Latest / Federal Retirement Advisors | FedLegacy / Federal Retirement Process 2026: ORA Timeline, Interim Checks, and TSP Withdrawal Rules
Transcript
- William Smith: Hey, what's going on, everybody? what going to dive into, because it's a lot of good stuff going on right now, especially in the government. And ⁓ one of the things I want to talk about today ⁓ is we're gonna talk about the first pension and what that means how to calculate that and what that means as far as retirement goes. But today was a a is a big week because with OPM, July 1st, July 1st, they started the the digital, the O R R A. Right? Online retirement. And so that starts, that starts July first. And so we want to talk about what that means because a lot of folks have been talking to us and they, you know, we have a lot of people that were retiring month and they're going through that process with the the the online retirement, the the whole digital process. And want to talk about what it means to you, especially if you're planning on retirement in ⁓ by end of the year or so, and because you'll be engaging with it. And what the difference means and what some of the some of the good things are, what some of the pitfalls are. And they're also helping you understand the timeline that and how that might alter the timeline and what and what it won't alter, right? And so wanna make sure we go through that. And again, we're we're getting away from all the slide based stuff. Soon we'll be bringing you all guests that we'll be talking to. Just so as you look as this might be your s maybe this is your first time. Or your second time or your 20th time, and you're like, well, where is the slide decks and all those type of things? We're getting away from that because we want to be more engaging. We also want to be able to answer your questions in real time and pivot to things that you might want to talk about. We don't want to just be talking at you. We want to be talking with you. And that way this is more conversational and that way can grow together, right? If you come on here one day and you have a specific thing you want to ask. We want to make sure we open the floor to you to be able to do that. But and so as we go through that transition and making it su make it sure it's more engaging. So today, and and we also want to make sure that we're able to address things in real time, like the digital retirement system that came online in on in ⁓ July 1st, right? That's a big topic this week. We want to make sure we knock it out. And so when it comes to the d when it comes to the digital retirement ⁓ and they're calling it O R A, right? And that's the online retirement application. What does it mean, right? Because there's a backlog and and and and the backlog, obviously people are experiencing it. We have people that are still have not received their full retirement check five months in. Still have clients who have not see received their retirement check five months in, they retired in December and they're still not they still have not received their check. Now, how what I wanna wanna wanna explain it to you is That varies per per agency. So back in January, OPM's ⁓ secretary r released an article. And we can I'll try to give it a team and see if we can get it to you later. But that in that article, it was called Peeling the Onion. And in the article of Peeling the Onion, it's on OPM.gov. If you just if even if you just Google peeling the onion on on OPM.gov, it breaks down the timeline of how retirement works. And so on average, and these are all on averages, I have clients who they retired at the end of September. They got their first paycheck in February, they got their estimate within within within 30 days. Everything is different based on your agency. So let me break down the timeline how the ⁓ online retirement application is to benefit you, and then what how it changed. Okay, so here's the timeline. On average, and these are all on average, this comes from opm.gov, the secretary, is fourteen it takes the average federal employee fourteen days to complete their retirement paperwork. That should shrink based on the old the the online retirement application. They say that part process should shrink because less paperwork is intuitive. A you know, AI can help with it, different things like that to make that process easier. here's the part that isn't easier. That varies by agency. So on average, it's 14 days to do that. That was back in January. The online retirement applications should shrink that. Then 60 days on average that retirement applications are processed by your HR. That is where there's a there's a there's a huge discrepancy. I was talking to a client because before this call, I wanted to make sure I just some different samples. And so this I was just talking to a client. She I was texting her before this. worked at the VA, the one in DC. When she retired, her process, I'm sorry, no, she does not work at the VA. She ⁓ worked at the Department of Transportation. Department of Transportation, their HR department did a great job. She's in DC Southwest New Jersey Avenue headquarters. Their process was pretty easy. It was at the agency for 30, I mean for about 20 days or so. Went over to the payroll department. The payroll department processed it in about 10. She had her, she had her, she had her intern check. Then she got her full check by February, right? So September she retired. She got her first intern check in December. She got her full paycheck in February. That's a pretty quick process. That's about as quick as it goes. So 14 days of process, 60 days on average for HR based on OPM. They have a fifty then listed on the site a 51 day period on the payroll, because then it has to go through payroll too, and all that stuff has to get set up. And then it gets to OPM. And then the OPM is now saying with the ORA that it's going to take them seven days, seven to ten days. They say seven days is that is is what it's going to average for them to then process your retirement once it gets to them. And then now you get your first paycheck. And so that also shrinks. But because before the O OPM timeline was a lot longer, but they're saying once it gets to them, it should take them no more than seven days. But it has to go through your HR, which is on average 60 days. And again, these are averages based on OPM. Every agency is different because the Department of VA, on the other hand, as opposed to the Department of Transportation, is over 60 days when it comes to their agency process and retirements. Because we have clients now who retired in December who have still not received the first paycheck. And we don't know where it's lost in the process. But unlike the Department of Transportation, they still haven't received their first paychecks. Right. And again, you might be experiencing that or know somebody experienced it. It varies per agency. But let me just break down the timeline again. You got 14 days on average ⁓ at at OPM. I mean the process, the paperwork at the beginning of the process, that gets shrinked by the ORA. Then it goes to the agency. Agency is where it gets lost. And OPM says they're working with different agencies to help shrink that process. Then it has to go to payroll. Payroll on average takes about 51 days according to OPM. And then it gets to OPM. And they're saying they're shrinking their process now to seven days once they get full package. Okay. Now, what does this mean? For you when you retire? Because that's the big question. People come to us they're afraid because they're like, okay, well, what do I do in this unknown abyss? Of is it 90 days? Is it 30 days? Is it 120 days? What do I do in that process? And it's a valid question. And so here's how it works. One, gonna get. An estimate of what your pay is gonna be anyway. You're gonna get an estimate, right? You're gonna get, they're gonna give you anyway, they say they say quoting the OPM again. All these numbers I'm quoting are quoting the OPM. That you're gonna get between 60 and 80% of your pay during that interim check on that interim part, interim part, right? So you're gonna get that. Now, the pro the the the issue with that, the gift and the curse of that is this. When you get in that 60 to 80 percent. Estimated check. They're not going to take state taxes out. They will take federal taxes out, but they're not taking your insurance out. And they're not taking your fegly out if you're getting fegly in most cases. And so those allotments that are coming out for things that you need don't come out. Now, when you do get, and so check is one number. But then now when you do get your full retirement check. those things do come out. And then that first one, the first one's gonna be a little funny because they're gonna give you back pay from what they didn't give you from when you first retired. But they're also gonna be taking out the FEHB that they didn't take out all that time if if you're not paying it along the way. They're gonna take out the FEHB, they're gonna take out the Fegley premiums, and then you still owe state taxes along the way. And so the thing, the thing that that that that that I was telling, and the thing that I tell a lot of clients is as they're leading up into retirement is you want to make sure you're putting money aside so that that process isn't a stressful process for you. Because our goal always is to make sure you retire on time and with confidence. And so it's hard to have confidence when you don't have set aside and you don't know when a new check is going to, when your first real pay check is going to come in And so, you know, I've seen people take out more money than they need to from their TSP that ultimately raises their tax bracket, maybe push them into Irma territory in the future because now they took their taxes too high because they got their annual leave. Then they get, you know, the full paycheck over time. Then they took too much out of their TSP. Just lack of planning. If you meet with us in our in our in our in our TSP finish line process sessions, we help you plan for that. If we see that there is a possibility that if you take too much, it might push you into another tax bracket, it might affect you with you with Irma and things like that, then we will we will either help you come up with another strategy to help you see that and that. Because again, when you retire, you know, it's stressful. Is your is your first time in what, years. Not having a paycheck coming every two weeks. And that's a real thing. And so you want to make sure that you have a plan in place so that when you do retire, not stressed. And that's the main thing that we talk a lot about at Fed Legacy is we want to make sure that the people that we meet with, we lower their stress levels. Because when you have when you have high stress levels around retirement, You can make poor decisions. And here's the thing. Once you get through that process where your full pension check begins to come in, I can tell you this now from doing this 17, 18 almost eight, eighteen years now, is that once you get that first paycheck, you can breathe easy because you know, okay, now this is gonna come to me monthly. You know exactly what's coming out, you know exactly how you posit you've positioned your TSP. Well, you and I say this if you if you're working with someone. That can help you navigate it. I should say it's peaceful in that case. But once you have everything outlined, I can tell you, like, is is interesting. I was talking to a lady this morning. She retired from the CIA and she was, she was just telling me how retirement is. And she was like, I'm all involved with my nieces and nephews now. They're getting ready to have a baby. And there's all this stuff about them. And I was like, I gotta it gotta feel good to be able to to to to relax and worry about their drama. Cause I always tell people, I'm like, When you retired, the drama's gonna seek you out. I mean, because you need to, and I and I mean family good drama. It's like it's good to have it because it's like it's a new mission every day, right? so my aunt-in-law, she ⁓ she lost her husband about three ago. And you know, she's still grieving and everything like that. But every time I see her, and now she's she's living alone and it's it's with the dog, it's just interesting. It's it's hard for her. And she's she retired from the the US courts. you know, so she has her pension, he was VA so she she has everything set up financially, but she's just bored now. You know, she's not living with any it's just tough. And so I always tease her, I'm always like, What's the new adventure? Did did the dog run out the yard? Like, did you know what what do you what's what the VA doing with it with Uncle Ronnie's pension? Like it's always something new. She's like, Well, my tire flat. I'm like, ⁓ interesting. All right, that's a new adventure. Like just every Always looking for the new adventure. So I say all that to say is that when you're in retirement, the last thing you want to be thinking about is money issues. And so you want to make sure you have those things lined up. And so this this this ORA and the and the OPM working with the agencies to make sure they shrink the wait time, it's a big deal because a lot of folks, especially if you're getting ready to retire, it can be a very stressful time. And so shrinking that timeline is super important, but making sure that you make the right decisions financially during that timeline another very important thing. And so here's what you want to do. You want to make sure that if you're getting ready to retire in the next year, you want to make sure you put some money aside to fill that gap. I always tell people at least have two to two to three months worth of savings set aside because you're also going to get your annual. You also will get your annual leave. So you're gonna get that check too. If you if you have some, right? So you want to make sure you have at least two to three months aside because the annual leave could be one or two months itself. So now you're at five to six months of savings. That gives you the peace of mind. If you don't, and I get it, that's okay. You wanna make sure that you you you you at least take some, maybe some money out of your TSP, if that's an option. you know, and we could talk about how to do that and how to structure that and what that means. We want make sure you do that because that's a that's another piece that you have to remember. The TSP timeline is different than the OPM timeline as far as retirement and your first check. TSP tends to TSP gets word through OPM that you are retired or through your agency that you are retired. They get they get that word earlier. And so I've seen cli I've seen clients who ⁓ like for example, the lady that department retired from the department of transportation. She didn't get her first full retirement check until February. But and she was she was younger than 59 and a half. But TSP got word that she was retired. They sent the f a notice that she was retired, considered retired before then. So she got that done in it was around mid-November. That was in that was in TSP, and she retired well, no, sorry, mid-October, but she retired into September. And so by mid-October, She was able to withdraw from her TSP without the 10% penalty because they had her down as retired. But she didn't get her full paycheck until the end of the to the to the to the beginning of February. So those timelines are different. So while that matters, I was talking to a guy, he's retiring at the end of June I mean into July. Well, no, he retired into June. His paperwork is in process right now. He tried into June. He's waiting now. But he he he was like, well, I submitted my retirement paperwork. I didn't have a bunch saved though. Can I go into my TSP? I said, no, you can't do that just yet, because if you do it now, you're gonna have that 10% penalty on it. And so we're waiting till he has that fully retired, that fully processed, so that he can then take money out of his TSP to to help him bridge the gap of what possibly could be a five month process. So those are the things that are ⁓ are are are you know are important when it comes to preparing for retirement. And those days leading up to it is understanding that timeline. Again, the article from OPM is is peeling the onion, is written by the secretary. It's ⁓ it's a good article. They give averages again. They only can give averages because the agency part is the black hole that unfortunately nobody can predict. Some some HR, some HRs are great, some aren't. Like Department of Transportation is amazing. No disrespect to everybody that works at the VA, but the VA is not so much. And so it just goes case by case by agency, by where you are location wise, all that type of stuff factors into it. And so ⁓ you just want to keep that in mind as you get ready to retire.