For lots of people retirement — the golden years — may be their best time. The career was great or at least satisfying and fulfilling. Kids and grandkids, if any, are doing fine.
Now it’s your turn. It may also be a time to reflect and figure out that being a career civil servant, as opposed to ballet dancer, safari guide or a poet, was not such a bad career move. Especially for grown-ups.
As a federal or postal worker — either under the Federal Employees Retirement System (FERS) or especially the Civil Service Retirement System (CSRS) — your annuity is guaranteed for life. And it is either fully or partially protected from inflation, something that just doesn’t happen with the relatively few remaining private sector pension plans. If you have or will have invested 20, 30 or more years in the Thrift Savings Plan, you should have an extra financial cushion that should come in very handy. A perfect formula for enjoying a happy, financially worry-free retirement. Provided it is just you. Or at most, the two of you. But if there is a second, third or fourth spouse in the picture, things can get complicated.
Two weeks ago, estate planner Thomas O’Rourke was on our Your Turn. He went over an 11-point checklist that all feds/retirees should consider before retirement. One of them is the status of any former mates. What kind of financial deal do you have with them, if any? What have you forgotten that they probably haven’t? Here are those points and a link to the show. Check it out and pass it on to a friend or coworker.
Meantime, Abraham Grungold, a frequent contributor, points out that many current and former feds have been or are married. But not necessarily to the original spouse. Which can be a problem. Grungold is a fed and also a financial coach. This is what he’s telling clients who have been married before:
FERS retirement and the ex-spouse
By: Abraham Grungold
There are approximately 4.5 million federal employees. But what is never discussed is how many of them are divorced? The COVID-19 pandemic has placed a lot of stress on marriages. Federal employees who had the opportunity to work at home are probably with their spouses 24 hours a day 7 days a week during 2020. It sounds wonderful but if you live in a small apartment or a small house that wonderful feeling may disappear.
But what about the employees who are retiring in 2021? They had a fulfilling career, and they look forward to retirement. You have worked hard, and you want to buy a new boat and go fishing or simply travel around the country on a whim. All their retirement dreams will be met with their FERS annuity, social security, and their TSP. But wait a minute, what about the ex-spouse? And hopefully, they have only one ex-spouse. An ex-spouse maybe entitled to a portion of their FERS retirement.
Every federal employee who has undergone a divorce during their federal career had better go back and read their divorce documents. The specifics would be found in the divorce judgement order and stipulation settlement documents. Federal employees may have agreed to giving up a portion of their annuity or a portion of their TSP account. Some states use the Majauskas, or coverture formula.
To settle with your ex-spouse, a Qualified Domestic Relations Order (“QDRO”) settlement agreement needs to be prepared and signed by both parties. It is submitted to a judge and then it is forwarded to the Office of Personnel Management (“OPM”) for processing.
So, before you decide to retire, do your calculations, to see if retirement is feasible to include the debt that you may owe to your ex-spouse.
Financial success can easily be achieved; it only takes a little effort.
Nearly Useless Factoid
By Alazar Moges
Hattie McDaniel was the first ever African American to win an Academy Award. She received the honor in 1940 for her role as Mammy in Gone with the Wind.