The law enforcement formula is based on 1.7 percent of their high-three salary and then multiplied by 20 years of service. That’s compared with the 1 percent of the high-three used in calculating FERS annuity. Based on a calculation of 20 years of service, a law enforcement retiree is getting 34 percent of their high-three compared with a FERS employee getting 20 percent of their high-three.
Law enforcement is “getting right off the bat a 14 percent benefit in basic pension benefit,” Flanagan said.
Another difference – Law enforcement is one of the few areas in the federal government that have mandatory retirement, in this case, at age 57, Flanagan said.
In exchange, federal law enforcement officers can retire earlier – at age 50 if they are within a “covered position” as defined in provision 6(c) in Title 5, or, they can retire at any age if they have 25 years of service.
“So they can go out at a relatively young age and start a second career, which many of them do,” Flanagan said.
Younger retirees must be beware of withdrawing funds from their Thrift Savings Plan too early. There is a 10 percent tax penalty if you withdraw before age 59 1/2.
“You can be exempt from that if you separate or leave the government when you turn 55,” Flanagan said, but added, “Some of these law enforcement officers will retire as soon as 47 or 48 so they’re not exempt (immediately).”
“I always tell people that if you are going to start a second career and you’re going to have enough income to cover your expenses, there’s nothing wrong to leave the TSP in the Thrfit or move it to an IRA and touch it later when you fully retire, which for many of those might not be until 59 1/2 anyway,” Flanagan said.
Federal v. State
Flanagan said she has heard from federal law enforcement who came from state positions that they would have received more lucrative benefits if they stayed at the state level.
However, Flanagan points out that some states are having trouble funding those pensions. Federal pensions might be moe secure, she said.
“But a lot of people might challenge me on that with all the proposals we’re hearing this year,” Flanagan said.