FERS - I've Left The Gov't (Not Retired)

[Zorin]

Hello everyone,

I was searching on Google and fell upon this site since it had some of the best advice pertaining to FERS pensions. I need some further advice that was not commented on with continued searching, see further information/questions below:

Background Info

I'm 53, retired military (22 yrs), completed 7 years of Civil Service before moving to contractor job in Nov 2022. Decided I didn't want to work until I'm 66 to get to 20 years CS (Yes, I know I could've completed 3 more to get to 10 yrs, but this contractor job allows me to be partially retired by 60 and I'm NOT going back to CS EVER...). With the new contractor position I have a Voya Financial ECAP in which to rollover my FERS. I have my OPM SF3106 Form fully filled out with all spouse and financial institution cert pages completed

Questions:
1. I'm confused on Section 13, am I supposed to fill out the "rollover" parts for both the "Interest Portion" and "Contribution Portion" and ask for both check to be put into my "Eligible Employer Plan"?

2. Do I even need to fill out Section 13 if I check the box "I Need Additional Information"?

3. Would there be a better course of action in moving this money, i.e. taking the 20% tax hit and moving to a Roth IRA, etc.

Any help on the above questions would be greatly appreciated.

v/r,
Z

[shunkman]

You might have better luck calling OPM for help with these issues.

[Zorin]

You might have better luck calling OPM for help with these issues.

This is part of the other issue, on hold forever and a day or leave a message and never call me back...

[annebert]

You don't need to roll it over - have you considered just waiting until 60 and getting the FERS pension?

[Weathering]

Why don’t you get credit for the 22 years in the military toward your CS time?
I know many who have done that. It takes time (like 12 months for paperwork to be routed around for signatures), but may be very worth it in the end.

[annebert]

Ok, thanks to Weathering's comment, I took another look at getting a FERS deferred annuity by adding in my Peace Corps service (which no one advised me about!) and therefore reread the rules. OP, you are eligible when you turn 62 to get a deferred annuity that is calculated based on
(the average of 3 highest annual salaries) x 1% x 7 years of service. Do the math to see if receiving that annuity for say 20 years is better than rolling over into your retirement plan. If your average pay was $50,000, you would get $3500 per year.

In addition, you can pay a deposit of 1.3% of the pay you received for your military service plus annual interest for the 7 years since you left the military to receive an annuity of 1% of highest pay x 29 years of service. It might end up to be about $10,000. Again, do the math to see if it's worth it. If your high 3 average pay is $50,000, that is $14,500 per year.

[Soon2BXProgrammer]

Are you sure getting a FERS refund is better then taking a deferred retirement at 62 with more then 5 years of service?

A FERS refund you only get YOUR money contributions, but a deferred retirement is partially funded by the government.

[Soon2BXProgrammer]

Why don’t you get credit for the 22 years in the military toward your CS time?
I know many who have done that. It takes time (like 12 months for paperwork to be routed around for signatures), but may be very worth it in the end.

In addition, you can pay a deposit of 1.3% of the pay you received for your military service plus annual interest for the 7 years since you left the military to receive an annuity of 1% of highest pay x 29 years of service. It might end up to be about $10,000. Again, do the math to see if it's worth it. If your high 3 average pay is $50,000, that is $14,500 per year.

if you buy the military time back, then my understanding is you have to give up your military retirement pay, to get the CS retirement pay for the same years. (I might be wrong...????) So the calculation is much more complicated for someone who is retired military then one that is just separated.

[sep]

Some additional considerations; How are the fees in the Voya Financial ECAP vs the TSP and are your investment options at least as good as the TSP? If TSP gives you a better deal, then you may want to just leave it there. If not, then rolling over the TSP might make sense.

Is the Voya Financial ECAP a qualified employer sponsored plan which will afford you the same legal protection from bankruptcy and lawsuits as the TSP?

Lastly, I understand your general situation, I retired from active duty after 20 years in 2004 and have worked in Civil Service first with the Air Force and now with the Army since 2005. Went down the contractor trail from 2004-2005 too.

[SR II]

Some additional considerations; How are the fees in the Voya Financial ECAP vs the TSP and are your investment options at least as good as the TSP? If TSP gives you a better deal, then you may want to just leave it there. If not, then rolling over the TSP might make sense.

Is the Voya Financial ECAP a qualified employer sponsored plan which will afford you the same legal protection from bankruptcy and lawsuits as the TSP?

Lastly, I understand your general situation, I retired from active duty after 20 years in 2004 and have worked in Civil Service first with the Air Force and now with the Army since 2005. Went down the contractor trail from 2004-2005 too.

Isn't OP talking about FERS, rather than TSP?

[Tooth]

Why don’t you get credit for the 22 years in the military toward your CS time?
I know many who have done that. It takes time (like 12 months for paperwork to be routed around for signatures), but may be very worth it in the end.

In addition, you can pay a deposit of 1.3% of the pay you received for your military service plus annual interest for the 7 years since you left the military to receive an annuity of 1% of highest pay x 29 years of service. It might end up to be about $10,000. Again, do the math to see if it's worth it. If your high 3 average pay is $50,000, that is $14,500 per year.

if you buy the military time back, then my understanding is you have to give up your military retirement pay, to get the CS retirement pay for the same years. (I might be wrong...????) So the calculation is much more complicated for someone who is retired military then one that is just separated.

Yes, you give up military pay. I would not buy back. IMO the only time buy back makes sense is for non-retired military. In addition, depending on retired rank, you'd need to make a high, high 3.

[mouth]

Why don’t you get credit for the 22 years in the military toward your CS time?
I know many who have done that. It takes time (like 12 months for paperwork to be routed around for signatures), but may be very worth it in the end.

In addition, you can pay a deposit of 1.3% of the pay you received for your military service plus annual interest for the 7 years since you left the military to receive an annuity of 1% of highest pay x 29 years of service. It might end up to be about $10,000. Again, do the math to see if it's worth it. If your high 3 average pay is $50,000, that is $14,500 per year.

if you buy the military time back, then my understanding is you have to give up your military retirement pay, to get the CS retirement pay for the same years. (I might be wrong...????) So the calculation is much more complicated for someone who is retired military then one that is just separated.

Yes, you give up military pay. I would not buy back. IMO the only time buy back makes sense is for non-retired military. In addition, depending on retired rank, you'd need to make a high, high 3.

It is almost universally a mathematical bad idea to trade military retirement for FERS retirement. Regardless, here are the key bits https://www.fedshirevets.gov/veteran-em ... etirement/ and https://www.opm.gov/retirement-center/f ... tired-pay/

[somedays]

If it isn't that large of an amount and you can afford it, I would do a direct transfer rollover of all FERS (and TSP, if you contributed) to a Roth IRA with Vanguard or Fidelity. I would not have them withhold taxes from FERS or TSP, I would simply pay taxes on any amount converted to Roth when you do your taxes at the end of the year as it will count as income. The amount that has already been taxed will go right into Roth and then amount that hasn't been taxed will be taxed per your instructions. From that point forward it will ALL grow tax free, no restrictions, no RMDs, no worries.

If you take the pension, the pension dies when you die. If you rollover to Roth IRA, it can be passed down to your heirs.

[Zorin]

Why don’t you get credit for the 22 years in the military toward your CS time?
I know many who have done that. It takes time (like 12 months for paperwork to be routed around for signatures), but may be very worth it in the end.

In addition, you can pay a deposit of 1.3% of the pay you received for your military service plus annual interest for the 7 years since you left the military to receive an annuity of 1% of highest pay x 29 years of service. It might end up to be about $10,000. Again, do the math to see if it's worth it. If your high 3 average pay is $50,000, that is $14,500 per year.

if you buy the military time back, then my understanding is you have to give up your military retirement pay, to get the CS retirement pay for the same years. (I might be wrong...????) So the calculation is much more complicated for someone who is retired military then one that is just separated.

Yes, I would lose my Military Retirement pay.

[Zorin]

Some additional considerations; How are the fees in the Voya Financial ECAP vs the TSP and are your investment options at least as good as the TSP? If TSP gives you a better deal, then you may want to just leave it there. If not, then rolling over the TSP might make sense.

Is the Voya Financial ECAP a qualified employer sponsored plan which will afford you the same legal protection from bankruptcy and lawsuits as the TSP?

Lastly, I understand your general situation, I retired from active duty after 20 years in 2004 and have worked in Civil Service first with the Air Force and now with the Army since 2005. Went down the contractor trail from 2004-2005 too.

Not talking about TSP, just FERS...

[02nz]

Are you sure getting a FERS refund is better then taking a deferred retirement at 62 with more then 5 years of service?

A FERS refund you only get YOUR money contributions, but a deferred retirement is partially funded by the government.

This is my understanding as well. Even a reduced pension is far more valuable than taking the refund of employee contributions.

[Zorin]

My apologies, but I thought the questions that I asked were pretty specific, but to add, this is about FERS only and questions related to the SF3106 Form. There is only about $26K in Cumulative Retirement (FERS)(My Contributions), which makes doing a retirement annuity kind of a moot point. I believe the money should be taken out and put elsewhere to keep making money for the next 7 years, but that's just me.

[SCb&b]

You would be eligible for deferred retirement at age 62 (9 years) if you leave money in. The yearly payment of that is high3 salary*1.1%*7 years of service. My guess is the value of that annuity is greater than $26k because of the unseen federal govt contributions - which you lose if you cash out. You'd have to input your salary info and perform present value calculation to know for sure.

Can't answer your questions about the form.

[sep]

Got it. Sorry, I missed the boat on that one. It looks like you will be eligible for a deferred retirement at age 62 with 5 years of service (7 in your case). It looks like you would receive a monthly payment of 1% of your high 3. https://www.opm.gov/retirement-center/f ... mputation/

Would you rather collect 1% of your high three at 62 or reinvest and grow the money til age 62? You could run some calculations to see which nets you more money at age 62. Other considerations are what happens to the monthly payout after you die vs reinvesting the money? Good luck.

[MnD]

There is only about $26K in Cumulative Retirement (FERS)(My Contributions), which makes doing a retirement annuity kind of a moot point. I believe the money should be taken out and put elsewhere to keep making money for the next 7 years, but that's just me.

Your FERS deferred annuity is a formula based on your high-3 salary and years.
Guaranteed and partly inflation adjusted for life with an option for a survivors benefit.
Looking at the balance of only your contributions and deciding the annuity "is a moot point" lacks careful analysis and very well might leave a substantial sum of money left on the table over a lifetime versus an analysis of the NPV of the deferred pension versus a rollover.

I suggest you post your high-3 and see if someone will run a NPV calculation. Or hire someone to do that for you.

[Soon2BXProgrammer]

My apologies, but I thought the questions that I asked were pretty specific, but to add, this is about FERS only and questions related to the SF3106 Form. There is only about $26K in Cumulative Retirement (FERS)(My Contributions), which makes doing a retirement annuity kind of a moot point. I believe the money should be taken out and put elsewhere to keep making money for the next 7 years, but that's just me.

This forum is valuable, because it doesn't answer your question you asked. It asks you the questions that you might consider asking yourself.

If you take your contributions out, you lose access to all the "agency contributions" that actually fund the deferred FERS pension.

So one needs to do a lump sum analysis of what the pension would be, vs what the lump sum you would get now.

Without having any facts, I would be careful taking a refund because my hunch based on past analysis is that the pension is worth more then your contributions.

The "money" is still working in the pension system if it is left there.

[Blue456]

My apologies, but I thought the questions that I asked were pretty specific, but to add, this is about FERS only and questions related to the SF3106 Form. There is only about $26K in Cumulative Retirement (FERS)(My Contributions), which makes doing a retirement annuity kind of a moot point. I believe the money should be taken out and put elsewhere to keep making money for the next 7 years, but that's just me.

This forum is valuable, because it doesn't answer your question you asked. It asks you the questions that you might consider asking yourself.

If you take your contributions out, you lose access to all the "agency contributions" that actually fund the deferred FERS pension.

So one needs to do a lump sum analysis of what the pension would be, vs what the lump sum you would get now.

Without having any facts, I would be careful taking a refund because my hunch based on past analysis is that the pension is worth more then your contributions.

The "money" is still working in the pension system if it is left there.

The pension should also be inflation adjusted. Something to keep in mind.

[Gadget]

The FERS deferred annuity is not inflation adjusted when you don't get a full retirement. So there's that.

I believe there is a cutoff at 10 years that makes deferred annuity a no brainer vs a lump sum payout.

I think in almost all cases, the deferred annuity is better if you qualify for one. I think the analysis might be more along the lines of will the future annuity be enough to even be worth filling out the paperwork for, or would you rather just consolidate and get a lump sum? The case where the deferred annuity loses is if we have rampant inflation until you retire, since it's only inflation adjusted once the annuity pays out (not in the years leading up to the payment).

For what it's worth, I took a deferred retirement/annuity with 10+ years. The math in my case made the deferred retirement win every time over the lump sum payout. But I can't remember why I seem to recall 10 years being a cutoff for something, so I don't know what would be worse about 7 in your scenario.

Edit: I looked it up. At 5 years of service you're eligible for the deferred annuity starting at age 62. At 10+ years, you're eligible for the deferred annuity starting at MRA, which for anyone born after 1969 is 57.

https://www.opm.gov/retirement-center/f ... Retirement

[SCb&b]

The FERS deferred annuity is not inflation adjusted when you don't get a full retirement. So there's that.

I believe there is a cutoff at 10 years that makes deferred annuity a no brainer vs a lump sum payout.

I think in almost all cases, the deferred annuity is better if you qualify for one. I think the analysis might be more along the lines of will the future annuity be enough to even be worth filling out the paperwork for, or would you rather just consolidate and get a lump sum? The case where the deferred annuity loses is if we have rampant inflation until you retire, since it's only inflation adjusted once the annuity pays out (not in the years leading up to the payment).

For what it's worth, I took a deferred retirement/annuity with 10+ years. The math in my case made the deferred retirement win every time over the lump sum payout. But I can't remember why I seem to recall 10 years being a cutoff for something, so I don't know what would be worse about 7 in your scenario.

Edit: I looked it up. At 5 years of service you're eligible for the deferred annuity starting at age 62. At 10+ years, you're eligible for the deferred annuity starting at MRA, which for anyone born after 1969 is 57.

https://www.opm.gov/retirement-center/f ... Retirement

Pretty sure that first line isn't accurate - the annuity IS inflation adjusted (once it's received). It just doesn't grow with inflation during the deferral period because it's based on your high 3 salaries which were by definition in the past. In this case it will not grow for the next 9 years but then once taken, will grow with inflation for the rest of life.

[Gadget]

The FERS deferred annuity is not inflation adjusted when you don't get a full retirement. So there's that.

I believe there is a cutoff at 10 years that makes deferred annuity a no brainer vs a lump sum payout.

I think in almost all cases, the deferred annuity is better if you qualify for one. I think the analysis might be more along the lines of will the future annuity be enough to even be worth filling out the paperwork for, or would you rather just consolidate and get a lump sum? The case where the deferred annuity loses is if we have rampant inflation until you retire, since it's only inflation adjusted once the annuity pays out (not in the years leading up to the payment).

For what it's worth, I took a deferred retirement/annuity with 10+ years. The math in my case made the deferred retirement win every time over the lump sum payout. But I can't remember why I seem to recall 10 years being a cutoff for something, so I don't know what would be worse about 7 in your scenario.

Edit: I looked it up. At 5 years of service you're eligible for the deferred annuity starting at age 62. At 10+ years, you're eligible for the deferred annuity starting at MRA, which for anyone born after 1969 is 57.

https://www.opm.gov/retirement-center/f ... Retirement

Pretty sure that first line isn't accurate - the annuity IS inflation adjusted (once it's received). It just doesn't grow with inflation during the deferral period because it's based on your high 3 salaries which were by definition in the past. In this case it will not grow for the next 9 years but then once taken, will grow with inflation for the rest of life.

You are correct. I tried to clarify that part later, but didn't do it very eloquently.

You get no COLA leading up to full retirement age. You start to get a COLA once it pays out. But depending on how far away your "deferred" retirement is, inflation could significantly eat into your high 3.

[Blue456]

The FERS deferred annuity is not inflation adjusted when you don't get a full retirement. So there's that.

I believe there is a cutoff at 10 years that makes deferred annuity a no brainer vs a lump sum payout.

I think in almost all cases, the deferred annuity is better if you qualify for one. I think the analysis might be more along the lines of will the future annuity be enough to even be worth filling out the paperwork for, or would you rather just consolidate and get a lump sum? The case where the deferred annuity loses is if we have rampant inflation until you retire, since it's only inflation adjusted once the annuity pays out (not in the years leading up to the payment).

For what it's worth, I took a deferred retirement/annuity with 10+ years. The math in my case made the deferred retirement win every time over the lump sum payout. But I can't remember why I seem to recall 10 years being a cutoff for something, so I don't know what would be worse about 7 in your scenario.

Edit: I looked it up. At 5 years of service you're eligible for the deferred annuity starting at age 62. At 10+ years, you're eligible for the deferred annuity starting at MRA, which for anyone born after 1969 is 57.

https://www.opm.gov/retirement-center/f ... Retirement

Pretty sure that first line isn't accurate - the annuity IS inflation adjusted (once it's received). It just doesn't grow with inflation during the deferral period because it's based on your high 3 salaries which were by definition in the past. In this case it will not grow for the next 9 years but then once taken, will grow with inflation for the rest of life.

You are correct. I tried to clarify that part later, but didn't do it very eloquently.

You get no COLA leading up to full retirement age. You start to get a COLA once it pays out. But depending on how far away your "deferred" retirement is, inflation could significantly eat into your high 3.

If the OP returns to the GOVT at least for one year his annuity will be adjusted to highest 3 years of pay.

[Zorin]

Sorry I haven't responded, been super busy, but I have read through the rest of the post up to this point and appreciate everyone's input. Still at a loss for the best course of action, but for hypothetical sake let's say I leave it and take the annuity... Estimate my High-3 at $91,500 x 1% x 7 years of service, is this the right calculation??? I'm just looking for either a yearly sum or monthly estimated sum for my annuity payments. Thanks

[MillennialFinance19]

Sorry I haven't responded, been super busy, but I have read through the rest of the post up to this point and appreciate everyone's input. Still at a loss for the best course of action, but for hypothetical sake let's say I leave it and take the annuity... Estimate my High-3 at $91,500 x 1% x 7 years of service, is this the right calculation??? I'm just looking for either a yearly sum or monthly estimated sum for my annuity payments. Thanks

Yes, you would get $6,405 a year, or $533.75 per month starting at 62. I’m guessing the math on this is way better than pulling the $25k in contributions.

[HeelaMonster]

Sorry I haven't responded, been super busy, but I have read through the rest of the post up to this point and appreciate everyone's input. Still at a loss for the best course of action, but for hypothetical sake let's say I leave it and take the annuity... Estimate my High-3 at $91,500 x 1% x 7 years of service, is this the right calculation??? I'm just looking for either a yearly sum or monthly estimated sum for my annuity payments. Thanks

Link below with additional details, but yes... that should be correct calculation (unless you end up getting credits that push you over 20 years, in which case you get a 10% raise and the multiplier in formula increases from 1% to 1.1%). But assuming you are working with those numbers above, I get $6405 for gross amount of annual pension.

This is just a personal anecdote, and our situations are different, but FWIW... I retired with only 5.5 years of govt service, having worked elsewhere for 35 years before I became a fed. So I was also not looking at a huge payout from FERS, but what I do get covers what I paid in after only four years, and then it's "gravy" for the rest of my life (plus a survivor benefit). And that's not even taking into account COLA. That is a great return, in my book, and it looks like your payback period would be about the same. Here's that link....

https://www.fedsmith.com/2022/11/09/how ... t-pension/

Thanks for your service and good luck in your decision.

[petulant]

Sorry I haven't responded, been super busy, but I have read through the rest of the post up to this point and appreciate everyone's input. Still at a loss for the best course of action, but for hypothetical sake let's say I leave it and take the annuity... Estimate my High-3 at $91,500 x 1% x 7 years of service, is this the right calculation??? I'm just looking for either a yearly sum or monthly estimated sum for my annuity payments. Thanks

I like to compare pensions to commercial annuities to get an idea of what they're worth.

So, let's start with the pension payout. You calculate it the same way I would, 91500*.01*7=6405.

Next, I get a quote for an annuity from immediateannuities.com. I check for one with a 2% COLA. Technically, FERS will lag inflation by about 1%, but FERS also has protection against large inflation shocks, which the 2% COLA does not. Let's pretend a 2% COLA annuity is the fair comparison.

For $200,000, a 62-year-old male in Iowa could get an annuity paying $956 per month with a 2% COLA. That's a payout rate of 5.74%. So, if we divide the FERS annuity by .0574, we get a notional principal value of $111585 in 9 years, i.e. 2032. The interest rate to grow $26000 in contributions to $111585 in 9 years is 18.96%. That's the "implied rate of return" approach.

Another approach: let's discount the $111585 to the present using a fair discount rate. Normally I would do some complicated comparisons of deferred annuities, but let's just say I've done those recently and 5% is a fair number. In that case, the net present value of $111585 in 9 years would be $71928 today. That means the vested FERS annuity is worth $26000 in your original contributions and $48540 in excess net present value (71928-26000=45928).

Now, as some point out, you don't get inflation adjustments for the next 9 years. The 5% discount rate or 18.96% implied rate of return figures are nominal. A "real" discount rate based on TIPS would be around 1-1.5% right now. In other words, this is fair math with respect to inflation. We could get more cute with a tax analysis since FERS contributions moved to a Roth IRA could grow without future taxes, while a large portion of the FERS annuity would be taxable income. The tax adjustments would cut the lead for the FERS annuity, but they wouldn't cut the advantages by more than half. Even with just half the implied rate of return or half the excess net present value, there is a big lead in the numbers.

So, given a first pass at the numbers, do you really want to move the contributions?

[tj]

It'd be one thing if you were 35 or 40 and had 7 years in the government, you're in your 50's - I see no reason to withdraw the FERS contributions.

[Adam11]

Leave your FERS contributions untouched and then collect the $500/month FERS pension at 62 for life. This is a no-brainer. Also, never say never. The future is hard to predict and if you happen to return to a fed CS job you’ll be starting back at zero in regards to progress towards the annuity if you get your previous contributions refunded, whereas you currently already have it guaranteed in the bag.

[nps]

Link below with additional details, but yes... that should be correct calculation (unless you end up getting credits that push you over 20 years, in which case you get a 10% raise and the multiplier in formula increases from 1% to 1.1%).

OPM cites the 1.1% multiplier as applying to "age 62 or above at separation" so I don't think it would ever apply to a deferred retirement. Strange though that it is included in the deferred retirement part of their website.

[Clarky]

It was a no brainer for me because I forgot all about it! Worked for the federal government for 13 years, have been working in private industry for 24. One day I mentioned to a colleague that I’m turning 62 (this was almost three years ago) and he reminded me that my annuity payout would not grow after 62 so I should file the paperwork. What annuity!?!?

Well, it was a pleasant surprise. The inflation adjustments are a nice surprise too.

I’d definitely wait, not do a lump sum. Would I have if I’d known I could? Good question. In this case, I think it’s going to turn out ignorance is bliss.

My two cents.

[Zorin]

Awesome!!! Thanks everyone, makes a lot more sense when you have numbers to work with, looks like I'll keep my funds in FERS and go with the annuity track down the road.

Thanks again for everyone's help and input.

[wassabi]

This is just a personal anecdote, and our situations are different, but FWIW... I retired with only 5.5 years of govt service, having worked elsewhere for 35 years before I became a fed. So I was also not looking at a huge payout from FERS, but what I do get covers what I paid in after only four years, and then it's "gravy" for the rest of my life (plus a survivor benefit). And that's not even taking into account COLA. That is a great return, in my book, and it looks like your payback period would be about the same. Here's that link....

Side question: Do you also get access to FEHB (healthcare) since you stayed over five years and technically retired as a Fed? That would be a really good deal for putting in five years of civil service, getting a small pension, and then access to healthcare. If that’s the case, is there a minimum age before you can use the healthcare? Feel free to reply via PM if my question derails this thread. Thanks!

[Blue456]

This is just a personal anecdote, and our situations are different, but FWIW... I retired with only 5.5 years of govt service, having worked elsewhere for 35 years before I became a fed. So I was also not looking at a huge payout from FERS, but what I do get covers what I paid in after only four years, and then it's "gravy" for the rest of my life (plus a survivor benefit). And that's not even taking into account COLA. That is a great return, in my book, and it looks like your payback period would be about the same. Here's that link....

Side question: Do you also get access to FEHB (healthcare) since you stayed over five years and technically retired as a Fed? That would be a really good deal for putting in five years of civil service, getting a small pension, and then access to healthcare. If that’s the case, is there a minimum age before you can use the healthcare? Feel free to reply via PM if my question derails this thread. Thanks!

I think you are eligible if you actually retire at 57.

[Parkinglotracer]

Awesome!!! Thanks everyone, makes a lot more sense when you have numbers to work with, looks like I'll keep my funds in FERS and go with the annuity track down the road.

Thanks again for everyone's help and input.

Zorin,

Trying to understand the rules; I thought a gov retiree can’t receive an active duty military retirement check and a FERs annuity at the same time … so one is forced to either buy back the military time and jump over to FERS or stay with the military retirement benefit. I know the rules get complicated especially when you throw in national guard service, etc. Can you receive both?

[rich126]

just to summarize a few things.

Immediate retirement as a federal employee (there are some exceptions where people can retire after 20 years but this isn't for them):

1. Minimum retirement age (depends on date of birth but often 56 or 57) + 30 years of service
2. Age 60 and 20 years
3. Age 62 and 5 years

To have health insurance in retirement you must have had it for your last 5 years of service and take an immediate retirement with the exception of a postponed retirement (see below). To get the 1.1 multiplier you must work until age 62.

Most people who leave the government and don't come back and didn't withdraw their retirement money get a deferred retirement and are not eligible for health insurance.

If you leave government at your minimum retirement age (MRA) and have 10 years or more of service but don't have 30 years you qualify for a postponed retirement. Usually this would be a person who joined the government later in life or worked there then left and then returned. A postponed retirement allows you to regain your health insurance when you start your pension. If you were at MRA and had less than 20 years of service you have to wait until age 62 to get your pension without penalty and your health insurance. If you were at MRA and had 20+ years of service you can get health insurance and your pension at age 60.

You can retire early, say you are at MRA but don't have 30 years to take a normal un-penalized retirement but the pension is permanently reduced by 5% per year from age 62. So if you leave at 56 with 25 years of service you would be penalized 30% permanently. The penalty is prorated based on months you are short but it always calculates from age 62 to the age you are (and not from age 60).

Personally I would always leave the money in the retirement system. I left after 15 years and then ended up returning after being away for 13 years. Return isn't for everyone but it will greatly bump up the pension due to inflation even if you came back at the same grade and give you the health insurance.

Like I said at the beginning, this is for the majority of federal employees, there are exceptions for politicians, law enforcement, and some other employees/agencies where they can retire after 20 years, if not sooner.

[HeelaMonster]

This is just a personal anecdote, and our situations are different, but FWIW... I retired with only 5.5 years of govt service, having worked elsewhere for 35 years before I became a fed. So I was also not looking at a huge payout from FERS, but what I do get covers what I paid in after only four years, and then it's "gravy" for the rest of my life (plus a survivor benefit). And that's not even taking into account COLA. That is a great return, in my book, and it looks like your payback period would be about the same. Here's that link....

Side question: Do you also get access to FEHB (healthcare) since you stayed over five years and technically retired as a Fed? That would be a really good deal for putting in five years of civil service, getting a small pension, and then access to healthcare. If that’s the case, is there a minimum age before you can use the healthcare? Feel free to reply via PM if my question derails this thread. Thanks!

Others have already responded with more details (e.g., see rich126), but yes.... I had FEHB during the 5+ years I worked in govt, retired at age 62, and now have that small pension plus FEHB continuing into retirement. And yes, that's a good deal. TBH, I didn't have any of this (benefits or timing) in mind when I became a fed, because the job sort of fell into my lap and it's something I just wanted to do, but it played out nicely.

[tj]

This is just a personal anecdote, and our situations are different, but FWIW... I retired with only 5.5 years of govt service, having worked elsewhere for 35 years before I became a fed. So I was also not looking at a huge payout from FERS, but what I do get covers what I paid in after only four years, and then it's "gravy" for the rest of my life (plus a survivor benefit). And that's not even taking into account COLA. That is a great return, in my book, and it looks like your payback period would be about the same. Here's that link....

Side question: Do you also get access to FEHB (healthcare) since you stayed over five years and technically retired as a Fed? That would be a really good deal for putting in five years of civil service, getting a small pension, and then access to healthcare. If that’s the case, is there a minimum age before you can use the healthcare? Feel free to reply via PM if my question derails this thread. Thanks!

I think you are eligible if you actually retire at 57.

You would need 10 years in if you retire at 57 - and you'd get a 25% reduction in the pension.