounting for 8 years of inflation. I believe 8 years of 3% inflation would make it valued at $29,562/year. My 4.4% contribution if invested: $766,216 or $30,648/year - accounts for inflation.

33 years of service, immediate annuity at 57 is $49,782 - no inflation gap since immediate annuity with COLA. My 4.4% contribution if invested: $698,721 or $27,948/year - accounts for inflation. If instead of a pension with me contributing 4.4% and gov 9.6%, I got to keep and invest 4.4% and gov added another 5% TSP match, then additional 5% match would be $794,001. 5% additional match plus my 4.4% invested = $1,492,7722 or $59,708/year.

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #195 on: May 12, 2019, 12:47:13 PM »
It's even worse than you've calculated, peachtea, because the FERS pensions actually pay out at closer to 6% due to being an aggregated annuity, not an individual plan.  The also "invest" it in the G fund for you.  I agree that the all new hires who are putting in 4.4% towards their pension are universally getting screwed, unless they work until normal retirement age. 

Then lets not forget all those years of zero pay increases over the past decade.  I don't see why anyone would want to work for the federal government anymore.  You can make much more money, and have more freedom, at equivalent private sector jobs.  Unfortunately, I think federal employment only appeals to the laziest of applicants these days, people who want to get on and then do fuck all for 30 years until they can collect that pension.  If you're talented and motivated, you're virtually guaranteed to do better for yourself at virtually any alternative employer.

Sugaree

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Re: Any FERS + TSP FIRE folks out there?
« Reply #196 on: May 13, 2019, 07:31:41 AM »
It's even worse than you've calculated, peachtea, because the FERS pensions actually pay out at closer to 6% due to being an aggregated annuity, not an individual plan.  The also "invest" it in the G fund for you.  I agree that the all new hires who are putting in 4.4% towards their pension are universally getting screwed, unless they work until normal retirement age. 

Then lets not forget all those years of zero pay increases over the past decade.  I don't see why anyone would want to work for the federal government anymore.  You can make much more money, and have more freedom, at equivalent private sector jobs.  Unfortunately, I think federal employment only appeals to the laziest of applicants these days, people who want to get on and then do fuck all for 30 years until they can collect that pension.  If you're talented and motivated, you're virtually guaranteed to do better for yourself at virtually any alternative employer.

For some of us, it's a calculated trade-off.  I'm here because I took advantage of the co-op program (now called Pathways) to get my second college degree paid for.  I still owe the DoD 4 more years under a continuing service agreement.  It's also the best paying job in my field in my immediate area and my living situation is such that I'd have to make 30% more than I do now just to break even on housing costs (my house is a paid-off family property so I pay property taxes and insurance, but can't sell it and buy somewhere else).  My husband is also a part-time caregiver for his parents, who live two houses down, so that's something that we have to think about too.  It's a frustrating work environment sometimes for sure, and I think that if I were under anything other than the original FERS, the math would be different and we might make different choices. 

sol

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Re: Any FERS + TSP FIRE folks out there?
« Reply #197 on: May 13, 2019, 08:14:26 AM »
In what way do you mean more freedom?  Just in terms of bureaucracy and more freedom to innovate and figure out the best ways to solve issues?

That's certainly part of it.  I found the entire environment a bit stifling at times.  They were very big on "staying in your lane" and not speaking uncomfortable truths.  Problems were sometimes covered up to protect powerful people.  And yes, the bureaucracy was momentous.

But I also meant freedom to retire early.  The FERS pension is a decent deal if you work until traditional retirement age and were hired before 2012.  But if you want to retire early, like virtually everyone here, it sucks.  It's golden handcuffs of the worst sort, where they yank out one of the legs of that three-legged stool if you dare to contravene the accepted career timeline.  Stay forever and you're taken care of.  Do anything else and you're fucked.  It's a prison.

There are other reasons to choose a career in federal service, of course.  The paychecks used to be more reliable than the private sector, until Congress started using furloughs as bargaining chips.  You can genuinely make a difference in your own country by directly making it better with the work of your own hands.  I found a certain level of professional respect came with the title, and sometimes you get to play with top secret stuff.  But I don't think any new hires should choose a federal career for the money, because the starting pay stinks and the raises are worse.  You definitely shouldn't choose a federal career if you're trying to RE.  If you really love government work, state government seems like a much better place to pursue that goal.

DebtFreeinPhilly

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Re: Any FERS + TSP FIRE folks out there?
« Reply #198 on: May 13, 2019, 11:06:49 AM »
Interesting discussion the last few weeks. I agree with @sol about wanting more freedom and not being in the bureaucratic meat grinder.

At my current age (38), I will have 15 years in, can collect a pension in 10 years at 48 with 25 yrs of service, and full blown retirement in 12 years (50). Yes I am LEO. The main reason for me to stick it out in my current position until 50 is access to my TSP without penalty. If I leave LEO status before 50, I lose the ability to access the TSP penalty free.

Noooowww...I am working on side hustles (REI, farming, woodcraft, etc.) that hopefully will produce an income equivalent to what I would withdraw from the TSP. This would make the "TSP Golden Handcuffs" issue moot and I would bounce at 48 with a 39% Pension + RSA.

the_fixer

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Re: Any FERS + TSP FIRE folks out there?
« Reply #199 on: May 13, 2019, 05:26:02 PM »
My wife made significantly more and had better benefits in the private sector but it is about the science for her and working in a national lab provides some pretty amazing opportunities although the pace VS what she is used to from industry is a bit of a challenge.

The pay cut compounds each year since she would normally get between 5 - 7% raise in industry compared to the ~2% she is likely to get working for the gov.

Seeing her live her bliss is worth it...

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