Are federal health benefits worth postponing early retirement?

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mathwhiz
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Are federal health benefits worth postponing early retirement?

Post by mathwhiz » Tue Oct 22, 2019 6:51 pm

My wife is employed by the federal government and her MRA is 57. We would likely be financially ready for early retirement at age 50. The thing that gives her pause is health insurance. That would be the only thing keeping her till 57. The peace of mind that she can maintain this benefit through retirement and after. It feels like golden handcuffs to her as we use her health coverage for the family. She dreams of winning the "lottery" which to her is her agency downsizing and giving her a VSIP or VERA which she would gladly take in 2 seconds flat as that would continue her health insurance coverage.

Have any feds here experienced this dilemma? What have you done?

UpperNwGuy
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Re: Are federal health benefits worth postponing early retirement?

Post by UpperNwGuy » Tue Oct 22, 2019 7:26 pm

I think the answer is yes.

delamer
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Re: Are federal health benefits worth postponing early retirement?

Post by delamer » Tue Oct 22, 2019 7:27 pm

The bottom line is that you’d need to figure out where you’d get health insurance and at what price for at least 15 years if your wife leaves at age 50.

Either that cost is doable or it isn’t.

If she is able to negotiate a part-time schedule, she could go as low as 16 hours/week and still be eligible for FEHB (although her premium would increase).

gtd98765
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Re: Are federal health benefits worth postponing early retirement?

Post by gtd98765 » Tue Oct 22, 2019 8:08 pm

Have you examined alternative sources of health insurance, how much they cost, and what type of coverage they provide? I think that's essential for even considering such a step; else you are just looking at the pro's without the con's.

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MikeWillRetire
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Re: Are federal health benefits worth postponing early retirement?

Post by MikeWillRetire » Tue Oct 22, 2019 8:25 pm

Yes, I was in a similar place 7 years ago at age 50. I also hoped for a VERA, but it never happened. Now at age 57, I don't have 30 years, so I will stick around another 2 years. The health insurance benefit is worth the wait in my opinion.

dcop
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Re: Are federal health benefits worth postponing early retirement?

Post by dcop » Tue Oct 22, 2019 8:56 pm

I'm not a Fed employee but at 50 you need a 15 year plan for insurance. Without subsidies as a couple you are probably looking at $1600 - $2200 a month on ACA depending on where you live and what plan AND most importantly you have to consider if ACA will survive 15 more years. 2020 premiums are not out yet.I'm 61 and retired and keeping my fingers crossed that ACA lasts til I'm on Medicare.

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mathwhiz
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Re: Are federal health benefits worth postponing early retirement?

Post by mathwhiz » Tue Oct 22, 2019 9:14 pm

Yes, this is the problem.

The way we thought about it was taking a large capital gain before retirement and putting that money in a money market or short term bond and just drawing that account down over 15 years. If we keep our taxable income at $30k for a married couple, the subsidies are very large. If we draw down another $30k in cash from savings each year, that gives us $60k a year which would be a doable no frills retirement before our pensions/social security kicks in.

But assuming there won't be any more changes to health care in 15 years is a very bad bet and can't be predicted. So it's a gamble perhaps with our lives and financial security.
dcop wrote:
Tue Oct 22, 2019 8:56 pm
I'm not a Fed employee but at 50 you need a 15 year plan for insurance. Without subsidies as a couple you are probably looking at $1600 - $2200 a month on ACA depending on where you live and what plan AND most importantly you have to consider if ACA will survive 15 more years. 2020 premiums are not out yet.I'm 61 and retired and keeping my fingers crossed that ACA lasts til I'm on Medicare.

Barefootgirl
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Re: Are federal health benefits worth postponing early retirement?

Post by Barefootgirl » Tue Oct 22, 2019 9:18 pm

Now at age 57, I don't have 30 years, so I will stick around another 2 years. The health insurance benefit is worth the wait in my opinion.

At 57, you only need 10 years to retire with the health insurance, so if you have more than 10?
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MillennialFinance19
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Re: Are federal health benefits worth postponing early retirement?

Post by MillennialFinance19 » Tue Oct 22, 2019 9:22 pm

I had a co-worker that had to grind until her FRA for this reason. She spent 5 or 6 years reminding us that it was the only reason she kept coming to work :shock:

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Taylor Larimore
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Re: Are federal health benefits worth postponing early retirement?

Post by Taylor Larimore » Tue Oct 22, 2019 9:29 pm

mathwhiz wrote:
Tue Oct 22, 2019 6:51 pm
My wife is employed by the federal government and her MRA is 57. We would likely be financially ready for early retirement at age 50. The thing that gives her pause is health insurance. That would be the only thing keeping her till 57. The peace of mind that she can maintain this benefit through retirement and after. It feels like golden handcuffs to her as we use her health coverage for the family. She dreams of winning the "lottery" which to her is her agency downsizing and giving her a VSIP or VERA which she would gladly take in 2 seconds flat as that would continue her health insurance coverage.

Have any feds here experienced this dilemma? What have you done?
mathwhiz:

I don't know what MRA, VSIP or VERA mean. I do know that my Federal Blue Cross Health Insurance has been invaluable. Probably saving me several million dollars fighting cancer during the last 15 years.

I hope this information helps with your family decision.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "In the abstract, health care is a right." He noted that his insurance bill after his transplant topped $780,000 but that with excellent health-care coverage through Vanguard, his portion was $3.46.
"Simplicity is the master key to financial success." -- Jack Bogle

rich126
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Re: Are federal health benefits worth postponing early retirement?

Post by rich126 » Tue Oct 22, 2019 11:42 pm

Mra is minimum retirement age. Comes with a penalty usually a permanent Pension reduction of 5% per year starting at -30%.
Vera/vsip are incentives to get people to retire early but without early retirement penalties. Very roughly.

When I was working in government I knew a bunch of people who wished, dreamed, fantasized about getting offered early retirement because they dreaded the work environment. Since we were heavily technical, early retirement was never seriously considered by management.

I left and came back long enough to qualify for retirement and my health insurance at 60. Currently I’m working elsewhere and am in my 50s.

If you are going to be wearing handcuffs at least they are golden, many others are stuck wearing something much worse.

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MikeWillRetire
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Re: Are federal health benefits worth postponing early retirement?

Post by MikeWillRetire » Wed Oct 23, 2019 7:22 am

Barefootgirl wrote:
Tue Oct 22, 2019 9:18 pm
Now at age 57, I don't have 30 years, so I will stick around another 2 years. The health insurance benefit is worth the wait in my opinion.

At 57, you only need 10 years to retire with the health insurance, so if you have more than 10?
It is true that one can retire at MRA, but if you don't have 30 years, you would have to agree to a pension reduction (25% reduction for age 57), or you would have to postpone the pension until age 60 or 62 and lose health insurance benefits during the postponement period.

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JoeRetire
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Re: Are federal health benefits worth postponing early retirement?

Post by JoeRetire » Wed Oct 23, 2019 8:00 am

mathwhiz wrote:
Tue Oct 22, 2019 6:51 pm
My wife is employed by the federal government and her MRA is 57. We would likely be financially ready for early retirement at age 50. The thing that gives her pause is health insurance. That would be the only thing keeping her till 57. The peace of mind that she can maintain this benefit through retirement and after. It feels like golden handcuffs to her as we use her health coverage for the family. She dreams of winning the "lottery" which to her is her agency downsizing and giving her a VSIP or VERA which she would gladly take in 2 seconds flat as that would continue her health insurance coverage.
So how badly do you need this health insurance benefit?

Could you be financially ready at 50 if this benefit didn't exist? Or is it a required part of your readiness?

If you already have enough, then more may have little real value.
Don't be a lemming.

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JoeRetire
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Re: Are federal health benefits worth postponing early retirement?

Post by JoeRetire » Wed Oct 23, 2019 8:02 am

mathwhiz wrote:
Tue Oct 22, 2019 9:14 pm
So it's a gamble perhaps with our lives and financial security.
If that's your feeling, then the answer is obvious. Don't gamble with your lives and financial security.
Don't be a lemming.

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RickBoglehead
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Re: Are federal health benefits worth postponing early retirement?

Post by RickBoglehead » Wed Oct 23, 2019 8:16 am

I know nothing about the federal health benefits.

I do know something about the cost of benefits on the open market.

My wife is 17.25 months away from qualifying to pay for medical benefits from the state. These benefits are far superior to those that we could buy on the ACA (we would not qualify for any subsidy), and they are lower cost.

I put together a spreadsheet that shows the cost of the ACA benefits from now until Medicare, then the cost under Medicare (of course these costs will go up). I then put in the cost of the state benefits under the same timeframes, and laid it out for until we turned 90.

The cost savings by waiting until retirement, just for medical, I estimated at $100,000. In addition, she would give up a very small pension, plus salary for the next 17.25 months (actually for the next 20 months because she'd work until the end of the school year).

We decided that we're not willing to give up $100,000 (plus pension and more earnings) for her to quit before hitting the 10 year mark. This comes up in discussion probably monthly, and each month she works the number gets smaller, but the target date gets closer. It's possible that by the time we reach March 2021 she may decide to leave during the school year. And, if things get untenable, she may give it all up and leave before 10 years.

Analyze the numbers. At your age, the cost is going to much, much higher than in my example.
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Re: Are federal health benefits worth postponing early retirement?

Post by daheld » Wed Oct 23, 2019 8:27 am

I am a fed and it is absolutely worth it to my family.

rai
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Re: Are federal health benefits worth postponing early retirement?

Post by rai » Wed Oct 23, 2019 8:30 am

Yes that’s a huge benefit to pass up.

We are 52/54 and probably could retire today. But if we wait 3.5 more years we’ll get a big stock payment. If we leave now nothing. It’s all or none.

We just have tried to work as little as possible, take maximum vacation and give away any shifts we can.

I’m on the side of thinking better to work a bit longer but with the benefit of having too much money than to work too less and maybe not having enough.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

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Re: Are federal health benefits worth postponing early retirement?

Post by Kenkat » Wed Oct 23, 2019 8:35 am

Taylor Larimore wrote:
Tue Oct 22, 2019 9:29 pm
mathwhiz wrote:
Tue Oct 22, 2019 6:51 pm
My wife is employed by the federal government and her MRA is 57. We would likely be financially ready for early retirement at age 50. The thing that gives her pause is health insurance. That would be the only thing keeping her till 57. The peace of mind that she can maintain this benefit through retirement and after. It feels like golden handcuffs to her as we use her health coverage for the family. She dreams of winning the "lottery" which to her is her agency downsizing and giving her a VSIP or VERA which she would gladly take in 2 seconds flat as that would continue her health insurance coverage.

Have any feds here experienced this dilemma? What have you done?
mathwhiz:

I don't know what MRA, VSIP or VERA mean. I do know that my Federal Blue Cross Health Insurance has been invaluable. Probably saving me several million dollars fighting cancer during the last 15 years.

I hope this information helps with your family decision.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "In the abstract, health care is a right." He noted that his insurance bill after his transplant topped $780,000 but that with excellent health-care coverage through Vanguard, his portion was $3.46.
My father in law was a federal government retiree (and fellow WW2 vet) and I agree, his Federal BCBS retiree health insurance was very very valuable for both him and my mother in law as well. It is a definite consideration in a decision to retire early without it.

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dm200
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Re: Are federal health benefits worth postponing early retirement?

Post by dm200 » Wed Oct 23, 2019 8:42 am

Never a federal employee - but many friend and acquaintances are.

In my opinion and observation, this is a very large benefit to pass up - both before Medicare age and after.

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Re: Are federal health benefits worth postponing early retirement?

Post by RJC » Wed Oct 23, 2019 10:00 am

As an aside, how does part-time employment work as a Fed? Does that affect healthcare and pension in any way?

delamer
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Re: Are federal health benefits worth postponing early retirement?

Post by delamer » Wed Oct 23, 2019 10:02 am

mathwhiz wrote:
Tue Oct 22, 2019 9:14 pm
Yes, this is the problem.

The way we thought about it was taking a large capital gain before retirement and putting that money in a money market or short term bond and just drawing that account down over 15 years. If we keep our taxable income at $30k for a married couple, the subsidies are very large. If we draw down another $30k in cash from savings each year, that gives us $60k a year which would be a doable no frills retirement before our pensions/social security kicks in.

But assuming there won't be any more changes to health care in 15 years is a very bad bet and can't be predicted. So it's a gamble perhaps with our lives and financial security.
dcop wrote:
Tue Oct 22, 2019 8:56 pm
I'm not a Fed employee but at 50 you need a 15 year plan for insurance. Without subsidies as a couple you are probably looking at $1600 - $2200 a month on ACA depending on where you live and what plan AND most importantly you have to consider if ACA will survive 15 more years. 2020 premiums are not out yet.I'm 61 and retired and keeping my fingers crossed that ACA lasts til I'm on Medicare.
Is a “doable no frills retirement” really what you both want in the years where you are likeliest to be most healthy?

Retirement at age 50 is a rare thing, Fed or no. Finding another job or moving to part-time (as I suggested earlier) might be better options.

delamer
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Re: Are federal health benefits worth postponing early retirement?

Post by delamer » Wed Oct 23, 2019 10:06 am

RJC wrote:
Wed Oct 23, 2019 10:00 am
As an aside, how does part-time employment work as a Fed? Does that affect healthcare and pension in any way?
It makes health insurance while you are working more expensive (proportionally to the hours reduction) and makes your pension smaller.

If two people have the same length of service (and age) and average hourly salary (last 3 years) but one works 40 hours a week and the other works 32 hours, the person working 32 hours will have a pension that is 80% of that of the person working 40 hours.

rich126
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Re: Are federal health benefits worth postponing early retirement?

Post by rich126 » Wed Oct 23, 2019 10:12 am

MikeWillRetire wrote:
Wed Oct 23, 2019 7:22 am
Barefootgirl wrote:
Tue Oct 22, 2019 9:18 pm
Now at age 57, I don't have 30 years, so I will stick around another 2 years. The health insurance benefit is worth the wait in my opinion.

At 57, you only need 10 years to retire with the health insurance, so if you have more than 10?
It is true that one can retire at MRA, but if you don't have 30 years, you would have to agree to a pension reduction (25% reduction for age 57), or you would have to postpone the pension until age 60 or 62 and lose health insurance benefits during the postponement period.
That is true.

Federal retirement has a few things to consider (I'm ignoring the old CSRS system that basically stopped for new hires sometime in the early 80s).

For Full retirement with immediate pension (i.e., no penalties/reductions)
Age + Years of Service
62 + 5
60 + 20
MRA + 30

MRA is minimum retirement age and it is based on year of birth. Anyone born in 1970 or later, it is 57.

Then you have the standard deferred retirement. Once you are vested (I think 5 years) and leave the government before eligibility for an immediate or postponed retirement, you can get a pension but NOT health insurance at your retirement age (usually 62).

You also have early retirement which occurs once you reach your minimum retirement age but you don't have the years of service (30). In that case you get an immediate pension and of course retain health insurance, life insurance (assuming you had it before), etc. There is a penalty of 5/12 of 1 % for each month of early retirement (5% per year). This is a permanent reduction and is calculated from 62.

For example, if your MRA is 57, you are 57, and you have 15 years of service you can retire but the penalty is (62-57)*5%. Now if you are 57 and have 30 years of service, it isn't early retirement because you qualify as listed above and you get your full pension and health insurance.

There is also something called postponed retirement. This is where you are not eligible for an immediate retirement but you have reached your MRA and have at least 10 years of service. In this situation you could take an early retirement but you are penalized as described above or you can just postponed your retirement and wait until you are 62 (or 60 if you have 20 years of service) and then apply for retirement and get your pension without penalty and get health insurance reinstated (assuming you qualified).

Obviously the advantage of postponement is no reduction in the pension.

And it can be quirky. In my case I left after reaching my MRA (56) with 20+ years of service so I'm eligible for a postponed retirement. I can get my full pension at age 60 (20+ years of service) but if I take it early, the penalty is actually calculated from 62. So the penalty goes 30%, 25%, 20%, 15% and zero on a yearly basis (although it is actually prorated monthly).

The other quirk that I didn't realize was that I thought I had to make the decision when I left the government. That is, take the penalty now, or wait until 60. Instead I can apply at any point between now and 60. So if I hit a situation where I was desperate for health insurance or was willing to take a penalty in the pension, I could fill out the paperwork, send it to OMB and then get my benefits. So if I won some money and no longer cared about the penalty I could at 58 or whenever apply and get the health insurance and the reduced pension. I view that as a pleasant bonus. Unlikely I'll go that route but it is something someone could do.

Postponed retirement is something that doesn't affect many people and usually only those that left the government and then came back later. Many people aren't aware of it since it seldom applies to them.


**** You can only have health insurance if you had it for 60 consecutive months prior to leaving government. If you never had it, or just had it for a year you wouldn't be eligible. There are a few exceptions for people who left after having it for 5 years, came back for a couple of years and then was eligible for an immediate retirement, then you are still considered eligible.

--------------
Make sure you don't base anything you do strictly on my comments above. Information is at the OMB site. https://www.opm.gov/retirement-services ... igibility/

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BogleFanGal
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Re: Are federal health benefits worth postponing early retirement?

Post by BogleFanGal » Wed Oct 23, 2019 11:29 am

My DH is grinding it out waiting for his MRA - one more year. He's in a very dysfunctional work environment with poor leadership - everyone is miserable and there is zero respect or support for employees. But there's nowhere else to go in our area and he doesn't want to relocate. As much as he'd love to jump ship - and almost did a couple years ago, losing that insurance benefit is an awfully high price to pay. The 30% pension hit is a bummer, but for lower earners like him, w/only 10 years in, the difference isn't that big. He's only holding out for the insurance.

It worries me a bit that fed retiree benefits could potentially be yanked at any time: fingers crossed that it's still there when we need it. :shock: But if not, we could potentially fund it out of pocket and cut discretionary costs.
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Re: Are federal health benefits worth postponing early retirement?

Post by Info_Hound » Wed Oct 23, 2019 11:38 am

Yes, the medical insurance is worth its weight in gold.

I am the widow of a fed employee and because I and my daughter had been covered under the fed health plan when he passed away at the tender age of 51 we were able to continue without an interruption in medical coverage.

I am able to continue coverage until I die if I wish. My daughter was able to stay on the plan until she turned 26, so she benefited from the low cost as a dependent and as an adult.

The federal $ subsidy of the annual premium really can't be beat. I believe I read the federal government provides something along the lines of a 70% subsidy of a plan cost.

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Re: Are federal health benefits worth postponing early retirement?

Post by rjbraun » Wed Oct 23, 2019 11:50 am

delamer wrote:
Wed Oct 23, 2019 10:06 am
RJC wrote:
Wed Oct 23, 2019 10:00 am
As an aside, how does part-time employment work as a Fed? Does that affect healthcare and pension in any way?
It makes health insurance while you are working more expensive (proportionally to the hours reduction) and makes your pension smaller.

If two people have the same length of service (and age) and average hourly salary (last 3 years) but one works 40 hours a week and the other works 32 hours, the person working 32 hours will have a pension that is 80% of that of the person working 40 hours.
I would think that part-time employment could also affect vesting. So, I would agree with delamer's assessment above for someone already vested, but if one were not then one would have to work longer, i.e., more part-time hours to bring service up to the level required for vesting. At least, I believe that would be the case for me.

THY4373
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Re: Are federal health benefits worth postponing early retirement?

Post by THY4373 » Wed Oct 23, 2019 12:18 pm

You need to look at your options and see what the alternatives are and then make a decision. You also need to consider that our time on this earth is truly a non-renewable resource and are those benefits worth seven more years of grinding away at a job for (assuming one doesn't have other reasons to keep working). FEHB benefits are valuable no doubt but are they seven years of your life valuable? Only you and your spouse can decide that. Good luck.

RJC
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Re: Are federal health benefits worth postponing early retirement?

Post by RJC » Wed Oct 23, 2019 12:55 pm

delamer wrote:
Wed Oct 23, 2019 10:06 am
RJC wrote:
Wed Oct 23, 2019 10:00 am
As an aside, how does part-time employment work as a Fed? Does that affect healthcare and pension in any way?
It makes health insurance while you are working more expensive (proportionally to the hours reduction) and makes your pension smaller.

If two people have the same length of service (and age) and average hourly salary (last 3 years) but one works 40 hours a week and the other works 32 hours, the person working 32 hours will have a pension that is 80% of that of the person working 40 hours.
I thought your pension is based on your 3 highest year's salary? Does that change if you previously worked full-time then transitioned to part-time?

Thanks.

gr7070
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Re: Are federal health benefits worth postponing early retirement?

Post by gr7070 » Wed Oct 23, 2019 12:59 pm

delamer wrote:
Wed Oct 23, 2019 10:02 am
mathwhiz wrote:
Tue Oct 22, 2019 9:14 pm
Yes, this is the problem.

The way we thought about it was taking a large capital gain before retirement and putting that money in a money market or short term bond and just drawing that account down over 15 years. If we keep our taxable income at $30k for a married couple, the subsidies are very large. If we draw down another $30k in cash from savings each year, that gives us $60k a year which would be a doable no frills retirement before our pensions/social security kicks in.

But assuming there won't be any more changes to health care in 15 years is a very bad bet and can't be predicted. So it's a gamble perhaps with our lives and financial security.
dcop wrote:
Tue Oct 22, 2019 8:56 pm
I'm not a Fed employee but at 50 you need a 15 year plan for insurance. Without subsidies as a couple you are probably looking at $1600 - $2200 a month on ACA depending on where you live and what plan AND most importantly you have to consider if ACA will survive 15 more years. 2020 premiums are not out yet.I'm 61 and retired and keeping my fingers crossed that ACA lasts til I'm on Medicare.
Is a “doable no frills retirement” really what you both want in the years where you are likeliest to be most healthy?
This was my reaction.

It's also not clear if this is required if the OP to pull off RE. How much wiggle room is there? What happens if things change?

That being said, 7 years is not a short time. That is a lot more time to work. It's also a lot of time for many changes.

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Re: Are federal health benefits worth postponing early retirement?

Post by daheld » Wed Oct 23, 2019 2:59 pm

Info_Hound wrote:
Wed Oct 23, 2019 11:38 am
Yes, the medical insurance is worth its weight in gold.

I am the widow of a fed employee and because I and my daughter had been covered under the fed health plan when he passed away at the tender age of 51 we were able to continue without an interruption in medical coverage.

I am able to continue coverage until I die if I wish. My daughter was able to stay on the plan until she turned 26, so she benefited from the low cost as a dependent and as an adult.

The federal $ subsidy of the annual premium really can't be beat. I believe I read the federal government provides something along the lines of a 70% subsidy of a plan cost.
This is an enormously beneficial aspect of FEHB that many don't consider.

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Re: Are federal health benefits worth postponing early retirement?

Post by Swansea » Wed Oct 23, 2019 3:23 pm

Info_Hound wrote:
Wed Oct 23, 2019 11:38 am
Yes, the medical insurance is worth its weight in gold.

I am the widow of a fed employee and because I and my daughter had been covered under the fed health plan when he passed away at the tender age of 51 we were able to continue without an interruption in medical coverage.

I am able to continue coverage until I die if I wish. My daughter was able to stay on the plan until she turned 26, so she benefited from the low cost as a dependent and as an adult.

The federal $ subsidy of the annual premium really can't be beat. I believe I read the federal government provides something along the lines of a 70% subsidy of a plan cost.
Yes, the figure of 70% is about what the government pays toward the cost of FEHB.

delamer
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Re: Are federal health benefits worth postponing early retirement?

Post by delamer » Wed Oct 23, 2019 5:29 pm

RJC wrote:
Wed Oct 23, 2019 12:55 pm
delamer wrote:
Wed Oct 23, 2019 10:06 am
RJC wrote:
Wed Oct 23, 2019 10:00 am
As an aside, how does part-time employment work as a Fed? Does that affect healthcare and pension in any way?
It makes health insurance while you are working more expensive (proportionally to the hours reduction) and makes your pension smaller.

If two people have the same length of service (and age) and average hourly salary (last 3 years) but one works 40 hours a week and the other works 32 hours, the person working 32 hours will have a pension that is 80% of that of the person working 40 hours.
I thought your pension is based on your 3 highest year's salary? Does that change if you previously worked full-time then transitioned to part-time?

Thanks.
Here’s the formula:

Say you worked for 20 years. If you worked full-time for all 20 years, then you would have worked 41,600 hours (20 times 2080). And let’s say your high 3, based on the salary scale for your grade/step was $100,000 for full-time. If you retired at 60, your pension would be equal to:

20 X 1% X $100,000 X (41,600/41,600) = $20,000.

Now assume that you worked 20 years, but full-time for 10 and 1/2 time for 10. That means total hours worked of 31,200. Same high 3 for full-time. Now the formula is:

20 X 1% X $100,000 X (31,200/41,600) = $14,928

So the reduction for part-time work is made via the hours component, rather than the salary component.

It seems a little odd at first, but it makes sense.

I had a combination of full-time and part-time work, so I am familiar with the pension calculation.

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Re: Are federal health benefits worth postponing early retirement?

Post by delamer » Wed Oct 23, 2019 5:39 pm

rjbraun wrote:
Wed Oct 23, 2019 11:50 am
delamer wrote:
Wed Oct 23, 2019 10:06 am
RJC wrote:
Wed Oct 23, 2019 10:00 am
As an aside, how does part-time employment work as a Fed? Does that affect healthcare and pension in any way?
It makes health insurance while you are working more expensive (proportionally to the hours reduction) and makes your pension smaller.

If two people have the same length of service (and age) and average hourly salary (last 3 years) but one works 40 hours a week and the other works 32 hours, the person working 32 hours will have a pension that is 80% of that of the person working 40 hours.
I would think that part-time employment could also affect vesting. So, I would agree with delamer's assessment above for someone already vested, but if one were not then one would have to work longer, i.e., more part-time hours to bring service up to the level required for vesting. At least, I believe that would be the case for me.
That is not the way it works for federal service. A year of service is a year of service, regardless of hours. If you have any part-time service, then your pension will be reduced (relative to all full-time work) but it doesn’t affect your eligibility for retirement.

There may be some minimum hours that you have to work, but I worked only 16 hours/week for a year and that was a year of service just like when I worked full-time.

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Re: Are federal health benefits worth postponing early retirement?

Post by rjbraun » Wed Oct 23, 2019 8:22 pm

delamer wrote:
Wed Oct 23, 2019 5:39 pm
rjbraun wrote:
Wed Oct 23, 2019 11:50 am
delamer wrote:
Wed Oct 23, 2019 10:06 am
RJC wrote:
Wed Oct 23, 2019 10:00 am
As an aside, how does part-time employment work as a Fed? Does that affect healthcare and pension in any way?
It makes health insurance while you are working more expensive (proportionally to the hours reduction) and makes your pension smaller.

If two people have the same length of service (and age) and average hourly salary (last 3 years) but one works 40 hours a week and the other works 32 hours, the person working 32 hours will have a pension that is 80% of that of the person working 40 hours.
I would think that part-time employment could also affect vesting. So, I would agree with delamer's assessment above for someone already vested, but if one were not then one would have to work longer, i.e., more part-time hours to bring service up to the level required for vesting. At least, I believe that would be the case for me.
That is not the way it works for federal service. A year of service is a year of service, regardless of hours. If you have any part-time service, then your pension will be reduced (relative to all full-time work) but it doesn’t affect your eligibility for retirement.

There may be some minimum hours that you have to work, but I worked only 16 hours/week for a year and that was a year of service just like when I worked full-time.
Interesting. I work in the public sector but not at the federal level. I am still waiting to vest and would be tempted to work part-time if that did not detract from my years of service. Maybe I will look into this, though I suppose a concern would be that part-time status could make me more vulnerable to getting let go in the event of staff / budget cuts, etc.

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Taylor Larimore
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Re: Are federal health benefits worth postponing early retirement?

Post by Taylor Larimore » Wed Oct 23, 2019 8:25 pm

mathwhiz:

With luck, the government might offer a benefit with a cut-back in employment. This happened to me and I retired with full health benefits at age 57.

Fortunately, I read Jack Bogle's first book, changed to indexing, and now live in a comfortable home that Jack built.

Thank you, Jack!

Taylor
Jack Bogle's Words of Wisdom: "We ignore the real diamonds of simplicity, seeking instead the illusory rhinestones of complexity."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Are federal health benefits worth postponing early retirement?

Post by dbr » Thu Oct 24, 2019 9:35 am

We know the cost and value of health benefits. Only the OP can value the benefit of early retirement, and we have heard nothing about that. How can you weigh a known on one side of the scale with no information at all about the other side of the scale?

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dm200
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Re: Are federal health benefits worth postponing early retirement?

Post by dm200 » Thu Oct 24, 2019 11:05 am

While this does not apply to all such federal retirees, having dependent health insurance can be one of the biggest benefits. We have longtime friends - where the husband is a federal retiree (after many decades of employment) - and was single until well into his fifties! Then he got married and retired from federal employment - and adopted three young children. Both his wife and children have health insurance based on his being a federal retiree - even though he is now on Social Security and Medicare!

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Re: Are federal health benefits worth postponing early retirement?

Post by kaudrey » Fri Oct 25, 2019 2:12 pm

mathwiz,

I am facing this situation also. We have decided it is NOT worth postponing my early retirement. Here are our circumstances:

I am 50. DH is 62. At age 52 (and a few months), I will have 30 years in the gov't. My MRA is 56 years and 10 months. DH is retired and on my health insurance.

I plan to retire in June of 2021, at age 52+. With my husband being older, we want to travel more and enjoy ourselves while he is still "young-ish" (he's in amazing shape).

Retiring with 30 years, but before my MRA, will allow me to get a deferred pension at my MRA, but lose health insurance.

COBRA with the government covers 3 years. It will get my DH to Medicare age (which he will hit 5 months after I retire), and will mean I need ACA or whatever exists at that point for 10 years until I reach 65.

Is it worth it? In my case, yes. My husband will start his (non-gov't) pension when I retire, I'll get my pension 5 years later, we'll both get SS. We have enough saved. To me, spending those years will be worth whatever it will cost for me to get insurance outside the gov't.

YMMV.

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Re: Are federal health benefits worth postponing early retirement?

Post by rich126 » Fri Oct 25, 2019 3:05 pm

COBRA with the government covers 3 years
Are you sure about that? I honestly don't know but have never heard that. The only exceptions I've found that provides 36 months are:

Employee entitled to Medicare
Divorce or legal separation
Death of employee
Loss of dependent-child status

Slacker
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Re: Are federal health benefits worth postponing early retirement?

Post by Slacker » Fri Oct 25, 2019 4:04 pm

kaudrey wrote:
Fri Oct 25, 2019 2:12 pm
mathwiz,

I am facing this situation also. We have decided it is NOT worth postponing my early retirement. Here are our circumstances:

I am 50. DH is 62. At age 52 (and a few months), I will have 30 years in the gov't. My MRA is 56 years and 10 months. DH is retired and on my health insurance.

I plan to retire in June of 2021, at age 52+. With my husband being older, we want to travel more and enjoy ourselves while he is still "young-ish" (he's in amazing shape).

Retiring with 30 years, but before my MRA, will allow me to get a deferred pension at my MRA, but lose health insurance.

COBRA with the government covers 3 years. It will get my DH to Medicare age (which he will hit 5 months after I retire), and will mean I need ACA or whatever exists at that point for 10 years until I reach 65.

Is it worth it? In my case, yes. My husband will start his (non-gov't) pension when I retire, I'll get my pension 5 years later, we'll both get SS. We have enough saved. To me, spending those years will be worth whatever it will cost for me to get insurance outside the gov't.

YMMV.
Double check on the following statement I make, because I may be completely wrong:

If you leave federal service and get on COBRA for FEHB and then subsequently start your pension before 18 months have elapsed since you separated, you will still be able to qualify for and keep your FEHB benefits upon starting your pension. I am unfamiliar with any necessary paperwork, but this is information I believe I have read previously on the OPM website.

Therefore, at most you would only have to delay separation from federal service until age 55 and 3 months. However, it is understandable that MANY things could happen in the 3 years between age 52 and age 55 for you and your DH.

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Re: Are federal health benefits worth postponing early retirement?

Post by delamer » Fri Oct 25, 2019 4:06 pm

rich126 wrote:
Fri Oct 25, 2019 3:05 pm
COBRA with the government covers 3 years
Are you sure about that? I honestly don't know but have never heard that. The only exceptions I've found that provides 36 months are:

Employee entitled to Medicare
Divorce or legal separation
Death of employee
Loss of dependent-child status
For former employees, it is only 18 months. Per OPM:
Temporary Continuation of Coverage (TCC) is available to: (1) employees who lose their FEHB Program coverage because they leave their Federal jobs, (2) children who lose their FEHB Program family member status because they reach age 26, and (3) former spouses who lose their FEHB Program family member status because of divorce or annulment. TCC allows former employees to continue their FEHB Program coverage for up to 18 months, and former family members (children and former spouses) to continue FEHB Program coverage for up to 36 months. For more information about TCC, please review the TCC pamphlet at www.opm.gov/insure/health/eligibility/tcc/index.asp.

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Re: Are federal health benefits worth postponing early retirement?

Post by tj » Fri Oct 25, 2019 4:09 pm

MikeWillRetire wrote:
Wed Oct 23, 2019 7:22 am
Barefootgirl wrote:
Tue Oct 22, 2019 9:18 pm
Now at age 57, I don't have 30 years, so I will stick around another 2 years. The health insurance benefit is worth the wait in my opinion.

At 57, you only need 10 years to retire with the health insurance, so if you have more than 10?
It is true that one can retire at MRA, but if you don't have 30 years, you would have to agree to a pension reduction (25% reduction for age 57), or you would have to postpone the pension until age 60 or 62 and lose health insurance benefits during the postponement period.

It's only a 15% reduction if you have 20 years at 57

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Re: Are federal health benefits worth postponing early retirement?

Post by delamer » Fri Oct 25, 2019 4:10 pm

kaudrey wrote:
Fri Oct 25, 2019 2:12 pm
mathwiz,

I am facing this situation also. We have decided it is NOT worth postponing my early retirement. Here are our circumstances:

I am 50. DH is 62. At age 52 (and a few months), I will have 30 years in the gov't. My MRA is 56 years and 10 months. DH is retired and on my health insurance.

I plan to retire in June of 2021, at age 52+. With my husband being older, we want to travel more and enjoy ourselves while he is still "young-ish" (he's in amazing shape).

Retiring with 30 years, but before my MRA, will allow me to get a deferred pension at my MRA, but lose health insurance.

COBRA with the government covers 3 years. It will get my DH to Medicare age (which he will hit 5 months after I retire), and will mean I need ACA or whatever exists at that point for 10 years until I reach 65.

Is it worth it? In my case, yes. My husband will start his (non-gov't) pension when I retire, I'll get my pension 5 years later, we'll both get SS. We have enough saved. To me, spending those years will be worth whatever it will cost for me to get insurance outside the gov't.

YMMV.
You might explore with your management continuing to work part-time until your MRA. You can work as few as 16 hours/week and still be eligible for FEHB.

And you can only continue FEHB for 18 months (under Temporary Continuation of Coverage) as a former employee.

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Re: Are federal health benefits worth postponing early retirement?

Post by Golf maniac » Fri Oct 25, 2019 7:53 pm

I had a chance to leave federal government service with about 9 years left before MRA and 30, thank God I didn’t do it. I would still be working today if I left, I am now retired with a great pension and health insurance at employee cost. I would suggest thinking very hard before you make this leap.

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Re: Are federal health benefits worth postponing early retirement?

Post by rich126 » Sat Oct 26, 2019 9:19 am

tj wrote:
Fri Oct 25, 2019 4:09 pm
MikeWillRetire wrote:
Wed Oct 23, 2019 7:22 am
Barefootgirl wrote:
Tue Oct 22, 2019 9:18 pm
Now at age 57, I don't have 30 years, so I will stick around another 2 years. The health insurance benefit is worth the wait in my opinion.

At 57, you only need 10 years to retire with the health insurance, so if you have more than 10?
It is true that one can retire at MRA, but if you don't have 30 years, you would have to agree to a pension reduction (25% reduction for age 57), or you would have to postpone the pension until age 60 or 62 and lose health insurance benefits during the postponement period.

It's only a 15% reduction if you have 20 years at 57
I don't believe that is correct. Even if you have reached MRA and have 20 years of service, the penalty for early retirement is calculated from 62 and not 60. Even though the person can actually get his/her pension w/o penalty at age 62. So the penalty on a yearly basis (it is actually calculated on a monthly basis) goes from:
Assuming MRA is 56, 20 years of service
56: 30%
57: 25%
58: 20%
59: 15%
60: 0%

I know that isn't intuitive but I'm pretty sure it is accurate. I've talked with people at my agency about this before. Myself and another guy were in a similar situation and he and I spent a lot of time researching postponed retirement and the various penalties for early retirement. Maybe it wasn't always this way, and I wish I was wrong, but I'd certainly believe it is correct.

I believe I had some paperwork from my agency describing this. And I know there is a FedWeek post out there from 2005 that contradicts this but I think they are mistaken.

https://www.opm.gov/retirement-services ... Retirement
If you retire under the MRA+10 provision

If you have 10 or more years of service and retire at the Minimum Retirement Age (MRA), your benefit will be reduced by 5/12 of 1% for each full month (5% per year) that you were under age 62 on the date your annuity began. However, your annuity will not be reduced if you complete at least 30 years of service, or if you complete at least 20 years of service and your annuity begins when you reach age 60.
If you postpone the beginning date of your annuity, the age reduction will be reduced or eliminated.
The age reduction applies to both the Civil Service Retirement System and the Federal Employees Retirement System components of your annuity, if you transferred to FERS and part of your annuity is computed under the CSRS provision.

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Re: Are federal health benefits worth postponing early retirement?

Post by LuigiLikesPizza » Sat Oct 26, 2019 11:15 am

It's only a 15% reduction if you have 20 years at 57

I don't believe so. At 57, it would be a 25% reduction (assuming round years), based on age 62. (5 years @ 5% per year)....and if 57 is your MRA, you only need 10 years to be able to hop, skip and jump out the door.

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Re: Are federal health benefits worth postponing early retirement?

Post by tj » Sun Oct 27, 2019 9:21 am

LuigiLikesPizza wrote:
Sat Oct 26, 2019 11:15 am
It's only a 15% reduction if you have 20 years at 57

I don't believe so. At 57, it would be a 25% reduction (assuming round years), based on age 62. (5 years @ 5% per year)....and if 57 is your MRA, you only need 10 years to be able to hop, skip and jump out the door.

One of the federal employees news sites states that you only subtracted the 5% for year from the age you can postpone until the date you qualify for an unreduced pension, and if you have 20 years, that is age 60 and not 62. Perhaps they were wrong

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Re: Are federal health benefits worth postponing early retirement?

Post by MikeWillRetire » Sun Oct 27, 2019 10:28 am

tj wrote:
Sun Oct 27, 2019 9:21 am
LuigiLikesPizza wrote:
Sat Oct 26, 2019 11:15 am
It's only a 15% reduction if you have 20 years at 57

I don't believe so. At 57, it would be a 25% reduction (assuming round years), based on age 62. (5 years @ 5% per year)....and if 57 is your MRA, you only need 10 years to be able to hop, skip and jump out the door.

One of the federal employees news sites states that you only subtracted the 5% for year from the age you can postpone until the date you qualify for an unreduced pension, and if you have 20 years, that is age 60 and not 62. Perhaps they were wrong
I have also seen that on the Federal Soup site. But it does seem to contradict what the OPM site says.
https://www.opm.gov/retirement-services ... igibility/

It is an odd situation. If you are 60 and have 20 years, you can retire with an unreduced pension. But if you retire one day before you turn 60, then your pension is reduced 10%.

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Re: Are federal health benefits worth postponing early retirement?

Post by VictoriaF » Tue Oct 29, 2019 6:35 pm

I waited to retire until I had MRA + 10. When Bogleheads talk about their number, they usually mean the assets. My number was MRA + 10.

When you become financially independent, your wife can look for a position with less responsibilities and possibly fewer hours. The retirement benefits are worth the wait.

Victoria
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Re: Are federal health benefits worth postponing early retirement?

Post by dbr » Wed Oct 30, 2019 8:08 am

So far no one has put a cost on waiting. Does everyone believe that not working for an extra ten years or so has no value?

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