By Tammy Flanagan
March 17, 2006My recent column on projecting your retirement income attracted a lot of reader feedback. Here are excerpts from some of the messages I received, with my responses:
When proposing retirement calculations, please use a more statistically "average" retiree for your calculations. [According to] the Federal Civilian Workforce Statistics "fact book," that would be a GS-9 to GS-10, not a GS-13, step 6 (in the "rest of U.S." category for 2006), as your $85,000 would indicate.
I used a higher salary since this article was written for Government Executive. (This is actually a low salary for an executive).
Great article. However, I disagree with including the Flexible Spending Account as a deduction from current net income, since it's money that still can be spent. In my case, with four family members who all wear glasses and one who is in the midst of braces, it's money I would spend anyhow -- whether I work or am retired. If FEHBP covered dental better and vision at all, it might be different.
I agree that money set aside for FSA will still be spent after retirement, but I included it on the salary side since it affects taxable wages.
Re: Federal income tax, there's no explanation of how it's computed. Suggest a footnote or a link to the exact page on the IRS website to determine what your post-retirement taxes will be.
There is no way to compute actual taxes without more information. I'm trying to capture a snapshot using a worksheet that should only take someone a few minutes to complete. I used a very general estimate of about 22 percent total federal/state withholding. The idea is to realize that taxes on a full salary are not the same as taxes on a retirement benefit. Also, I only applied the tax to the salary after FSA, FEHBP and TSP withholdings.
How does a 56-year-old FERS employee with 34 years of service making $85,000 per year only get a gross retirement pension of $17,765? That's less than 21 percent. Don't FERS employees who retire before age 62, but who still reach the minimum retirement age with 30-plus years of service get 1 percent per year -- thus a 34 percent pension (presuming that the $85,000 is the high-3 average salary)?
Many FERS employees who are currently eligible to retire have spent a portion of their career in another job (in the private sector or the military). Since FERS covers employees hired after 1983, the most FERS service someone could have right now is about 22 years.
My example covers a FERS employee who is eligible for Voluntary Early Retirement. The requirements for VERA under FERS are age 50 with 20 years of service or any age with 25 years of service (same as CSRS). There is no age reduction under FERS and the FERS supplement is payable at the minimum retirement age (55-57).
As a government employee who has to pay my former spouse a court order award, there is no way to figure that amount to determine if I can afford to retire. I have been told that OPM will compute how much my former spouse will receive from my divorce decree; therefore, that computation cannot be performed until after I retire.
If you wish to find out how much your former spouse will receive based on the court order, I recommend getting a retirement estimate from your personnel office and having the attorney who drafted the court order compute the amount to which the former spouse is entitled.
Overall, my main thought when I wrote my previous column was to provoke employees to think beyond the retirement estimate. I have had several conversations with employees in recent weeks who have worked for 30-plus years and felt that they couldn't afford to retire. They were comparing their "gross" income to their "gross" retirement. Once we looked at the "net" it was much more comforting!
Thanks for all of your comments, and keep 'em coming, using the "See Reader's Comments/Add Your Own" link at the top of the page.
By Tammy Flanagan
March 17, 2006