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Retirement Planning


Whether you are close to federal employee retirement or just starting out in your career, this is the place to share ideas with your federal colleagues on creating a secure financial foundation.


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icanzz  
#1 Posted : Wednesday, February 13, 2019 7:03:19 AM(UTC)
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High-3 Average Salary

Your “high-3” average pay is the highest average basic pay you earned during any 3 consecutive years of service.

So OPM does not use your highest 3 years of federal service, they use the "Highest 3 Consecutive years"?

Ugh.
TheRealOrange  
#2 Posted : Wednesday, February 13, 2019 7:17:24 AM(UTC)
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Originally Posted by: icanzz Go to Quoted Post
High-3 Average Salary

Your “high-3” average pay is the highest average basic pay you earned during any 3 consecutive years of service.

So OPM does not use your highest 3 years of federal service, they use the "Highest 3 Consecutive years"?

Ugh.

Yes, it is the highest three consective years. From OPM:

High-3 Average Salary

Your “high-3” average pay is the highest average basic pay you earned during any 3 consecutive years of service. These three years are usually your final three years of service, but can be an earlier period, if your basic pay was higher during that period. Your basic pay is the basic salary you earn for your position. It includes increases to your salary for which retirement deductions are withheld, such as shift rates. It does not include payments for overtime, bonuses, etc. (If your total service was less than 3 years, your average salary was figured by averaging your basic pay during all of your periods of creditable Federal service).



icanzz  
#3 Posted : Wednesday, February 13, 2019 7:25:59 AM(UTC)
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Well that's just wonderful...crap. Funny how you tend to hear what you want to hear. Years of hearing Highest 3 years....never recall hearing the word "consecutive". Life's lessons.

The word "consecutive" cuts $5,000 off my high 3 average. :/ Something I did not consider going OCONUS and only earning GS Base Pay.

Edited by user Wednesday, February 13, 2019 7:38:25 AM(UTC)  | Reason: Not specified

postalvet  
#4 Posted : Wednesday, February 13, 2019 8:05:44 AM(UTC)
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Originally Posted by: icanzz Go to Quoted Post
Well that's just wonderful...crap. Funny how you tend to hear what you want to hear. Years of hearing Highest 3 years....never recall hearing the word "consecutive". Life's lessons.

The word "consecutive" cuts $5,000 off my high 3 average. :/ Something I did not consider going OCONUS and only earning GS Base Pay.


that is why it is always important to pay attention.


I had heard consecutive since 1972.
Postal employee (retired) 38 yrs who helps even if some do not believe me! I was a Steward, officer & trouble maker. Just Sayin'
thanks 1 user thanked postalvet for this useful post.
GSBS on 3/3/2019(UTC)
icanzz  
#5 Posted : Wednesday, February 13, 2019 9:25:54 AM(UTC)
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Originally Posted by: postalvet Go to Quoted Post
Originally Posted by: icanzz Go to Quoted Post
Well that's just wonderful...crap. Funny how you tend to hear what you want to hear. Years of hearing Highest 3 years....never recall hearing the word "consecutive". Life's lessons.

The word "consecutive" cuts $5,000 off my high 3 average. :/ Something I did not consider going OCONUS and only earning GS Base Pay.


that is why it is always important to pay attention.


I had heard consecutive since 1972.


Yeah...It was easy for me to make the mistake tho...after 25 years active duty military. I mistakenly thought the High 3 were the same for military and civilian. Military after Sept. 1980 simply uses highest 36 months of base pay, months don't even need to be consecutive.

High-3: If you entered active or reserve military service after September 7, 1980, your retired pay base is the average of the highest 36 months of basic pay. If you served less than three years, your base will be the average monthly active duty basic pay during your period of service.

Edited by user Wednesday, February 13, 2019 9:27:40 AM(UTC)  | Reason: Not specified

Endless Summer  
#6 Posted : Wednesday, February 13, 2019 3:11:19 PM(UTC)
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Originally Posted by: icanzz Go to Quoted Post
Well that's just wonderful...crap. Funny how you tend to hear what you want to hear. Years of hearing Highest 3 years....never recall hearing the word "consecutive". Life's lessons.

The word "consecutive" cuts $5,000 off my high 3 average. :/ Something I did not consider going OCONUS and only earning GS Base Pay.


Well, if it takes some of the sting out of it, $5,000 less on the average equates to $1,100 les per year. Sure, it's a hit, but equals ~$91 per month. That's with 20 years in.
Citrine  
#7 Posted : Wednesday, February 13, 2019 7:00:09 PM(UTC)
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Originally Posted by: Endless Summer Go to Quoted Post
equates to $1,100 less per year. Sure, it's a hit, but equals ~$91 per month. That's with 20 years in.



that 1,100 per year is worth 22,000 cash (assuming 5%)

Endless Summer  
#8 Posted : Thursday, February 14, 2019 2:24:03 AM(UTC)
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Originally Posted by: Citrine Go to Quoted Post
Originally Posted by: Endless Summer Go to Quoted Post
equates to $1,100 less per year. Sure, it's a hit, but equals ~$91 per month. That's with 20 years in.



that 1,100 per year is worth 22,000 cash (assuming 5%)



I'm not sure I understand your math. Are you basing that on assuming you'll live 20 years after retirement? If OP is OCONUS then they are getting COLA/Base Subsidy, and LQA most likely. COLA alone is going to equal a few grand a year. Put that into a Traditional IRA and you've made up your loss, especially after taking the tax break. LQA means you're living for free, again, use the money that frees up to max out TSP/IRA's and invest the rest, if any.
icanzz  
#9 Posted : Thursday, February 14, 2019 6:20:57 AM(UTC)
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Originally Posted by: Endless Summer Go to Quoted Post
Originally Posted by: Citrine Go to Quoted Post
Originally Posted by: Endless Summer Go to Quoted Post
equates to $1,100 less per year. Sure, it's a hit, but equals ~$91 per month. That's with 20 years in.



that 1,100 per year is worth 22,000 cash (assuming 5%)



I'm not sure I understand your math. Are you basing that on assuming you'll live 20 years after retirement? If OP is OCONUS then they are getting COLA/Base Subsidy, and LQA most likely. COLA alone is going to equal a few grand a year. Put that into a Traditional IRA and you've made up your loss, especially after taking the tax break. LQA means you're living for free, again, use the money that frees up to max out TSP/IRA's and invest the rest, if any.


I agree living quarters allowance OCONUS _Foreign Area_ does allow for increased TSP deposits and that helps. But realize- OCONUS -foreign Area- the only pay used for retirement high 3 calculation is your BASE "General Pay scale" pay. Yes in OCONUS areas -Foreign Area- you also receive a "Post Allowance" to supplement your base pay...based on number of dependents and cost of living in your particular area. Post Allowance is tax free...but it DOES NOT get included in high 3 calculation. Now OCONUS "Non-Foreign" areas like Hawaii, Alaska..do/may receive a COLA in addition to regular pay but not really sure how that is treated as I never worked in OCONUS non-foreign area.
frankgonzalez  
#10 Posted : Thursday, February 14, 2019 8:46:28 AM(UTC)
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This is why you try to come back to a high cost of living area for your final 3 years before retiring! (ie NYC, SF, LA, DC, Boston, etc) If you can make that move and get a promotion in the process, even better. Helps to maximize the retirement, especially if you move to a low cost location immediately upon retirement.

Edited by user Thursday, February 14, 2019 8:47:33 AM(UTC)  | Reason: Not specified

You should have voted Cthulu...the greatest of all Evils
RVRGRL  
#11 Posted : Thursday, February 14, 2019 9:31:45 AM(UTC)
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Originally Posted by: icanzz Go to Quoted Post


I agree living quarters allowance OCONUS _Foreign Area_ does allow for increased TSP deposits and that helps. But realize- OCONUS -foreign Area- the only pay used for retirement high 3 calculation is your BASE "General Pay scale" pay. Yes in OCONUS areas -Foreign Area- you also receive a "Post Allowance" to supplement your base pay...based on number of dependents and cost of living in your particular area. Post Allowance is tax free...but it DOES NOT get included in high 3 calculation. Now OCONUS "Non-Foreign" areas like Hawaii, Alaska..do/may receive a COLA in addition to regular pay but not really sure how that is treated as I never worked in OCONUS non-foreign area.


Alaska and Hawaii are considered CONUS for civilians for just about every aspect (also meaning it counts as being stateside when trying to qualify for LQA at an OCONUS assignment). And if you get hired to Alaska from the lower 48 (and you're DoD) you'll get return rights.

In 2010/2011 they started converting the COLA to Locality pay. Currently AK is about 28% locality and about 4% COLA. Not sure about HI.

Edited by user Thursday, February 14, 2019 9:33:27 AM(UTC)  | Reason: Not specified

Endless Summer  
#12 Posted : Thursday, February 14, 2019 2:22:20 PM(UTC)
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Originally Posted by: icanzz Go to Quoted Post
...

I agree living quarters allowance OCONUS _Foreign Area_ does allow for increased TSP deposits and that helps. But realize- OCONUS -foreign Area- the only pay used for retirement high 3 calculation is your BASE "General Pay scale" pay. Yes in OCONUS areas -Foreign Area- you also receive a "Post Allowance" to supplement your base pay...based on number of dependents and cost of living in your particular area. Post Allowance is tax free...but it DOES NOT get included in high 3 calculation. Now OCONUS "Non-Foreign" areas like Hawaii, Alaska..do/may receive a COLA in addition to regular pay but not really sure how that is treated as I never worked in OCONUS non-foreign area.


That was kind of my point. OCONUS you get base pay only, that's what you're taxed on and that's what counts toward the retirement calc. If you are collecting LQA, then your housing costs (most) are paid by the govt, freeing up a lot of your income for investing in either pretax or post tax funds. On top of that is the Post Allowance which adds a few thousand, also untaxed.

As an example, you might be making $53k a year OCONUS versus $63k in Phoenix, Your LQA pays your housing, which would have been 18k of after tax money in Phoenix and you get $3,500 a year Post Allowance.

Yes, your high 3 average takes a hit. but you've got the equivalent of about $25k in expendable income to invest per year. One year of that would erase any shortcomings by the reduced avg.
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