We take look at the retirement timeline for Federal Employees in their first year of Federal Retirement
The following piece explores how a federal employee can expect their first year of retirement from the Government to go.
Picking on what date to exit service can be crucial, especially for workers who have been on the job for a long time, but that’s not what we’re looking at here. If you need help deciding when to retire- click here. Once goodbyes have been said, and you’ve left your keys behind with the Human Resources Department, they will send your retirement package to OPM’s Iron Mountain for processing. Congratulations! You are on your way!
Approx. 2 Weeks after Retirement Date-
You receive the annual leave payout check. This is subject to taxes, and generally, the government will withhold about 20% from this check. HR should be able to provide an estimate of what the dollar amount will look like based on how much annual leave has accrued over the course of one’s career.
Approx. 3-4 Weeks after OPM has Received the Application Packet-
The first annuity payment gets issued. This payment is called an “interim payment,” which is an estimate of the definite annuity check due to the annuitant. Typically about 60-70% of what the actual annuity payment will be, the shortage creates a critical need for available cash reserves during the time period in which the retiree is receiving these interim payments. This period could last anywhere from 6 to 12 months, depending on the retirement backlog at OPM.
It is also important to note that state income taxes, dental and vision coverage, and long-term care premiums all must be paid out-of-pocket during this “interim period”. Once your retirement application is finalized, you will then be able to have these costs deducted from your annuity payment each month. (More reasons to have significant cash reserves!)
Regarding the withdrawal of TSP money, acute awareness combined with careful planning can save an otherwise faulty retirement plan. There are stringent rules that apply to TSP which are not applicable in other types of employer-sponsored plans, or outside IRA accounts. In order to ensure the best decisions are being made for your personal situation, best practice is usually to consult a financial advisor with hefty knowledge about the TSP prior to withdrawing any funds.
Once interim payments are being received, and retirement documents are still in the process of finalization, there will most likely be very little correspondence with OPM. With proper planning, adjusting to a monthly check versus a bi-weekly one shouldn’t spur any major headaches. This is a good time to reflect on the life lived before retirement, and possibly work on all the projects and activities that were never accomplished before because you were too busy working.
Approx. 6-9 Months after Retirement Date-
OPM usually has retirement applications processed by this time. The recent retiree will receive a personalized statement titled “Your Federal Retirement Benefits”. This statement confirms the payment amount and details individual elections, including the amounts to be deducted from each monthly payment for taxes, health insurance, and other items as applicable. It also provides information that will be needed to prepare your tax returns. Remember, proper planning prevents poor performance. This is especially true for retirement!
Until Next Time,
**Written by Benjamin Derge, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
The First Year of Federal Retirement