Retirement: Cancun or the Titanic?

The 2012-2013 time period could set a new record for federal retirements. That’s both the good and the bad news. Good if you are staying in government but are currently stuck on the promotion ladder. Not so good if you have to spend your first few months of sleeping late worrying about paying bills and which brand of cat food to serve for dinner.

If you hope to retire this year with a $25,000 buyout, then the odds are you are out of luck until at least October, when a new round of buyouts may be announced. The first three months of the fiscal year (October through December) are the most cost-effective for agencies to lure workers off the payroll.

Nonpostal buyouts ($25,000 before deductions) by themselves are not a good reason to quit or retire. According to the pros, if you desperately need the money, then you should keep working and give up Starbucks, cable, smoking, etc., and keep your day job and steady paycheck. But if you are ready and financially able to retire, waiting a few months for the shot at a buyout is worthwhile. However, there is a possible financial downside. You can sidestep it, however, if you start building a sizable post-retirement nest egg right now.

Most retirement claims documents are on paper. Despite the computer wizards on “NCIS” and “Criminal Minds” — who can find anything in 35 seconds — federal retirement claims must be eye-balled by skilled human beings. That fact, plus a dozen agency buyouts, continuing Postal downsizing, and the lingering pay freeze, has created a backlog at the Office of Personnel Management. OPM has made processing retirement claims its No. 1 priority. But the going is still sometimes slow.

Federal Times reporter Stephen Losey has been tracking the retirement upsurge. He says that OPM has cut its applications backlog to 52,000 as of March. But it got 500 more new applications than expected in January, 815 more in February and 2,000 more than anticipated in March. He talked about the clogged retirement pipeline yesterday or our Your Turn radio show. To listen to it, click here.

Retirees are supposed to get interim payments equal to 80 percent of their projected final annuity. But stuff happens, and some retirees have been on half rations (some as little as 40 percent of their projected pension) for more than 12 months.

Bottom line: When and if your agency offers buyouts, most will come in the last three months of this year, or January 2013. If you are eligible you should be prepared to move quickly and have enough money saved up to pay your monthly expenses until your full annuity payment begins arriving. Tapping your TSP — unless you are 70 or older — to meet normal living expenses is not a good idea.


By Gillian Brockell

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