RIF, buyout, early retirement: Are you ready?

Suppose you work for the Army, Navy, Air Force or Marine Corps, and you get one of the new, Defense Department-only $40,000 buyout offers. Is it worth it? Are you ready? Can you afford to leave earlier than planned? Imagine you are with the State or Interior departments, or even the Nuclear Regulatory Commission, and the choice is the traditional 1990s $25,000 buyout. Or maybe you have to go through the sometimes torturous, often messy and time-consuming reduction-in-force procedure. Again, the question is, what happens if your job disappears with or without a buyout or severance pay?

Many people have some sort of retirement plan. But it’s unlikely that many have a Plan B, in case the date when they retire or otherwise leave the payroll is advanced by a matter of years. And comes as a surprise with a window of only a few weeks to decide what’s best for you. We asked Tom O’Rourke, a specialist in federal employment law, and estate planning. Here’s his list:

Factors to consider in evaluating a buyout offer

1. How much will I get after taxes?

  • State and federal income taxes.
  • Social Security and Medicare taxes.
  • Taxes can make a $25,000 buyout worth $14,800.

2. Can I afford to do it?

3. What are my plans after taking the buyout?

  • Full retirement.
  • Another job.
  • Consulting.
  • Is there a market for my skills?
  • What do I need to do to tap this market?

4. Sources of income after retirement

  • Funds from abuyout. How long will it last?
  • Annuity — How much will it be after taxes and other withholdings?
  • Social Security — Does it make sense to take it as early as possible or to defer as long as possible?
  • Tapping into your TSP.
  • What are your options?
  • Tax costs?

5. What do you plan to do after you retire? What does your spouse think of these plans?

6. Do you plan to downsize or move? If so, what is the impact on your taxes or your estate plan?

  • What, if any, changes need to be made to your existing estate plan (if you have one)?

Want more? Got questions? Listen to our Your Turn radio show today at 10 a.m. on Federalnewsradio.com or at 1500 AM in the D.C. area. Tom O’Rourke will be our guest and talk about what you should know, and maybe be doing, regardless of when you retire or leave government. If you have questions for Tom, send them to me before the show at: mcausey@federalnewsradio.com.

Nearly Useless Factoid

By Michael O’Connell

The phrase “the best laid plans of mice and men” finds its origin in the poem “To a Mouse, on Turning Her Up in Her Nest With the Plough, November, 1785” by Robert Burns.

Source: Wikipedia

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Your Turn with Mike Causey


Learn about everything from pay, benefits and retirement, to buyouts, COLAs and pay freezes. Call the show live Wednesdays from 10-11 a.m. at 202-465-3080 with your questions. Dial 605-562-0264 to listen live from any phone. Follow Mike on Twitter and send him an email with your questions and comments. Subscribe on Apple Podcasts or Podcast One.

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May 14, 2021 Close Change YTD*
L Income 22.8205 0.092 2.39%
L 2025 11.6927 0.0945 4.76%
L 2030 41.1018 0.4273 6.01%
L 2035 12.3241 0.1406 6.56%
L 2040 46.5644 0.5777 7.12%
L 2045 12.7395 0.1694 7.60%
L 2050 27.8739 0.3945 8.10%
L 2055 13.6430 0.2304 10.05%
L 2060 13.6429 0.2305 10.05%
L 2065 13.6427 0.2305 10.05%
G Fund 16.5839 0.0007 0.40%
F Fund 20.6395 0.0427 -2.55%
C Fund 62.4643 0.9226 11.83%
S Fund 80.5153 2.0505 12.34%
I Fund 38.2575 0.6353 6.73%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.