Thread: Retirement system error

Originally Posted by hawneye

Does anyone know of any individual/s who did or are doing TSP makeups because of the govt. mistakenly putting them in CSRS when they were suppose to be in FERS way back in 1987 when FERS replaced the Civil Service Retirement System? I'm curious to know their ideas, thoughts & strategies on TSP investing. I am one of the victims of the Federal Employee Retirement Coverage Correction Act (FERCCA) signed into law in 2000. It gives individuals a chance to be put in the correct retirement system & compensate them for the govts. error. One of the corrections allows an individual to do TSP makeup contributions retroactively to the date of the error.

If you have the opportunity to stay in CSRS, STAY THERE! It's much better than FERS, you can still contribute to TSP but don't get the matching.

Isn't there a way to break down the benefits vs. concessions in both
the CSRS and FERS retirement system? I would think that someone,
somewhere, offers a comparison breakdown for those who fall into
this catagory. Even at a small fee, an informed decision is always
best. Maybe someone out there did some research and came up
with a link concerning this question. Sorry, I don't have much
more to offer, then this brief comment. Good Luck.

Originally Posted by squalebear

Isn't there a way to break down the benefits vs. concessions in both the CSRS and FERS retirement system? Good Luck.

I don't have figures at my fingertips, but I did pay attention to the big differences because I missed being a CSRS Offset employee by 6 days. Pits.

The big difference is that you have to decide if you are going to stay in federal service for your working lifetime or if you want to go to the private sector at some point before you retire.

If you intend to retire from government then get into the CSRS kicking and clawing if you have to. The CSRS retirement annuity is MUCH (can't have too much emphasis there - I'm talking not even in the same universe) better than the FERS one is. And you can still contribute to TSP, as Luv2 said, you just don't get matching.

However, if you intend to move to private sector at some point, then FERS is the way to go because it is portable. You are piling up social security hours and your TSP is growing faster because of matching funds.

So that's the litmus test I know - retire from government or from private sector.

Hope that helps a little. Good luck!

Lady

To All,

In my case it was a no brainer to choose FERS over CSRS because of the TSP makeup. The makeup for all the 21 years in error amounted to a lot more than I would have gained if I had chosen CSRS-offset. Fully taking advantage of all the loss contributions plus lost earnings plus compounding interest for the past 21 years. Of course I would have to do the makeups do get this. The multiplication factor is anywhere from 8 to 10. In other words if my makeup was 10K I would get between 80-100K. It is difficult process to understand & it took me awhile to at least figure some of it out. Anyway if anyone is interested you can go to the OPM.gov site click on FERCCA.

[quote=hawneye;168214]To All,

In my case it was a no brainer to choose FERS over CSRS because of the TSP makeup. ... Of course I would have to do the makeups do get this. The multiplication factor is anywhere from 8 to 10. In other words if my makeup was 10K I would get between 80-100K. quote]

If I had joined federal service 6 days earlier, and thus been CSRS Offset, I would be making an additional $1,600 a month on my annuity. When you multiply that out over my remaining life (and I'm still many years from being able to collect my social security check) it's a big chunk of change! It will take less than 5 years to add up to your $80K.


"Time value of money" is one of those things that I get paid the big bucks to figure out. So it's something that springs to mind quickly. So of course I'd better add that when someone hands you $80K you have to figure the time value of money in there as well. For example, your $80k has more buying power today than my $80K would have in 4 1/2 years ($1600*50 months = $80K).

Anyway, that's the long way around to say "good luck" on making your choice!!

Lady

Its greater than TVOM in year periods. This is daily compounded monies. There is a much, MUCH higher potential for returns. But you are right that the $80,000 calculation doesn't come close to what I would venture its true value should be.

[quote=XL-entLady;168216]

Originally Posted by hawneye

To All,

In my case it was a no brainer to choose FERS over CSRS because of the TSP makeup. ... Of course I would have to do the makeups do get this. The multiplication factor is anywhere from 8 to 10. In other words if my makeup was 10K I would get between 80-100K. quote]

If I had joined federal service 6 days earlier, and thus been CSRS Offset, I would be making an additional $1,600 a month on my annuity. When you multiply that out over my remaining life (and I'm still many years from being able to collect my social security check) it's a big chunk of change! It will take less than 5 years to add up to your $80K.


"Time value of money" is one of those things that I get paid the big bucks to figure out. So it's something that springs to mind quickly. So of course I'd better add that when someone hands you $80K you have to figure the time value of money in there as well. For example, your $80k has more buying power today than my $80K would have in 4 1/2 years ($1600*50 months = $80K).

Anyway, that's the long way around to say "good luck" on making your choice!!

Lady

Not so fast............ (AT LEAST IF YOU ARE ATC)

My co-worker and I smile to ourselves as the CSRS crowd revels in thier percieved superior package.

We are some of the 1st FERS in '84. Our friend was fall of '83 and CSRS. Lets compare. Both have 31yrs "good" time.

I will go at 31 years at my MRA (56) And therefor qualify for a rather funky provision giving me 1.7% for each year of "good" time.

This equals 52.7% of an assumed 120k = $63240/yr
CSRS bud.. 58.0% of 120k = $69600/yr

We also get the supplement, figured at..... 31yrs divided by 40yrs(full SS qualifier) equals .775 times projected benefit of $18000 = $13950

$63240 + $13950 = $77190. We're already $7590/yr ahead.

But CSRS gets fulL COLA, while we get COLA minus 1%........ so we start losing ground right away. Plus our supplement gets NO COLA until you convert to real Soc Sec at age 62...... so more lost ground.

But as we TSP'ers know..... the real kicker is the TSP.

My CSRS pal has roughly $200k in his Thrift...... while I have ......much more.

Applying same %'s to the TSP accounts for next 7 years...
I'll have about $1M more than he.

At a mere 5% safe return per year, that's $50k per year, not touching the principle to leave to my kids..........

That's probably more than $50k per yr more than he.... plus $500k left to each of my kids....

I'm happy with my FERS.

You obviously have made your TSP account a priority in your financial planning. Ah-h-h. "Compound interest." Two of the most beautiful words in the English language!

Lady

I'm glad I selected FERS. I have 6+ years left & will retire @56 with 36 years. After I pay back the makeups in 3 years & 4 mos. & assume a conservative G Fund estimate of 5% interest on my balance, I will be at the 1.5M at retirement. I wanted to know if anyone else in TSPtalk is or have been in this situation. I would like their ideas?

Great job! You have planned and saved well.
May the G fund will keep up with inflation. How are you planning on pulling your $$$$ out of TSP? Fixed payments or rolling it to another fund?

Originally Posted by hawneye

I'm glad I selected FERS. I have 6+ years left & will retire @56 with 36 years. After I pay back the makeups in 3 years & 4 mos. & assume a conservative G Fund estimate of 5% interest on my balance, I will be at the 1.5M at retirement. I wanted to know if anyone else in TSPtalk is or have been in this situation. I would like their ideas?

Originally Posted by hawneye

I would like their ideas?

Please dont take an annuity.