Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

How to Know When It’s Time to Go

Last week’s column sparked a discussion on deciding when to retire. Some federal employees are eager and able to retire early, while others feel the need to keep working much longer. This discussion serves as a reminder that retirement planning is not like a Ron Popeil rotisserie oven--you can’t just “set it and forget it.”

Under the older Civil Service Retirement System, retirement decisions were fairly simple. CSRS was designed to provide a single benefit for life that would replace up to 80 percent of your salary if you worked long enough. People came into federal service after high school or college, worked for at least 30 years, and then began to consider the golden years of retirement. They could look forward to a steady monthly check adjusted for inflation for the rest of their days--and if they were married, they could provide a survivor benefit.

It’s very different for those under the Federal Employees Retirement System. They need to start thinking about retirement when they are first hired and continue throughout their careers. With investments in the Thrift Savings Plan one of the key legs in the FERS retirement stool, employees have to make many...

The Difference Between a Supplement and Social Security

Those who have spent a long career in government and are covered under the Federal Employees Retirement System are eligible for a benefit known as the FERS Supplement. (I’ve written about the supplement in the past.) To get the supplement, you have to be younger than age 62 at retirement and eligible for an immediate, unreduced, non-disability FERS basic retirement benefit. You’re eligible at your minimum retirement age (between 55 and 57, depending on your year of birth) with at least 30 years of creditable service, or age 60 with at least 20 years of creditable service.

I recently received an email related to the FERS Supplement from Russ Claus, who retired from NASA two years ago. He started as a CSRS employee, but then transferred to FERS for the last 12 years of his federal career. So he was entitled to the FERS supplement until he turned 62 this year. He wrote:

Last week I visited a local Social Security office and talked to a well-informed agent to discuss options for my Social Security filing.... One thing surprised me during the interview: My Social Security payment at 62 was about $3,000 more per year than I...

Not Exactly Getting Rich

Last week, I took a fresh look at the Windfall Elimination Provision, which affects the Social Security benefits calculation for those covered under the Civil Service Retirement System, because they did not have Social Security taxes withheld from their salaries. According to the Congressional Budget Office, as of this year, about 1.4 million CSRS retirees may be affected by this provision if they also qualify for their own Social Security retirement benefit.

Last week’s column led to lots of reader comments, like this one:

I know this is heresy to my fellow feds, but I believe that Congress essentially got things right when they established the WEP provision in 1983. Given the formula for computing Social Security benefits and its bias towards (apparent) low wage earning individuals, federal employees in those CSRS coverage, pre-Federal Employees Retirement System days indeed were being given unfair preferential treatment prior to the WEP's enactment in the computation of any Social Security benefit they might have claimed based on periods of non-federal employment.

I both agree and disagree with this statement. Social Security indeed was designed as a kind of insurance program, and is intentionally tilted to favor lower wage earners. Like...

When is a Windfall not a Windfall?

What if the government got rid of the Windfall Elimination Provision? Well, it did in April for some retirees--but unfortunately not those covered under the Civil Service Retirement System.

More on that in a bit. First, a little background.

Congress created the WEP in 1983 as a way to level the playing field for Social Security recipients. It covers employees who receive pensions related to work for which they didn’t pay Social Security taxes and who also receive Social Security retirement benefits from other work they performed that was covered by Social Security taxes. Federal retirees under CSRS, along with others who receive pensions from work not covered by Social Security, appear to be low wage earners from the standpoint of their Social Security earnings record. Under the WEP, their Social Security benefits are reduced in order to, the theory goes, eliminate the “windfall” they’d get from receiving full Social Security.

According to the American Federation of State, County and Municipal Employees, nearly 900,000 retired federal, state and local government employees are currently affected by the WEP. That number grows by about 60,000 retirees each year.

For many years, AFSCME, the National Active and Retired Federal...

How About Some Good News?

In 1974, Rufus and Chaka Khan released "Tell Me Something Good," a catchy tune written by Stevie Wonder. It was one of those songs that made you turn up the volume and roll down the windows, so I’m using it as inspiration this week. With so much negative news about federal retirement lately, I’ve come up with a mini-hit parade of good things that are going on.

Self Plus One Health Coverage

The Office of Personnel Management is in the process of implementing a new enrollment type, self plus one, under the Federal Employees Health Benefits Program effective in January 2016. The plan will cover the enrollee and one eligible family member (a spouse, dependent child under 26, or dependent child 26 or older who is incapable of self-support because of a mental or physical disability that existed before they turned 26).

You’ll have to act during the 2015 FEHBP open season this fall to take advantage of the new option. It’ll be less expensive than the current self plus family choice. What remains to be seen is whether for a married federal couple (two federal employees or retirees), self plus one will be less expensive...