Reply to What do you say when people keep on asking you when you plan on retiring?

Forum Index » Jobs and Careers

Reply to "What do you say when people keep on asking you when you plan on retiring?"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]In my agency, folks tend to work a long time, so retirement chit chat is more about crowd-sourcing TSP strategies or possibly trying to see if someone has a successful spouse that obviates the need to maximize pension.

The reality is that even for those folks that have 30 years in at 55, 1) they still have to work until 57 for an immediate retirement 2) [b]there are pretty significant pension penalties for retiring before 62 regardless of how many years one has in [/b]3) if someone is at MRA but has less than 30 years in, those penalties (5% for every year one is under 62) are REALLY significant.

There are a bunch of really optimistic folks in say r/govfire, but many of them are not looking to live a DC metro-area lifestyle. ONE of my coworkers will hit 30 years before MRA, but most of my team started around 40 and have about 10 years in (several converted from contractor positions). There are only a handful of position types where folks could retire at 50-55 with a penalty-free pension, and those are mostly law enforcement.

keep plugging away, contribute the max to your TSP, and when folks ask about your retirement plans just smile and tell them you love your job.

The reality of my personal situation is that I'll need to work until at least 62, but probably 65, and that seems par for the course for most of the people I work with. A lot of actual non-feds tend to have a really optimistic idea of what the current pension plan looks like and the rules around them, and hear the stories of say, FBI agents that can retire at 50 and then make big consulting dollars while collecting a pension, but that does not describe the bulk of federal employees. [/quote]

Wait, if at MRA (57) and you have 30 years, aren't you good?  No penalty[/quote]

The multiplier goes up to 1.1 at age 62. So if your MRA is 57 with 30 years and you retire then you get your average high 3 salary x 30%. If you wait until you're 62 you get your larger average high 3 salary x 35% x1.1, which goes up to 38.5%. If you can hold out until age 62 that can be a big difference in pension income.[/quote]

But most of that difference is from working five extra years, not the 0.1% difference in the multiplier. The pension will always be larger if you work longer, but at some point you have to accept the trade off between more retirement years versus more pension money.[/quote]

Two factors 1) the 10% bonus you get at 62, and 2) the fact that you will not receive cost-of-living adjustments until you turn 62.

So a GS-14 who retires at 57, making 166k a year with say 32 years in might have a pension of $54k. That pension will not increase until COLAs apply, for 5 years. Or they could coast along for another 5 years (banking that salary and raises), and have a pension of $72k a year, and get annual cost-of-living increases thereafter.

Maybe you did good and your TSP is 3 mil and so that extra pension money won't be noticed. But for a lot of folks, $18k a year is a lot to leave on the table. [/quote]

But you missed my point, which is that most of the difference comes from staying in the workforce and getting the additional years, not the additional 0.1%. But it’s always true that more years (and presumably higher salary) will get you a higher benefit than fewer. It’s not some “penalty” to retire sooner, just a choice for more years of retirement instead of higher benefit. That’s the trade-off I mentioned.

In your example of a person making $166k, at 1% and 32 years they would have a benefit of just over $53k. But someone with the same salary and years at 1.1% gets $58k. It’s not a massive difference.

Instead, the extra benefits come from the additional years and higher salary used in the calculation. But that’s as true for retiring at 67 as 62, and retiring at 72 instead of 67. Each five years in your example would get you an extra ~$9k/year, not even including the higher salary (so probably more like $12-15k in reality). The point is you have to pull the trigger at some point. For some people, including many that I’ve known personally, that was before they turned 62.[/quote]

calculations are with both higher and additional salaries. at 57, they'd have a benefit of 53k that will not increase for 5 years, and will then increase much more slowly. at 62 with modest wage increases, they'd have a pension of $72k. sure, at 67 they'd have a pension of $86k, BUT if they had taken the pension at 62, they'd at least have a COLA-adjusted pension of $78k. Their identical twin who took the pension at 57 will be trailing along at $58k from their early pension.

Their 5 year older big brother who started work the same year they did and retired at 62 with 32 years of service and the same salary, will have a starting pension of $60k that grows to $73k at 67.

The biggest increase to pension compensation is always going to be at the age 62 inflection point. I mean, if you truly hate your job and can't stand it anymore and have something concrete (and low cost) that you want to do with your time, I guess retire whenever. [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics