Opening a letter from the OPM and seeing the words, “Your Federal Disability Retirement application has been approved” is a life-changing moment. You’ve been waiting for months and now that you’ve been approved, it’s time to start preparing for your new future.
But what should you do now?
How much money will you earn?
Will it be enough to live off of?
These are valid questions and managing your Disability Retirement income is crucial to making sure you and your family are financially stable for years to come.
1. Calculate Your Expected Payments
Federal Disability Retirement benefits provide a reliable income, but it’s not going to be as much as your federal salary. It’s essential to budget to make sure your payments last through your retirement. By tracking your income and expenses, you can create a financial plan that works for your needs and avoids unexpected shortages.
To get a good picture of your expected Federal Disability Retirement payments, follow this calculation:
Keep in mind this calculator provides an estimate of your benefits. Actual calculations may vary depending on real data provided by the OPM and/or emerging case details. Additionally, this estimate is for informational purposes only and does not constitute legal advice from Harris Federal Law Firm.
2. Manage Your Fixed and Variable Expenses
Post-retirement, you might have a mix of fixed costs (like housing and insurance) and variable costs (like medical bills or family vacations). A detailed budget will help you manage the funds you have on hand, making sure you don’t overspend in one area or the other. Two key things to keep in mind here:
- If you retired with Federal Disability Retirement, it’s recommended to continue treating with your medical provider around every 6 months to prepare for the OPM’s annual reviews. This is something to keep in mind when looking at your future expenses.
- As you age, you should expect your insurance premiums to increase.
3. Have a Plan for Your TSP
Your TSP is one of the greatest benefits of working for the federal government. If you haven’t been keeping up with your contributions, now’s the time to think about your options, especially since you can’t contribute while on Federal Disability Retirement. Here’s what you can do with your TSP:
- Let it sit and grow with interest
- Roll it over into a private IRA or 401K
- Cash it out, though, keep in mind you might face a penalty depending on your age
With a solid plan and budget, your TSP can make a huge difference in the way you live your life throughout retirement.
4. Know if You Qualify for Other Federal Benefits
Are there any other federal benefits you qualify for? Do you receive VA Disability or were you approved for SSDI?
Knowing what benefits are available to you and how they can work together is an important part of considering your post-retirement budget.
You can receive these benefits at the same time as Federal Disability Retirement:
- VA Disability
- SSDI, but your payments will be reduced
- An OWCP Schedule Award, if you’ve reached maximum medical improvement
- You can’t receive OWCP workers’ compensation at the same time as Federal Disability Retirement.
Check out the graphic to learn how these disability benefits interact.
5. Bonus Tip: Find a Budget Template
No one wants to stress out about their finances, especially after having to take early retirement. Sticking to a plan is one of the most helpful ways you can prepare. Microsoft even has some budget templates that may help.
Also, keep in mind that once you turn 62, your Federal Disability Retirement will automatically transition into your regular FERS retirement. At that point, you’ll start receiving your FERS retirement pension, and a few years later, you’ll be able to start drawing Social Security.
Don’t get caught off-guard by the financial changes that come with Federal Disability Retirement. We often hear the payments described as a lifeline, but any adjustment to your finances should be approached with extra thought and care.
Find the long-term financial security and peace of mind you deserve. If you need help applying for Federal Disability Retirement, schedule a free consultation today. We’re ready to help you chart a clear path forward.
