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861NU  
#1 Posted : Tuesday, August 11, 2020 7:03:14 AM(UTC)
861NU

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Hi -- with the full realization that this not an audience of financial planners...I've been running some retirement numbers in my head, and have (finally) taken time to learn about the federal retirement benefits. My question to you is whether I have overlooked any "landmines" or otherwise made grossly bad assumptions in my calculations.

(1) FERS Annuity -- I'm a GS-15, Step 4 age 39. If I never leave the federal government and stay until 65, I'll be a GS-15-10 with 28 years of service when I retire. A GS-15-10 in my locality currently earns 170,800 a year. Assuming an average salary increase of 1% a year over the next 25 years (a bit conservative, right?), this means a 15/10 would be ~220,000 a year when I retire. 1.1% of a high-3 of $217,000 X 28 years of service = ~$67,000 a year in a FERS annuity.

(2) TSP -- I plugged in some numbers into the TSP official calculator.

(a) Is it safe for calculation purposes to assume a 1.5% annual increase in salary for me until retirement (because there will be six step increases for me between now and retirement, in addition to the yearly raises that Congress passes?)

(b) Is assuming a 6% return over 25 years sufficiently conservative (All my investments are in the L2050 fund). Assuming I contribute an average of 8% a year between now and 65, and the average return is 6%, the calculator says I should have roughly $1,500,000 in the TSP when I retire. Does this sound ballpark or way off? I don't know how much stock (no pun intended) to put in that thing.

So assuming one withdraws 4% of your TSP every year (which based on $1.5M is $60,000), my annual income would be $127,000 in 2045, NOT including SS. Am I screwing up anything major? I realize inflation is the killer here, and I don't really know what the purchasing power of this salary will be 25 years from now.

thanks...


GWPDA  
#2 Posted : Wednesday, August 12, 2020 4:03:52 PM(UTC)
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All I can say is thank the Lord I'm retired now and no longer have to deal with ANY of this. I'm looking over my paperwork, fixing some elements, and then - that's it! Done! Finished!

Look forward to it, mijo. It's a wonderful thing!
frankgonzalez  
#3 Posted : Thursday, August 13, 2020 3:14:20 AM(UTC)
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Originally Posted by: 861NU Go to Quoted Post
(1) FERS Annuity -- I'm a GS-15, Step 4 age 39. If I never leave the federal government and stay until 65, I'll be a GS-15-10 with 28 years of service when I retire. A GS-15-10 in my locality currently earns 170,800 a year. Assuming an average salary increase of 1% a year over the next 25 years (a bit conservative, right?), this means a 15/10 would be ~220,000 a year when I retire. 1.1% of a high-3 of $217,000 X 28 years of service = ~$67,000 a year in a FERS annuity.
Just as a note: A GS15 step 10 earns the same in most localities (GS salary is capped as a specific level: Rate limited to the rate for level IV of the Executive Schedule (5 U.S.C. 5304 (g)(1)), so unless that goes up, your pay won't go up).

And why wait until 65 to retire? You could do so at 62 and still the 1.1% multiplier. Also, why not try for SES (or ST, SL if those are available for your series) and increase your salary that way? You have 20+ years to do so, and only need 3 years for the retirement average salary calculation. Heck, work on that goal for the next 10 years, make the jump and then you can have an even higher salary than GS15 step 10 (not counting the larger potential bonuses, etc available to SES, such as being able to carry over more leave than GS, and so on).

You should have voted Cthulu...the greatest of all Evils
TheRealOrange  
#4 Posted : Thursday, August 13, 2020 7:07:55 AM(UTC)
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Originally Posted by: 861NU Go to Quoted Post
A GS-15-10 in my locality currently earns 170,800 a year. Assuming an average salary increase of 1% a year over the next 25 years (a bit conservative, right?), this means a 15/10 would be ~220,000 a year when I retire. 1.1% of a high-3 of $217,000 X 28 years of service = ~$67,000 a year in a FERS annuity.

As @frankgonzalez mentioned, that $170,800 is the cap and it equates to different steps of the grade 15 level in different localities: steps 7-10 in DC; steps 5-10 in SF; steps 9-10 in Philly; etc. You would need the cap to move, not just the general GS pay to increase. GS pay under can't exceed the pay rate at level IV on the Executive Schedule, and that does not seem to change as much as the regular GS pay increases.

https://federalnewsnetwo...more-top-career-employee*****-the-federal-pay-ceiling-in-2020/
861NU  
#5 Posted : Tuesday, August 18, 2020 5:36:46 AM(UTC)
861NU

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Thanks for the replies -- for some reason I wasn't getting notifications in my inbox so I didn't realize anyone had.

Re the GS-15 "cap," I understand that it exists, but the fact is the Executive Level IV salary has been adjusted every year in the same amount as the general GS salary increase. For example, look at how the pay of a capped GS-15 in DC has increased over the last 10 years:

2020 170800
2019 166500
2018 164200
2017 161900
2016 160300

I think the upshot is that if you are up against the cap, all you get is the annual increase, and no true step increase in addition to that.

But for FERS purposes I think I accounted for that, just looking at the historic top salary, and assuming it will go up 1% every year for the next 25 years.


861NU  
#6 Posted : Tuesday, August 18, 2020 5:38:41 AM(UTC)
861NU

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"And why wait until 65 to retire? You could do so at 62 and still the 1.1% multiplier. Also, why not try for SES (or ST, SL if those are available for your series) and increase your salary that way? You have 20+ years to do so, and only need 3 years for the retirement average salary calculation. Heck, work on that goal for the next 10 years, make the jump and then you can have an even higher salary than GS15 step 10 (not counting the larger potential bonuses, etc available to SES, such as being able to carry over more leave than GS, and so on)."


I am confused by this....True I'd get the 1.1% multiplier at age 62, but wouldn't I also get three more years within the formula too? meaning 1.1% of my high 3 multiplied by 28 and not 25? Or am I missing something?
frankgonzalez  
#7 Posted : Tuesday, August 18, 2020 6:17:36 AM(UTC)
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Originally Posted by: 861NU Go to Quoted Post
"And why wait until 65 to retire? You could do so at 62 and still the 1.1% multiplier. Also, why not try for SES (or ST, SL if those are available for your series) and increase your salary that way? You have 20+ years to do so, and only need 3 years for the retirement average salary calculation. Heck, work on that goal for the next 10 years, make the jump and then you can have an even higher salary than GS15 step 10 (not counting the larger potential bonuses, etc available to SES, such as being able to carry over more leave than GS, and so on)."


I am confused by this....True I'd get the 1.1% multiplier at age 62, but wouldn't I also get three more years within the formula too? meaning 1.1% of my high 3 multiplied by 28 and not 25? Or am I missing something?
You are correct...but that additional amount the annuity gains may not be as much (about $7k difference using your numbers) as perhaps working as a contractor for those years or going private sector (if you still want to work!) as you would get the annuity right away plus whatever you earn in the other job. So, you could move to a private sector position at 62, earning $100K a year, no need to pay for healthcare (as you would still have FEHB), plus your retirement annuity of $60K. 3 years of working private sector gains you $300k vs the $21k you would have gotten on top of your annuity, for a net gain of $279k. And the new job should have less stress! Or you could parley your final position/resume into a better paying private sector position than your federal job was paying...and so the net gains would be even higher.

I have 8 years to go until I hit 62 with 20 years of service. I am making my retirement plans based on that time frame so I won't need to continue working. That said, if I am still having fun when I get to that point, I will continue working (and consider other options that may arise that may not be federal sector) and be able to smile knowing that I can leave any time I feel like it as I have my retirement all ready to go the moment it ceases to be fun.

Edited by user Tuesday, August 18, 2020 7:42:59 AM(UTC)  | Reason: Not specified

You should have voted Cthulu...the greatest of all Evils
861NU  
#8 Posted : Tuesday, August 18, 2020 10:46:51 AM(UTC)
861NU

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That's really interesting, thanks. I'm a lawyer, would have to think creatively and hard about what contractor/private sector opps there might be for me out there. That might be an interesting career goal over the next 22 years, to develop some niche expertise like that. I'd of course want to contribute to a separate 401(k) since I'd be pulling out of the TSP at 62 as well. But that's interesting, thanks.
TheRealOrange  
#9 Posted : Tuesday, August 18, 2020 10:58:12 AM(UTC)
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Originally Posted by: 861NU Go to Quoted Post
For example, look at how the pay of a capped GS-15 in DC has increased over the last 10 years:

2020 170800
2019 166500
2018 164200
2017 161900
2016 160300

I think the upshot is that if you are up against the cap, all you get is the annual increase, and no true step increase in addition to that.

No step increase and no increase in locality pay. Those increases appear to be the base adjustment, with locality not factored in. That said, assuming a 1.5% increase isn't unrealistic, but it's far from guaranteed. The numbers you provided look closer to an average of about 1.25% over the past 5 years.
frankgonzalez  
#10 Posted : Tuesday, August 18, 2020 1:11:23 PM(UTC)
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Originally Posted by: 861NU Go to Quoted Post
That's really interesting, thanks. I'm a lawyer, would have to think creatively and hard about what contractor/private sector opps there might be for me out there. That might be an interesting career goal over the next 22 years, to develop some niche expertise like that. I'd of course want to contribute to a separate 401(k) since I'd be pulling out of the TSP at 62 as well. But that's interesting, thanks.
Federal Contract Law is niche, as is Federal Labor Law...and teaching those subjects, both within and out of the government (folks who want to sell to Uncle Sam need to know the FAR, as do those within the civil service. As for Federal Labor Law...different that the private sector in so many ways that it is a unique practice of law which gets to bill at the $350 on up an hour per the Laffey Matrix).

Heck, hang out your own shingle and just go into private practice and you could easily make some bank while relaxing in federal retirement while pretty much making your own hours...maybe add in some teaching at a local college or law school?

You should have voted Cthulu...the greatest of all Evils
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