Question 1
I’m a nurse working for the VA. I work night shift (80 hours of night shift differential) and every other weekend (48 hours of weekend differential) every pay period. Is the differential pay part of your salary for your high 3 for retirement calculation with FERS? Or is it only your base salary? I cannot find any solution on OPM.gov. Thank you for your attention.
Answer 1
I wish I had a more precise answer for you but sometimes differential pay is included in your high-3 salary but sometimes is not.
This PDF from OPM goes into the specific definition: https://www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c030.pdf
But one way to figure out if a certain type of pay is included in your high-3 salary is by finding out if FERS retirement contributions are being deducted from it. If you are contributing into the FERS retirement system (the system that funds your pension) from a certain type of pay then that pay will count towards your high-3.
For example, if you know that you contribute .8% of your pay into the retirement system then for every $10 dollars you make (that counts towards your high-3), $.08 will be deducted. So if you made $8 dollars as your normal salary and an extra $2 from differential pay then you will know that the $2 differential pay counts if .8% was deducted from it.
Note: If you were hired after 2013 or are a special provision employee (Law Enforcement, Air Traffic Controller, etc.) then you contribute more than .8% into the retirement system.
You can learn more about that here:
https://www.opm.gov/retirement-services/publications-forms/benefits-administration-letters/2014/14-102.pdf
Question 2
If you work until your Social Security full benefit age, which in my case is 66.5, is it better to start Social Security benefits, or live on your TSP until 70 and get the added percentage of Social Security. Thank you so much for all you share with us!
Answer 2
It depends on a number of factors but here are some things to think about.
If you are married and you are the higher earner between you and your spouse then it may make sense to delay. That is because your benefit will pass to your spouse (because yours was bigger) if you pass away first. If your spouse is much younger than you then it may make even more sense to delay.
Also, you will want to make sure your TSP is healthy enough to comfortably sustain your lifestyle while you delay Social Security. If you have to drain your TSP to near-empty just to delay Social Security benefits then it probably isn’t worth it.
But delaying Social Security can be a great way to guarantee more income for you for as long as you live.
Question 3
I am currently 55. If I meet MRA at 56 and 4 months, is it ok to retire or do I need to work longer? I have $900,000 in TSP. The only debt I have is mortgage and it’s only 48,000. I don’t, however, have much cash reserves. I would need to build that up and was wondering if I should reduce TSP contributions temporarily to focus on cash and mortgage. I am currently contributing 25%.
Answer 3
When it comes to if you can afford to retire at your MRA, I am not sure. You will want to run your numbers to see if you are comfortable with the level of income you will have at that point.
But when it comes to cutting back on your TSP contributions to build up your cash reserve, it is probably a good idea. Obviously, it would be ideal to not have to cut back on your TSP and still build a cash reserve but sometimes it is difficult to do both at the same time.
Having cash in retirement (especially at the beginning) is crucial so that you aren’t stressed as your different types of retirement income starts to come in.
