Author Topic: How many Feds here hanging on for MRA?  (Read 32179 times)

simonsez

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Re: How many Feds here hanging on for MRA?
« Reply #100 on: January 30, 2021, 02:34:56 PM »
I'm not sure what the future holds career-wise.  Love the job, love the people, it's very satisfying work, the pay:stress ratio is amazing, super flexible, able to be 100% remote, only get the 6 hr AL/pp but already feel with the maxiflex schedule I have more time off than I know what to do with (I'm sure I will find more ways as I get older!).  So not really in a hurry to move outside the feds or to retire but I know things may change.  Also it seems harder to get into the same line of work now.  Now we are only hiring badass PhDs whereas when I was brought on I had a Master's but we also hired people with just an undergrad degree.  So if I do move around, I would think twice about the barriers to entry unless changing fields.

If I do work until MRA at 57 I would be at 33 years assuming no gap.  Barring economic or personal health catastrophes, I would pull the plug then and let the supplement kick in and work its magic for 5 years.  Or maybe I have no possible way to spend all the money I've accumulated and retire earlier, who knows.  I will continue to save as if FIRE is a goal and continue to assess as I get older. 

Side note: I wonder if being a member of the 0.8 FERS rather than the 4.4 group makes the golden handcuffs stronger.  That is, if you retire super early and want a refund of your pension contributions, the 0.8 refund is a pittance whereas the 4.4 is a chunk of change.  The 0.8 people might hold out to milk what they can from their pension since the employer pays a higher proportion.

Loretta

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Re: How many Feds here hanging on for MRA?
« Reply #101 on: February 06, 2021, 12:09:38 PM »
2472 days here.  Hanging on by the skin my teeth until 50.  I do thank Past Self for pursuing a good government job with what I thought were good benefits in my early 20s.  Current Self has just received 2 doses of Pfizer vaccine for essential in-person work.  The last year at work has NOT been pretty or pleasurable but it did have a lot of gallows humor and regular, reliable paychecks when I know so many others were not so lucky in my community. 

ospreyjp

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Re: How many Feds here hanging on for MRA?
« Reply #102 on: February 06, 2021, 12:39:44 PM »
7 months and 21 days to go until MRA!  I am very ready to pull the plug.

Fomerly known as something

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Re: How many Feds here hanging on for MRA?
« Reply #103 on: February 06, 2021, 07:20:34 PM »
I know I’d be more likely to cut and run with the 4.4 contribution.

Phenix

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Re: How many Feds here hanging on for MRA?
« Reply #104 on: February 08, 2021, 06:47:28 AM »
I know I’d be more likely to cut and run with the 4.4 contribution.

I fall in the FERS-FRAE group.  Anybody hired prior to 2013 pays 0.8%, anybody hired in 2013 pays 3.1% (FERS-RAE), and anybody hired since 2014 (FERS-FRAE) pays 4.4%.
At 4.4%, I would be willing to forgo the pension in exchange for a better TSP match.

x02947

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Re: How many Feds here hanging on for MRA?
« Reply #105 on: February 08, 2021, 07:27:43 AM »
What's really a kick in the teeth is that I didn't understand the different SCDs when I first joined.  Buying back my military time put my leave SCD in the 0.8% timeframe, so I thought my contribution would be from that plan as well.  Nice little 3.6% decrease to paycheck I hadn't accounted for!

frugalecon

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Re: How many Feds here hanging on for MRA?
« Reply #106 on: February 08, 2021, 09:20:31 AM »
I know I’d be more likely to cut and run with the 4.4 contribution.

I fall in the FERS-FRAE group.  Anybody hired prior to 2013 pays 0.8%, anybody hired in 2013 pays 3.1% (FERS-RAE), and anybody hired since 2014 (FERS-FRAE) pays 4.4%.
At 4.4%, I would be willing to forgo the pension in exchange for a better TSP match.

And to add insult to injury, FERS contributions are with after-tax dollars. They reduce the taxable basis of your pension, but that may not be a good trade if you expect a lower tax rate in retirement.

afox

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Re: How many Feds here hanging on for MRA?
« Reply #107 on: February 08, 2021, 11:56:20 AM »
I know I’d be more likely to cut and run with the 4.4 contribution.

I fall in the FERS-FRAE group.  Anybody hired prior to 2013 pays 0.8%, anybody hired in 2013 pays 3.1% (FERS-RAE), and anybody hired since 2014 (FERS-FRAE) pays 4.4%.
At 4.4%, I would be willing to forgo the pension in exchange for a better TSP match.

And to add insult to injury, FERS contributions are with after-tax dollars. They reduce the taxable basis of your pension, but that may not be a good trade if you expect a lower tax rate in retirement.

can you explain: "They reduce the taxable basis of your pension?"

I am reading that the FERS pension distributions are taxable.

Sugaree

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Re: How many Feds here hanging on for MRA?
« Reply #108 on: February 08, 2021, 12:37:54 PM »
I know I’d be more likely to cut and run with the 4.4 contribution.

I fall in the FERS-FRAE group.  Anybody hired prior to 2013 pays 0.8%, anybody hired in 2013 pays 3.1% (FERS-RAE), and anybody hired since 2014 (FERS-FRAE) pays 4.4%.
At 4.4%, I would be willing to forgo the pension in exchange for a better TSP match.

And to add insult to injury, FERS contributions are with after-tax dollars. They reduce the taxable basis of your pension, but that may not be a good trade if you expect a lower tax rate in retirement.

can you explain: "They reduce the taxable basis of your pension?"

I am reading that the FERS pension distributions are taxable.

Each distribution that you get will have a taxable and non-taxable portion.  The contributions that you've already paid taxes on won't be taxed again.  But those contributions are now amortized over your life expectancy instead of all at once like it used to be.  It works out to be a tiny bit of untaxed income. 
« Last Edit: February 08, 2021, 12:43:24 PM by Sugaree »

elysianfields

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Re: How many Feds here hanging on for MRA?
« Reply #109 on: April 15, 2021, 06:23:12 AM »
As of today, I am 100 days away from my MRA. Even if I don't pull the plug quite yet once I reach it, it will be interesting to see just how fast a 100-day countdown goes.
@frugalecon congratulations on the countdown!  How fast is it going?

What are your post MRA-plans?

What were the keys to reaching your financial goals?

Dreamer40

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Re: How many Feds here hanging on for MRA?
« Reply #110 on: April 15, 2021, 07:51:07 AM »
My fed career was miserable so no way would I have stuck it out to MRA. I did almost 15 years then bailed recently. I knew all along I couldn’t stay so I was saving /investing a lot the entire time. Many people in my former office stay well past retirement eligibility because they can’t seem to imagine a life where their identity isn’t wrapped up in the job. It’s fascinating. My coworkers still think I’ll be back. Oh hell no.

FIREandMONEY

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Re: How many Feds here hanging on for MRA?
« Reply #111 on: April 15, 2021, 09:28:31 AM »
I've thought about hanging on, but I just don't see the point at all.

Started Fed in 2010, plan on hitting FI around 2030ish @ age 45.  At that point, I'll have 20 years in.  My TSP should be fairly healthy, along with both mine and my spouses Roth IRAs.  We plan on utilizing my spouses 457B for 5 years after FIRE, while we do our Roth IRA ladder.  Then live off the TSP rollover/Roth IRA ladder for a decade or so, while I continue to work a small hobby business.  Then, my FERS pension will kick in, my SS, and spouses pension as well.  At 62, those three annuities should be around $6500/mo.

Of course healthcare is an issue, but my belief is that US is headed towards more socialized healthcare and I plan to utilize the ACA/whatever is available in 10 years.  If the healthcare thing doesn't work out, I'll probably try to move to a lighter stress telework only position, or just keep working til I feel comfortable FIREing and paying full OOP for healthcare.  That's why I don't see the point in sticking around.  If an ACA plan has a comparable cost/coverage of my FEHB, and I already have enough to FIRE, what's the point?

Please poke holes in my plan!

mcneally

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Re: How many Feds here hanging on for MRA?
« Reply #112 on: April 15, 2021, 02:02:34 PM »
I've thought about hanging on, but I just don't see the point at all.

Started Fed in 2010, plan on hitting FI around 2030ish @ age 45.  At that point, I'll have 20 years in... Then, my FERS pension will kick in, my SS, and spouses pension as well.  At 62, those three annuities should be around $6500/mo.

Please poke holes in my plan!

That's almost the same timeline I'm on (Fed starting in 2009). How much is your spouse's expected pension? I'll just make up a number and estimate your high 3 to be $100k, so your pension would be $20k starting at age 60 (deferred pensions start at 60 rather than 62 when you have 20 years). That isn't inflation adjusted until you start receiving it, so in real terms, if inflation averaged 2.5% you'd be getting ~$1,150/ month.

Promised SS benefits on the earnings I made up if taken @ 62 are something like $1,300/ month. SS isn't going away but expecting 100% 30+ years from now might be a little optimistic.

For myself, I like the idea of waiting to the 20 year mark because it adds non-trivial value to the pension, getting it at 60 rather than 62 (and 2 fewer years of inflation costs). Where I might be borderline FI @ 15-18 years, I'll be securely so at 20. I see the 20 year pension + early SS as enough to cover bare bones expenses in a LCOL, so at traditional retirement age I just need savings to cover luxuries and unforeseen expenses.

You can certainly retire on the suggested timeline. I just wonder if you're overvaluing the deferred pension.

FIREandMONEY

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Re: How many Feds here hanging on for MRA?
« Reply #113 on: April 15, 2021, 02:50:27 PM »
I've thought about hanging on, but I just don't see the point at all.

Started Fed in 2010, plan on hitting FI around 2030ish @ age 45.  At that point, I'll have 20 years in... Then, my FERS pension will kick in, my SS, and spouses pension as well.  At 62, those three annuities should be around $6500/mo.

Please poke holes in my plan!

That's almost the same timeline I'm on (Fed starting in 2009). How much is your spouse's expected pension? I'll just make up a number and estimate your high 3 to be $100k, so your pension would be $20k starting at age 60 (deferred pensions start at 60 rather than 62 when you have 20 years). That isn't inflation adjusted until you start receiving it, so in real terms, if inflation averaged 2.5% you'd be getting ~$1,150/ month.

Promised SS benefits on the earnings I made up if taken @ 62 are something like $1,300/ month. SS isn't going away but expecting 100% 30+ years from now might be a little optimistic.

For myself, I like the idea of waiting to the 20 year mark because it adds non-trivial value to the pension, getting it at 60 rather than 62 (and 2 fewer years of inflation costs). Where I might be borderline FI @ 15-18 years, I'll be securely so at 20. I see the 20 year pension + early SS as enough to cover bare bones expenses in a LCOL, so at traditional retirement age I just need savings to cover luxuries and unforeseen expenses.

You can certainly retire on the suggested timeline. I just wonder if you're overvaluing the deferred pension.

Thanks, I didn't know that about the 60/62 thing with the 20 year mark.  I will definitely hit 20 years then, probably call it quits soon after.  My high 3 will probably be closer to 135/140 by the time 2030 rolls around.  So around $2300/mo.   My wife's pension will be $2050/2150 month depending if she collects it at 60/62.   She's not working right now, but I expect her to go back for a while sometime over the next 10 years.  That pension will probably grow to $2500+/mo.

My SSA.gov retirement estimator says at 62, my monthly benefit is currently $2000/mo, but now that I think more about it, that's probably taking into account working from 45 to 62.  So, SSN is probably closer to 1300 like you said than 2000+.  Anyway to figure that out?  How did you get to 1300?  And yes, I am optimistic, haha!  I figure we will have a pretty decent base income at 60/62 based only on our pensions/ss.  The investments should hopefully continue to grow through the 45 to 60 period and provide even more cushion from 60+.  I already run a small side-business currently and plan to continue after I fire @ 45ish, so there will be some additional income coming in throughout the timeline. 

What are your thoughts on FEHB vs ACA for FIRE?
« Last Edit: April 15, 2021, 02:54:51 PM by FIREandMONEY »

mcneally

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Re: How many Feds here hanging on for MRA?
« Reply #114 on: April 15, 2021, 04:11:28 PM »
My SSA.gov retirement estimator says at 62, my monthly benefit is currently $2000/mo, but now that I think more about it, that's probably taking into account working from 45 to 62.  So, SSN is probably closer to 1300 like you said than 2000+.  Anyway to figure that out?  How did you get to 1300? 

What are your thoughts on FEHB vs ACA for FIRE?

$2,000 @ 62 is pretty close to the max, so that was probably assuming you work til then, but yours would be more than the $1300 I said since your wages are higher that I guessed. IIRC on ssa.gov you can enter the age you plan to stop working to get the actual number.

I haven't really looked into health insurance because as long as job conditions stay similar what I really want to do is go part time 3 days a week and stay til MRA. My agency handbook says anyone can do it subject to management approval. It's rarely requested and the times that I've heard that it was were 1) two people caring for young kids and 2) a guy on dialysis, so I don't know how likely I'll be to get approved. I don't have big plans for endless free time, so if they deny me, I'll have to decide whether I want to A) quit and figure out something meaningful to do or B) work a fairly easy 40 hour job with six weeks vacation and be rich and give lots to charity.  It'll be probably 3-6 years yet before I request to go part time.

the_hobbitish

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Re: How many Feds here hanging on for MRA?
« Reply #115 on: April 15, 2021, 04:27:50 PM »
I'm also at about 12 years in. I'm thinking about retiring before I hit 20 years in (which would be still 10 years away from MRA). I assumed being sub-20 years made it not worth it to take the deferred annuity option and that I'd be better off taking the payout and investing it.

Does anyone know how to do the math on that? And on how to calculate if it's worth working parttime for a couple years to get the 20 years to take the deferred annuity?

mcneally

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Re: How many Feds here hanging on for MRA?
« Reply #116 on: April 15, 2021, 05:48:12 PM »
I'm also at about 12 years in. I'm thinking about retiring before I hit 20 years in (which would be still 10 years away from MRA). I assumed being sub-20 years made it not worth it to take the deferred annuity option and that I'd be better off taking the payout and investing it.

Does anyone know how to do the math on that? And on how to calculate if it's worth working parttime for a couple years to get the 20 years to take the deferred annuity?

It's fairly straight forward to calculate, but you have to make assumptions about investment returns and more importantly, inflation. If you quit at 40, your pension starting at 62 is worth 20% less if intervening inflation is 3% vs 2%.

The way I estimate it is to calculate the future value of the pension as
1) [nominal pension] / 4% = value at the time you start drawing it
2) figure from step 1 is in nominal dollars, to adjust for inflation, divide figure from step 1 by [(1 + inflation rate) ^ number of years between quitting and getting the pension]
3) divide figure from step by by [(1 + real investment returns) ^ number of years between quitting and pension]

Since the pension is not inflation adjusted and we're using real investment returns, both steps 2 and 3 are needed. This is not double counting inflation.

Assume $100k salary and 18 years of service at age 40, 2.5% inflation and 5% real investment returns you'd have
1) $18k pension / 4% = $450k value in nominal dollars
2) $450k / 1.025^22 years = $261k value in today's dollars (you start the pension @ age 62, 22 years after quitting)
3) $261k / 1.05^22 years = $89k pension value at age 40

Changing your investment and inflation assumptions will drastically change the results. If you're in the 0.8% contribution camp you definitely want the deferred pension regardless of how many years you have though. The deferred pension is worth several times what your contributions are.

At the $100k salary level, the difference in net present value between 19 years and 20 years is probably somewhere in the ballpark of $40k. It's noteworthy but it's not going to make or break you if you're FI without the pension.

I'm giving myself the 20 year timeline because I don't know what I'd do with my time if I retired sooner and, especially if you're on more of a leanfire budget, the odds of your life (and spending) significantly changing should weigh more prominent than whether you can withdraw 3% or 4% (see recently discussed Dr Doom blog post https://forum.mrmoneymustache.com/welcome-to-the-forum/dr-doom-posted-a-new-blog-entry!/). Excluding health insurance, I spend <$30k as a healthy single person, but I'm definitely not retiring on $750k at 35.

Monkey Uncle

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Re: How many Feds here hanging on for MRA?
« Reply #117 on: April 15, 2021, 06:26:55 PM »

What are your thoughts on FEHB vs ACA for FIRE?

I left federal service well before MRA and have been on ACA insurance for 3+ years now.  It's impossible to generalize because so much depends on your personal financial situation and the ACA plans that are available where you live (and also your risk tolerance for high-deductible plans vs. Cadillac plans).

For me, the ACA has worked out great.  My MAGI (modified adjusted gross income) is low enough that I qualify for a very low cost silver plan (one year it was essentially free).  Through creative withdrawals from investments, I can engineer my MAGI such that it maximizes the premium tax credit and cost sharing for silver plans.  Overall, ACA insurance has been substantially less expensive than what I was paying for FEHB, and I have basically the same BCBS plan I had when I was a fed.  Of course, great plans like that aren't available everywhere.

You can get a pretty good idea of cost by estimating what your MAGI will be after you fire, and then running through the plan finder on healthcare.gov.  That will also give you a good idea of the kinds of plans that are available in your area.  Of course, the plans can change from year to year.

marion10

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Re: How many Feds here hanging on for MRA?
« Reply #118 on: April 15, 2021, 07:07:44 PM »
I actually worked two years after my MRA - I generally enjoyed my job. The health insurance is what made it possible for me to retire at 59. I haven’t decided yet about when to take SS. With my pension, annuity supplement and TSP, I am doing just fine. Twenty years from now, I hope we will have better public insurance- but it is wonderful to have it now.

Fomerly known as something

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Re: How many Feds here hanging on for MRA?
« Reply #119 on: April 16, 2021, 11:04:26 AM »
I mentioned before, I’m a SCE so my MRA is at 25 years of service and I’ll still be quite young (47).  I’m sticking around another 51 months to get FEHB.  But being FI now did just allow me to put in for a PCS to San Francisco because it just sounds like fun for the next few years.

elysianfields

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Re: How many Feds here hanging on for MRA?
« Reply #120 on: April 18, 2021, 05:43:34 AM »

What are your thoughts on FEHB vs ACA for FIRE?

As a Foreign Service Fed, I'm in a different pension system and qualify for an immediate pension and "social security offset" at age 50 with 20 years of service.  The "social security offset" is an amount paid to an annuitant who hasn't yet reached age 62 and therefore cannot claim SS benefits, and it expires at age 62.

Given my earlyish access to my pension and the looming tax costs of RMDs on my TSP and other traditional holdings, I'll want to maximize my Roth conversions in retirement.  This also makes it more difficult to "manage" my AGI and keep my ACA cost low.  Consequently, the FEHB has a bigger benefit to me.

Currently we're enrolled in the GEHA HDHP with an FSA, and I make FSA contributions directly from payroll, which reduces my current Medicare and OASDI payroll taxes.  It also consequently reduces my SS benefit down the line, but I'm not so worried about that.

I've also paid all our non-covered / deductible medical expenses out of pocket and invested all the FSA funds in index ETFs.  In six-plus years of a rising market, I've amassed nearly $70k in the Ultimate Retirement Account.

If we remain healthy and don't need care for chronic medical issues, we'll continue the HDHP into retirement, and continue to make HSA contributions until reaching age 65.  The FEHB remains a great benefit to us.

frugalecon

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Re: How many Feds here hanging on for MRA?
« Reply #121 on: April 18, 2021, 07:07:26 AM »
As of today, I am 100 days away from my MRA. Even if I don't pull the plug quite yet once I reach it, it will be interesting to see just how fast a 100-day countdown goes.
@frugalecon congratulations on the countdown!  How fast is it going?

What are your post MRA-plans?

What were the keys to reaching your financial goals?

Hi EF,

My “countdown clock” is now at 21 days, and the time has gone fairly quickly. Partly that is because I have been INSANELY busy at work. Major deadlines. I haven’t decided yet exactly what my approach will be after MRA. I am not pulling the plug quite yet; I am involved in something where my role is pretty critical for at least the next several months, and I don’t want to leave my colleagues in the lurch. Also, I want to see how my mental frame changes when I can literally walk out at any time. Is that freeing? I don’t know. Finally, I am still at 100% telework, and it’s unclear how much things will be opening up this summer anyway.

In terms of how I have achieved goals, it has really been a matter of “setting it and forgetting it.” Savings is completely automated, and I have had an investment plan that I am comfortable with.

Cheers,
FE

elysianfields

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Re: How many Feds here hanging on for MRA?
« Reply #122 on: April 19, 2021, 02:50:29 AM »
As of today, I am 100 days away from my MRA. Even if I don't pull the plug quite yet once I reach it, it will be interesting to see just how fast a 100-day countdown goes.
@frugalecon congratulations on the countdown!  How fast is it going?

What are your post MRA-plans?

What were the keys to reaching your financial goals?

Hi EF,

My “countdown clock” is now at 21 days, and the time has gone fairly quickly. Partly that is because I have been INSANELY busy at work. Major deadlines. I haven’t decided yet exactly what my approach will be after MRA. I am not pulling the plug quite yet; I am involved in something where my role is pretty critical for at least the next several months, and I don’t want to leave my colleagues in the lurch. Also, I want to see how my mental frame changes when I can literally walk out at any time. Is that freeing? I don’t know. Finally, I am still at 100% telework, and it’s unclear how much things will be opening up this summer anyway.

In terms of how I have achieved goals, it has really been a matter of “setting it and forgetting it.” Savings is completely automated, and I have had an investment plan that I am comfortable with.

Cheers,
FE

I hear you on the heavy demands and not wanting to leave your colleagues in the lurch.  I hope you're doing valuable work and that the pace slows a bit.  Also, do share with us how things go once you pass the magic milestone - will your attitude change?  Will you have less shits to give?  Inquiring minds...

Automating my savings really helped reinforce the progress I'm making in my TSP/Roth IRA/HSA... and keeps the money out of my wallet where it might tempt me.

Edited to add - I just checked my TSP and my last twelve-month returns ending 03/31/2021 were 66.61%.
« Last Edit: April 19, 2021, 12:05:28 PM by elysianfields »

frugalecon

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Re: How many Feds here hanging on for MRA?
« Reply #123 on: May 09, 2021, 05:20:48 AM »
MRA has arrived...

Michael in ABQ

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Re: How many Feds here hanging on for MRA?
« Reply #124 on: May 09, 2021, 06:53:49 AM »
I'm only around the 3 year mark and I'm ready to pull the plug. Most of my department was contracted out ~20 years ago and it's created this very toxic us vs. them culture where many of the contractors feel like the government is the enemy. Everyone at a management level drinks the Kool-Aid even if the regular workers may genuinely want to do a good job.

I'm on the 5th contractor counterpart in 3 years and every single one has been a terrible manager. The latest seems to be the worst yet and has created a very bad working environment for all the people who are supposed to be doing the work I'm responsible for. I would need 8-10 trained people and a few years to catch up on the 20 years of neglect. Instead I've got 5 that are mostly untrained and I'm the one who ends up training them and doing a fair amount of the work because their management is too busy dealing with HR BS. I'm actually in the process of hiring the best person they had as GS employee. They fired her for some made up garbage about not reporting possible COVID symptoms but really because she called people on their BS and not following written regulations. It's going to be a real thumb in their eye and I'm told it caused quite a kerfuffle when I briefed my plan to senior leadership in a meeting recently (who all approved it).



My boss just left for another agency on Friday but she has 10+ years of federal service. There's no way I'd stick it out until MRA and even the minimal pension at 5 years is not an incentive for me. I've got health insurance through the National Guard (2 years from retirement eligibility) so the benefits aren't worth it to me. At 4.4% of my paycheck to get 1%/year, the pension is definitely not worth it. The TSP match has been nice but I'm ready to take those FERS contributions and run. My wife and I are in the process of buying a business and once that closes I'm out the door as soon as I can. I feel somewhat bad about leaving behind a mess, but short of senior leadership finally recognizing that this work can't be successfully contracted out, I can't get much done.

frugalecon

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Re: How many Feds here hanging on for MRA?
« Reply #125 on: May 10, 2021, 07:00:30 AM »
I'm only around the 3 year mark and I'm ready to pull the plug. Most of my department was contracted out ~20 years ago and it's created this very toxic us vs. them culture where many of the contractors feel like the government is the enemy. Everyone at a management level drinks the Kool-Aid even if the regular workers may genuinely want to do a good job.

I'm on the 5th contractor counterpart in 3 years and every single one has been a terrible manager. The latest seems to be the worst yet and has created a very bad working environment for all the people who are supposed to be doing the work I'm responsible for. I would need 8-10 trained people and a few years to catch up on the 20 years of neglect. Instead I've got 5 that are mostly untrained and I'm the one who ends up training them and doing a fair amount of the work because their management is too busy dealing with HR BS. I'm actually in the process of hiring the best person they had as GS employee. They fired her for some made up garbage about not reporting possible COVID symptoms but really because she called people on their BS and not following written regulations. It's going to be a real thumb in their eye and I'm told it caused quite a kerfuffle when I briefed my plan to senior leadership in a meeting recently (who all approved it).



My boss just left for another agency on Friday but she has 10+ years of federal service. There's no way I'd stick it out until MRA and even the minimal pension at 5 years is not an incentive for me. I've got health insurance through the National Guard (2 years from retirement eligibility) so the benefits aren't worth it to me. At 4.4% of my paycheck to get 1%/year, the pension is definitely not worth it. The TSP match has been nice but I'm ready to take those FERS contributions and run. My wife and I are in the process of buying a business and once that closes I'm out the door as soon as I can. I feel somewhat bad about leaving behind a mess, but short of senior leadership finally recognizing that this work can't be successfully contracted out, I can't get much done.

That sounds like an awful environment. I can only imagine how your group scores on the Federal Employee Viewpoint Survey. I definitely agree that the FERS pension is a lot less valuable when your contribution is 4.4% rather than 0.7%. That was a really big pay cut for new hires when that changed, especially since that is paid with after-tax dollars.

frugalecon

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Re: How many Feds here hanging on for MRA?
« Reply #126 on: June 05, 2021, 06:33:29 AM »
Four weeks post-MRA now. It is a little weird, to still be at work when I know that I can leave at any time. I was really pissed for a week or so, at the thought of still being at work, but have now entered a state of Zen calm. Talked with the spouse, who may want to work 1-2 more years. I think I will just keep playing it by ear, and seeing how I feel. Having rerun the numbers, we are in a good position to carry on with the same disposable income as now when we are working, so continuing in the job is really just about padding the safety cushion. Looking at the retirement tax picture, it is really fascinating to see just how much in tax a person doesn’t pay once the W-2 life is over. The FICA taxes are a huge line item.
« Last Edit: June 07, 2021, 03:43:51 AM by frugalecon »

elysianfields

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Re: How many Feds here hanging on for MRA?
« Reply #127 on: June 06, 2021, 02:25:46 PM »
Four weeks post-MRA now. It is a little weird, to still be at work when I know that I can leave at any time. I was really pissed for a week or so, at the thought of still being at work, but have now entered a state of Zen calm. Talked with the spouse, who may want to work 1-2 more years. I think I will just keep playing it by ear, and seeing how I feel. Having rerun the numbers, we are in a good position to carry on with the same disposable income as now when we are working, so continuing in the job is really just about padding the safety cushion. It is really fascinating to see just how much in tax a person doesn’t pay once the W-2 life is over. The FICA taxes especially are a huge line item.

Thanks for sharing your experience, glad to hear you've reached an equilibrium.  I hope that means you'll have no need to post an Epic FU story.  Keep us posted in any case.

I hadn't thought about the disappearance of OASDI & Medicare taxes after W-2 employment ends.  Of course, if you start your own business, you get to pay both halves (employer's + employee's).

Michael in ABQ

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Re: How many Feds here hanging on for MRA?
« Reply #128 on: June 06, 2021, 07:12:01 PM »
Four weeks post-MRA now. It is a little weird, to still be at work when I know that I can leave at any time. I was really pissed for a week or so, at the thought of still being at work, but have now entered a state of Zen calm. Talked with the spouse, who may want to work 1-2 more years. I think I will just keep playing it by ear, and seeing how I feel. Having rerun the numbers, we are in a good position to carry on with the same disposable income as now when we are working, so continuing in the job is really just about padding the safety cushion. It is really fascinating to see just how much in tax a person doesn’t pay once the W-2 life is over. The FICA taxes especially are a huge line item.

Thanks for sharing your experience, glad to hear you've reached an equilibrium.  I hope that means you'll have no need to post an Epic FU story.  Keep us posted in any case.

I hadn't thought about the disappearance of OASDI & Medicare taxes after W-2 employment ends.  Of course, if you start your own business, you get to pay both halves (employer's + employee's).

If you file as an S-Corp you get to avoid part of the payroll tax on profits. You have to pay yourself a reasonable salary but if you have a business making $200k in profit you can pay $75k as salary to the owner and then the other $125k as a profit distribution.

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Re: How many Feds here hanging on for MRA?
« Reply #129 on: June 09, 2021, 06:18:05 AM »

What are your thoughts on FEHB vs ACA for FIRE?

I left federal service well before MRA and have been on ACA insurance for 3+ years now.  It's impossible to generalize because so much depends on your personal financial situation and the ACA plans that are available where you live (and also your risk tolerance for high-deductible plans vs. Cadillac plans).

For me, the ACA has worked out great.  My MAGI (modified adjusted gross income) is low enough that I qualify for a very low cost silver plan (one year it was essentially free).  Through creative withdrawals from investments, I can engineer my MAGI such that it maximizes the premium tax credit and cost sharing for silver plans.  Overall, ACA insurance has been substantially less expensive than what I was paying for FEHB, and I have basically the same BCBS plan I had when I was a fed.  Of course, great plans like that aren't available everywhere.

This is really good info, since it's pretty much what I plan to do...retire at age 50 (but not at MRA) and then use ACA instead of FEHB.  If I can swing it, I'll work part time to keep my FEHB but there's no guarantee that will happen. 

I'm currently in northern Virginia, and contemplating moving to WVA.  I wonder how the ACA plans compare between the states.  Could make a big difference (not to mention cost of living being lower in general in WVA).

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Re: How many Feds here hanging on for MRA?
« Reply #130 on: June 10, 2021, 04:52:25 AM »

What are your thoughts on FEHB vs ACA for FIRE?

I left federal service well before MRA and have been on ACA insurance for 3+ years now.  It's impossible to generalize because so much depends on your personal financial situation and the ACA plans that are available where you live (and also your risk tolerance for high-deductible plans vs. Cadillac plans).

For me, the ACA has worked out great.  My MAGI (modified adjusted gross income) is low enough that I qualify for a very low cost silver plan (one year it was essentially free).  Through creative withdrawals from investments, I can engineer my MAGI such that it maximizes the premium tax credit and cost sharing for silver plans.  Overall, ACA insurance has been substantially less expensive than what I was paying for FEHB, and I have basically the same BCBS plan I had when I was a fed.  Of course, great plans like that aren't available everywhere.

This is really good info, since it's pretty much what I plan to do...retire at age 50 (but not at MRA) and then use ACA instead of FEHB.  If I can swing it, I'll work part time to keep my FEHB but there's no guarantee that will happen. 

I'm currently in northern Virginia, and contemplating moving to WVA.  I wonder how the ACA plans compare between the states.  Could make a big difference (not to mention cost of living being lower in general in WVA).

I have a Highmark BCBS silver plan.  From what I've seen, everything else offered in WV (or at least in my county) is crap (narrow networks, small coverage area).  If Highmark ever pulled out, I'd be screwed.  Hopefully that won't happen since they are such a huge presence in the local/regional insurance market.

frugalecon

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Re: How many Feds here hanging on for MRA?
« Reply #131 on: July 05, 2021, 04:06:30 AM »
As many probably know, if you retire under the “MRA+10” status and take an immediate annuity, your FERS pension is reduced by 5% for every year until 62, and there is no inflation adjustment until 62. That is a pretty big haircut. But I recently learned that, if you have 20+ years of service, you can get an unreduced annuity if you postpone taking it until 60, since you would have been eligible for an unreduced annuity under the “60+20” status. As long as you can cover health insurance another way (spouse, COBRA, ACA), that can be a pretty good trade.

Michael in ABQ

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Re: How many Feds here hanging on for MRA?
« Reply #132 on: July 05, 2021, 10:11:12 AM »
I'm only around the 3 year mark and I'm ready to pull the plug. Most of my department was contracted out ~20 years ago and it's created this very toxic us vs. them culture where many of the contractors feel like the government is the enemy. Everyone at a management level drinks the Kool-Aid even if the regular workers may genuinely want to do a good job.

I'm on the 5th contractor counterpart in 3 years and every single one has been a terrible manager. The latest seems to be the worst yet and has created a very bad working environment for all the people who are supposed to be doing the work I'm responsible for. I would need 8-10 trained people and a few years to catch up on the 20 years of neglect. Instead I've got 5 that are mostly untrained and I'm the one who ends up training them and doing a fair amount of the work because their management is too busy dealing with HR BS. I'm actually in the process of hiring the best person they had as GS employee. They fired her for some made up garbage about not reporting possible COVID symptoms but really because she called people on their BS and not following written regulations. It's going to be a real thumb in their eye and I'm told it caused quite a kerfuffle when I briefed my plan to senior leadership in a meeting recently (who all approved it).



My boss just left for another agency on Friday but she has 10+ years of federal service. There's no way I'd stick it out until MRA and even the minimal pension at 5 years is not an incentive for me. I've got health insurance through the National Guard (2 years from retirement eligibility) so the benefits aren't worth it to me. At 4.4% of my paycheck to get 1%/year, the pension is definitely not worth it. The TSP match has been nice but I'm ready to take those FERS contributions and run. My wife and I are in the process of buying a business and once that closes I'm out the door as soon as I can. I feel somewhat bad about leaving behind a mess, but short of senior leadership finally recognizing that this work can't be successfully contracted out, I can't get much done.

That sounds like an awful environment. I can only imagine how your group scores on the Federal Employee Viewpoint Survey. I definitely agree that the FERS pension is a lot less valuable when your contribution is 4.4% rather than 0.7%. That was a really big pay cut for new hires when that changed, especially since that is paid with after-tax dollars.

And now the new contractor has hired the lead from the current contract - thus guaranteeing no real change. At most 2-3 of the current semi-trained workers will transfer to the new contract meaning there's still little or no institutional knowledge. They're offering a whopping $2,000 more for a manager position vs. the technician/worker role ($60k vs. $58k) so little chance they'll find someone good. We close on purchasing a business at the end of the month and at this rate I'm probably going to leave a month or so after that. I'll cash out my $6k or so in FERS and not look back. I've spent three years trying to fix this and made very little measurable progress. I see no reason to stick around and pound my head against the wall for any longer. I'm looking forward to being in control of my business and not having to worry about dealing with all the bureaucracy to get anything done - only to find some arbitrary change like a hiring freeze for the position I was two weeks away from filling.

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Re: How many Feds here hanging on for MRA?
« Reply #133 on: July 06, 2021, 05:58:55 AM »
As many probably know, if you retire under the “MRA+10” status and take an immediate annuity, your FERS pension is reduced by 5% for every year until 62, and there is no inflation adjustment until 62. That is a pretty big haircut. But I recently learned that, if you have 20+ years of service, you can get an unreduced annuity if you postpone taking it until 60, since you would have been eligible for an unreduced annuity under the “60+20” status. As long as you can cover health insurance another way (spouse, COBRA, ACA), that can be a pretty good trade.

Postponing is also not a bad way to free up space for a couple of years for a Roth conversion ladder. And with postponing, as opposed to deferring, you can restart FEHB when you start taking the annuity.

simonsez

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Re: How many Feds here hanging on for MRA?
« Reply #134 on: July 06, 2021, 10:21:34 AM »
As many probably know, if you retire under the “MRA+10” status and take an immediate annuity, your FERS pension is reduced by 5% for every year until 62, and there is no inflation adjustment until 62. That is a pretty big haircut. But I recently learned that, if you have 20+ years of service, you can get an unreduced annuity if you postpone taking it until 60, since you would have been eligible for an unreduced annuity under the “60+20” status. As long as you can cover health insurance another way (spouse, COBRA, ACA), that can be a pretty good trade.
It is a big haircut but presumably the toughest years to weather will be the ones from retirement to just before SS kicks in.  That is, even though the pension haircut is permanent for each year of retirement, the FERS Supplement can help.  By the time SS starts being collected, feds could have more than they know what to do with so a reduced pension (as opposed to no pension due to delaying to avoid the reduction) could make sense in some situations.

For instance, if I stop working once I hit 30 years, here is what my access (I'm aware there are more ways to access, I mean access easily without any hoops to jump through) would look like:
Age 54 (retirement), Roth IRA contributions, taxable account
Age 55, Roth IRA contributions, taxable account
Age 56, Roth IRA contributions, taxable account
Age 57, pension, FERS supplement, Roth IRA contributions, taxable account
Age 58, pension, FERS supplement, Roth IRA contributions, taxable account
Age 59, pension, FERS supplement, TSP, Roth IRA (partial), taxable account
Age 60, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 61, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 62, pension, FERS supplement (partial), TSP, Roth IRA, taxable account
Age 63, pension, TSP, Roth IRA, taxable account
Age 64, pension, TSP, Roth IRA, taxable account
Age 65, pension, TSP, Roth IRA, taxable account, HSA
Age 66, pension, TSP, Roth IRA, taxable account, HSA
Age 67+, pension, TSP, Roth IRA, taxable account, HSA, SS

Honestly, I think my plan would look similar if I don't make it to MRA.  I would just need even more from my Roth IRA contributions and taxable account to bridge the gap as well as more exposure to SORR.  I'll run realistic numbers when I get closer to see when I would take my pension and start the FERS Supplement (if under 62).

The earlier years of retirement require the most planning as access to all retirement accounts isn't there yet.  Thus I could envision scenarios where someone decides to take a pension ASAP even at a reduced amount as opposed to waiting. 

frugalecon

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Re: How many Feds here hanging on for MRA?
« Reply #135 on: July 06, 2021, 02:24:13 PM »
As many probably know, if you retire under the “MRA+10” status and take an immediate annuity, your FERS pension is reduced by 5% for every year until 62, and there is no inflation adjustment until 62. That is a pretty big haircut. But I recently learned that, if you have 20+ years of service, you can get an unreduced annuity if you postpone taking it until 60, since you would have been eligible for an unreduced annuity under the “60+20” status. As long as you can cover health insurance another way (spouse, COBRA, ACA), that can be a pretty good trade.
It is a big haircut but presumably the toughest years to weather will be the ones from retirement to just before SS kicks in.  That is, even though the pension haircut is permanent for each year of retirement, the FERS Supplement can help.  By the time SS starts being collected, feds could have more than they know what to do with so a reduced pension (as opposed to no pension due to delaying to avoid the reduction) could make sense in some situations.

For instance, if I stop working once I hit 30 years, here is what my access (I'm aware there are more ways to access, I mean access easily without any hoops to jump through) would look like:
Age 54 (retirement), Roth IRA contributions, taxable account
Age 55, Roth IRA contributions, taxable account
Age 56, Roth IRA contributions, taxable account
Age 57, pension, FERS supplement, Roth IRA contributions, taxable account
Age 58, pension, FERS supplement, Roth IRA contributions, taxable account
Age 59, pension, FERS supplement, TSP, Roth IRA (partial), taxable account
Age 60, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 61, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 62, pension, FERS supplement (partial), TSP, Roth IRA, taxable account
Age 63, pension, TSP, Roth IRA, taxable account
Age 64, pension, TSP, Roth IRA, taxable account
Age 65, pension, TSP, Roth IRA, taxable account, HSA
Age 66, pension, TSP, Roth IRA, taxable account, HSA
Age 67+, pension, TSP, Roth IRA, taxable account, HSA, SS

Honestly, I think my plan would look similar if I don't make it to MRA.  I would just need even more from my Roth IRA contributions and taxable account to bridge the gap as well as more exposure to SORR.  I'll run realistic numbers when I get closer to see when I would take my pension and start the FERS Supplement (if under 62).

The earlier years of retirement require the most planning as access to all retirement accounts isn't there yet.  Thus I could envision scenarios where someone decides to take a pension ASAP even at a reduced amount as opposed to waiting.

One thing to keep in mind is that you can access TSP once you are 55, without the 10% penalty, if you have left Federal service. No need to wait all the way until 59 1/2.

simonsez

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Re: How many Feds here hanging on for MRA?
« Reply #136 on: July 06, 2021, 03:00:27 PM »
As many probably know, if you retire under the “MRA+10” status and take an immediate annuity, your FERS pension is reduced by 5% for every year until 62, and there is no inflation adjustment until 62. That is a pretty big haircut. But I recently learned that, if you have 20+ years of service, you can get an unreduced annuity if you postpone taking it until 60, since you would have been eligible for an unreduced annuity under the “60+20” status. As long as you can cover health insurance another way (spouse, COBRA, ACA), that can be a pretty good trade.
It is a big haircut but presumably the toughest years to weather will be the ones from retirement to just before SS kicks in.  That is, even though the pension haircut is permanent for each year of retirement, the FERS Supplement can help.  By the time SS starts being collected, feds could have more than they know what to do with so a reduced pension (as opposed to no pension due to delaying to avoid the reduction) could make sense in some situations.

For instance, if I stop working once I hit 30 years, here is what my access (I'm aware there are more ways to access, I mean access easily without any hoops to jump through) would look like:
Age 54 (retirement), Roth IRA contributions, taxable account
Age 55, Roth IRA contributions, taxable account
Age 56, Roth IRA contributions, taxable account
Age 57, pension, FERS supplement, Roth IRA contributions, taxable account
Age 58, pension, FERS supplement, Roth IRA contributions, taxable account
Age 59, pension, FERS supplement, TSP, Roth IRA (partial), taxable account
Age 60, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 61, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 62, pension, FERS supplement (partial), TSP, Roth IRA, taxable account
Age 63, pension, TSP, Roth IRA, taxable account
Age 64, pension, TSP, Roth IRA, taxable account
Age 65, pension, TSP, Roth IRA, taxable account, HSA
Age 66, pension, TSP, Roth IRA, taxable account, HSA
Age 67+, pension, TSP, Roth IRA, taxable account, HSA, SS

Honestly, I think my plan would look similar if I don't make it to MRA.  I would just need even more from my Roth IRA contributions and taxable account to bridge the gap as well as more exposure to SORR.  I'll run realistic numbers when I get closer to see when I would take my pension and start the FERS Supplement (if under 62).

The earlier years of retirement require the most planning as access to all retirement accounts isn't there yet.  Thus I could envision scenarios where someone decides to take a pension ASAP even at a reduced amount as opposed to waiting.

One thing to keep in mind is that you can access TSP once you are 55, without the 10% penalty, if you have left Federal service. No need to wait all the way until 59 1/2.
@frugalecon Do you have a link to this?  All I can find are rules stating that you can do this only if you leave the federal service in the year (or after) you turn 55.  If someone hits their MRA at age 52 and wants to retire, I'm not seeing explicit rules where they could take out TSP at 55 since they separated at 52.  Maybe I'm reading outdated information, though.

Fomerly known as something

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Re: How many Feds here hanging on for MRA?
« Reply #137 on: July 06, 2021, 03:15:05 PM »
As many probably know, if you retire under the “MRA+10” status and take an immediate annuity, your FERS pension is reduced by 5% for every year until 62, and there is no inflation adjustment until 62. That is a pretty big haircut. But I recently learned that, if you have 20+ years of service, you can get an unreduced annuity if you postpone taking it until 60, since you would have been eligible for an unreduced annuity under the “60+20” status. As long as you can cover health insurance another way (spouse, COBRA, ACA), that can be a pretty good trade.
It is a big haircut but presumably the toughest years to weather will be the ones from retirement to just before SS kicks in.  That is, even though the pension haircut is permanent for each year of retirement, the FERS Supplement can help.  By the time SS starts being collected, feds could have more than they know what to do with so a reduced pension (as opposed to no pension due to delaying to avoid the reduction) could make sense in some situations.

For instance, if I stop working once I hit 30 years, here is what my access (I'm aware there are more ways to access, I mean access easily without any hoops to jump through) would look like:
Age 54 (retirement), Roth IRA contributions, taxable account
Age 55, Roth IRA contributions, taxable account
Age 56, Roth IRA contributions, taxable account
Age 57, pension, FERS supplement, Roth IRA contributions, taxable account
Age 58, pension, FERS supplement, Roth IRA contributions, taxable account
Age 59, pension, FERS supplement, TSP, Roth IRA (partial), taxable account
Age 60, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 61, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 62, pension, FERS supplement (partial), TSP, Roth IRA, taxable account
Age 63, pension, TSP, Roth IRA, taxable account
Age 64, pension, TSP, Roth IRA, taxable account
Age 65, pension, TSP, Roth IRA, taxable account, HSA
Age 66, pension, TSP, Roth IRA, taxable account, HSA
Age 67+, pension, TSP, Roth IRA, taxable account, HSA, SS

Honestly, I think my plan would look similar if I don't make it to MRA.  I would just need even more from my Roth IRA contributions and taxable account to bridge the gap as well as more exposure to SORR.  I'll run realistic numbers when I get closer to see when I would take my pension and start the FERS Supplement (if under 62).

The earlier years of retirement require the most planning as access to all retirement accounts isn't there yet.  Thus I could envision scenarios where someone decides to take a pension ASAP even at a reduced amount as opposed to waiting.

One thing to keep in mind is that you can access TSP once you are 55, without the 10% penalty, if you have left Federal service. No need to wait all the way until 59 1/2.
@frugalecon Do you have a link to this?  All I can find are rules stating that you can do this only if you leave the federal service in the year (or after) you turn 55.  If someone hits their MRA at age 52 and wants to retire, I'm not seeing explicit rules where they could take out TSP at 55 since they separated at 52.  Maybe I'm reading outdated information, though.

You are correct for the rule of 55 you must retire in that year.  (I’m an SCE who has a rule of 50, but my MRE is 47 so I don’t get to access it until 59.5)

frugalecon

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Re: How many Feds here hanging on for MRA?
« Reply #138 on: July 06, 2021, 03:48:16 PM »
As many probably know, if you retire under the “MRA+10” status and take an immediate annuity, your FERS pension is reduced by 5% for every year until 62, and there is no inflation adjustment until 62. That is a pretty big haircut. But I recently learned that, if you have 20+ years of service, you can get an unreduced annuity if you postpone taking it until 60, since you would have been eligible for an unreduced annuity under the “60+20” status. As long as you can cover health insurance another way (spouse, COBRA, ACA), that can be a pretty good trade.
It is a big haircut but presumably the toughest years to weather will be the ones from retirement to just before SS kicks in.  That is, even though the pension haircut is permanent for each year of retirement, the FERS Supplement can help.  By the time SS starts being collected, feds could have more than they know what to do with so a reduced pension (as opposed to no pension due to delaying to avoid the reduction) could make sense in some situations.

For instance, if I stop working once I hit 30 years, here is what my access (I'm aware there are more ways to access, I mean access easily without any hoops to jump through) would look like:
Age 54 (retirement), Roth IRA contributions, taxable account
Age 55, Roth IRA contributions, taxable account
Age 56, Roth IRA contributions, taxable account
Age 57, pension, FERS supplement, Roth IRA contributions, taxable account
Age 58, pension, FERS supplement, Roth IRA contributions, taxable account
Age 59, pension, FERS supplement, TSP, Roth IRA (partial), taxable account
Age 60, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 61, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 62, pension, FERS supplement (partial), TSP, Roth IRA, taxable account
Age 63, pension, TSP, Roth IRA, taxable account
Age 64, pension, TSP, Roth IRA, taxable account
Age 65, pension, TSP, Roth IRA, taxable account, HSA
Age 66, pension, TSP, Roth IRA, taxable account, HSA
Age 67+, pension, TSP, Roth IRA, taxable account, HSA, SS

Honestly, I think my plan would look similar if I don't make it to MRA.  I would just need even more from my Roth IRA contributions and taxable account to bridge the gap as well as more exposure to SORR.  I'll run realistic numbers when I get closer to see when I would take my pension and start the FERS Supplement (if under 62).

The earlier years of retirement require the most planning as access to all retirement accounts isn't there yet.  Thus I could envision scenarios where someone decides to take a pension ASAP even at a reduced amount as opposed to waiting.

One thing to keep in mind is that you can access TSP once you are 55, without the 10% penalty, if you have left Federal service. No need to wait all the way until 59 1/2.
@frugalecon Do you have a link to this?  All I can find are rules stating that you can do this only if you leave the federal service in the year (or after) you turn 55.  If someone hits their MRA at age 52 and wants to retire, I'm not seeing explicit rules where they could take out TSP at 55 since they separated at 52.  Maybe I'm reading outdated information, though.

You are correct for the rule of 55 you must retire in that year.  (I’m an SCE who has a rule of 50, but my MRE is 47 so I don’t get to access it until 59.5)

Oh, ok, I didn’t know that nuance. Thanks for the correction!

elysianfields

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Re: How many Feds here hanging on for MRA?
« Reply #139 on: July 07, 2021, 04:17:31 AM »
As many probably know, if you retire under the “MRA+10” status and take an immediate annuity, your FERS pension is reduced by 5% for every year until 62, and there is no inflation adjustment until 62. That is a pretty big haircut. But I recently learned that, if you have 20+ years of service, you can get an unreduced annuity if you postpone taking it until 60, since you would have been eligible for an unreduced annuity under the “60+20” status. As long as you can cover health insurance another way (spouse, COBRA, ACA), that can be a pretty good trade.
It is a big haircut but presumably the toughest years to weather will be the ones from retirement to just before SS kicks in.  That is, even though the pension haircut is permanent for each year of retirement, the FERS Supplement can help.  By the time SS starts being collected, feds could have more than they know what to do with so a reduced pension (as opposed to no pension due to delaying to avoid the reduction) could make sense in some situations.

For instance, if I stop working once I hit 30 years, here is what my access (I'm aware there are more ways to access, I mean access easily without any hoops to jump through) would look like:
Age 54 (retirement), Roth IRA contributions, taxable account
Age 55, Roth IRA contributions, taxable account
Age 56, Roth IRA contributions, taxable account
Age 57, pension, FERS supplement, Roth IRA contributions, taxable account
Age 58, pension, FERS supplement, Roth IRA contributions, taxable account
Age 59, pension, FERS supplement, TSP, Roth IRA (partial), taxable account
Age 60, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 61, pension, FERS supplement, TSP, Roth IRA, taxable account
Age 62, pension, FERS supplement (partial), TSP, Roth IRA, taxable account
Age 63, pension, TSP, Roth IRA, taxable account
Age 64, pension, TSP, Roth IRA, taxable account
Age 65, pension, TSP, Roth IRA, taxable account, HSA
Age 66, pension, TSP, Roth IRA, taxable account, HSA
Age 67+, pension, TSP, Roth IRA, taxable account, HSA, SS

Honestly, I think my plan would look similar if I don't make it to MRA.  I would just need even more from my Roth IRA contributions and taxable account to bridge the gap as well as more exposure to SORR.  I'll run realistic numbers when I get closer to see when I would take my pension and start the FERS Supplement (if under 62).

The earlier years of retirement require the most planning as access to all retirement accounts isn't there yet.  Thus I could envision scenarios where someone decides to take a pension ASAP even at a reduced amount as opposed to waiting.

One thing to keep in mind is that you can access TSP once you are 55, without the 10% penalty, if you have left Federal service. No need to wait all the way until 59 1/2.
@frugalecon Do you have a link to this?  All I can find are rules stating that you can do this only if you leave the federal service in the year (or after) you turn 55.  If someone hits their MRA at age 52 and wants to retire, I'm not seeing explicit rules where they could take out TSP at 55 since they separated at 52.  Maybe I'm reading outdated information, though.

You are correct for the rule of 55 you must retire in that year.  (I’m an SCE who has a rule of 50, but my MRE is 47 so I don’t get to access it until 59.5)

Oh, ok, I didn’t know that nuance. Thanks for the correction!

That's close, but not entirely accurate.

According to this IRS page:
   
Quote from: The Internal Revenue Service
The following additional exceptions [to the additional 10% tax] apply only to distributions from a qualified retirement plan other than an IRA: ...
Distributions made to you after you separated from service with your employer if the separation occurred in or after (emphasis mine) the year you reached age 55, or distributions made from a qualified governmental benefit plan, as defined in section 414(d) if you were a qualified public safety employee (federal state or local government) who separated from service in or after the year you reached age 50.

N.B. that your separation from service with your employer must occur in or after the year you reach 55, not only that particular year.

elysianfields

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Re: How many Feds here hanging on for MRA?
« Reply #140 on: October 05, 2021, 12:07:32 PM »
This thread needs a revival, as I’m down to 54 months and counting… though the golden handcuffs are feeling especially tight today.

Michael in ABQ

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Re: How many Feds here hanging on for MRA?
« Reply #141 on: October 05, 2021, 01:11:45 PM »
I'm only around the 3 year mark and I'm ready to pull the plug. Most of my department was contracted out ~20 years ago and it's created this very toxic us vs. them culture where many of the contractors feel like the government is the enemy. Everyone at a management level drinks the Kool-Aid even if the regular workers may genuinely want to do a good job.

I'm on the 5th contractor counterpart in 3 years and every single one has been a terrible manager. The latest seems to be the worst yet and has created a very bad working environment for all the people who are supposed to be doing the work I'm responsible for. I would need 8-10 trained people and a few years to catch up on the 20 years of neglect. Instead I've got 5 that are mostly untrained and I'm the one who ends up training them and doing a fair amount of the work because their management is too busy dealing with HR BS. I'm actually in the process of hiring the best person they had as GS employee. They fired her for some made up garbage about not reporting possible COVID symptoms but really because she called people on their BS and not following written regulations. It's going to be a real thumb in their eye and I'm told it caused quite a kerfuffle when I briefed my plan to senior leadership in a meeting recently (who all approved it).



My boss just left for another agency on Friday but she has 10+ years of federal service. There's no way I'd stick it out until MRA and even the minimal pension at 5 years is not an incentive for me. I've got health insurance through the National Guard (2 years from retirement eligibility) so the benefits aren't worth it to me. At 4.4% of my paycheck to get 1%/year, the pension is definitely not worth it. The TSP match has been nice but I'm ready to take those FERS contributions and run. My wife and I are in the process of buying a business and once that closes I'm out the door as soon as I can. I feel somewhat bad about leaving behind a mess, but short of senior leadership finally recognizing that this work can't be successfully contracted out, I can't get much done.

That sounds like an awful environment. I can only imagine how your group scores on the Federal Employee Viewpoint Survey. I definitely agree that the FERS pension is a lot less valuable when your contribution is 4.4% rather than 0.7%. That was a really big pay cut for new hires when that changed, especially since that is paid with after-tax dollars.

And now the new contractor has hired the lead from the current contract - thus guaranteeing no real change. At most 2-3 of the current semi-trained workers will transfer to the new contract meaning there's still little or no institutional knowledge. They're offering a whopping $2,000 more for a manager position vs. the technician/worker role ($60k vs. $58k) so little chance they'll find someone good. We close on purchasing a business at the end of the month and at this rate I'm probably going to leave a month or so after that. I'll cash out my $6k or so in FERS and not look back. I've spent three years trying to fix this and made very little measurable progress. I see no reason to stick around and pound my head against the wall for any longer. I'm looking forward to being in control of my business and not having to worry about dealing with all the bureaucracy to get anything done - only to find some arbitrary change like a hiring freeze for the position I was two weeks away from filling.

Looking back on this I'm so glad I quit. I put in my two weeks notice in July. The day after I quit I was on a plane to close on the business purchase. Now I can hire someone the same day I meet them if I want to. No one to consult with on decisions but my wife who is the co-owner. The only paperwork I filled out when hiring my last employee was a paragraph or two job posting on a local FB group and then having my accountant send them a link to fill out a W-4 and direct deposit information.

I do still need to fill out some forms to get my FERS money back. About a week after I quit they went back to 100% masks on base and I didn't feel like trying to go in person and do the paperwork. Now I have to go through the OPM. I downloaded the form weeks ago, just been busy and haven't submitted it yet. I probably have to fax or mail it in like a caveman. Now that I own my own business I can go purchase automation software and not worry about it being unapproved to run on the government system or needing a million dollar contract just to scan some documents or setup cloud storage.

charis

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Re: How many Feds here hanging on for MRA?
« Reply #142 on: October 05, 2021, 02:59:56 PM »
Has anyone left after five years but well before MRA and anticipates a small pension at 62? That will likely be our situation. Can't imagine hanging around for another 15 years.

erutio

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Re: How many Feds here hanging on for MRA?
« Reply #143 on: October 05, 2021, 03:13:43 PM »
Has anyone left after five years but well before MRA and anticipates a small pension at 62? That will likely be our situation. Can't imagine hanging around for another 15 years.

That would be my plan as well.

Michael in ABQ

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Re: How many Feds here hanging on for MRA?
« Reply #144 on: October 05, 2021, 04:23:12 PM »
Has anyone left after five years but well before MRA and anticipates a small pension at 62? That will likely be our situation. Can't imagine hanging around for another 15 years.

I could have bought back some military time and hit the 5-year mark to get a pension. However, it would have been something like $300/month 25 years from now. I'm fairly confident I can turn my FERS contributions today into an income stream to rival that - plus I'll have the principal of that investment that could presumably be passed on while the pension dies with me.

Monkey Uncle

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Re: How many Feds here hanging on for MRA?
« Reply #145 on: October 05, 2021, 06:08:49 PM »
Has anyone left after five years but well before MRA and anticipates a small pension at 62? That will likely be our situation. Can't imagine hanging around for another 15 years.

Yes.  I left after 15 years, but well before MRA.  As things stand now, I'm planning on taking my pension when I reach MRA (about 57 for me), because cFiresim says I'll come out slightly better that way than waiting until age 62.  The pension won't be a lot, but it will help (along with SS) in providing a modest guaranteed income floor.

A key point is the fact that I signed on with Uncle back when the FERS employee contribution was miniscule.  So it would be crazy for me to cash out those contributions and forgo the pension.  If you are paying the current onerous employee contribution, your situation likely is quite different.  Especially if you only have 5 years in - your pension likely won't amount to anything, especially after inflation eats away at it for a few decades.

JJ-

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Re: How many Feds here hanging on for MRA?
« Reply #146 on: October 05, 2021, 07:25:50 PM »
Has anyone left after five years but well before MRA and anticipates a small pension at 62? That will likely be our situation. Can't imagine hanging around for another 15 years.

Yes.  I left after 15 years, but well before MRA.  As things stand now, I'm planning on taking my pension when I reach MRA (about 57 for me), because cFiresim says I'll come out slightly better that way than waiting until age 62.  The pension won't be a lot, but it will help (along with SS) in providing a modest guaranteed income floor.

A key point is the fact that I signed on with Uncle back when the FERS employee contribution was miniscule.  So it would be crazy for me to cash out those contributions and forgo the pension.  If you are paying the current onerous employee contribution, your situation likely is quite different.  Especially if you only have 5 years in - your pension likely won't amount to anything, especially after inflation eats away at it for a few decades.

Fascinating that the math works out to take it at 57 instead of 62. I always assumed waiting the five extra years to waive the ~25% penalty was the better play. I guess I should start running numbers.

I'll end up having closer to 17 years but the last (next) 5-7 are expected to be at 3/4 time. No way I'm doing 20-22 more years to hang on for max pension+fehb at MRA.

Monkey Uncle

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Re: How many Feds here hanging on for MRA?
« Reply #147 on: October 06, 2021, 04:16:24 AM »
Has anyone left after five years but well before MRA and anticipates a small pension at 62? That will likely be our situation. Can't imagine hanging around for another 15 years.

Yes.  I left after 15 years, but well before MRA.  As things stand now, I'm planning on taking my pension when I reach MRA (about 57 for me), because cFiresim says I'll come out slightly better that way than waiting until age 62.  The pension won't be a lot, but it will help (along with SS) in providing a modest guaranteed income floor.

A key point is the fact that I signed on with Uncle back when the FERS employee contribution was miniscule.  So it would be crazy for me to cash out those contributions and forgo the pension.  If you are paying the current onerous employee contribution, your situation likely is quite different.  Especially if you only have 5 years in - your pension likely won't amount to anything, especially after inflation eats away at it for a few decades.

Fascinating that the math works out to take it at 57 instead of 62. I always assumed waiting the five extra years to waive the ~25% penalty was the better play. I guess I should start running numbers.

I'll end up having closer to 17 years but the last (next) 5-7 are expected to be at 3/4 time. No way I'm doing 20-22 more years to hang on for max pension+fehb at MRA.

Yes, it works out the same way for SS - slightly better outcome (in terms of max SWR) if I take it at 62 vs waiting until 67.  Both SS and the FERS pension are designed to be actuarially neutral.  You get the same expected lifetime payout regardless of when you start taking it.  Starting as early as possible reduces withdrawals from your portfolio a little earlier, which mitigates sequence of return risk to a small degree, and perhaps gives a little boost from the presumably higher rate of return earned by your invested assets.  However, this is all highly situation dependent, based on the amount of your pension/SS, the size of your portfolio, how you have it invested, your age and assumed life expectancy, etc., etc.  I would encourage everyone to run their own numbers based on their own situation.  And re-run them right before starting any benefits.

elysianfields

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Re: How many Feds here hanging on for MRA?
« Reply #148 on: October 06, 2021, 07:47:52 AM »
A key point is the fact that I signed on with Uncle back when the FERS employee contribution was miniscule.  So it would be crazy for me to cash out those contributions and forgo the pension.  If you are paying the current onerous employee contribution, your situation likely is quite different.  Especially if you only have 5 years in - your pension likely won't amount to anything, especially after inflation eats away at it for a few decades.

That's a huge point, and makes staying on more costly for people who started working for the man more recently.

Fortunately, like @Monkey Uncle I joined early enough to maximize my return on that miniscule investment.

While the pension is OK - in the Foreign Service we get 1.7% x High-3 x years for the first 20 years, 1.0% for every year thereafter - I think the FEHB benefit is much more valuable, even if the employee's contribution to health care has been increasing faster than inflation.  Thoughts?

charis

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Re: How many Feds here hanging on for MRA?
« Reply #149 on: October 06, 2021, 08:11:38 AM »
As a later joiner, if I stayed for 5-6 years, I'm looking at a pension of ~600-700/month 20+ years from now for ~30k in contributions. A five year vest is rare these days and it seemed not worth pulling the $ out, but now I don't know. If the stache does well, it's not enough to make a difference, if it doesn't, might be nice to have in the background.
« Last Edit: October 06, 2021, 08:35:01 AM by charis »

 

Wow, a phone plan for fifteen bucks!