FERS Supplements, Deferred Annuities and the Travel Forum

Posted on Thursday, 26th August 2010 by Dennis Damp

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The FERS supplement and deferred annuities have attracted considerable attention recently. Many are thinking seriously about early retirement these days. Thankfully we have Linda Duncan, our HR and Benefits Forum Host, available to handle these often complex issues for our site visitors.

We recently added a Travel Forum and Nancy Holston’s article titled New England in Autumn highlights sightseeing in Maine and the best sights to see in the area. You can add her travel articles to your newsletter list if you are interested in traveling in retirement. Her next article will be on family vacation planning .

FERS Supplement Impact on Earnings

If you retire with a FERS supplement and go back to work in retirement your supplement is subject to the same Social Security earnings rules. Basically, if you are receiving a supplement and earn more than $14,160 a year in 2010 you would have to give back $1 for every $2 you earn over this limit.

CSRS employees that worked 40 quarters or more in the private sector and collect Social Security at age 62 are also subject to these same income limitations until they reach full retirement age

If you are looking for employment in retirement visit our Retiree Jobs Center for job listings and guidance. Job listings range from independent wine consultants to instructors and companies looking for retired feds that held security clearances.

Deferred Retirement Clarifications (FERS)

FERS employees are not eligible for a regular retirement until they reach their minimum retirement age (MRA) and have 30 years of service, age 60 with 20 years, or age 62 with 5 years service.  If you leave prior to your MRA, you can apply for a deferred retirement when you reach your MRA with 30 years of service, or at the age 62 with 5 years of service.  However, with a deferred retirement you will not be eligible for the FERS supplement, life insurance or health benefits when you leave.  If you wait to retire at your MRA, and you had Federal Employee Health Benefit (FEHB) coverage for the past five years, you can continue FEHB coverage into retirement.

Another consideration is the elimination of the cost of living adjustment (COLA) for those considering a deferred retirement for the time period between when they first elect this option and start to collect an annuity, often a period of many years. Inflation can significantly impact your deferred annuity. COLAs will resume when you start collecting your annuity and reach age 62.

The MRA + 10 Annuity option assesses significant penalties for taking an early annuity. Typically you can retire at your MRA with as little as 10 years service however for each year under age 62 you give back 5% of your payment.  If you elect this option at the MRA age of 57 the penalty would be 25% of your annuity payment!  If you elect this option and defer your retirement until age 62 no penalties are assessed.   You would also be able to enroll in the FEHB and FEGLI programs again when your deferred annuity starts if you were enrolled in these programs for the last five years of your federal employment.

We receive many calls from former employees and their survivors asking how to initiate a deferred annuity.  We added a complete section on this process on our site including links to the Deferred Retirement Application, OPM Form 1496A.  Review this section for complete guidance.  If a former federal employee dies before collecting the deferred annuity the surviving spouse is eligible to receive 50% of their annuity payable starting on the date the deceased employee attained the age and service requirements for the annuity. Lesser amounts are payable if the surviving spouse wants to collect earlier.

Travel Forum

Sign up for the new Travel Forum Newsletter.

Are you looking for a travel bargain?  Do you want to go somewhere you haven’t been before but want to know what to expect?  Maybe you’re open-minded and want to go on an adventure to someplace new.  The Travel Forum Newsletter has something for everyone.  It has tips for retirees but also great info on travel spots for anyone who loves to travel.

Do you have questions about a particular resort or vacation destination?  Do you have a suggestion for an article?  Send your questions or suggestions to the Travel Forum blog.

If you are receiving this newsletter you can add the Travel Forum articles to you newsletter list.  Just enter your email address and click enter. You will receive an email with instructions on how to add other forums to your list.

Learn more about your benefits, employment, and financial planning issues on our site and visit our Blog frequently at http://fedretire.net to read all forum articles.

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.”

Posted in UNCATEGORIZED

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New England in Autumn

Posted on Monday, 16th August 2010 by Nancy Holston

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Fall Colors, Moose and the Coast of Maine

Autumn is my favorite time of year.  It is also one of my favorite times to travel.  The temperature isn’t too hot or too cold.  It’s just right for enjoying outside activities during the day and enjoying the evening relaxing.  New England is always on my list of fall travel spots and Maine is one of my favorite places to visit.  The Maine coast is dotted with lighthouses, rocks, trees and crashing waves.  It offers plenty of choices of rural towns and cities to spend your time in and best of all, it is not crowded.  Acadia National Park near Bar Harbor is a great place to visit.  If you want to see the mountains and lakes there is plenty of spots to visit in Maine’s interior.  The White Mountains and Moosehead Lake are great choices.  I have been to Maine four times and would like to share information on some of my favorite spots.

Portland, Maine

This coastal city is a great place to spend several days or as a stop while you explore the coast of Maine.  The Portland Head Lighthouse is one of the most prominent and photographed on the east coast.  The cobblestone streets will take you back to times gone by as you stroll by the many shops and galleries in the downtown area.  The water front has restaurants with outside seating to enjoy good weather.  One of my favorite stops is the Flatbread Company which offers gourmet pizzas that are unusual and flavorful.  If a Maine Lobster is more what you have in mind then the Portland Lobster Company is another waterfront choice.  Of course there’s Gilbert’s Chowder House if all you are looking for is some New England clam chowder.

The Fall Drive: Down East Traveler recommends a daylong tour beginning on Route 25 from downtown Portland through Gorham and Westbrook.  The transformation from city to country is nearly complete by the time you hit Standish.  Farms and orchards are part of the scenery.  After you cross the Saco River you’ll see the fall colors of Saddleback Hills of Baldwin to the north.  Cornish is a great place to stop if you like antiques.  It is also a favorite for canoeists on the Ossipee River.  In Porter you’ll take a left on Route 160 traveling south passing through East Parsonsfield and Limerick that have retained their rural charm.  In Limerick Mills take Route 11 south through Newfield and Shapleigh.  When you enter Sanford you will need to watch for Route 202 headed north to Alfred and Waterboro.  The Nature Conservancy has protected an area of pine barrens near this area.  When you get to Hollis Center you need to take Route 35 north which will take you back to Standish and Route 25 into Portland.

Bar Harbor and Acadia National Park

This is a popular area for tourists.  The town of Bar Harbor is quaint with lots of shops, galleries and restaurants.  Lodging ranges from cozy Bed & Breakfast Inns, charming cottages, or Motor Inns to grand Oceanside hotels.  Activities range from sea kayaking to bicycling or hiking.  You can go out on a whale watch boat for part of your day.  Don’t limit your search to whales though.  Keep an eye out for seals and puffins also.  You will also find many lighthouses along the coast if you want to explore.

The Park Loop Road is a 27 mile long scenic drive through Acadia National Park along the rocky coast and park gardens.  Be sure to drive or hike up to the top of Cadillac Mountain.  At 1532 feet high it’s the tallest point along the eastern seaboard.  On a clear day you will have a spectacular view of Frenchman Bay and the Atlantic Ocean and the islands in the surrounding area.  Cadillac Mountain is also a great spot for star gazing at night.  There are 120 miles of hiking trails in the park for day trips.  The park also has a Carriage Road system that intersects with hiking trails in the park, but they are not intended for automobiles.  The carriage trails were built in the early 20th century, a gift of John D. Rockefeller Jr.  They were restored and the park service now maintains the road.  You can travel the Carriage Road in a horse-pulled carriage offered at the Wildwood Stable.  No matter what you decide Acadia will offer fall scenery that won’t disappoint.

Moosehead Lake

This is a great place to spend several days.  Lake Cabin rentals are available in all parts of this large lake.  You may be able to arrange to rent canoes while you’re there.  In some instances the owners will deliver them to the cabin.  The fall foliage will be at your door step.  You won’t have to go out and search for it.

Not only can you enjoy the fall foliage and the lake, you will find this a great place to go out and watch the moose in their own environment.  You can often see moose from the road side but you might find an early morning canoe ride more fun.  We found a local tour operator and selected an early morning canoe safari that included breakfast at a rustic lodge on the opposite side of the pond (we were on one of the Roach ponds).  The lake is surrounded by small rural towns.  There are several restaurants to choose from but can be several miles from a lake cabin.  Planning meals at your cabin may be a better choice.  The cabins are usually stocked with seasoning and cooking oil for your convenience.  It’s a great choice for a family trip.

Travel Resources:

Information on Maine:

Visiting Portland, Maine:

Visiting Bar Harbor and Acadia National Park area

Visiting Moosehead Lake:

Flying to Maine:

Manchester, New Hampshire is a good option.  Southwest Airlines flies to Manchester and offers lower fares than you’ll likely find to Portland or Bangor.  Boston may also have a reasonable fare if you want to travel through Boston to get to your New England destination.

Nancy Holston

Learn more about your benefits,  employment, travel, and financial planning issues on our site and visit our Blog frequently at http://fedretire.net to read all forum articles.

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances. Travel policies and packages are subject to change without notice. To ensure the accuracy of this information, contact travel providers and hotels at the time of your bookings to confirm pricing, itinerary, and all costs. The comments and observations are limited to the author’s personal experience and your results may vary significantly. This article and replies to comments are not intended to substitute for professional travel services. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

Posted in UNCATEGORIZED

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Retirement Questions Answered plus Clarifications

Posted on Monday, 2nd August 2010 by Dennis Damp

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We receive many questions each month from retirees and federal employees and many are focused on the following subject areas. I suggest copying this article and keep it with your important papers so you and your family will have the answers needed when faced with these issues.

Retirement Income Verification

If a mortgage company or institution requires an official confirmation for your annuity payments you must have the fax number of the financial institution available and call OPM at either 1-888-767-6738 or 202-606-0500. The OPM retirement specialist will ask you for your name and Claim number (Retirement CSA #). They will fax the confirmation of annuity to your financial institution immediately. You can also fax the request to OPM at 724-794-6633 however this could take up to a week or longer to receive a reply depending on the workload at the office.  It is often difficult contacting OPM by phone. Go to our OPM contact listing for details on best times to call and other helpful information including how to request a federal retiree identification card.

Annuity Direct Deposit Changes and Retirement Paperwork Requirements

To enroll in Direct Deposit for your annuity check or to change your enrollment to a new bank or account, OPM needs to know the routing number of the financial institution and your account number. The financial institution will provide this information. Once you have your account and routing numbers, retirees can call OPM at 1-888-767-6738 or 1-202-606-0500 to make this change by phone or initiate it online through OPM’s retirement system at http://www.servicesonline.opm.gov. To process your request online you have to first establish an account through OPM.

The financial institution can also submit a SF 1199A form to OPM for processing your direct deposit.  The form can be faxed to OPM or sent to OPM via regular mail. Federal employees that wish to set up direct deposit when they retire must complete a SF1199A form and submit it with their retirement paperwork to continue with automatic direct deposit after they retire.  This has to be done even if the federal employee currently has his or her check deposited in an account now. When you retire OPM processes payment and needs to know where to send your monthly payments.  The employee and bank must sign and date the form prior to sending it in with your paperwork. Complete mailing addresses, PDF fill in forms, fax numbers, and procedures are available online at http://federalretirement.net/retireforms.htm.

Military Buyback (Credit)

There are many issues to consider when determining whether or not  it is beneficial for a federal employee with prior military service to buy back their military time to receive credit for federal retirement. First and foremost you MUST make a deposit and payback your military time PRIOR TO RETIRING. We have written numerous articles on this subject to answer questions such as;  should I do this, how do I start the process, and is it cost effective and more. Links follow for critical information on this subject:

Retirement Eligibility

There are many variables to consider to determine ones eligibility for retirement.  One of the most frequently asked questions are from federal employees who started working for Uncle Sam in their mid to late 50s and have military time. These feds want to know how soon they can retire and collect a federal pension.

For voluntary civilian retirement the employee MUST work at least 5 years of creditable civilian service. Military service credit can’t be used to meet the 5 year minimum eligibility. Therefore, if you are age 60 with 4 years of creditable civilian employment and 4 years of military time that you bought back, you can’t retire until you reach age 62 and then you would have 10 years towards retirement for annuity calculations. Eligibility requirements are discussed and eligibility charts provided for both CSRS and FERS employees on www.federalretirement.net. You can also estimate your monthly annuity payment on this site.

Retirement Cost Analysis

In preparation for making that leap to retirement many ask questions about financial concerns and how to estimate their post retirement income. I developed a spreadsheet with complete instructions that help federal employees determine, within reason, what they and their spouse will have to live on when they retire.  This spreadsheet can be downloaded and the examples present a realistic assessment for an average retiree plus it also determines what the surviving spouse will have to live on when the inevitable happens.

Use this spreadsheet to determine what your post retirement income and expenses will be and share this information with your spouse so they too will feel comfortable with your decision.  This exercise will also help you focus on the realities of retirement and help you assess whether or not you will need to work part time to supplement your income.

Clarifications

The Treasury Direct Program

In the June article I mentioned that the U.S. Savings Bond program will be suspended for payroll deduction shortly and that you can still buy bonds through Treasury Direct. There was a typo in the link for the Treasury Direct program in the newsletter and the correct link is www.treasurydirect.gov. You can purchase savings bonds online or buy treasury notes, bills and bonds through Treasury Direct.

Social Security Clarification

A site visitor asked the following questions about the Social Security Adjustment – Additional INCREASES for Active Military Service example that I discussed in my June article.

Question: Didn’t we get credit for our military time in Social Security?  Or does this mean they are adding 16 more quarters to our Social Security benefits (4 years time 4 quarters a year)?

Answer: You won’t get additional quarters, they give military additional cash for each quarter they served because if they didn’t you may not have made a sufficient amount for that time to be considered a substantial earnings year. For example, I was making about $97 a month military pay in early 1969 and that times 12 is only $1,164 for the entire year. I actually made a little more because I was promoted the first year. If you go to the Social Security tables at http://www.ssa.gov/retire2/military.htm you will see that from 1968-1971 you had to make $1,950 to meet substantial Social Security earnings that year to receive Social Security credit.

They will add $300 a quarter or $1,200 for each year you served. That increased my earnings for 1969 to $2,364 on paper and they will now count that year towards social security benefits.

One other point of to consider is that the adjustment is automatic for anyone who served from 1968 through 2001 and there isn’t any adjustment for military service after 2001. Service prior to 1967 isn’t automatically added and you have to take your DD-214 with you when you apply and request that your Social Security is properly adjusted for the time you served.

Updates

A major update was published last month for www.federaljobs.net. We spent 5 months redesigning the site and added new and expanded features for federal employees and anyone seeking jobs in the federal government. The new jobs board provides comprehensive job listings for government and private sectors in your area so that job seekers can evaluate ALL potential opportunities in their area. 

Learn more about your benefits, employment, and financial planning issues on our site and visit our Blog frequently at http://fedretire.net to read all forum articles.

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.”

Posted in UNCATEGORIZED

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Alaska Cruising – Late Summer Deals to Alaska are Abundant

Posted on Wednesday, 7th July 2010 by Nancy Holston

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I’ve been on several Alaska Cruises and always find them the best choice for relaxing and forgetting about all your day-to-day responsibilities. Traveling through the inside passage is peaceful while sitting in the lounge at the top of a ship. You glide slowly by mountains rising out of the ocean that sometimes seem close enough to touch. Eagles soar overhead in search of their dinner.  A light house will occasionally appear on a small island and even if you’re not tired, the gentle rocking of the ship, while traveling slowly through the inside passage, will lull you to sleep.  I’ve even found myself nodding off while reading a page turning novel.

Alaska is also a must for folks who love nature and wildlife.  Marine mammals can be hard to spot from 12 decks above sea level but you can see whales passing by, seals and sea lions popping up to see the ship, and occasionally a sea otter.  Traveling the Inside Passage provides lots of opportunities to spot wild life on shore as well.  With a good pair of binoculars and patience you can spot Mountain Goats high in the mountains in Glacier Bay and sometimes Grizzly bears on shore in the Misty Fjords.

If this sounds appealing to you, now is the time to go. You won’t find a better time to book a cruise than now.  Excellent deals are available for late August and early September departures out of Seattle, WA or Vancouver, BC.  But don’t limit yourself to a cruise only. Consider a cruise tour if you are interested in seeing Alaska’s interior or if you intend this to be a once of a lifetime trip. During late summer, you may even get to see the Aurora Borealis in Alaska’s Interior.  Denali National Park is included on nearly all cruise tours and the beauty of the park is impossible to capture with words.  The variety of wildlife is abundant, with Grizzly Bears, Moose, Dall Sheep, Caribou, Wolves and Lynx among those visible to lucky visitors. It is a rare opportunity to see Mt McKinley because the high peak creates its own weather and it is often shrouded in clouds.  Consider yourself very lucky if you are able to view this spectacular natural wonder on your cruise.

Selecting a Cruise Line

Selecting a cruise line is a matter of personal preferences.  If you like traditional cruising then Royal Caribbean or Celebrity may be the best choice.  The cabins on Celebrity are also a step above other lines.  If you like the freedom of eating when and where you like then NCL may be the best choice.  Holland America and Princess Cruise Lines offer freedom and traditional cruising options.  Most cruise lines now have specialty restaurants that will provide an opportunity to eat exactly what you want on those rare occasions that the evening’s menu doesn’t have something that looks good to you at an additional charge ranging between $5 and $20.  Evening attire is less strict than in the past.  It may still be the suggested attire for the evening but resort casual is acceptable in the dinning room.  With the airlines now charging for checked luggage, cruise lines are more accepting of casual dress.  I always had two large suitcases for myself when cruising: one suitcase with my casual dress and active wear, the other with evening and resort wear.  My next cruise will be a one suitcase cruise.  I have traveled on each of the above cruise lines; however I don’t think you’ll be disappointed with any cruise line you choose as long as you find the itinerary you’re looking for at a price you can afford.

Cruise line web sites:

http://www.carnival.com
http://www.royalcaribbean.com
http://www.princess.com
http://www.hollandamerica.com
http:/www.celebritycruises.com
http://www2.ncl.com
http://www.disneycruise.com (Disney begins Alaska cruising in 2011)

Cruising Basics

If you have not cruised before here’s some basics that will help avoid surprises.  The fare advertised doesn’t include port taxes which vary dependent on ports of call.  You may also be charged a fuel surcharge when the cost of a barrel of oil exceeds an amount usually posted somewhere on the invoice.  The fee is normally $10 a day, per person.  Gratuities for the cruise staff is now commonly added to your room charges at the rate of $10 a day, per person.  This is convenient and avoids standing in line to get cash or smaller bills to tip each staff member that serves you the last night of the cruise.  If service exceeds or is disappointing you can stop at the Pursers Desk and ask that the charges be adjusted accordingly.  Food is included in the fare, however specialty restaurants are additional.

Air Travel Arrangements

Air fares charged by the cruise lines often exceed the fares you may be able to find yourself, unless you are booking a last minute cruise.  I often arrive at the port city 2 or more days ahead of time by booking my own air travel arrangements and see the sights prior to boarding the ship on embarkation day.  However, if you don’t intend to arrive at least one day early at the port city, book your air travel through the cruise line.  That will guaranty you will make it to your ship in the event of travel delays at no additional cost to you.

Travel Insurance

Cruise lines offer travel insurance and encourage it in case of trip cancellation.  I recommend you obtain your own travel insurance through an independent company.  This will avoid a conflict of interest with the cruise line and usually saves you money.  You can also tailor the policy to the coverage you are most interested in.  I buy it in case I have an unexpected illness or injury that requires special travel to a hospital.

Alaskan and Canadian Ports

I have been to most of the ports of call you are likely to find on any of the itineraries for Alaska Inside Passage Cruises.  Victoria, BC is a beautiful city on the South East tip of Vancouver Island.  It is most famous for its Butchart Gardens located nearby.  They are worth seeing!  Vancouver BC, host of the 2010 Winter Olympics is a beautiful city.  The opportunities range from shopping in the city to eco tours outside the city.  You are very likely to be greeted by more eagles than you’ve ever seen before at the port of Prince Rupert BC.  Excursions are limited in Prince Rupert, so book in advance if you see something of interest.  Whale Watching is high on the list of activities there.  Ketchikan Alaska receives a high amount of rain fall, but it is a neat little town with wooden walks along the water, lots of shops and galleries and just a fun town to explore.  It is near the Misty Fjords.  You can take a sea plane ride to see them from the air. One of my favorite trips in August and September is to a bear sanctuary where you can watch black bear catch Salmon during the spawning season.  You travel by sea plane to reach the sanctuary.  Juneau is home to the Mendenhall Glacier and another great spot to go Whale Watching.  Humpback whales come to Alaska in the summer to eat before returning to Hawaii in the winter to mate or give birth.  I’ve never been disappointed on a Whale Watch trip here.  Haines is a very small town that is the starting place for a wilderness adventure.  The Chilkook is full of spawning salmon during the cruise season, always a draw for fishermen and fishing bears.  Haines offers many trips to watch wildlife or go kayaking.  Skagway is home of gold rush history.  The White Pass Railway is a must if you stop here.  It’s a beautiful ride up the mountain following the trail used during the gold rush. Visiting Glaciers can be exciting in May when ships can often get close to the face of the Glacier.  However a fall visit normally limits how close the ship can get due to ice bergs in the bay.  It’s still worth seeing in the fall, but don’t be disappointed if you’ll need binoculars on a late summer cruise.

Cruise Resources
http://cruisedirect.com
http://www.americasvacationcenter.com
http://www.cruisecritic.com
http://www.vacationstogo.com
http://www.cruisesonly.com
http://www.gillscruise.com
http://www.cruisemagic.com/cruise-lines

If you are a frequent flier, check for deals through your frequent flier programs.  Rewards programs from VISA and MasterCard may also have cruise deals available.

If and when you choose a cruise, have a Bon Voyage!

Nancy Holston

Learn more about your benefits,  employment, travel, and financial planning issues on our site and visit our Blog frequently at http://fedretire.net to read all forum articles.

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances. Travel policies and packages are subject to change without notice. To ensure the accuracy of this information, contact travel providers and hotels at the time of your bookings to confirm pricing, itinerary, and all costs. The comments and observations are limited to the author’s personal experience and your results may vary significantly. This article and replies to comments are not intended to substitute for professional travel services. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

Posted in UNCATEGORIZED

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Changes, More Military Credits, & Retiree Jobs

Posted on Monday, 28th June 2010 by Dennis Damp

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Changes to the Savings Bond Program

OPM recently sent retirees a letter announcing the phasing out of paper savings bonds through traditional savings plans. If you have savings bonds withheld, they will be stopped automatically in October, the last month you will receive a bond. You can continue to purchase savings bonds through the Treasury Direct online program or you can still purchase paper savings bonds through your local bank.

The benefits of Treasury Direct, www.treasurydirect.gov, is that you can sign up, manage your account, purchase and redeem savings bonds online plus print out detailed account holdings. Individuals can also purchase U.S. Treasury Inflation Protected (TIPs), and Treasury Bills, Notes and Bonds for your account and the money is easily transferred from and to your designated local bank savings or checking account. I always liked paper bonds because you can keep them in your safety deposit box and cash them in at any bank.  It’s like having cash instead of just credit cards.

This does create a double edge sword so to speak. Our society is totally dependent on the Internet today, we can’t do anything without it; from pumping gas, everyday purchases, to ATM withdrawals. It would seem to even the most casual observer that we are becoming too dependent on this one venue. That being said, the Treasury Direct program is very easy to use and you can purchase Treasury Inflation Protected bonds called (TIPs), a good substitute for I Bonds, without any annual dollar limits. Find out more about other financial considerations for federal employees and retirees.

Social Security Adjustment – Additional INCREASES for Active Military Service

Don, a retired federal manager, former associate and friend, emailed me earlier this month about this credit. If you served on Active Duty your Social Security may be increased. For example, I served on active duty from 1969 through 1972. According to Social Security, go to http://www.ssa.gov/retire2/military.htm to check this out for yourself, I will be credited with $300 in additional earnings for each calendar quarter in which I received active duty basic pay.  Don said that this isn’t automatic and that he was advised that you must take your DD-214 form with you when you sign up for Social Security to receive this credit.  This isn’t just for federal retirees; it’s for anyone who served on Active duty. This does make sense considering that when I was on active duty my starting pay was $97 a month, YES just $97 a month and when I was discharged In 1972 I was making $270 a month! If you lost or misplaced your DD-214 form you can get a replacement from the National Archives.   Visit our Social Security page for more details.

Additional Retiree Job Options

More companies are trying to attract retired federal employees and those close to retirement due to their special skills, knowledge and abilities. We continue to receive job postings from companies desperately seeking to fill critical jobs with qualified federal workers and retirees. Visit our jobs board for complete listings. You will find new listings for:

  • Instructor – Federal Acquisitions
  • Radar/Automation (Retired FAA Tech)
  • Navaids/Comm (Retired FAA Tech)
  • Contracting Specialists
  • Retirement & Benefits Specialist

Learn more about your benefits, employment, and financial planning issues on our site and visit our Blog frequently at http://fedretire.net to read all forum articles.

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.”

Posted in BENEFITS / INSURANCE, EMPLOYMENT OPTIONS, ESTATE PLANNING, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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The Windfall Elimination Provision

Posted on Sunday, 13th June 2010 by Robert Benson

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How does it work?  Who does it apply to?

If you are eligible for Social Security and a CSRS employee your Social Security payments will be reduced unless you have 30 years of substantial earnings where Social Security was withheld from your wages. The amount of the reduction decreases if you have 21 or more years of substantial earnings.

The Windfall Elimination Provision, or WEP, is a cost-cutting law passed during the Reagan administration.  WEP reduces, but does not eliminate, the earned Social Security benefit of a person who is also receiving a pension from a system where there were no Social Security withholdings.

Generally, the full retirement benefit (aka: “Primary Insurance Amount,” or PIA) for Social Security is determined by multiplying the first, lowest tier of the retiree’s Average Indexed Monthly Earnings (AIME) by 90%, multiplying the second tier by 32%, and the third by 15%, and then adding the three together.  These percentages ensure that low income retirees get a larger portion of their AIME than higher earners.  But for persons receiving a pension where Social Security was not withheld, the formula is different.

WEP modifies the three-tier formula so the retiree gets a smaller percent – 40% instead of 90% – of his earnings at the first-tier level.

Each year the tier levels are adjusted to allow for increases in the average “Wage Index,” but the percentages applied to each tier are unchanged.  For 2010, the first tier is set at $761, meaning the WEP reduction cannot exceed (90% of 761 minus 40% of 761), or $380.50.

Limits:

  • The WEP reduction cannot be more than one half the amount of the other pension.  Thus, if a person is receiving, say, $440 monthly from his other pension, his Social Security WEP reduction could not exceed $220.
  • If the retiree had significant earnings under Social Security, for a relatively long time, this is recognized by a gradual decrease in the percent of the cut.  Starting with 21 years of ’substantial’ earnings under Social Security, the WEP reduction is gradually phased out, until 30 years, when there is no reduction at all.

Special case.  When a person’s AIME is less than the first tier amount, the WEP reduction works out to be more than 50% of the total that would otherwise be due.  For example: his AIME is $500.  He will receive 40% of the $500, or $200.  Without WEP, he would have received 90%, or $450.  The $250 reduction in this case is 55.5% of the unreduced amount.

Persons affected.  Federal employees under the “old” CSRS retirement system, or under CSRS-Offset, but only for the “pure” CSRS employment.  Also, police officers, fire fighters, school teachers and all others receiving pensions from agencies not participating in Social Security.

Nearly every year since enactment of the WEP law, bills have been introduced in Congress to repeal, or mitigate, the Windfall Elimination Provision.  None have passed.  Given the current economic climate, there is, unfortunately, scant reason for optimism in this area.

To use software to calculate your exact WEP reduction, go to www.fedbens.us and click on #8 on the menu.  Further information:  www.ssa.gov .

© 2010 by Robert F. Benson

Visit http://federalretirement.net often to learn more about retirement options, benefits, and estate planning issues and I suggest signing up to receive my FREE monthly benefits newsletter.

The information provided may not cover all aspect of unique or special circumstances and federal regulations are subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our reply is not intended nor should it be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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