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Fed up Fed
Old 09-18-2014, 02:11 PM   #1
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Fed up Fed

Hello,

As longtime followers of this forum for planning advice and as a direct result, we are finally at the point of convincing ourselves that we are FI and ready to RE. I am 58 and DW is 56. We live a fairly frugal lifestyle other than preparing our boat for cruising. Although I am two years away (need 10 full years of federal service) from a $1,200/mo pension and continued health benefits - mentally I am done.

FIREcalc gives us 100% success results without the pension. And our full-time cruising friends say, “Don’t wait. Go now!” mainly because the lifestyle requires fairly good health. Based on their average annual expenses over the last couple of years and no personal debt of our own (boat is paid for and house will be sold), our initial annual budget will be around $35K excluding a major repair event.

We are still fine tuning the numbers and timeline and will be meeting with an FA next week. Many more questions and progress reports to follow.
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Old 09-18-2014, 03:05 PM   #2
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Welcome LuVul.

I totally get being fed up with work. I think most of us here can relate.

My question about your plan is what you will do, sometime in the future, when you're no long full-time live-aboards? Will you set aside money to rent or purchase in the future?

Also - my standard questions that I always bring up...
- does your 35k include taxes or is it net spending?
- did you consider healthcare if you retire before the pension/health benefits? Is that part of your 35k?

If either answer is no - you should probably update the plan to consider taxes and health insurance/out of pocket.

(The reason I ask these questions so much is that these are the factors I overlooked when I initially started working my retirement escape plan... I had to go back to the drawing board and revise my plan.)
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Old 09-18-2014, 04:26 PM   #3
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If you retire two years early (now), can you still get the health care but with a reduced pension? Or, do you have to have the full 10 years. If not, I would work the extra two years and then retire.
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Old 09-18-2014, 07:16 PM   #4
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Wow, that's an amazing benefit for ten years work. Does the medical extend all the way to 65 and Medicare? I worked in the private sector(16 years full time, the rest part time) for 40 years to get 13K a year SS(at 62) And not continuing health care. So, IMO that's very generous. I know my dad also got a great pension, but he worked at the post office for 35 years to get that (hated it, but he had a family and did what he had to do) It seems times have changed. Good luck and all the best to you!
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Old 09-19-2014, 06:04 AM   #5
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I would think that one through. $14K+ per year with the FERS diet COLA is a pretty significant chunk of change especially if you are long lived and eventually want to sell the boat and move ashore. I would run the net present value of that annuity and compare it to your refund to see what you are passing up -- I suspect a lot. Health care is a more complicated equation. With the ACA online and potential subsidies if your gross tax is low that route might be as good as or even better that the rate for a Federal plan (you will still pay the employee component in retirement). Then you need to look at what you would do come Medicare age -- most Feds keep their HI (and continue to pay the employee share) in lieu of a Medicare supplemental policy. Some of us skip Medicare Part B and just stay with the Federal plan but a lot pay for Part B and the carrier's promise of no more co-pays or deductibles.

Two years is not a long time although I recognize that burnout can stretch it into an eternity. Good luck.
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Old 09-19-2014, 06:15 AM   #6
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I forgot to ask, what about a deferred retirement? Under FERS, if you have at least 5 years of service you can defer to age 62 and take the retirement then. With your 8 years you will still get 80% of what you would have gotten by working two more years (actually, more than that since at age 60 your annuity will be cut 10% but not the deferred annuity at 62). No Fed health plan but ACA may be a good deal at your initial income level and Medicare will only be three years away when you start pulling the annuity (which is primarily taxable income).
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Hang in there
Old 09-19-2014, 06:55 AM   #7
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Hang in there

Good Luck LuVul, I know exactly how you feel. Hang in there.
Federal Service, in my opinion isn't what it used to be. I just retired from it myself, early..one bonus is no more awful commute to McLean..
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Old 09-19-2014, 07:21 AM   #8
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Luvul; Giving up the federal pension would be a huge hit to your financial security. And the reported annual expenses of your friends are just that, the expenses of your friends, not necessarily yours. They of course want you to join them, and for that reason may be painting too rosy a picture. Don't let them unduly influence you. 24 months is not that long.
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Old 09-23-2014, 01:33 PM   #9
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Thanks. This is the reality check I needed; especially with regards to the pension.

Response to questions:
-Our post live-aboard life (depending on health) will still include the boat for part-time local cruising, but will also include a land base somewhere in the States or Central/South America.
- $35k is a net spending estimate (and I see your point).
- We estimated ACA and found it to be very close to the Fed health benefit cost and was included in the $35k.
- Based on FERS pension/annuity eligibility criteria, because I will not reach 62 before retirement, I would not qualify for any benefit. One must be at least 62 in order to serve only 5 years and for a much reduced benefit. For me, it’s Minimum Retirement Age (MRA = 56 for me) + 10 years; I’m 58 now will be 60 in two years.

Time flies except when you are counting the days... But yes, logically I should continue working despite my initial reaction to ER now. I’ve been recently “promoted” from a strictly engineering role into a management role. Guess I was fortunate in the past to have never been exposed to this level of bureaucracy.
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Old 09-23-2014, 02:39 PM   #10
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I agree with what DonHeff said, look into a deferred retirement if you can't stand another two years. That will get you a pension, but no health insurance.
I also understand how your job changed. I spent 28 years as a design engineer (19 in the federal government). Two years ago, management abandoned our design work in favor of risk analysis. It's not for me, but I have 3.75 years to get to MRA. I won't go with deferred retirement because I want the health insurance, but it has been really tough going for me too. I sympathise.
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Old 09-23-2014, 03:53 PM   #11
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You and DonHeff made me re-research the annuity eligibility. Looks like I was reading about "immediate" annuity requirements versus deferred. Deferred annuity requirements look to be a minimum of 5 years, calculated at 1% of high three salary X years of credible service and deferred until age 62. The previous MRA + 10 years assumption looks to be for an immediate annuity. Am I understanding this correctly?
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Old 09-23-2014, 05:40 PM   #12
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I think you need to recheck the rules and that you will qualify for the pension once you turn 62 based on what seems to be 8 years of service if you leave now. The medical would not be available though.
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Old 09-23-2014, 05:58 PM   #13
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Quote:
Originally Posted by LuVul View Post
You and DonHeff made me re-research the annuity eligibility. Looks like I was reading about "immediate" annuity requirements versus deferred. Deferred annuity requirements look to be a minimum of 5 years, calculated at 1% of high three salary X years of credible service and deferred until age 62. The previous MRA + 10 years assumption looks to be for an immediate annuity. Am I understanding this correctly?
Yes, that's correct.
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Old 10-01-2014, 12:09 PM   #14
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If you are FERS, and are going to hit age 60 with 10 years of credited federal civil service, and retire at 60, remember the penalty for such "early" retirement is a permanent reduction in your pension of 5% of the pension for every year that your age is under 62. Expect your pension will be 9% of your averaged high three earning years.
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Old 10-16-2014, 09:24 AM   #15
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Wow 9% is pretty good. FERS for USPS is 3% of the average high three years (that's after 30 years of service).
I would finish out the two years.


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