Much of the emphasis on federal retirement planning focuses on being prepared to leave employment when you hit one of the combinations of age and service that allows you to retire.
Hitting one of those combinations allows you to end your career voluntarily. But what if it ends involuntarily?
That notion brings to mind, for those old enough to have retirement in their sights, the job cuts during the Clinton administration—or potentially even those of the Reagan administration. Reduction in force, or RIF, was a commonly used term in federal agencies, with its complex formulas for who would stay, who would be bumped into a lower-level job, who would leave semi-voluntarily with a buyout and/or early-out offer, and who would simply be put out of work.
That hasn’t been nearly as much of an issue of late. Over the last decade, for example, there has been no year in which more than 1,000 employees have been separated by RIF out of a workforce, excluding the Postal Service, of some 2.1 million.
Another thing that can happen in downsizing or reorganizing situations is involuntary retirement, what the government calls discontinued service retirement. That is immediate retirement for those who would have been separated by a RIF and who are not eligible under a standard age and service combination but who have at least 25 years of service or are at least age 50 with 20 years of service—and who aren’t offered, or don’t accept, an offer of early retirement which has the same terms.
That’s more common, about double the number of those separated by RIF, but still small compared with voluntary retirements in the 60,000-70,000 range.
Slightly more common still is disability retirement, of around 3,000-4,000 a year. That can be considered a form of involuntary separation since the employee presumably would have continued working had the disabling condition not occurred.
Even added together, those account for only a small portion of annual retirements, so what’s the big deal?
Remember, this is not just about retiring involuntarily, it’s about ending your career involuntarily. The number of “quits” each year runs to 10,000-20,000 above the number of retirements.
Why did all those people leave? It wasn’t because they lost their jobs due to disciplinary reasons or the end of time-limited jobs, or because they transferred to another agency—those are accounted for separately.
In many cases, they likely found other opportunities more to their liking. But in many others, it’s likely because of a life event outside their control. That’s according to a recent Brookings Institute study that concluded that “a large and increasing number of older workers do not choose the timing of their retirement.”
It said that of people in their 50s, what it calls the traditional run-up to retirement, in 2014 more than half of retirees said they had been forced or partly forced to retire, up from a third in 1998.
“If we expect people to work into their mid- to late-60s, we need to pay attention to what is happening in their lives in their 50s—and even earlier. Many Americans in their 50s are already out of the labor force, and many retire involuntarily before traditional retirement ages,” it said.
Other recent studies have pointed to reasons that people must stop working before they expected to, such as family care responsibilities and shocks to their personal health. Those studies have concluded over and over that more people end up retiring earlier than they had expected as compared with later.
What does that mean to you as a federal employee? Well, if you’re eligible for voluntary retirement already but are continuing to work, don’t count on that being the case until you go at a date of your own choosing. Instead, prepare as if you might have to stop working tomorrow.
That means following the advice regarding retirement planning such as reviewing your records to make sure they show all of your creditable service, that you make payments if needed to capture credit for time such as military service or time for which no retirement contributions were taken from your pay or contributions you withdrew at a break in service, making sure you would meet the five-year coverage rule for continuing FEHB health insurance coverage, understanding TSP withdrawal policies and the rest.
If you’re not yet eligible for voluntary retirement but are close, the same applies, but you should also understand the rules for leaving before retirement eligibility—when you would be eligible for deferred retirement and how large a monthly payment you would get, the impact on eligibility for FEHB and other benefits, and the fact that you would lose all of that if you choose the alternative of taking a refund of your retirement contributions.
Do you absolutely have to do that? No. But if the last year has taught us anything, it’s that things happen.
ask.FEDweek.com: Government Pension Offset and Social Security Earnings Test