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.
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:
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:
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).
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:
This has greatly improved the submission process — but it has not eliminated delays on the OPM side once your packet is submitted.
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:
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:
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.
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.
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 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.