$40,000 buyout: Manna from heaven or insulting bribe?

If the government were to offer workers a $40,000 incentive to retire, everybody would be happy, right? Senior Correspondent Mike Causey says not quite everybod...

So how are retirement-age feds reacting to the tantalizingly remote possibility that Uncle Sam’s buyout carrot will be raised from $25,000 to $40,000? Although it’s mostly talk at this point, lots of people are excited by the possibility. Or insulted by it.

Ever hear the term, different strokes for different folks?

Reaction from readers to a long-shot upgrade of the buyout package range from show-me-the-money to are-you-kidding-me? Except they didn’t say “kidding.”

The vast majority of people who responded to the column said yes. Many had been waiting for the 1990s-era $25,000 buyout to be adjusted for the fiscal realities of 2016. Some who would have had to take early retirement in the mid-90s to qualify for a buyout now have more than enough time to retire with a much higher annuity. Many are years past their once-planned retirement date. Some have held on for economic reasons, or because of the not-so-hot outside job market. Or because they are still reeling from the Great Recession and wondering when the next one will arrive. Even with an inflation-indexed annuity (an almost unknown perk in the private sector) many on-the-job feds and postal workers wonder if they can make it in retirement. Especially those who didn’t max out on their TSP contributions, didn’t get the government match or played it too safe with investments that barely kept pace with inflation.

What wasn’t a surprise was that most of the many people who responded said, in effect, yes. Most were very happy that a higher buyout amount is even on the radar, even though it is a long shot.

But a surprising number, maybe 20 percent, either said that $40k wouldn’t be enough to entice them out of government and into retirement. Some said deductions would be a problem and that they would only accept a $40k buyout if it were tax free and deduction free. The odds of that happening are slim and none, with none having the upper hand. Imagine how the media and some politicians would handle $40,000 tax-free buyouts for bureaucrats!!! Put that in the ain’t-gonna-happen category.

Coming up, we’ll pass on some comments from feds who said they’d jump at a buyout offer, and why. But for today, here are some of the downsides people found in what others believe would be a fantastic offer:

”The problem with any type of buyout is that they are most often provided to the employee in a high-tax earning year (October, November or December) rather than in the subsequent lower income retirement year. That means that a $40k buyout, less 33 percent in taxes and deductions, equates to a mere $27,000 — not much of an incentive to encourage early separation.” — Gordon L. Homeland Security

Wanda L., from the Treasury Department says she’d take the $40k but thinks it should be governmentwide (as opposed to an individual agency decision) to open up the promotion pipeline to the under-55 crowd. “The government has a great restructuring compensation tool by offering employees in the highest pay grades a way out without penalties, which would save a serious chunk of money. And if Uncle Sam only replaced 1 in 3 employees in the entry level salary ranges, it would remain productive and collaborate with the normal flow of life — the old generation giving way to the younger generation.”

From the IRS, Chris S., said first he’d “take a LONG HARD look at my current financial plan for sure! I could go now, but I enjoy my job. So I would have to decide which of the two positive options to choose.”

Also from the IRS, Randi S. has a different approach. “I decided two years ago that my 55th birthday would be my magic number. I’ve been blessed with having reached a fairly high grade … and my husband will continue to work … when I leave. Would it be nice to be offered a fat bonus of $40K? Yeah, that would be quite a nice little supplement. Am I going to hold on until it happens? Nope. I’ve already made up my mind … it’s time to move on to the travel and leisure life we’ve talked about … time to turn it over to those who still have the same drive I had years ago.”

Chris A., from Homeland Security said the best part of his long federal career has been since DHS was created in 2003. He said he loves it but, “I’m exhausted and it’s time for me to own my time and spend time with my parents while they, and I, are still in great shape. Chris said he could leave this fall with more than 33 years service and 9 months of unused sick leave.”

Bob from D.C. was one of several people who said the any buyout, regardless of the amount, is “worthless” unless it is tax-free.”

Frank C., also from D.C. said, “If ‘they’ really want to downsize, here’s a couple of options that should be offered:

  1. One year salary plus one year ‘time in service’ credit, or
  2. $40,000 plus two years ‘time in service’ credit.”

More, as in lots, to come.

Nearly Useless Factoid

By Michael O’Connell

A tip of the NUF hat to fellow Federal News Radio web editor Jory Heckman for pointing me to this factoid:

In 2015, travelers left behind $765,759.15 — mostly in loose change — at Transportation Security Administration airport security checkpoints. Thanks to a 2005 law, the TSA can keep that money to help finance its operations.

Source: USA Today

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