Strategies to Avoid the OPM Trap
If you’ve heard it once, you’ve heard it a thousand times: “Wow, you work for the federal government? Must be nice to have such a great benefits package!”
What people outside of public service don’t realize is that those great benefits come with a few strings attached — namely, the fact that sometimes you have to navigate some bureaucracy to access all those benefits.
This is particularly true when you’re ready to retire. Retirement isn’t just something you can decide to do one day and expect everything to fall into place in a few weeks. To maximize your benefits — and even just to get your pension payments in a timely fashion — you need to plan ahead.
Here’s what you need to know to avoid falling into the OPM Trap.
OPM Retirement Basics
The Office of Personnel Management (OPM) is responsible for processing federal retirements and ultimately issuing your FERS annuity. You’ve likely interacted with OPM at various points in your career, but retirement is where their role becomes critical.
When you’re ready to retire, there are plenty of forms to fill out and decisions to make. To ensure that you have time to get all your financial ducks in a row, the OPM encourages federal employees to begin retirement planning as early as five years ahead of their proposed retirement date. Getting an early start lets you:
- Maintain FEHB coverage for the required five years before retirement
- Review your FEGLI options
- Understand your FERS annuity eligibility and how it fits alongside your TSP and Social Security
- Confirm your service history, raises, and records in your Official Personnel Folder (OPF)
When you get to a year out from your desired retirement date, it’s time to get serious about planning and applying. At this point, you’ll need to:
- Review your Official Personnel Folder (OPF) to check dates or service, raises, and more for accuracy
- Tell your supervisor about your plans
- Choose an official retirement date
- Attend a pre-retirement counseling session or workshop to understand your benefits and the process
- Elect survivor benefits
- Get an annuity estimate to help you with your planning
Finally, you should submit your retirement application at least 60 days before your planned retirement date — and today, that process is much easier thanks to OPM’s Online Retirement Application (ORA).
Yes — Retirement Applications Are Now Submitted Online
In the past, retirement paperwork was entirely manual and had to be mailed or hand-delivered. Today, OPM allows federal employees to apply for retirement through the Online Retirement Application, which makes the process more streamlined.
With ORA, you can:
- Submit your FERS retirement application electronically
- Upload all supporting documents
- Sign forms electronically
- Track your claim online
- Receive notifications and updates through the portal
This has greatly improved the submission process — but it has not eliminated delays on the OPM side once your packet is submitted.
The OPM Trap
Here’s where many employees get blindsided.
Even with the online application, OPM still has to review your paperwork, validate service time, audit pay records, confirm survivor elections, and calculate your annuity. This part is still highly manual and can take a significant amount of time.
Although OPM’s official goal is to process retirement claims within 60 days, the reality is that it often takes:
- 3–6 months for most retirees
- 6–9 months for more complex cases
- Up to 12 months in rare situations
During this period, you won’t receive your full pension. Instead, you’ll get what’s called an interim payment — typically 60% to 85% of your actual monthly annuity.
And here’s the part that surprises most people:
- Interim payments don’t start immediately.
- It typically takes 6–8 weeks after retirement before the first interim check arrives.
That means up to two months with no income, followed by several months of partial income, which can catch retirees off guard if they haven't prepared.
This delayed start — paired with reduced interim payments — is what we call the OPM Trap.
Strategies to Cover the Interim Payment Period
Fortunately, the OPM Trap doesn’t have to derail your retirement if you plan ahead. Here are several strategies federal employees rely on to bridge the gap.
- Savings accounts and money markets: A simple, easy-to-access savings vehicle may be all it takes to see you through, especially if you began planning for the OPM trap a few years in advance.
- Your traditional TSP account: If you retire in the calendar year you turn 55 years old, you can begin to take distributions from your Thrift Savings Plan. This is money you’ve been saving for retirement, so it may make sense to begin accessing it while you wait for your pension to be complete.
- Annual Leave Lump Sum Payment: One of the best ways to keep cash on hand as you wait for your full pension is to use your Lump Sum Payment of Annual Leave. You’re entitled to be paid for your unused leave time at your regular hourly rate, so this can be a great windfall that gives you cash without forcing you to raid your other accounts. This check usually arrives within a month of your retirement. Keep in mind that annual leave lump sum payment will have taxes withheld.
In fact, you can plan ahead to maximize your annual leave payment by taking fewer or shorter vacations in the last years before retirement.
Pro Tip: Retiring on December 31 will ensure that your lump sum check comes in a fresh tax year, which may help reduce your total taxable income for your final year of employment.
The Bottom Line
The OPM Trap is real, but it doesn’t have to derail the beginning of your retirement. When you plan ahead for a long delay, you’ll ensure that you can sail through the waiting period without too much trouble. And if you’ve over prepared, and your interim payment period is shorter than expected, even better!
Need help with your retirement planning? We can help! Federal benefits and retirement planning is what we do, so contact us for a consultation today.