“Nothing is as easy as it seems
Everything takes longer than you expect
If anything can go wrong
It will go wrong and at the worst possible moment.”
– Murphy’s Law
I like to think of the above quote as the preamble to Murphy’s Law; there are many more elements of the law such as “The shortest line moves slowest,” but for the FERS retirement system the preamble says it.
I am going to set aside for a while my strong desire for privacy and let you, my friends on the Helena National Forest, know what it has been like for me to retire in the FERS system and hope you will be better prepared than I was.
- Nothing is as easy as it seems: In January 2012, I started thinking about retirement as the VSIP (Voluntary Separation Incentive Pay) or some such acronym started floating around our in-boxes. I applied for it and prepared, as much as possible, for retirement. I applied to make a “service credit payment” to buy back the time I spent as a seasonal before I received a permanent position. I mailed the application on January 19, 2012. At that time I was informed I will owe $1,210.00 to buy back my time in service. I was also informed that they were processing the applications from March 2011 so they were far behind. At some time in the near future I will receive a bill for that $1,210.00.
(I received that bill on December 3, 2012 with a nasty note saying I had 30 days to send the money or I would lose the opportunity to buy back the time. The bill was dated November 12, 2012. After a few frantic e-mails I got an extension so I would have the 3 weeks necessary to get the funds from the insurance company.)
I jumped through hoops trying to get set up to get the VSIP including calculating how much I would get out of a $25,000.00 incentive. Had I received the VSIP my payment after taxes etc. would have been $16,000.00. That would have been a big help but it was not to be. I did not get the VSIP. I still started the retirement process. I was assigned a Retirement Counselor, and decided September 30, 2012 was a good day to retire.
- “Everything takes longer than you expect.” – A trusted Forest Service retiree showed me how to run the on line “Retirement Calculator.” It took about 10 minutes and I had a reasonable expectation (I thought) of my retirement income. I had many e-mails with my Retirement Counselor and I felt reasonably confident about the process. I studied the options for the TSP, annuities, 401K’s and so forth, and whether or not to take a full FERS annuity benefit for my husband and the Social Security Supplement for me (I qualified because I retired before age 62). I continued to do my work as a range technician and focused on the job rather than the retirement process.
- If anything can go wrong, it will go wrong, and at the worst possible moment. My retirement counselor asked me in late August 2012, “I won’t have to visit you under the bridge while you wait for your full annuity to begin will I?”
This question bothered me enough to check into some other investments we had, (paid up insurance policies with a cash value available $14,000.00). My husband, Richard, who had been out of work since July, applied for unemployment insurance. He found out a couple of weeks later that his employer had not paid unemployment insurance on him for the 20 plus years he had worked there as farmers/ranchers are not required to pay it. The bottom line: There was no unemployment insurance for him. Things were beginning to look grim. Most of my friends who had retired were enrolled in CSRS so their experiences were different than mine.
Back to the numbers.
- The average of my high three: $50,038.00
- Unused sick leave: 759 hours
- Survivor Benefits: Full – I felt it was too risky in our case to do less than a full benefit
- Health Insurance: Blue Cross, Family Plan Monthly Premium $430.00
- Annuity start: 10/01/2012
- Age 60
Now the fun begins:
I had 20 years, 4 months and 11 days: not counting the time I am buying back.
FERS basic Annuity: 847.00
Minus Survivor premium: $84.00
Total FERS Annuity: $763.00 per month
FERS Supplement per month: $671.00
Minus Federal Tax $77.00
Minus Health Insurance $430.00
Minus Life Insurance premium $17.00
Leaving a balance of: $147.00
Expectations v. Reality: The Interim Retirement Payment
My total FERS annuity, including the Social Security Supplement, after reductions: $910.00 per month. I thought I would receive about half of that amount, around $450.00 per month, during the interim until my retirement benefit was completed in about 7 to 10 months.
On November 2,2012 I received by direct deposit $206.00 for my October annuity payment.
On November 5, 2012 I received a letter from OPM Retirement Services Program explaining that this was my interim payment. Fortunately there was a phone number for those with questions. When I called, a person explained that I would not receive any payment for the FERS Supplement during the interim period. I would only get the 50% from the FERS annuity. I was surprised.
The weary sounding woman on the other end of the line told me that many people called and were surprised and unhappy at the interim amount. “I wish this was explained better by the retirement counselors and retirement seminars.” She said. “You will get the full amount when your final retirement is calculated sometime next summer, retroactive to October 1, 2012.
When I explained I was only getting $206.00 per month she offered to try to get it bumped up to $300.00 or so. I thanked her and got off the phone, now with a raging headache.
My final paycheck came about October 22, 2012. It was about half as much as usual as I had only worked half a pay period by Sept. 30, (the end of the fiscal year) my retirement date. This is the only payment that was the amount I expected and received on time.
I had believed my Lump Sum Annual Leave payment would come at the same time as my last paycheck. It did not. It was a month later. We had planned to make our house payment with this lump sum amount. Our house payment was late, for the first time ever.
Using My TSP
I have $151,000.00 in my TSP. I had decided to roll my entire TSP into an IRA and expected the TSP would be coming a few weeks after I retired. In early November I received a letter and web site to apply for my TSP account and the news that it would take them at least 60 days to process it.
We took the letter and forms to our Financial Advisor at a well known investment firm. (I will give you the company’s name and the agent’s name if you request it.) He made sure the paperwork was in order, a fairly easy process, and mailed it off. We should be able to have those funds around January 13. (He will set up two separate accounts, one to use immediately with enough dollars in it to make the house payments for a year, and one to manage for growth.) The account with the funds for the house payments will be taxed at 20% when the account is set up. The money in the growth fund will be tax deferred until it is withdrawn.
We had not planned to use the TSP until I had reached age 70 ½ as seemed wise when attending the retirement seminars. We realized we would have to use some of the TSP funds as soon as possible. I read a FedSmith article noting that the average dollar amount federal employees had in their TSP accounts was about $60,000.00. (See 208 TSP Millionaires Enjoy a Big Return in January) (I also saw an article elsewhere that put this figure at $25,000.) Regardless of which number is correct, this is a very scary statistic.
As you can see from what I have just shared the TSP needs to be a much bigger part of our monthly income as FERS retirees than it is for the CSRS employees. Richard will reach age 62 in September of 2013 and he will able to begin drawing Social Security then. We hope to stop using our TSP funds at that time or sooner if Richard finds a job and can delay starting to use his Social Security.
Our private insurance cash value savings of $14,000.00 was to be our safety net and even that took longer to access than we had imagined. We had expected it to take a couple of weeks and it took a month. (They suck the monthly premium out of our checking account with ease, why couldn’t they just credit the account? One wonders.) We had one late house payment but we have caught it up now. We hope to use less than $10,000.00 of the insurance funds for living expenses. We may have to use more.
- FERS Retirees need to plan for the TSP to provide half or more of their projected monthly income from the 60 days after retirement (minimum time it takes to get your TSP dollars in hand) for the rest of your lives.
- FERS retirees, even if they get the Social Security Supplement, will have a very low FERS annuity for the first 7-10 months until the final retirement calculations are made. Mine is $206.00 per month. After the final calculations are made, your FERS annuity will still be quite low. (If you make $100,000.00, per year, about twice as much as I did, your monthly annuity will only be about $1,800.00 per month. Remember, mine is about $910.00 after reductions.) How many people can live on that amount? Can a person survive on $400.00 for the 7-10 month interim?
- FERS retirees must have a sizable savings account or other investments outside the Forest Service to get them through the first 7-10 months of retirement. It would be better if you have a full year of living expenses on hand before you retire. This is hard I know but it will save lots of headaches.
- FERS retirees will get a lump sum payment of the back owed Social Security Supplement and FERS annuity for the 7 -10 months you did not get the full retirement. this will be barely enough to recharge your emergency savings account. Life will not start being rosy at that time as most people do not have enough saved in the TSP for a comfortable retirement.
Guess What? I’m still glad I retired. We are actually doing pretty well all things considered, and even though we made some mistakes, the Lord has seen us through. Read Dave Ramsey. Save, Save, Save.
Diane L. Johnson is a Former Range Technician for the Townsend District of the Helena National Forest.
- December 4, 2013: Update: My TSP funds reached the investment firm in early December, sooner than I expected. We are able to make our house payments with this fund.
- On December 10, 2012: I mailed my payment to OPM in the envelope they provided. The amount was actually $1,426.00. I did send it certified mail. I checked with the person assigned to my case on January 2,2013 and the agency had not received it. This person assured me that I will not lose my opportunity to buy back my time due to delays in the mail and processing. I have kept copies of all correspondence related to my retirement. Everyone I have talked to has been very kind and helpful.
- On January 10, 2013: I received my check back. I had mistakenly written the correct amount of the payment ($1,426.00) in the box on the check but had written the number I had expected to pay (One thousand two hundred twenty six, AN ERROR) on the line where the check amount is written. I mailed a new check on the next day by certified mail and it was received on January 17, 2013. I received the receipt on January 23, 2013 with the signature of the person that picked up the envelope. I also e-mailed the person assigned to my account about my mistake and she returned my e-mail when my check was posted.
Due to my own mistake my final retirement calculations will be a month later than they could have been. I expect my full retirement to begin about April 1, 2013.