As you draw closer to being eligible for retirement, you must ask yourself about post-retirement finances. Retirement will only be enjoyable when you can live well off your annuity, TSP, and SRS/Social Security benefits (for those eligible). If you feel you are prepared to retire on the finances front, congratulations. If not, there are some things you can do to fix it.
Stay in Service
Staying in service essentially translates to more years in service, increased High 3, and more benefits after retirement. Staying in service instead of retiring is a great option for Federal workers who feel they need to work for longer before they can lay back and relax. If you decide to take this option, know that you are not alone. Quite a few Federal employees opt to stay in service even after they are due for retirement.
However, if you are a law enforcement officer, this option will be impossible, as officers and some other federal employees have a fixed retirement age.
If you can and choose to stay, you will be changing two things that will work very well in your favor. One, you will increase your years of creditable service. Two, you will increase your High 3. These two things, along with a fixed multiplier, will calculate your total annuity.
Staying in service will also afford you the chance to add to your Thrift Savings Plan contributions.
How Does Staying in Service Help Increase Your High 3?
As the name suggests, High-3 is a federal worker’s highest basic salary over three years. That is, the three years that an employee gets their highest salary. These years can be successive or not. Basic salary does not include bonuses, such as cash awards, vacation, and lump-sum payments of unused annual leave. It is the exact amount that appears on an employee’s pay stub before tax-cuts and other deductions.
A lot of federal employees receive their High-3 during their last years in service. If this applies to you, you can get yours by subtracting three from the date you wish to retire. Your pay during this period will be your High-3.
Note: Leave without pay (LWOP) does not cut service periods if they are not up to half a year. Workers that take up to one year of LWOP will have high-three periods based on four years instead of three.
Now that you know all you should about your High-3, you can better estimate your finances if you retire later than planned. Make calculations for different periods that you can retire from service. The period with the best annuities will undoubtedly be the most appealing.
While computing the calculations, make sure you factor in annual pay raises and other increases that can affect your annuity. However, don’t get so carried away with trying to make more money that you work yourself to the ground.