If you are separating from federal service for retirement purposes, keep in mind that you might not receive your initial annuity payment from the Office of Personnel Management until approximately five to seven weeks from the date of your separation. You should be prepared for this lapse of income period.
Also, keep in mind that it can take an average of three to six months to execute the final adjudication of your retirement, depending on OPM’s staffing and workload. Some retirements are more complicated to compute than others, and OPM wants to triple-check everything before they finalize your retirement. OPM does not want to overpay anyone, but they understand that annuitants need their income, so they place folks into “interim retirement pay” status.
The duration and percentage of interim retirement pay can be affected by the following:
- When applicable, the FERS Supplement is usually not included in interim retirement pay;
- Special Group computations required for law enforcement officers, firefighters, and air traffic controllers;
- CSRS Offset computations if CSRS Offset retiree will be 62 within 90 days (or is already 62);
- Court-ordered benefits for a former spouse (filed with OPM);
- Part-time service;
- Unpaid deposit/redeposit service (if required for retirement purposes);
- Unverified or missing service;
- Insurable Interest survivor elections;
- No survivor election; or
- Waiver of military retired pay is not verified, if applicable.
Once OPM finalizes your retirement and verifies that any applicable taxes are withheld and premiums for insurance are paid, they will retroactively pay you a lump sum for any previous underpayments. But, meanwhile, you still have bills to pay. This might not be that big of a deal if you have a post-retirement job lined up, a spouse who is still working, or enough money saved to help cover living costs while waiting for OPM to finalize your retirement.
When you separate from federal service for retirement, you will begin receiving income on a monthly basis. When preparing to retire, it would be good to speak with your agency retirement counselor to determine when your last pay date will be for your final pay and unused annual leave. Compare this to when you might expect to receive your initial annuity payment from OPM and be aware of how long you might expect to be in interim retirement pay status. Depending upon our financial needs, you may or may not be okay with this lapse of income period, but at least you can start planning and be prepared for this.
For multiple personal reasons, many federal employees are not necessarily ready to withdraw income from their Thrift Savings Plan (TSP) immediately upon separation from federal service. But it’s good to be aware of your withdrawal options so you can plan for the future, whether you intend to postpone TSP withdrawals or not. Regardless, when you are ready to exercise your withdrawal options from TSP, you will be communicating with TSP, not OPM. Applying for income from TSP is a separate application process from applying for retirement from federal service. In next month’s article, I will cover the various TSP withdrawal options.
Keep in mind, it will often take approximately two to four weeks from the date of your separation for your agency to notify TSP that you are no longer employed. You will not be able to exercise your post-employment TSP withdrawal options until TSP receives this notification from your agency.
Click here for an update from OPM regarding Interim Retirement Pay.
James Marshall is a federal retirement benefits specialist and the owner of Federal Retirement Planning LLC. For more information, please visit the Federal Retirement Planning LLC website.