TSP Withdrawal Options Case Study
In an effort to provide real-life situations to show how the different federal benefits apply, we will be presenting hypothetical situations and potential solutions each month. This month we present a TSP Withdrawal Options Case Study. All names and situations are fictional and for educational purposes only.
Max has been an Air Traffic Controller (ATC) for 27 years and has enjoyed the experience. He has been married for 28 years and has three children, one son and two daughters. Now he is age 53 and thinking about his retirement options. As a child, Max grew up on a farm, and he has always been a country gentleman. With his federal retirement right around the corner, he hopes to spend all of his free time out on the farm. He would love to have a few cows, raise goats and chickens, and plant a big enough garden to raise their own produce.
Since he is over 50 years old with more than 20 years of service in a Special Provisions position, he is eligible to retire. However, he is a little apprehensive about leaving his federal career and the big life change that comes with it.
What is a postponed federal pension?
If you retire under MRA+10, in order to avoid a penalty on your pension, you can “postpone” receipt of your federal pension until age 60 or 62.
Retirees under MRA+10 are subject to a 5% penalty for every year that you retire under age 62. For example, if you retired at age 56, your annuity would be reduced by 5% for each of the six years you retired early, resulting in a 30% reduction in your federal annuity for life.
Federal Retirement Changes – 2018 Budget Reform
Federal employees all over the nation have been buzzing about the latest federal retirement changes news of 2017’s budget proposal. If passed, this will affect federal retirement plans both while employed and in retirement. In other words, federal employees may be required to pay more and receive less – that is if Congress approves the budget plan.
What’s all the buzz about, you ask. Federal employees all over the nation are talking about how the federal retirement changes in 2018 budget reform aims to reduce future federal benefits for those retiring in 2018 and the years to follow
Deferred Federal Retirement Case Study – Cynthia
In an effort to provide real-life situations to show how the different federal benefits apply, we will be presenting hypothetical situations and potential solutions each month. Below is a Deferred Federal Retirement Case Study for your review. All names and situations are fictional and for educational purposes only.
Family Needs Arise
Cynthia began her federal career soon after graduating college. She enjoyed 27 years with her federal agency and had no plans for changing before retirement. Unfortunately this year her mother was diagnosed with Stage III breast cancer. Because of her mother’s age and treatment required, her mother will require significant amounts of care. After discussing all of their options with her husband, they decided that it was best that she walk away from her federal career to look after her mother’s medical needs full time. At this time their financial situation would allow Cynthia to be there for her mother and her husband’s salary to support their household needs.
What is a deferred federal pension?
If you have worked for the federal government for over 5 years but are ready for a change, you may want to consider a deferred federal pension?
There are two different ways to qualify for a deferred federal pension:
To begin drawing a federal pension after reaching Minimum Retirement Age (MRA) or at a later date specified by a federal employee, he or she must retire with 10 years of creditable service, including 5 years of civilian service. The federal pension would begin the first day of the month after attaining MRA or on the later specified date. MRA+10 is only made available to FERS employees.