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July 18, 2019

Federal Employee Retirement and Benefits News

Category: Articles


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Partial Retirement: Are You Ready?

Working life doesn’t always end just because you are “retired” and more and more these days, people are continuing their working years long after careers end. Whether the intention is to help with transitioning, or because of financial reasons, a recent poll puts the number at a whopping 72 percent of people that are anticipating to continue working in some capacity after their official retirement.

For certain people, this may mean they can now look at jobs outside of their chosen fields and branch out into new areas of the workforce. So what can you do to prepare for this next chapter in your life and career?

The first step is to make sure you don’t go in blind. Planning is key.

How much are your living expenses? This is important to know as you figure out your retirement. With whatever pension or annuity payment, and Social Security you may earn, what is the difference between that amount and what you are making? Does the work you’re seeking have the hours to cover that? Do you have the flexibility to fit into their organization yourself?

These are the questions you need to be asking yourself.

Generally speaking, there will be less available hours, and for less pay, now that you are not a full-time employee, so its important to make sure you have an emergency fund to cover any unforeseen expenses that may pop up as you first transition into retirement.

The same is true for benefits. Your retirement fund is probably going to be the only coverage you can expect, as part-time work also often comes with diminished benefit plans. If you are retired from full-time work, but your Medicare benefits haven’t begun, it might be a perilous time for you insurance-wise, with premiums going up as you become more responsible for your own coverage. Make sure to factor this into your living expenses as well.

The most important thing to remember though is this, if you can avoid dipping into your retirement accounts, you should.

Because partial retirement means you’ll still be managing an income, this is an ideal time to let those retirement accounts you have to marinate. By putting off any withdrawals from those accounts, you can avoid certain taxes (money grows pre-taxed in most IRAs) and fees (sometimes as high as 10 percent) that come with early withdrawals. The longer you wait to access that money, the more there will be there for you when you do!

So this all begs the question: if you’re partially retired but still working, when should you start collecting Social Security?

This all depends on your financial situation, of course, but there is certain information that may help in deciding whether it is the right time for you to collect or not.

First is your age. If you collect Social Security before the federally recognized retirement age of 62, you will see a reduction in benefits right off the bat. The earlier you start collecting, the greater the reduction will be. The reduction could possibly get even worse if you are still earning money through part-time work too, with $17,640 a year being the threshold after which your Social Security benefits might be affected. This is the main reason to put off collecting until you’ve stopped working completely.

In summation, with a few steps, you should be able to keep working and making money even after you’ve retired from full-time work as long as you plan your financial future ahead of time, and know-how and when to start pulling from Social Security. Financial advisors should be able to help with any further questions you may have.

Retirement at age 70

Security After Retirement in California

Following similar programs in Illinois and Oregon, the general populace in California is now free to contribute to a new state-sponsored retirement fund called CalSavers.

Just like a 401(k) or other savings index, CalSavers is designed for automatic contribution to via an employees paycheck.

November of 2018 is when CalSavers launched, and it already has funded 1600 accounts with a 5 percent savings rate at about $91 per person on average. The amount of eligible people who are opting out of the CalSavers program is low, at only 22 and a half percent.

Employers in California are compelled to fall in line, as by law they have to offer their workers a retirement plan, and if they don’t have their own system set in place, then CalSavers would be the default for employees.

This will be a slow process, as CalSavers only began on July 1st of this year, and employers have several deadlines by which they’ll need to comply. The fist of these deadlines is for companies with over 100 employees. They have to have their workers enrolled in CalSavers (or one of their own offered plans) by 2020. Companies with 50 employees have longer, with up to two years to comply. And small companies, those with five workers or more, have the full three years to make sure their workers meet the new California retirement standard.

This is a long time coming for this very populated state. According to research out of UC Berkeley Labor Center, less than half of working-age adults have a retirement plan. The majority have no savings at all. And those who have been contributing to retirement plans have typically not put in enough to sustain them through the duration of their golden years.

There have been a few speed bumps in the rollout process, though. CalSavers was even sued a year prior for not being in compliance with the Employee Retirement Income Security Act of 1974, which deals with oversight in regards to retirement plans for private companies. The court allowed CalSavers to continue rolling out the program regardless. This is on top of critics and other advisors who claim that CalSavers will actually get in the way of companies investing in their own private 401(k) plans which are often better for employees than what CalSavers is offering.

As of September, CalSavers is also slated to be an option for self-employed people, with bilingual options for Spanish offered via the app on through support as well.

While not the first state to offer a program like this, California is certainly the largest, with 20 different cities and states also planning to offer up a similar type of ultimatum for employers operating within their borders. While still in the process of coming together, it looks to be a significant change for retirement options lead by each state.

retirement security funds money saved

More TSP Changes Coming Soon

The TSP Modernization Act is going into effect soon, and that means lots of changes to the fund are forthcoming.

As of mid-September of this year, the TSP’s governing body, the Federal Retirement Thrift Investment Board, has a few new rules set to go into effect. This is in addition to a few other proposed rules the Board is currently drafting.

One of the proposed new rules involved withdrawals after you leave government work. Previously there were many restrictions when it came to when you could take your money and how much you were able to take, but the Federal Retirement Thrift Investment Board wants to do with that, allowing for as many withdrawals as the former employee wants, from a lump sum, incremental payouts, annuity, or any combination therein. The only restriction, according to the Board, would be that the beneficiary would only be permitted “one installment payment series in place per account at any given time.”

There are other payment options too that were not previously available. Recipients can now collect on a yearly or quarterly schedule, as well as the previously permissible monthly payment option that existed before these new rules. Folks in the TSP are also allowed to amend the rate and amount they collect in these payments at any time in the year, a change from the limited options that you were able to make if you chose to take your money in fixed payments. TSP recipients can also stop collecting payments at any time, which they previously weren’t allowed to do unless they took the remaining money in their fund out and closed their account. If stopping monthly payments, you’d have the option to do a lump sum or annuity, or restart your monthly checks again.

And lastly, rules around the age-based withdrawals for people who were 59 and a half years of age or older who are still working have changed, and they may be allowed up to four age-based withdrawals per account per any given year. Previously, you were only allowed on age-based withdrawal, in which you had to take the money you were tapping into in a lump sum payment.

TSP News

Recession Fears Unfounded for Retirement Investors

Since 2018 there have been rumblings in the financial world over a possible impending recession, with a slew of polled retirement investors saying that they feel that one is imminent. But all of this might be unfounded.

Wells Fargo, in a recent statement, looked to assuage fears by assuring the public that the economy is in good standing and that there is no indication of financial turmoil on the horizon.

Wells Fargo models only make projections about a year in the future, and most recessions take much longer than a year to build up. Still, 11 percent of the people currently investing for retirement anticipate a market downturn this year, with an additional 40 percent thinking it will be here by next year.

A representative for the bank noted that they think the recession is “unlikely” and the economic expansion we’ve been experiencing is “longest expansion in the history of the U.S. economy” so that any downturn may seem like a bigger deal than it actually is.

Financial institution Morgan Stanley agrees, but is not quite as optimistic as Wells Fargo, putting their estimated odds for a recession at 15 percent for this year and 30 percent for next. It’s hard to predict, with new tariffs lowering the risk, and the Federal Reserves rate of interest which if lowered, will help the economy, but that may or may not happen any time soon, according to a representative from there.

federal retirement savings

TSP Contributions Are Raising For Those Automatically Enrolled

In a recent bulletin put out by the overseers of the TSP, the Federal Retirement Thrift Investment Board, they outlined their new plan to raise the contributions for those automatically enrolled to 5 percent, up from 3.

This will begin on the 1st of October, in 2020, and was authorized earlier, back in 2009, with the Thrift Savings Plan Enhancement Act. Anyone contributing prior to the October 2020 start date is exempt from the contribution hike.

Payroll and human resources departments received this bulletin to help with the transitioning to the higher percentage contribution rate, with another bulletin forthcoming that will go out to TSP contributors at large that will outline all the upcoming changes in greater detail.

5% is what the government had previously matched back on all TSP contributions. So now the automatic rate will be in line with that, with the breakdown as thus: a dollar for dollar match back on 3 percent, with the next 2 percent matched at a rate of 1 to 2, or fifty cents on every dollar, making the matching contribution, dollar-wise, for your 5 percent, about 4 percent in cash. The TSP also provides an automatic 1 percent return contribution regardless of what you put in yourself, making up the deficit and turning the grand total they match into an even 5 percent as well. You are free to contribute more than 5 percent yourself if you desire, but the agency will not match back more than what we have just outlined here.

All of these new plans and changes should ensure a proper retirement fund built up for anyone taking advantage of it at the end of their government working years.

If you have questions or concerns regarding your own Thrift Savings Plan, please reach out to a trusted financial advisor for guidance.

Thrift Savings Plan Funds

Getting Yourself a Pension After Retirement

Most jobs no longer offer pensions, with the last figure being that only 15 percent of working people have some kind of traditional pension plan. This figure excludes federal employees, where that number is much higher, at 75 percent.

The perception that pension plans are better for workers than the now more-common IRAs and 401(k)s is not untrue. 401(k) plans are at the whims of the stock market and subject to an additional slew of regulations and taxes. A traditional pension plan would give you a monthly check, with little to no fuss.

But hope is not lost. You can do a few things yourself, even if you’re already retired, that can help set up an income stream similar to a pension plan with your own investments and other benefits you may be receiving.

The first step is to look at your Social Security, which basically works like a pension program already, albeit a small one. $1,461 a month is the average Social Security payout per individual. This is certainly helpful, but for most people only about half their bills.

The best way to make the most of your Social Security is to put off collecting it as long as possible. 70 is the maximum age you are when you have to start collecting, and only 4 percent of people actually wait that long. The longer you keep working, and put off collecting from this fund, the higher those monthly checks will be when you start to draw from them.

Even then, Social Security isn’t the final answer. The next step should come with your 401(k) or IRA, which you can begin accessing when you hit the age of 59 and a half years old. While it is normally a large chunk of change and yours to do with as you please, it would behoove you to think of it less like a windfall and more like a paycheck, a set amount to pull from, that can fund your personal pension.

Of course, it tends to get a little more complicated the older you get, especially after you reach the 70 and a half-year-old threshold in which you hit the age limit for the required minimum distribution (RMD) where you have to start collecting Social Security.

What happens then is you take your 401(k) accounts and your IRAs and add them up, dividing that number by the life expectancy factor that the IRS has determined (available on their website), so you can figure out how much to pay yourself each month as the years go on. As you get older, the number of years in the life expectancy factor drops, meaning the amount you must take out yourself will rise. Divide this number each year by 12 months, and you can figure out a nice steady pension-like paycheck to give yourself every 30 or so days. Add that to the Social Security paycheck you’ll be getting.

If you require more money, then you can use some of that “pension” to buy mutual funds or another fixed annuity, or possibly refinance your home. There are many things you can do to turn cash into more cash if you’re smart with it, but, generally speaking, there it is the money you are going to spend your golden years with.

Retirement Benefits

12 Retirement Savings Facts

Here are a few facts about retirement savings that you may or may not be aware of:

1.  More people are planning for their future than ever in the past, contributing a large share of their monthly paychecks to retirement plans than any point prior. 12.8 percent is what the total amounts of workers contributing towards retirement were. In 1984, this number was only at 9.9 percent.

2. In addition to that last fact, retirement savings now are the highest amount too. While pension plans are no longer as common as they once were, IRAs and 401(k)s make up the difference, and currently, the amount of total worker wages put into retirement savings was a whopping 337 percent.

3. 80 percent of people already retired claim that they are doing good and have enough money to be comfortable, while 75 percent claim that since retiring they haven’t had to adjust their living standards at all, as reported by the 2016 Survey of Consumer Finances, conducted by the Federal Reserve.

4. The Census Bureau says that the rate of poverty among retired Americans is dropping. In 2012, the poverty rate was 6.7 percent, down from the 9.7 percent it was in 1990. All indicators point to this trend continuing.

5. While pensions are offered less by employers, the amount of people covered by it has not changed all that much. 1973 was the top year for pensioners, with 39 percent of non-government workers a part of that program. This was compounded by the fact that even then, there were provisions from employers to determine eligibility, some as stringent as demanding 15 years on the job.

6. According to research done by the Congressional Budget Office, it appears that Social Security is covering more than the common perception states, making up for up to 60 percent of the retirees prior earnings. This is much more than the widely accepted figure of 40 percent.

7. Most retired people’s income is better than what advisors typically suggest, most of them at 70 percent or higher, meaning that there should be no significant change in the living standards of the retiring individual. Some data reported by the Investment Company Institute claims that 113 percent is what a middle-income household is pulling in on average, after retirement, and the ones that aren’t exceeding that amount are mostly just under it.

8. Social Security is the largest income supplemental program in America and the main source of money for a lot of retired people. Any changes to the program could have huge effects on the entire American economy. Improvements to the fund and other governmental programs are big factors for retirees.

9. All told, the assets in American retirement plans is much bigger than the added assets of retirement plans in other countries by far, with most countries retirement assets adding up to merely 19 percent of the GDP, while in American that number is 150 percent due to programs like Social Security and other private investment holdings offered by employers.

10. While the cost of healthcare has undoubtedly gone up, it is somehow not taking more money out of the pockets of most retired people, as income levels have gone up too, mostly matching the same rate. All of this is not to say that rising health care costs aren’t a concern for retirees, but the fact that the income level is matching it on average is a sign of a strong system in place.

11. 401(k)s and IRAs have shown to have no worse inequality in retiree incomes than under the traditional pension plans of years prior. The perception had always been the opposite, that 401(k)s create greater disparity in retired equality. This is even further from the truth once Social Security is added to their income. The distribution of money among retirees is pretty much equal to what it was when pensions were the main retirement fund.

12. The actual inequality between plans is when you factor in what is provided by the government, which has a deficit of up to $26 trillion, meaning that more money is being paid out by these plans then are going into it. This is not as bad for retirees individually as it is for the economy as a whole.

Image Credits

TSP Alerts Agencies to Pending Withdrawal Policy Change

In the notice that the TSP has sent to agencies, employees who make withdrawals to cover for financial hardships won’t need to wait for six months anymore before making investments again. The policy change is expected to take effect on September 15.

The notice informs the agencies to notify employees who have made withdrawals for financial hardships of this anticipated change. It also urges agencies to make necessary changes to their payroll systems so as to accommodate the changes.

Through September 13, 2019, the Financial Hardship In-Service Withdrawal Report  (Report 5501) will be generated. The report will become obsolete come September 15, 2019, and any withdrawals made on or after that day won’t need a six-month contribution suspension.

From September 15, 2019, any employee that received a financial hardship in-service withdrawal and is under suspension will restart TSP investments. Investing will be possible even if they will not have completed the six months by September. The TSP will send them a notice and alert them that they can start to reinvest, but the participant is solely responsible for restarting investments. They will do this by submitting a new TSP Election form or through the agency’s pay system.

This change, however, doesn’t affect other forms of in-service withdrawals like the age-based withdrawals allowed without a tax penalty for employees aged 59 years or older. The people that take that form have always been allowed continuous investment. The current lifetime of such a withdrawal’s lifetime will be ended at the same time among other changes in withdrawal.

The TSP, the 401(k)-style program offers five funds, and one of them is tracking international stocks. It will be broadened in 2019 to include emerging markets. Also, the TSP offers funds referred to as ‘lifecycle.’ These funds mix investments in the basic funds in ratios that have a variation with the expected withdrawal times. Over time, the mixes become more conservative.

TSP Policy Changes

Things to Know About Your FERS Annuity

When it comes to the Federal Employees Retirement Plan, the FERS annuity is the solid foundation. There are four key points that people fail to understand, even as a good number of federal employees know how to calculate their FERS annuity.

Understand How FERS is Calculated at Different Ages

The first thing to know is the difference in the calculation at age 62. The FERS retirement formula is your high 3 x number of years of service x 1%. The formula, however, changes if you work until age 62 and retire with 20 or more years of service. You will receive 1.1% per year worked instead of getting 1% per year worked. An extra 0.1% on 20 years of service will add an additional 2% to your high 3.

For the employee that is considering retirement around the age of 62, the extra 0.1% can make a big difference. Or the employee near the 20 years of employment threshold and is considering retirement after age 62.

Know How Your Survivor Annuity Works

If you are married at retirement, you will have the option of electing a 5% reduction for a spousal benefit of 25% or a 10% reduction for a spousal benefit of 50%. If the federal spouse dies first, the nonfederal spouse can continue Federal Employee Health Benefits (FEHB), which is another reason to select a SA. However, the surviving nonfederal spouse cannot continue FEHB without a SA. If you are considering using life insurance to replace the SA, this is something to be aware of.

Your COLAs Won’t Keep Up With Inflation

FERS retirees do receive an annual COLA, even as most retirees that receive a pension don’t receive any type of annual increase on their pension. The downside to that COLA is that it won’t keep up with inflation. This means that your expenses are increasing at a far more higher rate than your income.

A lot of retirees only look at their TSP balance when they determine their allocation and want to invest conservatively in their TSP when they retire. If the 4% rule of investment withdrawals is applied and the value of FERS annuity is added, then there will be a significant change. This is because the value of the above FERS annuity is $600,000, and this would all be considered fixed dollars. Investing is a lot more than just numbers and math if we look at it from a strictly logical perspective.

FERS Annuity Knowledge Things to Know retirement

Here is How to Compound Your Wealth First in Readiness for Retirement

When you are young, it is easy to put off any thoughts about saving because retirement is years away. But then this is not recommended. It is advisable to start saving as early as possible for your retirement instead of waiting until you hit 40 to get serious. The good news is that investing has got you covered.

Compound interest

Government employee Eric Bowie,48 from Kansas City, had a life-changing moment when he was in his 20s. When he used to work as a teacher, a salesman arrived at the school to offer his services to the staff. Eric was blown away when he showed him an illustration of the impact of compound interest on investments.

During that period, Eric was a contributor to a teacher’s pension but had no other retirement plan. He started studying the tables and examining how his money would grow. By the time he stopped teaching, he had in his possession $30,000. He was certain that if he continued contributing, he would have about $700,000 in 30 years. This idea appealed to him. He transferred his savings to the government Thrift Savings Plan as soon as he started working for the government. He now has a six-figure account after his continual contribution for over 17 years. According to Bowie, spending less is a powerful tool.

You Don’t Have to Be a Genius

According to David Schneider, a financial planner, and Schneider Wealth Strategies founder, the key to investing successfully isn’t brilliance in making investment decisions. It is about staying away from mistakes like failing to expand your investments. When Rob Grass, 43, started investing, he made a few mistakes. He went into the whole thing blindly.

After its legalization in Canada, Grass invested in cannabis stocks. He, however, says this was a late move. He then developed an interest in investing in Blackberry.  He approached his bank instead of a brokerage house and asked it to buy the stock for him. At the time he wanted to buy, each share was priced at $9.18, but his bank didn’t act right away. It made the purchase when the value for each share had risen to $15. A total stock market index fund is the perfect starting point for new investors.

“ They are normally available in a 401(k), or one can acquire them through a brokerage firm,’’ said Schneider.

The Investing Mindset

According to Jordan Sowhangar, a CFP and wealth advisor at Girard, attitude is key. Individuals should have a financial plan in place before hitting the retirement age. Sowhangar says that the plan will hold you accountable. He advises on seeking the help of a financial advisor.

Risky Business

Daryn Duliba’s first mistake was not investing while he was still a youngster. The reality of retirement hit him when he was in his 40s, and he looked for ways to increase his returns so as to make up for all those lost years. He tried putting his money into cannabis stocks, and it was growing quickly. But the money never lasted. Whatever he gained, he ended up losing because he had no idea what he was doing. His advice is to keep learning.

Retirement Wealth

Providing For The Person Who Has an Insurable Interest in You

A provision of the federal retirement that is not quite popular allows one to provide a survivor annuity to a person with an insurable interest in you. A person with an insurable interest in you is a person that is financially dependent on you and is expected to attain a financial benefit if something were to happen to you.

The insurable interest annuity is generally used to provide benefits to someone else other than your spouse seeing as spouse’s benefits are covered under standard spousal survivor benefit policies. The eligibility for this benefit will fall to an adoptive or blood relative such as a child, a qualifying partner or former spouse, a same-sex domestic partner that meets some qualifications and last but not least a person you are engaged to be married.

Also one can establish an insurable interest by submitting affidavits from two or more people who are aware of your relationship, this is if the person you want to provide a benefit for isn’t on the list above. They will need to confirm the extent as to which they are dependent on you, your relationship, and the reasons she or he might expect, if you stayed alive, to derive a financial benefit. In addition, you will need to have a medical exam done and have a report signed and dated by a physician that’s licensed to prove that you are in good health.

The amount of your annuity that could be used as a base and the age difference between you and the person you intend on getting the benefit for. This are the two things that will determine how much the benefit will cost you. 10% if the survivor is the same age, older than or less than five years younger. 15% if 5 but less than 10 years younger, 20% is 10 but less than 25 years younger, 25% if 15 but less than 20 years younger, 30% if 20 but less than 25 years younger, 35% if 25 but less than 30 years younger, 40% percent if 30 or more years younger.

The proceeds of your Federal Employees Group Life Insurance and your TSP account are examples of other benefits that may be provided for a non-spouse, and as long as someone else doesn’t have a legal title to them, they will easily receive those benefits.

financial dependent insurable insterest

Mistakes Not to Make When it Comes to Retirement Savings

We know all too well how important it is to plan for retirement, and there are so many mistakes one can make when retirement planning is involved. Here are but a few mistakes that one can avoid.

First of all, not saving enough. A good number of us have estimated the age to which we will get to leave, the majority placing the number between 75 and 85. However, we might end up living longer than expected to, let’s say, 95 or even 105. That said, having enough put away is essential so as to ensure the golden years are enjoyed, no matter how long one ends up living.

Assuming good health through retirement years. You might have always eaten right and never missed a day of work, but mother nature has a way of catching up. A significant dent could be put on your retirement savings by your health, taking a bad turn. It is, therefore, better to overestimate your retirement needs rather than underestimating.

Procrastinating on starting a retirement account until later in your working years. This procrastination only makes it way harder to meet the goal you’ve set. It is best to start early and set aside as much as you can now.

As much as social security is a nice benefit, relying solely on it can generally prove to be is advisable that this benefit is used as an added benefit.

Using retirement funds to loan funds. We are all hit by hard times, and at times it may be tempting to scoop some of the funds in your retirement account to weather the cloudy days. This is a problem because once those funds exit your account, they are no longer earning interest, thereby sacrificing the potential your money has of growing. You can borrow from your retirement account only when you are entirely out of options, and that is your only saving grace

Avoid Retirement Mistakes

Why Working Into Old Age May Not Salvage Your Retirement

Working longer isn’t always the right solution to increasing your savings. However, the fact that staying at work has its benefits can’t be denied. One of its perks is that pre-retirees can boost their income from retirement by choosing to remain in the workforce for a little more time. You get an increase of 8% in your benefit check for every year you delay Social Security until you reach age 70.

Not everybody can continue to do this as those who leave their careers due to medical conditions turn to their retirement security

“Many people are not aware that Social Security gives out disability insurance, but the process of getting those payments is a long one,” says Niv Persaud, a Certified Financial Planner at Transition Planning & Guidance.

According to research carried out by the Centers for Disease Control and Prevention, 3 out of 4 Americans of ages 65 and above suffer from multiple chronic illnesses, which include arthritis and diabetes. These conditions pose a threat to people’s finances when they are driven to reduce their working hours or quit their jobs.

Mathematica’s Center for Studying Disability Policy recently carried out research and established that two years after developing their conditions, newly disabled employees usually in their 50s and 60s experience a decline in their earnings by 50%.

Although the affected workers have Federal Disability and Retirement Benefits, which help make up for their lost earnings, it doesn’t compare with what the workers were previously making.

Coverage For People With Disability

Social Security provides disability insurance that financially supports workers who are not physically or mentally strong. You need to have worked for a minimum of ten years for you to qualify for this insurance but the workers that are younger qualify for the benefits with lesser time. One thing about this disability coverage is that it is very difficult to qualify for it.

The agency vets applicants by using a five-question process. It also determines whether the individual’s condition is so severe as to prevent them from doing any work. After qualifying for the coverage, you will wait until the sixth month before receiving your benefits.

Boosting Income

There is nobody that really expects to become disabled, but there are measures you can take before a health emergency knocks in order to ensure your income is protected. You can start by purchasing disability insurance. The coverage will replace 60% of your total earnings within the given time. The benefits run for 3 to 6 months in the case of short-term disability plans and up to 5 years for long-term plans. You can also set up an emergency fund.

Pay Keen Interest to the Details

First, you should make sure you read your plan’s fine print. People often have to wait between 30 to 90 days to receive benefits after filing a long-term disability claim. As you wait for the benefits, you will have to tap into your funds so as to meet your needs.

You should know the definition of ‘disability’ according to your policy. Some require you to be incapable of performing work related to any occupation for you to be considered disabled.

“Ensure your policy defines disability as the state of being incapable of performing your own occupation,” said Nelson

Working Retirement Old Age Employee

How Much is The Real Worth of Your FERS Annuity?

In today’s workplace, the employees with one of the best benefits packages available have to be the federal employees, and a big part of it is the Federal Employees Retirement System (FERS) annuity. Federal employees that started their career after or on January 1, 1994, are provided with this pension that is FERS annuity. FERS annuity is based on a retirees final three years of service and their years of service, but what is it really worth?

As for some, the value of the annuity may not really matter, but it can be really important for those that are planning on designing the appropriate investment allocation. It is then important to take all streams of income into consideration, but how is a stream of income valued?

When it comes to valuing a stream of income, the simplest possible method would be determining what percentage of income you expect to withdraw from your investments first. There is a high chance of your investments lasting you for the rest your lifetime if per year, you only withdraw 4% of your investment assets. Chances of running out of money drastically increase once your rate of withdrawal goes higher than 4%. A good number of retirees only look at their TSP balance when they are determining their allocation when wanting to invest.

If the 4% rule of investment withdrawals is applied and the value of FERS annuity is added, then there will be a significant change. This is because the value of the above FERS annuity is $600,000, and this would all be considered fixed dollars.

If the value of social security were to be included in the investment allocation, then $500,000 would be its value. Even if the entire $400,000 TSP balance was invested in stocks, with the two income streams accounted for the allocation by the investor still looks quite conservative.

Since emotions can cause a lot of bad decisions, it takes up a huge role in an individual’s investment decisions. Everyone wants to sell stocks at the market bottom, and everyone wants to buy them at the market top – this is according to a number of studies conducted to study the emotional side of investing, and they all came up with the above result.

FERS Annuity Value Worth Money Investment

How Much American Retirees Spend in a Year

According to federal data, to get by in retirement costs roughly as much as it was before retirement. $50,178 is what a household that is run by a 65-year-old spend in a year. This is according to the most recent federal data on consumer spending. An average of $60,815 is spent across all households. The older houses have almost similar expenses with younger Americans; this includes:


On average, an older household spends $6,513 per year on food, and this figure includes when eating out or eating at home. The amount is lower compared to the $7,896 spent by the average household.

Public Services and Utilities

On utilities like electricity and natural gas as well as services such as water and phone, on average the older household spend $3,714. The average spent across all households is $3,956.


Now, this is one expense that increases in retirement compared to the $4,924 for all households; on average, an older household uses an average of $6,700 each year. For both average and older households across all ages, most healthcare spending is on insurance, and the rest is on medical supplies, drugs, and medical services.


The spending here is inclusive of mortgage, rent, and as well some hidden homeowner costs such as insurance, property taxes, maintenance, and repairs. This also translates to about a third of older household spending, which is an average of $16,723 per year as compared to $20,001 for the average household.


Just because commuting may come to a halt during retirement doesn’t mean that transportation costs will as well. On transportation costs such as insurance, gas, and vehicles. On average, the older household will spend an average of $7,472 per year; this is compared to the $9,735 for all households.

money spend retirement retiree spending

Overview: Federal Disability Retirement

This is relief from civil or federal service due to a health condition that has rendered an employee incompetent or unfit for the work they had been effectively executing before and is legally acknowledged. This special benefits package is accorded to the employees of postal and federal categories. Based on medical grounds of the employee, FERS and CSRS are able to acknowledge this offer.

Workers who have developed a disability or a medical condition that hinders their productivity in the workplace are the beneficiaries of this package. The Office of Personnel Management approves this if an employee applies for disability retirement, or he or she proves needy.

However social security disability and OPM disability retirement should not be confused, the difference between the two is that you qualify for social security disability when there is an absolute disability and for the latter, proof of unproductivity due to health limitations.

Disability Retirement Qualifications

You need to produce medical proof and show an inability to perform in the workplace and the inadequacy leading to incompetency with your current position. You should be recognized by CSRS for five years or have served in the Federal service for at least 18 months.  It should be clear that for minimally one year from the date you apply for disability retirement, the medical condition that has incapacitated you will proceed.  With no remedy for the victim, the employer may be left with no choice but to relieve the victim of disability, considering the negative impact of the medical condition.

The OPM Disability Retirement is a sure way of easing the suffering of an employee in their time of need, seeing as they have been serving the state. If you need assistance, a FERS disability lawyer is a very important person to keep around. They will be the bridge between the government and the agency to make sure that you are granted the right to enjoy the free time to recover.

Federal Disability Retirement

6 Important Questions Clients Need to Ask on Inherited 401(K)

To minimize tax liability and ensure that one gets the most of the insurance, it is very important that clients who are to receive or rather inherit a 401(k) from their loved one know the plan’s rules. They should check if the 401(k) original owner has started taking the required minimum distributions so as to make the right decisions by knowing their claiming options. In addition, whether they can add on their inherited assets into their own 401(k) plan or not is determined by the relationship between them and the original 401(k) owner.

How to Avoid Nasty Surprises When Retirement Arrives

Distributions will still incur taxes in retirement despite contribution taxes on traditional 401(k) are deferred. So as to minimize their taxable income in retirement, workers should not direct all their savings to a traditional 401(k). Rather, they should consider stocking away some of their money in a Roth 401(k) if such a feature is offered in their plan.

Retirees Fleeing These Three States in Huge Numbers

Connecticut, New Jersey, and Maine saw the biggest number of residents moving to other states. A large number saying the main reason for the relocation is retirement. It is said that many retirees move to other states to minimize their tax liability and as well reduce their cost of living.

Federal Employees Set to Soon Have More Withdrawal Options for Their Money in Retirement Accounts

It was announced that by the officials of the Thrift Savings Plan, that the plan of new account withdrawal options will soon be implemented and made available for military personnel and federal employees who are contributing to the plan.

401K Retirement Questions

Retirement Preparedness for Generation X

Recent studies have shown that for people under the age of 55, a substantial portion of them, 65 percent, do not think that the money they’re putting aside now will last them through retirement. For people over the age of 55, that number drops to 45 percent, but it is still quite a lot, especially if one has been meticulous about their savings.

Concerning those above the age of 45, the split in attitudes comes with a number amount: about 75,000 dollars in retirement funds saved. The difference is clear. $75,000 seems to be the natural amount one would have if they had been saving diligently for their future financial security. When nearly half the people surveyed fall below this target amount, it suggests that something addressing retirement savings, in general, must be done.

More statistics reveal an even bigger issue: of those with less than 75,000 dollars saved for retirement, 3/4ths of them do not think what they have managed to save so far will last them through the rest of their lives. This is in opposition to people with over $75,000 in their accounts, where that number of those concerned is only a 1/3rd. This is the dilemma of Generation X. They are the first demographic less likely to have a pension than those who had come before them, making them wholly responsible for their own retirements.

Social Security may have to pick up the brunt of the difference, should people not have enough to live on once they reach retirement, with estimates putting it at nearly 62 percent of their projected income. The people with over $75,000 in the bank are much more optimistic, with Social Security expected to only make up a fourth of their take-home amounts, the remainder based on a mixture of annuity, pension, and other savings.

The main divide between these two camps seems to be two-fold: what the person currently makes, and what their pension looks like. Higher incomes and secure pensions mean less worry. In addition, people under the $75,000 mark also tend to have more debt, which usually takes precedence over savings.

So what can be done?

There are few steps a Gen-Xer or anyone can take to help ease some of the retirement burden, today. The most obvious step would be to enroll in a good retirement plan with a rate high enough that, extrapolated, could cover your base living expenses in your retirement. This could all be automated in most cases. Couple this with further education in terms of how and where to save your money might alleviate some of the retirement anxiety.

Preparing for Retirement Generation X Under 55

Taking Risks with your TSP

With its focus on American Treasury securities, the G Fund is the most invested fund in the Thrift Savings Plan or TSP. Before 2015 it was the default fund for TSP enrollees who hadn’t made any moves to divide up their assets between different investments. Because the G Fund’s principal and interest is backed by the Government, it is the safest bet of all possible TSP investment options.

The main failing with the guarantees offered to employees through the G Fund is that people playing it safe with that investment might miss out on many of the chances to grow their retirement fund through other avenues in the market. And with things like inflation, a wavering growth in the market, the safe retirement fund you’ve been saving towards might not be as much as you thought by the time you reach it.

Take the period between 2009 and 2018, for example, wherein the return on the G Fund was only 2.3 percent, while the return on the S&P 500 C Fund was much higher, at 13.17 percent. That’s a big difference. Even taking out the huge market fluctuations in 2009 and 2010, the C Fund still averaged a return of 8.53 percent.


It may sometimes be wise to move assets to the G Fund during periods of market unrest, especially when you’re close to retirement age, but during these periods of economic downswings, the savviest move for investors would be to put their money into the C Fund; it is cheaper, and essentially investing like it was on a discount.

The reason people might be risk-averse might lay in the structure of the TSP itself. How can workers make investments based on the risk and rewards of certain funds when the TSP doesn’t provide any of that information. A lot of investors either have to guess or play it safe, opting for things like the G Fund. This is not a great move as through things like FERS current pensions are not as big as they used to be two or three decades ago.

This isn’t to claim that an investor should ignore the G Fund completely, but it is usually a wise move to diversify and put your money into different investments, and not miss out on any gains.

While things like fear of market losses, are totally valid, more often than not, the main reason people tend to play it safe with investments is listening to bad advice from a co-worker who, while most likely having your best interests at heart, are not financial advisors, nor do they know all the details of your particular circumstance. Things like moving, personal goals, debt, and your retirement date all are factors in how and when you should be moving your investments around. Setting goals and then following through are the key factors in deciding how to invest.

While the TSP has occasionally addressed investing over time and risk management before, including the retirement income calculator offered on their website, these resources are not the end all of advice in the matter either. While risk-averse planning is an excellent place to start, in order to make the most of your future retirement, it would make sense to get a fuller spectrum picture of what certain annuities might do as for their possible reward on return.

The best plan is knowing what you want, and then working backward to figure out the best way to get there. Professional financial advisors, both within and from beyond what the TSP offers, is an excellent way to go. They can steer you in the right direction, or at least give you a bigger picture of what you may or may not be missing out on by keeping your retirement fund focused on the low-risk investments only.

Thrift Savings Plan Investment Risk

Getting More Out of  Your Retirement Checks

Taking advantage of your Social Security benefits and maximizing your retirement checks, is paramount in regards to your easing into a cozy retirement. Before making any decisions that may have an impact on your retirement fund, it is important to consider what this would mean for your future. The same is said of collecting your Social Security too early.

At current, 60 million people are drawing from the country’s Social Security fund, while 170 million people are paying into it. One thousand four hundred dollars was the average amount per month that a recipient of Social Security was able to draw, with that number getting higher or lower depending on the person’s particular circumstances.

Pensions from employers are no longer the norm in this country, with only 20 percent of companies offering up any pensions. Social Security is different, as it is paid out by the government, and guaranteed to a person collecting. Though meant to be supplemental, it is the primary source of income for a lot of retired Americans.

So how do you stretch that monthly check to make it last? There are a few steps you can take now to help ensure a more lucrative future.

The 35 Year Plan

Thirty-five years or more is the ideal length of time, according to financial experts, if you want to maximize the amount you receive, which is determined by when you stop working.

The pay you receive from Social Security is determined by the average monthly payments you made during those 35 years. That number is then used to figure out what sort of benefit payout you earned throughout that time. The reason you want to work more is that higher averages in those years can bring up the lower averages during the leaner years when figuring out your Social Security amount. If you don’t pay into the fund for at least 35 years, a zero year is entered in its place, and that can significantly lower the amount you collect.

Keep Working

You will see a significant jump in the amount of your benefits if you continue to work past the age of 65. They will give you more for delaying retirement and keep increasing that amount by about 8 percent a year until you turn 70, which is the age you have to start collecting.

So even though you can start collecting at age 62, you certainly shouldn’t if you’re younger than 65, if you’re able. If you collect early, each month will have a reduction on it until you reach the retirement age. Still, even if you keep working past 65, you should apply for Medicare, so you don’t have to pay more into it.

Spousal Benefits

Your spouse’s benefits are also something to take into consideration. For people born before 1954, you can get 50 percent of what the house’s highest qualifier received at 65, meaning if your spouse made more than you, you too can reap the rewards by having your benefits bumped up to match theirs.

Change Locations

Certain states have much lower taxes on Social Security benefits. Retirement is an excellent time to consider relocating yourself to a new state in which this might be the case. Thirteen states currently tax your Social Security income, including Colorado and Vermont. Places like Florida, a popular spot for retirees due to the warm weather, do not.

Retirement Checks

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