Postal Retirement: Eligibility vs Affordability

Postal Retirement

OK, so you’ve met your MRA (minimum retirement age), or better yet, maybe another early out came around and you want to take it. Time to pick out balloons for the retirement party, right? Maybe not. Unfortunately, we’ve seen so many employees pay attention to what they’re ALLOWED to do, that they completely disregard what they can AFFORD to do. Retirement may seem like the ultimate freedom, but that may not be the case if you can’t pay your bills.

Below are just a few things to consider before you walk away from your steady job…

Expenses

First of all, make a detailed list of your monthly expenses. Refer to your last few months bank statements to make sure you’re not forgetting anything. Mortgages and car payments are not your only expenses. Food, entertainment, and spoiling the grandkids all need to be considered. Just because you don’t get a bill in the mail doesn’t mean it doesn’t cost money.

Income

Next, calculate your exact income in retirement. When looking at your monthly benefit on the annuity estimate that the government sends you, remember to take out medical coverage (which will roughly double – look in the upper right of the form), and don’t forget to take out a little for taxes as well. The average FERS employee that we see with 30 years of service and a 53,000 high three, after taxes, insurance, and leaving a survivor benefit, only brings home about 800 or some from their FERS pension. These same folks usually bring in about 1200-1500 in Social Security Income as well. For some reason, most people expect more. It’s much better to be aware of this ahead of time so there are no surprises.

Savings (TSP)

Finally, know the role of your TSP (Thrift Savings Plan). On the back of your statement you will find a number showing what your monthly benefit would be if you annuitized it. While this seems fine and dandy, read the small print. Luckily, the small print with the government is only 684 pages of size .01 font, so let me go ahead and point out some major implications here.

  • First, if you take advantage of that monthly payment, you can NEVER change it. If your circumstances change, too bad.
  • Next, you have NO access to cash. If you have an emergency, too bad.
  • Also, the survivor benefit works exactly like that of your pension. So, once you pass, your spouse will get a survivor benefit. Once they pass, the government is off the hook. Your heirs will get nothing.

Keep in mind, there ARE other options with your TSP. We just wanted to point out that this particular option probably wouldn’t be so popular if people understood the “side effects”. To educate yourself on other options, contact us, OR attend one of our Retirement Seminars. As a general rule though, if your FERS pension and your Social Security Income together are not sufficient to pay your monthly expenses, you may want to consider postponing the retirement party for a while…

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