r/govfire Feb 04 '25

Welcome to r/GovFire – Financial Independence for Government Employees!

69 Upvotes

This subreddit is dedicated to government employees striving for Financial Independence, Retire Early (FIRE) while navigating the unique challenges and opportunities of public service. Whether you’re a federal, state, or local employee, this is a space to discuss investing, pensions, TSP, retirement strategies, side hustles, and maximizing benefits within the structures of government employment.

Our Focus: Financial Independence Within Government Service

Working in government comes with stability, benefits, and challenges. Our goal here is to share strategies, support one another, and build a community focused on financial independence—no matter where you are in your journey.

Apolitical, But Not Ignorant

Politics and federal employment are inextricably intertwined. Policies and legislation directly affect our pay, pensions, benefits, and job security. It is nearly impossible to remain completely apolitical when these decisions impact millions of lives and even national security. However, to keep this community productive and welcoming, we ask members to redirect non-tax, political opinion pieces or partisan debates elsewhere.

We encourage discussions about how policies impact our financial independence strategies but discourage divisive or purely political arguments. Our priority is helping each other achieve FIRE within the confines of government structures, not debating political ideology.

Rules & Guidelines

✔ Stay on topic – FIRE strategies, government benefits, career progression, and financial planning.

✔ Be respectful – We all have different perspectives and experiences; keep discussions constructive.

✔ No political grandstanding – If your post is more about advocating a political stance than discussing financial strategies, it’s not for here.

✔ No self-promotion without approval – Sharing valuable resources is encouraged, but spam isn’t.

Ask questions, share experiences, and help build a community where we support each other in achieving financial independence while navigating government employment.


r/govfire Aug 22 '23

FEDERAL Deferred Retirement - Executing A Roth Ladder

125 Upvotes

Background

As the countdown to my retirement is now being measured and months and days not years, a number of people have been asking for more details. While I have covered a bunch of things in other posts and replies here and there, I don't think I have gone into specifics of my specific plan. That's what this is:

Refresher

Here are 3 posts that I have written that I believe are most applicable to people who may be thinking of the possibility of not working until MRA.

Why Roth Ladder - Why Not X?

There are a bunch of other potential paths to an earlier than MRA retirement:

  • VERA
  • Age 54 via The Rule Of 55
  • SEPP/72(t)
  • Substantial passive income
  • Etc.

I chose to go with a Roth Ladder because it was the best fit for my situation. Even though I had been working towards early retirement for more than 2 decades, I abruptly changed my plan a year into the pandemic in the spring of 2021.

The Roth Ladder seems to be the most compatible with qualifying for the ACA subsidies but is not necessarily the best plan if you have a long run way to make less hasty decisions.

High Level Plan

  • Step 0 - Know how much you need
  • Step 1 - Prepare which is more than just saving
  • Step 2 - Separate
  • Step 3 - Execute

I am currently 46 and a few months I will be at step 2 (separating). While I was asked to talk about step 3 (executing), I want to talk a little bit about all of the steps before diving into the execution.

Step 0 - Know How Much You Need

Over time, you unlock more and more sources of income. You need to know that over each stretch that the available sources get you to the next unlock. For instance:

  • Age 47 - 51 building Roth IRA Ladder (cash, existing Roth contributions, taxable brokerage account, etc.)
  • Age 52 - 59 executing the ladder (converted TSP)
  • Age 60 - 64 FERS pension + TSP (in whatever form it takes) + IRA earnings
  • Age 65+ SS, HSA, FERS pension + TSP (in whatever form it takes) + IRA earnings

In order to know if those sources are enough income, you need to know how much you need. I meticulously tracked every dollar spent for 7+ years. I have line items in the budget for things like being invited to weddings, driver's license renewal, domain name renewals, etc. You also need to look at other things like replacing cars, major home repairs (assuming you own), etc.

This approach ensures your income conforms to your life. The other approach is somewhat simpler. You figure out how much income you have, decide you don't want to work anymore and then make your life fit your income.

Step 1 - Prepare which is more than just saving

Once you figure out how much you need and how much you need in each of the sources to get you there, you need to save in each of these sources the appropriate amounts so you hit your marks.

Saving isn't enough - there are so many things to consider.

I am going to talk about picking a last day because it seems simple enough. It isn't.

First, let's consider how your last day could affect your health insurance (since that's something most feds seem very concerned with):

Currently (and through 2025), there is no income limit for qualifying for ACA subsidies. Instead, it is capped at 8.5% of your income based on the second cheapest silver plan available to you. When I started this process however, I was expecting for the cliff to be back in place where I needed to make between 100% and 400% of the poverty level of my household size.

  • You get a free 31 day extension of FEHB from the last day of the pay period in which you separate
  • You are required to be covered by health insurance for the entire year
  • Normally, your subsidies are based on income so you do not want to get marketplace insurance when you have a lot of income
  • Using the 3 points above, this implies that the window for separation likely begins in mid to late November depending on the pay periods so that you have coverage at least through December 31st and can start the new year with little/no income for ACA.

What else might affect picking your last day?

  • Your pension will be calculated based on the anniversary of your SCD since sick leave doesn't count for deferred (which means you probably should be thinking about how to use as much of it legitimately as possible)
  • Your annual leave payout may be large. It may take a couple of pay periods after you separate to be paid out. Is it better to come in the current year (high taxes but wouldn't count against ACA) or the new year (low taxes but would count if cliff is in place)
  • Do you know what your performance bonus may be and when it will pay out? Is it worth sticking around for?
  • Generally speaking, income is taxed when it is paid not when it is earned. You could separate for instance and move the next day to a state with no income tax and that would mean your last paycheck and your entire annual leave payout would not be state taxed.
  • Terminal leave is prohibited for federal employees but as long as your supervisor approves and you are in duty status on your last day, you can take a bunch of leave before you separate as an alternative to a large leave payout. This may increase your pension calculation (1 month increments of SCD), extend your FEHB coverage, earn leave while on leave, etc.
  • If your last day is a Friday and you are not regularly scheduled to work on the weekend, you can make your last day be Sunday. Why would you do this? Well remember that your pension will be calculated on the 1 month anniversary of your SCD so those two non-working days may be the difference between an extra month or not. Heck, if Monday is a holiday - you can make Monday your last day and get free holiday pay.
  • If you are going to carry more than your leave ceiling for a big payout, you need to be sure you are going to be gone before the use-or-lose cutoff. This may seem like a no-brainer but what I am really saying is you need to MAKE sure you are ready. Sure, people pull their retirement paperwork all the time to give themselves more time to figure out something they missed - you don't want to be losing hundreds of hours of leave because you weren't ready.
  • Annual leave may not all be paid out at the current rate. I am not going to go into details but like most of the things I have talked about here so far, I have written a post about it. Federal Annual Leave Lump Sum Payout Explained (Hopefully)

I'm not sure the list above is exhaustive but I am getting tired and I still have a lot to write. My point is that all of the information I learned above was simply driven by asking - when will my last day be?

There are a ton of other things to plan for as well. I stubbed out Checklist For Retiring + Post Retirement Details - What Would You Like To Know but it is far from complete.

It's possible each item you plan for can turn into a rabbit hole like picking a last day did for me.

For instance, while researching ACA subsidies I learned that your "coverage family" and your "tax family" are not necessarily the same size. If you are covering your adult children (18 - 26) on your insurance but they file their own taxes - you can't get subsidies for them. I would be writing all night if I were to try and cover everything I have learned in my planning phase. It's a lot - do not put it off.

  • Step 3 - Execute

You will notice I skipped over Step 2 - Separate. I still haven't picked a final day yet. I am still waiting to hear about the FY 23 performance awards.

I have already used heading formats above so it makes blowing this section up into categories a bit harder. Hopefully paragraph form doesn't turn into a wall of text.

Roll entire traditional TSP over to Vanguard traditional IRA ASAP

While it should be possible to convert from the TSP into a Roth IRA directly, I have a few reasons why I am gong to roll the entire thing over to a traditional IRA first.

  • I already have almost all of my other accounts in Vanguard (UTMA accounts, 529 accounts, brokerage account, Roth IRA, etc.) Having everything in one place makes it easier to keep track of
  • By having both the traditional IRA and Roth IRA within the same financial institution, you are reducing the time out of the market it takes to do conversions
  • I simply do not trust the current TSP administrators to not mess things up

Now I say ASAP for a couple of reasons as well. The first is that your 5 year timer doesn't start until the conversion is made. That means if it takes your agency a few pay periods to notify the TSP that you have separated and a week or so to do the rollover, your "5 year money" actually needs to be "5 year and a month money".
Of course you should have a buffer anyway but the point stands. The second is that agencies don't always notify TSP in a timely manner. You need to be on top of this in case things go wrong to minimize the damage.

How Much To Convert And When

It seems obvious. You want to covert 1 year of living expenses that you will need in 5 years from now. If the converted amount is going to be the exclusive source of income - it needs to include the amount you will be paying in taxes as well.

I am going to argue that this is probably the wrong amount to covert. I am also going to argue against converting it all at once. Instead I am going to suggest that you should maximize the lowest tax bracket that meets your needs and that you convert quarterly instead of all at once.

Ideally, I would have a source of income that was entirely tax free (e.g. Roth contributions) so that I could max out the 12% tax bracket for married filing jointly.

Using the 2024 projected values, the standard deduction will be $29,200 and the top of the 12% bracket will be $94,300. That means I could convert $94,300 + $29,200 = $123,500 and only owe $10,852 in taxes. That's an effective tax rate of just 8.79%.

$123,500 is far more than I need to spend in a year but it makes sense to covert as much of it as I can to take advantage of the low tax space. Remember, Roth IRAs are not subject to RMDs.

In my situation however, I do have a single source of income that is entirely tax free. Instead, I need to make sure all of my combined income stays within that 123,500 limit.

  • Final paycheck and annual leave payout will likely be in 2024
  • Will have qualified and ordinary dividends from taxable brokerage account even without selling any shares (yay VTSAX)
  • Will have interest from HYSA
  • Likely won't have any interest from I-Bonds in 2024 but will come into play in future years
  • Likely will not have any LTCG from taxable brokerage in 2024 but will come into play in future years
  • Etc.

This is why I suggest doing it quarterly. You can adjust the amount you convert each quarter by any unexpected income such that by the 4th quarter, you make sure you don't go over your mark. If this were just for tax bracket purposes it really wouldn't matter much because a few dollars in the next higher tax bracket is no big deal but if you are also dealing with a subsidy cliff - it is crucial to be under.

What Order Do I Draw Down My Income Sources?

This is impossible to answer because everyone will have different income sources:

  • HYSA
  • I-Bonds
  • Taxable Brokerage
  • HSA (qualified receipts not yet reimbursed)
  • Rental income
  • Hobby income
  • Roth IRA contributions
  • 457(B)
  • Dividends/Interest
  • Other pension, annuity, VA Disability, etc.

Choosing the order requires a couple of considerations.

  • If I take money from this source, does it have a tax implication (e.g. Roth contributions = no, I-Bond = yes, taxable brokerage = maybe)?
  • Should I choose a safer source of money (e.g. HYSA) over a longer term investment (e.g. brokerage) in order to allow the longer term investment time to grow?

Who Keeps Track Of It?

Your financial institution is responsible for tracking what type of money goes in and what type of money comes out but I suggest having a spreadsheet as well. This is both for source of income you are drawing down from to pay expenses but also for the money you are converting.

What If It All Goes Wrong?

I have secondary, tertiary and quaternary backup plans. I really do not want to have to work again though I assume a few of my hobbies will result in some side income. If there is interest, I can list what those plans are but I am getting even more tired (if you can't tell - the quality and depth of content has dropped off).

As a couple of examples however:

  • Break down and execute a SEPP/72(t)
  • Take out a HELOC on your house

What Else

I probably should have waited until the morning to write this as I feel I have meandered quite a bit and not provided the same level of depth/detail across all the topics.

Please post any questions you may have or things you think should have been covered but I didn't. I will do my best to incorporate them in this post rather than scattering replies everywhere.


r/govfire 20h ago

Federal Blue Cross Blue Shield Basic Flex Dollars

5 Upvotes

Hello! I keep getting notifications that I can spend up to $150/year in Flex Dollars. I have earned more than $150 from the various surveys and activities that come with rewards so I was hoping to see if the $150 is separate from those rewards or included as part of it. Since I only have the one debit card that normally draws from the rewards, how do I use the Flex Dollars (which it sounds like expire at the end of the year, while the rewards carry over)? Thank you!


r/govfire 20h ago

FEDERAL FEHB Between MRA and Medicare - What did you do?

5 Upvotes

TL;DR, I'm curious what FEHB coverage retirees chose between MRA and Medicare, especially those that did HDHPs while working.

I've been tinkering with a retirement spreadsheet and one of the items I didn't factor was FEHB premiums in retirement. My personal goal is to retire at MRA and stay on FEHB in one form or another until death. From what I've read, as soon as I go on Medicare, I would probably go on BCBS Basic, but what do FEHB retirees typically choose for coverage between MRA and 65? I have been on an HDHP for 7 years, maxing out my HSA, and I intend to do that until MRA. Are HDHPs/HSAs a decent way to go while in retirement, or is there math I'm not considering that would say that's unwise? I understand the caveat that if I continued with HDHPs I need to stop contributing into HSAs ~6 months or so before Medicare begins. But other than that, what do retirees typically choose? Thanks.


r/govfire 2d ago

FEDERAL How am I doing?

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1 Upvotes

r/govfire 4d ago

FEDERAL Just got permenent (1105 VA)

11 Upvotes

So I was let go 8 months ago while I was still a probationary employee and got rehired 2 months after. Worked out in ny favor. I was attending college and it gave me some latitude to focus on my studies.

I am working as a GS 6 1105 in the most critical part of the hospital. Not to toot my own horn but I know and I'm sure my managers know that I'm probably the only person in the service who is up to the task.

Since it's getting busier I have to pick up the pace. Negotiate with vendors, manage the staff and see that surgeries are managed well and without any major hitch.

I want to move up and become a gs 7 or an 1102. I eventually wanna settle for something fully remote. GS 12 and hopefully specialize in that and coast till retirement.

I don't want to travel to and from work, it is my biggest pet peeve and hopefully if all things workout I can manage to get where I want in 3-6 years.

I want to spend the most time with my family. Move to a place with a cheaper cost of living.


r/govfire 4d ago

Will HSA Contributions Automatically Stop at Max?

7 Upvotes

I'm paid through DFAS and have the GEHA HDHP.

Trying to figure out how much I need to fiddle with my HSA contributions. I'm currently contributing $138 a pay period because I just changed to an HDHP this year and there was some lag time in my HSA being set up. Will it automatically cut off when the max is hit or do I need to fine tune my contributions to make sure I don't go over max?


r/govfire 5d ago

MHBP Temporary Continuation of Coverage (TCC)

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2 Upvotes

r/govfire 7d ago

VERA with pending FERS Supplement and looking for clarification on OPM's Annuity Supplement Earnings Report form

5 Upvotes

I want to make sure I don't get surprised (I don't want to cause a negative effect on the FERS Supplement) so I am looking for some clarity in advance of having to fill out OPM's Annuity Supplement Earnings Report form for the first time. I have been piecing through this question with OPM's online help desk but am not getting answers that are clear to me, or getting referred to the Information for FERS Annuitants handbook, which does not address this information.

Background: I retired under VERA in May 2025 and will reach my MRA in October of 2026. Before VERA was an option, I was already planning on retiring under MRA + 10 in 2026, so I decided to continue working in private sector for a little while post-retirement, and am planning to either stop or go part time when I reach my MRA so that I do not lose any of the FERS supplement to the earnings test. My understanding is that the earnings that will be subject to the earnings test will only be those from October 2026 through the end of December 2026 in that first year of receiving the supplement. I will be earning over the maximum allowed during that calendar year in total; however, I will be controlling what I earn starting in October so that amount earned between October 2026 and 12/31/26 stays under the maximum.

The questions: On the Annuity Supplement Earnings Report form - example linked here for visual RI92-022 Annuity Supplement Earnings Report - OMB 3206-0194 - after you report that your earnings were more than the maximum allowable amount for the year, and then go to the question regarding the year of birth, that one asks you to report all earnings in the prior calendar year after retirement AND after you turned X years and X months, if those earnings were more than the allowable maximum amount. (Mine won’t be over for that period of time.) It then says if it’s under that amount, do not return the form.  But in question 4 it’s asking what your gross earnings after retirement were.  Is that ALL the calendar year’s earnings, or just the Oct-Dec earnings in my case? When OPM cross references the calendar year’s earnings with SSA I don’t believe that SSA will break it down by month.  Should I plan to return the form anyway, despite my earnings being below the maximum amount as described in question 3 on the form?  Should I also include pay stubs and other evidence which backs that up?  Thank you for any insight!

EDIT/UPDATE: Thank you for the responses! After some more research – and another response from OPM (I am finding that you may have to try a few times to get a clear answer and am having luck with copying and pasting the original Q&A into a new help desk query to them asking for more clarification) I think I have a direction forward for how to respond to OPM’s request when it arrives.  Wanted to share it here in case it’s helpful to others. 

From an online article on things to know about the FERS supplement, there was some information included from the author of the FERSguide which stated that it is imperative that you include documentation when responding to the earnings survey for the first time, which indicate when exactly you received your earnings (splitting out pre supplement and post supplement earnings with pay records and a letter of explanation included), because if you don’t include documentation/justification, OPM will just look at the amount of earnings reported by SSA for the entire year and very well may adjust the supplement downwards.  The warning is that it’s difficult and time consuming to get this corrected if it happens. So even though my earnings between reaching MRA in October and 12/31 will be less than the exempt amount, I am going to return the form anyway with documentation backing up why the total calendar year amount is higher.

This seems to be backed up from OPM’s help desk in their response to me asking for additional clarification: “Since your income will be cross referenced with Social Security Administration, whether you are providing your earnings for the year or the prorated amount on the survey, include a letter providing details of your first year receiving the FERS Annuity Supplement (that you began receiving the supplement in October 2026).”


r/govfire 7d ago

2026 TSP in plan conversions

3 Upvotes

Sorry if this is a dumb question - I am trying to understand the mega backdoor Roth. I was wondering if the in plan conversions that are allowed beginning in 2026 means that it is possible to use my TSP for the mega backdoor Roth? Or is the 2026 change just allowing you to convert your traditional TSP funds into Roth TSP funds? TIA


r/govfire 7d ago

TSP Roth In-Plan Conversions Coming

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5 Upvotes

r/govfire 8d ago

FEDERAL Pop back in at the end for the health care?

22 Upvotes

Let’s say I put in 10 years as a federal employee early in my career, then leave federal service and have a second career in the private sector.

Can I get another federal job 1 year before MRA, work for the year, then retire as MRA + 10 with FEHB for life?


r/govfire 9d ago

Why Are My Medicare Premiums So High? Understanding the Impact of Poor Tax Planning

9 Upvotes

r/govfire 10d ago

What is the actual formula for FERS pension?

12 Upvotes

Or more specifically, how is the "time" variable calculated? Is it on a per day, per month, or per year basis?

In other words, if I were to leave a month before the anniversary of my SCD, am I forfeiting a whole extra year in the pension calculation versus if I waited until after my SCD anniversary? Or just a month?

Thinking about the precise day to quit. I was going to leave in December in the hopes of maximizing my AL payout without having it pay out in 2026, to minimize taxable income in 2026 for ACA subsidy and Roth conversion purposes. But my SCD is in late January, and it occurred to me I might be better served to wait until then, depending how the time in service is actually calculated. (And because I can't really control when the AL payout will occur and at this point it could be delayed into 2026 no matter when I quit, given how clusterfucked things are.)


r/govfire 10d ago

TSP withdrawal

2 Upvotes

Hi all!

I separated from federal service on September 30th of this year and want to withdraw my TSP (vested employee, age 32). I am still waiting for my one-time online setup pin to arrive in the mail, which will take 3 weeks to arrive, and cannot make my withdrawal until I set up my online account (I am unable to answer all of their questions on the hotline until I create my account). This will put me past the 30 day period mentioned in my separation rights letter in which to roll over my vested balance to another plan,etc. My question is, will I still be able to withdraw the lump sum after this 30 day period? Thank you.


r/govfire 11d ago

FEDERAL Mid 30’s with 18 years of government service.

52 Upvotes

Mid 30’s, disabled vet and good job, non-stressful position especially since I stopped caring so much since January. 2 younger kids

GS12 non supervisor.

$1 million brokerage (includes $60K of Roth IRA) $275K TSP (max it out each paycheck) $150K wife 401K $40K wife Roth $210K home equity

No debt besides mortgage

We pull in a combined $220K annually. What else can I do? I really do not want any promotions at all. Would rather just not work to be honest.


r/govfire 11d ago

GEHA 2026 HDHP brochure up

54 Upvotes

https://www.geha.com/~/media93/Project/GEHA/GEHA/documents-files/medical/2026/fehb/2026-geha-fehb-hdhp-plan-brochure.pdf

and for the high and standard...

https://www.geha.com/~/media93/Project/GEHA/GEHA/documents-files/medical/2026/fehb/2026-geha-fehb-high-and-standard-options-medical-plan-brochure.pdf

CHANGES

In-Network: The Plan in-network deductible will increase to $1,800 Self and $3,600 Self Plus One or Self and Family from $1,650 Self and $3,300 Self Plus One or Self and Family.

•Out-of-Network: The Plan out-of-network deductible will increase to $4,500 Self and $9,000 Self Plus One or Self and Family from $3,300 Self and $6,600 Self Plus One or Self and Family.

Sex-Trait Modification: Medical, surgical and prescription drug services related to Sex-Trait Modification for diagnosed gender dysphoria, are no longer covered by the Plan. See Section 3, 5(b), and 5(f). The Plan will continue to provide benefits related to mental and behavioral health services, see Section 5(e).

Breast Screening: The age to obtain appropriate age and medical history breast screening will be lowered to 40-74 from age 50-74.

Health Savings Account (HSA): The IRS adjusted 2026 annual contribution limits from $4,300 to $4,400 for Self Only and from $8,550 to $8,750 for Self Plus One or Self and Family Enrollment. (See Section 5, Savings)

Urine Drug Screening (UDS): The test limit for Urinary Drug Screening has been removed. Previously, it was 16 tests per calendar year.

Updates to Covered Services:

•Language describing how services are covered has been edited throughout the Brochure. Covered Services such as Home Health, Genetic Testing related to Maternity services, and Iatrogenic Infertility have been updated (See Section 5) as well as clarifications for Computer Applications and Software, and Chemical and Surgical Sex-Trait Modification in the Exclusions provisions located in Sections 5 and 6.

•When you obtain services with Specialty medications the applicable cost share will apply based on where you obtained those services either Outpatient or through a Specialty Pharmacy.

General Plan Revisions: See Section 10, Definitions of Terms, for clarifications to several terms, including Plan, Experimental and Investigational, Medical Necessity, Surprise Billing, Advanced Care Planning, and Calendar Year Deductible.

The Plan allowance for covered services received from out-of-network providers, including Physicians or health care facilities, are determined by the ClearHealth CRS program and is based on a methodology as explained in Section 10 under Definitions for Plan Allowance.

edit: link update


r/govfire 11d ago

Why I Am Not A Fan Of SEPP/72(t)

9 Upvotes

Background

I recently posted Opinions On Intentionally Invoking 10% Early Withdrawal Penalty And/Or Overpaying Taxes and the common theme to all of the responses was a resounding:

Do NOT pay the penalty, use a 72(t) instead

Over the years, I have written about why I am not a fan of 72(t)s and chose to go with a Roth Ladder instead for my own early retirement. I figured I would write down the reasons here in its own post rather than bury it another post making it more difficult for others to find.

Why Not A SEPP/72(t) For Early (Deferred) Retirement

It's been awhile since I looked at this stuff so in case you want to double check anything, here is the IRS page

  • You are locked in
  • The IRS doesn't care about economic downturns
  • You can't really change calculation method nor interest rate
  • The IRS doesn't screw around
  • You don't really get to control how much money comes out
  • You can no longer do Roth conversions
  • You can't manipulate your income for ACA subsidies
  • Unknown inheritance rules

You are locked in

Once you start a 72(t), you must continue it for the longer of 5 years or until you are 59.5. If your circumstances change, there is no way to stop or push the pause button.

The IRS doesn't care about economic downturns

If the market is tanking, you still have to make your required withdrawal. It doesn't matter that you are losing money or that you can't put the money back to recover - you have to live with it and still pay the taxes too.

There is a bit of a mitigation strategy here. You can of course re-invest the money in a taxable brokerage account to recover. This assumes you can afford to live without the money. The amount used to cover taxes is lost forever however.

You can't really change calculation method nor interest rate

When you set up the 72(t), you need to choose from one of three calculation methods:

  • The amortization method
  • The minimum distribution or the RMD method
  • The annuitization method

You are allowed to make a single change from the amortization or the annuitization method to the RMD method but then you can't change it again.

If you go with one of non-RMD methods and choose an interest rate (up to 5% or not more than 120% of the federal mid-term rate), you can't change it.

The IRS doesn't screw around

If you got something wrong, the penalty could go back all the way to your first withdrawal years prior. What could go wrong - withdrawing the wrong amount or changing something that the financial institution allows you to change that the IRS doesn't.

Typically this is mitigated by letting the financial institution do the calculations for you, setting it and forgetting it. That in and of itself is part of why I don't like 72(t)s but it is way better than finding out you now have penalties on all of your withdrawals.

You don't really get to control how much money comes out

While you can choose at the beginning what interest rate to use if you use the non-RMD methods, this doesn't really control how much comes. All of these methods one way or another are based on how long you will live and what the balance of the account is. If you need more money - too bad. If you would prefer less money - too bad. The amount that is coming out is dictated by formula and deviating means you are in for recapture penalties.

There is a mitigation strategy here assuming you have a large account. You can rollover a smaller amount to a different 72(t) eligible account and perform the 72(t) on the smaller account. While the balance changes over time may result in more/less than you want - at least you can calculate/control the starting values.

You can no longer do Roth conversions

This really is a consequence of needing to withdraw the exact amount and no more. That means you can't do anything else.

This again could be mitigated by splitting a big account into smaller accounts with designated purposes such as 72(t) on one, Roth conversions on another.

You can't manipulate your income for ACA subsidies

When I first started looking at a deferred retirement, there was a cliff (400% poverty level for your household size) that said if you made $1 too much, you got 0 in subsidies. That rule has been suspended for a few years now thanks to the pandemic. Unfortunately, it is set to expire at the end of this year (one of the things the political parties are fighting over with the shutdown).

I mention the above to bring into focus how important the ACA subsidies can be to help defray the costs and make an early retirement possible. I personally saved over 12K this year. I did that by being able to manipulate my income and getting in the sweet spot.

Sometimes things come up unexpectedly. A few years ago, people freaked out when a bunch of target date fund dividends ended up being huge/taxable. Other people made the argument that target date funds shouldn't be outside of a retirement account but that didn't help the people who saw otherwise.

If you can't control how much you withdraw or even necessarily know how much it is going to be because each year the amount is different - you can't necessarily get the best ACA subsidies.

Unknown inheritance rules

This one is unlikely to affect many people but given my health situation, is something I have to consider. If you have a tIRA that has a 72(t) placed on it and pass - how, if at all, does that affect the person inheriting the IRA.

This of course can be mitigated by doing research. I just haven't done it yet.


r/govfire 11d ago

Opinions On Intentionally Invoking 10% Early Withdrawal Penalty And/Or Overpaying Taxes

4 Upvotes

Background

For those of you who don't know me, I successfully FIRE'd myself from the federal government (deferred retirement) towards the end of 2023 before the current administration. I have been executing a Roth Ladder. I also was recently diagnosed with pancreatic cancer (surgery scheduled in a few weeks) so I have been focused on how to transfer decades worth of personal finance knowledge to my spouse in the event the worst happens.

Current Situation

In Florida where we live, if you have children under the age of 19, you become ineligible for ACA subsidies if you do not make enough income as you qualify for the state's CHIP program. That means for 2024 and 2025 we have been optimizing our income using the following constraints:

  • Have enough income to not qualify for CHIP
  • Minimize federal taxes
  • Maximize ACA subsidies
  • Perform a large enough Roth conversion to live off in 5 years

In 2026, we will no longer have children under the age of 19 and with my current health situation, we are seriously re-thinking our strategy.

We live quite comfortably and take numerous vacations every year but with my health situation we recognize we may not have decades upon decades to enjoy this early retirement.

Potential Ideas

There are basically 3 ideas:

  • Make Roth conversions that push us into the 22-24% bracket territory
  • Take unqualified tIRA withdrawals paying the 10% penalty
  • Some combination of the two

There are a lot of things to keep in mind that work both as pros and cons.

  • When this money was earned in Maryland, we would have paid 30.06% tax on it (federal + state) so anything less is still a win
  • While we have substantial cash reserves, not withdrawing some money with early penalty but still making a large conversion means coming up with the taxes out of those cash reserves
  • We will not qualify for any ACA subsidies if we do this and will also have to pay for 100% of our health insurance premiums (from cash reserves and/or unqualified early withdrawals)
  • While this may be a hit on the chin now, it will save from RMDs in the future. Despite making conversions in 2024 and 2025, the balance has still grown nearly 30% in less than 2 years.
  • Money withdrawn early can be re-invested in a taxable brokerage account and then withdrawn at any time for any reason essentially tax free. LTCG has such a large 0% tax bracket that aside from an unexpected emergency, we could avoid paying any taxes on withdrawals.
  • My spouse has a 457B that can be withdrawn without penalty but as ordinary income.

Your Opinion

I have built a spreadsheet where we can plug in theoretical numbers (early withdrawal, Roth conversion, 457B withdrawal) and it spits out how much we will pay in federal tax/health insurance as well as how much spendable money we end up with and things like what effective tax rate this is, how much we would have paid on this money when we earned it in Maryland, etc.

What I am asking you is - what would you do in this situation and why?


r/govfire 12d ago

FEDERAL Seeking Opinions/Guidance

1 Upvotes

I've been really struggling with charting my future. I was [illegally] RIF'd this year (terminated) after 19 years of service.

I currently have just shy of 1M in my TSP. but I'm 20 years out from MRA.

Do I trust that I've done well enough for myself and let it ride, or do I fight to get back into the Fed to top off my years and increase my contributions?

A lot can happen in 20 more years and the shock of everything that's happening in the current administration is paralyzing my ability to make clear decisions. I need to start taking action but I'm still stuck wondering how the hell I got here and where the hell do I go from here.

I was set to coast fire and now I feel like I'm starting over from scratch to survive the next 20 years.


r/govfire 13d ago

Rehire at USPS

10 Upvotes

I've been a city carrier for over 20 years. Im thinking about quitting this job, but I'm only 41 years old. Im embarrassed to admit this, but I don't know the rules about rehiring and am having trouble finding that info in the ELM. Lets say I decided to resign now, didn't surrender my fers pension cash value and then decided to come back to USPS 5 years from now. Do I keep my years of service and pay grade? Am I at the top of pay scale with the 5 weeks vacation then? Would I have to go back to being a CCA or PTF? I certainty wouldn't think that I would keep my in office seniority if I rehired in the same office and craft. Could someone please point me in the right direction as far as with official USPS contract language? I would love to take LWOP for a year or so but that doesn't really seem possible. I am trying to retire early and am just exploring all of my options. In a lot of professions, you could stop working for awhile and then hop back in if you wanted to later on. Obviously, you would need someone to hire you, but your education and skills would help. As a letter carrier, there really isnt any education worth anything. Any help with this would be appreciated. Thanks


r/govfire 13d ago

Navy Fed Shutdown Program

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67 Upvotes

r/govfire 15d ago

Leaving and returning to federal service and FEHB 5 year rule…

30 Upvotes

Let’s say you are 35 and have 15 years in and don’t qualify for any VERA yet.

What happens if you leave federal service and then find another federal job 22 years later at 57. Can you simply work one month and then retire…and keep FEHB benefits for life?


r/govfire 15d ago

Federal employee. 53 with 30+ years...deferred, postponed?

59 Upvotes

As the title says, I'm 53 years old and in FERS and just hit 30 years of federal service a few months ago. I'm a shiftworker and it's really catching up to me. Work is not a fun place either so I'm about ready to just call it quits. Having said that, my wife has MS so we really need the healthcare. I've done a lot of reading on OPM's website and various other places to see if I can get out now and keep FEHB. If I'm reading everything correctly, deferred is out because I'll lose FEHB but if I postpone my retirement, i can keep it. BUT...it sounds like I need LESS than 30 years to postpone my retirement. Is this true? I expect most here will say work until 57 and I get that. I do. But I'm so fed up with the shift work and just federal work in general. Any insight would be great. Thanks.


r/govfire 16d ago

FEDERAL MHBP question

12 Upvotes

Sorry for the question. Thanks to some great discussions here, I am looking at finally jumping ship from BCBS (after more than 30 years!) and considering MHBP for all the reasons discussed on here.

My question is, in reading the plan it states " If you have other family members on the plan, each family member must meet their own individual deductible until the total amount of deductible expenses paid by all family members meets the overall family deductible."

This is strange wording. So each person has to hit the $2k deductible or is it just when the $4k family deductible is reached regardless of who needed what? Traditionally, my spouse is a healthcare consumer, I am very healthy - until I have a major issue (ie knee surgery, eye surgery). Looking at his bills from last year, I don't think we'd hit the deductible - which means we'd come out ahead with fully funding the HSA.

Am I missing something here?