Question 1
I have worked for the post office for 30 yrs and understand my retirement benefits pretty well. However, I have a friend that resigned after 10 years of service and went to work at a non government job. Is there any federal retirement pension benefit for them after they reach retirement age? I was told we were vested after 3 years but I don’t know what that means.
Answer 1
Great question. So after 3 years of creditable service you are vested in your agency’s automatic 1% contribution to your TSP. That is probably where you got the 3 years from.
However, for retirement purposes you have to work at least 5 years to be vested. Basically what this means is that you have to work at least 5 years to get any sort of pension from your federal employment in retirement.
So, if your friend had 10 years of service then he would be eligible for a pension in retirement. Most likely the type of retirement that he will be eligible for will be a deferred pension. This basically means that his pension won’t start when he leaves federal service but can be turned on at age 62.
Note: To be eligible for this deferred retirement you will have to keep your retirement contributions in the FERS system.
Question 2
Is it better to have your cash bucket of retirement in TSP and move remaining TSP funds to an IRA for the other two buckets or the opposite?
Answer 2
Great question. With interest rates so low right now (June of 2021) it is hard to find a place for short-term money. For example, savings accounts or even CD’s aren’t pay hardly anything right now. Because of this some people like using the G fund to earn some return on the money that they’d need in the short-term.
This can make a lot of sense. However, the TSP has some rules that can make it a pain to access sometimes. For example, you can only have 1 withdrawal request every 30 days. Because of this, I would still keep some money in a savings account so that you have immediate access to some money if needed in retirement.
Question 3
I know that I can deduct my health care and long term care as well as FEGLI fees from my FERS pension once I retire. My question is can I enroll in the FSAFEDS health care savings program with pre-tax dollars and have it deducted from my pension after I retire?
Answer 3
Great question. Unfortunately, I don’t have a lot of good news in this answer. Once you are retired you are not able to use a FSAFED. 🙁
Also, while your insurance (FEHB, Long term care, FEGLI) premiums do come out of your pension in retirement, they are not tax deductible. Some of the confusion comes from the fact that while you are working your FEHB premiums are tax deductible but this goes away once you retire.
