Solving the FERS Retirement Puzzle

I’ve had the privilege of counseling over 10,000 postal employees over my career. Each one of these employees had different situations and circumstances that influenced when they should retire. Notice I said SHOULD retire and not when they COULD retire. As you approach retirement it’s important to know your numbers so you can determine when you SHOULD retire and not just when you are eligible.

The best way I can illustrate my point is to use some actual employee scenarios.

SCENARIO #1

Dale was a FERS employee who had 30 years and had met his Minimum Retirement Age of 57. He was eligible to retire and called me to make sure he knew his numbers. Here were his numbers:

Net Pension would be $1,100
FERS Supplement $900
Total Fixed Income: $2,000

Dale was bringing home $1,500 every two weeks working and his budget was based on making that much per month. As you can see he was $1,000 a month short of what he needed. Dale had an option to draw the money he needed from the TSP but he only had $200,000 in the TSP. As a general rule employees should not draw more than 3% of their TSP balance annually to lessen the chances of running out of money. If Dale took out the 3% he was still going to be short on what he needed.

SOLUTION:

Dale and I discussed his specific situation and both came the conclusion that he didn’t want to retire and feel broke. He asked my opinion of when he should retire and I suggest age 62. Look at how his numbers changed by working until 62:

Net Pension would be $1,350
SSI at 62 $1,550
Total Fixed Income: $2,900

Not only did Dale increase his monthly income by $900/month for life, but he also contributed an additional $50,000 to his TSP. Now Dale has $250,000 in his TSP and the 3% he can draw per year from the TSP will bring his retirement income per month to over $3,500 a month.

SCENARIO #2

Paula has worked 20 years for the postal service and is eligible to retire because she has reached the age of 60. She wasn’t sure if she could afford to retire so she called me to run her numbers.

Net Pension would be $900
FERS Supplement $750
Total Fixed Income: $1,650

Paula’s pension and supplement were not enough for her to retire. She needed about $3,000 a month to live comfortably in retirement. Paula’s case is a good example of how the TSP can compensate for working a shorter career. Paula had accumulated over $325,000 in her TSP. We looked at her risk tolerance and found a program where she could draw 4% of the balance for the rest of her life and never worry about running out of money. This program gave Paula another $1,083/month which more than covered what she needed for retirement.

CONCLUSION:

Every employee has unique circumstances that must be considered when considering retirement. There is no “one-size-fits-all” when it comes to retirement. The first thing you must do is know your numbers. How much will you make a month (factoring in all deductions) based on a given retirement date. Second you have to know how much you need in retirement. For most people, they need just as much per month as they do working unless homes are being paid off. Last, you have to factor in the TSP and determine YOUR best date to retire.

If the idea of retirement and running all these numbers intimidates you we are here to help. We have been offering retirement seminars through postal unions for years and we are confident we can get you the answers you need.

David Fielder
President
Postal Benefits Group
Office: 636-875-5206
david@postalbenefitsgroup.net
www.postalbenefitsgroup.net

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The True “Cost” of the G and F funds

Are you contributing to the TSP? Are you one of the 47% of federal employees who are either in the G or the F fund right now because of its safety? We wanted to shed some light on a few key issues in hopes of you understanding the value of other options that might work better.

For the previous 12 months the G fund has returned 2.03% and the F fund has returned .55%. Did you lose any money in either of these funds? No. Did you still lose when it comes to retirement? Yes.

The key word to consider when you take the “safe” approach with your TSP is inflation or the basic cost of stuff you need on a day to day basis. Do you remember what stuff cost you 20 years ago? Let’s take a look:

Gallon of gas: $1.11

A dozen eggs: $.87

Pack of Cigarettes: $1.76

We show you this to show you that even though your TSP account in the G or F fund is not showing a negative on your statement you are still losing in terms of spendable cash in retirement. On top of the increase in prices the money in your TSP has not been taxed yet either.

We write this article for a specific type of person and hope we can offer you some assistance. Are you an employee that:

  • Wants to make sure your life savings is safe
  • Doesn’t want to have to “manage” your money daily or monthly
  • Wants to earn a fair return that will make sure your money lasts in retirement and keeps up with the cost of stuff you need to buy.
  • Wants to make sure your heirs are protected in the event of your death.
  • Is 59.5 or older or retired

If this list above describes you please take a few minutes and request a Free Benefits Review. You can have the safety of the G fund but have the opportunity for much better returns than the G or F fund can offer. Our “G-C” account has the protection of G with the potential of C in good markets. Special circumstances require special approaches and products. The “one size fits all” approach the TSP uses is not for everyone.

You can request a Free Benefit Review and learn more about our “G-C” account by visiting www.postalbenefitreview.com

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Postponed and Deferred Postal Retirement

Postponed and Deferred Postal Retirement

Those of you who are wanting out and don’t quite meet the basic requirements need to understand all of your options. This article is for FERS employees with at least 5 years of service and want to know their options for an early retirement.

1) MRA +10:

If you have reached your Minimum Retirement Age and you have at least 10 years of service you can take an early retirement. You will be eligible for federal health benefits in retirement, however you will be subject to a 5% penalty for each year you are under 62.

To avoid this penalty employees who are MRA or older and have 10 years of service can Postpone their retirement until age 62 and can avoid the penalty completely. It is important to note that you will not be covered by federal insurance during the period between your separation and age 62. You would request a Postponed retirement package from Shared Services if you choose this option.

2) Deferred Retirement:

This option is available to employees with at least 5 years of service. If you choose this retirement option you choose to defer your pension until you are 62 (or 60 if you have at least 20 years of service). There will be no penalty taken from your pension, BUT YOU WILL NOT BE ELIGIBLE FOR FEDERAL HEALTH BENEFITS.

If you are not completely sure when you can retire or what you will get please take advantage of our Free Benefit Review. You can request this review at www.postalbenefitreview.com.

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Taxes and Retirement

Taxes and Retirement

I hate to bring up the nasty subject of taxes but unfortunately it is a subject none of us can escape. Some of you are going to retire in the next couple of years and there isn’t a whole lot you will be able to do to minimize your taxes. However, those of you who have 10 or more years to go may have an option to create a second pension that the government cannot touch.

Most of you know that the money you put in your TSP is not taxed when you put it in. Think of it this way, the government is letting you put that money in now and not pay the small amount of tax that would come out of it now, so he can take big chunks out of your money when you draw it out of the TSP. We like to call the TSP Uncle Sam’s retirement account.

Many will say that taxes will be lower in retirement so if I draw my TSP money out in retirement I will pay less tax. Well, I have a couple of questions for you: 1) Do you have more deductions now or when you retire? For most people the answer is now. By the time you retire the kids are gone and the house is either paid for or so close to being paid for you don’t have that deduction any more. 2) Do you think tax rates are going to go up or down over the next 20 years? Folks, the way the government is using its credit card there is no way any reasonable person would think taxes are going anywhere but up in the future. I mention both of these points to address the myth that taxes will be lower when you are in retirement. I’ve included below the history of tax rates in the US. As you can see, we are very low right now compared to what it has been in the past.

Historical Highest Marginal Income Tax Rates
Year Top Marginal Rate Year Top Marginal Rate Year Top Marginal Rate
1913 7.0% 1946 86.45% 1979 70.00%
1914 7.0% 1947 86.45% 1980 70.00%
1915 7.0% 1948 82.13% 1981 69.13%
1916 15.0% 1949 82.13% 1982 50.00%
1917 67.0% 1950 91.00% 1983 50.00%
1918 77.0% 1951 91.00% 1984 50.00%
1919 73.0% 1952 92.00% 1985 50.00%
1920 73.0% 1953 92.00% 1986 50.00%
1921 73.0% 1954 91.00% 1987 38.50%
1922 56.0% 1955 91.00% 1988 28.00%
1923 56.0% 1956 91.00% 1989 28.00%
1924 46.0% 1957 91.00% 1990 31.00%
1925 25.0% 1958 91.00% 1991 31.00%
1926 25.0% 1959 91.00% 1992 31.00%
1927 25.0% 1960 91.00% 1993 39.60%
1928 25.0% 1961 91.00% 1994 39.60%
1929 24.0% 1962 91.00% 1995 39.60%
1930 25.0% 1963 91.00% 1996 39.60%
1931 25.0% 1964 77.00% 1997 39.60%
1932 63.0% 1965 70.00% 1998 39.60%
1933 63.0% 1966 70.00% 1999 39.60%
1934 63.0% 1967 70.00% 2000 39.60%
1935 63.0% 1968 75.25% 2001 38.60%
1936 79.0% 1969 77.00% 2002 38.60%
1937 79.0% 1970 71.75% 2003 35.00%
1938 79.0% 1971 70.00% 2004 35.00%
1939 79.0% 1972 70.00% 2005 35.00%
1940 81.10% 1973 70.00% 2006 35.00%
1941 81.00% 1974 70.00% 2007 35.00%
1942 88.00% 1975 70.00% 2008 35.00%
1943 88.00% 1976 70.00% 2009 35.00%
1944 94.00% 1977 70.00% 2010 35.00%
1945 94.00% 1978 70.00% 2011 35.00%

So what avenues do you have available to you to save where the taxes won’t bite you in the back side? You have two options really as a Postal employee:

1) Roth RIA or Roth TSP

This is a great way to save money for retirement. You can fund it with after tax dollars and then when you draw it out in retirement there is no tax whatsoever. The downside to the Roth IRA is it is extremely limited on how much you can put in. The limits are $5,500 if you are under 50 and $6,500 if you are over 50. It’s pretty hard to accumulate any sizeable amount of money in a Roth with those kinds of limits. Think about this, the government lets you put $17,500 in an IRA in most cases but he limits what you can put in a tax free vehicle. Interesting huh?

2) Life Insurance

This vehicle has been around for a long time and is still one of the only places Uncle same can’t touch when it comes to taxes. As a matter of fact it’s the only place you can save money with no limit** and it be totally tax free in retirement. Cash value life insurance builds cash value obviously and when you accumulate a large sum of money in a policy you can take the cash out in the form of a policy loan that never has to be paid back. How much tax do you have to pay for taking one of these loans? NOTHING. You would also have to go along with the tax free income a nice death benefit that would take care of you loved ones in the event of your premature death.


An Example

Let’s look at a real example of a Postal employee who wants to set up a second tax free pension. This employee WAS contributing $500/pay over and above his match to the TSP. Let’s look at what happens when he puts this same $500/pay into the cash value policy we suggest and see what happens when he retires in 15 years.

Annual Contribution: $13,000

At age 60 the employee can convert his cash value into an annual 2nd pension of $33,000 a year. Remember, that $33,000 is tax free because it is a loan. None of this money would show up on your tax returns. I don’ t know many people who wouldn’t like to have a second tax free pension. On top of the tax free income you have created you would also have a death benefit of $360,000 at age 60 in case you pass away early. All of those proceeds pass to your heirs tax free as well.


If you would like a custom presentation designed for you based on your age and your retirement date please email me at david@postalbenefitsgroup.net.

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Disability Retirement – Part 3

In this article we will address how to write your letter to your doctors as well as how the compensation works if you are approved for a disability retirement.

Example Letter to Doctor:

(Start example)

Dr. Anyone,

On August 6, 2012, I wrote to you informing you that I had submitted my papers to the United States Postal Service Office of Personnel Management (OPM) requesting a Medical Retirement. You stated to me during my last scheduled appointment with you that you thought that was the best route for me to take other than just quitting. You stated that you would assist me in any way that you could.

Enclosed is a Physician’s Statement which is required by the OPM, along with copies of my bid job description (both personal and professional). I have highlighted exactly what is required from you (minus the copies of my medical records, as I already have those). It is important for me to show the OPM that I can no longer continue to do the work required in my current position as an Sales and Service Distribution Clerk (SSDA), as the repetitive work and heavy lifting, pulling and pushing is debilitating to my health and body. I must show that I have complied with all the tests, surgeries and therapies that you have suggested and completed; but that continued employment in this position is regretfully not conducive to my continuing issues with tendonitis and joint/arthritis issues. They also need to know I have reached “Maximum Medical Improvement” with my condition.

I realize this is additional work for you and I apologize for any inconvenience. This information is time critical. I need to have it as quickly as possible.

Thank You,
[your name]

(End example)

If I am seeing one doctor for my arthritis issues, another doctor for my respiratory condition and another doctor for back issues, Do I need each one to send in a physician statement?

Yes, the employee’s total medical health is taken into consideration. If your arthritis limits your mobility and your back condition limits your ability to lift weight, both conditions have an overall effect on if you can perform the essential requirements of your position.

What will my annuity be if I am approved for a medical retirement?

As a CSRS employee, you are guaranteed a minimum of 40%. However, if you have more than 21 years 11 months of service, your disability will be computed using all your creditable years of service. For example- if you had 30 years of service and were only 52 years old, you would receive credit for all years of service and would receive a disability of .5625% of your high-3.

That wouldn’t be a full annuity because you are forced to leave due to a medical reason three years earlier than a full retirement (which could have added another 6% at full retirement). You would receive this amount plus any additional COLA’s every year that one is granted.

If you are a FERS employee your computation is a bit different. You will receive earned annuity based on actual service if you are age 62 or over, or you are eligible for a regular Voluntary retirement with no age reduction.

If you are age 61 or less the FERS disability is computed at 60% for the first 12 months minus 100% of your Social Security entitlement (if you receive one from Social Security). This means you would receive an amount of 60% of your high-3 the first year. After the first 12 months, you would receive 40% of your high 3 minus 60% of the social security amount.

If you filed for disability from OPM, you are required to also file for disability from Social Security at the same time. This is required because you have Social Security as a component for your retirement and it also has a disability payment for FERS members.

Once you have been approved for Social Security disability, you must immediately notify OPM that it has been approved. If you are approved for both, you must recognize that you are not allowed to keep both of these amounts in total. You would receive this amount until age 62. At that time your retirement would be recomputed and you would receive a new annuity for all years of service plus the years you were retired on disability.

There is no underlying principle of the computation which allows for the offset. It is federal law and if you are under FERS, then you must follow the law. Do not think you can keep the entire OPM amount and the Social Security amount and it will not catch up to you. Understand that the government will catch up with you eventually. Sooner or later, you will have to pay this money back.

What if I want to work doing something else?

If you are approved for disability retirement from OPM, you can still work elsewhere and earn as much as 80% of your base for the grade and level of your last government position. It should be something within your restrictions. If you earn more than 80% while on disability, your retirement could be jeopardized.


Postal Benefits Group has secured the services of the only Postal Disability Retirement Expert. She has personally handled over 100 cases and all 100 were approved. There is a charge for her service. If you would like more information on getting her assistance with your retirement please email disability@postalbenefitsgroup.net with your situation. We will forward it on to her and if she feels you have a good case she will accept the case and we will put you in contact with her.

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Disability Retirement – Part 2

In this article we will give you an example of how a postal employee should describe their job duties as part of the disability retirement process.

Example:

(Start example)

The position of a Sales and Service Distribution clerk assigned to the Anytown Post Office involves the following tasks. Use this as an example then analyze your position in the same detail the next day you go to work. Document every move and every detail.

In the morning, when breaking mail down to be sorted, I will be moving carts and large hampers from the dock area into the facility. This requires me to push equipment that weighs from 45-1200 pounds. Empty weight of a cage (6’x 4’x 3’ with a metal shelf that weighs 25 lbs) that is used to transport mail ~325 lbs and when it is fully loaded with mail, it can weigh up to ~1200lbs I will have to remove the mail from the equipment and it will be in trays (8-15 pounds), flat tubs (5-50 pounds), and mail sacks (variable weights up to 70 pounds).

I am required to stand for 2-3 Hours, intermittently static, when I am sorting mail to a letter case. These trays of mail weigh approximately 15 lbs. when full. The case is approximately 30 inches off the ground and has mail slots of 3” x 4” for mail to be placed in each slot. The mail sorting case looks like a grid and is a total of 56 slots for mail to placed with a total height of 6 feet. I will stand as I sort the mail and be required to place mail in the case reaching from below my waist to 18 inches above my shoulder. This requires a repetitive motion utilizing my upper arms and hands. I will repeat this motion 200-500 times in a 15 minute period.

I am required to stand for 2-3 hours, intermittently static, when I am sorting mail to a flat case. The flat tubs of mail (plastic containers -1’x 1.5’x 1’that weigh up to 50lbs) vary in weight from a few pounds to 50 pounds when full. The case is approximately 30 inches off the ground and has slots for flats that are 10” x 4” for mail to be placed in each slot. The mail sorting case looks like a grid and is a total of 40 slots for mail to placed I will stand as I sort the mail and be required to place mail in the case reaching from below my waist to 1 foot above my shoulder. I will repeat this motion 300-500 times in a 15 minute period. When I sort the mail to the Post Office Boxes in the office the task is similar to casing mail but the dimensions’ include boxes located only 18 inches off the floor to a height of 65 inches.

The mail distribution portion of my position requires prolonged standing, walking, bending, lifting (up to 70 lbs), pulling, pushing/pulling large metal containers (with weights up to 1200 lbs), and reaching above my shoulders and below my waist .

When assigned to the window section of the office, my tasks include selling stamps, accepting mail (letters and flats) and parcels (of all shapes and sizes up to 70 pounds). My job will involve fine manipulation using a computer system. I will have to lift packages across the counter to place them on a scale to be weighted. After the mail is accepted I will have to place the package in a mail cart/hamper/metal container for transport to the rear of the Post Office for dispatch.

The window clerk portion of my position requires prolonged standing, walking, bending, lifting (up to 70 lbs), twisting turning, pushing/pulling carts/hampers/large metal containers (with weights up to 1200 lbs). I will do this multiple times in an hour period depending on how busy the windows are.

I am allowed two 15-minute breaks and a 1/2 hour lunch in a 8 1/2 hour window. (hour 2 – break, hour 4 – lunch, hour 6 1/2- break).

(End example)

*ATTACH THIS TO THE FRONT OF THE JOB DESCRIPTION YOU GIVE YOUR PHYSICIAN

In our next article we’ll address how to write your letter to your doctors as well as how the compensation works if you are approved for a disability retirement.


Postal Benefits Group has secured the services of the only Postal Disability Retirement Expert. She has personally handled over 100 cases and all 100 were approved. There is a charge for her service. If you would like more information on getting her assistance with your retirement please email disability@postalbenefitsgroup.net with your situation. We will forward it on to her and if she feels you have a good case she will accept the case and we will put you in contact with her.

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Disability Retirement – Part 1

There are thousands of Postal employees who are eligible for a Disability retirement but are unsure if they qualify or they are intimidated of the process. Our goal is to give you a detailed description of what is involved as well as how to provide your documentation in a way that gives you the best chance at being approved.

Applying for a Disability Retirement is an option all federal employees have available. It is a time consuming process and remember you are certifying that you cannot perform your job anymore due to health reasons. There are forms that will need to be completed by your doctor, your supervisor, and yourself.

There are two basic formulas that are followed and one deals with the procedures for CSRS and the other deals with FERS disability. The basic criterion that must be met for both is the following:

Required Criteria:

OPM considers the documentary evidence that you, your physician, and your agency provide. Your claim can be allowed only if the evidence established that you meet all of following criteria:

  1. A medical condition, which is defined as a health impairment resulting from a disease or injury, including a psychiatric disease.
  2. Disability must last more than one year.
  3. Become disabled while serving under FERS or CSRS.
  4. A deficiency in service with respect to performance, conduct or attendance, OR in the absence of service deficiency, show that your medical condition is incompatible with either useful service or retention in the position. (Useful and efficient service means fully successful performance of the critical or essential elements of the position-or the ability to perform at that level-and satisfactory conduct and attendance.)
  5. Your medical condition has caused a service deficiency.
  6. Your employer must certify it is unable to reasonably accommodate your medical condition in your present position and that it has considered you for any vacant position in the same agency, at the same grade or pay level, and within the same commuting area, for which you are qualified for reassignment.
  7. You, or your guardian or other interested person, must apply before your separation from service or within one year of your separation. The application must be received by OPM within one year from the date of your separation. This time limit can be waived only in instances involving incompetency.

When should I apply for a disability retirement?

You should consider applying for disability retirement only after you have provided your employing agency with complete documentation of your medical condition and your agency has exhausted all reasonable attempts to retain you in a productive capacity, through accommodation or reassignment. Your supervisor will need to provide a statement for OPM that is contained in the packet.

What forms do I fill out?

Complete SF 2801, Application for Immediate Retirement, and SF 3112, Documentation in Support of Disability Retirement.

What are the service requirements?

For CSRS employees- you must have completed at least five years of creditable Federal civilian service and for FERS employees- 18 months.

What documentation will I need to support my application?

Your doctors will need to provide OPM with statements stating that your condition will not be improving (you have reached maximum medical improvement) AND your condition(s) keeps you from performing the essential elements of your position.

The thing to remember when applying for disability retirement is that you and your Physician need to show a correlation between your illness or disease and the expectations of your job with the agency.

How will my doctor know what the essential elements of my job consist of?

In your medical retirement packet that you receive from your agency, it will contain a copy of your “Standard Position Description” but it does not accurately detail what you do on a daily basis for your job.

Include a detailed account of what you do in your position with the “Standard Position Description” and a cover letter for your physician so he has a clear understanding of what your job truly involves.

In our next article we will go into specific detail of how much detail is needed to successfully be approved for a disability retirement.


Postal Benefits Group has secured the services of the only Postal Disability Retirement Expert. She has personally handled over 100 cases and all 100 were approved. There is a charge for her service. If you would like more information on getting her assistance with your retirement please email disability@postalbenefitsgroup.net with your situation. We will forward it on to her and if she feels you have a good case she will accept the case and we will put you in contact with her.

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Updating your Beneficiaries – Part 2

Updating Your Beneficiaries

Most Postal employees understand they need to have beneficiaries designated for their benefits. The most common beneficiaries are for your TSP (TSP-3) and your FEGLI coverage (SF 2823). You can learn more about updating your FEGLI and TSP beneficiaries by referencing our previous article on beneficiaries here.There are other beneficiaries that must be named outside of these.

Upaid Compensation

Every employee needs to complete an SF1152. This form names a beneficiary for any unpaid compensation you are owed upon your death. When would this apply? Let’s say for example you don’t die on the end of a pay period. You’ve only been paid up to your last paycheck. These hours that you have not been paid for will be paid to your beneficiaries. This form will also address any accrued annual leave.

Unpaid Retirement Contributions

Another beneficiary that is sometimes overlooked pertains to your retirement contributions. If you are unmarried and without need for a survivor benefit you will still want to protect any proceeds that do not get paid out upon your death. For example, if you pass away two years into your retirement you will want any remaining retirement contributions to transfer seamlessly to the heirs of your choice. If you are CSRS you can do this using SF2808, and for FERS it is SF3102.

If you ever have questions about your benefits or retirement please feel free to contact us.

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Preparing for Postal Retirement

Preparing for Postal Retirement

Thousands of Postal employees are considering retirement. This article will help you prepare for the retirement process and make sure you understand how timing factors into when to retire.

After reading this, if you have additional questions please do not hesitate to contact us.

  1. If you are CSRS the best dates to retire are either the first 3 days of the month or the last 3 days of the month.
  2. If you are FERS it is best to retire the end of the month.
  3. Before you retire you must consider that you will not get your full pension check immediately. OPM is backed up and right now they are telling employees it will be 6-9 months before you receive your full pension check. You will receive approximately 60% of your pension while they are verifying your retirement documents. Once they are done with the verification process you will then get a check for the back money you are owed.
  4. During the time period you are receiving a partial pension the government does not take health insurance out of your check. Once everything is verified they will send you the back check for pension payments owed and out of that same check they will take the health insurance out that was not taken from your partial pension.
  5. Request your retirement package at least 60 days before you plan to retire.
  6. Decide how much if any you want to keep of the Postal Life Insurance. If you haven’t already read m y article on how the Postal life insurance program works please review it before making that decision.
  7. Remember that for your spouse to be eligible for the Federal health plan in the event of your death you must give them a survivor benefit. It doesn’t have to be the full amount but they have to receive something to be eligible for health benefits.
  8. You as the employee must be on the federal health plan for 5 years before you retire to be eligible to bring the coverage with you into retirement.
  9. If you are not sure what you want to do with your TSP or if you aren’t sure how the TSP options work please read my article “you have options with your TSP”. Don’t annuitize without educating yourself.
  10. If you are 59.5 or older and you are a FERS employee we encourage you to make choices with your TSP before you retire. The government allows you to rollover your TSP at 59.5 and in almost every case you will have better options outside the TSP.

We hope this helps some of you with your preparation to retire. If you have specific questions please feel free to contact us.

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CSRS Employees and Social Security

CSRS Employees Social Security

One of the most common questions we receive in our seminars is from CSRS employees on their Social Security. While there aren’t a lot of CSRS employees who qualified for Social Security there are enough that we felt it necessary to write this article. We have tried to simplify a very complex subject and explain it in a way you can understand.

Windfall Elimination Provision

The Windfall Elimination Provision was passed by the government because they felt CSRS employees were getting Social Security checks that were higher than they should be. We don’t agree with this logic, but this is why the law was passed. In a nutshell, the Windfall Elimination Provision reduces CSRS employees Social Security benefits based on how many years they had “Substantial Earnings” per the Chart below:

Year Substantial Earnings
1937-54 $ 900
1955-58 $1,050
1959-65 $1,200
1966-67 $1,650
1968-71 $1,950
1972 $2,250
1973 $2,700
1974 $3,300
1975 $3,525
1976 $3,825
1977 $4,125
1978 $4,425
1979 $4,725
1980 $5,100
1981 $5,550
1982 $6,075
1983 $6,675
1984 $7,050
1985 $7,425
1986 $7,875
1987 $8,175
1988 $8,400
1989 $8,925
1990 $9,525
1991 $9,900
1992 $10,350
1993 $10,725
1994 $11,250
1995 $11,325
1996 $11,625
1997 $12,150
1998 $12,675
1999 $13,425
2000 $14,175
2001 $14,925
2002 $15,750
2003 $16,125
2004 $16,275
2005 $16,725
2006 $17,475
2007 $18,150
2008 $18,975
2009 – 2011 $19,800
2012 $20,475

If you made at least the amount shown on the chart in a given year that year would be counted. If a CSRS employee worked 10 years from 1972-1982 and paid social security in those years and earned $7,000 in each of those years then the employee would have 10 years of “Substantial Earnings”.

Your Reduction

Now that we know how many years of substantial earnings we can find out how much our Social Security will be reduced by referring to another Social Security Chart. The following chart has years down the left-hand side. This is the year in which you turned 62. Find the year where you turn 62 and then find the years of substantial service and you will see the amount your Social Security is reduced.

Maximum Monthly Amount Your Benefit May Be Reduced Because Of The Windfall Elimination Provision (WEP)
ELY = Eligibility Year: The year you reach age 62 or became totally disabled (if earlier).
ELY Years of Substantial Earnings
20 or less
21
22
23
24
25
26
27
28
29
30
1990 $178.0 $160.2 $142.4 $124.6 $106.8 $89.0 $71.2 $53.4 $35.6 $17.8 $0.0
1991 185.0 166.5 148.0 129.5 111.0 92.5 74.0 55.5 37.0 18.5 0.0
1992 193.5 174.2 154.8 135.5 116.1 96.8 77.4 58.1 38.7 19.4 0.0
1993 200.5 180.5 160.4 140.4 120.3 100.3 80.2 60.2 40.1 20.1 0.0
1994 211.0 189.9 168.8 147.7 126.6 105.5 84.4 63.3 42.2 21.1 0.0
1995 213.0 191.7 170.4 149.1 127.8 106.5 85.2 63.9 42.6 21.3 0.0
1996 218.5 196.7 174.8 153.0 131.1 109.3 87.4 65.6 43.7 21.9 0.0
1997 227.5 204.8 182.0 159.3 136.5 113.8 91.0 68.3 45.5 22.8 0.0
1998 238.5 214.7 190.8 167.0 143.1 119.3 95.4 71.6 47.7 23.9 0.0
1999 252.5 227.3 202.0 176.8 151.5 126.3 101.0 75.8 50.5 25.3 0.0
2000 265.5 239.0 212.4 185.9 159.3 132.8 106.2 79.7 53.1 26.6 0.0
2001 280.5 252.5 224.4 196.4 168.3 140.3 112.2 84.2 56.1 28.1 0.0
2002 296.0 266.4 236.8 207.2 177.6 148.0 118.4 88.8 59.2 29.6 0.0
2003 303.0 272.7 242.4 212.1 181.8 151.5 121.2 90.9 60.6 30.3 0.0
2004 306.0 275.4 244.8 214.2 183.6 153.0 122.4 91.8 61.2 30.6 0.0
2005 313.5 282.2 250.8 219.5 188.1 156.8 125.4 94.1 62.7 31.4 0.0
2006 328.0 295.2 262.4 229.6 196.8 164.0 131.2 98.4 65.6 32.8 0.0
2007 340.0 306.0 272.0 238.0 204.0 170.0 136.0 102.0 68.0 34.0 0.0
2008 355.5 320.0 284.4 248.9 213.3 177.8 142.2 106.7 71.1 35.6 0.0
2009 372.0 334.8 297.6 260.4 223.2 186.0 148.8 111.6 74.4 37.2 0.0
2010 380.5 342.5 304.4 266.4 228.3 190.3 152.2 114.2 76.1 38.1 0.0
2011 374.5 337.1 299.6 262.2 224.7 187.3 149.8 112.4 74.9 37.5 0.0
2012 383.5 345.2 306.8 268.5 230.1 191.8 153.4 115.1 76.7 38.4 0.0
*Important: The maximum amount may be overstated. The WEP reduction is limited to one-half of your pension from non-covered employment.

Using our example and assuming our employee turned 62 in 2011 they would have a reduction of $374.50 (using the 20 or less for years of substantial earnings). The more substantial earnings years you have the less the deduction from your social security.

Our next blog post will be how the Government Pension Off-set affects Spousal benefits when the spouse is a CSRS employee.

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