Fork or Knife? The Truth About VERA

Micah Shilanski  00:00

Welcome to a special episode of Plan Your Federal Retirement podcast. I’m your host, Micah Shilanski, and joining me today to go over some really important and timely details, the one, the only , Tammy Flanagan, Tammy, how’s it going?

Tammy Flanagan  00:13

Hi, Micah, yeah, we’re in a whirlwind, aren’t we? I think everybody is at this point. So yeah, we’re doing good, but we’re hanging on for dear life, we’re trying to figure out, you know, if it’s a fork or a knife in the road or what it is so, so we’re going to try to figure that out, right?

Micah Shilanski  00:30

No, we’re going to go through a lot of stuff together, we’ve been getting, uh, Tammy, you and I both, independently, have just been getting a bazillion questions on this, which is great. Keep them coming. We know you guys have it. People are calling our office. I was talking to Victoria in our office, and she says, hey, Micah, here’s a bunch of questions, and I answered him, and she’s calling people back, and I was like, alright, you clear out your day, you clear out everybody, she’s like, no, I was on the phone, about 10 other people called, so it’s, we’re constantly getting questions and emails, these are good and really, Tammy, it’s, you know, we’ve given good information, I actually don’t want to food pod, the information has been pretty good, but it’s a pretty tight timeline, and people need to make some real big decisions.

Tammy Flanagan  01:04

Exactly, yeah, somebody suggests today that if they don’t get enough people signing up by Thursday morning, they could extend it, but no one has said that, so I wouldn’t want to start that rumor, but I definitely, yeah, I’ve been telling people when they asked me to wait till Thursday, you know, because every day we look there’s more information, so it’s putting some of these puzzle pieces together that you want to have before you make this commitment that you can’t turn back, that would be one record recommendation I would make that’s pretty safe.

Micah Shilanski  01:33

I like it, there’s only one client that we were like, just send the email today, there’s no point in thinking about it, because we’ve been hoping for a VERA for two years. You know, she’s financially ready to retire, he’s already retired. You know, this is a godsend to them, because it’s just like, okay, perfect, now we get to retire together, and before she’s gonna be tied up for another four years of federal service. So in like that case, when we were planning on it, everything was lined up, I mean, the retirement plan was good to go, mentally, they were ready, financially, they were ready pull the trigger, let’s call this a day.

Tammy Flanagan  02:02

I agree, because for a lot of people, this is a golden opportunity, they’ve been just waiting for an early out, not necessarily thinking it would happen like this, but, you know, it’s, it’s what they’ve been waiting for, so, yeah, I’ve had a few clients call me and say, when can we meet? We got to do the final steps.

Micah Shilanski  02:18

That’s right, that’s right. Now, if that’s not you, and there’s a lot of people that are not you, there’s a lot of things to be considering, and there’s there’s some people that this makes a ton of sense for. It’s a no brainer, there’s some people that I could kind of go back either way, Tammy on whether it makes sense or not, we can talk about that, and then there’s other set of people that says this is not for you, and so we just you know knowing which camp you’re in is going to give you so much more peace of mind, because if you’re in the this isn’t for you camp, quit paying attention like move on with life, start getting other things done, etc. We don’t need to burn brain power here.

Tammy Flanagan  02:49

Yep, and this isn’t available as much as it’s government wide, there are a lot of exceptions. I saw the letter going out to Social Security employees, and pretty much everybody’s exempt from this, so they’re not going to have many people even entitled to apply for they’ve already exempted law enforcement and intelligence communities, so those folks are working just like they always did, you know, they’re not paying any attention to this, and then I’ve also found, like today, I was talking to people patent and trademark and, you know, even though this early out has been offered through and authorized from OPM, if the agency doesn’t want to participate in the VERA I’m assuming they can choose not to, because that’s what they told me they were doing. So that part I’m still not sure about OPM overrides the agency, but I I’m going to lean towards that the agency can still say we’re not going to authorize early out at this agency.

Micah Shilanski  03:43

That seems the more conservative, you know, guess, right? And I agree with that.

Tammy Flanagan  03:49

Might be wrong, but that’s the air on the side of being conservative.

Micah Shilanski  03:53

Amen, Amen. Now let’s bring up this kind of the first question that, no matter who I’m talking to, this is the first question that they ask, and you probably get the same one, and we’re not attorneys, right? So we can’t give any legal advice on this, but Tammy, the question is, Micah, is this real? And if it is, am I even going to get paid? Like, if I take this, am I going to get paid for the next seven ish months until the end of September? Are they really going to process my retirement, or are they going to yank this out from underneath me? I think it’s real, Tammy, what do you think?

Tammy Flanagan  04:20

I think it’s real, too, and there was a letter came out today, I’m looking at it right now. It’s called the name of the memorandum that’s going to all agencies is legality of deferred resignation, and here’s what they say about getting paid, which kind of makes sense, it says: May an employee be placed on administrative leave during the deferred resignation period. Yes, the decision to grant administrative leave and for how long lies largely within the agency’s discretion. Now you give a footnote to say why they are saying that there was a federal register that came out the end of December during the Biden administration that was trying to set some parameters over administrative I Believe, but apparently they’ve found a way around that about the 10 day limit and all of that, because they said, here’s what they said about that. They said they can go beyond the 10 days, they can do it for the whole period of time, so according to this, which, again, is coming from the same source that the original memo came from, they’re claiming that it is legal. I do think there may be some court cases on this, and the one thing to be cautious of is if you send in the email saying, you know, what is this supposed to say, resign or resign, retire, you’re going to get a notice back from your agency, it’s a boiler plate from OPM telling you all kinds of things about you’re not allowed to join a lawsuit, you’re not allowed to file suit yourself, like you’re you’re agreeing to all these non disclosure things, so be real careful when you send that in, because you’re going to get this contract after you’ve committed to it, so be real careful there.

Micah Shilanski  05:56

Yeah, so this goes back to the aspect of, you know, and I know, I put out a video, it’s done pretty well, there’s a lot of people on it, you know, Tammy, right? When this person came out, I was traveling, so I just did it while I was traveling. But it’s like, hey, you know, there’s two aspects to retirement, the financial aspect and the mental aspect, and if you’re checking both those boxes, then this is a good option for you, but if you’re borderline, man, there’s so many unknowns. I don’t know if I would tell you to take it.

Tammy Flanagan  06:20

Yeah, if you haven’t already been planning to retire, if this already wasn’t on your radar, so meaning you haven’t done any real planning yet, you haven’t taken taxes into consideration, you haven’t checked your records to make sure all your services verified. I would be really hesitant, because with a normal situation that takes time. You know, we always tell employees start your planning five years before you plan to go at least, if not at the beginning of your career, but people who procrastinate, at least start it when you still have time to make changes, when you still have time to locate missing documentation or to pay a deposit. You know, don’t fly by the seat of your pants just because you’re under pressure to make this decision. This is like impulse buying.

Micah Shilanski  07:02

Yeah, so you know, if you had already made the decision that says, hey, I’m gonna buy this, then I’ll send a 20% salecame out, I’m gonna pull the trigger on that thing, I have no problem on it, right? Because I was gonna buy it at 100% now it’s at a discount. I love it. So Tammy, let’s make a little bit of pivot here, and let’s say, okay, if somebody does take this, right? And there’s a lot of reasons it makes a ton of sense, and we can get into this a little bit more, but let’s walk through the process of what we think, and I say think, because we don’t really know, we don’t got those details out yet on what it’s going to be, but what do you think that process is going to be from they send in the resignation, they get the payment, when do you think they’re going to fill retirement application? When do you think they’re going to get their first check from a retirement side? Let’s just say they picked september 30. You know, there’s no extension on it for them, for whatever reason. What’s that timeline going to look like?

Tammy Flanagan  07:45

Well, first of all, when you submit the admission that you’re going to take advantage of this, and you send the memo back to OPM, you’re going to get this agreement, which, to me, is a contract, right? In fact, you have to sign it. So that is a contract. It has your name, your title, all of that, so you want to make sure that that this is what you want to do, and then it says in here that you have to continue working through February 28th so your administrative leave doesn’t start until March 1st, you had to turn in, it even tells you how to turn in your badge and your equipment and all of that stuff. So even though you’re still on the payroll, you’re pretty much gone as of that date. So now, yeah, like you were saying before, the question is, when do I turn in my retirement application? If it was me, I would turn it in next week, because I want to be top of the list if my agent, especially if I’m in a large organization where there’s going to be a lot of people taking advantage of this, I want them to start putting my package together when they’re not stressed out and up against the clock that I’m leaving next week, so I’m going to set my retirement date for December 31st, but I’m going to put my application in tomorrow, if that’s what I’m planning to do. Now, of course, you can retire sooner, but they are allowing you to delay the retirement until December 31st and stay on administrative leave until then.

Micah Shilanski  09:05

Why wouldn’t you take that? Like, why wouldn’t we, you know, why would we go out on September 30th if a retirement date versus 12/31 like, exactly, I’m not seeing a downside of this, right? Why wouldn’t you pick the furthest date out there? Because you’re increasing your benefits, like, because you’re being paid administrative leave, that time counts to increasing your pension, right? That extra seven, that extra three months, in this case, is going to increase your pension, you’re going to keep getting your full paycheck during this period in time, and then after that administrative leave time period, you just move into normal, assuming you’re eligible, you move into a normal retirement or a zero retirement. It’s a good deal, I don’t see any reason not to.

Tammy Flanagan  09:39

Well, there’s one thing that bothers me, and it’s because what happens at the end of a normal year? When does OPM receive the most retirements?

Micah Shilanski  09:50

That’s a great point. They receive the most at the end of the year, yep.

Tammy Flanagan  09:53

Yeah, and so now you’re going to add to that, all these people that were not previously going to retire now they’re going to go out December 31st and OPM employees might be among the bunch that are leaving. I’d be afraid that it’s going to take two years to process my retirement, or mistakes will be made. That might be one reason why I might choose a date a little earlier. I don’t I mean, it’s, it’s a gamble, depends on how much cash I have that I can carry myself through as long as I am I feel secure that way, I’m willing to wait, then, yes, I think there’s all the advantages in the world of waiting, you get more of everything according to the plan.

Micah Shilanski  10:31

And Tammy, I remember, and I know you do as well when it used to normally take a year plus to get a retirement application through, right? So that’s not a ridiculous statement. I mean, now it was in there, the near past that this actually happened, and it’s been amazing that OPM is now getting them in three to six months, you know, compared to what we had, so that’s not an outlandish statement, I agree. So this goes back to our Cash Flow Planning, which cash flow is the heartbeat of retirement, right? You have to have good discipline in knowing what you’re spending, knowing what income you have coming in and putting together your cash reserves, whether it’s your TSP, your IRA Roth conversion planning, whatever you’re doing, but that investment plan needs to have a healthy portion in cash or cash equivalents, right? If you want something a little bit more, but you need money accessible for taming just what you said is, let’s say you want to maximize that retirement, you wait till the end of the year. Let’s see, go out on September 30th, but you and 200,000 other people did as well, right?

Tammy Flanagan  11:23

Which is most part, it could be that many.

Micah Shilanski  11:26

You know, that’s what they’re saying, 5 to 10% let’s go with 2 million federal employees, that’s 200,000 right? Now, not all of them will have retirement applications, so cut it in half. 100,000. Tammy, how many retirement applications a year does OPM normally get?

Tammy Flanagan  11:42

About that in a whole year, now we’re talking about that one month.

Micah Shilanski  11:45

Uh huh, and so, and then, plus the normal people that are going to retire on that as well, so this could be a big portion of people coming, so going back to the basics, right? Having, and I love Tammy, you said that you got to have a solid cash flow base and a place to draw that money from, because we have no idea how long it’s gonna take that pension to start.

Tammy Flanagan  12:02

And we don’t, we don’t, and you gotta, you gotta know what you’re entitled to, because I’m afraid, if they start rushing through these applications, you know, because they got to get them done, there could be mistakes made, so make sure you understand where those numbers are coming from, make sure you save all the documentation of your beginning and ending dates, any changes in work schedule, any changes in retirement coverage, because those are the things that prove that are evidence of your career. So if you’re going to fight a mistake that you think has been made, you’ve got to have the evidence, just like any any investigation. So yeah, I’m telling people to download their entire eOPF, because you’re going to lose access to that once you leave be listening to the news, because it’s changing daily, because there are proposals in Congress to change the high three to high five right now, there’s a proposal to get rid of the supplement. If you see Congress pulling the trigger on that, go out today, you know you don’t want to have that change in the law, change your retirement to to lose the things you’ve just worked for, so it’s, it’s crazy times, for sure.

Micah Shilanski  12:02

Tammy and those proposals, though, those are proposals that I’m looking at that would affect, uh, new retirees, those aren’t proposals that will affect current retirees, they can change them yet, pull up, yeah.

Tammy Flanagan  13:19

And in the in any contribution to health insurance, if they make a change to that, that can certainly affect retirees too,so any change to insurance premiums, insurance contributions that can change for retirees, and COLA changes most certainly can affect retirees, but if you change the way the retirement is computed, that has to happen before it’s computed, right? Not to say that they couldn’t change that rule too.

Micah Shilanski  13:46

We’re the odds, though, right the odds are, and historically, when the government has changed the system, they’ve left the current federal employees alone, the retired current retired ones alone, and it was the new ones that they really changed the system, whether it’s CSRS to FERS, FERS to RAY, FERS to FRAY.

Tammy Flanagan  14:02

In the future, yeah, so let’s hope that, and the good thing is that type of change does require congressional action. That’s not something OPM can say, well, tomorrow we’re going to use the high five, there has to be a change in the law,so, and they proposed this before, and not only in the FERS Trump administration, but in previous administrations to try to change the supplement and all these other things, they’ve never gotten anywhere because there’s been so much lobbying against it, so I’m hoping that that would hold true today, because, you know, this is one of the things we can still hold on to, is the value of this retirement benefit at its current level, because a lot of people, yeah, a lot of people are making decisions way ahead of when they had planned to.

Micah Shilanski  14:44

So one of the questions that we often get is leave. It says, okay, my guy, if I take this deal like, what’s going to happen to my leave, my annual leave, my sick leave. Now I’d say there’s two ways to look at it, are you going the retirement route or the resignation route right now, you’re resigning them to a retirement that means you’re eligible for an immediate retirement, whether it’s the VERA or normal retirement, and so that route we just got to think about it, is that’s like a normal retirement, right, Tammy? So that means the leave that you get is going to be cashed out when you separate from service, and so let’s just say the annual leave, thank you, the annual leave would be cashed out when you separate. So if you were left on 12/31 it’s you and 100,000 of other people, so it could be the lead, but within a couple of weeks, generally, the next pay cycle or so is when that annually, yeah, is gonna be cashed out, yeah, or so, right? But it’s the it’s the ish number, but I could see an easy delay, but they’re not gonna lose it.

Tammy Flanagan  15:35

Right! I compare this situation to what was happening during COVID, when everybody was working for home, they had a pivot to a different way of doing their job, and there were some payroll offices that got stuck, and they were delaying annual leave payments for nine months so that couldn’t and so I would say, don’t count anything out from happening, but just pay attention real close and stay in touch with your HR office, read the reputable news sites, listen to us, because we’re reputable, we try to stay on top of this, just keep in mind things can change.

Micah Shilanski  16:09

And then your sick leave, you still get your sick leave, and you know it’s going to be computed, yeah, yep, just same way for retirement, so it’s going to add to your retirement benefits. So again, you’re not losing any leave benefits at all by taking this resignation to a retirement is that? Is that a right, correct statement there Tammy?

Tammy Flanagan  16:26

Yeah, and I’ll just add to that, that sick leave doesn’t make you eligible to retire, so you know, if you need to have 30 years of service, you can’t use your sick leave to get there, unless you’re sick and you go on sick leave for, you know, however long. So you can’t do that. Now, we did read for early retirement that if you have enough annual leave, you can put it pretty much go on annual leave, and then get to the point when you’re eligible and then leave that day. But again, that was not going to take you beyond December 31st in this current offer, so if you’re not eligible till next January, then you can’t retire during this resignation.

Micah Shilanski  17:04

Yeah, maybe I’m not creative enough, but I can’t see how that annual, that terminal leave, like the military, has terminal leave, right when you get your leave, just burn it off and you’re done, and that’s frowned upon in civilian service. You know, this would be a case to use it in this type of era, but I don’t see any benefit in that, Tammy, because not no, let’s just save that up and get the check for it at the check for it at the end, because you’re going to.

Tammy Flanagan  17:23

Assist you. I don’t have to work during that time anyway.

Micah Shilanski  17:26

Exactly, yeah, okay. Other questions that we’re kind of getting in here is the first supplement I know. Just put up a video on that one yesterday as well, because a lot of questions I’ll be getting if you go out on a VERA, how does that FERS supplement work? Now keep in mind that your pension is based on your retirement benefits are based on those three stools, right? We have our Pension, we have our Social Security and our TSP, it’s a three legged stool. Your pension allows you to retire early, earlier before 62 when your Social Security starts, so they give you this FERS Supplement if you’re eligible to help bridge that gap from that retirement to 62, so you’re still eligible if you go out on a VERA or a FERS Supplement, but it doesn’t start right away. Tammy, when does it start?

Tammy Flanagan  18:08

It starts at your minimum retirement age. So that could be 57 if you were born in 1970 or later, or it could be 56 in two months, depending on your year of birth. So you’re going to check the MRA chart at opm.gov and it’ll show you when that is. But let’s say you took an early out with 25 years of service, and you were only 47, so you’re waiting 10 years to get that FERS Supplement check. So you better have another job lined up, because that first benefit after 25 years is only replacing 1/4 of your gross income. That’s not a lot of money to live on, and, you know, trying to take TSP out at 47 is not wise either for most people, and you’re not going to get the supplement till 10 years from now, so I think you’d be hurting for money, the best part about that, you’d have health insurance, and if we’re trying to get out of the government because you had another job, or you wanted to become self employed, Yeah, it could be a really great deal, yeah, but you have to have that in your plan, you can’t think that, oh, I’m going to take this retirement and live happily ever after.

Micah Shilanski  19:11

Well, Tammy, you brought up. I totally got to put on the list, my apology, but TSP, right? If you take a VERA let’s keep in mind TSP rules or tsp rules, FERS retirement rules, or FERS retirement rules, right? These things are different.

Tammy Flanagan  19:23

They don’t intersect.

Micah Shilanski  19:24

Yes, they don’t intersect, right? So we got to take off our FERS hat, and we got to put on our TSP hat. Now, the TSP hat is not an IRA hat. Those are also different hats, right? So the TSP is in order to access it, not law enforcement, you know, special provisions in order to access your TSP without a premature penalty to it, you have to separate it 55 or older. Okay, what does that mean? So if you take a VERA at 52 because you have over 20 years of federal service, and I’m 52 and I take this, I cannot access my TSP without a penalty, just by a normal distribution of the TSP until 59 and a half, right? So there’s a big time window here. Now there’s this thing’s called 72 T’s and systematic distributions, boy, caution flags go up all the time. People don’t understand the big mistakes can be made. It’s a tool, but be very careful. So again, if you’re eligible for the VERA and for their retirement, that’s awesome. That doesn’t necessarily mean you’re eligible for your TSP access.

Tammy Flanagan  20:22

Right, exactly. I was talking about that today in terms of withdrawal options, and like the 72 T’s these are all life expectancy options, and if you’re 47 or 52 you potentially have another 30, 40 years of life expectancy, which means they’re going to divide that balance by 30 or 40 years, the amount you’re going to get at 52 is not going to really supplement your FERS benefit very much, and you got to stick with, yeah, so, so that’s really not something you can count on. In fact, you want to let that TSP account grow until when you can afford to fully retire, so if you’re going to just turn around and go get another job, don’t count on using that TSP in the interim, you know, let that grow.

Micah Shilanski  21:04

Get let it grow, think about Roth conversions. I mean, next year 2026 the TSP is going to allow internal Roth conversions. And so that’s super exciting. How are they going to do it? I have no idea. I’m looking to look forward to figuring it out when it happens, but I think that’s a great option. But, yeah, let that TSP grow for you.

Tammy Flanagan  21:19

Yep, that’s for sure.

Micah Shilanski  21:20

Tammy, other thoughts on this, this fork in the road that people should be thinking about right now. We kind of talked a lot about the benefits. It really is, again, if you were pretty much ready to go, and this happened to coral s with your timeline, probably makes sense to really give it a hard look if you weren’t ready to go, unless you want to transition to the private sector, something else, this is probably not a good option for you.

Tammy Flanagan  21:40

I had kind of an interesting question today about someone who said, what if I need to apply for disability? Oh, no, yeah. So with disability retirement, you don’t necessarily choose the date you have to be approved, you have to apply for Social Security Disability, it’s a whole process, but let’s say you did that and you didn’t hear back from OPM by the time September 30th rolled around. So you could, in essence, resign on September 30th, just like you would be required to do. You can still process that disability after you’ve separate, you have up to a year after you separate to file for disability, so you’re still taking a bit of a risk in case you’re denied the benefit, because you could be turned down if you don’t have a disabling condition that prevents you from doing your job, and the agency didn’t try to accommodate you first. So there’s hoops to jump through, but I don’t think this would necessarily stop you from applying for disability that can still be processed, but I’d be really hesitant about thinking it’s going to happen anytime quick, whether it’s Social Security application, which are really lagging behind because Social Security can’t hire enough people because of the hiring freeze, and they are short staffed, and OPM going through what they’re going through right now. I think they’re going to not put as much as they should put disability on the top burner. I think it’s still going to get delayed, so be careful.

Micah Shilanski  22:07

Was there anything I didn’t read that with that in mind, was there anything the agreement you have to sign with the resignation that would eliminate you from applying for disability retirement?

Tammy Flanagan  23:14

They didn’t address that. I wonder if they will. I wonder if that’s going to come out tomorrow in a frequently asked question, because I think there’s a lot of little technicalities that when they wrote this, they didn’t consider all the ifs ands and buts, you know, because, like, we know, Micah, federal employees careers take all kinds of different twists and turns, and you got to think of all and that’s why it’s so complicated, that’s why they haven’t been able to automate retirement. Because there’s so many unique situations, and I think that’s going to be the devil in the details.

Micah Shilanski  23:47

Yep, yeah, very much so. All right, so big action items on this podcast. Get more information right, learn about this. Really good takeaways, Tammy, I’m going to pull on something that you said that if you want to say yes to this, probably wait until Thursday to send off that email, because every day is coming out with new information, including for Tammy and I, you know, we’re getting new stuff all the time, and we’re learning about it, so I like to have as much information as I can before I have to make that decision. Unless, of course, it’s a no brainer. You’re going to do it anyways because you’re planning on a VERA that’s kind of the one exception to that. And Tammy, what are the good takeaways or action items should our listeners be thinking about for this week?

Tammy Flanagan  24:23

Yeah, I’m telling people to gather all your documentation, fill out the form. If you’re thinking about a deferred retirement or an immediate retirement, get the application, fill it out, look and make sure you understand it, go to OPMs website and learn what’s creditable service, what isn’t if you haven’t paid a deposit for your military service, get that done if you can’t leave and not pay the deposit because you can’t pay it afterwards, so try to do everything possible to cram your retirement planning into this short time frame, because if you’re thinking about this, that all has to get done, whether you have five years to do it, or whether you have five days to do it.

Micah Shilanski  25:00

Yeah, very much, so also, if you’re going to do a postponed or a deferred retirement, we did a series on that, so sorry to plug our own stuff, but Tammy, you and I have seen way too many mistakes that other people have made on in properly filling out that application. It is, you wouldn’t think it’s that complicated. It’s the devil’s in the details on this one, folks, and you could lose the best benefit you ever had by merely putting the wrong date, so make sure you go to our class, hire Tammy, work with somebody that knows this to make sure you get this done correctly.

Tammy Flanagan  25:30

Yeah, it’s it’s different times, this is unprecedented, so everybody, I wish you all luck, and I hope that you make the right decision for you and you don’t feel pressured, because I think a lot of people are feeling this pressure to make this decision which it is, but on the other hand, you can always say no, no, just wait and see what happens.

Micah Shilanski  25:48

Tammy, thank you so much to all the listeners, till night time, Happy Planning!

Tammy Flanagan  25:52

Bye, bye.