Federal spouses planning to leave service together

[OfficeSpace]

I have enjoyed learning from and living vicariously though the experiences of many insightful contributors to this board and am thrilled to join now that my final countdown has commenced. This post serves as my obligatory introduction!

Note: As helpful references for readers unfamiliar with the nuances of Federal Government retirement, my post originally included hyperlinks to official Office of Personnel Management (OPM) web pages describing the acronyms, abbreviations, and terms I use deliberately below such as FERS, FEHB, resign, retire, defer, postpone, annuity reduction, MRA+10, SRS, Sick Leave credit, TSP, VERA, VSIP, etc., but the moderators asked me to remove them per the “naked links” provision within the Posting Standards. Sorry for any confusion or inconvenience!

My wife and I are government civilians covered under the Federal Employees Retirement System (FERS). In March 2023, she will reach her Minimum Retirement Age (MRA) of 56 years and 4 months with 22 years of service when I will be 51 years old with 33 years of service. We are aiming to walk out together at the earliest opportunity, which we believe can occur as follows:

• She will retire under the MRA+10 provision to continue our Federal Employee Health Benefit (FEHB) coverage but incur an annuity reduction of roughly 30%.
• I will resign and defer my benefits until my MRA of 57 years to avoid any annuity reduction but forfeit the Special Retirement Supplement (SRS) and the Sick Leave credit.

If alternative health care coverage could be secured temporarily, then she could separate at her MRA and postpone retirement benefits until age 60 to avoid the annuity reduction, but as it would take at least 12 years to break even based on income alone, we are not considering that option seriously. So, with our plan above, her annuity of ~$21k will start in 2023 while my annuity of ~$53k will start in 2028, both increasing for cost of living from those dates forward. We intend to take Social Security at age 70, which will amount to ~$43k for her starting in 2036 and ~$46k for me starting in 2041.

We currently have about $1.5M in non-Roth Thrift Savings Plan (TSP) (L2020 for her and L2030 for me), about $1.5M invested in Vanguard (75% stock index mutual funds, 20% GNMA, 5% REIT), and $50k readily accessible in a money market. We always have contributed the maximum to our TSP accounts and invested any remainder in Vanguard, including backdoor Roth IRAs starting last year.

Our house is worth about $650k with just over $300k left on our mortgage, which was refinanced several years ago at 3.5% with a monthly payment of about $2400 including escrow; we are in no particular hurry to pay it off before it matures in 2042, as keeping our money out of the house has served us well on the investment front. The roof is new, all major renovations are complete, and our two vehicles are aging (10 and 11 years old) but reliable. We always pay off our credit card balances and have no other debt. Our only child recently graduated college with a STEM degree, secured career employment in her field, and married a wonderful young man with a stable career job also in a STEM field; neither have student loans or other debt. Our parents are alive and well physically, mentally, and financially.

Our annual expenses typically are well under $100k, though we have been estimating a need for $120k to cover taxes due when withdrawing from advantaged accounts and accounts with significant capital gains. Firecalc indicates that we should be successful even if I resign earlier, which is an attractive proposition considering the current COVID situation. If an early out opportunity become available under Voluntary Early Retirement Authority (VERA), even without Voluntary Separation Incentive Payments (VSIP), then of course we will go without hesitation!

Please let me know if there is anything we may be overlooking, and I will strive to update this thread as milestones in our journey are reached. Thanks again!

 

[jazz4cash]

Congratulations. Your expertise in Federal Employee benefits may be valuable to several here.

What are your thoughts on the TSP Annuity feature? I don’t follow it closely enough to understand how the index works, but occasionally it looks attractive but 98% of the time it’s awful.

 

[OfficeSpace]

Thank you! "Expertise" is generous; I have not investigated the TSP Annuity feature so have no insight to offer on that front. Sorry!

 

[MikeWillRetire]

Sounds like you are aware that your pensions won't get a cost of living increase until you are 62. How did you model that in firecalc? There's not an easy way to do it. Try running it without a COLA and see how it goes.

 

[OfficeSpace]

Actually, I did not realize that, but do see it now on the OPM site. Thank you!

So in my post, "both increasing for cost of living from those dates forward" should read "both increasing for cost of living from age 62 forward."

I just re-ran my scenario in Firecalc with the Inflation adj? box unchecked and the difference in output was minimal, thankfully.

 

[MikeWillRetire]

Also, double check your social security numbers. Those numbers are close to the maximum possible. That may be correct if your salary history was very high for 35 years.

 

[38Chevy454]

Seems you have done well with TSP and Vanguard savings, and the dual pensions to go along with the savings. In short it seems you are good shape and ready to enjoy retirement. I am assuming that your expenses includes some form of medical insurance that is part of the pension(s)? The only tough financial part is to get you from your retirement date to receiving your pension. Your after tax vanguard account has plenty to get you through that time. Then reduce the Vanguard some once your pension starts, and likely can almost reduce again to small amount once you start the SS income. You haven't even tapped into the TSP savings yet. Or could use some of the TSP instead of the Vanguard funds to optimize tax rates and potentially more Roth conversion.
Welcome to the forum.

 

[OfficeSpace]

Thanks! Our TSP investments benefited from more aggressive funds (L2040 and L2050) until December when we felt the market was too overvalued and reigned them in a bit. Our VG investments took more of a beating last month but the stock index funds are on a longer horizon since we plan to draw from TSP first to facilitate Roth conversions and avoid RMDs later. Yes, the portion of FEHB that we must cover once retired is factored into our estimated expenses, and the toughest part financially indeed will be drawing from our savings during the early years to augment her reduced annuity before my full annuity kicks in. The SS amounts are as indicated on the MYSSA.GOV web site for age 70, but that assumes we work until then, and IDK how to compute it more accurately.

 

[MikeWillRetire]

Thanks! The SS amounts are as indicated on the MYSSA.GOV web site for age 70, but that assumes we work until then, and IDK how to compute it more accurately.

To estimate your SS benefits, use this calculator
https://www.ssa.gov/benefits/retirement/estimator.html

After it runs the first time, click the "add a new estimate" button. Where it says "at what age do you plan to stop working" enter age 70. Where it says "enter your income between now and when you stop working" enter 0. That should get you close.

 

[OfficeSpace]

Ah, I see. I was entering 51 for "What age do you plan to stop working?" which resulted in "If you select an age prior to 62, we will estimate your benefits starting at age 62." Using your approach, the estimated amounts at age 70 years are "$2,968 a month" for her and "$3,354 a month" for me. Thanks!

So in my post, "will amount to ~$43k for her starting in 2036 and ~$46k for me starting in 2041" should read "will amount to ~$36k for her starting in 2036 and ~$40k for me starting in 2041."

I just re-ran my scenario in Firecalc with those amounts updated and thankfully our success rate remains 100%!

 

[WyomingLife]

Our annual expenses typically are well under $100k, though we have been estimating a need for $120k to cover taxes due when withdrawing from advantaged accounts and accounts with significant capital gains. Firecalc indicates that we should be successful even if I resign earlier, which is an attractive proposition considering the current COVID situation. If an early out opportunity become available under Voluntary Early Retirement Authority (VERA), even without Voluntary Separation Incentive Payments (VSIP), then of course we will go without hesitation!

Please let me know if there is anything we may be overlooking, and I will strive to update this thread as milestones in our journey are reached. Thanks again!

Impressive and awesome. You are nailing it.

Are your expenses estimated or tracked?

 

[OfficeSpace]

Thanks! We are encouraged by what has been posted on this board and the feedback received so far in this thread. We have been tracking our expenses carefully for the past 5+ years and, excluding renovations, college expenses, wedding receptions, etc., the total consistently comes in well under $100k, and should not increase in retirement.

 

[Out of Steam]

In many agencies, Voluntary Early Retirement Authority (VERA) is common enough to be worth waiting for. At least talk to colleagues and recent retirees about how often it has been offered in the past. With almost three years to go, I think your chances are pretty good--especially if you have two different agencies that could offer it.

I retired last year with VSIP, but stayed just long enough to qualify for regular retirement.

 

[OfficeSpace]

We work for an agency that has enacted VERA only rarely and never recently, but as these are unusual times, we remain hopeful. Congratulations on your retirement with VSIP!

 

[goingtotravel]

Looks like a good plan. DH and I are also both feds. Have you figured in survivor's benefits into your numbers? For FERS it's a 10% cut in pension for a 50% survivor benefit for your spouse or 5% for a 25% benefit.

Have you and DW requested a written retirement estimate from your HR org in your agency? DH just got his and it was good to verify our estimates and doing that his HR found a summer job he had in college where he could pay into FICA for that job and get a few more months added to his service time.

 

[OfficeSpace]

Thanks! Yes, the annuity figures I posted reflect the 10% reduction for a 50% survivor benefit, and HR did provide us with verification of creditable service and estimation of benefits. Good luck to you both!

 

[cnocmmz]

Also, double check your social security numbers. Those numbers are close to the maximum possible. That may be correct if your salary history was very high for 35 years.

Correct...Also, if you go the SS website under your account, not sure although, the amount shown is based on you working up to that maximum age. For instance, if you retire at 57 and just wait until 70 to collect I am not sure that number shown would be accurate? Just something to consider.

On another note, you both have done well in TSP and other investments. Congrats indeed!

 

[OfficeSpace]

Thanks! Mike's method for using the SS estimator worked well in our case.

 

[OfficeSpace]

We currently have about $1.5M in non-Roth Thrift Savings Plan (TSP) (L2020 for her and L2030 for me), about $1.5M invested in Vanguard (75% stock index mutual funds, 20% GNMA, 5% REIT), and $50k readily accessible in a money market.

One year later, we have $2.2M in TSP and $2.3M in VG including $50K in ROTH IRAs and $130k in a MM. Cashing out my accrued leave balance would be worth another $50k, and her salary covers all critical expenses, so I'm tempted to pull the plug early but am struggling with the decision. OMY (or OMPaycheck) syndrome is real.

Guilt: DW must work another two years to reach MRA and carry FEHB.
Greed: It's hard to give up my paycheck even though we seem to have enough savings and income without it.
Fear: The market, and therefore our portfolio, seems super inflated.

As there is no urgent need to resign immediately, I suppose it makes sense to hang in there until the end of the year, but my enthusiasm about the job has all but evaporated, which makes it a grind.

 

[cnocmmz]

Well, congrats indeed. You guys have been really exceeding most saving standards for federal employees. Looking at the numbers you are both financially in a great spot. I would offer this to contemplate: even if you are not at the MRA. Reducing your annual income at 5 % annually because of the penalty is not that bad. You are still getting a pension for longer period of time ( it is based on the SS concept). Then, I believe your Cola would start ASAP and so something to consider. In any case run the numbers.
-Another point that was made here is to make sure your expenses are locked in?
I too am a gov employee and am resigning the end of the year with only 12 years, although I do have a 26 year enlisted E9 mil pension at age 60. My wife is retired and getting her pension and SS at 67. Our income is over 120k.
Lastly, think hard because I do not believe the supplemental SS will be in the Gov budget for many more years it has been on the chopping block for the last 5 and it is only a matter of time. Life is short.
I wish you both the best, you can do what you want if you just plan accordingly.

 

[Bigdawg]

One year later, we have $2.2M in TSP and $2.3M in VG including $50K in ROTH IRAs and $130k in a MM. Cashing out my accrued leave balance would be worth another $50k, and her salary covers all critical expenses, so I'm tempted to pull the plug early but am struggling with the decision. OMY (or OMPaycheck) syndrome is real.

Guilt: DW must work another two years to reach MRA and carry FEHB.
Greed: It's hard to give up my paycheck even though we seem to have enough savings and income without it.
Fear: The market, and therefore our portfolio, seems super inflated.

As there is no urgent need to resign immediately, I suppose it makes sense to hang in there until the end of the year, but my enthusiasm about the job has all but evaporated, which makes it a grind.

Nice update. Regarding the guilt; talk it over with DW. Statistically she will outlive you so hit her with that. LOL

Greed: We all deal with that with the easy money. Would another mil change anything in your life? I'm betting not.

Fear: I would go like 30-40% G fund in your TSP. That gives you a lot less equity exposure.

Good luck with your first world issues and congrats on saving well.

 

[OfficeSpace]

Thanks!

DW is a few years older than me, so statistically we are pretty close WRT life expectancy. Her TSP is invested in L-Income (71% G) and my TSP is invested in L-2030 (33% G), at least until the next correction...

If DW postponed at her MRA to avoid the reduction, then it would take 12 years to break even, so we aren't considering that option. It's moot in my case since I am resigning before my MRA and therefore ineligible for the annuity (I must defer). If SRS still exists at my MRA, then to be eligible I must return to work (anywhere in the Federal Government) and then retire.

Expenses are locked in, though I'm sure discretionary spending will be more than it was last year during the pandemic (that said, we did establish new, inexpensive travel habits that most likely will endure). We recently refinanced the mortgage for another 30 years at 2.375% which reduced the monthly payment by nearly $700, which will help bridge the years between her MRA (reduced annuity) and mine (unreduced annuity).

cnocmmz, congratulations to you and your DW! And thank you for your service, both military and civilian.

 

[MikeWillRetire]

I was going to say you should retire now because your portfolio alone has enough money to support your retirement. But then I realized that one of you has to get to retirement age to lock in the health insurance, so I get it. Instead of cashing out your leave, consider using all of it to make the job more tolerable. You don't need the extra money.

 

[OfficeSpace]

I think you're right and will try to hang in there a while longer. I turn 50 this year so am taking advantage of the TSP catch-up contribution, and leave continues to accrue even while being taken, so it makes sense.


Thanks for the encouragement!

 

[Retire52]

OP,

Congratulations to you both. Nice position to be in. I would add consider maxing out your sick leave as well. if you feel even the slightest bit under the weather take some sick time--your mental health is important too. you have no reason to worry about using it up this close to retirement. with max use of your accrued vacation time and sick leave, you can ease the grind.

When I neared retirement, I also started a Monday Mornings count down about 9 months out from retirement date. I had a sticky tab I would peel off from my office wall locker, inside door so no one else could see it, for each Mon I knocked out. Seeing those numbern of those tabs dwindle was very satisfying.

Having said that, I really enjoyed my job before I retired, so if you are feeling it is a grind two years out, any steps you take to make it more enjoyable will be significant. However, a discussion with your DW, say a year out, if the work situation is no better about punching out a year earlier maybe a good azimuth check.