Posted on Thursday, 7th July 2011 by

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How to Avoid a Retirement Nightmare

We continue to receive reports of significant OPM retirement paperwork processing delays and insufficient partial interim pension payments. A site visitor sent a frantic message to us last week asking for assistance after receiving notice from OPM that he will receive an interim payment of 30% of his full annuity for up to 6 months. His interim  payments are considerably less than his living expenses and he stated that he may lose his home because he can’t afford to pay his mortgage payment.

Unfortunately his situation is not uncommon today. Things may get worse as more feds elect to retire due to proposed benefit changes and potential agency downsizing initiatives.  Many federal employees, especially those under CSRS, tend to ignore financial planning all together and expect their annuity to supply all of their retirement needs. This is a false assumption and can lead to dire consequences for those who take that path.

A recent survey reported that 58% of baby boomers are concerned about not having sufficient funds for retirement and only 39% crunched the numbers to determine if they would have sufficient income in retirement. Talk about living life on the edge! I personally would be an emotional wreck not having at least an idea and a basic retirement plan prepared for this life changing event called retirement.  You can download our free report titled How to be Financially Prepared When You Retire to explore where you stand financially. Share this report with others in your organization.

Why are interim payments so much less than expected in some cases?

  • There may be a divorce decree at the root of the problem.  Many federal employees that went through divorce years ago never completed the necessary paperwork after their lawyers completed the legal side of the matter. Ann Ozuna, our Divorce and HR Forum Host, reported in her recent article that, “Whether you are the “fed” or the “former spouse”, if you have retirement, insurance benefits or TSP benefits which were divided or assigned in the divorce decree, your work is not done when the ink dries at the courthouse.”  She also warns feds “If your decree was a long time ago and you have not sent off the decree/order to be “accepted for processing” at OPM, do not wait until retirement. “  OPM may reject the decree if it doesn’t conform to their specifications as outlined in her article titled Federal Benefits in Divorce – After the Decree, NOW What.
  • The retiree didn’t obtain an official estimate of their retirement benefits before leaving. Believe it or not, some actually ignore this critical step and run estimates based on their retirement plan eligibility requirements without doing all of the needed due diligence. There are many things to consider; prior military service and credits, how part time work factors into the equation, your service comp date may have been incorrect, and many more factors determine the actual amount that you will receive from Uncle Sam when you leave. Your agency’s HR department provides estimated annuity payment calculations upon request from what is documented in your Official Personnel File (OPF). Even though they have your OPF you still need to review, question, and verify everything. SCD dates should be confirmed; especially if you worked for several different agencies throughout your career.
  • Other reasons annuitants receive lower total compensation than anticipated include things such as lower than expected Social Security Supplement payments for FERS employees. It is often much less than expected as I discussed in my May 2011 column. Also, individuals who returned after a break in service may have neglected to buy back their prior federal time; the list goes on and on.

Most federal employees can’t rely exclusively on their federal annuity in retirement to maintain their standard of living. Thankfully most have TSP accounts, savings accounts, savings bonds, certificates of deposit, stocks and bonds to bolster their income in retirement. If more income is needed you can always go back to work in the private sector and maintain 100% of your federal annuity without penalty.  It is always best to prepare for the unexpected and have cash reserves to get you through tough times such as when OPM takes too long and provides too little upfront when you first retire. This is one reason why I feel so strongly about paying off your mortgage before you retire.

Retiree Job Opportunities

We continue to receive postings to our jobs board for many positions that are targeted specifically towards federal retirees. You will find new job vacancies from staffing accountants, accounting assistants, health service administrators, several forest and land management positions, airport advertising manager and many more jobs that you will find of interest. We provide free postings for employers that are seeking to recruit and hire highly qualified and talented federal retirees. Check the job listings out to see if there are any in your area.  There isn’t a retirement annuity penalty for federal retirees that are reemployed in the private sector. You can also explore rehired federal annuitant opportunities.

Learn more about your benefitsemployment, travel, and financial planning issues on our site and visit our Blog frequently at to read all forum articles.

Request a FREE Retirement Benefits Summary Analysis from a local independent adviser. A sample analysis is available for your review. This service is not affiliated with the author, or Bookhaven Press LLC.

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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.

Last 5 posts by Dennis Damp


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