Q: How does my leave and disability impact finances?
There are at least five reasons you are financially exposed:
- Because leave and disability retirement are separate programs with
different eligibility requirements and don’t coordinate, you could find
yourself in extended periods of LWOP with no income coming in.
- Leave donations are just that – donations which are not
guaranteed for a specific period of time and are not tied to your
monthly bills.
- Now that you can convert your unused leave to increase your
retirement income, like most federal employees, you should become more
reluctant to make donations.
- Disability retirement provides a base pension benefit that offers a
two year step rated down income stream that levels off at 40% of your
high-3 average salary. This pension benefit is not only taxable, it
doesn’t come with COLA. As an actively working employee you may find it
difficult to live on this benefit amount.
- The combination of LWOP with the reduced income received from
disability retirement may force you to withdrawal funds from your TSP,
or other savings and investments before you’re ready. The premature
liquidation of your TSP or other savings and investments will have a
negative impact on your future income security.