Everybody's got a price: What's yours?

Monday - 2/27/2012, 2:00am EST

Buyout season is upon us. January, February and March are the months that buyouts are most cost-effective for Uncle Sam.

So what would you do if the boss offered you $25,000 (before deductions) to take regular or early retirement? What's your tipping point?

Last year (2011), 21 federal agencies offered buyouts to more than 30,000 federal and postal workers. They ranged from major offers (6,500 in the Air Force) to as few as 33 employees of the Army Materiel Command. Most were targeted to specific components of agencies. The Education Department targeted 350, or about 10 percent of its total workforce in specific sub-agencies. Agriculture limited its buyout offer to 1,966 workers in its Rural Development division. Agencies offering buyouts (VSIPs) and early retirement (VERA) included the U.S Courts, CDC, Federal Trade Commission, GAO, NASA, the NRC and, of course, the eternally downsizing U.S. Postal Service.

So far this year, buyouts have been offered to a limited number of employees at the IRS, the Los Alamos National Laboratory, roughly 800 VA employees and another round for Air Force civilians. Both the GSA and the Transportation Security are planning buyouts. Many IRS workers are expecting another round of VSIP and VERA offers.

(Check out a list of agencies offering buyouts and early retirements.)

When and if a buyout offer comes, you will likely have a very short window in which to decide, and leave. If there is a stampede, you may face a first-come-first-serve situation. So what should you consider?

David Snell, director of retirement services for the National Active and Retired Federal Employees said, "Nobody should retire based solely on a buyout offer. You will always make more money working than if you retire." But he said if all things are equal, and you are ready, willing and able to go, "a buyout would be your tipping point."

There are other financial consideration to consider. Such as:

  • Once you retire, how long before you get your first full annuity check, as opposed to an interim payment which could be as little as 40 percent of your projected annuity. The answer is, you don't know. Neither does the government. There is currently a backlog of about 60,000 retirement applications. Although, OPM promises to cut that way back, a new wave of retirements and early retirements won't help clear the pipeline.

  • The "average" time between retirement and your first full annuity check is supposed to be around four months. But we've heard and documented cases where retirees were still getting half rations after more than a year. That's a long time to go if you income drops but your bills remain constant. People shouldn't have to dip into their TSP accounts before they want and need to do so.

  • Finally, there are other financial considerations. Federal pay has been frozen for two years. The President (who implemented the freeze) has budgeted for a modest 0.5 percent raise in January. But Congress may continue the freeze. Retiree cost-of-living adjustments are another thing. COLAs are based on the increase (if any) in the cost of living.
The COLA factor prompted Sidney from Cincinnati to ask "...I am under the CSRS system. Do you know if there is any chance of a COLA at the end of this calendar year. Leaving in May gets me 2/3rds of the COLA and if there is one makes a big difference on staying or leaving."

Good question. Two things: There is no guarantee that there will be a COLA, or at least a sizable increase for retirees in January 2013. It all depends on the level of the Consumer Price Index for the third quarter (July, August, September) of 2012. Obviously we don't know what those numbers will be. One correction. COLAs are pro-rated. To get the full January 2013 COLA (if any) someone would have had to be retired by December of last year. Someone retiring in May of this year would — assuming there is a COLA for 2013 — get less than half of the 2013 COLA.

2012 Causey Awards
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