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

8 Reasons Your Retirement Estimate May be Inaccurate

I’ve written several times in the past about the importance of getting a retirement estimate from your agency well in advance of your planned retirement date.

The only problem is that sometimes these estimates don’t accurately predict what you can expect in retirement. Here are eight of the most common causes of an inaccurate retirement estimate.

1. Improper Documentation

If a portion of your federal career has not been properly documented in your electronic official personnel folder, then your agency will not be able to accurately account for your complete length of service needed to compute your retirement benefit. It is your responsibility to ensure that your eOPF contains the records that document your federal career.

When is the last time you looked at your eOPF? You should see a record of beginning and ending dates of every period of federal employment as well as records of military service and any other service that may be potentially creditable towards eligibility and computation of your federal retirement benefit. If you notice there are missing records that would document your career more accurately, contact a retirement specialist at your agency.

2. Sheer Complexity

Your estimate should be prepared by an...

How to Estimate Your Retirement

The Office of Personnel Management determines exactly how much each federal employee will get in retirement benefits when the time comes to leave federal service. But that process can take a long time. Currently fewer than 70 percent of new retirement claims received by OPM are processed in less than 60 days. And once your application has been processed, it’s too late to make sure you understand just how much money you’ll have in retirement.

That’s why it’s important to get an estimate of your benefit long before you actually go out the door. You can get one from your agency, whether you’re under the Civil Service Retirement System or the Federal Employees Retirement System. I’m often asked to review a CSRS or FERS retirement estimate to see if I can detect anything that might be missing or subject to question before an employee moves forward with his or her plans for retirement.

In addition to requesting such an estimate--which is a very important part of the retirement planning process--you can get informal estimates in a variety of ways:

  • You can do your own estimate simply by using old-fashioned math: Compute your high-three average...

Don’t Rush to Withdraw Your Retirement Savings

Last week President Obama signed into law a measure allowing federal law enforcement officers, Customs and Border Protection officers, firefighters and air traffic controllers to access funds in their Thrift Savings Plan accounts without penalty under certain circumstances when they retire early.

The Defending Public Safety Employees’ Retirement Act ensures that such employees who retire in or after the year they turn 50 will not be subject to the 10 percent tax penalty on TSP retirement funds and other 401(k)-type plans tapped before the age of 59 and a half. 

The TSP Board says it’s reviewing the law and expects to publish information on its website about implementing it before the measure takes effect on Dec. 31.

It’s possible that other groups of employees with early retirement eligibility, such as Foreign Service Officers or employees of the Central Intelligence Agency, may also one day get penalty-free access to their TSP funds. But that would take another act of Congress.

Also, there are other exceptions to the 10 percent penalty. You can find a complete list on page 7 of the TSP publication, Important Tax Information about Payments from Your TSP Account.

If you are among those...

A Rude Annuity Shock

In the federal retirement system, what you don’t know can hurt you. This week, I present the story of a shocking—and arguably unfair—surprise the spouse of a retiree received upon his untimely death.

The case involves the quirky plan known as Civil Service Retirement System Offset. CSRS Offset is a version of CSRS established for employees who completed at least five years of civilian federal service creditable under CSRS, but who also had a break in federal service for at least a year that ended after 1983, and came under the Social Security system at some point in their careers. Further, when they returned to government, they didn’t go back into CSRS or the newer Federal Employees Retirement System, but rather into CSRS Offset. Such people pay Social Security taxes and a reduced CSRS contribution. Their CSRS retirement and survivor benefits are offset by the value of the offset service in their Social Security benefits. (If you need further explanation, here’s a previous column explaining CSRS Offset.)

Although CSRS Offset can work to the advantage of the employee, that is not always the case for a surviving spouse. Let’s look at why.

The “offset...

The TSP Quiz

Even the most experienced investors in the federal government’s retirement savings program, the Thrift Savings Plan, may find some things about it surprising. With that in mind, I decided to present a short quiz this week on TSP facts and statistics.

When you’ve completed the quiz, click here for the answers.

1. When should you make your request to withdraw funds from the TSP?

a. When you are 70 ½ years old, whether you are still working or are separated from federal service

b. No later than the end of February of the year after your separation from federal service if you are over age 70 ½

c. April 1 of the year after you are separated if you are already over 70 ½

d. The TSP does not require that you withdraw funds from your account until you want to

2. The TSP will declare your account to be abandoned when:

a. There is no activity in your account, such as interfund transfers, monthly withdrawals or contributions

b. You don’t respond to the TSP’s notice that you must make a withdrawal request by the required minimum distribution deadline

c. You are on active-duty military service

d. You neglect...