As you’re getting closer to retirement, you may be reaching out to your HR department trying to figure out how you can get good, accurate information from them. There’s some good news and maybe some bad news to this. The good news is that most HR departments are really good resources, and you should definitely rely on them to get information as you’re preparing for retirement. The bad news is that a lot of times they can be overwhelmed, and you have to recognize that they’re human beings and sometimes make mistakes or have false information.
Anytime you’re dealing with something as major as retirement, it’s recommended that you trust and verify to avoid any serious consequences, such as what Robert experienced in the example below.
A Federal Employee named Robert, age 57, thought his target retirement date met the criteria for regular full retirement under the Federal Employee Retirement System Minimum Retirement Age plus 30 years requirements.
His agency’s HR department sent him a number of retirement benefit estimates reporting that he did indeed qualify. Like most people, Robert just assumed these were a sufficient guarantee and didn’t think twice about the criteria involved.
A few days before Robert’s scheduled retirement, he received a copy of his retirement benefits package from HR.
As he reviewed the package, he discovered some shocking news: he still needed six months of creditable service to qualify for regular full retirement MRA plus 30. His first six months of federal employment were not considered creditable service, because he wasn’t paying into the Federal Employees retirement system during that time.
Robert immediately canceled his retirement. If he hadn’t, he would have irretrievably lost 25% of his federal retirement benefits.
The moral of the story is, go to your HR department. Review your resources and always verify everything yourself or with a financial planner.
Review Your Federal Employee Personnel File
An excellent resource you still have while you’re working is your employee personnel file. In your file, you’ll find a document called your SF-50 – the Notification of Personnel Action. It contains certain employment information useful to the applicant or if applying for another federal job. It is used by current and former federal employees.
Here’s what we recommend: Print out all your SF-50’s. Get a glass of water, or a glass of wine or whatever it is that you drink, set it all out on the kitchen table and organize them chronologically. First, make sure that you’re in the correct system. Then verify that all the dates look correct, add up and that there are no gaps.
When is the Best Day to Retire?
Once you verify that you can retire, the next question is when is the best day to retire?
Start by answering the following questions:
- When does your pension get paid?
- How is your annual leave paid?
- Do you have enough money to retire?
- What are your other sources of retirement income?
First, do the numbers. Identify your income streams and projected expenses. How much income will your pension generate, Social Security, TSP, and other investment balances? How much will you need monthly to cover your fixed and variable expenses? (We can provide you with a worksheet to assist in this process by request).
Secondly, what are your retirement plans? What type of lifestyle do you expect? Are you looking to travel? Do you want to move to a warmer state or closer to children? Figuring out this information now will help you plan for the future.
Remember, the HR department is a great place to start, but again, anytime that you’re dealing with something so important, it’s crucial that you take the time to verify everything yourself or with the help of a professional financial planner, particularly those that specialize in federal benefits like ourselves.
If you have any specific questions about your benefits, let’s have a conversation!
For over 30 years, federal employee retirement planning has been a key focus of Medallion Financial Group. We recognize that FERS retirement benefits have extra layers of complexity, such as the Thrift Savings Plan (TSP), 401K, Pension plan, FEGLI and more. It’s easy to get lost in a sea of bad advice when so few people understand the basics. We help with the basics and beyond to enable our clients to get the education and advice they need to retire with confidence.
Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.
We strive to exceed client expectations – because we have high expectations of ourselves.