Deferred, fed couples, and agency match all on today’s Fednobabble.com,
This is Fednobabble.com, where Kevin and Cassie make federal retirement benefits understandable for humans like you. These two don’t hold back as they answer questions from the Fed Pilot workshops and webinars or from questions submitted by you at Fednobabble.com.
Oh, look at that, we’ve got one of your boys with this don’t know, but also I guess my kids will be joining us for today’s discussion. Excellent.
I love it. Hi, boys. OK, let’s jump in. Maybe they know some of the answers to this as well.
So. This first one, will you be going over deferred retirement, obviously. Now, this is webinar, right? Yeah. Do you cover this in your webinar? No, I don’t. We do cover it in the day long one because there’s more time. But this goes for very, very few people. And so, I mean, really. Yeah, really. Not very many people at all. So we we I don’t talk about it. And what I say is, if you if you really want to dove into this, when you you know, afterwards we can talk about this, but not right now where it’s not going to pertain to anyone except for you.
But can you so being fully retired, can you explain the other options? I don’t know how in-depth you want to go, but the other options that are out there. Yeah, so when you’re looking at, you know, retiring from federal service, I don’t think people really understand what the deferred retirement is. This one often gets confused with postpone retirement.
Yeah, deferred retirement is when somebody separates from service earlier than an actual retirement date. Right. So they’re not eligible for any sort of immediate or postponed pension benefit. Right. So they’re typically prior to their minimum retirement age, which is either fifty five to fifty seven, depending on your birth. But they’re separating prior to their minimum retirement age, and even if they have over 10 years of service, that doesn’t matter. They’re they’re either younger than their minimum retirement age or they’ve met their minimum retirement age and they haven’t met at least 10 years of service.
That’s when a deferred retirement is going to pertain to somebody. Right. Postponed retirement is when somebody has met their minimum retirement age and has at least 10 years of service. So they qualify for a reduced pension benefit immediately under the MRA+10 rules. But then they say, hold the phone, I’m going to wait until I’m fully eligible to receive my pension, whether that’s age sixty six to fifty nine, whatever that looks like based on the number of years of service that they have.
And they simply want to avoid that MRA+10 penalty, right, and that helps, and then they’re OK with postponing their other federal benefits as well, such as FEHB and vaguely. But if they do that, I mean, separating out under and MRA+10 pension, they’re not going to receive the SRS or the special retirement supplement anyways, whether they take the immediate pension or the postponed pension. But deferred employees, when you go out on a deferred retirement. So again, those are people that are under their minimum retirement age with or you’ve met your minimum retirement age and have less than 10 years of service.
Then they’re not going to have any of those benefits that are eligible no matter when they when they begin taking that pension. So even if they obviously deferred, then you’re not going to be able to take your pension until 60 or 62, depending on your years of service anyways.
But if you wait, you’re not going to be able to pick up FEHB and vaguely even when you begin your pension, you’re simply saying, I’m done with the federal government, I’m done with their pension, with their benefits, and I’m choosing not to continue them at all. So, for instance, somebody again, who’s forty five. And separate from service, they haven’t retired because they’re not receiving their pension, so they’re going to retire if they have 20 years of service, they can begin their pension at age 60 because they have those 20 years of service.
But then they’re going to waive FEGLI, FEHB, special retirement supplement like they’re not going to receive any of those other benefits, even when a pension at 60.
And this is a great example of why when people say, OK, can you dove into deferred? And and it’s like, well. Boy, if I do, I mean, it’s not a simple discussion, it’s not a this is how it works. I mean, you can’t say, like you just said, this is how it works. But then the natural question is, OK, well, what do I do? And that’s that opens up a whole can of worms that you and I aren’t going to answer.
But, you know, like someone an adviser and I trusted network there, they will be able to answer because they see your situation, they know your situation, they see your numbers, they see everything. They ask and say, OK, what’s best for you to maximize your benefits. This is what you do. But and but you that was a great example of why we don’t even try to explain it in in a workshop or something like that, because it just goes, oh, it’s overwhelming.
It’s tough. So, yeah, OK, good. That’s number one, number two.
All right, my husband and I are both federal employees. What options are available to us?
Hmm. What options are?
There, you know, right off the top. I can think of a couple things.
There’s some there because there are bonuses for federal employee couples that are married to each other. One of them has to do with health care. Right.
So with health care, some things with that is that if as long as you both have are in the FEHB plan when you retire, then if one dies, that doesn’t mean that the other one doesn’t get FEHB anymore. You don’t have to take the S.R., the survivor benefit. So they’re they’re out of it that way. You know, they’re not strongarmed into the survivor benefit program because they both are entitled to that. That’s right. And that’s one way there are some there’s another benefit.
I can’t there’s another benefit. So here’s the thing. Yeah, go for it.
The FEHB and the survivor benefit are definitely one. But then they also have to think about the income. Right. So with somebody who is in the federal service and somebody who’s not not always is the spouse who’s not in federal service going to have a pension. And so, sure, the the federal employee obviously will get the pension, but with federal employee couples, both of them are going to have a pension. So that’s going to change a little bit.
How excuse me, how, you know, that planning process looks like and especially for TSP benefits, like they’re both going to have a TSP, you know, federal couples are are, again, like you said, the FEHB and the surviving spouse.
Well, they’re probably both going to have Bagli as well. And the special retirement supplement option, if they’re first like we have to look at, there’s so many similarities and benefits to the federal program that the other federal spouse is going to naturally have depending on which retirement system they’re under. OK? But there’s there’s a whole lot of benefits to that. And so the planning considerations are going to be different because federal couples have the same benefits as each other rather than if somebody doesn’t work.
If a spouse doesn’t work for the federal government, they’re not going to have the ability to keep certain programs. There’s there’s going to be having to be more coordinated approach with the benefits to make sure that certain plans are there for the spouse other than having to be or having to be eligible for them on their own. Yeah.
And I’ll give you I’ll give you one quick example. I’ve had this happen a few times in in my workshops, not too often, but it does happen every now and then where there is a federal couple married together and one is a citizen, one is a fer’s. And when we get to the TSP, I say, OK, this I come to this particular slide and I say, this is dedicated to you to right now. I said, let’s say husband is first and wife is, as I say, husband.
If you want to take out anything from your TSP, you have to get permission from your wife. But wife, when you want to take anything out from your TSP, you don’t have to get permission from your husband. You can just take it out. And he’s just notified, which means that if you get to the mailbox faster than he can, he’ll never know how you got all those shoes. So and and they look at each other. Oh, and you can just sometimes just feel like, are you kidding me?
Why is that fair?
And she just you know, the wife is gloating and saying, yes, I can do that and he’s mad. And then I think, OK, you know, maybe we need to bring in a psychologist or a counselor of some type to work out the issues that you do to that I have created now for you. So, yeah, but there are little things like that that there are differences between CSRS and FERS. Sometimes they own a lot of times they play really well together and can give you some bonuses.
But there are times like that when they don’t play very well together anymore.
So it’s kind of like, well, security, right? If you have a CSRS employee and a first employee, IRS is going to not have Social Security, but they’re going to have a higher pension. FERS is going to have maybe a lower pension, but then they get the Social Security. But the CSRS simply cannot get. Yes. Well, most of the time, I should say, it’s not going to be eligible for the benefit under Social Security because of the government pension offset.
And, you know, and so there’s even though the CSRS can have whatever freedom they have with the TSP by not notifying their spouse or getting consent or anything to withdraw their money. Well, the first employee, you know, they’re going to have other benefits, too.
Yep. It’s all over the place. It gets so confusing.
It depends on to answer this question. It depends on which system those federal employee couples are under. As for what their options are available, because they’re going to be different if you have a CSRS and a FERS as opposed to a person of FERS or a CSRS & a CSRS. You know, and so that’s why getting in touch with somebody who can help them kind of figure out what the differences are or what what options are available to them based on their retirement system is going to be key.
How do you maximize this? How do you put all the rules just in line and keep as much of your own money as possible? That’s the key right there. How do I keep as much of my own money as yourself?
What was that again?
Do you keep it or not? I’ll give it to you. Oh, no, that’s not what I mean. Yeah, that that’s. Yeah, yeah. That’s not what I was talking about. But that’s OK. That could be two. Right. Right. OK, let’s go on to the next question.
Does the agency match contributions count towards nineteen thousand five hundred max contribution now? Period. Done. OK, I have another question. OK, that was easy, right? I know we only have a few minutes here and I thought that would be perfect for that. But I want to ask another question in here that I’m pretty confident I know the answer to. But I may be wrong in this.
This says, does agency match contributions? Let’s just put a question mark right there. Does the agency match the contributions as opposed to OPM matching contributions and does no matter how.
Hold on hold. And how often do you get that in your workshop where they ask if OPM matches?
I don’t often. But what I do get is a difference between understanding of what an agency does and what OPM does. And, for example, that compared to the compared to the report that they can get from OPM. Those could be the same, but they could be off. Isn’t going to be the site. Right. OPM says, you know, OPM has an MRI and then they have you know, we can take advantage of when someone is going to retire and make it the last day of the month to maximize the amount of money that they have.
But if you’re a law enforcement officer, then it’s actually up to the agency if you hit your maximum retirement age as to when best… I mean, so sometimes we have to look at what OPM says. Sometimes we have to look at what the agency has said. And so I was just thinking here, I think it’s OPM, isn’t it? And talk about that. So OPM is pretty much for advice for federal employee. And they but they handle more of the retirement stuff.
And the and the laws and the regulations with the federal government. But so, no, they don’t have anything to do with the contributions to TSP or anything.
The agency or OPM, the OPM, the Office of Personnel Management is simply to manage those things.
Right now. The agency is the H.R. department or the agency that you work for, OK? And they’re going to have more specific information. Now, I see this in benefit reports, right, where somebody is like, well, I got this estimate from OPM, but then I got this estimate from from the agency. Well, OPM is going to take into consideration more of what the agency is because the agency does it maybe doesn’t have everything the OPM does or vice versa.
Mm hmm. Right. So, for instance, if somebody has submitted the certified summary of service, the agency has all of that record of somebody whose service history, OPM may not have that service history. And they’re going to give you the information based on what you have, what your retirement is, whether, you know. So they’re going to calculate the pension based on all that information. They’re not going to run the year. They’re not going to be the H.R. department where that can run different scenarios and provide different right reports to you based on if you buy back your military service or something like that.
Right. They’re not always going to have the the part time Proration factor. Because they may not have all of those, and so I think people get this confused often where submitting the retirement application, for instance, they think, oh, well, I’m going to send that into OPM. Well, before you do that, there’s some things that your agency has to do first. And so you actually submit your retirement application package to your agency so they can get together the other documents that need to be included in the package and then send it off to OPM.
And that’s what that process looks like. And when you when you separate agency and OPM, people are like, oh, I didn’t I didn’t realize that that’s how that worked. Right. Well, yeah. You know, it’s separate. Yeah.
It’s it’s good to have an understanding, at least some basic understanding of who does what and and understand, for example, that, oh, my retirement comes from OPM.
And and not the agency and the agency doesn’t handle my retirement, it’s OPM and who not only who to go to, but also when you’re looking for the final word, do go to your H.R. for the final word of what your retirement will be like or do you go to OPM? And so, again, it’s good to understand what your agency is handling and doing compared to what OPM is handling and doing.
Yeah, and I’ll tell you all all things regarding your deductions and contributions and all of that, that is strictly OK. In fact, I’ve got a friend who works in the payroll department, that is for the people who do payroll right there. They’re figuring out what that looks like and and all of that for you. That is is not OPM. It’s not even TSP, really.
That’s your payroll office.
So, OK, well, that’s you know, that’s a that’s something that I don’t think I’ve ever really discussed with anyone before in more in in-depth like that. It’s been a cursory hey, you got to know the difference. But we’ve never dove into it because, you know, in a workshop, we just don’t have time to do that. But it’s good to have an understanding of that. OK, as always, if you would please like and subscribe, get notifications and make sure you stay up to date, make sure you have all the information Cassie.
Any last words of wisdom?
Go get a benefits analysis from somebody, right, whether it’s each hour or OPM get something if you’re looking at retirement planning or are curious about what that looks like for you and try and get in touch with somebody who understands what these benefits are all about because they’re going to help answer the questions that pertain to you specifically. And if you’re looking at a more robust type planning, then reach out to a financial adviser and who understands the federal benefits if you don’t have one.
Let us help you get someone in your area. Great. Thank you very much.
And we’ll talk to everyone next time to get Cassie’s comprehensive report on your federal retirement benefits. At no cost. No obligation. And no sales pitch. Go to Fednobabble.com while you’re there. Submit a question for them to answer on the show.