A Retirement Journey, Part One: Pre-Retirement

I recently had the pleasure of interviewing Bob, a recent retiree, who allowed me to share his retirement journey with you in the hope you might gain some insight to the process and possibly learn a few things. He did a lot of things right, but acknowledges he made a couple of mistakes along the way.

Over the course of the next three weeks, we’ll look at how the retirement process unfolded for Bob. Here’s a rundown of his situation at retirement:

• Marital status: single (divorced before his federal service)
• Retirement date: Dec. 31, 2021
• Age: 70
• Civilian federal service beginning date: July 1, 2012
• Military service: Air Force 1971-1975; receiving veterans’ benefits and health care from a service-connected disability
• Total service for retirement computation and eligibility: 13 years, 9 months (includes around three months of unused sick leave credit)
• Federal Employees Health Benefits coverage: GEHA High Deductible Health Plan 341, self only coverage, $136.95 per month, $900 annual health reimbursement arrangement
• Agency at retirement: Federal Aviation Administration, Department of Transportation

Preparation

Bob attended a pre-retirement training program in 2014, and also connected with a financial adviser who provided him with an analysis of his situation. This included a review of his tax returns, income, expenses and retirement benefit estimates. 

Because Bob had served four years on active duty in the Air Force, he decided to pay a military service credit deposit in 2014. This provided him with four additional years of service in his Federal Employees Retirement System benefit computation. He saved a copy of the receipt he received from his payroll provider showing that he had paid in full. (The Defense Finance and Accounting Service has a very good set of instructions on paying a military service credit deposit.)

Bob also downloaded all of his personnel records from his electronic Official Personnel Folder. Employees lose access to these records a short time after they leave federal service, so it’s a great idea to get copies of them, along with your final leave and earnings statement, before retiring.

At the FAA, Bob was allowed to submit his retirement application up to one year prior to his retirement date. He turned in the FERS Application for Immediate Retirement on March 1, 2021, nine months prior to his retirement. It’s a good idea to submit your application at least 60 days before the retirement date you’ve picked, to allow your human resources office to prepare your retirement package for submission to the Office of Personnel Management. The HR office must prepare a Certified Summary of Federal Service; provide documentation to OPM regarding your entitlement to continue FEHB coverage and Federal Employees Group Life Insurance into retirement; prepare a final retirement estimate; and offer counseling about your retirement and insurance selections.

It’s important to remember that you are most likely not the only person retiring from your organization when you decide to go. In some larger agencies, there could be hundreds of employees retiring at any given time. Filing your application early allows time to make  corrections and address any issues that might be discovered during processing. Unlike the Social Security Administration, which allows you to cancel your application for retirement benefits up to a year after you become entitled, your federal retirement is effective as of close of business on your retirement date.

One week after Bob submitted his retirement application, a human resource specialist from the Employee Benefits and Retirement Branch of the FAA Benefits Operations Center sent him an email, introducing herself and providing her contact info. She was his main point of contact, although she said he could call anyone at the BOC if he had general questions.

The specialist didn’t offer counseling in the way a financial planner would, but instead made sure Bob understood things like his options for continuing FEGLI. A good retirement specialist can answer your questions on life and health insurance, benefits and the particulars of the retirement application process. 

Annual and Sick Leave

At the end of 2021 (pay period 26), Bob had a balance of 344 hours of annual leave. That included leave that he carried over from 2020 and leave earned and not used in 2021. He also had accrued 548 hours of sick leave. Bob received a lump sum payment for the annual leave on Feb. 8, 2022, the pay date for pay period three. The annual leave lump sum payment computation is easy—you get paid every penny, at the rate of pay you would have been paid if you were still employed during that leave period.

For Bob, that meant the payment included the General Schedule pay adjustment that federal employees received in January. The only federal deductions from this payment were for FICA, Medicare and income taxes. (If you live in a state that taxes income, you would also have state tax withholding.) Bob lives in Florida, which doesn’t have an income tax. 

Bob’s 548 hours of sick leave were converted into whole months at a rate of approximately 174 hours per month, or three months. In total, he completed nine and a half years of federal service, plus the three months of converted sick leave and the four years of military service that he bought back, for a total of 13 years, 9 months.

In the meantime, Bob’s retirement application was going through processing at OPM and he was weighing his options regarding Social Security and the Thrift Savings Plan. Over the next two weeks, we’ll look at how Bob navigated that process.