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FERS Technical Question
Old 02-22-2009, 05:55 AM   #1
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FERS Technical Question

I know there are a lot of current and pending federal retirees on this board. Hopefully, one or more of you know the answers to some technical questions relating to the FERS annuity and the effect of the associated COLAs.

After retiring from the military, I went to work in the federal civil service under the FERS retirement/benefit system. Under FERS, you qualify for a minimal deferred annuity at age 62 if you have worked at least five years, calculated at one percent per year worked times your high three average salary. If you work at least ten years, you can take the annuity early, as early as age 56, but the annuity rate is reduced by half a percent per year (e.g., if you would have had a ten percent annuity rate at age 62, you only get seven percent if you take the annuity early at age 56).

What I am wondering about is how the COLAs fit into all this.

For simplicity, lets say I left the civil service at age 56 with a high three average salary of $100,000 and exactly ten years of service. Here are my questions:

1) If I wait until age 62 to collect the annuity, I think I will get $10,000 a year (ten percent times $100,000), COLA-adjusted going forward after age 62. Is this correct? Assuming there is some inflation before I hit age 62, do I also get COLAs for the time period between age 56 and 62 or is my first annual draw at age 62 fixed at $10,000? I know that social secuity benefits continue to bump up with inflation betwen the time you stop working and the time you draw them, so am wondering if this deferred FERS annuity amount bumps up as well.

2) If I take the immediate annuity at age 56, it will be reduced from $10,000 a year to $7,000 a year. When do COLAs kick in on that? Right away (that is, when I am age 56), or only when I get to age 62? And don't tell me never, I don't want to hear that . . . .

I realize that these are pretty esoteric questions, but I bet there is someone on this board who has researched or even experienced this issue.

Thanks in advance!!
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Old 02-22-2009, 06:12 AM   #2
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I found the OPM website to be very helpful. They have excellent writeups about each system (FERS/CSRS).

I THINK if you take the MRA+10 retirement you don't get COLAs until age 62. You may get the special supplement from 56 to 62.

link: http://www.opm.gov/retire/pre/fers/index.asp
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Old 02-22-2009, 06:29 AM   #3
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And even then, don't forget that these are not full COLAs with FERS. They are the infamous FERS "diet-COLA's" (1% less than a full COLA? I have forgotten). On MRA+10 we do not get them until age 62. Also I am retiring on MRA+10 and will not get the special supplement, so check the link Bimmerbill gave you for details on that.
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Old 02-22-2009, 07:30 AM   #4
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I believe the info. above is correct, you don't get the COLA until age 62, and then it is a "diet COLA" (CPI minus 1%). But, check the OPM website to be sure. Another website for info. on federal retirement, that I have found useful, is Federal Soup.

FederalSoup.com - A place to share, debate and discuss.
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Old 02-22-2009, 07:34 AM   #5
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My understanding is no matter how you retire under FERS (VERA, MRA+10, etc.) you do not get a COLA until you are 62.

This is what will probably keep me in the work force longer than I had planned. I'm thinking we are going to hit some high inflation years and after 20+ years of service, my pension will be eroded down to nothing. If I keep working, my salary will increase with COLAs.

This is not a happy thought.
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Old 02-22-2009, 07:56 AM   #6
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Quote:
Originally Posted by Helen View Post
My understanding is no matter how you retire under FERS (VERA, MRA+10, etc.) you do not get a COLA until you are 62.
...........
Exception being: Law Enforcement, Air Traffic Controllers, & FireFighters. COLA's start immediately upon retirement regardless of age. (apparently not applicable to OP though)

(Interestingly, FERS Retirement for Members of Congress is the same as for LE/ATC/FF. Assistant US Attorneys also. Also anyone who works "behind the walls" in the Bureau of Prisons - clerks, secretaries, psychologists, maintenance, etc.)
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Old 02-22-2009, 08:04 AM   #7
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Quote:
Originally Posted by OhSoClose View Post
..... I know that social secuity benefits continue to bump up with inflation betwen the time you stop working and the time you draw them, so am wondering if this deferred FERS annuity amount bumps up as well.
......
I don't think so - off the top of my head my answer would be "no, never heard of that."

The only thing close to this is if you go out early on a "Disability Retirement" (pretty hard to get approved I hear, except maybe for those with "connections") - every year that you are out counts as a working year for annuity purposes - then at age 62 you can convert to a regular FERS retirement & have those years you were on Disability Retirement calculated as years worked. Pretty good deal if you ask me - of course the downside is you supposedly have to be truly disabled to get it.
(& for those who disagree with that program, don't blame me, I didn't invent it)
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Old 02-22-2009, 09:29 AM   #8
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Yeah, I read that if you go out on retirement with any age related deductions, the special supplement is not available.
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Old 02-22-2009, 10:24 AM   #9
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Originally Posted by Texarkandy View Post
The only thing close to this is if you go out early on a "Disability Retirement" (pretty hard to get approved I hear, except maybe for those with "connections") ....
Somewhat off topic to the OP, but I have a friend who got her Disability Retirement approved. The process is long, since you first have to apply for SS disability and wait for THAT to be judged (even if you know it won't be approved) -- and SS is very slow in most cases. After SS rules, then FERS does its own separate judgment. In her case, she didn't qualify for SS disability at that time since she had some earned income in the year before her crippling car accident, and so that disallows SS disability for some period of time (in most cases). Although this SS rule was obvious from the start, the FERS rules require waiting the 1+ years for SS to make a 5 second judgment; after that, her case only took a few months more. I don't think "connections" played any role for a lowly GS-12. And she is really disabled -- after 6 back surgeries and 3 years of PT, she can now walk for about 15 minutes at a time -- this is no "scam" disability.
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Old 02-22-2009, 01:13 PM   #10
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Here's a nice little FERS/CERS retirement calculator from the USGS:

USGS Retirement Estimator
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