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

How to Pick a Financial Adviser

One of the questions I get asked over and over at my seminars is: “How do I find a financial adviser who I can trust and who understands federal retirement benefits?” Sometimes, I get mistaken for such an adviser, since I talk about financial issues in the context of discussing federal retirement benefits. It’s true that the topics of benefits and financial planning are intertwined. But there’s a difference between the two.

Think of it this way: If you ask a retirement specialist at your agency, “When should I retire?” they would be able to tell you when you would be eligible for retirement and might even help you pick a date that maximizes your retirement benefits. But the question, “When can I afford to retire?” requires a different kind of expertise -- that of a financial planner.

Who has been your financial planner so far? The answer may be yourself -- and you may have done a great job. But you may also be reaching the point where you need some outside help to ensure your decision-making is sound when it comes to planning for life after government.

The Old and the New

Under the older Civil Service Retirement ...

Retired and Rehired

The new phased retirement option has been getting lots of attention lately, but there are other options for continuing to work for government after retirement that have been around a lot longer. In fact, there are three of them.

Personal Services Contractor

The first involves an agreement between a retiree and his or her agency to be rehired under a personal services contract. This involves providing a predetermined amount of compensation for a prescribed amount of work to be completed. In these cases, the individual is reemployed, but without any benefits of federal employment.

Those under a personal services contract receive a 1099 form from the IRS at the end of the year rather than W-2 that employees receive, since they are being paid a fee for a service. For tax purposes, contract workers are self-employed and responsible for both the employer and employee share of taxes due.

Contractor Employee

Another way for an employee to be rehired into the same or similar work would be to work for a private sector company that does business with the federal government. In this situation, the employee retires and then is rehired by a company that holds a contract with a particular ...

Phased Retirement: Case Studies

With all the news lately about the upcoming phased retirement option for federal employees, many people are considering whether it makes sense for them. To help clarify the issues at stake, let’s look at a couple of case studies, one for an employee under the Federal Employees Retirement System and another for someone covered by the Civil Service Retirement System.


Let’s say Jim is 66 and still loving his federal job. He has 30 years of service and a high-three average salary of $100,000. His retirement would be computed as 1.1 percent x 30 years of service x $100,000, or $33,000 per year (before any reductions for survivor benefits). He would love an extra day or two a week to play golf. Under phased retirement, he can collect half of his salary ($50,000) and half of his FERS retirement ($16,500).

Here are some factors Jim should consider as he weighs phased retirement:

Social Security: Because Jim is over the full retirement age for Social Security and is no longer subject to the earnings limit, he could begin to draw benefits (let’s say $20,000 a year). That brings his total ...

A Phased Retirement Q&A

Clearly, a lot of federal employees are interested in the idea of stepping gently into retirement using the new phased retirement option being unveiled this fall. I’ve received quite a few questions from employees about how phased retirement will work. The answers to some of them will have to wait until agencies issue their individual guidance for implementing the program. The Office of Personnel Management will be issuing separate guidance here to assist agencies and employees with administrative and procedural matters.

For now, let’s look at some of the questions that already have answers.

How will my retirement benefit be computed before and after I enter phased retirement?

Here’s the answer from OPM: “Upon entry into phased retirement, OPM will compute the employee’s ‘phased retirement annuity’ using the three highest consecutive average pay years the employee had accrued up until that point. During phased retirement, if a new high-three average pay were to accrue, it would be reflected in the computation of the composite annuity. At full retirement, the ‘phased retirement annuity’ portion of the employee’s annuity would not change; but, the ‘fully retired phased component’ portion would take the new average pay into account ...

Here’s Some Good News About Your Retirement Benefit

Are you in the mood for some encouraging news?

Every year, the Congressional Research Service issues a report called, “Federal Employees’ Retirement System: Budget and Trust Fund Issues.” This year’s report states that there is no point over the next 80 years at which the assets of the Civil Service Retirement and Disability Fund are projected to run out. The CSRDF provides retirement benefit payments for federal retirees covered under both the Civil Service Retirement System and the Federal Employees Retirement System.

The CSRDF held a balance of $835.7 billion at the end of fiscal 2013, and obligations from the fund totaled $77.5 billion. Those consisted mostly of annuity payments to retirees and their survivors. The fund also covers payments to estates of deceased federal employees and retirees of any money left in the employee or retiree’s retirement account. Those added up to $445 million in fiscal 2013. Administrative expenses for the fund totaled $128 million, or 0.17% of total obligations. (It’s also interesting to note that $2 million was transferred from the CSRDF to the Merit Systems Protection Board last year to pay for favorable retirement decisions for employees and retirees who won ...