Phased Retirement: The Bottom Line

• By Tammy Flanagan
• June 14, 2013
• comments

Last week, we looked at the proposed rules governing the new phased retirement option in government, under which an employee could choose to work part time while receiving a partial retirement benefit. This week, let’s look at how a pair of partial retirement scenarios would play out under the government’s two main retirement systems.

Civil Service Retirement System

Suppose Pat, a 55-year old CSRS employee with 32 years of service and a salary of $100,000, wanted to shift to half-time employment. If Pat retired completely, her annuity would be $60,000. Under phased retirement, if Pat went to half-time service, the annuity would be computed as if Pat were fully retiring. However, she would be paid half of it, or $30,000 per year, plus $50,000 per year in salary, for a total income of $80,000.

Let’s assume Pat found this a desirable arrangement, and continued it for five years before deciding to fully retire. During this time, suppose Pat’s annuity increased through cost of living allowances to $36,000 per year, and her salary went up to $120,000.

Pat would then have an annuity computation made as if she had been ...

Let The Confusion Begin!

• By Tammy Flanagan
• June 7, 2013
• comments

The option of a phased retirement -- being partly retired while working part-time -- is closer to becoming a reality in the federal government. This week, the Office of Personnel Management issued proposed rules for allowing employees to work a part-time schedule while beginning to draw federal retirement benefits. The comment period on the proposed rules ends Aug. 5. Afterwards, OPM will publish final rules and then issue new forms for agencies to use in implementing the program.

In the meantime, the proposed rules are likely to generate a lot of questions -- and some confusion -- among employees. Here’s a look at what’s clear in the regulations, and what’s still up in the air.

Eligibility

To take advantage of phased retirement, employees must meet certain criteria:

• They must have been employed full-time for the preceding three years before the phased retirement begins.
• Civil Service Retirement System employees must be eligible for immediate retirement with at least 30 years of service at age 55 or with 20 years of service at age 60.
• Federal Employees Retirement System employees must be at their minimum retirement age (MRA) with at least 30 years of service or 20 years of service at age 60 ...

65 and Still Working

• By Tammy Flanagan
• May 31, 2013
• comments

When it comes to retirement, 65 may be the new 45, at least for some people. With good health and better health care, many of us are feeling good and maintaining an active lifestyle well into our later years.

I like to tell people attending my retirement seminars about a man who was hired into federal service at age 74 and worked for 22 years before retiring at 96. Then I ask them how long they think he got to enjoy his retirement. The answer: 11 years. He died at age 107. The moral of this story is that retirement dates are different for everyone and only you will know when the time is right for you.

According to a recent analysis from the Office of Personnel Management, more than 177,000 federal employees are between 60 and 64 years old, and almost 85,000 more are 65 or older. This might explain why I get so many questions from employees who are confused about enrolling in Medicare at 65.

So this week I wanted to focus on a single question: What should you do about Medicare if you’re still working for the government at 65?

The information I ...

Beneficiary Beware

• By Tammy Flanagan
• May 24, 2013
• comments

You might want to keep this column attached to your TSP-3 beneficiary designation form.

My associate Joe Sullender, senior vice president for investments at Wells Fargo Advisors, recently became aware of a potential tax consequence of leaving your Thrift Savings Plan balance to your spouse in a beneficiary participant account. After reading what comes next, you might decide you need to consult a CPA, an estate planning attorney and a financial adviser if you inherit an IRA, 401(k) or TSP account.

If you are married, it is most likely you would want your spouse to inherit the balance of your TSP account. This would happen automatically through the standard order of precedence if there is no designated beneficiary on file, in which case the spouse is first in line to inherit the benefit. If your spouse's share is $200 or more, the TSP would maintain the beneficiary participant account and invest the entire share in the Government Securities Investment (G) Fund until your spouse makes a different investment choice or withdraws the money as a single payment, monthly payments, annuity or a combination of these options.

In the case of a non-spousal TSP participant account -- which is different ...

The Great Claims Processing Pileup

• By Tammy Flanagan
• May 17, 2013
• comments

Last week, the House Subcommittee on Federal Workforce, Postal Service and the Census met to hear testimony on the following question: "Is the Office of Personnel Management Processing Federal Worker Pension Claims on Time?" Last month, I addressed the issue of the retirement backlog in a column. Dozens of people posted comments afterwards, many of them recent federal retirees who indicated OPM is indeed making progress in reducing the backlog of claims and processing retirement applications in a timely manner.

At the hearing, Ken Zawodny, associate director of OPM for retirement services, testified that this year, the processing time for the average retirement case is less than 90 days, down from 136 days in 2012.

But OPM is clearly concerned about maintaining progress in reducing that even further. This year’s budget sequester has caused the agency to eliminate overtime for claims processors. At the same time, ongoing efforts to cut the postal workforce have added more retirement applications to the pile.

From January through April 2013, OPM received more than 60,000 new retirement applications -- 43 percent more than during the same period in 2012, and 44 percent more than projected. Still, the efforts of OPM employees resulted in ...