Suffering from pension envy? Welcome to the club

Do you have a touch of pension envy? Do you wish you could switch retirement plans with some of the younger or older people in your office. If so don’t worry about it. You don’t need therapy, at least not for that reason.

It’s probably safe to say that many if not most feds under the old Civil Service Retirement System envy their colleagues who are in the Federal Employees Retirement System. Most retired feds are covered by CSRS, which was replaced by FERS in the mid-1980s.

At the same time most FERS employees would probably move to the CSRS program in a heartbeat if they could, which they can’t. Most current federal and postal workers are under FERS which replaced the CSRS system in the mid-1980s. In 1987 workers were given the choice of remaining in CSRS or moving to FERS.

And they each have a point — with limits.

FERS was designed to shift more of the cost of retirement to workers and away from Uncle Sam, the employer. That’s the way most private companies do it. FERS offers workers a reduced — compared to CSRS — lifetime annuity. But people get and pay for Social Security coverage. And they can qualify for a matching government contribution of up to 5 percent for their Thrift Savings Plan.

In addition to saving the government money, FERS was designed for portability. The majority of people who sign up for government service do not actually retire from government so portability is a blessing.

Thursday’s column was about feds who would switch plans if they could. So today we have some feedback which may be helpful, maybe even reassuring to some:

“I’m CSRS and glad, but now and in the future for newer employees you’re much better off not being wed to a government-specific retirement plan (like CSRS) that isn’t mobile. Another thing is the TSP annuity is yours. Any government program could be cut in the future. Who’s to say they won’t cut pensions in the future?” — Steve, IRS

In yesterday’s column Wayne S., a retired law enforcement officer said folks who switched from CSRS to FERS were ‘short sighted’. This prompted another LEO to write:

“I’m [in] law enforcement and I’m one of those who switched over … got the rest of my Social Security quarters, was able to boost my TSP with the matching, had several years of [Social Security] small checks, worked as a re-employed annuitant a good period of what I call ‘hack and stack,’ stayed in shape health-wise, have a TSP balance of $900,000 — at least until the latest down turn — [and] rental property accumulated by the permanent changes of station coming in. [I] put my daughter through private school [for grades 1-12], University of Virginia, both paid off, [and the] University of Baltimore Law School [and] she is now an attorney for the government. The Ameritrade account is pumping and other positive things are going on.

“I could go back to work if I’d like but it would be nightwatchmen at the warehouse with cable TV and a cot. So I don’t know what Wayne S. is talking about — short term thinking, just saying.” — MMJ

“I enjoy your columns and thought I might comment on your most recent one concerning CSRS and FERS. One important aspect of the previous offers to switch to FERS was that your retirement is calculated based on the % of time worked under each retirement system. I switched after 75 percent of my pension base was under CSRS … which means 75 percent of my pension gets the full CSRS cost of living adjustment and only 25 percent comes under the FERS diet-COLA formula. So I still receive a nice pension.

“This applies to COLAs as well. For instance, with the upcoming 2.8 percent COLA, I will actually receive around 2.6 percent rather than 2 percent, even though I technically retired under FERS.

“Also, law enforcement and firefighter retirees can qualify for up to 20 years of service under each system so retirement would be computed at the higher rate for more than the 20 years allowed under either system alone. I was in this category and retired with 19 years under CSRS and 10 years under FERS. So my total retirement income is a bit higher than if I had retired under either system alone. I also now qualify for Social Security without having to work another 10 years after retirement.

“Thought this twist might be of some interest.”  — Greg

Nearly Useless Factoid

By Amelia Brust

In the American West, more cowboys were killed by lightning and falls than by gunfights.

Source: Esquire