FERS Deferred Retirement?

[strobot]

Are there any federal workers out there that did a deferred retirement? If so, can you please share your story! There are a few threads on here that lightly touch on it but not many - and almost zero instances where a person reached FI early and left their govvie job with a deferred pension.

Thanks!

 

[FLSUnFIRE]

I'm interested... 46 now and can't see w*rking another 11 to "retire" and no chance of VERA/VSIP. Walking away from the security (and FEHB*) is hard, especially with the turmoil in the economy right now. Planned to pull the plug in 2020 but kicked the can to 2021 with COVID driving OMY. Would love to hear from someone who walked away to tell me it will all be ok! If I kept spending the same and worked to 57 I'd likely die rich and miserable.


Most of my assets are in TSP so I'd likely start a SEPP 1-2 years after separating for cash flow and to avoid crazy RMDs later. I'd want to see how my income/expenses shake out after separating before I commit to such a long period of withdrawals (will likely earn some money doing things I want to do) so I stay below the ACA cliff (at current valuations, I'd be only a few $k from losing some subsidy)



* I'm not a high consumer of medical but my current doctors are in the network of an HSA eligible plan in the marketplace, although with higher Deductable/OOP than my current plan; if I manage my MAGI it will cost me less than my portion of my FEHB HDHP premiums I currently pay (but I will budget to pay the full cost). Of course, the wildcard is what will happen to the ACA and/or will a single payer scheme be hatched? Every now and then the idea is floated to open up FEHB to everyone.. that could probably be an appealing development for us civil servant FIRE wannabees.... permanent COBRA?



FLSunFIRE

 

[strobot]

Lololol this is exactly what I keep telling my wife. "Yes, we will be rich but ill likely be dead not long after at this rate."

 

[strobot]

I guess there isn't anybody! Much like I had expected.

 

[ProGolferWannabe]

I did this

Not exactly sure what I can share that will be useful, but I took this option several years ago. I retired a couple of years before I was eligible for my annuity...I am currently receiving my pension now. My transition was relatively easy as: (a) while I retired, my wife continued working; (b) she also works for the Feds so we are currently securing health insurance through her, and will carry her plan into her retirement; and (c) we always lived pretty modestly and were able to live comfortably on her salary prior to my drawing my pension. Had my wife not worked for the Feds, and had she not wanted to continue working for a few more years when I decided to hang it up, I doubt I would have left early. If you have any specific questions, I’d be happy to try and answer them.

 

[FLSUnFIRE]

https://www.reddit.com/r/govfire/


I recently discovered this subreddit. I am not active but skim it when at w*rk. With the government, FIRE is even more rare. Most of my coworkers are miserable but don't even consider leaving federal service (much less FIRE from it). A few know my ambitions but I'm not sure they really believe it... then again, most of them are in debt to their ears and contribute minimally to TSP (when they are not borrowing against it for consumer purchases).

 

[FLSUnFIRE]

Not exactly sure what I can share that will be useful, but I took this option several years ago. I retired a couple of years before I was eligible for my annuity...I am currently receiving my pension now. My transition was relatively easy as: (a) while I retired, my wife continued working; (b) she also works for the Feds so we are currently securing health insurance through her, and will carry her plan into her retirement; and (c) we always lived pretty modestly and were able to live comfortably on her salary prior to my drawing my pension. Had my wife not worked for the Feds, and had she not wanted to continue working for a few more years when I decided to hang it up, I doubt I would have left early. If you have any specific questions, I’d be happy to try and answer them.

Your situation is a bit different than mine as with a FED spouse you can have your cake and eat it too wrt benefits. When I married (now divorced), the plan was for me to FIRE at 50 instead of my original goal of 40 as we allowed some lifestyle creep ("happy wife happy life"... or not ) and she would follow 10 years later around 50 as well. Having a second income/benefit path would make it a no-brainer for me to leave. As it happened, my stable career allowed her to jump career tracks several times and she is in great shape now and probably already close to FI in her mid 30s.

One question, have you withdrawn from TSP yet (particularly SEPPs directly from), if so, how as your experience been? Looks like it will be reported to the IRS as qualified and I won't need to worry about screwing it up. My only experience directly with TSP was taking out a loan (to manage taxable income) and I found the customer service experience to be horrible.


Thanks

 

[ProGolferWannabe]

Your situation is a bit different than mine as with a FED spouse you can have your cake and eat it too wrt benefits. When I married (now divorced), the plan was for me to FIRE at 50 instead of my original goal of 40 as we allowed some lifestyle creep ("happy wife happy life"... or not ) and she would follow 10 years later around 50 as well. Having a second income/benefit path would make it a no-brainer for me to leave. As it happened, my stable career allowed her to jump career tracks several times and she is in great shape now and probably already close to FI in her mid 30s.

One question, have you withdrawn from TSP yet (particularly SEPPs directly from), if so, how as your experience been? Looks like it will be reported to the IRS as qualified and I won't need to worry about screwing it up. My only experience directly with TSP was taking out a loan (to manage taxable income) and I found the customer service experience to be horrible.


Thanks

I have not yet withdrawn anything from the TSP, and for now atleast, have no immediate plans to do so. So, I can’t really speak to any customer service issues involved with withdrawing funds. On a somewhat related note, I did find the people at OPM who were responsible for doing my final pension calculations and starting my annuity to be remarkably unhelpful. Very poor communication, difficult to talk to someone, etc. in the end, it all worked out ok, but I would have appreciated a bit more hand holding.

 

[Paulz]

Interested as well. Financially we are set and can go, but its the FEHB that have us still working.

 

[ProGolferWannabe]

Interested as well. Financially we are set and can go, but its the FEHB that have us still working.

Had my still working spouse not had FEHB access, I would have been exactly in your situation. I don’t know if there really is a solution/alternative that is as attractive as keeping your FEHB. I suppose you could look at ACA plans, maybe utilize COBRA for a relatively short period of time....but these solutions are not likely going to be attractive from a a cost standpoint.

 

[jimbohoward69]

Unless I'm mistaken, I don't believe you can set up a 72t distribution directly through the TSP...you would need to rollover funds to a tIRA beforehand. That said, you CAN make withdrawals penalty-free from TSP if you are age 55 or older when you separate/retire.

Regarding OP's question, I plan on doing a deferred retirement at age 62 (I'm 50 now). I currently have no inclination to return to federal service so I initially was just going to withdrawal what I'd put in and invest it elsewhere...but then after using a FERS calculator, I realized I had about a .00001% chance of getting the return(s) needed to match what I'd get with the annuity.

 

[FLSUnFIRE]

Unless I'm mistaken, I don't believe you can set up a 72t distribution directly through the TSP...you would need to rollover funds to a tIRA beforehand. That said, you CAN make withdrawals penalty-free from TSP if you are age 55 or older when you separate/retire.

You can using the life expectancy method (which I want to use anyway) and is addressed in the official TSP literature (TSP-536) and I have read in several places that the 1099 will even report them as qualified (FedSmith, etc) as they calculate the withdrawal using the IRS tables.


More info: https://www.fedweek.com/tsp/tsp-withdrawal-payments-based-on-life-expectancy/

 

[FLSUnFIRE]

Regarding OP's question, I plan on doing a deferred retirement at age 62 (I'm 50 now). I currently have no inclination to return to federal service so I initially was just going to withdrawal what I'd put in and invest it elsewhere...but then after using a FERS calculator, I realized I had about a .00001% chance of getting the return(s) needed to match what I'd get with the annuity.

Anyone in before they increased the employee contribution would be foolish to take it out! The NPV of the income stream (starting at 60 for me if I separate around 47 as I hope to) is way more than the payment I would get back for my contributions with ~23 years of service. -Especially if discounted at a rate that would account for the near-zero level of risk. I'm happy with the compensation package but can't tolerate another 10 years of bureaucracy and boredom required to reach MRA.

 

[Lawrencewendall]

Here's what I did. It may sound complicated but it really isn't. I spent a fair of time on the phone with our Benefits Center and OPM but if I've gotten something wrong, please correct me.

I retired from FERS at 54 (Rule of 55) with 8 years of service. I opted to chose deferred retirement since I had more than 5 years of service. As I was told, 3 months prior to turning 62, I need to turn the deferred retirement paperwork into OPM and the amount at 62 will be the average of my highest 3 years of pay times the number of years (8). The deferred retirement is COLA'ed.

Had I waited 2 years, I would be eligible for early retirement (10 years of service) which would start the month after I retired but is NOT COLA'ed.

 

[clobber]

I retired from FERS at 54 (Rule of 55) with 8 years of service.

So you lost your access to FEHB correct?

 

[Lawrencewendall]

So you lost your access to FEHB correct?

I've got Tri-Care so I never participated in FEHB.

 

[zinger1457]

A little late to the discussion but I’ll add my experience, I did a deferred FERS retirement last year. Left the Feds about 10 years ago and submitted the paperwork to start collecting my pension in Nov 2019. The FERS paperwork states to submit the required forms 60 days before you want to start collecting so I submitted the forms in Aug 2019. About a month after submitting the forms I hadn’t heard anything from OPM, didn’t even know if they received them, so placed a call to OPM. Was told they received them but might be 2-3 months before they would get around to reviewing them. Called them again in Dec 2019 and was told it might be April 2020 before they could process it. Received a letter from OPM in early Feb 2020 with my account number and password to access the OPM online web site. About a week later got my first check, it included the money owed back to Nov 2019. Started getting my regular monthly check on 1 March 2020.

I think deferred retirees get pushed to the end of the line when it comes to processing retirement paperwork. Had a friend who retired in Nov 2019 on an immediate retirement and his paperwork went through right away and he received his first check in Dec 2019. The delay wasn’t a major issue for me, my pension is relatively small and I’m not dependent on it, just wished the communication was a little better during the start.

 

[strobot]

Interested as well. Financially we are set and can go, but its the FEHB that have us still working.

It's part of the reason we are FIretiring overseas until the US can get universal healthcare. Without having to worry about monthly medical payments, you would be shocked at how easy it is to FIRE.

 

[marinauser]

My spouse also had the same experience. Worked for the feds for a little less than 10 years. Nearly 20 years later, filed the paperwork relatively easily to start the small pension at 62. Took a few months to even confirm the receipt of the paperwork and several more months before payments actually started and the first check included the back pay.

 

[strobot]

A little late to the discussion but I’ll add my experience, I did a deferred FERS retirement last year. Left the Feds about 10 years ago and submitted the paperwork to start collecting my pension in Nov 2019. The FERS paperwork states to submit the required forms 60 days before you want to start collecting so I submitted the forms in Aug 2019. About a month after submitting the forms I hadn’t heard anything from OPM, didn’t even know if they received them, so placed a call to OPM. Was told they received them but might be 2-3 months before they would get around to reviewing them. Called them again in Dec 2019 and was told it might be April 2020 before they could process it. Received a letter from OPM in early Feb 2020 with my account number and password to access the OPM online web site. About a week later got my first check, it included the money owed back to Nov 2019. Started getting my regular monthly check on 1 March 2020.

I think deferred retirees get pushed to the end of the line when it comes to processing retirement paperwork. Had a friend who retired in Nov 2019 on an immediate retirement and his paperwork went through right away and he received his first check in Dec 2019. The delay wasn’t a major issue for me, my pension is relatively small and I’m not dependent on it, just wished the communication was a little better during the start.

Did you start withdrawing at your MRA, or one of the other FERS milestones (60 & 62)? How many years did you have in?

 

[zinger1457]

Did you start withdrawing at your MRA, or one of the other FERS milestones (60 & 62)? How many years did you have in?

I chose to start collecting when I turned 62, had 14 years of service.

 

[FLSUnFIRE]

A little late to the discussion but I’ll add my experience, I did a deferred FERS retirement last year. Left the Feds about 10 years ago and submitted the paperwork to start collecting my pension in Nov 2019. The FERS paperwork states to submit the required forms 60 days before you want to start collecting so I submitted the forms in Aug 2019. About a month after submitting the forms I hadn’t heard anything from OPM, didn’t even know if they received them, so placed a call to OPM. Was told they received them but might be 2-3 months before they would get around to reviewing them. Called them again in Dec 2019 and was told it might be April 2020 before they could process it. Received a letter from OPM in early Feb 2020 with my account number and password to access the OPM online web site. About a week later got my first check, it included the money owed back to Nov 2019. Started getting my regular monthly check on 1 March 2020.

I think deferred retirees get pushed to the end of the line when it comes to processing retirement paperwork. Had a friend who retired in Nov 2019 on an immediate retirement and his paperwork went through right away and he received his first check in Dec 2019. The delay wasn’t a major issue for me, my pension is relatively small and I’m not dependent on it, just wished the communication was a little better during the start.

I do not trust the government record keeping at all. My official personnel record is (was) missing the first 10 years of my career -now it has scanned copies of *my* documents (I have hardcopies, scanned, and hardcopies at my parent's house) and I really have low faith in the system (and the competence of 80% of the HR workers... the few good HR are saints!). I also have EOY leave and earnings statements and all my W-2s from the start of my career. I expect it to be a cluster when I request my pension but have my documentation. If I were immediately retiring, I could have better access to my current personnel office but after a decade the trail will be cold and I'll be on my own.

 

[zinger1457]

I do not trust the government record keeping at all. My official personnel record is (was) missing the first 10 years of my career -now it has scanned copies of *my* documents (I have hardcopies, scanned, and hardcopies at my parent's house) and I really have low faith in the system (and the competence of 80% of the HR workers... the few good HR are saints!). I also have EOY leave and earnings statements and all my W-2s from the start of my career. I expect it to be a cluster when I request my pension but have my documentation. If I were immediately retiring, I could have better access to my current personnel office but after a decade the trail will be cold and I'll be on my own.

I always had a pretty good idea how much I would be getting for a pension but prior to submitting my paperwork I tried to get OPM to tell me what my calculated pension would be but their response was they didn't have the time, instead they sent me copies of all my work/pay history and told me to calculate it myself. It appears all of the calculations (length of service, high 3 salary, etc.) are done manually by OPM staff. Seems crazy that the system isn't computerized, it would take a program 2 seconds to spit out the numbers, and with a lot less chance of error. The first time I knew what my exact pension would be was when I received the first monthly check, it was close to what I calculated.

 

[AginMS]

My original plan was to retire at 58 with 14 years of federal service -- so the MRA+10 path. But rather than take a 20% reduced pension at 58 (-5% for every year you draw the pension before 62) I was going to take a deferred pension at 62.

Lately though, if the numbers keep working out, I think I may be able to retire before my MRA. I'm now hoping to separate at 55 with 11 years and take the deferred retirement. From what I've read, since I was planning to defer anyway under MRA+10 there isn't much difference in separating before MRA (except in this case there is no choice but to defer). Obviously the number of years will be less also.

BUT, one thing different I have found if you separate before MRA is that your accumulated sick leave will NOT be calculated into your total time. But I don't think getting 2 or 3 months added to my calculation is worth w*rking an extra 2-3 years.

My situation is also different from yours in that I'm retired military and have Tricare so FEHB is not a consideration for me.

 

[clobber]

It appears all of the calculations (length of service, high 3 salary, etc.) are done manually by OPM staff. Seems crazy that the system isn't computerized, it would take a program 2 seconds to spit out the numbers, and with a lot less chance of error. The first time I knew what my exact pension would be was when I received the first monthly check, it was close to what I calculated.

I don't think this is true. OPM uses FACES to compute all those things. There is even a user manual posted on the login screen so you can see what they do. It is fairly extensive and you can see why they don't want to work through it for everyone who randomly requests it. I'm guessing that all the input is manual and they have to sift through the SF-50s.

Most federal employees have access to tools at work (like GRB, EBIS, etc) that provide estimates. There are a hundred different calculators and spreadsheets on the Internet to help you estimate.