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Another FERS question
Old 05-30-2016, 09:04 AM   #1
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Another FERS question

DW has been a Fed with Interior/US Fish & Wildlife Service since January 2011. She just turned 53. She's also had some health problems and, lately, for the first time ever, has been asking me, "So, again, when could I retire"? She's a very hard worker and this is a watershed moment I want to capitalize on! She has maxed her TSP since she started, including the makeup provision but our primary interest is in her securing federal employee health insurance access for life. I've been reading up on this and want to ask the good, knowledgeable forum members a couple of questions:

1). The Minimum Retirement Age (MRA) of someone born in 1963 appears to 56. She has 5.5 years of service, so her MRA + 10 should be January 2021, since she started January 2011, right? As I understand it, she can buy into the Federal health insurance plan for us both for life at that point, right? We have no kids.

2). If 1. above is correct, she'll be 57.5 at FIRE. Does TSP allow her to access her funds penalty-free if she separates from service after age 55 but before age 59.5? Details online on that part are harder to find. If so, would she have to take annuitized payments or could she transfer to an IRA?

Thanks, All, for double checking my novice Federal retirement system research!
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Old 05-30-2016, 09:13 AM   #2
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1) if you have an annuity you can get health insurance. In her case yes, but her annuity will be reduced 5 1/2 percent every year until she reaches 62.
2) read here
http://www.myfederalretirement.com/public/767.cfm
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Old 05-30-2016, 09:25 AM   #3
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1. She must retire and receive a pension to get the health insurance. So yes, in her case she can retire after 10 years of service.

2. Yes, she can access her TSP funds without penalty as long as she retires during the year she turns 55 or after.
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Old 05-30-2016, 10:22 AM   #4
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As above, yes, January 2021. The MRA+10 will be earliest she can file for immediate retirement with the annuity and health insurance. Yes, the annuity will be reduced quite a bit for each year under age 62, but a 10 year FERS pension is a small one anyway (about 10% of your annual salary at FRA) and the health insurance is the real prize there. The annuity is a nice little bonus but the health insurance is the pot of gold at the end of the rainbow. (For what it's worth, my MRA + 10 is into 2025, when I'd be 59. We'll see. If I stick it out that long, I'm pretty sure it will only be for the health insurance.)

As for her TSP, she could do anything with it if she separates at age 55 or above. She could leave it there, take distributions from it, roll it into an IRA (remembering that it can't be tapped until age 59 1/2 without using Rule 72t). Frankly I'd leave something in the TSP for continued access to the G Fund, if nothing else since you can add IRA funds to TSP if you want to increase cash allocation at a much better than money market rate. Can't get that rate on "safe" cash equivalents anywhere else.
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Old 05-31-2016, 03:58 AM   #5
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You must carry the health insurance plan for 5 years before you retire in order to carry it over into retirement. She should crunch her numbers in EBIS for some rough numbers on retirement pay.
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Old 05-31-2016, 06:06 PM   #6
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I really appreciate the verification that our thinking is on track with the rules. I will read the links and will bone up on the advantages of the G Fund. Right now, DW is simply in the 2030 target fund so we haven't paid much attention to it. Good luck to you all with your own plans.
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Old 06-01-2016, 04:23 AM   #7
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If you leave at least $250 in your tsp, you can transfer money back if you need to later on. Don't close it.
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Old 06-01-2016, 07:04 AM   #8
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Excellent tip.
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