Tag: Federal retirement

federal retirement

Federal retirement is a word that describes the retiring process and all the formalities involved for the federal employees of the country.

Thinking about Retirement? By Joe Kosek

Thinking about Retirement?

By Joe Kosek

 

Most people believe that retirement should allow them a reward for their hard earned work. However, a successful retirement does not just happen; it requires proactive and  detailed planning.  In planning for your retirement, considering the following five questions could ensure you a  comfortable retirement.

 

  1. Do you have a plan?

 

What do you dream of doing in retirement? Do you want to travel? Do you want a second career?  Do you want to pursue a hobby? Are you into golf, gardening, etc.? What is your goal or retirement dream? You can begin to work toward that goal.

 

  1. Do you have the money?

 

It’s great to dream, but you must have the financial means to get there.  Will you have enough money to live comfortably and enjoy your retirement years? Think about your retirement dream then figure out if you have enough money to live your dream. This exercise may cause you to change your goal or cut back on your expenses to make your dream come true.

 

  1. Is moving a good option?

 

 

  1. nearness to family members;
  2. housing cost;
  3. access to affordable healthcare;
  4. weather conditions; and
  5. Taxes

 

  1. Should you sell your home?

 

Even if you are not leaving your area in retirement,  should you consider selling your current home? This becomes particularly relevant if your mortgage has been satisfied and your home has increased significantly in value.

 

  1. Do you have an estate plan?

 

An estate plan is a map. The map reflects the way you want your personal and financial affairs to be handled in case of incapacity or death. Taking the time to prepare an estate plan now will save your family time, expense and anguish in the event of your capacity or death.  Failure to properly  plan will result in a larger portion of the assets of your estate being used to pay taxes, court costs, and attorney’s fees.

 

Retirement planning is a challenge, but pondering the previous five questions can greatly assist your success in retirement.

 

EPA Offering Buyouts to Reduce Personnel

It seems that many agencies are accepting president Trump’s idea of reducing the number of federal employees and the EPA Offering Buyouts is proof positive that Trump’s vision of a smaller government is becoming a reality. The Environmental Protection Agency has recently initiated steps to buy out certain personnel. The EPA has decided not to hire more workers unless it becomes necessary. It is believed that the agency may offer voluntary retirement as well. The impact of these changes on retirement benefits and federal retirement can just be guessed right now because no one knows the exact impact.

EPA Offering Buyouts
The EPA has begun offering buyouts to reduce the number of Agency employees

How the EPA Offering Buyouts Will Impact the Agency

The EPA has begun offering buyouts to reduce the number of federal employees in the Agency. The Agency has about 15,000 employees at the moment. This decision was probably taken because of an executive order by President Trump that was released last month and talked about streamlining agencies through the federal government.

How was the Message of Reducing Federal Employees at EPA Conveyed?

The message of reducing federal employees was conveyed via a letter sent by the Acting Deputy Director of EPA, Mike Flynn. This letter was sent to all the regional administrators. The content of this letter stated that the White House had asked federal government agencies to start taking immediate actions that are aimed at reducing the workforce.

The letter further stated that as per the said guidance, the EPA offering buyouts to start an early buyout or early out program. Flynn also mentioned that the goal was to complete the program by the end of the year.

No Hiring

Flynn also mentioned that though the governmentwide hiring freeze has been lifted, new recruitments at the EPA will not be encouraged. The resource situation of the agency is such that it has to opt to stay away from external hiring.  This hiring freeze is not aimed at restricting recruitment for all the positions as there can be limited exceptions that are permitted on a case-by-case basis.

Setting of a Trend

Though the memo has minimal details about the agency’s plan to reduce the number of federal employees, it can be probably one of the several plans that will be submitted by various agencies.

Targeted Approach

It is also a fact that EPA has been a central target of the Trump administration as the President of the country, Donald Trump had earlier promised that he would reduce the agency to tidbits. The budget he has proposed would slash the funding of the agency by 30 percent and cut around 3200 federal employees. It will also obliterate funding for Superfund cleanups, climate change research and scrap over 50 programs. The efforts being made towards improving the energy efficiency, cleaning up the great lakes and funding infrastructure projects in the Native American communities are among the scrapped plans.

Understanding the Buyout

Those of you who don’t fully understand what the EPA Offering Buyouts will mean to federal employees must know that buyout is also known as a voluntary separation incentive payment. It is a cash payment that is made to a federal worker to tempt him or her to leave voluntarily. The maximum amount of money that can be offered per person is $25,000. This payment is taxable which means that the take-home value is reduced by a few thousand dollars at least.

Federal workers who are selecting this option must leave by a specified date, and they are not allowed to return to federal employment within five years unless they manage to repay the entire pretax buyout amount.

Is Early Retirement Offers on EPA Agenda?

In most cases, the buyouts are coupled with early retirement offers, but in the case of EPA, it is not clear whether they are on the agenda or not. For those of you who don’t know, Voluntary Early Retirement Authority lets federal employees retire before they reach the standard combinations of years of service and age.

The two most vital federal retirement systems are Federal Employees Retirement System and Civil Service Retirement System. The latter applies to people who were hired before 1984 which consists of less than 10 percent of the workforce. These people are now older and closer to retirement on an average.

Early retirement offers allow employees in either of the two systems to retire at any age with 25 years of service or age 50 with 20 years or service. It is potentially subject to a reduction in one’s retirement benefits.

Why are Layoffs Unpopular?

Laying off the federal workers or Reduction in Workforce is not preferred by federal agencies because it requires a tedious, expensive and disruptive process. RIFs have been out of trend as Agencies have not used them for decades and they try to avoid them. Agencies prefer other methods like cutting down the travel and other expenses as well as cutting down the feds via attrition.

Conclusion:

Federal employees have been under the scanner since President Trump took over. The attempts to reduce the number of feds have been initiated at EPA by offering buyouts. The agency may also offer early retirement options which may badly impact retirement benefits and federal retirement.

What Are the Fastest Growing Retirement Plans?

A recent report has highlighted some of the fastest growing retirement plans and how the assets of the top 1000 retirement plans in the US are growing. The topper in the list is the popular TSP or Thrift Savings Plan. Other plans have also performed well recently, and according to the Pensions & Investments’ annual survey, corporate sponsored 401(k) plans outperformed the TSP during this most recent period. This information will come in handy to people who are planning to invest in a retirement fund or are considering switching from their existing plan.

Retirement Benefits

The Assets of The Fastest Growing Retirement Plans

The Pensions & Investments’ annual survey that was released recently stated that assets of all 1,000 largest retirement benefits plans of the US grew to USD 9.39 trillion as on September 30, 2016. It is 6.2 percent more than the figures of 12 months earlier. It is even the highest level in the history of the Pensions & Investments’ annual survey.

Defined Benefit Pension Plan Assets vs. Defined Contribution Plan Assets

During the survey period, of 12 months, the assets of defined benefit pension plans in the top 1000 grew by 4.9 percent to a total of $6.12 trillion. In contrast, the assets of defined contribution like the TSP or 401(k)s rose by 8.6 percent and reached the level of $3.28 trillion.

Expert Opinion

Jeff Boettcher, Principal of BWM Advisory, LLC of Scottsdale, Arizona stated that every year this survey illustrates how important these resources are to individuals as well as the economy in general.  Mr. Boettcher went on to say that these investments represent the largest pool of investable assets anywhere in the world.

Defined Contribution vs. Defined Benefit Plans

Among the 200 retirement plans listed as the largest, the worth of assets was USD 6.79 trillion on September 30, 2016. It is 6.2 percent higher than a year earlier. Of this, about USD 1.96 trillion belongs to the DC plans; it is up by around 8 percent. In contrast, approximately USD 4.83 trillion belonged to DB plans. It is up by about 5.5 percent.

The Gap

The survey revealed that there was a gap between the number of public and corporate funds reporting a double-digit asset growth. About 25 of the top 100 corporations in the top 200 saw the assets grow by 10 percent or more. In contrast, only four of 77 public plans saw the assets grow by 10 percent or more.

Key Reason

Consultants think that the reason behind the gap mentioned above is the longer duration of corporate pension funds’ propensity to invest in fixed-income assets.

Top 5 Largest Retirement Benefits Plans

The survey results stated that all five of the largest retirement plans in the country are public plans and their rankings have been the same as last year. As expected, the federal retirement thrift savings plan that is based in Washington DC is the largest retirement plan of the country and had $485.58 billion in assets on September 30, 2016. It has increased by about 9.5 percent a year before.

The second position, the California Public Employees’ Retirement System, in Sacramento, had $306.63 billion in assets and saw an increase of 7.3 percent from the last year. Three others in the top 5 ranking were California State Teachers’ Retirement System, West Sacramento, New York State Common Retirement Fund, Albany and New York City Retirement Systems. They were worth $193.87 billion, $184.46 billion and $171.57 billion respectively. They saw an increase of 6.6 percent, 6.3 percent, and 10.6 percent in that order.

Corporate vs. Union Plans

Chicago-based, The Boeing Co, was the largest corporate retirement plan. It has assets worth $107.38 billion, and it has increased by 5.3 percent. Western Conference of Teamsters Pension Trust, Seattle is the largest union plan with $37.24 billion in assets. It has been holding steady from its $36.91 billion in assets a year before. Its overall rank is 45.

Survey Details

Pensions & Investments has compiled a survey of 1,000 largest retirement benefits plans since the year 1979. The process of the survey includes reporting, data gathering and verification that is done by the entire U.S. editorial team of the news organization.

The questionnaires are sent to over 1,300 fund sponsors available in the organization’s database. Then the largest 1000 were identified based on the completed surveys, database searches, and follow-up phone calls & emails.

Conclusion:

Based on the asset growth of the Defined Contribution plans listed, it is clear that people continue to trust the value of their retirement plans. The survey also suggests that althought the Thrift Savings Plan is the largest in terms of assets, it is not the plan that is increasing in size the fastest. Whether the comparison is because Federal Employees are aggressively seeking alternatives to their TSP or because the performance of the underlying funds has been impacted for one reason or another is difficult to ascertain but worth considering if you are faced with the question about what to do with your retirement funds.

Few Federal Employees are Leaving Jobs Due to Election of President Trump

Before the presidential elections took place last year, many federal employees were of the opinion that they would leave their jobs if presidential candidate Donald Trump was chosen for the oval office. Well, the elections are over now and he is the new President. But are the feds leaving their jobs? No, because they probably like the comforts of a government job as well as the annuities they get as a part of FERS retirement system.

federal employees

Surveys Said Many Federal Employees May Leave if Donald Trump becomes the President

There were many surveys in which many federal employees stated that they will leave the job if Donald Trump comes to power. In one survey, 25 percent federal workers said that they might leave if he comes to power. In another survey, only 65 percent of the feds said that they would commit to keeping their jobs if he came to power. As many of the federal workers are older, one expects the federal retirement numbers to see a jump in January. But did it happen?

January Numbers Did Jump

OPM has reported that the January numbers have jumped dramatically and the number of backlogged applications was up by 53 percent in January as compared to the last month, i.e., December 2016. After seeing these figures one assumes that the feds are keeping up with their opinion of leaving a federal job post retirement. But all is not as it seems.

But Not Much

These figures are not much when one considers the fact that an annual surge of retirements always takes place in January as most feds decide to quit in the final month of the year. While one remembers the fact, it can be seen that the figures in January 2017 are actually lower than the previous five years.

In the data shared by OPM, it was highlighted that the number of new retirement benefits claims of federal employees was 15,317 in January 2017 while they were actually higher, 15, 423 in January 2016. In January 2015, they were at 18,629 while in January 2014, they were 17, 383. These numbers were 22, 187 in January 2013.

Older Feds Will Dominate

As per the figures of September 2015, almost 28 percent of the federal employees were 55 or older than that. Many of the federal workers opt for leaving the service when they qualify for federal retirement pension. Even when that happens, 25 percent of the US workforce will comprise of people who are 55 years of age or older in 2020.

The Love for Federal Jobs

One of the reasons why people stick to federal jobs no matter whether they like the new president or not is that they receive a retirement annuity for the remainder of their lives. The federal retirement system is so lucrative that people love it immensely.

How Many Ineligible Federal Employees Retired Post Election

Unfortunately, the data on the number of federal employees who retired post-election without being eligible is not revealed yet. It will be sometime later when people will get to know that how many of the recent retirees were eligible for it and how many took retirement without even being eligible just because they didn’t like the new president.

No Surge Foreseen

Given the recent federal retirement application data, it is clear that many federal employees are not planning to retire in bulk due to the presidential election. If that were to happen, it might have happened till now.

Not a Lie

Some people may assume that as the federal retirement figures didn’t jump drastically post-electoral results, many federal employees (of the 35 percent who said that they would retire if Donald Trump wins) were lying. It is a misconception, people should realize that the respondents probably didn’t shift their loyalties and might have voted for Hillary Clinton, the Libertarian candidate or the green party candidate. Some may have actually retired earlier than planned.

Just an Opinion

It is highly probable that many federal employees were just expressing their political opinion in a dramatic manner while answering the survey questions. Some of them might even have hoped that the answers they are giving might steer other voters away from President Trump. Some may even think that they would resign but couldn’t resign due to financial responsibilities or other such reasons.

Simply put, the federal employees might have thought that the election results were one of the reasons for leaving but it was not the main or the only reason for quitting a lucrative job with numerous benefits. They might have also changed their minds later on.

It is also possible that the government will lose many federal employees who are young and don’t like the election results.

Conclusion

It can be seen that though many federal employees don’t like the fact that Donald Trump is their new president, they are not considering quitting due to the benefits like annuities offered by the FERS retirement system.

Government Provided Federal Retirement Contributions

All the people who are eligible for federal retirement are interested in knowing the amount of contribution that is being done by the federal government. It helps them to plan their finances in a better manner and assists them to be well prepared for the future. If you are also one of the people who are eligible for federal retirement contributions, you must read this article to get a handle on how things are vs. how people assume things to be. It might turn out to be an eye-opener.

federal employee retirement PSRetirement helps federal employees maximize their retirement through education, knowledge and proper planning.

The Statement on Federal Retirement Contributions

A report by Heritage foundation stated that the federal government contributes up to 18 percent of a federal employee’s pay for federal retirement. Some people analyzed the contributions they are getting and the results they got were below 18 percent. So were they wrong in doing the math? Let’s find out by digging out some facts.

What’s Included in Federal retirement Contributions by the Government?

Once you understand about the factors included while stating that federal government contributes 18 percent of the employee salary in federal retirement, you might get some clarification. Therefore, we should have a look at the included factors first.

OPM has estimated that the total contribution made by the government to the federal retirement or federal employees’ retirement system is 13.2 percent for the employees who were recruited before the year 2014. This 13.2 percent is achieved by reducing 0.8 percent employee contribution from 14.0 percent costs.

OPM also estimated that the contribution is 11.1 percent the employees that were hired either in 2014 or even later than that. It includes 3.1 percent employee contribution. It is pertinent to add here that an additional 1.3 percent contribution by the employees goes towards paying the CSRS obligations that are unfunded.

It should also be mentioned that all the federal employees get an automatic 1 percent contribution to their thrift savings plan by the federal government. It can even be up to an additional 4 percent in matching contributions.  Considering all these factors, the total government contributions can indeed be from 15.1 percent to a maximum of 18.2 percent.

Total Compensation of Federal Employees including Federal Retirement Contributions

The contribution of the federal government to the financial compensation of all the federal employees is considerably higher than the salary earned by each federal worker. The overall compensation package includes several other items and contributes to computations. The average federal employee’s total compensation that includes all the salary and benefits is more than $123,000.

Conclusion

It is hoped that the aforementioned explanation would act as a guide to all the federal workers who are confused about government contributions to the federal retirement. The explanation is as simple as it can be and includes all the vital points that will help the federal employees to plan their retirement in a better manner. It will also throw a light on the facts which may motivate some federal employees to stop worrying so much if the government is already contributing 18 percent to their federal retirement.

In contrast, some federal employees who had a misconception that the federal government contribution towards their federal retirement is high and didn’t save up much might get face the reality and start saving up better rather than relying solely on the federal retirement system only. No matter how much contribution you are making as a federal employee or how much the government is paying to boost your federal retirement, it is always advised to not put all your eggs in one basket and look for multiple sources of income in retirement. It would save you from the embarrassing and highly uncomfortable situation of running out of money in retirement. Won’t you agree?

Retirement Benefits Savers Get a Gift from IRS

The Internal Revenue Service of the USA has given a special gift to all the retirees who have some retirement benefits saving. It has allowed them a chance to explain why they didn’t stick to the 60-day deadline while moving their money from one IRA to another or from a 401(k) to an IRA. Earlier, the retirees just had to pay tax for missing the deadline and they didn’t get a chance to explain the situation. Experts are still advising to make the money transfer online.
A new rule announced by IRS says that the taxpayers who fail to move funds from one retirement benefits fund to another won’t get penalized hastily.

IRS reduced the Worry of Retirement Benefits Savers

IRS has considerably made the life of a retiree easier as the rule of moving retirement benefits funds from one IRA to another and from a 401(k) to another within just 60 days cost a lot of money to the retirees earlier and harmed their nest eggs. When a retiree failed to move the funds in time, he or she had to pay taxes for the full amount. If the person moving the funds was 59 and a half years of age, he or she had to pay an additional penalty.

Avoiding the Risk

In order to avoid the risk of paying extra tax, the financial experts advised the retirees to do an online transfer of their funds. Not only it’s very convenient but it’s quicker too. It ensures that the funds are transferred smoothly within a few days.

The Mistakes

Some retirees had to pay extra tax because they had a misconception that the account they have moved their funds to  a qualified retirement account while it was not the case. Some even made the mistake of losing the distribution check.

Expert Opinion

The founder of IRAhelp.com and a certified public accountant, Ed Slott says that this move of IRS is a big deal and it will help a lot of people. He says that when people had to pay full taxes due to a small mistake, they lost their tax-advantaged status.

Slott adds that people who didn’t submit the funds on time usually did it inadvertently rather than trying to pull something over on the IRS. He also said that there was a costly appeals process so only a few offenders pursued it. He concluded by saying that online transfer is still the best practice.

The Circumstances

IRS has announced that the new rule would be effective immediately and has shared a list of circumstances that allow a person to be excused for not submitting the retirement benefits savings in a new account on time. Some of these circumstances are severe damage to the residence of the taxpayer, death in the family of the taxpayer, serious illness of a family member, a postal error, etc. In such circumstances, the taxpayer must immediately provide a written self-certification explaining why or she missed the window.

Manning City Council to get Retirement Benefits

The members of Manning City Council will have access to health insurance and retirement benefits starting spring 2018. This decision was made recently. A few people have shown their displeasure with the decision. They argue that the decision should be taken when it is to be implemented rather than 2 years before. Some even stated that people should have a say on the issue.

Why are Retirement Benefits and Health Insurance Benefits being offered now?retirement benefits

The Council members had the option of getting the retirement benefits and the health insurance benefits because of the state insurance and they were considered to be full-time employees. Now the ordinance needs to be modified so that the members can get the employers portion of it. These details were shared by Scott Tanner who serves as the Manning Administrator.

He also added that the ordinance would not be effective until April 2018 when the next council is supposed to be elected.

The Opposition

Pro Prothro who is a local businessman as well as the Clarendon County Chamber President has challenged the decision taken to amend the ordinance. He says that the timing of the proposal is not good. He admitted that the council members had the right to take the decision legally but he didn’t like the fact that the change is approved today while it will be effective after two years. The situation after 2 years is hard to guess. No one can decide the cost of retirement benefits and health insurance benefits at that time accurately.

Prothro accepted that the council members should get paid for their time. But he insists that the change should be tabled till January 2018 because getting statistical data on healthcare costs would be an easy thing to do then.

Another Opponent

Another opponent of the change, Art Lambert said that the council’s Rules of Procedure don’t allow the council members to fix their own salaries especially when they are in the office. He thinks that the council members should consider whether it’s appropriate for them to take this step.

Lambert also expressed doubt on the exact date when the council’s decision to change retirement benefits and health insurance was proposed. He claimed that he had studied all the minutes and could not find the record of this change. He also had the opinion that people should get the opportunity to vote on the matter and so it should be a referendum.

Calculating the FERS Supplement by Paul Kalra

A Lesson on Calculating the FERS Supplement by Paul Kalra

FERS Paul Kalra

There are many FERS annuitants who are able to retire prior to the age of 62, and who are eligible for the SRS (Special Retirement Supplement). You can meet such requirements if you have retired:

  • Following the MRA (Minimum Retirement Age) after putting in at least 30 years of service;
  • At age 60 with at least 20 years of service; or
  • Upon either an early voluntary or an involuntary retirement at age 50 after having 20 or more years of service, or at any age after at least 25 years of service, when it has been determined that your agency is undergoing a major reorganization, a RIF (reduction in force) or a transfer of function. (In this situation, you will not receive the SRS until you have reached your Minimum Retirement Age).

As Social Security retirement benefits cannot be received until you reach at least the age of 62, the Special Retirement Supplement can help you with bridging your income until the time that these benefits are paid out.

In order to determine roughly how much you will receive from your SRS, you should first obtain an estimate of benefits from the Social Security Administration. Each year, Social Security provides a statement of estimated benefits, so you will be able to easily find the dollar amount of estimated benefits that you are likely to be receiving at age 62.

Next, take this dollar amount and multiply it by your years of FERS service (rounded off to the nearest whole number). Once you have done so, divide this figure by 40. This will provide you with the approximate amount of FERS supplement that you should receive.

As an example, if the amount of Social Security benefit that you are estimated to receive at age 62 is $5,000 and you have put in 30 years of FERS service, then the calculation will be as follows:

$5,000 X 30 / 40 = $4,500

In running this calculation, your estimated FERS Supplement benefit would be approximately $4,500 per month. It is important to note, however, that certain situations such as obtaining outside employment following retirement could have an impact on the amount of benefit that you ultimately receive.

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Federal Retirement benefits reporting addressed by FASB

Recently FASB has come in the news because they released two different proposals this past week that are aimed at addressing some of the reporting issues that federal officers face regarding their Federal Retirement Benefits.

FASB’s proposals address federal retirement benefits concerns:

Proposed Accounting Standards Update (ASU), Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post retirement Benefit Cost is the name of the proposal put forward by the agency. It addresses the major concern of presenting the fixed benefit cost on a net basis to combine elements with a variety of predictable values. All the users of such statements have let FASB know that the net benefit cost’s service cost component is almost always treated in a different manner when compared to other constituents.

According to this proposal, the employer would file the cost component of the service in the same line of items as the other costs of compensation that arise from the rendered services of the employees that have been affected by the period. There is other information in this regard mentioned in the proposal as well.

All the changes that have been made complying to the proposal would be applicable to all the employers regardless of the fact that they are for-profit or not. The only requirement is that they should offer benefit plans that are defined or other post-federal retirement benefit plans or any other benefits for that matter.

 

5 Things You Must Do If You Are Eligible for Federal Retirement

federal retirementIf you are a Federal employee who is counting the days to his or her retirement then you must remember to do certain things. These things will help you to get your money soon after retirement and would save you from any unforeseen financial trouble.

How to make Federal Retirement Easy on You?

  1. Check your service records: If you are among those people who are about to retire in a few years, you may want to start checking your federal service records and make sure there are no loopholes. If you have any time lag then you may want to prepare an explanation of the same to speed up the process of your application.
  2. Connect with HR: You may also want to connect with the HR department (ORM) to see that they have all the data required to process your federal retirement Also, check that your crucial details like address are not misspelled or obsolete. Remember, a little mistake can cause a lot of time delay.
  3. Save Some Money: It would also be smart for you to start saving some money for the days when your retirement benefits application is being processed by the concerned departments. As you will not have a regular income, you may want to pay up your bills in advance. It will save you from embarrassments like having to borrow a few bucks from your friends or relatives.
  4. Track Your Application: The progress of your application can be tracked online in all cases. These online checks will let you know how soon you will get your money and you will not have to visit the respective office every now and then. If you really need the money you can also request the concerned department to process your application a bit faster.
  5. Be Prepared for Different Outcomes: The outcome of the entire process can be different in unusual cases. For instance: If a retired employee has had a divorce and is bound by law to take care of the spouse financially, the employee would get only half of the amount unless the matter is studied by the respective authorities. So you must be prepared for these obstacles in advance and discuss your case with an expert to avoid feeling disappointed in the end.

It is assured that these steps if taken at the right time will make your federal retirement process much smoother.

Things to know about federal retirement and taxes

phased federal retirement [Photo credit: Lending Memo]

If you are a servant of the federal government, then there is nothing you would look forward to more than achieving your federal retirement and enjoy the benefits that follow. The road towards retirement isn’t always an easy one but if you follow the right procedures and fund the right account then when the time comes, you normally have what you would hope for. Here is a list of things that we believe every federal retiree or future retiree should know:

Things to know about federal retirement:

  1. The federal income tax will purpose all of the incomes that you get out of retirement. This is inclusive of TSP, Social security and IRAs etc. So, this entails that the amount you will lose to federal income tax will be dependent upon the marginal tax bracket within which the income lies.
  2. It doesn’t matter if you are getting a CSRS or a FERS pension, it won’t be fully taxable. The reason being that you made the contributions from dollars that were already taxed. This does make sense because otherwise you would be taxed twice.
  3. The deductions because of TSP don’t affect the retirement income either. This is because retirees can’t make TSP contributions.
  4. The payroll taxes will not be deducted from your retirement income but only from your earned income. So, you won’t be parting with any money pertaining to your Social security tax or the Medicare tax.
  5. Around 85 percent of the Social security benefits are taxable. The specific amount is based on the provisional income. This is a very important keyword and to find out the figure, you can add ½ of your social security, some non-taxable income and all of your taxable income. This provisional income will then be compared with certain thresholds meant for joint and single filters.

 

Looking to start your savings or retirement accounts?

military retirementA recent study that was conducted by the ORC international and the Federal Credit Union of the Navy revealed that the military youngsters are incredibly and remarkably more inclined towards taking up the savings and/or the retirement funds than the youngsters from the general population. Saving money is something everybody wants to do but not many are able to do it because it’s definitely easier said than done. Everybody is aware of the importance but not many are able to get started without facing challenges. For those who have just joined the military or have been there for some time now, there are enough retirement accounts opening facilities for them to be able to be satisfied:

An emergency fund is one of the best avenues to take upon in this regard. Emergencies can never really be avoided because of their sudden transpiring nature. What we can do however is to be prepared once we are faced with any predicament. For people that can have retirement accounts or savings’ ones for that matter, an emergency fund can go a long way. You can just get it opened without any hassle and don’t touch it unless you absolutely have to. Make small additions to it every month and you should be able to have money when your car needs a sudden repair or any other such out of the blue emergence of something.

The best way to make your retirement accounts filled with money all the time is to take small steps. Don’t try to be extravagant and put all of your month’s salary in there. Another thing to remember in this regard is to start as early as you can. Often officers start late in their service tenure and when they reach their retirement they don’t have much in their accounts to look forward to. There are many avenues to take upon like the IRAs, 403(b)s and the 401(k)s etc. in this regard.

 

Details about the new military retirement system

military retirement system
(the-military-guide.com)

Soon we will be hearing from the Defense Department regarding the new military retirement system that’s set to be put in to effect from January the 1st of 2018. There are some intricate details regarding the system that are to be shared and everybody is looking forward to hearing something that they would like to hear.

Details about the new military retirement system:

During 2016, the armed personnel can expect the implementation of the financial education programs that are going to be spread across the whole force and will allow the service members that are eligible to get help regarding making decisions of selecting retirement packages. They can either get enrolled in a new retirement plan or just go with the rudimentary benefit that is given under the grandfather clause. Even though, as mentioned the plan will not be put in to practice before 2018, all the already in service troopers will be offered the traditional grandfather clause that is part of the basic 20 year retirement system.

If you entered the troops after January 1st 2006, then you will have the liberty to choose between the 401 (k) system and the offered one. This would definitely create an ambience of uncertainty as 2018 approaches near for the people that are in the middle of their services.

The troopers who came before 2006 and have served for over 12 years, will be given the chance to opt for a waiver but because this ensures few financial fruits, not many would like to make the switch.

There have been cases where the Pentagon has forcefully asked some of the troops to take upon retirement plans but with the new military retirement system and its launch, it’s expected that things are going to get a lot more open to choice of the military.

The Last of the Government Research Chimpanzees are Retiring

research chimpanzees

The Government is retiring the last of the research Chimpanzees

There have been some chimpanzees used by the government for scientific research purposes but now the National institutes of health has decided to send the final few research animals into federal retirement. These research chimpanzees include some that were present in the Texas facilities. They will be moved to the nearest federal sanctuary as soon as some space is cleared out for them.

This is not something to be surprised of for most of the people as the government had already made such remarks and indicated that one of the closest ancestors to the homo sapiens will cease to be used as research specimens. During 2014, the national institutes of health had announced that soon all the chimps that were serving as lab rats will be retired and this looks like something to do with that announcement.

In the past week, the labs had cleared the chimps and it was said that they are no longer going to be subject to experiments in the lab anymore. The main director of NIH stressed during his last speech that the research on chimps in the world of today is no longer something pragmatic and it’s finally time for us to move on.

The first thing on the mind of the NIH board apparently will be to send the 20 chimpanzees that they currently own to the Chimp haven which is a government owned and funded chimp sanctuary up in Los Angeles. After that more animals are destined to follow and be placed in other sanctuaries that are spread out across the country.

Here’s hoping that steps like these mean an end to the exploitation of these animals and they can finally spend some years without having to abide by the rules formed by the human scientific civilization. Steps like these can only be lauded.

Medicare Premiums to Rise for Some Retirees

medicare premiums

On Monday, November 1, President Obama signed legislation that averts what, for many federal retirees, would have been a very large increase in their Medicare Part B insurance premiums. Instead of facing a $50 plus increase, federal retirees who do not receive Social Security payments will see an increase of about $19 a month. This includes a $15.80 a month increase in their basic premium, plus a $3 monthly surcharge.

Retirees whose Social Security income covers their Medicare Part B premiums will see no increase. Current law limits the increases in Medicare insurance premiums that Social Security recipients must pay.

Increases in Medicare premiums may be no larger than a recipient’s increase in Social Security payments. For the 2016 calendar year, there will be no increase in Social Security payments, consequently Social Security recipients are protected from 2016 increases in Medicare Part B premiums.

However, this “hold harmless” provision only applies to retirees whose Social Security income pays their Medicare Part B insurance. Before the November 1 legislation became law, other Medicare Part B beneficiaries would have faced a premium increase from $104.90 to $159.30 per month.

No such “hold harmless” protection exists for Federal retirees who do not get Social Security. Without a change in legislation, these retirees would have had to pay the extra $50 plus in monthly Part B premiums.

To offset lower revenue for the Medicare Trust Fund, Medicare beneficiaries will pay a $3 per month surcharge, for about five years beginning in 2016. Social Security recipients will not pay the $3 surcharge in 2016. However they will pay the surcharge in any future years when their “hold harmless” provision does not apply.

The November 1 legislation reflected a broad-ranging budget and debt-limit agreement negotiated between the President and the Congress. The legislation avoids a default on U.S. Government debt payments. It also raises caps on federal defense and non-defense spending. An additional provision of this legislation caps the increases in Medicare premiums.

— by John Zottoli

Most Tax-Friendly States To Save Your Federal Retirement Benefits

Most Tax-Friendly States To Save Your Federal Retirement Benefits

Welcome to Alaska and save taxes on federal retirement benefits
Photo – jkbrooks85/flickr

When selecting the location for life after federal retirement, no doubt sun n’sand and some golf courses figure prominently. But Florida and Arizona are not even in the top five in terms of taxes and making your federal retirement benefits last longer.

For that, you need to find the most tax-friendly states, and this is where Kiplinger’s latest ranking of states might come in handy. The magazine ranks Alaska as the No.1 most tax-friendly state for retirees, with no state income tax, sales tax or estate/inheritance tax.

This means that your Social Security benefits and any federal retirement plan distributions and income such as a TSP withdrawal, IRA earnings, etc. won’t be subject to any state income tax in Alaska. It helps you manage your savings plan better, while at the same time making your retirement income last longer. Throw in low gas tax, low property taxes, and refunds for state residents from oil revenues, and it all adds up to make your retirement income feel like it’s much bigger than you thought it was.

Of course, you also have to select the right location within Alaska. This is because local taxes imposed by municipalities may result in you having to pay a higher net tax in Alaska than you would in other states where retirement benefits are taxed at the state level. So if you choose Anchorage or Fairbanks, you don’t have to worry about local taxes. But other cities and smaller municipalities may not be so benevolent.

 

Top 10 Most Tax-Friendly States To Safeguard Federal Retirement Benefits

 

Here’s the top 10 most tax-friendly states, as per Kiplinger’s, where you can make your federal retirement benefits last longer.

  1. Alaska
  2. Wyoming
  3. Nevada
  4. Mississippi
  5. Georgia
  6. Delaware
  7. Arizona
  8. Louisiana
  9. South Dakota
  10. Florida

VA Federal Employees Face Charges for Misuse of Funds

VA Federal Employees Face Charges for Misuse of Funds

reward executives

Two senior Veterans Affairs managers face criminal charges after a watchdog group reported that these federal employees gave employees large salaries and relocation reimbursements as an incentive to reward executives.

The inspector general of the Veterans Affairs Department said that the two federal employees received some $400,000 in total for a relocation of about 140 miles. Moving expenses are allowable expenditures for the agency; however, evidence indicates that Kimberly Graves and Diana Rubens rigged the system to create job openings for which they could apply.

In addition to arranging new positions for themselves, the two federal workers kept their higher paying salaries despite the new positions sitting on a lower federal pay scale. Ironically, Rubens moved to her new position in Philadelphia to clean up that VA office following a range of scandals including changing benefit claim dates and retaliation against whistle blowers.

These two women could face criminal charges and their case is at the U.S. Attorney’s office.

Scheme of Increasing Salaries

While the case of fraudulent behavior by federal employees is startling, the Inspector General detailed a bigger scheme that involve increasing salaries for many executives. The report showed that some 22 federal VA employees received promotions to executive positions or relocated over about 3-years. The report that these promotions/relocations were used to justify salary increases. All but 1 of the 22 employees listed received a substantial pay increase following their promotion or relocation.

The Attorney General’s report said “Annual salary increases totaled about $321,000 with relocation expenses totaling about $1.3 million.” In addition, the report further detailed another $140,000 in relocation incentives. In total, federal employees spent some $1.8 million on reassignment.

Jeff Miller, the House Veteran’s Affairs Committee Chairman said that the finding align with recent investigations into the organization.

“It is clear from this report that Undersecretary (Allison) Hickey and others in VA leadership knew they could use fear, intimidation and timely relocation incentives to coerce subordinates to relocate to jobs they didn’t apply for, at the taxpayers’ expense. These VA managers knew what they were doing and it is clear that from day one that VA officials were using the relocation expenses program to enrich themselves.”

 

The VA Response

The VA responded to the allegations, agreeing with the attorney general. The released the following statement: “As a result of their findings, VA leadership will conduct a 30-day review of all incentive and relocation procedures in the department… The VA will full cooperate with other federal agencies as required as we continue our daily effort…”

Federal employees have come under fire his year as numerous reports have shown that this federal benefits program is riddled with fraud and mismanagement. Reports have included mishandling of healthcare requests, changing the dates on applications, and unaccounted spending of about $6 billion per year, and a shortfall of some $2.6 billion this summer that nearly caused several VA hospitals to shut down.

Republican representative Dan Benishek expressed frustration earlier this year. “Do we have to listen to this repeatedly? Obviously, there are some problems that really need to be fixed. It’s unbelievable that this is happening.” He continued, “It seems to be a new revelation every month about some incompetence.”

The VA is responsible for managing and distributing federal benefits for military veterans. The purpose of the VA is to help veterans receive proper medical care, compensation and insurance coverage.

Federal Retirement Backlog Still Backed Up

Federal Retirement Backlog Still Backed Up

governmentDespite efforts to reduce a massive federal retirement backlog, the Office of Personnel Management did not make much headway in August, according to numbers released by the OPM. The OPM began tracking their progress in May of 2014 as a way to help reduce the retirement benefits backlog.

Currently the Office of Personnel Management has a backlog of 16,350 applications for federal retirement. This number is only down by 105 from July. Although the Office of Personnel Management processed just under 7500 retirement claims last month, they fell short of their goal by about 150. Compounded with the 7,341 new government retirement claims received in August, (roughly 550 more than received the same time last year) the numbers may not be dropping anytime soon.

The Numbers Keep Growing

The Office of Personnel Management saw progress in backlog reduction from March through May, but new applications grew the backlog by almost 2,000 applications in June and July. The backlog grew from 14,511 to 16,455 between June and July. The OPM had projected a backlog of about 11,442 by July, but were stymied by the unexpected influx of new applications. As of May, the backlog of federal retirement benefits was reduced by 15.6 percent.

Percentages of claims processed each month have dropped 12 percent from the high of 83.7 percent in December of 2014. In the last six months, they have averaged just over 70 percent, with some months dropping as low as 68 percent processing.

In most years, the OPM receives a high volume or retirement applications in January, with levels lowering to a steadier flow throughout the year. It is common for some months to spike though.

Budget Cuts Complicate Matters

Retired federal employees may be concerned because government-wide budget cuts take effect in October, reducing the amount of overtime the OPM can pay to claims handlers. The budget cuts will also reduce the OPM’s ability to hire new employees to help tackle the overflow.

In addition, retired federal employees may face longer delays if the government cannot reach a budget agreement for funding agencies by midnight, October 1. A government shutdown would delay retirement benefits processing and potentially add to the backlog.

The OPM has struggled to clear the backlog for years and frequently deals with frustrated retired federal employees and complaints from Congress. The Office of Personnel Management set a goal to reduce the number of claims by just over 11,000 by the end of September, which does not appear to be likely.

According to the OPM website, retired federal employees should expect their first payment within 5 to 7 days from the time the OPM receives the electronic files. The OPM says that delays may be caused by missing information and that some 23 percent of applications filed are missing some information and about 11 percent fail to meet the 30-day deadline. The OPM typically attributes these errors to the agency from which the retiree completed their service.

August’s low numbers follow a backlog growth of 13 percent in July.

Government Shutdown Tips For Federal Employees and Retirees

Retirees

As Oct 1 draws closer, everyone is bracing for what looks to be another certain game of congressional chicken that will cause billions of dollars in losses, and a lot of pain for people who rely on government services.

Some federal employees may enjoy it as a welcome respite from the drudgery of their daily routine. Others will worry about furloughs and pay loss during the shutdown. Federal retirees fall under both categories of people who rely on government services and get paid by the government.

It’s understandable that as a federal retiree, you may be worried about retirement services during the shutdown. Well, you can at the very least stay informed while Congress goes through its routine.

The Office of Personnel Management (OPM) has published a guide for exactly this situation – providing guidance for shutdown furloughs.

The guide includes separate sections for everything from furloughs and working during a shutdown to pay and benefits, leave, etc. It also provides information about the effect of a shutdown furlough on Thrift Savings Plan (TSP) contributions, investments, and loans.

For retirees, the guide provides detailed information about retirement services during a government shutdown.

Federal Retirement Services During a Government Shutdown 

For starters, you should know that the effect of a shutdown furlough is the same for employees under the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS).

Secondly, retirees under both CSRS and FERS will continue to receive their scheduled federal annuity payments on the first business day of the month, irrespective of whether there’s a shutdown.

If you submit a retirement application during a shutdown, the effective date will remain the same. There may be a delay in processing as OPM waits for other agencies to provide the necessary information. However, OPM Retirement Services employees will still be working as usual during a government furlough.

Reemployed Annuitants and FEGLI

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FEGLI For Reemployed Annuitants

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