Welcome to How to Pick your FERS
Retirement Date like a Pro and 4 little-known Mistakes to Avoid. "So what's the best day to retire?" While that's a reasonable question, it often leads to that water cooler conversation. There's so much misinformation about
retirement benefits, what's worst or best, and what you should or shouldn't do. Unfortunately, this leads to a lot of mistakes and potential misfortune. This video is brought to you by the FERS Blueprint Online FERS retirement training and I'm Kelly Monroe, creator and chief illustrator. We know how hard it is to build your retirement benefits knowledge because retirement trainings are hard to come by, and that can leave you vulnerabe to getting information from financial salespeople who just want to sell you an annuity or something else.
Plus, they don't always have accurate information. That's why I decided to take the FERS retirement training that I've been teaching for years at agencies, and turn it into simple, online video lessons: the FERS Blueprint.
That way, you can get your retirement training when you want it, and without a pushy salesperson trying to get you to buy a product. At the end of this video I'll tell you how you can get a retirement date checklist that you can
use to help you plan your own retirement. You'll need to know this first. Before you pick your retirement date, you need to know the answer to this question: When does your first pension actually start? The technical answer is the first day of
the following month after you retire, but I think gets a lot easier if we just use
a picture. Let's pretend that Franny FERS retires on January 15th, so her pension doesn't start until February 1. Now this could leave Franny
in a bit of a pickle because she won't be getting any pension until the next
month. That's why the general rule of thumb in FERS is to retire on the last
day of the month, no matter what day of the week.
"Is that all?" I wish it were that
easy and I bet you do too, but there's a bit more to picking your retirement date
and I'm going to show you some mistakes that you'll probably want to avoid. Mistake No. 01: Giving up or losing annual leave. When you retire, any annual
leave that you have on the books, or that you haven't used as vacation, is paid out
to you in a one-time lump-sum payment. Pretty cool benefit, right? But if you're in a use-or-lose scenario with annual leave and you want it to be paid
out at retirement, then you'll need to retire by that leave ending date for
that year. Otherwise, you'll miss out on that use-or-lose leave. But isn't it the
same every year? Well, here's the challenge: the leave ending dates change
every year, so that can make it tricky. For instance, the leave year ending date
for 2017 is January 6th 2018.
And yet the leave year ending date for
2018 is January 5th 2019. OPM does publish a leave year date calendar, and I've put the URL for it below this video for your reference. Mistake No. 2: Paying
more income taxes unexpectedly. If you've saved a lot of annual leave then you're
likely to get a pretty big check, but it's taxable. This income is going to be
added to all of your other earnings that year, and this might cause you to have an
unexpected and possibly expensive tax headache "What happened last year? Why didn't you call me?" Talk with your
tax professional, and ask if it might be better to pick a retirement date on the
last day of the year or within the first few months of the year when your work
earnings will be less, so that your annual leave may be taxed at a lower
Tax planning and retirement go hand-in-hand unless you like tax surprises, which most of us would prefer to avoid like the plague. Mistake No. 3: Losing TSP monies to penalties. A lot of people plan to use money from their TSP when they retire, but they aren't too
clear about the age restrictions before they pick their retirement date. Normally, you must be at least 59 1/2 years old to take monies out of your retirement savings account, like TSP or an IRA. If you're younger than that, you could have to pay something called an Early Age Withdrawal Penalty, plus normal income taxes. This unfortunately can get expensive. However, there's a really important exception for your TSP. If you retire or separate from
service – as in quit or get RIF'd – in the year in which you turn 55 or older, you can take withdrawals from your TSP without any Early Age Penalty.
It's called a waiver. So don't be in such a hurry! Here's a mistake that sometimes people make. Let's just say that someone retired at age 57, and next they decide to transfer their TSP to an IRA right away because they don't know anything
about the early age withdrawal waiver inside of TSP Boom! Once the TSP is
transferred to the IRA, the waiver is lost and any withdrawals under age 59 1/2 may be subject to that Early Age Withdrawal Penalty. The moral of the story? If you're retiring under 59 1/2, you should strongly consider leaving your funds at TSP because of the early age
withdrawal waiver. I've put a link to the TSP information in the description below for you. Mistake No. 4: Thinking that FERS starts right away. While it's true that your FERS pension does begin the first day of the month following the month you retire, that doesn't mean that you'll immediately start receiving
payments that quickly. You need to be prepared to wait because OPM's retirement application processing can vary quite a bit. Personally, I've seen it take six weeks time, all the way up to nine months or longer
before the full pension is received.
It can be a big mistake to retire without
enough savings to take care of everyday expenses, and money can get tight really
fast. Even TSP can take 4-6 weeks after you retire before you can request payments, so it makes good financial sense to start out retirement with at least 4-6 months of expenses in a savings account – that's the bare
Make sure that you know how to pick your retirement date like a pro before you get ready for your retirement party. If you'll have use-or-lose leave,
check that leave date calendar so that you don't risk losing that extra leave. Talk to your tax professional about how the extra income from the annual leave payment may impact your tax planning. Map out how you'll access your TSP monies Finally, make sure you've saved enough to wait while your retirement application is in line at OPM Wouldn't having a retirement date checklist be helpful? Personally, I love a good checklist.
You can click right up here to
get your Pick Your Retirement Date Like A Pro Checklist. It's totally free just, click right up here to get your checklist. I've also put the URL
below in the description Click right here to download your checklist.