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

8 Myths About Federal Retirement

Sometimes it seems like I’ve made a career out of debunking urban legends about federal retirement benefits. Anyone who has worked in a federal personnel office has heard many claims that just simply aren’t true, no matter how many people have passed the information around. Here are some of the common myths I’ve encountered recently.

Civil Service Retirement System

Myth: Members of Congress want to move the remaining employees covered under CSRS out of the system.

Truth: They don’t have to. CSRS employees currently make up only 4 percent of the federal workforce. More than 70 percent of all new retirement claims are from people under the Federal Employees Retirement System.

Myth: CSRS retirees are not entitled to Social Security retirement benefits.

Truth: Anyone who earns 40 credits of coverage under Social Security is eligible for a Social Security retirement benefit at age 62 or later. Individuals who receive a pension from work not covered by Social Security (such as CSRS) may be affected by the Windfall Elimination Provision, which will cause the benefit to be computed under a modified (read: lower) benefit formula. In addition, if you are eligible for spousal or widow’s benefits...

As Costs Go Up, Benefits Don’t Keep Pace

You probably are already aware by now that health care premiums are rising next year, while pay increases and cost of living adjustments for 2017 are nothing to get excited about.

Retirees will know for sure after Oct. 18 how much COLAs for Civil Service Retirement System, Federal Employees Retirement System, military retirement and Social Security benefits will go up in January. That’s when the Bureau of Labor Statistics will release the Consumer Price Index for the month of September. According to a formula set in federal law, September is the final month needed to determine the retiree COLA. It is likely to be small, based on monthly price increases so far in 2016. According to the American Institute for Economic Research, the benefits will most likely rise between 0.2 percent and 0.5 percent in 2017.

Civilian federal employees should know by Nov. 30 how much their salaries will increase for 2017. That’s President Obama’s deadline for deciding on a locality pay plan that likely will include a 1 percent pay increase and a 0.6 percent locality adjustment.

Health care costs are increasing more rapidly than that. The Office of Personnel Management recently announced...

What Is the FERS Supplement Worth?

One of the unique features of the Federal Employees Retirement System is the supplement it offers to younger retirees. About 40 percent of FERS retirees receive the supplement in addition to the FERS basic retirement benefit and income from the Thrift Savings Plan. It is designed to provide additional income to bridge the gap from the time they retire until they’re old enough to qualify for Social Security.

The supplement is a temporary payment. It doesn’t receive cost of living adjustments and is not paid after age 62. The supplement is treated as taxable income in the same manner as the FERS basic benefit and will be included on IRS form 1099-R along with other taxable FERS retirement income. The supplement is calculated by the Office of Personnel Management, rather than the Social Security Administration.

The FERS supplement does not directly affect your Social Security retirement benefit. But if you’re receiving the supplement, it means that you retired earlier than age 62 and are no longer working and earning a substantial salary, so indirectly, your lifetime history of Social Security covered earnings will be smaller than reported on your Social Security estimate.

Employees are eligible for the...

Best Dates to Retire: Taking Your Leave

Last week, I presented my annual calendar showing the best dates to retire in 2017. I noted that there are a lot of different factors to consider in settling on a date, and the best days aren’t necessarily the same for all employees.

One of the most significant considerations is how much annual leave you have accrued and what you can be paid for it. Let’s look at a couple of examples.

Stockpiling Leave

Dan plans to retire on Dec. 31, 2017. He will carry over 240 hours of annual leave on Jan. 8, 2017 (the maximum he is allowed to keep in his account at the beginning of the leave year).

Throughout his final year of employment, Dan plans to save the annual leave that he earns each pay period. If he retires on Dec. 31, 2017, he will accrue 25 leave accruals. He earns 8 hours per leave period, so that will be an additional 200 hours of leave plus the 240 hours that he had at the beginning of the year.

If Dan doesn’t use any annual leave during 2017, he will be paid for 440 hours of unused annual leave. If his annual...

Best Dates to Retire 2017

Download the Best Dates to Retire 2017 Calendar

As has been my custom since I started to write this column more than 10 years ago, I am presenting the annual best dates to retire under CSRS, CSRS Offset and FERS for next year. Federal employees can retire the day they become eligible or any day thereafter, but there are some days that are better than others to choose as your date of final separation from government.

Selecting the best date to retire is becoming more complicated because federal retirement has become more complicated. Until 1984, there was only the Civil Service Retirement System, under which a single retirement check was the sole source of retirement income for most federal retirees. Only about 4 percent of current federal employees remain under CSRS.

Today, the more flexible Federal Employees Retirement System provides income from a smaller basic benefit, a retirement savings account (the Thrift Savings Plan) and Social Security. In many cases, FERS employees have had private industry and military service in addition to their federal careers that may have produced additional sources of retirement income.

Here are some things to consider if you’re contemplating retiring in 2017:

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