How Re-employment Affects Federal Retirement Benefits

/in /by

If you retired and are considering going back to work for the government, you could boost your annuity—perhaps substantially.

Unless you are one of the few who will be able to keep both your annuity and the full salary of your new position, what happens depends on whether your retirement was voluntary or involuntary and what retirement system you were in. If your retirement was voluntary, you’ll continue receiving your annuity; however, unless you are allowed to draw both fully, your salary for the new job will be offset by the amount of your annuity. If you work part time, the reduction will be proportional.

In general, the annuity of a retiree stops if he or she was involuntarily separated and the new position is permanent in nature, for example a career, career conditional or excepted service appointment. If that’s the case for you, when you go back to work you’ll have the same status as any other federal employee in an equivalent position and with a similar service history. In other words, you’ll pick up where you left off. When you leave government again, your annuity will be reinstated unless you are entitled to either an immediate or a deferred annuity based on the new separation. Click HERE to read full article

Naming Minor Children as IRA Beneficiaries

/in /by

A traditional IRA or a Roth IRA owner can name any adult as their IRA beneficiary. The IRS owner simply names an adult on the IRA beneficiary form. But this is not the case if the IRA owner wants to name a minor as beneficiary. When a minor inherits retirement dollars, the child is not legally able to make decisions with regard to finances. Some type of custodian or guardian will be needed. A potential problem is that not all IRA beneficiary forms allow nomination of a guardian.

Another option is to name a custodial account for the minor on the IRA beneficiary form. Custodial accounts established either the Uniform Gifts to Minor Act (UGMA) or the Uniform Trusts to Minors Act (UTMA) can be used for this purpose. The IRA owner names the custodian of the account on the IRA beneficiary form. Please click HERE to read more.

Federal Open Season and Year End Decisions

/in /by

As the 2022 year ends, Federal Employees and Retirees need to consider many decisions about their benefits, taxes and their Thrift Savings Plan. Open Season is the time to review your health insurance pertaining to the benefits that may be needed in the coming year such a new baby or required surgery. It may be necessary to change your policy in order to save money especially if your premium is going up next year. Here are seven thoughts that should be considered during open season and before 2022 ends.

1. FEHB decisions include, health, dental and vision plans. Saving on premiums with a lesser expensive plan or reducing from a family plan to self plus one plan.

2. TSP contributions for the following year. The maximum allowed by the IRS has increased for 2023 to 22,500 and for those over 50 years of age to 30,000. Click HERE to read more.

TSP: Simple Design, Confusing in Detail

/in /by

The Thrift Savings plan, though simple in design, can get confusing in the details. There are some misconceptions that many participants have about their TSP, and we’ll look at them here.

Many participants think that they will face a 10% early withdrawal penalty on anything they take out of the TSP before they reach the age of 59 ½. This is not true in almost all situations. If you are a regular employee that separates and withdraws money from the TSP in the year in which you reach the age of 55 (or later) there is no early withdrawal penalty. If you are a special category employee e.g., law enforcement officer, firefighter, air traffic controller, etc.), the age is 50. It’s Individual Retirement Arrangements (IRAs) that assess early withdrawal penalties for money taken out before age 59 ½. The TSP (and other employer sponsored plans) do not.

The situation where the TSP will impose an early withdrawal penalty is if an employee separates before the year in which they reach the age of 55 (50 if a special category employee). However, even that penalty can be avoided if the employee follows a life expectancy based withdrawal methodology for the longer of 5 years or until they reach 59 ½ (sometimes called Rule 72t). Click HERE to read more.

Am I Better Off Waiting Until After Jan. 1 To Retire?

/in /by

Question: I retired under FERS from the VAMC just to return 1 year later to be re-employed as an annuitant. I am planning to retire for good this year. I’ll have been reemployed for three years in February 2023. Would it be better to wait and retire the end of January 2023?
Reg’s Response: When you retire again, you’ll be entitled to a supplemental annuity based on your years and full months of service.

Retiring on January 31 would entitle you to one more month of service and be used in your annuity computation. Also, since that supplemental annuity will be calculated using your biweekly pay rate for your entire period of reemployment, the annual pay increase that goes into effect on January 1, 2023, would give you a two-pay period bump in your annuity computation.

Reg Jones is the resident expert on retirement and the federal government at Federal Times. From 1979 until 1995, he served as an assistant director of the U.S. Office of Personnel Management handling recruiting and examining, white and blue collar pay, retirement, insurance and other issues. Opinions expressed are his own.

Citation-The Federal Times- November 14, 2022