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Re: [TSP_Strategy] What is the FERS Supplement Worth?

 

This has been a great discussion. I want to add one more thing:

Earlier you (Jim) said that "Even one day short of age 62 it's 1%." True, but you can get around it by taking a deferred retirement. This defers the annuity, you stop working, and then at age 62, you become eligible for the 1.1% even though you stopped working prior to age 62.

This is similar to the SS tradeoff. I'll skip the math but the bottom line is that a 100% FERS employee will break even 11 times the # of years deferred. (Of course, this doesn't include other factors like the potential to gain by investing immediately, or the potential to lose from a higher tax rate if you take another job, etc.) For people split across FERS and CSRS, the breakeven point is further away. For me personally at 59, I wouldn't break even until 120 because my CSRS earnings dominate.

But it might be attractive to people who have another job lined up, want to escape a few months early, or a couple other situations.

https://www.opm.gov/retirement-services/publications-forms/pamphlets/ri92-19a.pdf

Don

> On Oct 11, 2016, at 8:25 AM, JM Bud jmbud2@gmail.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:
> I was referring to the FERS portion of my annuity going up by 10% the day I turn 62. Your wrote, "...for me anyway, it's just not worth giving up 3 years of my life for 4%." In my case, I don't feel like I'm giving up years of my life for a bonus. I think my last 20 months of my career will actually be quite fulfilling -- a capstone of sorts, and go by quickly.
>
> Yes, your calculation on the CSRS portion is correct and more accurate than the approximate 2% per years of service. There are very few of us "TransFERS" civil servants. But it worked out well for me.
>
> Jim
>
> On Fri, Oct 7, 2016 at 1:09 PM, Don Libes wrote:
> Are you sure of the 9*2% calculation? Based on https://www.opm.gov/retirement-services/csrs-information/computation, I think you get 5*1.5% + 4*1.75% = 14.5%, not 18%.
>
> You mention you "think of that as a 10% bonus" but it makes more sense to think of it in the context of your overall annuity in which case, it's lower than 10%. More like 3.3/(14.5+33) = 7%. Still very significant, of course.
>
> But since you earlier said that you would stay an extra 2 years for the 7% jump at 62, I'm curious if you now feel obliged to stay even longer to make up the 18-14.5 difference you were expecting or you'll be happy with your payout at 62. (I'm guessing that you must have a helluva TSP by now and it's really the enjoyment of your job, not the 7% increase that will truly keep you there for another 2 years.)
>
> As another data point for others, I'm 3 years away from 62 and am coming to the realization that life is too short and there are so many other things I want to do instead. My 10% FERS bonus works out to 4% on my entire annuity and, for me anyway, it's just not worth giving up 3 years of my life for 4%.
>
> Don
>
> > On Oct 7, 2016, at 11:07 AM, JM Bud wrote:
> > That's right, Dan. The age 62 bonus on FERS annuity is 1.1%. Even one day short of age 62 it's 1%. I think of that as a 10% bonus for crossing the finish line!
> >
> > At that point, I'll have 33 years in FERS and 9 in CSRS. So unless I'm mistaken that will be 33 x 1.1% = 36.3% of my high 3 salary for life instead of 33%. Plus I believe I'll get 9 x 2% = 18% of my high 3 from CSRS years.That mix and the TSP match all these years has turned out well for me.
> >
> > Jim
> >
> > On Fri, Oct 7, 2016 at 10:03 AM, Dan danbev6462@yahoo.com wrote:
> > JM u stated a 10% lifetime bonus? Are u referring to the jump from 1% to 1.1% at 62? And what do you mean 3.3% annuity increase?
> >
> >> From: JM Bud
> >> I agree. I'm staying two more years until I reach 62 to take the 10% FERS lifetime bonus on the FERS, With 42 years of service at that point, the ~3.3% increased annuity is worth far more to me than taking the FERS supplement now.
> >>
> >> I'm fortunate though that I really enjoy my position at NASA and the people I work with. Sadly, that's not the case for some civil servants. Everyone's situation is different. The supplement can be a lifeline to get a jump on a new phase of life. You can't always put a price on that.
> >>
> >> Jim
> >>
> >> On Fri, Oct 7, 2016 at 8:52 AM, barbs miandsh2000@yahoo.com wrote:
> >> given the no-COLA on the FERS supp and FERS retirement, anyone already weighed the pros/cons of sticking it out until 62 versus going at MRA?
> >> 10% alone in the FERS supp seems like alot to forego for another 5.5 yrs.

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Posted by: Don Libes <don@libes.com>
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Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.

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