Is the Deferred Resignation Program an opportunity or a risk for federal employees? In this episode, Tommy, John, and Michael break down what this program means, how it’s impacting federal employees, and why having a solid financial plan in place is more important than ever. They’ll discuss why you can’t rely on every media headline, the importance of working with a knowledgeable team, and how to position yourself for financial stability—no matter how secure your job may seem.
They’ll also cover key concerns around the program, the role of VERA, and why waiting until major changes happen isn’t a sound strategy. Whether you’re directly affected or just looking to strengthen your financial future, this episode provides valuable insights on preparation, planning, and making informed decisions during uncertain times.
Listen to the full episode here:
What you will learn:
- An overview of the Deferred Resignation Program. (00:45)
- Why having the right team by your side is crucial in unpredictable times. (3:15)
- The importance of planning ahead, no matter how secure your job may seem. (5:15)
- Why not all media advice applies to your situation—and how to filter what’s relevant. (16:00)
- Why you should only take advice from someone who truly understands your circumstances. (23:00)
- Key concerns surrounding the Deferred Resignation Program today. (28:00)
- What VERA and VSIP mean and how they impact you. (30:30)
- Who is navigating this situation most successfully and why. (38:00)
Ideas worth sharing:
- “You would hate to miss an opportunity to change your life because you don’t have your finances in order. So, there are many good reasons to do solid financial planning and not think that you can leave that step out.” – Mason & Associates
- “It’s powerful when you have positioned yourself well and when you have a strong financial plan in place.” – Mason & Associates
- “We are in uncertain times and having a financial plan in place that is adaptable and flexible is very important.” – Mason & Associates
Resources from this episode:
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Read the Transcript Below:
Congratulations for taking ownership of your financial plan by tuning into the Federal Employee Financial Planning Podcast, hosted by Mason & Associates, financial advisors with over three decades of experience serving you.
John Mason: Welcome, I’m John Mason, and today we’re going to discuss what is on everyone’s mind, the Deferred Resignation Program and how it’s impacting our clients and our financial planning at Mason & Associates. If you’re not familiar, the Deferred Resignation is an opportunity for federal employees to resign, collect pay for a number of months until the resignation becomes effective later in 2025.
The Deferred Resignation is an interesting opportunity for those retiring or who are thinking about retiring this year or next, but it’s also causing some angst among those who are not eligible to retire. In this episode, I’m recording with my business partners, my father, one of my best friends, Mike Mason, Tommy Blackburn. Welcome to the Federal Employee Financial Planning Podcast.
Mike Mason: Good to be here. Timely subject. Hopefully, we can get this edited and get out to people before they’re forced to make a decision. But welcome and a busy week for me. I’ll be moving tomorrow and the rest of the week, so it’s a good time.
Tommy Blackburn: It’s definitely the year is off to a very busy start. It seems like we have changes, executive orders and court legal proceedings almost daily, it would seem. I mean, it’s only February 11th as we’re recording today. Boy, the year is off to a fast start here with constant headlines and constant changes. So even if this deferred resignation offer goes away, if the actual deadline on it hits, it seems like we’re anticipating this is not the end of all of these potential opportunities and decision points that potentially will come this year.
John Mason: We always say it’s going to be an interesting year. We always say, Oh, this is going to be different this time, or this is going to be crazier than last year. But this year, in fact, actually, does feel crazier than last year. It feels different than many, many years of our career.
I’ve been doing this now. I think 14 or 15 years, Mike for over 30, Tommy about 14 or 15 as well, and this time it does feel different, and this time it does seem like it is different.
One, because we have something that’s never existed before, and that’s the fork in the road, the deferred resignation opportunity. I think there’s still some question on whether or not it’s lawful. I think there’s still some question on whether or not the people who take it, whether or not they will actually be compensated through the end of September, which I think is the current rule. So we’re going to talk a little bit in this episode just about the full context of what’s going on and some of our thoughts, what we think is coming next.
But I also want to say, Tommy, to your point that in the middle of all this, and if we just go ahead and acknowledge that we have something that never existed before, then we may have things that do exist, that we’ve seen in the past, that may come to fruition later this year. Discontinued service retirements, RIFs, Vera VSIP opportunities, and oh, by the way, let’s just pile on that the current tax code is set to sunset at the end of this year, so we’re going to have a new tax code to learn as well.
Tommy Blackburn: And we’re continuing to roll out Secure 1.0 and 2.0, so previous tax laws are still being implemented as we’re talking about changing existing ones. We’ve had changes to Social Security, so it’s, may you live in interesting times. It seems like it is certainly happening.
Mike Mason: You better buckle up and hope that you have, you know, a team like Mason & Associates on your side because there’s going to be a lot of decisions that need to be made. And we’re not telling you we’re going to have all the answers, but there’s probably not a better place to go to, to figure them out than our company.
Tommy Blackburn: Well, I love it, Mike, because I think as we unpack all of this and share our thoughts and some education around it, I think it comes back to where we come back as a firm constantly with the client is we’ve already got a plan in place. We had an adjustable, adaptable, evolvable plan. Let’s go back to it. So we make decisions. We’re not making decisions in a vacuum. We’re updating the plan and we’re using that as a starting point. And you certainly don’t want the house to be on fire and having to figure this out while it’s on fire versus just being able to bob and weave because you already had a plan.
John Mason: For a long time, we’ve mentioned on this podcast when we previously did the radio that federal employees had, generally speaking, a very secure career, right? We knew that we could go to work. I’m not throwing stones. Maybe it’s hard to get fired. Maybe our job’s very secure. We have less turnover and turmoil as compared to other private sector industries, for example. And we’ve had this conversation, Mike, you were saying this a long time ago. It’s like, we need to have an emergency fund. We need to have money in the bank. We need to prepare for government shutdowns. We need to be ready.
Like what happens if we go through a government shutdown? And we don’t get back pay, like that could happen, you know, and we’ve been championing this message for so long. And it feels like until this point, everybody kind of just looked at us and said, Yeah, yeah, yeah, y’all are crazy. Everything is secure. And then bam. Something like this deferred resignation fork in the road comes in and it’s like, well, things aren’t as secure as we thought they were.
So it’s time to buckle up. Like if you don’t get caught up in this, if you don’t get riffed, if you’re not caught up in some sort of reduction in force. Again, it’s another wake up call that we need to maybe dust off that resume, build up the emergency fund and be prepared because maybe your job as a federal employee looks a little bit more like a job in Silicon Valley than it used to look like as a federal employee back in 1984 when you began your career as a first employee.
Mike Mason: Yeah. And speaking of 1984, just to put some things in context, cause you know, I got in the business in ’87, you know, I remember a bull market that pretty much started in ‘87. And by 1997 clients that were 50% bonds and 50% equities, you were telling me if I didn’t put them 100% equities, they were going to fire me. You know, so because they just believe that they were never ever going to have a downturn in the stock market.
Almost John to your point. Like you don’t need an emergency fund as a federal employee because you’re never going to face that opportunity. Well then 2000 and 2001 comes and 2008 comes and maybe it was a pretty good idea to use some of the basics in financial planning.
And I would just take it one step further. Maybe it’s not always about the government’s going to take your job away. Maybe you’re like one of our clients that was at NASA that had a real good opportunity to leave the federal government. And it’s nice to have a stockpile of cash if there’s an opportunity. You’d hate to miss an opportunity. To change your life because you didn’t have six months of bills saved up and you couldn’t do that. So, many good reasons to do solid financial planning and not think I can leave that step out.
Tommy Blackburn: It comes back to flexibility, which I think we preach quite a bit. And I think it cuts both ways, right? Both opportunity and risk. And usually in life there’s more opportunity than there is risk. But I love that framing, Mike, of you know, it could have allows you to take an opportunity as well as shelter, you know, uncertainty that may come.
John Mason: So as we share maybe some additional thoughts and stories, you know, it goes back to having a plan in place. And at this point, if you’re listening to this podcast and you’ve been on the journey with us for over three or four years, and this fork in the road offer came and you hadn’t hired us or another firm like us and you didn’t know what to do. Well, shame on you.
Because you’ve heard the message and we’ve been asking you, maybe not begging you, but really saying like, it’s time to have an advocate. It’s time to have somebody on your side. Although this did feel a little bit like a phishing email, phishing with a P, you know, when things come out with these hard deadlines, you have to make a decision within two weeks. We’re trained as professionals to be like, well, that’s spam. That’s phishing. They’re creating a sense of urgency.
So one, it didn’t feel right when this came out, but as I think of the five or 10 clients that we have that may take this opportunity. It was so refreshing to be able to pull up their plan and write capital and instantly say, Oh yeah, you’re good. We could have retired last year. We could have retired two years ago. We were planning on retiring at the end of the year anyhow.
Or even the conversation I had with a client, Ben and I were working together. It’s like, okay, so what’s worst case? You take this opportunity and then they lied to you. And you don’t get any pay and you have to retire effective March 1st. You’re still good, right? Like we’ve done your plan. We knew you could retire. We told you you could retire two years ago and being able to put this all into context. So in the middle of this fishing kind of scammy feeling thing that was going on, that’s creating a lot of angst and uncertainty. We’re able to bring those folks, Mike, back to a place of calm because it’s like, remember, we’ve already done your plan. If you don’t have a plan in place, you’re not going to get one up to speed in 14 days, are you?
Mike Mason: It’s not going to happen. It’s not going to, and at least not one that you have a whole lot of confidence in, you know, because you’ll have 14 days worth of experience with that new financial planner who probably isn’t going to understand federal benefits, the way a firm like ours does.
And we had one just this morning that’s that she’ll reach age 60, I’m sorry, age 57 and a half, have her time in 30 years. Now she gets to have an eight month vacation before she gets exactly what she was expecting to get eight months from now. You know, so it’s, and it’s nice that that plan’s in place, and they’re not like a ten year, ten years, tenured client. You know, they’re like a year and a half, and it’s nice to, for that decision they made a year and a half ago. I got an email from them this morning. You promised to look over my retirement papers to make sure I’m not making any mistakes. I’ll be filling them out and sending them to you next week, which is really cool.
John Mason: Our clients are telling us throughout this process. We are so glad we had you in our back pocket. Our clients are telling us we’re so grateful that we already had a plan in place. We’re so excited that we can reach out and talk to you. And oh, by the way, although we stick to a really rigid schedule of when we do client meetings, when stuff hits the fan, Tommy, Yeah, we’re just taking phone calls and making phone calls and like when deadlines happen, we know how to act fast and our clients have been very appreciative and that makes us feel good about what we’re doing.
Tommy Blackburn: Well, that’s why we have a rigid schedule is to allow us to bob and weave on these other issues when we need to. So it’s intentional for a reason and even in the rigid schedule. We keep a lot of flexibility there and I was thinking there’s so many good things here and the flexibility and it’s awesome for us to be able to say you’re already going to retire.
Maybe you see if this offer is real or isn’t real. We’ve certainly expressed a lot of skepticism about it, and at least right now, as we record this, it’s held up in court, so it seems like a lot of legal actions will, you know, be coming with everything that seems to be changing so quickly right now, which maybe that’s a good thing. Let the legal system work. I hope that’s the positive that comes out of this.
Another thing I was thinking about, John, as we evaluate this, I think we’ve seen this with some clients too, is it’s like, yeah, I understand. Maybe mathematically, like I could get eight months for free. Seven, eight months, if this is real and I was going to retire, but maybe I didn’t want to retire in September or I didn’t want to stop. I didn’t want to go on administrative leave today. I had some mission that I believe in. There’s something in life that’s still pulling me to do this job. And that’s been really encouraging to have those conversations as well. Right. It’s like, yeah, you’re not, don’t let somebody tell you you’re stupid for not taking this just because maybe that’s the best financial offer. Let’s start with what’s, let’s make sure we got our bases covered, how’s your financial plan, what’s important to you, let’s make decisions from there.
You’re absolutely right, we’re definitely, we’re all getting the, so grateful to have, to know you guys have our backs. Even when we’re saying, let’s pass on this, we all are anticipating this probably isn’t the end of it, and so folks are happy to know, glad you’re there. And it’s even been kind of exciting as we look around, potentially, the corner. And we start thinking about things like RIFs and VERAs and VSIPs and discontinued service because one that reached out that y’all know as well, you probably didn’t know they reached out, they’re not eligible for retirement, but they will be under a VERA or even a discontinued service.
And so that’s been interesting again as we bob and weave to say, well, if that happens, even under a riff, you’d be eligible for early reduced retirement. But let’s look at what that does to your plan and you’re in good shape, etc. So it’s just been. I think it’s powerful when you’ve positioned yourself well, when you have a plan in place and you have flexibility. And we’re seeing that with our clients and they’re thankful to have us there. So they’re not making knee-jerk reactions and they can go forward in confidence.
John Mason: Well, thank you for sharing. Thank you for sharing, Tommy, the story about clients who are not taking it out of almost like a moral obligation or some, a moral code or compass. And that doesn’t mean the people who are taking the fork in the road offer do not have morals, but I have an email from my inbox from two days ago that said, John, quick update. I’m not taking it because the admiral or the captain who’s in charge of my command is retiring this year.
I’m retiring this year and I don’t want to leave my agency. I don’t want to leave my department in a bad place. I want to be able to train the next person. I want to have a say on when I go. And I don’t want to be forced on administrative leave right now. So it’s really, really cool. So to those of you who are not taking the offer because it doesn’t fit in your plan, or because you want to make sure that the people you’ve worked so long with are taken care of, that’s amazing.
And there are, maybe you missed out on some free money. Maybe you didn’t, but there are a lot of military veterans, Mike, who have less than a 50% VA disability rating. There are a lot of veterans who have more and I’m not saying the ones who have less than 50 have made some better decision than the other, but people make their own decisions. And there are plenty of people out there who aren’t pursuing a higher VA disability rating, who won’t pursue the discontinued or the deferred resignation offer, because that’s their prerogative. And we want to support all of these people and say congratulations to both sides, because you both win from this opportunity.
Mike Mason: Let’s, let’s, remember one of our favorite radio sayings, and I know you, we’ve used it here on the podcast as well, and it starts with they, and what’s the rest of it? They are not talking to you. So this is a very good point, very good time to remember that the person sitting across, you know, the office from you, which we don’t have a lot of that because there’s a lot of people working remotely, but your friends. Your coworkers, you know, they’re not talking to you. They don’t know your plan. The media, you know, depending on which side of it you listen to, you’re going to hear how there’s no way in the world Trump’s going to pay you for eight months to do nothing, you know, and, and so, and you can’t count on your members of Congress.
I mean, this is the same Congress that just voted to kneecap Social Security to give higher benefits to CSRS that’s retired. And then a month later, we want to lay off a third of the workforce, you know, so the retirees get a big benefit. And now FERS, who didn’t get anything from that, you’re going to have a member of Congress maybe vote to not fund the government and tell you they’re doing that for your benefit. Well, guess what? If they don’t fund the government and you’re active, you’re not going to get paid. And if they fund it four months later, you’re going to get back pay. So if they don’t fund it, and four months later, they fund it, you’re going to get paid, you know, because that’s what the letter said. So they are not talking to you. Forgive me. That’s why you guys don’t let me do this as often because I get a little Washington, DC unhappy. That’s okay,
Tommy Blackburn: I think we appreciate the passion.
John Mason: Yeah, I was just thinking as y’all were bringing up social security, I keep seeing on Yahoo Finance that Trump’s going to do away, President Trump’s going to do away with the penny and maybe the nickel. And it’s like, oh, well, I don’t think that pays for what we just did in social security. But, potentially you know, it’s like we’re, I guess if you find enough small things, it adds up to big things.
And I do want to say, that as a team of financial planners. One, our operations team has done a really good job fielding client phone calls, letting us know what’s urgent, what’s not urgent, who’s scared, who’s not scared. But as a team, we came together pretty quickly and basically came to the conclusion that we’re going to handle this fork in the road offer. Not by giving somebody advice on whether or not they should take the offer, but by educating, empowering our clients to know, yes, you can, or no, you can’t retire.
We’re not actually giving advice on whether or not we think this is law. We’re not giving advice on whether it’s the right thing to do, or the wrong thing to do, or if it’s moral or immoral. We’re just saying, if you can retire, great. And if you would like to try this new thing that we’ve never seen before, have at it. But it’s impossible for us to give advice on a program that we’d never seen before. So I thought it was really cool that we just came from a standpoint of like, let’s deal with the facts. You’re good or you’re not good.
Tommy Blackburn: Yeah, I agree. It’s, and like so many things with our interactions with clients and the relationship is. It’s pretty rare where we say this is the decision, right? It’s usually, it’s usually a matter of education, supporting, empowering, as you talk about, John, right? Where, let’s lay it out, and if we give you good information, you’re going to make the best decision for you. And it’s probably the decision we think you should make as well, but it’s all about just giving you good information to work with.
And so I guess we’re reframing, we’re pivoting the conversation like, okay, yes, we have this offer and we don’t really know what to make of the legality and so forth around it at this point, because it really seems like it’s in question, but let’s bring it back to your plan. Here’s where you stand now. What do we think about this?
Mike Mason: And I would say, and I like my Joe Diffie moment, you know, because many times the clients that we make are ready to retire, not ready physically, emotionally to retire, but, you know, financially. So, you know, how many times have we said, you know, we’re going to give you a Joe Diffie disc to play anytime the government does something that ticks you off and what’s the song, take this job and shove it. So we’ve always, before this came out, we’ve always given the ability to say, when you’re emotionally ready, you can retire. You know, when the government does something, when work is no more fun, you know, you can retire. When something happens, you’re positioned to go out. And maybe they knew that before they called us, they just wanted reassurance, you know, when they got the Joe Diffie moment.
Tommy Blackburn: It’s certainly a big decision. Yeah, understandable that anybody would want to have a discussion around it. It’s a huge decision. Mike, I wanted to go back for a second about they’re not talking to you. So we’re talking specifically to today or focusing on this deferred resignation offer. And I think we’ll get into shortly. Some of the other ways they could potentially downsize the federal workforce. But you also went into social security and it just sparked a thought.
Recently I was talking with clients who had nothing to do with this. It was actually around taking social security. But it, the whole thing, they’re not talking to you because they said, everybody we talk to, all of our friends, nobody has delayed social security. And you’re just like, well, I don’t know them. I don’t know what their plan is and I don’t know who’s advising them. But I can tell you from our perspective, and it was what we generally see, where one of you is going to take it early, the other is going to delay, we’re waiting for one of you to retire because we’ve got an earnings test to deal with that would basically wipe it out.
You wouldn’t get any right now while you’re working. So we’re having that discussion. And it also pivoted to one, your standard of living shouldn’t change whether we delay or don’t delay. If you really want to take Social Security, your plan is in great shape. So we can certainly do that. Mason & Associates will help you do it. By the way, it’s actually contrary to our benefit because by us turning on social security early, it means less we’re gonna have to distribute from your investments, which is how, you know, our fee is based on the amount of investments we’re managing, so we’re giving advice as counter to our own benefit, but it was just a another, we give them all the time and that when you’re social security and they’re not talking to you, made me think about it. Cause that was another example where it’s like, I don’t, I don’t really know who, what this situation is and what these people are going off of. But as your advisor, here’s what we’re saying and we’re flexible either way.
John Mason: Let’s not take your financial planning advice on Reddit or, or the financial planner at the water cooler or a financial planner who has not actually done your financial plan. I mean, a financial plan, financial, even a CFP who doesn’t know who you are as a person shouldn’t be even giving advice at a cocktail party on whether or not you should delay until 70 because maybe they don’t know anything about you, which means they’re not qualified to really give any opinion other than. Depending on how long you live, it may make sense for you to delay, right? Like, that’s pretty much where the conversation has to end until you know more specifics.
Mike Mason: Absolutely. And I just throw another, you know, monkey wrench in the system. You know, imagine we wake up January 1 of next year and Social Security is tax free, you know, so now are you going to take 40,000 out, well, take 60,000 out of an IRA to net 40,000 or just take 40,000 from Social Security? So, again, having a planner in your game. Instantly, we’re going to be able to make those decisions. I don’t know which ones are going to be. But I would say the social security trust fund is not in the best shape, you know, maybe it’s tax-free for four or five years before someone figures out they can’t do it anymore. So who knows? We may, we may flip-flop, but at least, you know, we’re going to have all the information in front of us to help you make that decision.
John Mason: Well, break, break, break, tangent alert. We’ve deviated from the subject quite, quite far. So I’m going to bring us back to what everybody’s talking about, which is this fork in the road offer. Guys, we serve about a hundred families each, a little more, a little less, depending on the advisor.
And Tommy, you mentioned like counter to our own benefit. And frankly, I guess it’s like counter to our own financial benefit to kind of cap ourselves to a limited number of families. But we’re also personally benefiting from not being overworked, overstressed. Our clients are benefiting because we’re available in times of need and in times of emergency.
So we feel good about the hundred families. We dropped a podcast episode a few days ago where there was a call to action that said, if you want to become a client, here’s how you start the process. We are nervous. And I think it’s good for our audience to hear as we think about changes and we think about what may come next is that we could find ourselves in a place where we’d never been before.
And we could find ourselves in a place where we have to put new potential clients on a waitlist because we have a tax law to learn. We’ve got clients going through VERA, VSIPs, RIFs, fork in the road, one, two, three, four, whatever’s coming. We’re our top priority and our top mission is to take care of the people who have already asked us to be their financial planners. So I’m cautiously optimistic about the value that we can add this year, but I’m also just a little worried on what that’s going to mean to us as a firm. Our personal lives, our business lives, the hours that we’re going to work because this is when we’re needed. And this is where we have the ability to shine, um, but we have to protect ourselves along the way. So audience do with that what you will, and I think we also wanted to call out. We’re also very sorry. I think sorry is the right word, or we empathize, or we just feel like this really stinks for a lot of federal employees, guys.
Like, there are 1-year, 2-year, less than 10-year federal employees who either just came in, maybe they have a young family, and there’s turmoil going on right now, and there’s unrest, and there’s questions about whether these folks are going to have a job, and regardless of what we believe, whether the government’s too big, too small, should be cut, should not be cut, there are real families and people that are suffering from this. And the suffering maybe hasn’t even started yet. And I think it just would be wrong not to acknowledge the fact that this really, I hate to say this word on a podcast, but this really sucks. Like on one hand, I can be really excited about potentially reigning in spending, but then I think about the humans behind that and how that impacts them. And it’s not going to be an easy road.
Tommy Blackburn: I don’t know if we all agree on this. I think we do, but I’ve seen some things recently that I think I agree with, which is you like to, I understand we’re trying to shake this system up. And sometimes I guess you’ve got to throw some extreme things out there to try to make a difference. And unfortunately, I guess collateral may have may happen.
But at times though, yeah, you wonder. Can we, will it be approached with a scalpel or will it be approached with, you know, a sledgehammer and a sledgehammer, I think, as you’re saying, John, is that’s the one where you see a lot of harm being done to folks, maybe who shouldn’t be caught up in it, or not, at least maybe not being done in a caring way. So I guess we’ll see what comes of it. Certainly would hope that it can be thoughtful and done in a fairly passionate way, I suppose only time will tell.
Mike Mason: Yeah and let me just, and then I think we want to get to some of the frequently asked questions, but let me just say there are people that have said, I’m not going back to the office. You know, and they were never going to go back to the office and going back to the office is more than they wanted to do and we can call it negative, but eight months, you know, of full pay that might get you to retirement, might get you to find another job. That’s, that’s a very valuable offer, so it’s not all negative in that process, you know, because if you weren’t going back anyhow, it’s kind of a blessing to get eight months.
John Mason: I think the biggest issue is, what if you don’t take the deferred resignation and then your job gets cut later this year? That’s the, you know, the people who are like, yeah, I’m not going back. And then they get the eight or nine months of pay while they’re exploring other opportunities. That’s all well and good. They kind of. Whether they had a gap year or they got paid to look for another job, but then it’s the people who didn’t resign, who did say they’ll go back to the office, who still may get chopped.
Mike Mason: That’s scary. Yeah, that’s scary. That’s a tough decision there. Did you want to do those frequently asked questions?
John Mason: Before we go there, I guess let’s call it out. So, so if you haven’t been there yet, audience, opm.gov/fork . I thought that was funny this morning when we actually read the URL. So opm.gov/fork/FAQ. So there’s a whole list there of frequently asked questions. It talks about, you know, what you can do, what you can’t do. It talks about what if you were going to retire. In November, December timeframe. So there’s a lot there. We’ll link it in the show notes. We’ll put it in the blog. So you’ll have access to all of these things, but let’s pivot to VERA VSIP. What is a VERA VSIP? What I personally believe we’re going to see this later this year. I don’t think we’re going to have the cuts that we’re looking for from the fork in the road. So I personally think a VERA VSIP is coming for whoever wants to take it. Let’s define VERA. Let’s define VSIP. So that our listeners can be aware of those.
Mike Mason: Yeah. Voluntary early retirement authority, VERA, you know, and that’s typically, and guys, correct me if I’m wrong, but typically, you know, with a VERA, you’re going to get. Some maybe advancement on your age, you know, if you don’t meet the age requirement, maybe a couple of years advancement on age, if you, if you’re missing a service requirement by a couple of years, you know, so maybe an incentive on time and service, an incentive on the age to where you can pull the trigger at 59 and look like you were 60.
Tommy Blackburn: My understanding, at least of. What you’ll see with a lot of these VERAs is they’ll change the retirement eligibility to age 50 with 20 years of service or any age in 25 years of service. So I’m sure they can get creative and maybe you’ve seen that in the past, Mike, where they offer to tackle on some time and change some other things around. But it looks like, maybe the, like, starting place for a VERA is they lower that basically that minimum retirement age and the years of service required to get there.
But that’s what’s been kind of interesting to even go through with some of our clients where, you know, this offer comes out, the deferred resignation, and you look at it, and it’s like, well, your plan was to get to MRA and we’re not there yet in this eight months or, you know, we still have years, but you did meet, you do have age 50 and 20 years or, or the 25 years in any age. So it’s, it’s interesting to begin thinking through those scenarios. And so, John, that’s at least hopefully addresses your question between Mike and me, the, the VERA. I think that was the one you wanted to hit on.
John Mason: Yeah. So that voluntary early retirement authority, I think y’all hit it well. And there are nuances with the FERS supplement as well that we can talk about. So under a VERA, you could still be eligible for the FERS supplement. We still have to be worried about like, if we’re 54. And we separate, we have to worry about how we’re going to provide income because we didn’t make it to 55, which means we don’t have access to penalty-free TSP withdrawals. I don’t think and
Tommy Blackburn: And we might as well hit the supplement, John, that I guess some folks call it the Social Security bridge. I’m not sure if it has other acronyms out there, but under the VERA, my and even a discontinued service, if we get into that, my understanding is it’s so, say we were 50, we were the earliest, we do still get a supplement, but it doesn’t start until that MRA, which most likely going to be that age 57.
John Mason: That’s perfect. And then what we’ve seen historically is a VERA also paired with a VSIP, which is that voluntary separation incentive pay. And I think historically they’ve been 25, 000. So it’s not, it’s not completely crazy to think that once we get through this fork in the road, that hopefully we go to, if we need to make additional cuts, a voluntary early retirement authority, which would still lend itself to being a deferred resignation.
It would be voluntary for most folks. A voluntary early retirement authority would be voluntary. Hopefully, we can trim what we need to do on voluntary action before we start looking to RIFs and things of that nature. So, we may do another episode, Tommy, I think on VERA VSIP, but that basically captures it. If you’re CSRS and listening, there’s different rules for that too, which we’re not going to talk about today.
So just know that, that we as a firm are positioned when these offers come, or if they come, we’ll be able to help our clients navigate the opportunity. And, and then it just goes back to having somebody in your corner because that’s going to happen. Our hypothesis that will happen and we’ll be ready. And we have a lot more clients, I think, who would be, or a significant number of clients who would be excited about the VERA more so than the deferred resignation.
Mike Mason: Agreed.
John Mason: So let’s touch a little bit, Tommy, on the discontinued service retirement slash reduction in force or a RIF. They seem pretty similar to me. And I don’t know that I’ve ever helped somebody retire on a DSR, but but I’ve seen RIFs. I don’t remember DSRs, but as I read the rules, they seem very similar to a VERA. Just not voluntary.
Tommy Blackburn: You’re right. That’s our big takeaway is that this is not voluntary. I think the way it works, John, is almost like, and when I think about it, like an image in my head, it’s like you’ve got RIF and then if you’re eligible, if you have the 50, age 50 and 20 years of service or any age and 25, and you’re part of this RIF, you’re then like a subsection, a little, another circle inside of it that says you, can do this discontinued service retirement. So it’s kind of like, did you get RIF? And if you did, well, then you have almost like the VERA, availability to you where you could take an early reduced, pension based on those reduced requirements.
I think that a RIF, I haven’t seen one of these before. So audience, please, you know, I’m, I’m trying to educate myself, learn from the other guys here. It sounds like this is a tedious process for them to do. It almost seems like they prefer to go the other avenues because they’re quicker.
I think, I think in a RIF, they have to usually have OPM has to sign off on it. And who knows when there’s a, well, there’s a way they may do it very quickly, but it seems like because it’s considered more drastic. There’s more bureaucratic processes essentially that have to be done before they can do a RIF. So it’s almost like if you’re trying to get things done, the path of least resistance is to go these other routes before they get to a RIF. Because then it’s involuntary and it looks like they have to do it based on ten years.
So John, you said the person with three years, certainly they could be stressing right now because if it gets to a RIF, they’ve checked that box where, hey, I don’t have the tenure maybe. And it’s also on performance and service time. Seems like some of kind of how they go through identifying the folks that are going to get RIF. But if you’re more typical of one of our clients, you’re closer to retirement, you probably are going to have essentially that VERA offer even inside of the RIF where you could just take an early retirement and get to continue your benefit. We believe.
John Mason: I think there was something I was writing it. My notes aren’t great right now, but with a RIF there could also be some severance pay, you know. And you could potentially be eligible for severance pay if you satisfy some rules. But then I think I was also reading that there are, like, what constitutes a RIF. Like, you could be relocated, you could be demoted, and there’s certain rules all around that, and it’s like, if they don’t harm you so badly, then it’s not necessarily a RIF or a DSR. So there have to be certain hurdles that must, am I, am I reading that right, Tommy? Do you remember seeing that?
Tommy Blackburn: Say, say that again, that there are certain hurdles.
John Mason: It was like there were certain hurdles. Like, you have to be, if, like, if they offer you a sideways job within your same commuting area, then it doesn’t count as a RIF. You know, or if they take you from a GS-13 to a GS-12, that doesn’t necessarily count as a RIF. So there’s like a whole set of rules all associated with, like, we tried to do good by you and we only harmed you so much, so therefore this does not count.
Tommy Blackburn: I think you’re right, yeah. Yeah, I think, I think you’re absolutely right. Yeah, so there’s still like a couple of other paths they can take to try to avoid getting to the RIF, right? Where it’s like, you probably wish we did a RIF versus basically demote you.
John Mason: Exactly. So, well guys, we’ve covered a lot. You know, I think as I process this podcast, like my, my big takeaway is we’re in uncertain times and having a financial plan in place that’s adaptable, that can change, that that’s flexible, is very important.
I think the people who are positioned well right now are the ones who have done all the right things, saved a bunch in TSP, have a good emergency fund, hired a financial planning team and they’re ready because sometimes like things move fast and you have to act fast to take advantage of that opportunity. This feels like one of them.
So it just is a continued thing for me where I hope federal employees across the country are going to continue to make sure that they kind of operate their plan a little bit more, Mike, like they’re a Silicon Valley employer, like they’re employed by somebody in Silicon Valley rather than employed by an entity that will never fire them or at least have a little bit, which I don’t mean to be mean, just a little bit of a feeling in your stomach that says, you know what, like my whole life could be turned over tomorrow.
How do I make sure that my family’s okay if that happens? And there’s a certain amount of that that’s good and healthy. And there’s a certain amount that’s not. I’m not suggesting that we’ve reached the balance, that we’ve found the balance in the force, as they would say in Star Wars. And, and I, I’m not, certainly not saying that President Trump is bringing balance to the force, you know, if you’re Star Wars fans out there. But there has to be some balance and having a certain amount of pressure or anxiety or fear of losing your job does tend to lend to making really good financial planning decisions to protect against those what-if events.
Mike Mason: Yeah. And it’s, I would say, and I’m, I’m not defending our current president in this situation, but you know, I’ve said this many times, the biggest hiring entity over the last couple of years has been the government, and it takes 15 private sector jobs to pay for one government, you know, employees’ salary and benefits, and it’s unsustainable at that rate.
Everything blows up. You know, everyone makes choices. Not everyone can be a federal employee, because somebody’s got to pay into the system for the federal and the military. And if you get, and this is not the first time it’s been bloated, it’s been bloated before and, and President Clinton, you know, laid off a lot of the federal workforce. So it’s bloated. There’s money to be saved, you know, and we just need to do it respectfully, but they don’t look at it like the president hates federal employees. It’s bloated and we’ve got to get our numbers right.
John Mason: Tommy, any closing thoughts or comments on your end?
Tommy Blackburn: No, no closing thoughts. I think the other than it’s been fun. And our hearts go out to everyone. We’re here for our clients. We hope this is helpful to others. We’re, as you hopefully you hear throughout the years listening to us, and potentially working with us, we adapt, we change, we are proactively monitoring and practically touching base with those clients we know are impacted and we’re here to help our clients.
John Mason: Well, that’s awesome. So folks, thank you for being on this journey. Thank you audience for being over three years doing this. Is our content helping you make more informed decisions? Do you feel more educated and empowered than you were before? Have you made positive changes in your financial plans since you started following? If so, be sure to share those comments. Share a comment down in the comment section below. Send us an email to masonfp@masonllc.net.
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