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Old 04-06-2011, 11:13 AM   #1
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Federal pension

OK, up until now I've considered my federal pension (FERS) as a pretty safe bet.

Now, I am not so sure. I've seen bills to cancel it, freeze it, change how its computed (high 5 vs high 3), increase employee contributions, etc.

How do I go about factoring in this uncertainty into my investment plans?

Sure, none of the bills have passed. But I'll be affected somewhat by the federal pay freeze so I know were the voting sentiment stands.

I've invested a bit more aggresively in stocks since I consider my FERS pension a "bond" investment. Do I swing back to a more conservative approach? Ignore FERS all together?

I have a 11 to 15 year timeline until I can draw the pension so a lot can happen.
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Old 04-06-2011, 11:46 AM   #2
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Chances are these changes under discussion will only affect new-hires. If it turns out that this is not the case, then you will have no choice but to adjust your retirement plans at that time.

To me, it seems a little early to act on these possible changes, because I don't think we don't know if they are even likely, much less certain.

The talk about hi-5 has been going on for many years, but it hasn't happened yet and hopefully this is just more talk.

Also I would suggest building up your TSP to use as retirement income in conjunction with your FERS pension. That is how I am using mine, anyway. Now that I am retired, my TSP is all in G-fund and I get monthly automatic payments. This income is great to supplement my relatively small FERS deposits, and I regard it as a very certain income source.
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Old 04-06-2011, 12:24 PM   #3
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To kind of piggyback off the OP, I am a military air traffic controller right now and plan on swithing to the FAA in a couple years. The way ATC federal pensions work are 25 years or 20 years over age 50. I have already started saving for retirement and with my projected savings with my larger FAA salary, I should have enough to retire before age 50. Is there some sort of cash value if I retire prior to reaching the time in service or age milestone? Would this be a dumb move, especially if I will have about 3-4 years left before I hit the time in service or age requirement? I'm not exactly sure how this type of pension works.

I like the idea of making my own path for retirement, but also feel like I will be held down by the restrictions put on collecting a pension (age or time in service).
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Old 04-07-2011, 06:55 AM   #4
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To kind of piggyback off the OP, I am a military air traffic controller right now and plan on swithing to the FAA in a couple years. The way ATC federal pensions work are 25 years or 20 years over age 50. I have already started saving for retirement and with my projected savings with my larger FAA salary, I should have enough to retire before age 50. Is there some sort of cash value if I retire prior to reaching the time in service or age milestone? Would this be a dumb move, especially if I will have about 3-4 years left before I hit the time in service or age requirement? I'm not exactly sure how this type of pension works.

I like the idea of making my own path for retirement, but also feel like I will be held down by the restrictions put on collecting a pension (age or time in service).
One of the proposals sitting in the Senate now lists doing away with the annuity for all new hires in 2012. At the same time there is nothing to increase the TSP contribution of the federal government. This brings up an interesting quandary for those of us in the enhanced retirement program. We have a mandatory retirement age. Just about all of the jobs covered by those retirement programs require experience. So the proposal would have people, who are starting later in their working life, having to save almost all of their income to be able to retire at the mandatory retirement age. Not to mention we don't have the luxury to be able to work a few more years if the economy tanks.

Nobody is advocating for the federal employees, except the federal employees. The few people I've talked with at work seem to think, "eh it doesn't affect me, so I don't care." They will change their tunes when they realize the people serving as their back up are idiots, because the federal government will be unable to attract the best and brightest. Heck they wouldn't even be able to attract the marginally glowing and slightly OK.

To directly answer your question though. There is no cash value to the annuity. Once vested if you quit, you can take the annuity when you are old enough without a reduction in pay out. If you only have 3-4 years, I'd stick it out and get the full retirement. 50 years old is still young enough to enjoy your retirement and you will have many years in retirement. Here is OPM's page on retirement: FERS Retirement
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Old 04-07-2011, 07:57 AM   #5
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I'm a fed, 20 months out from retirement eligibility. Like most other feds, I'm feeling the effects of the current 2 year pay freeze. For me, this came at the worst possible time in my career, my final 3 year window for pension calculations. I'm not getting into the politics of this stuff, just the numbers. I have some choices to make. I can retire in 20 months, but with a smaller income due to the pay freeze. I can work more years, to increase my pension by 2% for each year worked. I can submit my resume for a higher graded position, and then if/when I am selected, I can relocate, work a couple of years at the higher pay, then retire...basically making up what I am losing with the pay freeze. Obviously, I've been planning for awhile to retire in 20 months, but that was based on my projected pay before the pay freezed came about. I'm not sure which route I'm going to take. I don't want to work much if any longer than the 20 months, but would consider doing at least 2 full years if I got the higher graded position. I don't really look forward to moving just for the extra pay, and what a hassle to move for just a couple yrs & then move back to where I really want to retire. Oh well, lots of people have bigger problems....like no job. I'll be deciding pretty soon what to do.
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Old 04-07-2011, 11:10 AM   #6
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Heck they wouldn't even be able to attract the marginally glowing and slightly OK.
Right....

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Old 04-07-2011, 11:49 AM   #7
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I don't know about other people without pensions, but I can barely read about large federal pension plans for non military with out feeling cheated. I would like to see those larger pensions means tested the way social security is.

No more 100k federal pension when social security is caped at ~ 30k. Just as there is no lock box with cash to repay social security participants, there is no lock box to pay the promised government matches and grants to these pensions. The government should be equally bankrupt on all old age promises and should have showed much much more restraint in being first to the feeding trough for it's self interests. Does anyone else get pensions based on a couple highest earning years outside government?

Actual contributed money by the participants and a reasonable partial match at moderate rates achievable to everyone seems fair in view of 401k type market penetration.
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Old 04-07-2011, 11:51 AM   #8
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For me, this came at the worst possible time in my career, my final 3 year window for pension calculations.
I discovered when I retired from my state job that what counted for the high-3 calculation was base pay, not actual pay. Since I was working half time, that made a big difference. So maybe it would be worth your while to look into working part time for a few years, if the federal benefit formula works like the one for my state.
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Old 04-07-2011, 12:33 PM   #9
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I guess I just don't like the uncertainty. Yeah, I know, the private sector deals with it all the time.

Is it worth working for 20 to $30K below market for a future pension that may be significantly changed? How do I evaluate the risk?
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Old 04-07-2011, 01:13 PM   #10
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I did the FERS MRA+10 option, resigning after 18 yrs 3 months to retain my health and sanity. I will be eligible to apply for my own small FERS pension in 3.5 years. I am hoping that former employees who left federal service voluntarily will be grandfathered if any drastic changes occur.
I'm not freaking out. I have monthly TE dividends I can tap into if need be.
I do have a CSRS survivor pension coming in right now, and my own TSP converted into an immediate fixed annuity. I am doing fine financially as long as I stick to my budget.
The winds of Capitol Hill can blow in very strange directions. All we can do is wait and see what happens.
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Old 04-07-2011, 01:28 PM   #11
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We get a pension that covers about 25% of our expenses (but it's not from the government). We'll both be able to draw SS in a few years as well.

However, when I use financial calculators I do not include the pension and only use half of the SS figures. Even though I don't know what will happen to our nest egg in the future, I feel rather confident we could do fine without 'promises'.
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Old 04-07-2011, 03:11 PM   #12
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I don't know any of those supposed $100k federal pension recipients. I'm sure they're out there, but they would be among those federal professionals whose career paths and choices put them into positions like attorney, physician, policy makers, etc. along with those in the Senior Executive Service. Far more feds will retire with pensions in the $15k (or less) to $50k range, some less, some more. Personally, after what will be a 36 year federal career, I don't feel guilty about receiving a $43k pension. I believe I have earned it, just like any private sector employee would feel the same way about their own retirements. I'm personally sick of the ridiculous exaggerations I keep hearing on TV & the radio about how federal employees are raping this country's economy. What should the salary of someone with responsibility of ensuring compliance with multi-million dollar defense contracts be? In one day recently, I signed for and obligated the govt. to purchase and pay for $10,000,000 worth of missile defense hardware. That was just one day, two purchases. That did not include a missile. My job is to make absolutely sure the government gets exactly what it pays for, hardware that meets many crucial specifications, and most importantly, functions as advertised when called upon by our troops in harm's way. My work is just one of many, but extremely important and vital national defense activities that really can mean life or death for US troops, our allies, and civilian populations. So, how much should I get paid? I can tell you my salary is a whopping $63,148 per year. I do get partial government subsidy of my health insurance, but I still pay about $400 per month towards that insurance, as I should. My penison, if I retire in 20 months, is as stated above, roughly $43000. Out of that amount, I still have to deduct my $400 monthly (for now) health insurance, my life insurance (governent life insurance isnt' much of a bargain but probably all I can get with diabetes, high blood pressure, history of skin cancer) deduction for spouse's survivor's benefits, (approx. $300 mo.) and last but not least, federal taxes. So...how much is left after all that? Not a hell of a lot. I'll be lucky to maybe clear $2400 a month. Then...every now & then, whenever somebody decides it's easier to deflect the real reason the federal budget is in the toilet towards those greedy federal employees....we get a pay freeze, a COLA freeze (for retirees) or some other great "perk" of being a fed. Yeah, I know....we have such great job stability that nobody else has.....ok, so what prevented those people from applying for federal jobs back when they were looking for a job? I'm really sick of hearing the bs day in & day out from people who have no clue. It's great being the whipping boy for corrupt politicians on both sides of the aisle who want to take the easy way out (hanging it on federal employees) instead of actually fixing things. When it's all said & done, if EVERY federal employee takes a pay cut and/or freeze, pensions are changed to a different calculation formula and whatever else can be done, it still will amount to a drop in the bucket compared to the $$ that would be realized by fixing some of the actual, much bigger problems. But...it's way easier to crucify the evil federal employee, from the $15k a year commissary grocery clerk to the $45k a year electrician/auto mechanic....on up to the guys making the bigger $$ in DC. It's just much easier than actually tackling the reality of why we're bankrupt.
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Old 04-07-2011, 03:15 PM   #13
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It's just much easier that actually tackling the reality of why we're bankrupt.
Government has grown while manufacturing has not.......
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Old 04-07-2011, 03:15 PM   #14
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As somebody who has argued pretty vigorously that state and local pension need to be reduced, I haven't heard as much enthusiasm (at least by informed individuals) for reducing Federal pension. I frankly don't think it needs it because by and large the transition to FERS solved many of the biggest problems with Federal pension and since that was done in 1987. I figure most folks near retirement already were impacted by that transition, in effect you'll already took your medicine.

Now the number of Federal employees and possibly their pay is different story, but one better talked about in the soapbox
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Old 04-07-2011, 03:35 PM   #15
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I don't know about other people without pensions, but I can barely read about large federal pension plans for non military with out feeling cheated.
I hear you. I worked for mega-corp with a great pension plan, and when I had 20+ years, the pension plan was capped/frozen/effectively yanked. So lots of us have had to deal with these kinds of things. I feel the pain, but so much of what I hear lately (ex: teachers in Wisconsin) is that the gov't workers think they are entitled to more than the rest of us somehow. <end of rant>
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Old 04-07-2011, 05:06 PM   #16
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Marty, your earlier post was lamenting how you were being inconvenienced in not getting a pension based on a salary you had yet to ever achieve when the overwhelming majority of Americans do not even get a pension. You need to know how that looks to someone without a pension. You did not have a clue before I challenged it and that made you mad.

At a time where retirement income and health insurance for retirees is being stated as too expensive to be available to the rest of Americans who are not federal retirees, you are complaining about NOT being paid based on income you never had.
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Old 04-07-2011, 05:15 PM   #17
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This one's starting to get interesting...
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Old 04-07-2011, 05:45 PM   #18
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The GOP will push for cutting anything including their current obligations to people who worked for compensation.

If they want to change the deal.... they are going to have to do it with much younger people who have time to recover.... perhaps 30 years old and younger. If they go very much higher in age the people affected have too much invested in the program and too little time to recover.

At best they can do light adjustments to the benefits. They are going to have to increase taxes.

IMO - increasing the Inheritance tax is the least impact on the economy. But there will have to be an increase in payroll tax also.


Your best bet is to vote against the GOP in the next election.

Email your concern to your senators and representative.

Email the President for a veto any attempt to do anything drastic that translates to cutting your benefits in a large way.
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Old 04-07-2011, 05:51 PM   #19
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Old 04-07-2011, 05:58 PM   #20
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The GOP will push for cutting anything including their current obligations to people who worked for compensation.
Blame the janitor for the mess....

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Your best bet is to vote against the GOP in the next election.
A large majority of American voters disagreed with this strategy in November 2010....

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Email your concern to your senators and representative.
Wait, that isn't going to work, the majority of them are GOP! ...

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Email the President for a veto any attempt to do anything drastic that translates to cutting your benefits in a large way.
Hope that works for you...
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