Eric White We’re talking about the new ORA system or I guess, is it ORA system? I’ll let you correct pronunciation my for federal retirees. Obviously, that system is going to get used a lot over the next coming months. If what has been happening recently is any sign of what’s to come, tell me about what’s going on with the system and what feds are saying, of the ones that have been using it have been saying about it.

Thiago Glieger Yeah, Eric, this new system, so we call it ORA. I think that’s how most people are calling it, as you said. So this is a brand new system. And honestly, it’s been confusing a lot of people, it’s replacing the old paperwork that a lot federal employees had to fill out, the SF-3107, as they were going to retire from their agencies. But I think the big problem here, Eric, is, they’re finding that a lot of the HR departments are just simply overwhelmed. We had a lot of people that were leaving, we have bottlenecking of a lot people that are leaving on DRP as well, and so they just can’t provide the kind of support that they used to before. So a lot of these questions start to pile up. It’s a brand new system and there’s not enough people in place to help answer those questions. Retirement is already a pretty stressful process for people. So then on top of that, not having a clear process or information about a new system only adds to the anxiety. And so when it was first launched, everyone hoped that OPM was going to say, this is going to be faster, it’s going to be smoother, it’s going to require less people, and OPM actually said the opposite. They said at first, it might actually take longer. They are very hopeful that over time this is going to be a good system, but right now there’s a lot of moving parts that have to come together for all of that efficiency to really start showing up. And as you guys have seen, Eric, there’s tens of thousands of federal employees retiring. We just had the first wave here on 9/30. We’re gonna have another wave here 12/31. And so it’s really, really tough for people to get answers to the system.

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Eric White Yes, sort of a ready fire aim approach that we love here in the USA. Walk us through what a federal employee should expect when they decide to retire under this new system. What are some of the major changes from the old system? Not that anybody retires more than once hopefully, but what exactly are they looking at from a landscape perspective?

Thiago Glieger Yeah, so what it used to be is that a lot of agencies would run the GRB platform retirement estimator for federal employees retiring. And the GRB platform was effectively a repository of your federal service and it would give you information on what retirement could look like, estimates of your pension, things like that. So then we run into problem number one, a lot agencies cut GRB. So now federal employees are saying, well, what does my retirement estimate look like? How many credible years do I have? That system is no longer there. So then agencies are not even able to provide that information. But presuming you’re still going to move forward with the actual retirement process, first step is you have to notify your HR office that you’re ready to retire. You can send them an email generally and say, I believe I’m eligible, I’d like to start the retirement planning or the retirement process. And this is because the HR group has to initiate the ORA system in most cases. Every agency has a little bit of a different process, but this is what the majority of the groups are doing. You have to remember what’s different here is now HR is swamped. There’s tons of people retiring. There’s less of them around to be able to do this, which is causing some of the bottleneck. Once HR begins the ORA process, you’re given access to it. And again, this is going to replace the SF-3107, which is the retirement form. And so now it’s actually easier, because instead of filling out a government form, you’re just going through a system online and it’s asking you questions one by one. Everyone has filled out those kinds of forms before. So it’s actually pretty easy as we’ve seen with some of our clients. And what it does is it takes your answers and pre-fills the form for you, which is a nice service. Once you submit that part, it’s really important that a federal employee stay alert because a lot of times HR, they may kick it back if they need additional information, there’s something that’s missing. So you have to check to make sure you have it. You have to make to make you don’t need to do additional work on the ORA system for that. That’s when it moves to payroll. Once it moves to payroll, they finalize all of your hours, which can take a month to a month and a half just at payroll itself, before it goes to OPM. So if you think about it, we’re talking a month at payroll, could be a month before HR actually gets around to being able to initiate the system for you. At two months so far. Once it hits OPM, that’s when the official clock starts, as OPM likes to describe it. And there’s some uncharted waters here because OPM has not really handled A), this new system before and B), this many federal employees retiring all at the same time. So they release information, there’s some congressional report that gets put out there that talks about how many applications are coming into the system and what is the average processing time month over month. We’ve been seeing that go up and up and up over the last three months. I expect it’s going to continue to get worse. So we’re talking three months at the agency level, plus whatever time OPM is going to need for themselves.

Eric White We’re talking with financial planner Thiago Glieger. So other than those long timelines, well, we can call them unknown timelines, as you say, what are some of the other issues that federal employees are seeing so far with the system? It sounds like it is going through some growing pains, but are there any fundamental flaws with it that people are just not liking?

Thiago Glieger I think some of the challenging questions that the system asks them are things like, how much withholding do you want to do on your taxes? Or what do you want to do about life insurance? And before, there were some guidance in the forms and how to be thinking about some of these things, the system is a little bit more streamlined and it just asks you the question. Well, if you haven’t gone through the process of creating a financial plan, how do you know how much insurance do you need? What kind of tax liability are you expected to have? So federal retirees are called upon to make these decisions in real time as they’re filling out the form and they don’t really have the information to be able to answer those questions. The other issue that we are running into, and this one hasn’t been too much, is that sometimes people don’t get the notification of additional action that they need. Sometimes it gets stuck in their spam email. So this is something that again, it’s those bumps that they’re trying to pull together. There are a lot of systems in the background that have to coordinate with each other, and as any brand new system that gets launched, there’s always stuff that’s going to break, so I’m sure some of that’s going to be a problem too.

Eric White All right. And so what can folks do if they are looking to retire? You’re a financial planner, I guess we’re talking to the right person. How can they financially prepare for any delays that might occur because some of those dates don’t line up and you don’t want to be caught in between paychecks, as they say, and without anything coming in. What sort of precautions can those looking to retire take?

Thiago Glieger Yeah, that’s a really good point, Eric. I think the first thing that federal retirees should remember is that you will get your annual leave lump sum. So that comes pretty quickly, in our experience with clients, right after you leave. So you get your final paycheck, and then shortly thereafter, you get your lump sum. So depending on how many hours you have, you’re going to get a big check that’s going to help you to meet your expenses between when you leave and no longer have an income and when the pension actually fully starts. There are also, in most cases, an interim payment where it’s a portion of your final pension, not the exact amount. But again, we don’t want to count on that because there’s cases where people don’t get it. So the biggest thing is that, let’s say you’re planning to retire December 31st, now is the time to start boosting your cash reserves. So what do I mean by that? Cash in the bank is going to be really important here. So this might mean, and it sounds a little counterintuitive, but might mean maybe don’t put as much in the Thrift Savings Plan for the rest of the year if you know you’re going to retire. Yes, you have access to the TSP if you are retiring within a certain age, the age is 55 for most people, but cash in the bank is that much easier to access, it’s already been taxed in most cases. So if you reduce your TSP contribution, that means your take-home pay goes up and you get to start accumulating that cash. I would also think about what kind of expenses maybe you have coming up. The general guide for people is we like around six months worth of your monthly expenses in cash in the bank at all times. And because we might be looking at delays on your pension starting, you might want to increase that a little bit more. So if you’ve got big renovations you were planning to do on the home, maybe postpone that for a little bit until you get greater clarity around OPM’s timeline for the stuff. And the last one, and this one’s a little bit controversial as well, but it depends on how old you are. If you leave prior to the age of 55, which a lot of people have done this year, you technically don’t have access to the TSP funds un-penalized, unless you are law enforcement or special provisions, 1811s, things like that. So what you can look at is a potential TSP loan. You can get up to $50,000 and that comes without that 10% early withdrawal penalty. Which is kind of nice because you can put that in your bank account, use it or don’t use it, but at least it creates extra cashflow for you. Of course, check with your financial professionals, make sure that this is something that is feasible within your plan, but that’s been a really solid one to help bridge people over.

Eric White Uncertainty is the word of the day for a lot of federal employees, particularly those that are retiring, even. So, any advice on handling that aspect of things you’re already in, going through the anguish of entering into a new stage of your life, having all of this in the background of shutdowns and potential furloughs and things of that nature, what can you tell people that are going through this right now?

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Thiago Glieger I would say for folks to rely on your planning. This is something that creates great peace of mind just knowing what you’re going to do in which scenario. So if this happens, if it takes longer, if the markets crash in the middle of your waiting for your pension, all of these things, if you can think ahead of what those potential problems may be and what you’re going to do if those things happen or what you’re going to do in preparation to hedge some of those risks, that gives you great peace of mind. We have to be careful about watching the economy and the news around the markets. The markets are very volatile and you always have different opinions and people talking about what the markets are going to do next. We have to be careful because that creates a lot of anxiety for retirement. And I think too, the more information you have, the better. OPM has a really, really helpful Retirement Quick Guide, which we can give you guys the link, and I’m sure you guys have this already. You can put it in the show notes. But the OPM Retirement Quick Guide is super helpful, it walks you through the process so you know what to expect. And in fact, there is one additional resource that is actually your benefits officer directory. This is something that OPM maintains pretty regularly and it’s the HR person in charge at your office. In case the process is just stuck and if you can’t get answers, you can’t get anywhere, this is a place you can look for to find out who’s in charge of your agency to get the answers you need.

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