No matter what age you are or what stage you are at in your career, defining your federal retirement objectives is a critical part of your federal retirement planning.  Sometimes determining how much money you need for retirement can feel like a guessing game.  How can you know what you will need in 20, 30, 40 or 50 years?  Determining how much money you will need for retirement is best guided by defining your federal retirement objectives.  Once you know how you want to live in retirement and what you hope your life will look like in retirement you can factor that into things like cost of living and medical expenses to determine how much you need to start saving for your retirement.  Unfortunately, there is no “one-size-fits-all” calculator that can just give you what you need.  Whether you have already spoken to a federal retirement planner or are anticipating your meeting, defining your federal retirement objectives is one of the first steps in successful planning.

First, it is important to start your ideal vision of retirement and scale back if necessary.  What does your dream retirement look like?  Do you want to travel?  Do you want to golf on a weekly basis?  Do you want to contribute to charity?  Do you want to help financially support family members?  Do you want to dine out often?  Most people want to be able to enjoy life in retirement with the peace of mind that they have the finances available to live comfortably and do the things that they want to do so that they still enjoy life. Next, it is important to take into consideration cost of living.  Do you want to continue to live in the home you live in now?  Do you want to live in a retirement community?  Do you want to own a vacation home somewhere?  Living expenses tend to increase over time so knowing what type of home and living arrangement you would like to have can help you anticipate your financial needs.  Additionally, even if you do not plan to live in a retirement home or care facility, the need can sometimes arise due to life circumstances or health conditions.  Care facilities can be quite expensive so it may be a good idea to build a financial cushion in for that so that you can live in the best home for you at that stage of life.

All of these things are important factors in defining your federal retirement objectives but it is also important to determine at what age you hope to retire.  For example, you will need more money if you plan to retire at 57 than if you retire at age 70.  If you want to retire as soon as possible, you need to save as much as possible so that you do not run out of money or have to sacrifice your dream retirement.  Further, if you properly invest funds, your finances can grow significantly as opposed to simply putting them in a bank account and leaving them there for retirement.  With defined retirement objectives and the guidance of a financial advisor well versed in the federal employee retirement system, you can anticipate and properly save for your dream retirement.

When it comes to retirement from a career working for the federal government, there are a lot of different options.  No two retirements look the same.  People retire at different ages, at different stages of their career, and for a variety of different reasons.  VERA is a term that all federal employees should be familiar with because it stands for Voluntary Early Retirement Authority and it is what we are talking about when discuss whether or not you should opt to “early out” for retirement.  It is important to know that you must be eligible to early out, not everyone can be granted VERA.  There are 4 government requirements for an employee to be granted VERA:

1. Meet the minimum age and service requirements –
   • At least age 50 with at least 20 years creditable Federal service, OR
   • Any age with at least 25 years creditable Federal service;
2. Have served in a position covered by the OPM authorization for the minimum time specified by OPM (usually 30 days prior to the date of the agency request);
3. Serve in a position covered by the agency’s VERA plan; and
4. Separate by the close of the early-out period.

In essence, if you opt to early out for retirement, you are able to retire and receive an immediate annuity many years earlier than ordinary eligibility would mandate.  VERA was implemented for agencies that may be struggling financially, restructuring, reshaping, downsizing, transferring function, or reorganizing to temporarily lower the age and service requirements in order to increase the number of employees who are eligible for retirement.  For an agency to be able to offer employees VERA they must apply and receive approval from the Office of Personnel Management (OPM).  Typically, agencies are granted VERA for a period of time and employees must choose to early out within that window of time.

While an early retirement may sound great, there are some important considerations.  For CSRS employees, there is a penalty.  The Office of Personnel Management explains how the annuity will be calculated if you opt to early out, “Annuity is calculated based on the average high-3 salary and years and months of creditable service. Unused sick leave can be used for additional service credit. If the employee is under age 55, this calculation is reduced by one-sixth of one percent for each full month he/she is under age 55 (i.e. 2% per year).”  So, in essence, your annuity will be penalized by a small percent but, if you have not yet saved enough for retirement, that could impact your ability to live on your retirement income in the long run.  The OPM also notes that there is no annuity penalty for FERS employees who choose to early out but the Special Annuity supplement will not be provided until the minimum retirement age is reached.  Determining what the right step is for you can be confusing because there are a lot of calculations to consider and planning to be done.