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The atmosphere regarding retirement planning has become notably tense in recent months. Many employees are grappling with the complexities surrounding notices for voluntary and, in certain cases, forced early termination of federal careers. The terminology around options—such as Deferred Resignation Programs (DRP) 1.0 and 2.0, Voluntary Early Retirement Authority (VERA), and Voluntary Separation Incentive Program (VSIP)—can be daunting. Not to mention, the unsettling prospect of a Reduction in Force (RIF) notice that could lead to an involuntary separation compounding stress for those eligible for Discontinued Service Retirement based on age and years of service.
Numerous employees have expressed their confusion and anxiety regarding these options with comments such as:
“I’m feeling overwhelmed by this.”
“It’s stressful knowing we have only days to decide.”
“When is the right time to submit my request?”
“I haven’t known what to expect, and they surely know I’m eligible for retirement.”
“Amidst current political uncertainties, I worry about my retirement benefits’ security.”
“My plans to retire around 64 or 65 may not be feasible anymore; I might not even be able to stay until I’m 62.”
“I consider a DRP, but I need more clarity about the rights I might relinquish, making this decision even harder.”
“I think acceptance of the DRP might be my best bet, but our HR department’s silence is disconcerting.”
Since the announcement of the initial DRP on January 28, communicated through the “Fork in the Road” memo, efforts to clarify the situation have been underway. This article aims to explore the concerns surrounding the decision to leave now versus waiting until later, providing insights into the potential risks involved. To facilitate readers’ decision-making, we will present a “sleep at night” rating—where a score of “1” denotes significant worry, while “10” represents complete peace of mind.
Concern #1: Will Retirement Calculations Change?
Question: What if retirement calculations shift to a high-five average salary from a high-three average? Should I leave now to be safe?
Analysis: Consider an employee with a 2025 salary of $156,755, whose 2020 salary was $126,620. With planned salary increases, her high-three average salary is projected at $146,831.58 by September 30, 2025. In contrast, her high-five average will be approximately $139,967.23, leading to a difference of $6,864.35 in yearly retirement calculations. For an employee retiring under VERA with 25 years of service, this decision could result in a monthly pension difference of $143.
Solution: If the employee moves her retirement up to May 31, 2025, her high-three average would adjust to $144,500.68, and with 24 years and eight months of service, her yearly retirement would be calculated differently—but would yield a monthly benefit that is still more favorable than sticking with a later retirement based on high-five computations.
Sleep at Night Rating: For those secure in their retirement plans, this scenario might rank between 7 and 10—less risky if early retirement aligns well with personal goals like relocating or starting a business.
Concern #2: The Fate of the FERS Supplement
Question: What will happen if Congress decides to eliminate the FERS Supplement?
Analysis: The supplement primarily affects those retiring before age 62. Employees already 62 or older, those who plan to work post-retirement, or those younger than their Minimum Retirement Age (MRA) may find themselves little affected by this prospect.
Solution: With no proposals having been enacted yet, those nearing retirement may want to act sooner if they rely on the supplement. This component can significantly augment retirement income, particularly for those with over 20 years of service. The timeline for retiring three or four months sooner is relatively marginal in terms of financial difference.
Sleep at Night Rating: For those counting on the FERS Supplement as part of their financial plans, this concern might be rated between 3 and 6, underscoring the critical nature of securing income beyond federal service.
As you navigate the complexities and uncertainties of retirement planning this year, it’s important to stay informed and proactive about potential scenarios that may impact your future.
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