Lock down survival tip: Measure twice, cut once

Whether you’re building a destination-Mars rocket, thinking about removing your own appendix or looking for the best time to retire, the old measure-twice-cut-once rule is a good one!

Now maybe more than ever for federal and postal workers who have enough service time to call it a day — or think they have. Because being eligible to retire doesn’t mean you can afford to retire!

Time in grade and in government doesn’t automatically mean you will be able to maintain a reasonable standard of living once you’ve traded your biweekly pay check for a monthly annuity.  That’s particularly true for many if not most  workers under the Federal Employees Retirement System. Unlike long-service Civil Service Retirement System employees, who can retire on an immediate annuity equal to 50%-80% of salary, many FERS retirees will have to take their Social Security benefit as soon as eligible. And also tap their Thrift Savings Plan accounts right away, regardless of the status of the stock market or the economy.

Most federal agencies do a fair to excellent job of helping long-time employees weigh their options as to when to retire. But many aren’t so good, even in the best of times and these, as you probably noticed, are not the best of times by any measure.

Advertisement

Many HR offices, people and equipment, have been diverted to other duties. Or are working from home but without the equipment or backup they need to help potential retirees see what their financial situation will be like once they pull the plug.  And while it is nice to have in-house help, benefits expert Tammy Flanagan said it is up to everybody to be prepared and know how to run their own numbers to determine when they can retire in comfort.

“It’s important to have a long-term plan rather than just a day-to-day plan,  because you’re thinking in terms of decades rather than weeks,” she said. She also points out that the COVID-19 pandemic has changed everything for just about everyone, throwing all of us, whether newcomers or long-time workers, into a sort of mid-life crisis.

She’s going to be my guest today on our Your Turn radio show at 10 a.m. EDT. The subject: Taking charge of your retirement options.

She said many workers haven’t been able to get an estimate of their annuity because the software normally used for that has been diverted to other more immediate chores. That means many people have no idea what their monthly annuity would be if they retire now, at the end of the year or much later.

To which she replies, “Why not? Why don’t people know? Everyone who works for the government should know how to calculate a basic CSRS or FERS estimate. The formula can be found on [the Office of Personnel Management’s] website and it only requires a few pieces of data that most federal employees could estimate with some level of accuracy.” There’s two things to know:

  1. High-three average salary
  2. Length of creditable service

“Once you estimate your average salary over the highest three years of basic pay of your career (generally the last three years) and your total length of service through your date of retirement, the formula is nothing more than a second grade math problem. That is not to say that there are not things that need to be understood beyond this and that do add a level of complexity to the calculation. There are many reasons why federal employees also may need to consult an outside retirement counselor to help them pick their best retirement date(s). Situations such as:

  • If you have had a work schedule other than full time during your career, this may impact your retirement eligibility and calculation. If you have had part-time, intermittent, ‘when actually employed’ (WAE) or extended periods of leave without pay, then you may need additional retirement counseling.
  • If you have experienced any changes in retirement coverage such as a change in coverage from ‘FICA only’ to ‘CSRS’ or ‘FERS,’ or if you transferred from CSRS to FERS. Or if you left federal service and returned after a break in service — then you may need retirement counseling.
  • If you have CSRS Offset retirement coverage and you don’t understand the relationship between your CSRS retirement benefit and Social Security retirement, then you may need retirement counseling.
  • If you are married, and you don’t understand how a survivor benefit election will affect your retirement and how it will provide replacement income for a surviving spouse, then you may need retirement counseling.
  • If you served on active duty in the uniformed services or if you volunteered with the Peace Corps or VISTA, then you may need retirement counseling.
  • If you have gone through a divorce and your former spouse has been awarded a portion of your CSRS or FERS retirement benefit or survivor benefits, then you may need retirement counseling.
  • If there are records missing from your eOPF that document a portion of your federal career, then you may need retirement counseling to help you locate any missing records.

“The agency retirement estimate should be used to validate your own calculations and to show the effect of the above mentioned items that may impact your retirement benefit. For these reasons, it is important to have an estimate from your agency prior to submitting your retirement application. I understand, however, that the policy of some federal agencies has been to only provide estimates once the application to retire has been submitted. At the very least, an employee should have access to an experienced retirement specialist to help them understand what may affect the value of their CSRS or FERS benefit so that they are able to validate their financial readiness for retirement prior to making the commitment to leave.”

You can listen live at www.federalnewsnetwork.com or on 1500 AM in the Washington, D.C., metro area. The show will also be archived on our website so you can listen later or refer it to a friend.

Nearly Useless Factoid

By Amelia Brust

Around Toronto, several small houses, ornate brick office buildings and even a baronial-looking “castle” are actually camouflaged electrical substations for the Toronto Hydro company. The company started disguising its substations in the early 1900s, to make residents more suspectible to the idea of having them for the sake of electric demand. However, as times changed several of the dummy houses no longer blend in to their surroundings.

Source: Web Urbanist