Pension reduction tradeoffs ?

[jdw_fire]

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Originally Posted by Want2retire My point is that if medical coverage is tied to the pension, that can affect the computations. In my case, one can delay getting the lifetime medical covereage until the pension begins and then re-start it with exactly the same premiums as those who took it immediately. Some people do. I'd rather not, though. Too much chance for something to go wrong, and besides it would probably cost me a lot to get other medical coverage for the six months. Mostly it's a peace of mind issue for me.

my understanding is that if you dont start collecting an annuity within 1 month of your separation you can no longer get it. Ensuring a Healthy Retirement (6/16/06) -- www.GovernmentExecutive.com

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Of course, as with all other federal benefits, there are a series of rules related to FEHBP. To continue coverage into retirement, you must: Have retired on an immediate annuity (that is, an annuity that begins to accrue no later than one month after the date of your final separation). Have been continuously enrolled (or covered as a family member) in any FEHBP plan (not necessarily the same plan) for the five years of service immediately preceding retirement--or if less than five years, for all service since your first opportunity to enroll.

oops, i stand corrected. apparantly it is only required that you be eligable for the immediate annuity to ensure you can eventually get it

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Let's look at a couple of examples: Suppose Alice is a 42-year-old FERS employee with 17 years of federal service. She's not eligible to retire with immediate benefits. But if she resigns, she may apply for a deferred annuity later. Under CSRS and FERS, the deferred benefit is payable at age 62. Alice could choose to take a reduced payment as early as her FERS minimum retirement age. But she would not be eligible to reinstate her FEHBP coverage. Now let's take the case of Tony, who is 57 and has 15 years of service. He's eligible for an MRA+10 retirement under FERS. If he applies to receive this benefit immediately, he will be subject to a penalty of 5 percent for every year he is under age 62. To avoid the penalty, Tony postpones receiving the retirement until he's 62. He is eligible to reinstate his FEHBP when he begins receiving his postponed FERS retirement.

[W2R]

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Originally Posted by jdw_fire oops, i stand corrected. apparantly it is only required that you be eligable for the immediate annuity to ensure you can eventually get it

Federal retirement is extremely complex. But now that we have got that straightened out, I'd like to repeat my post from the previous page that inspired our digression so that it might be addressed.

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Originally Posted by Want2retire Is the pension all that is involved, or are there health benefits tied to the pension? My pension will be reduced by about 2.5%, because I will be retiring about half a year before I turn 62. But it still makes sense to take an immediate pension, because my pension is miniscule and my health benefits are tied to my pension. For the 2.5% difference ($17/month difference, before taxes), I would rather just lock in the same lifetime medical coverage uninterrupted and as always. It is worth it to me to eliminate the worry and expense of dealing with a six month gap.

[Delawaredave5]

I think there's more risk to corporate DB pensions than people think - they all think "Megacorp will be here forever".

Interesting article below how salaried folks are getting stuck at Delphi

http://www.nytimes.com/2009/10/27/bu...Aix1jOar4+4RdA

Mr. Beiter estimated that slightly fewer than half of Delphi’s white-collar retirees would have their pensions cut, by 30 to 70 percent. One woman in his area who had earned a pension of $2,925 a month checked with the Guaranty Corporation and was told her retirement check would be pared to $390. But others will have smaller losses, and some will not lose at all.

The wide-ranging losses occur because of the way Congress devised the pension insurance program. It gave the biggest protection to the elderly, so that in practice, people in their 50s take the biggest hits.