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

Where Benefits Are Today

In last week’s column, Where Retirement Benefits Came From, we looked at the origins of the retirement system, both nationally and in the federal government. This week, let’s examine how we got to where we are today.

Recent history in regard to private sector as well as federal retirement plans starts with the invention of the employer-sponsored savings plan in 1978. At about the same time, changes in the tax code put company pension plans in jeopardy by requiring them to account for their pension liabilities. According to a 2014 article in Bloomberg Pursuits, Richard Stranger, a policy analyst on the staff of the congressional Joint Committee on Taxation, was the primary author of the 869-word section 401(k) of the 1978 tax law that created employer-sponsored plans.

The 401(k) provision encouraged employees to direct part of their salary into retirement accounts without paying taxes on it up front and established basic rules to prevent too much of the benefit from going to executives. Theodore Benna became known as the “father of the 401(k)” because he created and gained IRS approval of the first such savings plan while serving as vice president of the Johnson Companies...

Where Retirement Benefits Came From

Martin Luther King once said, “We are not makers of history, we are made by history.”

When I was in school, I had a hard time coming up with a good reason to study history. My history teacher was very theatrical and tried to bring the subject to life by changing the tone of his voice from a whisper to a shout, but his extraordinary effort was lost on me. I just thought he was a little kooky. But if we are indeed shaped by history, then studying it may help us understand how we got to where we are today and where we might be headed in the future.

The topic of retirement was what actually made me passionate about learning more about the past. To me, it’s a fascinating story.

The inability to work due to illness, disability and the frailty of old age is nothing new. Saving for retirement dates back to the ancient Greeks, who stockpiled precious oils that kept well over time. Gradually, our ancestors developed the idea of charity and responsibility of family members to take care of each other.

One of America’s founding fathers, Thomas Paine, backed one of the earliest...

When Life Takes an Unexpected Turn

One of the “what-if’s” of any career is that an unanticipated health problem could derail your future retirement plans. This has happened to many federal employees who, due to an illness or injury, are no longer able to perform their federal job, but they’re also not yet eligible to retire.

For some, recovery is possible and the time spent away from work can be covered by sick leave or some other benefit. The government does not offer short term disability protection specifically, but offers a wide range of leave options and workplace flexibilities to assist employees who need to be away from the workplace. These include annual leave, sick leave, advanced annual or sick leave, leave under the Family and Medical Leave Act, leave without pay, alternative work schedules, credit hours under flexible work schedules, compensatory time off and telework. Agencies may also have a voluntary leave bank program. It is important for the employee to remain on the payroll for as long as possible so that, upon recovery, they can return to normal duties and continue to plan for retirement when they are financially and mentally ready. If an employee dies prior to retirement, certain family members...

Benefits Cuts Are (Probably Not) Coming!

In 1986, not long before the implementation of the Federal Employees Retirement System, CQ Researcher reported on the Reagan administration’s plans to replace the existing Civil Service Retirement System.

“The president's 1987 budget once again proposes to make the new federal retirement system akin to private pension plans, but with one big difference,” the report stated. “Unlike most private sector workers, federal employees contribute directly to their pensions—currently 7 percent of salary under CSRS, after taxes, which Reagan wants to increase to 9 percent. He objects to federal retirement without penalty as early as age 55, after 30 years of service. The president would raise the retirement age to 62. He also has asked Congress to limit cost-of-living increases in pension benefits, a provision most private-sector plans do not offer.”

Does any of this sound familiar?

Fast-forward to 2018, and President Trump’s new management agenda reiterates a proposal to alter retirement benefits. Office of Personnel Management Director Jeff Pon says requiring feds to wait five years to vest in their pensions “just doesn’t make sense” for the modern workforce. The administration recommends moving away from pensions altogether and toward a defined contribution-only system. This, officials...

Follow These Steps to a Smoother Retirement

The process of retiring can be smooth for some people and a nightmare for others. Is it just the luck of the draw? The good news is that according to the Office of Personnel Management, 76 percent of all claims received monthly are processed in 60 days or less. As of the end of February, OPM had a backlog of 24,225 Civil Service Retirement System and Federal Employees Retirement System claims waiting to be processed.

To help facilitate smooth processing of your retirement, you should take the following steps:

  • Update your pre- and post-retirement checklist. This 10-point pre-retirement checklist from USA Today includes some great ideas to prepare for the next chapter of your life.
  • Thirty to 90 days prior to your retirement date, complete the CSRS or FERS retirement application (along with a form to continue Federal Employees Group Life Insurance).
  • If you’re eligible and want to begin collecting Social Security retirement benefits at the same time as your CSRS or FERS retirement, you can file online.
  • Following your retirement, you will receive your final salary payment for the work performed through your retirement date. Remember that your salary is paid after it is earned, so you...