Turning On Your Benefits

The art of timing when you begin drawing on your various sources of income is key to ensuring a comfortable retirement.

The Office of Personnel Management received 5,135 new retirement claims in December. That’s on the low side compared to the average month, but typical for December, since these claims are mostly from employees who retired in November. The end-of-the-year surge, which in some years has exceeded 20,000 new retirement applications has yet to arrive at OPM’s doorstep.

In the meantime, the employees who have retired at the end of the 2020 leave year are in their first weeks of the transition from employee to annuitant.  

In the scenario below, you will see the progress of moving into retirement from the perspective of a Defense Department employee who retired on Dec. 31. He has decided to “turn on” his Federal Employees Retirement System benefit and his Social Security retirement benefit, and to begin taking withdrawals from his Thrift Savings Plan investments.

Some new retirees choose not to start receiving all of their benefits at the same time for a variety of reasons, such as:

  • There is an eight-year window for starting to receive Social Security retirement benefits. This begins at your first eligibility at age 62 and ends at 70 when you have maximized delayed retirement credits. For more information, you can watch  thi webinar conducted by the Bipartisan Policy Center: Social Security Claiming: Opportunities and Considerations.
  • Because of large lump sum leave payouts, some new retirees delay TSP withdrawals and use their final leave payout to cover expenses in the initial months of retirement. That’s a good way to let the dust settle and figure out exactly how much additional income you need.
  • Some retirees return to the workforce after their federal careers have ended. They generally don’t need to find work with benefits, because their insurance is provided through their federal retirement.

Here is a report from the Defense Department retiree on how they are progressing through the transition of employee to annuitant:

In November it was confirmed that my human resources office had completed reviewing my SF 3107, Application for Immediate Retirement (FERS). I had submitted the application in early October.

I received my first Social Security check on Dec. 23. I am at my full retirement age so my income will not affect the amount of my benefit.

On Dec. 30, I did my exit interview, since my retirement was effective at close of business on Dec. 31, which was my paid holiday. I turned in my badge and other equipment I was issued.

My payroll office was the Defense Finance and Accounting Service and they were notified of my separation. Here are some retirement tips from DFAS: “When the following information appears on your Leave and Earnings Statement, your retirement documents have been processed:

  • A statement indicating that your FERS or CSRS retirement data was sent to the Office of Personnel Management
  • Separation Date
  • Register Number
  • Payroll Office Number
  • Please note: Your retirement information must be submitted to OPM within 30 days of your retirement date. If this timeframe has passed, contact your human resources office immediately for your retirement action and/or package’s status."

On Jan. 6, I received my leave and earnings statement that showed my final pay for pay period 2 and my lump sum payment for annual leave of 448 hours.

My final payment hit my bank account on Jan. 8.

On Jan. 9, I filled out the online application to receive periodic monthly payments from the TSP. This was fairly simple to complete, but I need to obtain my spouse’s notarized signature on the application (required of all applications of employees who separated under FERS; CSRS retirees are only required to have their spouse sign acknowledging the withdrawal request). I will eventually send this form to the TSP by mail, fax or I can upload it to the TSP website. The TSP cannot process my withdrawal request until my agency notifies them that I’ve separated from service and provides the date of my separation. It usually takes up to 30 days after the actual date of your separation for them to receive this information. There will be a change in your status on the account area of the TSP website showing that you are no longer an active employee.

I do sort of make out with the 2021 1% pay adjustment. I retired as a GS 13-10 at the “Rest of U.S.'' locality rate. I cashed in 448 hours of unused annual leave. My hourly pay rate in 2020 was $56.83, and if I was still employed, my hourly rate for 2021 would have increased to $57.40/hour. The difference in a payout of 448 hours at the new pay rate is $255.36 (before taxes). Not much, but I’ll take it! The extra money was not included in my final salary payment, but hopefully will be included in the next pay cycle. The lump sum annual leave is generally paid at the salary that the employee would have received if they had remained on the agency rolls to use the balance of the leave. 

I now have both Medicare Parts A & B. OPM will process my open season change to Blue Cross Blue Shield Basic and I should be reimbursed $800 for Part B premiums next June or July once I can show that I’ve spent that much in Medicare premiums. It’s great that they provide at least a partial reimbursement for Part B premiums. In addition, it will be nice to not have out of pocket costs when I need most health care since this is one of the plans with “wraparound” coverage, meaning when Medicare pays first, the FEHB plan will cover the rest, leaving me with $0 out of pocket cost for most medical expenses other than if I go out of the BC/BS Preferred Provider network and for things that aren’t covered by Medicare Parts A & B, such as dental, vision, hearing aids and prescriptions. 

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