Last week I pointed out a few things that can ruin your retirement, whether in the short term or in the long term. This week I want to tackle some issues that, if not addressed ahead of time, can cause you to clap your hand on your forehead and say, “If only I had …”
First of all, let’s go back to a point I mentioned last week because it’s so important. With a few exceptions, you can keep one of the most valuable government benefits, Federal Employee Health Benefits (FEHB) program coverage, in retirement only if you have been enrolled for the 5 consecutive years before. your retirement or since your first opportunity to register. (Note: the main exception, which is itself rare, is that if your agency offers you the option of taking early retirement, you should only be enrolled in the FEHB program when the offer is made.)
Check your eligibility to keep FEHB and then check it three times. Then give it a little time and check it again. This is not a joke. If you retire without this eligibility you will get a temporary extension with no government share for bonuses and then like I said last week you are on your own.
If you are someone who will lose their health benefits, you may want to postpone your departure until you can keep that coverage until retirement.
Once you are sure you have the health insurance protection you need, make sure that your retirement income will provide you with the financial protection you will need. Two of the most common mistakes I see are overestimating the number of years of service that will be included in your pension calculation, especially for:
• Refunded service — If you have already left government, received a refund of your pension contributions, and returned to government service, this refund could have a significant impact on both your eligibility for retirement and the calculation of your pension. . Since the rules differ for CSRS and FERS depending on whether you have to or can deposit money to get credit for that period, you will need to meet with one of your agency’s retirement advisors to determine the rules that apply. ‘apply. Only then can you decide which option is best for you.
• Military Service — If you are a CSRS employee who served in the armed forces before October 1, 1982, you will not have to make a deposit to get credit for your active service to be used in the calculation. of your pension. If you served after that date, you will. If you do not make this deposit, are retired and eligible for a Social Security benefit at age 62, your pension will be recalculated downward by 2 percent for each year (5/12 of 1 percent per month) that is covered by this period of service. The rules are different for FERS employees. If you are one of them, you only have one option. Make the deposit and get credit for that period or don’t make the deposit and get no credit for that period.
Also, ask yourself the following question: will your last annuity and the nest egg in your savings plan account be enough to allow you to live the life you want to live in the future? That TSP account might be a good number, but how will it translate into income and for how long? There are calculator functions on www.tsp.gov to facilitate this analysis; you might be surprised at what you find.
Make sure you have an accurate picture of your pension, taking into account these possible reductions. Also, be sure you know how choosing a survivor benefit will reduce your benefits and remember that if you are covered by the IRSB, with rare exceptions, you will not receive a cost of living adjustment ( COLA) on your pension until you reach the age of 62. .
The value of this pension – plus social security if you are entitled to it – will be less, often much less, than what you received in wages. Yet, you will still have basic expenses to cover, such as house or rent payments, health and life insurance premiums, federal and state taxes, and more. Experience is a great teacher, and it tells us that life in retirement costs more than we realize. .
Doing the necessary math may mean you have to postpone your retirement until the numbers add up, but failing to do so may mean you have to go back to work to make ends meet.