financial planner Stephen Zelcer

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Is FERS really a 3 legged stool?

In our latest video, we scrutinize the Federal Employees Retirement System (FERS), traditionally described as a three-legged stool comprising the FERS pension, Social Security, and the Thrift Savings Plan (TSP). This analysis is crucial for FERS employees contemplating early retirement, specifically at the Minimum Retirement Age (MRA). We delve into the accessibility of each retirement component at MRA, explore the nuances of employer-based versus individual retirement plans, and assess the FERS annuity supplement’s role in bridging the gap to Social Security eligibility. This concise yet comprehensive exploration offers vital insights for those navigating their retirement planning within the FERS framework.

finance expert zelcer federal employees

What's better, to retire with the biggest balance of leave, or to spend down your leave??

In this video, we delve into a vital decision for those nearing retirement: is it better to retire with a large balance of leave (sick and annual) or to spend it down? We analyze the benefits of each approach, highlighting the conversion of unused sick leave into credible service towards pensions and the potential for maximizing benefits by strategically using leave before retirement. The discussion covers the implications of using sick leave for an extended service period, accruing additional leave, benefiting from TSP matching, and saving on pre-tax FEHB premiums. We also explore the concept of ‘terminal leave’ and provide practical advice for those considering extending their service by utilizing their leave, thereby maximizing their retirement benefits. This video is an essential guide for those planning their transition into retirement, offering insights into optimizing leave for a more advantageous retirement package.

finance expert zelcer federal employees


Stephen contrasts CSRS’s full COLA with FERS’s lesser ‘diet COLA,’ which may not keep pace with inflation. He suggests FERS employees, especially pre-2013 hires, could fare better due to Social Security and a robust Thrift Savings Plan. He advises careful financial planning with conservative estimates, considering Social Security’s uncertain future.

finance expert zelcer federal employees

Fake Social Security

Stephen explains the FERS annuity supplement, or ‘Fake Social Security,’ which temporarily fills the gap for retirees awaiting actual Social Security. This supplement, based on years of FERS service and subject to earnings limits, provides income from MRA to age 62. Unlike real Social Security, it doesn’t impact future benefits and stops when eligible for actual Social Security, ensuring retirees receive consistent income.

finance expert zelcer federal employees

MRA+10 Retirement should you postpone your FERS pension?

Stephen explains the MRA+10 retirement option for FERS employees, allowing retirement at Minimum Retirement Age with 10 years of service. He details the choice between immediate pension with a penalty or postponing for full benefits later, akin to Social Security decisions. He suggests taking the pension early, despite reductions, especially considering health insurance costs without federal contributions during postponement. The recommendation is to accept reduced benefits early rather than waiting, to avoid additional expenses and long-term financial loss.

finance expert zelcer federal employees

VERA Are you ready for an early out?

Stephen introduces the concept of VERA (Voluntary Early Retirement Authority), a provision that allows federal employees to retire early under specific circumstances. VERA is an option when agencies need to reduce staff due to financial constraints. Unlike regular retirement, VERA enables employees to retire at 50 with 20 years of service or at any age with 25 years of service. Stephen shares a client’s story who used VERA at 47 with over 25 years of service. The client had prepared by networking and securing a post-retirement job that made their federal pension an investment bonus, allowing them to retire financially stable at 54. Stephen notes that early retirement opportunities like VERA are time-sensitive and sometimes result from agency mismanagement, suggesting that those seeking early retirement might consider positions in such agencies.

finance expert zelcer federal employees

Quitters never win: the cost of quitting your federal career

Stephen discusses the ramifications of quitting federal employment, especially before reaching five years of service, which forfeits any future pension. He emphasizes the value of federal benefits such as TSP matching and FEHB health coverage, which would require significant salary increases in the private sector to match. Stephen illustrates that to replace a $20,000 annual federal pension, one would need a $500,000 nest egg, based on the 4% withdrawal rule. He cautions that leaving federal service means forgoing secure, government-guaranteed benefits, urging careful consideration before quitting.

finance expert zelcer federal employees

Maximizing Your Federal Pension: The Power of the High-3

Stephen discusses the ‘high-3’ salary, which is the average of an employee’s highest three consecutive years of earnings and is used by OPM to calculate federal pensions. He points out that for many, this period is typically the final three years of their career, often resulting in a strategic push for higher earnings during this time. He mentions tactics such as pursuing management positions or relocating to areas with higher locality pay like the D.C. metro area to maximize this high-3 average, thereby increasing their pension payout for life. Stephen’s message is clear: the last three years can significantly impact your federal pension, and it’s worth planning for this in your career trajectory.