When should you take a buyout?

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This topic contains 10 replies, has 10 voices, and was last updated by  Henry Brown 5 years, 11 months ago.

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  • #148914

    Steve Ressler
    Keymaster

    With federal retirement up 25% last year and agencies looking to strip down personnel costs, I imagine there will be a lot of federal buyout offers in the next couple years.

    Tactically the 2002 Homeland Security Act allowed non-Defense agencies to seek buyout authority from the Office of Personnel Management when appropriate, capping the pay out at $25,000.


    So when should you take a buyout?
    -When’s the financial time?

    -How should other factors weight in (bored at your job, worn out or the reverse – still loving what you do)

    P.S. GovExec has a great buyout watch of agencies offering buyouts

  • #148934

    Henry Brown
    Participant

    Would offer that the only time to take a buyout is when you are ready to retire. 15 or 16 thousand dollars (AFTER Taxes) is not going to make much difference in your financial situation.

    Because I had decided to retire this year both for financial reasons (my retirement check was going to be very close to my civil service pay) and the job was no longer “fun” and genetically I knew that at maximum I would likely have 15 years maximum to have fun doing something else. I kept hoping that OPM would in fact offer a buyout (would certainly buy a nice world class vacation) but I was going to retire regardless

  • #148932

    Stephen Peteritas
    Participant

    Also here’s a good guide to 2012 and 2011 by fed news radio: http://www.federalnewsradio.com/?nid=204&sid=2694670

  • #148930

    Anonymous

    People will not retire solely on the basis of a $25K buy out.

  • #148928

    Allan Aprea
    Participant

    The issue regarding early retirement is much more complex for FERS employees. Their pension is about half of what CSRS employees get, and even reduced social security benefits do not kick in until age 62. If FERS employees have another job on the horizon, they can roll their TSPs into a 401(K) plan with their new employer. Unless the FERS employee was very good at timing the market, their TSPs are probably quite a bit smaller than they envisioned at this point.

    Bottom line is $25K is only an incentive to FERS employees who already had decided to retire.

  • #148926

    Eric Erickson
    Participant

    I noticed that people only take buyouts if they are planning to retire within the next year or less. In that case, what is the value to the government of offering buyouts?

  • #148924

    Hi Eric and Allan – I think that’s one of the keys to the success of buyouts: encourage those people who are about 20 feet from the edge to run up and jump over even sooner.

    But I see your point – what is the real cost savings of a few months salary…unless there’s a significant number of people who take it?

  • #148922

    Amalia Bozoki
    Participant

    I suppose if you are one of those employees eligible for a RIF (Reduction In Force), it would be smart to go ahead and take the buyout. $25K will help fill financial gap while looking for another job.

  • #148920

    Candace Riddle
    Participant

    It depends on several factors.

    1. What is your current age – this makes a difference when considering how much income you need in retirement. Are you old enough to collect social security? How much can you draw off any current retirement savings at the time you retire? (Sometimes there are age-bands associated with annuities…as in you can draw more as you get older).
    2. What is your current health situation and how much is your insurance going to cost you in retirement? If you are sick or have a pre-exisiting condition that may make you ineligible for a private insurance or a spouse’s policy, you may want to weigh your options.
    3. What is the future of your retirement plan? If you retire now will you be getting a greater payout (long-term) than if you wait 2-5 years longer? This happened to my Mother. She was a teacher for 30 years. She wanted to do the 30+5 in order to draw a larger amount off of her state retirement. Unfortunately for her, the state was restructuring the retirement system this year. If she would have stayed for the +5 she would have lost 20% instead of gaining 20%. In her case, it made more sense to take the buyout on top of survival benefits with her retirement.
    4. Which brings up another point. When looking at whether or not to take survivor benefits on your retirement (which means they pay your spouse for a set time, or life, after you die) or to take a lump-sum, the above factors must also be considered along with any retirement savings that your spouse has, and your spouses current health.
  • #148918

    Dale S. Brown
    Participant

    I think that you should take a buyout when you know what you want to do. As Henry Brown and Susan Thomas pointed out, it isn’t enough money to change the quality of life after retirement, whether in CSRS or FERS. The question is being confident that you can find another job or consulting work- or that you want to retire and can afford it.

  • #148916

    Allison Primack
    Participant

    When I posted this question onto GovLoop’s LinkedIn, Alan Greenberg said “You should not take a buyout unless you were planning to leave anyway.”


    Do you agree?

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