|
|
Did you love your job? If so, you may have been happy with your life. That is until your supervisors explained that your company was cutting costs. Due to those cost cutting measures, you are being forced into early retirement.
Most likely, you are over 55 years old. If you are like many other individuals in your shoes, panic may be the first feeling that sets it. Yes, being forced into early retirement may seem like “the end of the world,” but it doesn’t have to be.
Company Grapevine
At most companies, cost cutting is already in the company news or being talked about on the company grapevine. Everyone is talking about what is going on “upstairs” or in the board room. Most likely, your company, if it is of any size, has or will be bringing on a consultant. This way, management has someone to point the finger, when layoffs or early retirements take place. “We have visited with our consultants and it is their recommendation that . . . ”
First, when you get the news, take action. See if you can stay on for an additional two or three months – say 90 days. This will give you time to get your affairs in order. Explain that you understand that cutbacks are necessary, but as a valuable employee, you’d like to get your affairs in order and would like to stay on for three months “or so”.
Transition Teams
This terminology “or so” lets your employer know that you are going to go willingly, but would like some consideration and employment time to get your stuff together. Another term that is used is to ask, “Can I be on the transition team?”. Transition teams are needed to get the company from the size they are now, to the size they will become in six months. Transition teams might be one or two employees or they might be 100 or more. Some people will be asked to be on the team, and why not you?
When being forced into early retirement, you will be required to sign a number of important documents. Never agree to retirement without first learning about your company’s rules, restrictions, and attached strings. Will you receive a severance package? Does that severance package eliminate your pension or eliminate you from receiving any other important employee benefits? If so, talk to a financial advisor right away, particularly before you sign anything. Determine what your best course of action is. Is it better to take the severance pay or receive all of your benefits? Continue reading Forced Into Retirement? Consider These Steps
Here is the scenario: You are sitting at the kitchen table on a Saturday morning and start to think seriously about retirement. You take out your calculator and start banging out some numbers. I have a very basic calculator that I run all of my retirement numbers on. It is solar powered so I never have to worry about running low or even out of battery power. The one that I use at home is a TI-1795 SV (TI =Texas Instruments) that I got at my local Office Max. It cost under $20. Using this simple calculator, you can do some easy math to arrive at how long it will take you to retire.
Easy Math
Ready? Divide 72 by 3 and what is the result? If you got 24, that is the correct answer. So what does that mean? That tells you, if you get a 3% return on an investment, it will take 24 years to double your money. If you divide 72 by 7 then you will get an answer of approximately 10.3. In all of my “what ifs” I always plan on making a 10% return. So when you divide 72 by 10 you get 7.2 years. Hence the name of the rule is the Rule of 72.
So why is this important? It gives you an easy way, although not precise, to calculate when you will have enough money to retire. We’ll get to figuring how much you are going to need in another article, but while I have your attention, let’s add in another number.
Starting with $100,000 Continue reading What Is The Rule of 72?
See Part One Civil Service Early Retirement Here
Background About CSRS and FERS
CSRS Retirement The Civil Service Retirement Act, which became effective on August 1, 1920, established a retirement system for certain Federal employees. It was replaced by the Federal Employees Retirement System (FERS) for Federal employees who first entered covered service on and after January 1, 1987.
The Civil Service Retirement System (CSRS) is a defined benefit, contributory retirement system. Employees share in the expense of the annuities to which they become entitled. CSRS covered employees contribute 7, 7 1/2 or 8 percent of pay to CSRS and, while they generally pay no Social Security retirement, survivor and disability (OASDI) tax, they must pay the Medicare tax (currently 1.45 percent of pay). The employing agency matches the employee’s CSRS contributions.
CSRS employees may increase their earned annuity by contributing up to 10 percent of the basic pay for their creditable service to a voluntary contribution account. Employees may also contribute a portion of pay to the Thrift Savings Plan (TSP). There is no Government contribution, but the employee contributions are tax-deferred. For more information about TSP, see the TSP website.
Unused Sick Leave, Health Insurance Coverage, etc.
- If I take early retirement, what happens to my unused sick leave?
CSRS employees will receive service credit for any unused sick leave in determining their annuity (but they must meet eligibility requirements for retirement before the sick leave is added). Continue reading Civil Service Early Retirement Part II
Working for Civil Service
I have always thought that working for the US Government as a civil servant, would be the way for some people to take early retirement. It sure worked out well for my cousin Tom. Both of my aunts were nurses and one worked for the veteran’s hospital and the other worked for the county hospital.
Differences between Government and Municipal Service
The aunt who worked for the vetern’s hospital was a true government civil servant. The other aunt who worked for the county had a job that had a lot of the same benefits and retirement as a civil servant, but she was not a true government civil servant. She was just like my cousin Tom. She worked for a municipality but she was not a governement worker in the true sense of the word.
If you entered Federal Service prior to January, 1987, you were covered under a plan known as CSRS or Civil Service Retirement System. These people do not contribute to Social Security and they don’t gvet any at age 66 or whenever.
Questions People Ask About Early Retirement
- Who is eligible for early retirement?
The Office of Personnel Management (OPM) has authorized the agency to offer early retirement to eligible employees. The agency may exclude employees in certain jobs that are critical to the agency’s operation. The agency may revise the list of eligible employees before the early retirement window closes. Unless you are excluded, you are eligible for early retirement as follows:
If you are under the Civil Service Retirement System (CSRS), you must have served in a position covered by the CSRS for at least l year out of the 2 years immediately before retirement. If you are under the Federal Employees Retirement System (FERS), this rule does not apply.
You must be at least 50 with 20 years of service or have 25 years of service at any age. At least 5 years must be civilian service, whether you are retiring under CSRS or FERS.
You must be serving under other than a temporary appointment. Continue reading US Government Civil Service Early Retirement
You have probably heard about the 80/20 rule before. If you work or have previously worked in a sales organization you might hear that 80% of the sales are generated by 20% of the sales people. In everyday life, you may have heard that 80% of your income goes for 20% of the things you purchase. For example, maybe your house payment and your groceries take about 80% of your pay. And then you get to figure out how to allocate the other 20% of your take home pay for all of the things you need. According to statistics, 80% of the IRS taxes come from 20% of the tax paying people in the United States.
When it comes to retiring early, one of the biggest challenges you face is reallocating the 80/20 rule so that 20% of your income goes to 80% of what you need. If you think of it in those terms, it comes down to a cartoon I saw 20 years ago in the Wall Street Journal where two guys are walking down the street and one says, “I’ve been looking at my nest egg and have come to the conclusion that I either need a smaller nest or a bigger egg.”
So how much do you put aside for retirement? It depends. It depends upon how old you are – are you in your 20s or in your 40s or in your 50s? It depends upon how much you earn. It depends on your job and if you are a professional or if you are a technician or if you are a blue collar worker.
For the sake of example, let’s say you are single, you’re 40, and have some sort of technical job like an Registered Nurse (RN) or Licensed Practical Nurse (LPN) or maybe you work in Information Technology as a server administrator or programmer. For this example, I am going to assume that your place of work does not offer a retirement plan such as a penion or 401k retirement plan. If your workplace offers these retirement plans, so much the better. But let’s assume that your place of employment does not. Continue reading The 80/20 Rule
|
|
