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March 28, 2024

Federal Employee Retirement and Benefits News

Category: Articles

Articles

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How Policymakers Can Affect Social Security in 2019

It’s yet another year, and everyone is worried about their retirement security and how to keep it high. Did you know that policymakers can either help or prevent retirement security in 2019? A lot of people are concerned about retirement stems regarding uncertainty about working at older ages since most of them would love to work longer if given a chance. This is either to help them to stay active and productive or so that they can boost their savings. The rest of their concerns revolve around Social Security, savings, debts and the profoundly increasing costs of health care.

Policymakers have the power to shape five economic trends this year which are debt, health care, savings, jobs and Social Security, which can profoundly help or hinder retirement security improvements.

For starters, the Policymakers in Congress should pay close attention to the labor market. There has to be a constant labor market growth if there will be retirement income equality. If everyone gets a job, it means that they can all save. The elders, in particular, should be given opportunities to work longer.

Some seniors face challenges trying to secure jobs than others. The level of unemployment keeps rising, and it is even worse for the Latinos, and the African-Americans compared to the whites.

Secondly; the policymakers should work on policies that provide workers with more access to retirement savings. You will realize that most employees do not have access to savings plans such as IRAs and 401(k). This mostly applies to the people of color, those with a low level of education and those working under small employers. They should look up to states like California and Orgon which have already started to implement state-sponsored savings plans for individuals who have no access saving plans at their work.

The third case is where the policymakers can put more efforts on expanding Social Security, which is an excellent way of eliminating cases of insufficient retirement savings. Over the past few years, such cases have gotten no attention as the Congress focused more on tax cuts proposals for corporations and high earners. This has resulted to the woes of the ordinary citizens being taken for granted, but there is hope that with the new majority in the House of Representatives and the presidential elections coming up soon, momentum could shift towards such woes.

Fourth, the policymakers should observe the interest rates as high rates will directly increase costs for the retirees. According to calculations made as per the Federal Reserve’s Survey of Consumer Finances, the results showed that many retirees, up to 60.3% in 2016 had some form of debts some which included a credit card balance of $2,000. Increased interest rates only make the income inequality even worse, and the retirees will suffer a lot.

The fifth scenario involves the health care costs which can profoundly affect inflation. For the last few years, the Affordable Care Act has put some efforts to ensure that healthcare inflation is balanced with price increases. In 2018, the Centers for Medicare and Medicaid Services had anticipated the health care inflation to increase at a higher rate than price increases. This may also be witnessed in 2019. Increased health care costs could lead workers to spend their retirement income, and even worse, they could end up in out of pocket spending.

Medicaid expansion in many states could help in balancing healthcare inflation as prices increases in most services tend to rise at a slower rate in Medicaid than private insurance.

Most households are still struggling with preparations for retirement. They all aim at having enough to cater for them in their retirement age, but circumstances won’t let them get there. The bottom line is that a strong labor market, Social Security protection, accessibility to retirement savings and low-interest rates and health care inflation can significantly help in boosting retirement income security. Policymakers should have these aspects looked into.

Federal Retirement Benefits

Federal Retirement Plans Complicated by Shutdown

Federal employee retirement has been caught in a complicated web weaved by the partial government shutdown. Various factors come into play when determining if a federal employee is able to retire during the lapse in appropriations.

The good news is that the Office of Personnel Management Retirement Services is funded by the Federal government’s retirement trust fund. This means that it operates normally whether OPM is open or closed. This further means that employees can choose to retire freely if they have received their fiscal 2019 appropriations and they won’t experience any abnormal delays.

Things only get more complicated is what happens if an employee at a shuttered agency had plans to retire this month. As long as an employee had issued a request to retire at a certain date, he or she would be considered to have retired at the given date. Even so, once the government reopens paperwork may need to be filled retroactively. This is according to a shutdown guidance from OPM.

OPM wrote, “for employees who, on or before the requested retirement date, submitted some notice of their desire to retire, agencies should then lapse in appropriation ends, make the retirement effective as of the date requested.”

Problems begin to come up within individual agencies, where during shutdowns human resources departments are usually deserted. The retirement package, including large sum payments for unused leave, could be delayed if your retirement date is during the shutdown, depending on whether or not an agency has completed the necessary portion of the retirement process.

For those scheduled to retire after the start of the shutdown and before the end of the leave year, OPM said that they won’t lose leave hours over the annual rollover cap, even if agency furloughs prevented their retirement from being processed on time.

For those employees that had planned to retire during the shutdown and had not informed their agencies would most likely have to wait until after the government reopens to start the process.

Don Fletcher

Blended Retirement Final Opt-in Rates Yield More Surprises

Final numbers are in on military folks who switched over into the new Blended Retirement System (BRS) by the Department of Defense. This was during a long opt-in period that ran through Dec. 31. The results defied the forecasting tools depended on by the department as the results came in lower than expected. In addition was relied upon by the military compensation and retirement modernization commission, to project from the new plan budget savings.

Singular effectiveness of the Marine Corps’ approach in deepening member interest in the BRS, has been shown by the Opt-in rate across service branches. They rely more on vigor and youth and hence fewer careerists. 59.4 percent equivalent to 84,324 active duty marines opted into the BRS. Doubling the rate of almost every other service.

39.8 percent of those Marine Corps Reservists, got into the new plan. This number being 3 times more the Opt-in rate of the others: Army National Guard 9.2 percent, Navy reserve 11 percent, Coast Guard Reserve 9.2 percent, Air National Guard 11.3 percent, Air Force Navy 11.2 percent, Army Reserve 10.9 percent.

BRS also put out a requirement that the services offer an Opt-in chance to any active duty member who has had less than 12 years in service as of Dec. 31, 2019. In addition, the law also required that the services educate their pool of eligible members on full details of the legacy plan.

No service had set a target or goal for the number of members who should opt into the BRS. It solely depends on individual personal career goals, opportunities, and circumstance as to whether it’s the right choice. Over 1.6 million members received training.  In addition, they also had access to an online calculator to compare plan values as well as financial counselors. A social media platform was also set up and won recognition as the best in government.

Only 14 percent of reserve component and 19 percent of active duty force on average serve 20 years to quality of a lifetime annuity. Yet 85 percent will leave with a retirement benefit of some sort once BRS is fully implemented.

The Retirement Modernization Commission, as well as Department of Defense, heavily relied on a computer software designed to predict decision behavior. It has been very effective in predicting retention rates of personnel offered rates among other cash incentives for years.

However, it did not work as well in predicting how many service members would switch to the BRS. In its defense, the model was not designed for this kind of behavior. Even though the opt-in for most f the eligible members, some qualify for time extensions. This includes members who are still cadets or midshipmen, members with a date of entry on Dec. 31, 1017, or before and those who did not have at the very least 30 days in 2018 to make an Opt-in decision. In addition, some will be given more time because of special circumstances or family hardships.

Military Retirement has been confusing for some.

6 Things You Should Consider Before Your Retirement: Live Comfortably After

If full-time work is nearly coming to a close for you, it’s important to really look at the financial aspects of your next life move – be it semi-retirement, retirement or something else altogether. After all, you don’t want the transition to throwing your curveballs. Thus, looking at the decisions you make under a fine tooth and comb is important to ensure you know what your bottom line will be.

Some individuals saved for years for their retirement, but others either didn’t or haven’t been able to, hoping they could make it through. Some people want to continue working until they die. No matter what your thoughts are, experts feel you need to make sure your financial base has been covered in the event something happens.

Healthcare Is Most Often Forgotten Expense

As people get older, they often go to the doctor more often. However, it’s an expense most people tend to forget. An average 65-year-old couple will pay about $280,000 in their lifetime for medical care.

Of course, once you turn 65, you are eligible for Medicare. If you retire at or after that age, Medicare is available to you. The coverage doesn’t cover dental, vision or long-term care though. This is something to keep in mind. How much you pay into

Medicare is dependent on a number of things:

-Income

-Late-enrollment fees

-Additional coverage (optional) and how much

If you retire before you are 65, you have to find your own healthcare coverage.

For people who have a gap in their coverage, they can take advantage of COBRA. According to federal law, employers with 20 workers or more can permit ex-employees (retirees qualify) to stay on their employer-sponsored health plan so long as the ex-employee can pay the entire premium cost.  Most employers will cover current employees, not COBRA coverage.

You also have the option to enroll in the Affordable Care Act plan (also called Obamacare), and income dependent, you could get a subsidy to help pay for your plans. Some other choices include short-term plans – come with skimpy coverage but are good for otherwise healthy individuals who have no pre-existing conditions.

Realize What Your Social Security Plan Is

While you can begin taking out social security when you turn 62, the longer you delay, the more the check will be. The increase is anywhere from six to eight percent a year until you turn 70.  The majority of people can’t wait and take that amount. If you’re that case and still work, you need to know how the income from your job will affect your social security benefits.

The Bureau of Labor Statistics found that over half of people (54.7 percent) ages 60 to 64 worked a part-time job in 2017. For those 65 and older, it was 31.2 percent.  If you begin withdrawing from Social Security before the full retirement age, you are limited to how much money you are allowed to earn before your benefits become affected.

For 2019, the amount is $17,640. If you earn more than this, the amount is reduced by a $1 for every $2 earned.  When you finally turn the full retirement age, you get the money back by getting an increase in your monthly check.  When this happens, you can also work and earn as much as you want without your benefits being affected.

For 20189, if you take retirement early and get social security and then decide to work until you hit full retirement age, you get $1 deducted for every $3 earned above $46,920.

Look At Your Income and Tax Scenarios

Retirement income sources can vary from each person – retirement savings (401k), individual retirement account, taxable savings and investment accounts, business and trust income, health savings account, Social Security and pension. And, you don’t have to have just one retirement income source, which is why you need to be smart as to how you use it.

All retirement income sources are taxed differently, which is something you need to keep in mind. For withdrawals from a traditional 401(k) or IRA plan, you are taxed as if it were work income. However, withdrawals from Roth IRAs and Roth 401(k) plans, you are not taxed. If you own a taxable investment account, withdrawals may be subjected to capital gains taxes.

You’ll also need to take minimum distributions – the yearly amount that needs to be withdrawn – when you turn 70 1/2 from either your traditional 401(k) or IRA. There are no RMDs with Roth IRAs, but something Roth 401(k) plans to have them. You may find yourself in a higher tax bracket at the end of it all.

You can mitigate this by rolling the assets into a Roth IRA before this happens or use the funds before the RMDs start, so you’re not faced with paying more taxes.  Bear in mind that your yearly income will also affect how much you pay for Medicare. If you make more, you’ll pay more for your coverage.

Look At The Risks Of Retirement Accounts

If you have either or both an IRA and 401(k) plan, you need to ensure the investment mix is ideal for your retirement plan.  How much of your portfolio is focused on stocks, which can be risky but do offer the best returns, is going to depend on the amount of income you need for retirement and the risk you can feasibly handle.

If you’ve held onto a particular investment for many years, you may want to see if it’s still the right investment for you.

Give Yourself Some Leeway

According to financial advisors, you need to have several years’ worth of income that doesn’t include the stock market, cash, or other risky investments. Any money you need for the next two or three years should not be put at risk. Since the market can take a downturn before you know it, you need to have three years’ worth of income that won’t be hit by ups and downs.

Should the market drop, you don’t have to sell investments for a lower amount to produce the income you must have to live comfortably.

Prepare Yourself Emotionally

Most financial advisors worry for the people who see their jobs as part of their identity, as moving into the retirement phase of their life is difficult to do. While they may be happy for the first two or three years, after some time, they start to feel depressed.

The best thing these individuals can do is set up a strong social network, volunteer their services somewhere or become interested in various activities. Some retirees may feel satisfied by sharing what they know with others.

It’s also important to prepare yourself to see assets shrink rather than increase. Since you’re not working anymore and making withdrawals, your assets in retirement accounts are going to shrink, and this is something that can make some individuals uncomfortable with retirement.

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How Companies Can Pass the Mandatory Nondiscrimination Testing Process

The new year is a time for company retirement plan sponsors to look over their nondiscrimination testing procedures to make sure contributions are still within the federal limits and is set up to boost employee participation.

January is the right time for company benefits executives to look over their retirement plans with everything else addressed – health insurance open enrollment, for example. It’s important to begin with the nondiscrimination testing to ensure the plan is following the federal guidelines.  Companies are required by the IRS to do annual non-discrimination testing on qualified retirement plans such as the 401(k) and a 403(b). The goal is to make sure highly-compensated employees are not giving preferential treatment, leaving out the non-highly- compensated employees.

Actual Contribution Percentage and Actual Deferral Percentage Tests

There are two key tests that are used to make this determination:

Actual deferral percentage – This looks at the pre-tax and Roth contribution percentages for HCEs comparing them to the NHCE’s average salary deferral package. If eligible HCEs do not surpass any of the following listed below, they pass.

-125 percent of ADP for NHCE group

-200 percent of ADP for NHCE group or ADP for NHCE group plus another two percent.

Actual contribution percentage – This looks at the employee after-tax and employer matching contribution, comparing the HCE’s percentages to the NHCE’s. They pass if the HCEs is not more than the notations listed below:

-125 percent of ADP for NHCE group

-200 percent of ADP for NHCE group or ADP for NHCE group plus another two percent

Should a company’s plan does not pass, the sponsors have nearly three months after the plan’s year ends to give back the extra contributions to the HCE or pay a 10 percent penalty. The money can be given back at any point in the year. And, failure to implement corrections could lead to the plan not being tax-exempt.

Use a Non-Qualified Deferred Compensation

Employees need to save anywhere from 12 to 15 percent of their salary for their retirement. However, since many NHCEs are not participating and contributing, the majority of HCEs are unable to do this.

How does a company address this?

Companies can implement a non-qualified deferred compensation plan for their HCEs, and encourage NHCEs to contribute more, using company meetings, webinars, and other similar activities.

Companies Need to Keep an Eye on Contributions

It can be difficult to keep an eye on contributions of a retirement plan to ensure it stands compliant. However, to ensure this happens, there are three things you can do – to help yourself and your employees save for retirement.

Analyze the Nondiscrimination Testing From The Year Before

Plan sponsors need to look over the year before’s ADP/ACP test results, getting a good look at the present HCE contribution percentage. This will let sponsors know if NHCEs can boost contributions before the end of the year.

It will also help to find out if an HCE paid too much into the plan and how much they need to be refunded. This will give them an idea of how to determine their HCEs’ contributions.

Create an Automatic Enrollment Option

Another way to boost the participation plan is to set up an automatic enrollment option. This is very easy to manage and can increase the level of participation in the sponsor plan. According to one study, auto-enrollment plans have a 90 percent participate rate compared to just 50 percent if opted-in

Create a Safe Harbor Plan

According to the IRS rules, a safe harbor plan demands the employer to contribute toward the retirement account of all their eligible employees. When they do this, the employees will automatically pass the testing. What are the measures that employers must pass to qualify?

-They must contribute at least three percent of all employees’ salaries (no matter how many are participating)

-They must provide a minimum of 100 percent match for the first three percent of an employee’s contribution and 50 percent for the next two percent.

Granted, going through the information isn’t a great way to start the new year, but doing so means you’ll be in good shape to pass the nondiscrimination test, help your employees to save for their retirement and start each year off right.

Federal Employee retirement

Prospective Retirees Not Financially Prepared For Golden Years

Did you know that most people have not saved enough money for their golden years? In fact, the Allianz finance firm conducted a survey of over 3,200 baby boomers in 2016, and it showed that over 60 percent were worried that they’d run out of money before they died – fearing more than death itself.

What is likely to happen if the supposed retirement crisis actually comes about? How will the nation handle the Americans who are living beyond their savings? What kind of landscape does retirement look like in the next few years?

A Look at The Gap In Retirement Savings

It appears more and more people are outliving their savings, which is causing some retirement fears. A 2017 Annual Transamerica Retirement Survey of more than 6,300 people of 18 or older noted 55 percent of baby boomers and 57 percent of Gen Xers.  Baby boomers have an estimated average $164,000 saved in their retirement accounts while Gen Xers have saved an average $72,000.

And, the report shows 47 percent of millennials have the same fear where they have an average of $37,000 saved.

According to conventional wisdom, a working person should have saved $1 million by the time they have retired. However, even experts say $1 million is not enough to get through the golden years. Say you take out four percent every year, adjusted for inflation; you have $40,000 a year to live off of. Most people want to live comfortably in their retirement years, which means they need more than $1 million in their retirement savings.

What Does The Future Of Retirement Look Like?

The U.S. Government Accountability Office put together a report looking America’s retirement system.  After the report was put together, the GAO office emphatically asked Congress to consider revamping the way in which the nation can save for retirement.  Beginning in 2035, Social Security will not be able to pay out full benefits, but the retirement savings issue is a problem beyond the SSA.

Private employer-sponsored plans providing traditional defined benefits have decreased and continue to do so. And, even though there’s been a rise in pension plans with defined contribution plans, most people are still not saving enough money. The GAO report notes the retirement savings plan are extremely low or don’t exist.

Professionals who assist future retirees plan for their golden years are a bit pessimistic about how people will fare.  They say pensions are nearly gone; Social Security isn’t funded properly for future generations and, with the gig economy, workers are not saving in a 401(k) program that many employers offer.

Thus, the burden of taking care of retirees will be on government entitlement and public assistance programs such as Medicaid. It’s also believed that Medicaid costs will increase significantly in the next few decades, especially as the long-term care for future retirees cost will place huge pressure on both state and federal government trying to control costs.

It’s not just a crisis where people hurt individually, but the nation’s economy is going to be hurt by the impact the retirement crisis is going to have. If legislators continue to chip away at Medicaid’s long-term care assistance program, retirees may find themselves in serious trouble.

Experts believe the healthcare system is going to feel the strain of carrying for retirees constantly plagued by illnesses. It’s also believed family members will have to take on more of the long-term care responsibilities. This could have a huge economic impact – healthcare costs increasing and family members quitting work to take care of the elderly.

The crisis in retirement is already there. And, retirement financial advisors must sit down with their clients about their retirement future. Many prospective retirees have big dreams and lifestyle goals that are bigger than what they can afford. For many, they’ll have to settle on less expensive lifestyle, or they’ll need to rely on the government assistance to help care for them.

Is There An Answer To Retirement Security?

According to the GAO, Congress needs to consider offering a universal access to retirement savings plans, eliminate some complexity and risk retirement plans have and stabilize the federal retirement plans. In the meantime, retirees are on their own. Therefore, they need to continue saving money and hope to fund enough savings to live through their retirement years.

The Gen. Z still in school should be required to take a financial literacy class in school. This would help to educate kids early on about the needs to save for retirement.  If there is a saving grace for baby boomers who are still working, there are not enough Gen Xers to replace the retiring baby boomers, which means they could continue to work or work in a semi-retired fashion.

Many companies offer part-time or consulting positions for those who still want to work. While working during one’s golden years may sound horrible, it may be necessary as people continue to live and stay healthier longer.

federal workers - Aubrey Lovegrove

4 Key Tips To Ensure Your Retirement Money Is Being Wisely Invested

It’s important that, as you age, your portfolio does well. Of course, the trick is making that happen. When you’re in your working years, you’ll hear people say you need to invest aggressively to ensure you have enough income in your retirement. Does the same rule apply to when you’re already retired? In some sense of the saying, yes, but you need to manage it right to ensure you come out on the winning side.

Take Some Risks With Your Investments

The basic rule, for when you get older, is to move some of the investments you have into safer vehicles like bonds. However, that’s some not all of them. The reality is that stocks often give you higher returns than bonds do, but they do have some risks to them as well. Still, you’re liable to handle inflation better during retirement if some of your investments are still in stocks and not solely in less risky investments like bonds.

Keep in mind that Americans are living much longer today, and over a quarter of current 65-year-olds will live into their 90s. Your savings and investments need to reflect that situation and will increase as you get older.

You also don’t want to put too much into stocks, since the market can go negative before you know it, ruining your chances for a good nest-egg for retirement.  The goal is to find a good mix of stocks and bonds.  Forty percent of your money should go into stocks with 60 percent going into bonds. Of course, if you love taking risks, you can always do a 50/50 shot.

Protect Your Interest and Dividend Income

There are two key ways in which stocks can make you money. You can sell shares at a higher price than you paid for them or hold them to collect the dividends. You can also profit from the bonds by selling them for more than you bought for them or you can also hold them to collect the interest.

For the most part, bonds pay interest but not every stock will make dividend payments. If you choose ones that do make payments, you can give yourself some protection when the market is volatile.  If you opt for companies that continue to pay dividends, you can offset the losses with that income should you have to sell it.

Be Smart About Your Taxes

A huge misnomer is that senior citizens no longer have to pay taxes after a certain age. Unfortunately, there are two things you can count on in life – death, and taxes. The investment income you get is also taxable, meaning you are taxed during retirement provided the money is held in some brokerage account. A way to reduce the tax bill is to buy into municipal bonds.

These bonds are similar to corporate bonds, paying two times a year and gives you back your principal investment once the term is over. While you pay taxes on the corporate-issued interested, there are no federal taxes on municipal bond interest. If you buy bonds in the state you live in, you won’t pay any local or state taxes either.

Always Watch Your Portfolio

Regardless of how old you are, you should never take the sit back and let it roll approach to an investment portfolio. You need to keep an eye on these investments often and ensure they are going the way you want them to and addressing the needs you have.

It’s to be expected that you’ll need to rebalance the portfolio to make sure that it still has a mixture of bonds and stocks. Remember, you may have to sell certain ones or values may change due to market conditions, which can affect the influence they have on your portfolio. You don’t have to check on it every day, but every two or three months will suffice. You can also do it yourself or hire a financial advisor you trust to do it for you.

You may be retired, but you still need to think about your investments. Be smart about them, so they’ll work the way you want them to while you enjoy those golden years.

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How to Be Aware of What Your Retirement Income Could Be Like

According to the old saying, time flies when you’re having a good time. For the people in 1987, retirement investing was new for the majority of federal employees.  So much has happened since that time. Today, when federal employees retire, they’ve got income from FERS, TSP, and Social Security to replace pretty much the income they earned while they were working.

This sounds great, right? However, you have to understand there’s a difference between net income spent every two weeks and gross income. As such, there will be a difference between the gross retirement income and your net. Every one of your retirement savings options will be subjected to an array of withholdings. Your FERS could see a number of reductions such as:

-FERS basic retirement benefit could be decreased for part-time work schedules, age penalties (should you retire early) and survivor benefit elections. You may also have to give some of the amount to a former spouse.

-FERS withholdings are taxed by the federal government (and possibly state too). You also have insurance premiums to consider here.

-Your Social Security benefit will be subjected to federal income tax, and some states will also tax the money you get from SS.

-You’ll pay a premium for enrolling in Medicare Part B using the money in your Social Security retirement benefit.

-TSP payments you get after you retire could be subjected to both federal and state taxes.

It’s important to understand how your retirement income will be affected by all the tax withholding so that you can figure out what your net retirement income will be. By doing this, you can rest assured that you have more than enough income to meet your current and future obligations.

Many people tend to spend their net income, which is why you should produce the same net income as you get in a biweekly salary. After all, most of your expenses are unlikely to go down when you retire.

-You may no longer have a mortgage, but the house will still need to be maintained. You’ll still have to deal with property taxes and homeowners association fees and dues.

-You may have children in college, getting married, vacations, etc. Do you want to spoil your grandchildren while you’re at it?

-You don’t have to worry about business wear or commutes, but you do have other ways in which your retirement money will be spent.

It’s imperative to have a solid financial plan. You have to prepare for the possibility of healthcare costs and long-term care. You have to do some estate planning and mentally prepare yourself for the next step in life.

How To Know What Your Retirement Income Is Going To Be

Coming up with your potential income from CSRS or FERS is fairly easy. In the majority of cases, you can ask for help from a retirement specialist to paper the estimate starting on the date you want to retire.

If you want to know what your Social Security retirement income will be, you may need to visit www.ssa.gov to see your personal benefits statement. You can get one through the mySocialSecurity account or ask for one by mail, by phone or by going to your local Social Security office.

The SSA mails out these statements to people 60 and older who are still working and not getting SS benefits or those who do not have a My SS account. The statements are sent out three months before your birthday.

To estimate the TSP investment income is a bit harder to do. After all, you’ve got three ways in which to produce income from a TSP investment.

The first thing you need to do is found out how much monthly income is necessary to supplement the Social Security and FERS benefit and withdraw a certain amount every month (allowing for taxes). If you take out too much early on, you may end up out of money before you know it.

An important rule to remember is not to withdraw more than four percent of the account balance in one year. This is why the TSP provides another option – withdraw your payments each month based on your life expectancy.  The younger you are, the payments will be smaller. As you get older, your life expectancy drops and payments rise. Regardless of the withdrawal option, the balance in the TSP is still invested, and you could get inter-fund transfers while you get payments.

Annuities: Are They A Good Thing For TSP Accounts?

Another potential income from a TSP account is to buy a life annuity that offers you a steady stream of income. This option has an array of features such as:

-Cash refund

-Offset inflation by increasing payments

-10-year feature that lets you balance the original investment payable to a beneficiary if you don’t live long enough to collect the original investment

There are two negative points to using this annuity option:

-You lose any control over the investment

-You cannot take out partial withdrawals or make changes to the investment option

On top of that, annuities bought today are locked into the three percent annuity interest rate index for the life of the annuity. If the rates rise in the future, you’re out of luck. The takeaway though is that your money doesn’t run out. If you choose to increase payments, the payment is adjusted every three up to three percent to account for future inflation.

There’s no reason to settle with just one withdrawal option – you can do a combination of them if you want. However, it’s best to learn what you can about the options and talk to a TSP retirement specialist.

Some or all of your TSP investment can also go into an individual retirement account (IRA) that allows you to make other investments or buy annuity products. However, before you choose to move money from the TSP, make sure to talk to someone about it.

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Protecting Your Children Financially after Death

For parents, one of the biggest concerns in life is passing away and not having the appropriate structure in place to support children. Fortunately, through continued health benefits coverage and survivor annuities, the federal government has taken steps to make this easier. What’s more, there’s always the option of life insurance payments.

Federal Employee Health Benefits

As long as you aren’t on the ‘self-only’ coverage plan, all family members you leave behind after death will still be enrolled as long as you’re enrolled in the FEHB program as you pass; this is only true if one family member receives a survivor annuity. We should note that the enrollment will adjust to a self-only type of coverage when there’s only one survivor annuitant eligible for coverage.

Under a surviving parent’s FEHB plan, your child should be protected right up until 26 years of age. Where no surviving parents are found, the coverage will normally end alongside the annuity (18, for most). However, this doesn’t mean they’ll be on their own because they have options; they can either go for TCC (temporary continuation of coverage) or convert to a lower-benefit individual policy. While the TCC will have FEHB-type benefits, it only lasts for 36 months. Furthermore, while your child will bear the full cost, a TCC comes with admin expenses of 2%.

Federal Employee Group Life Insurance

What if you’re covered under FEGLI? In this case, the surviving spouse normally receives the death benefit. Where no spouse is found, it will go to the beneficiary you chose while setting up the policy. If you haven’t taken this step, the money will follow a ‘standard order of precedence’ which means your children will be first in line.

Below, we’ve listed the standard order of precedence alongside advice on how the money is split (if required). If the policyholder doesn’t designate a beneficiary for the money, this is the order in which it will be given after death;

  • Spouse/widow
  • Child/children – shared equally, the descendants of a deceased child (if any) will receive his/her share
  • Parents – either split between the two or in full to a surviving parent
  • A duly appointed administrator or executor of your estate
  • Your next of kin

If none of the first four are found, the money will reach whoever your next of kin was at the time of death. Furthermore, you should be aware that this order is disregarded if a court is issued a decree of annulment, divorce, or legal separation where the benefits are expected to be paid to another party entirely.

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Leaving the Public Sector: Important Financial Considerations

Researching a potential career change can bring some exciting times; as well as a new salary and benefits, a change of environment can make a huge difference to our enjoyment in life. However, before deciding to leave the public sector, we recommend considering the financial implications carefully!

Short-Term

In the short-term, your main concerns are likely to be related to your pay. However, this doesn’t mean you should forget healthcare benefits, employer contribution, and retirement plans. Will your new employer offer a retirement plan? Will the cost of healthcare suddenly increase significantly?

Long-Term

Once you’ve compared these short-term considerations, what happens in the long-term? Despite suffering in recent years, public sector retirement benefits, for example, still exceed anything offered by the private sector. Once you consider the maximum match for a TSP and FERS, around 15% of your salary can actually be contributed by the government. Although you’ll get close with school systems and universities, the private sector just cannot compete when it comes to contributions.

Is overall compensation lower in the private sector? Well, you could research three different studies and find some very different answers. This being said, the disparity differs, according to a CBO study, depending on educational attainment.

As well as contributions, the retirement benefit itself needs to be assessed. With a TSP, you have something akin to a 403b or 401k plan which are both normally available with larger companies. With FERS, though, this is essentially a pension which keeps benefits fixed even if the stock market crashes. With a pension, there are opportunities to shift the investment risk to the employer (as well as the risk of inflation being taken by the government because FERS has a cost-of-living adjustment). This is something you need to consider before making any big decisions because it’s much easier to meet retirement goals when a percentage of the risk has been transferred to the employer. We think it’s important to manage the risk of both poor investment performance and inflation.

FERS and TSP

What are you going to do with all FERS contributions? Assuming you have five years of experience with the government, a deferred annuity at retirement will be your main option. Although many will be able to request a refund, we advise you to remember the value of a pension. When making this decision, assess what income you could receive after re-investing the refund, assess what income you would get from the pension, and then decide on a strategy.

What are you going to do with your TSP investment? On a similar note, you won’t be able to make contributions (or take a loan) after leaving the public sector…but this doesn’t mean you can’t leave the funds where they are. In terms of investment, the TSP does have some low-cost options.

For many, they like to transfer (roll) the funds into an IRA or even a different employer retirement account. Before the rollover, make sure you pay off outstanding loans and assess potential plan expenses (you don’t want any nasty surprises later down the line!).

Summary

If you’re currently in the research phase of changing jobs, be sure to take your time and consider all of the financial implications carefully. By comparing the pros and cons of every option we’ve discussed, you’ll be able to decide whether or not it’s the right time to change. If you’re really motivated to make this change in your life, then you’ll know how to do so without a huge financial cost when all is said and done!

Benefits of TSP

There are several advantages to the Thrift Savings Plan for participants. The most basic part is that the federal government offers a contribution match for up to 5% of the employee’s annual income. These can be made in the form of automatic payroll deductions. TSP funds can be low-cost ways to save for retirement, especially with lifecycle funds tailored to a specific retirement date. You can also choose from traditional pre-tax contributions, which allow you to not have to pay income tax until retirement, or Roth TSPcontributions that allow you to pay the tax now and not worry about it at retirement. Both are good options, but consider talking to a TSP withdrawal expert before you make any decisions.

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Difference between CSRS and FERS

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TSP CSRS, or the Civil Service Retirement System, offers the Thrift Savings Plan as a supplement to your CSRS Annuity or military pay- as of January 1st, 2018, military employees also participate in a military TSP.

TSP and FERS, or Federal Employees’ Retirement System, makes your TSP one part of a three-part retirement plan. This also includes the FERS Basic Annuity and Social Security.

The difference between the FERS or CSRS Annuity and the TSP is that the annuity is based on your years of service, rather than how much you have contributed, and is also voluntary, as opposed to the annuity.

Regardless of which retirement system you qualify for, contributing to the Thrift Savings Plan is vital to your retirement, especially if you contribute early. TSP compound interest means that the earlier you start to make contributions, the better. However, if you did not start saving at an earlier point, committing to a steady and consistent contribution schedule will almost always produce positive results.

How does TSP work?

If you are a new federal employee, you most likely have an established account and were enrolled in a 3% payroll deduction. If you were hired before July 31st, 2010, you were not automatically enrolled in a TSP account and will need to create it yourself. For CSRS employees and members of the uniformed services, you must elect to contribute to the TSP. You are also not eligible for agency contributions.

You can elect to stop or change your contributions at any time. Check with your payroll office or agency to find out how to sign up for TSP. You may be required to use your agency or service’s electronic system, or you may have to submit Form TSP-1 (Form TSP-U-1 for uniformed services). The Thrift Savings Plan website has the forms available if your agency or service accepts them.

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TSP funds

There are five core funds in the Thrift Savings Plan- four of them are index funds, which mean that they are exactly matched to a broad market index.

  • G Fund (Government Securities Investment Fund)
    • This fund does not invest in an index. The only fund that it is connected to is a nonmarketable treasury security issued for the TSP by the U.S. Lowest return and risk
  • F Fund (Fixed Income Investment Index Fund)
    • Matches the Barclays Capital U.S. Aggregate Bond Index. Slightly higher return and slightly higher risk.
  • C Fund (Common Stock Index Investment Fund)
    • Out of the three stock funds in the TSP, the C is considered the most conservative. It is connected to the Standard and Poor’s 500 Index, which has greater volatility than either the G or F funds.
  • S Fund (Small Capitalization Stock Index Fund)
    • This fund is connected to the Dow Jones U.S. Completion Total Stock Market Index, which is a total of 4,500 companies that fall outside of the S&P 500’s list. Potential for large growth, but also large losses.
  • I Fund (International Stock Investment Fund)
    • The only internationally invested fund. High risk, but potentially high reward.

There is another option for Thrift Savings Plan investment funds- the L funds. These are funds that actually invest in a variety of all the other funds and target a specific retirement date, initially investing in the more aggressive funds and slowly moving into the more stable bonds funds as retirement approaches.

How to change my TSP contribution

If you have not made a contribution election through your agency to start contributions or change the way your contributions work, there are a few steps:

  1. Ask your personnel or benefits office whether your agency or service handles enrollments
  2. Determine the amount you want to contribute and whether you want a Roth or Traditional TSP
  3. Return your completed TSP-1 or TSP-U-1 to your employer to get your payroll deductions set up. Your election should be effective no later than the first full pay period after your agency or service receives it.
TSP and FERS are important parts of your retirement
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Withdrawing from the TSP

You have several withdrawal options that you can choose from. Partial withdrawals are allowed in a single payment. You can also make a full withdrawal with any one or any combination of the following methods:

  • A single (lump sum) payment
  • A series of monthly payments
  • A life annuity (Thrift Savings Plan Lifetime payment options).

A combination of any of these three full withdrawal options is called a “mixed withdrawal.” You can have the Thrift Savings Plan transfer all or part of any single payment or, in some cases, a series of monthly payments, to a traditional IRA or an eligible employer plan by completing the TSP-70 form. Payments to you can be deposited directly into your checking or savings account using electronic funds transfer (EFT).

Spouse’s Rights

If you are a married Thrift Savings Plan participant (even if you are separated from your spouse), spouses’ rights apply to annuity purchases. If you are a married FERS or uniformed services participant with a total account balance of more than $3,500 and you are making a full withdrawal of your account, your spouse is entitled by law to an annuity with a 50% survivor benefit, level payments, and no cash refund. If you choose any other withdrawal option or combination of options by which your entire account balance is not used to purchase this particular type of annuity, your spouse must sign the statement on your withdrawal form that waives his or her right to that annuity.

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New Investments in TSP for Rehired Workers

As we all know with Thrift Savings Plans (TSPs), retired workers aren’t normally allowed to make new investments after leaving their role with the government. However, for those rehired by the government, the story is a little different.

For all rehired annuitants, the same TSP investment terms apply as to any other active employee. For example, this includes government contributions when under the FERS program. In 2019, $19,000 is considered to be the annual maximum.

This being said, we should note that there are certain circumstances where rehired annuitants cannot invest in their TSP. For example, anybody allowed both full annuity and full pay should ask for advice before taking action (particular authorities allow receipt of both).

For any active employees over the age of 50, catch-up contributions could also be possible with the TSP. Whether you left for a period and came back or have been in the same role continuously, this is possible, and the limit sits at $6,000.

Unfortunately, retroactive contributions still aren’t attainable which means that catch-up contributions can only be paid for the current year. If a rehired annuitant retired and then missed a year of catch-up eligibility, it’s now too late to redeem this benefit.

However, this information is still useful to know, and we hope to have helped some rehired annuitants currently looking for advice!

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All Unpaid Federal Workers Escape Penalty for TSP Loan Defaults

For federal workers who have already missed a paycheck as a result of the partial government shutdown, all concerns have been eased for now with regards to missing TSP loan payments.

For many across the country, they used their TSP retirement savings as security against a loan while the country was in better times. Through payroll withholding, these loans are paid back whether they were initially used for a mortgage or any other use. For employees not getting paid or working for free, there was major concern regarding what would happen with these repayments.

For the pay period between December 23rd and January 5th, federal employee pay distributions are due to be made in January; this is a two-week window during which unpaid status became a reality for around 800,000 people. For those who continued to work despite receiving no pay, they have been promised back pay as soon as funding returns; meanwhile, furloughed employees would also receive back pay assuming legislation in Congress passes.

When will all this happen? Well, this is a difficult question and a reason why defaults on TSP loans have become a topic of conversation. Whenever a loan defaults, it could lead to a 10% early withdrawal fee after being considered a taxable distribution. However, we should note that this only occurs after two missed payments; the borrower will also normally have a chance to get up to date.

TSP Notification

According to an online post, anybody that was current with their loan payments before the shutdown shouldn’t have concerns at missing a payment or two. As soon as retroactive is approved, the correct payments should be submitted, and the loan will be current once again. If we include both uniformed military personnel and federal employees, it’s thought that 740,000 general purpose loans are currently outstanding with another 150,000 home loans outstanding too.

While ‘unpaid’ status normally prevents employees from taking out new loans (through the TSP), the situation is slightly different under a shutdown because assumptions are that anybody who takes a loan under these conditions will be back in employment once the repayments are due. During financial hardship, withdrawals may also be possible for account holders, but their need must be documented (unlike with a loan!).

Recently, a TSP spokeswoman, Kim Weaver, noted how call volume hasn’t yet exceeded what’s normal which suggests financial hardship withdrawals and loans aren’t being requested currently. Of course, we should note that the TSP isn’t affected directly by the government shutdown since it’s a self-funding agency.

Impact on Investment

Aside from TSPs, there are also concerns for regular investments during the shutdown because these also come from payroll withholding and are therefore not being made while in unpaid status. For the 90% of federal employees under FERS, employer contributions are set after judging the salary an individual receives, so these are also affected. Whether you invest or not, all FERS employees receive an automatic 1% contribution of their salary (with a potential for 4% matching contributions).

Fortunately, Weaver also commented on this topic and said that retroactive contributions would be made for personal investments as soon as employees are on paid status again. For those under the Civil Service Retirement plan, no government contributions are awarded.

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Your Complete Guide to Government Shutdown FAQs

As the government shutdown goes through the different stages in its life, and even now that it’s ended, we’ve been inundated with questions regarding how it works; what happens to insurance, whether employees can apply for unemployment, and a whole lot more!

Today, we’ve decided to compile an extensive guide to the FAQs regarding the government shutdown for future reference, and hopefully, this can help put some minds at ease!

During the shutdown, can I take sick days?

According to the Office of Personnel Management (OPM), all excepted employees will have the option to either take sick leave or annual leave while the shutdown occurs (without the normal penalties that come with them).

For those who have continued to work without pay, they can take approved leave just as they would normally. In this case, time will be charged in personal leave banks and payment for hours will come after the shutdown comes to an end. Alternatively, excepted employees can accept ‘default furlough status’ for whenever they take leave; no leave will be charged and payment for time will come after the fact.

The OPM suggests the second option to be better for excepted employees. Before moving on, except employees who are expected at work and don’t show will be considered ‘absent without leave’ just as normal.

Am I eligible for unemployment benefits and do I need to look for work?

Your eligibility to receive unemployment benefits actually depends on the state in which you reside; OPM recommends to check with your state’s rules since some will require individuals to be actively seeking work. In some states – including Virginia and Maryland – this requirement will be waived for federal workers since they’re already in employment.

For the most part, full-time excepted employees aren’t able to claim unemployment benefits. On the other hand, those who work either part-time or seasonally may be eligible. Last week, a new legislation was introduced for those working without pay to file for unemployment, so we recommend checking with your own state and finding the latest in this regard before filing.

Am I retired if my retirement happened during the shutdown?

In short, yes. As long as the retirement application was submitted before the shutdown, everything should have been processed as normal; even if your retirement date was during the shutdown. Whether the paperwork has been processed or not is another question entirely, but you won’t be expected to return to work.

I’m paying for transport to get to work, can I get reimbursed?

Although most agencies are lacking in funds right now, you will be able to file an SF Form 1164 reimbursement claim once the shutdown ends. Once this is given to the agency’s transit benefit representative, this should be processed properly.

Will I get paid? If so, when will I get paid?

Thankfully, the Government Employee Fair Treatment Act was signed by President Trump in mid-January which means that all federal employees, whether excepted or furloughed, will be paid after the shutdown. The President has authorized back pay for all federal employees, and this can occur once the lapse in appropriation ends (and not before). For federal contractors, Senate Democrats have attempted to introduce legislation for back pay, but this has never previously cleared Congress, so we await news on this one.

In the Trump-signed legislation, checks are to be sent out as soon as possible (regardless of scheduled pay periods), but a more definite timescale is likely to come once the current lapse ends.

Will I still get my GS step increase?

Since agencies aren’t allowed to reject the previously-agreed General Schedule step increases due to funding issues, retroactive pay is likely to reflect the increase on the date it was due.

How will back pay be received?

Judging by previous shutdowns and the expectations of federal employee unions, back pay is likely to come in the form of a lump sum (though this will be confirmed after the shutdown).

Will retroactive pay be considered 2018 or 2019 income for tax purposes?

In the days and weeks ahead, OPM will issue guidance on this topic, so this is likely to come after the lapse in appropriations ends. However, if we look at the 1995/96 shutdown, government employees were asked to file back pay for the period of work it covered (even if furloughed or working without pay).

What if I had use-or-lose leave?

According to OPM, all annual leave lost at the end of 2018 should be restored after the government shutdown. However, it may be the case that only leave requested in writing before November 24 will be restored. Ultimately, the answer to this depends on how long the shutdown continues but OPM will keep updating us all.

Am I still building sick/annual leave?

For furloughed workers, 80 hours is the limit for building annual and sick leave on an unpaid status. Excepted employees will continue to build leave, but won’t be able to use it until the shutdown is over. A retroactive accrual of leave was authorized by the President and Congress in the back pay bill on January 16th.

Will there be a delay to W-2s?

According to USDA, 705,000 W-2s will be distributed in the last week of January and all NFC clients should receive a W-2 by February 2nd; you can contact the NFC reporting center if this doesn’t happen.

What about federal dental/vision insurance and federal health insurance?

Under the FEDVIP, coverage will continue during the shutdown, and the number of payments enrollees must miss before receiving bills has been extended by OPM to three.

During the shutdown, coverage under the FEHB program will continue too; enrollment generally continues for 12 months in non-pay status. While your contributions accumulate, they’re withheld until the government shutdown ends.

How does long-term care insurance and group life insurance work?

FEGLI continues for 12 months in non-pay status, and coverage under the Federal Long Term Care Insurance Program will also continue regardless of the shutdown. Participants will be billed after three missed payments by long-term care partners, however.

What happens with my flexible spending account?

When a paycheck is missed, payroll deductions to FSAFEDS will stop. While you’re still enrolled, eligible health care claims cannot be reimbursed until pay status resumes.

Can I suspend TSP loan payments?

During this record-breaking shutdown, the TSP are abandoning normal protocol which means employees aren’t required to send a notice of non-pay status. As long as payments were up to date before the shutdown, defaulting will not be caused by one or two missed payments.

Is my retirement impacted?

Unless the lapse lasts for six months, this lack of pay will not affect your high-3 average pay or your retirement-creditable service. For current retirees, annuity payments should continue since a significant chunk of the OPM is funded from other sources that aren’t affected by annual spending bills.

 

Can I make allotments from pay?

 

During the shutdown, allotments won’t be possible since employees aren’t getting paid. OPM has stated that allotments for those affected by the shutdown will be reviewed before deciding on whether alternative arrangements need to be made for loan payments. According to the Coast Guard on TRICARE, nobody will be disenrolled for non-payment.

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Civilian Retirement: Time to Start Planning

Planning for the future can be beneficial, so we compiled some tips and advice from several military veteran financial experts on how to help you plan your long-term investments.

Don’t Count on SGLI

Servicemember’s Group Life Insurance (SGLI) is only available to those in the active military. While the fixed rate (no matter your age or health) is one of the most comprehensive plans available, you, unfortunately, can’t take it with you when you leave the service.

Founder of the financial news site “The Military Wallet,” and Air Force veteran Ryan Guina, says that it’s a good idea to lock up an inexpensive term life insurance policy at a young age, when the policy is relatively inexpensive.

Remember, there will be no coverage gap if you start paying into a newer policy that also covers military just before you leave the service.

Purchasing a Home: Yes or No?

Of course, the military provides a housing allowance, but knowing if that’s the direction you want to go in could be difficult. Not using your housing allowance to buy a home might even feel wasteful. But owning a house comes with many unique risks.

Buying might be the smart play if you can either hold on to it until the market is favorable, or if you can manage it remotely, but an honest assessment of your own finances may be in order first.

Start Saving Now

Retirement plans aren’t worth much in the private sector, so it helps to start investing cash into retirement when you’re younger, have a regular paycheck, and have good options while you’re in the military.

Retirement Options to Consider:

  • Thrift Savings Plan: “The TSP offers incredibly low-cost index funds that track several major stock indexes,” according to Guina.
  • Individual Retirement Arrangement: Of this, the most common retirement fund for civilians, Guina says that there is more control over how you invest the funds. However, he recommends sticking with the TSP until you have a good handle on investing, and can manage an IRA on your own.”
  • Taxable investment accounts: Guina says that investing for retirement is great, but you might not want to put all of your investments in a retirement account that allows access to the funds without penalty.

Other Options

It’s a smart move to consider an employer sponsored retirement plan, like a 401K, or 403B, even if you’ve already left the serivce says Curtis Sheldon, former air force pilot and head financial planner of C.L. Sheldon & Company.

According to Sheldon, 10% of your monthly earnings should be put into retirement, with the employer hopefully matching some of those funds as well.

Passive Investment

Sheldon says that itt’s really really hard to try to beat the market and that you’re much better off just investing for the long term. He also believes that there’s nothing wrong with being just a passive investor.

Regardless: Invest, Invest, Invest

Sheldon says that the biggest single predictor of your success is getting started, and getting started now. “It’s critical to start now no matter when ‘now’ is for you,” Sheldon implores.

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How Military Deposits Work

Military deposits are essential for anyone who wishes to qualify for the federal retirement credit for military services that happened on or after 1957. It is also known as the post-56 military service as the HR members refer it.

What is a military service deposit? This is the payment that workers make to the civilian retirement fund to enable creditable military service to be applied to the retirement eligibility and in the annuity computations. All active duty military services are commendable for retirement and may be required to pay a deposit for them to receive retirement credit for it. They are given a 2years grace period from their first retirement coverage date to allow them to pay a military deposit in full without interest. After the two years are over, interest will accrue and will keep piling up annually until the deposit payment is made.

1957 is many years ago but the period is still honored. The military services rules on military deposits differ between the CSRS and the FERS, and the CSRS rules are a bit complex and confusing. There are also special rules for the retirees.

The military deposits are made up of 7% and 3% of the CSRS and FERS respectively base pay plus interest. The rate of interest is determined depending on your interest accrual rate; the year when you entered on duty. The interest differs from year to year.

Any CSRS worker who entered into service after 10/1/82 is required to make a military deposit for their post-56 military service to be counted eligible for retirement and retirement computation. Any FERS worker should make military deposits for them to have their post-56 military service qualify for pension and retirement computation.

What about CSRS workers that were employed before 10/01/82?

If employed before 10/1/82 and has not made any deposits yet

The military time qualifies for CSRS retirement

The military time counts for CSRS retirement computation until the retiree is 62 years of age.

If the retiree qualifies for Social Security at 62, the military time will no longer be counted in the CSRS retirement computation. The retiree will not need to have applied for SS. The fact that they already qualify for it is enough to have their CSRS annuity reduced.

If the retiree does not qualify for Social Security at 62, the military time continues to count in the CSTS retirement computation even after the retiree is eligible for the SS after reaching 62 years.

Military service that previously computed an active duty military retirement will not be included in a civilian annuity except in a case where the military retired pay is waived. Also, if the military retirement was due to a combat-related disability, there will be an exception. Most of the active duty retirees do not leave their military retirement. Retirees that have retired from the reserves can deposit the active duty section of their retirement.

Most FERS workers that are not active duty retirees are expected to make military service deposit. The CSRS workers who are not active duty military retirees and that qualify for Social Security at 62 years are also expected to make the military deposits.

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Federal Retirement and the Longevity Risk

The average life expectancy for Americans is on the rise which has led retirees to worry about how they can make their savings last them for a more extended period. Longevity risk has become a thing, whereby, retirees are concerned about outliving their savings. In this case, it is vital for everyone to have an effective financial plan to guide them in ensuring that they do not run out of their savings soon.

The federal retirement system has come in handy to help its 2.8 current employees. Its goal is to help workers start saving as early as ten years before their expected retirement date. It is a unique, yet sophisticated system that entails the U.S Postal Service and a quasi-governmental agency, and today it has the most significant number of civilian federal employees. They believe that it is paramount for every federal worker to understand their financial benefits and how each one of them can help them maximize their savings.

All workers that were hired before 1st January 1984 are part of the CSRS while those employed after comprising the FERS, a complex retirement system that includes tax-favored and social security savings plan. FERS is made up of up to 94% of current federal workers. Most employees qualify for the full retirement benefits between 55 and 57 years of age with at least 30 years of service.

The Federal special group of workers such as federal law enforcement officers, air traffic controllers, and firefighters are eligible for paying an additional ½% salary deduction and get a better retirement benefit. They qualify for full retirement at 50 years of age and at least 20 years of service.

All federal works qualify to take part in the Thrift Savings Plan, a federally managed contribution plan that is almost similar to a 401(k) plan. The TSP plan is made of five individuals and life-cycle funds which allocate investments as per the proposed retirement date. Although TSP’s availability is limited, it is preferred as it offers workers an affordable way of saving for retirement. The FERS workers qualify for the TSP matching funds, up to 5% per annum but the CSRS do not qualify. The TSP contribution limit for the workers’ deferrals is expected to rise to $19,000 as the catch-up contributions remain constant at $6,000. The federal workers are qualified to start catch-up at 50 and are expected to make a maximum contribution of $19,000 to the TSP per year or make savings in an equivalent tax-deferred plan liken 401(k).

The federal workers can decide on whether to participate on TSP, Roth TSP or both to increase their contribution limit. However, all the federal matching funds are kept in their TSP accounts. A Roth TSP is like a 401(k), and therefore there are no income limits for the Roth contributions. The contributions are beneficial in that they help in creating tax-free funds to increase their retirement income at the least ta possible. Workers should contribute to their Roth TSP accounts multiple times a year before retirement to ensure that they have saved enough funds at low taxation during retirement.

Retirees with full benefits can withdrawal traditional TSP finances before 59 ½ years at no penalty. FEBH, a Federal Employee Health Benefits insurance program allows the workers to either keep their current pans or choose alternative plans during the yearly open season.

Federal workers work for many years as they invest for their retirement. Every employee has the right to enjoy their retirement age, and the first step to ensuring it is coming up with an effective plan and seek the help of a financial advisor who can help them on savings ten years before retirement.

If you need help planning your retirement, please be sure to reach out to a trusted financial advisor.

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The Secret to Boosting Your Retirement Savings this Year

Everyone talks of New Year resolutions and plans, but in most cases, those resolutions do not go past spring. However, if the idea is to save more in your retirement savings account, there is a solution to help you make it last.

The secret to saving and save without giving up is efforts. According to Paul Fenner, a financial planner in Commerce Township, Mich, the simplest way to increase your savings is to make it automatic. What does this mean? It means that you have to look for natural and encouraging ideas that will motivate you to save, such as signing up for 401(k) plan if you are yet to.  The next step is to decide on the percentage of your base salary that will automatically go to your saving account every pay period.

In 2019, federal employees are allowed to save up to $19,000 in their 401(k), federal Thrift Savings Plan, 403(b) and most of the 457 plans with extra $6,000 contributions which are applicable for workers of at least age 50 years.

If the amount feels too high for you, try and contribute what you can comfortably afford but ensure that it is enough to get your company match if you already have one as recommended by David Geibel, the managing director of Univest Wealth Management, King of Prussia, Pa.

If your retirement savings plans provide an auto-escalation aspect, of which most employer plans do, it will allow you to increase your contribution amount every year on a fixed rate without tampering. You may not even notice the difference in the paycheck since the escalation rate is mostly a small percentage per month, but annually, the little increment will boost your overall contributions.

If you are yet to join the 401k) or maybe it is not accessible at work, you can set up an IRA at any brokerage firm. In this case, some funds from your paycheck will automatically be transferred to the IRA account. 2019 is an excellent year for the savers as IRS increased the contributions limit for IRAs from $5,500 to $6,000, which happens to be the first increment since 2013. There is also an extra $1,000 for savers who are at least 50years old. The IRA opening process will not take you more than 15 minutes, and the best part is that you get to do online.

The self-employed individuals are eligible to open up a SEP IRA, and they can contribute up to $56,000 in 2019.

From these, you can tell how easy it is to save with the automated retirement savings plan. It is more of a subscription service, and in the end, you will love the results during your retirement age.

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Shutdown Fills Regulatory Action with Uncertainty for Industry

Retirement industry stakeholders and investors seeking information from the affected federal agencies were clouded with uncertainty during the shutdown. Industry sources were not sure whether the Securities and Exchange Commission would have to modify its rule-making timeline, as well as its standard of conduct package.

Some firms were in the dark as to when employees at the SEC would sign off on their applications in order to become registered investment advisers. This is because only a limited number of the agency’s employees were working. Foreign investors that that are interested in investing in U.S businesses that are seen to present a national security concern are in a similar state.

The said investments are now to be reviewed by the committee on Foreign Investment, which is part of the understaffed Department of Treasury. There was a whole other level of uncertainty for the roughly 800,000 federal workers who didn’t have a clue when their next paycheck would arrive.

Hardships 

The number of hardship withdrawals made by federal workers from their retirement funds increased during the shutdown. This is according to the Federal Retirement Thrift Investment Board data.

Data from Dec. 26, 2018, to Jan. 14, 2019 shows that there were 7,055 hardship withdrawals. This is up from 5,249 such withdrawals over the same period a year earlier. A spokeswoman for the multi-billion Thrift Savings plan, Kim Weaver, in an email said at the time that it’s too early to know for sure that the rise in hardship withdrawals is due to the shutdown. She also noted that the number of plan participants has risen to about 5.5 million as of Dec. 23, 2018, which is up more than 330,000 since the end of 2017. In addition, Ms. Weaver stated that the IRS is still allowing hardship withdrawals for natural disasters.

The U.S economy could have had a greater negative impact if the shutdown had lasted longer.

Uncertainty has also been seen for some businesses planning to go public through an initial public offering. The process should be straight forward for those that have completed the SEC review process once staff return to work. Foreign investment in U.S. businesses is to be reviewed by CIFUS that is in the early stages of an 18-month pilot program of broader jurisdiction. The committee, however, isn’t reviewing any deals as of now, said a partner and head of global trade at Goodwin Procter LLP, Richard L. Matheny.

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A Third of the Feds are Expected to Leave Their Jobs

From Federal Employee Viewpoint Survey findings, it shows that almost a third of employees have the desire to leave their jobs, while half think about changing positions within the government, compared to leaving it.

Those thinking about taking another job within the federal government is around 18 percent, which is 4 percent above those thinking to leave for employment outside the government. There is another 6 percent that is anticipating retirement and 5 percent considering leaving for their own reasons; few will quit for reasons that are not related to retirement.

OPM’s report termed this as an interesting finding, with those expressing their intent to leave having an average of 50 in engagement index score and those intending to remain scored an average of 76. The index is composed of response to questions regarding senior leadership, supervisors, and their intrinsic work experience with the government-wide score average being 68.

From separate questions that were inquired about regarding their retirement plan, 4 percent responded that they expected to retire within a year, 10 percent was between one and three years, 11 percent ranged from three and five years, and the remaining was over five years.

About 4 percent of the federal workforce retirees in the following year would be maintaining their recent year’s annual retirement rates among non-postal employees.

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Wider Impact of 800,000 Unpaid Federal Employees

Despite proposals for short-term fixes, president Trump has stood firm several times so far over funding for the wall, and it means the government shutdown appears set to continue. While a national emergency seems the very last resort, Trump has already rejected plans to reopen government departments as the debate over wall funding continues…so what happens now?

Well, even those who have been watching politics for decades would struggle to answer that question, and it means some 800,000 federal workers are left with uncertainty over their financial future. While many are struggling to pay for mortgages and simple living expenses, others are trying to take their mind off the problems by continuing their work despite no pay (including air traffic controllers at O’Hare International Airport).

Is the debate progressing? Well, President Trump has met with lawmakers and aides (while also tweeting about his experiences), and he has noted the importance of the wall not only for security but also humanitarian reasons. While at a farming convention, he suggested that those not getting paid agree that there’s ‘no substitute’ for a barrier on the border. However, some have spoken openly against this comment.

Trickle Down Effect

If the shutdown marches into February, there’s a large concern the trickle-down effect will drag millions of other Americans into financial hardship. With the Department of Housing and Urban Development not receiving funding, one Schaumburg resident, Diane Rock, claims she’ll be evicted because of Trump’s administration. Unfortunately, there are similar stories all over the country. Although a spending bill has passed the House, Senate Majority Leader Mitch McConnell has so far failed to call this legislation to a vote.

In the most recent meeting between President Trump and House Speaker Nancy Pelosi, the former walked out of the meeting and branded it a ‘waste of time.’ Shortly after, officials from the White House claimed that an emergency order could be the solution since it would allow the government to be reopened without Trump having to compromise and lose support. However, this comes with its own problems – court challenges and a new precedent for executive power being too high on the list.

The Future of the Shutdown

For Trump, there’s more than one motivation to keep fighting for the funding. As well as this being a key promise in his 2016 election campaign, we also need to remember that the next election is only next year. For those planning to support him for a second term, they won’t want to see him back down over this key issue.

Would rank-and-file Democrats work with Trump and build a consensus for the wall? Will the government be reopened until February 1st and/or February 28th with the two bills to be discussed and voted on? According to Rep. Nota Lowey, the bills offer additional options which would allow the government to reopen and discussions to continue over border security. However, all these questions are still to be answered in the days ahead.

Among the public, opinions are divided; it seems a small majority oppose the wall. Following this, Trump seems to have been awarded with the blame by most Democrats and also a chunk of Republicans (who say it’s the responsibility of Trump or a mixture of both parties).

While Vice President Pence recently met with Senate Republicans, senators from both parties had a meeting too so discussions are always ongoing and this keeps a burning flame of hope for those being affected deeply by the shutdown.

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