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Federal Employees Benefits Q &A

Do you have questions about your federal employee CSRS or FERS pension/annuity or federal employee retirement planning? Concerns about your Thrift Savings Plan (TSP) account or what about federal employee pay and leave issues?

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The Q&A forum is moderated by Ed Zurndorfer -- an expert on federal employee benefits -- and a Certified Financial Planner, chartered life underwriter and chartered financial consultant in Maryland.

Zurndorfer is also the author of several federal employee benefits guides published by Federal Employees News Digest.

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#1 Posted : Friday, June 18, 2010 6:59:03 AM(UTC)

Rank: Newbie

Groups: Registered
Joined: 6/14/2010(UTC)
Posts: 8

Let me try to put this question as simply as possible, even thought we have tried to wrap our heads around it for months and are having a very hard time making a decision.

My husband is a Conner vs OPM retirement error.  He needs to select one of two retirement systems: CSRS-Offset or FERS with a CSRS component.  He will be 60 this year, has over 30 years of service, has paid back a substantial amount (all) of his civil service deposit for his seasonal time, and hopes to retire at the end of the year.

When he reaches age 62, he will receive SS with either system (yes, we know it is reduced taking it early).  We realize, and are aware of how much, there would be of an offset to the CSRS-Offset retirement annuity.  We, also, know he could receive a FERS supplement to age 62.

The catch is that if he goes with CSRS-Offset, at this time, he would need to return about $90k in government matching 401k funds.  However, the CSRS-Offset base annuity, after the offset, is about $10,000 more per year than the annuity with FERS.  And, if COLA’s ever begin again, CSRS-Offset ‘s could feasibly be higher at different points over the years, perhaps adding value to that annuity.  Also, the survivor benefit could be 55% with CSRS-Offset, or a wider range of lower options, instead of 50% with FERS. 

We played out on tsp.gov how much could be added monthly to his income over 30 years to age 90, at 4% interest, with his 401K balance if he goes with FERS and with his reduced 401K balance if he goes with CSRS-Offset.

When you add all the different elements:  government annuity, SS, and a monthly Thrift amount, the yearly amount is almost exactly the same between the two.

We have been to financial planners and their thought, typically, is that there is the potential for earning considerably more than the 4% we used if he goes with FERS with that $90k, and, should my husband pre-decease me, I would have that additional Thrift $ to use (my retirement income will be considerably less than his) if he passed away sooner than later (I hope not!) as opposed to the 55% of the CSRS-Offset annuity on into time.  However, they do have the caveat that the investments are not backed by the federal government as the higher CSRS-Offset annuity is.  And, we can’t help but fear, after watching the stock market over the last few years and looking at the state of the economy, that if our accounts tank again, it could easily wipe out the advantage of the possibility of earning more with the extra 401K $ left in the FERS scenario.  I should add that we are both very conservative with our 401K $ and somewhat hesitant with investing.  The security of the higher CSRS-Offset annuity  just feels better, but maybe that is unwise on our part.

We don’t expect to be told what to do, but are searching for any additional thoughts on how we can look at this to help nudge us one way or the other.  Any comments regarding the merits, or disadvantages, of either retirement plan, or flaws in how we are looking at this, would be appreciated.

Thank you!    


Ed Zurndorfer  
#2 Posted : Tuesday, June 22, 2010 7:19:32 PM(UTC)
Ed Zurndorfer

Rank: Senior Member

Groups: Registered
Joined: 9/10/2001(UTC)
Posts: 4,414

Very simply put, if your husband chooses CSRS Offset and returns the $90,000 in TSP matching funds, he will (assuming he lives for at least 9 years after he retires) "get his money back" after nine years of receiving the additional $10,000 CSRS annuity. If he does not live for nine years, you will receive the additional survivor annuity and "get the money back" after a certain number of years.
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