GovExec Daily: Retirement Planning Tricks for All Feds

Ross Gianfortune
This is GovExec Daily, where we bring you the federal stories that really matter.  It's May 23, 2022 . I’m Ross Gianfortune.

The COVID-19 crisis has reoriented the way many people see work and federal employees are no different. According to Forbes Magazine, workers closer to retirement felt the impact of the pandemic recession, as the number of workers over 55 that were forced out or left the workplace during the pandemic rose by a significant 7.6%. With federal retirement a part of that calculus, public servants are no strangers to retirement planning and its complications.

And it is complicated. CSRS and FERS employees both have forms, numbers and issues to understand and pay attention to. The TSP can be a source of stress or comfort, depending on how much anyone follows it. Health insurance, both pre- and post-retirement, became doubly important during a public health emergency like the coronavirus.

Erin Carter is Director of Programs at National Active and Retired Federal Employees. After a short break, she’ll join GovExec Daily to discuss federal employee retirement strategies.

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Ross Gianfortune:
Federal employees have many important decisions to make by the time that they retire, but even more decisions await before retirement is near. Some of these choices can have lifelong consequences and need to be carefully considered, even if they can be complicated and confusing.

Erin Carter is Director of Programs at National Active and Retired Federal Employees association. She joins me now to discuss federal employee retirement strategies.

Welcome to the program

Erin Carter:
Thanks, Ross. Thanks for having me.

Ross Gianfortune:
So let's sort of start with the jump. How close and I should feds have on their retirement accounts? Should Feds look at the TSP every day? Should they be following the ticker? Like it's the weather?

Erin Carter:
Well, that's a great question. And I know I personally am looking at things with a one eye open these days with the flexibility and massive fluctuations in the market. And I think it's it's really a personal choice. Some some people are much happier when they aren't paying attention to the big ups and downs, and others can't help but look at it and watch what's going on. Our experts will tell you not to try and time the rise in the fall of the market but to develop a long term strategy that's based on sound financial planning, and then follow that strategy. Some people like to use the lifestyle funds that shift more towards conservative investments as they age to provide a great variety greater insulation from the market via changes as they begin to withdraw their savings. But how much risk a person takes on at any given time is really going to depend on personal tolerance for risk? And how much the personal need is in terms of the annual withdrawals. So

Ross Gianfortune:
if you're close to retirement, how much should someone public servant factor in things like taxes, Social Security and things other than just their specific, you know, sort of investment side of it?

Erin Carter:
Sure. You know, it's one of those things where we always recommend that folks really sit down and take a look at all of their all of their income streams and all of their expenses. And there's so many variables depending on age and which Retirement System folks are under the you know, will they be entitled to Social Security? Can they wait to take Social Security until they're age 70 to maximize that benefit? You know, how soon after retirement, are they going to need to start taking required minimum distributions that we're seeing people work a little bit longer these days. So that could be a consideration for them and which of course, could impact taxes and Medicare rates and all kinds of other things. So you know, one of the one of the things that I think is are often misunderstood. And thinking about those, those streams of income is really related to the cola, I talk to a lot of folks who think that if they retire on December 31, they're going to get that cola January one from that year, not realizing that there's the prorated rule, not realizing that they have to be age 62, before December 1, and retired before December 1, to even be able to qualify for a COLA that year. And when they're seeing the big numbers, the 5.9 is the four point nines and gosh knows what it's going to look like this year, they really want to make sure that they're taking advantage of those. And it's really heartbreaking for me to have to tell them that that doesn't apply for them, you know, until a year from now. So, again, we've got a number of webinars that are resources for folks thinking about retirement and really looking at those, you know, expenses and income streams. And we have an online community in our fed hub platform. That's called the retirement zone. And it is specifically dedicated to this topic and things around retirement that people you know, maybe didn't think of, or, or need to be thinking about that. They haven't given consideration yet. So I invite your listeners to tune in and check those out.

Ross Gianfortune:
Yeah, it's certainly not uncomplicated that is for sure. As have the last two years been COVID-19 has affected pretty much everything all of us do, how has it affected the ways that public servants are approaching and should approach retirement?

Erin Carter:
Well, you know, OPM has certainly been significantly impacted by the COVID pandemic, and not just on the retirement front, but on the, you know, death claims that they've been processing and survivor claims and things along those lines. So I think that folks who are approaching retirement need to have a realistic frame of mind and know that this is not going to be a short process, we are recommending that everybody has at least six months worth of finances saved. And that is at least six months. I'm working on a couple of cases now with North members who are going into the eight month territory and their retirements have not yet been finalized. So you know, certainly the payout for annual leave does help in those scenarios, but it only goes so far it is processed by the agency and not by OPM. So it does happen a bit faster. So that is something that folks can, you know, count into their coffers as they're heading into that retirement timeframe. But I definitely think a reasonable expectation and patience, patience is going to be a big factor.

Ross Gianfortune:
Yeah, I think that's a good way to look at it in general and has been for the last couple of years, particularly with regards to dealing with anybody over the phone or in person is a lot of patience, a lot of empathy is almost universal, and good advice for all of us. Absolutely. So sort of speaking of, of the pandemic in health and such as it were, what should fans know about health insurance and how it changes post retirement? Well, in broad strokes,

Erin Carter:
I think that that Feds should understand a couple of things. One is that while the premium for their Fe HB plan will remain the same in retirement as it was while they were working with the same employee contribution annuitant contribution versus government contribution, it will be paid monthly and not bi weekly. And I think that that number jumps out to people when they first see it because they are so used to seeing a smaller number bi weekly that when they see it monthly, it jumps out at them. I think it's also notable that you will be paying the premium with post tax dollars, not pre tax money. And we're often asked if if the FE HB premium will go down in retirement because an annuitant enrolls in Medicare Parts A and B. And that's not the case, the premium does not change. But if you have both fe, HB and Medicare most plans will waive things like CO payments, deductibles, coinsurance, and some will even provide a fund to reimburse part of your part or all of your Medicare Part B premiums. So you know, we're asked all the time if somebody should should take Medicare Part B and enroll in it. And there's not really a one size fits all answer for that some folks are subject to Irma and that the income related monthly adjustment amount. And depending on what those numbers look like, it can be really, really shocking to have to pay that much every month for Medicare coverage. You know, and again, we talk about risk risk averseness if you're super risk averse, then Medicare Part B is probably a good thing for you. You can virtually guarantee yourself covered John on just about everything with very little out of pocket costs, versus, you know, the off chance that you could get hit with a bill that that could be hard for, for for someone to pay that's living on a really fixed income. So, you know, you never know what the future holds. And so that's kind of a an extra insurance pocket insurance ace in the hole, so to speak, to cover those unknown circumstances. So, you know, we also talk to folks all, all open season about looking at their plan and determining whether the plan that they're on is the plan that they should be on, is there a less expensive option that they could look at that will still provide them great coverage, particularly with Medicare A and B. And so those are the types of things that we always advise our members to really sit down and take a look at is the coverage you have the right coverage for you? So those are a couple of things to think about in retirement.

Ross Gianfortune:
My mom recently retired from public service,valbeit local, not federal service. And that kind of stuff was boy, frustrating for her a lot of those kinds of shocking realizations about the post tax premiums and things like that. Absolutely. You know, you talked about sort of empathy and patience, retirement processing can take a while, it's probably going to take longer now that we're in this pandemic period. What kind of things should someone who's near retirement, you know, in that sort of, you know, close range, you know, to the retirement age, what should that person do? And try and make the process as smooth as possible?

Erin Carter:
Yeah, it's a great question, and one I wish we had that silver bullet answer for it would just be great. If we could answer that, and fine tune it. I think some of you know some of the processing time is simply out of the employee's control. Once somebody retires and the paperwork is submitted, and they've worked their last day, the agency agency that they work for, still has to complete their final payroll processing, they have to complete their annual leave payout. And it's at that time, then that all of the paperwork is sent to OPM for for that processing to start. So the first thing I would recommend is they take the time to really read all of the forms, including all of the instructions, you know, some of the questions or have circular in nature, where one question down at the bottom of the form might refer to a question at the top of the form. So being aware of what that question is really asking, and then answering it, understanding the elections, like things like the survivor benefits that have very lasting implications, some of those decisions cannot be reversed. So knowing what you're really signing up for is key. And then to take advantage of the services offered by your agency, if they have retirement classes, and, you know, things along those lines, definitely participate in those double and triple check every entry on the form to make sure that every question that should be answered is answered. Give your forms to your spouse or to a friend and have them look over it and make sure that that somebody else lays their eyes on it to see that they might be missing an answer somewhere. And then again, NARF, because our members are the folks listening to your show. North has a number of webinars that we've done that not only covered determining the best date to retire, but also in preparing retirement forms and some of those things that you really need to look out for so that you're, you know, you're sure that you've you've completed them correctly. I think a lot of the processing times slowdowns are when things are incorrect on the forum. And there's there has to be back and forth with OPM. Most of that is done via the US postal mail. And so it's waiting to receive communication, sending communication back getting it to the right department and getting it appended to the to the package. All those things take time.

Ross Gianfortune:
Yeah, for sure. The the you don't want to be relying on the post office for your communication at this stage in history. I think that's probably not a standard thing. But we'll end on this, you know, so that you had done that Norfolk done a webinar recently on this, but what are some sort of general tips on retirement planning for early and mid career federal employees? I imagine start early as part of that. But what else is sort of within that umbrella?

Erin Carter:
Absolutely. Start early is definitely a good thing. And I think that it's a good practice to start learning about it is early into your career as possible and go to a class see what it's all about. See the things that as you work through your career you need to be thinking about in terms of of your retirement. You know, join NARF let us partner with you for your entire career and help you with the things that you need questions on and I think that one of them that's overlooked and we've already mentioned it today is health care and And I know I'm guilty of it, you know, you get comfortable with the plan that you're in, you know how things work, you don't want to change it. So you don't. But as you go through the different stages of your career from when you're first starting out to having kids and adding them to the plan, you know, often the your needs changed, but the plan doesn't. And is there another plan that that would suit you better. So take the time to look at those plans during Open Season and make sure that you're in one that really best suits your needs, that habit will definitely serve you well as you near retirement and have to ponder the Medicare question. And I think another opportunity very often overlooked is the agency match to the TSP, my parents who were both federal employees themselves, always preached to us that we have to maximize the employer match with our 401 Ks. And they said, if you start doing that, when you're younger, you get used to it and you don't miss it. And it would be really, it would be a shame to miss out on any of those matching contributions that could have an impact on on your retirement, you know, health and longevity of funds available. So those are two things that I think could really help folks as they are starting out or early in their careers, and then pay attention. You know, we've we do mid to late career, webinars and things all the time. We have sessions devoted to them at our upcoming fed con 22 in Scottsdale in August. So, you know, get in, get involved, get active and make sure that you're on top of those benefits and what they will mean to you when you retire.

Ross Gianfortune:
Yeah, it's never too early. It's never too early to get involved in to sort of pay attention. Certainly, that seems like great advice, and certainly something a lot of our listeners will take. Erin, thanks so much for being on the show with us.

Erin Carter:
Thanks for having me. I appreciate it.

Ross Gianfortune:
Thanks for listening to GovExec Daily. Our show was produced by Adam Butler and hosted by me, Ross Gianfortune. We want to thank Erin Carter for joining the program. Our music is the song “Signals” by Catfish Dancing. Be sure to rate, review and subscribe on Apple Podcasts or Google Podcasts or wherever you get your podcasts. Check us out in the Clubhouse app by searching GovExec Daily. You can email us any feedback at podcast @ govexec.com or hit us on Twitter @ Govexec. 

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