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

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

Post by 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by shunkman »

You might have better luck calling OPM for help with these issues.
Topic Author
Zorin
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Re: FERS - I've Left The Gov't (Not Retired)

Post by Zorin »

shunkman wrote: Mon Jan 23, 2023 1:50 pm 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by annebert »

You don't need to roll it over - have you considered just waiting until 60 and getting the FERS pension?
Weathering
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 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.
Earned 40 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
Soon2BXProgrammer
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Re: FERS - I've Left The Gov't (Not Retired)

Post by Soon2BXProgrammer »

Weathering wrote: Mon Jan 23, 2023 5:40 pm 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 wrote: Mon Jan 23, 2023 8:01 pm 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.
Earned 40 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
sep
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by SR II »

sep wrote: Tue Jan 24, 2023 12:43 am 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by Tooth »

Soon2BXProgrammer wrote: Tue Jan 24, 2023 12:21 am
Weathering wrote: Mon Jan 23, 2023 5:40 pm 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 wrote: Mon Jan 23, 2023 8:01 pm 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by mouth »

Tooth wrote: Tue Jan 24, 2023 6:58 am
Soon2BXProgrammer wrote: Tue Jan 24, 2023 12:21 am
Weathering wrote: Mon Jan 23, 2023 5:40 pm 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 wrote: Mon Jan 23, 2023 8:01 pm 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 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.
Last edited by somedays on Tue Jan 24, 2023 1:49 pm, edited 1 time in total.
Topic Author
Zorin
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Re: FERS - I've Left The Gov't (Not Retired)

Post by Zorin »

Soon2BXProgrammer wrote: Tue Jan 24, 2023 12:21 am
Weathering wrote: Mon Jan 23, 2023 5:40 pm 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 wrote: Mon Jan 23, 2023 8:01 pm 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.
Topic Author
Zorin
Posts: 5
Joined: Mon Jan 23, 2023 11:52 am

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

Post by Zorin »

sep wrote: Tue Jan 24, 2023 12:43 am 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 02nz »

Soon2BXProgrammer wrote: Tue Jan 24, 2023 12:19 am 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.
Topic Author
Zorin
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by MnD »

Zorin wrote: Tue Jan 24, 2023 9:48 am 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.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
Soon2BXProgrammer
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Re: FERS - I've Left The Gov't (Not Retired)

Post by Soon2BXProgrammer »

Zorin wrote: Tue Jan 24, 2023 9:48 am 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.
Earned 40 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
Blue456
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Re: FERS - I've Left The Gov't (Not Retired)

Post by Blue456 »

Soon2BXProgrammer wrote: Tue Jan 24, 2023 11:56 am
Zorin wrote: Tue Jan 24, 2023 9:48 am 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.
PAS and chill.
Gadget
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Re: FERS - I've Left The Gov't (Not Retired)

Post by 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by SCb&b »

Gadget wrote: Tue Jan 24, 2023 2:41 pm 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by Gadget »

SCb&b wrote: Tue Jan 24, 2023 8:43 pm
Gadget wrote: Tue Jan 24, 2023 2:41 pm 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
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Re: FERS - I've Left The Gov't (Not Retired)

Post by Blue456 »

Gadget wrote: Wed Jan 25, 2023 10:32 am
SCb&b wrote: Tue Jan 24, 2023 8:43 pm
Gadget wrote: Tue Jan 24, 2023 2:41 pm 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.
PAS and chill.
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