Is Part-Time Retirement Right for You?

We’ve devoted some ink recently to part-time retirement proposals. The House Oversight and Government Reform Committee in April approved a bill that allows retirement-eligible federal employees to continue working scaled back hours and draw a partial salary. And the full Senate has passed legislation that includes a similar proposal, as does the Office of Personnel Management’s fiscal 2013 budget request.

When the House Oversight and Government Reform Committee cheered a Congressional Budget Office estimate that its unanimously approved proposal could save taxpayers $427 million and increase revenues by $24 million between 2013 and 2022, many of you asked how -- or if -- it could benefit you.

“Why would someone want to work for pennies on the dollar when they could get another job [that] could pay much better in private enterprise?” asked reader Robert Howard.

Well, that depends on who you are and how motivated you are to go after a contracting position, according to Tammy Flanagan, senior benefits director for the National Institute of Transition Planning Inc. and columnist for Government Executive.

Fully retiring and seeking work in the private sector could push you outside your comfort zone. “This might mean adjusting to a new culture, new benefits, new leave accrual, basically . . . new everything,” Flanagan explained. “On the other hand, a phased retirement would be the same job, same boss, same everything, just less of it.”

Flanagan gave the following example of how the financial benefits would compare: Say Fed McGee retires under the Civil Service Retirement System after 35 years of service and a salary of $80,000. If he retired fully, then he would receive $53,000 in retirement benefits (using a high-three calculation) and he could still seek additional employment in the private sector.

But if Fed McGee decides to enter the proposed phased retirement program, then he would earn a salary of $40,000 -- half his salary prior to retirement -- plus $26,500 in retirement annuity, or half his full-time entitlement. Those benefits would accumulate and could be received during his part-time gig, but his full annuity wouldn’t kick in until after he completed his part-time work.

Flanagan said accumulating additional benefits is the upside of taking a part-time retiree position under the proposals, but noted it is true that Fed McGee could retire fully and then earn any amount of additional private sector income without affecting his ability to receive a full CSRS or Federal Employees Retirement System benefit.

For those who want another option, there’s also the existing re-employed annuity program, which we explained here. That program is tightly regulated; employees can participate for only one year or less and there are limits on the percentage of re-employed annuitants an agency can employ. Unlike the House Oversight and Government Reform Committee proposal CBO scored, which currently awaits full House consideration, re-employed annuitants don’t receive additional annuities.