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How Ready Are You For Retirement?

Ready Are You For Retirement?• Have you quantified your financial objectives?  In other words, have you estimated how much money you will need to live the life you desire in retirement?

• Have you saved enough in your TSP Account?

• For Postal Employees – Are your Retirement Elections up to date in LiteBlue?

• Have you set appropriate goals for retirement?

• Do you have doable strategies to achieve those goals?

• Can you itemize the strategies to achieve the goals you have set for retirement?

• Do you know where all your important records are?

• Have you informed someone you trust about your important records?

• Do you have your spending under control and what strategies have you used to control your spending?

• Do you know how you spend every single dollar and cent?

• Do you keep a spending chart so that you can actually determine what you are spending, how you are spending and if changes need to be made?

• Are you saving enough money?

• Have you prepared an estimated retirement budget and devised steps to help you operate within your budget?

• Do you intend to leave a big inheritance to your children, other family members, or a charity?  If so, have you set aside money or made provisions to accomplish that goal?

• Have you thought about where you will live in retirement and the cost involved?

• What would you do in the event of an unexpected and extended disability before you retire?

• Do you have an emergency fund?

• If you are a couple, are both parties completely aware of the status of the financial situation?

• If something happens to either of the parties,  is each member capable of managing the family’s finances independently?

• Are you taking full and total advantage of any tax-deferred savings options offered by your employer?

• If you have dependents that rely on your income for survival, what plans have you put in place in the event of your death?

• Are you taking care of your health so that you can have a good quality of life in your retirement years?
There are many more retirement readiness questions we could pose, but I think we have sufficient fuel to allow us to take a good look at our readiness for retirement.   Remember if you have not done any of the things listed, it’s ok, you need only make them a part of your individual action plan and get started activating that plan as part of your goal to Retire Well.

P.S.  Always Remember to Share What You Know.

Dianna Tafazoli

RELATED TSP ARTICLES

Thrift Savings Plan (TSP) Withdrawal Options

For Postal Employees – LiteBlue and the TSP

Federal and Postal Employees – Choosing a Financial Professional

The Thrift Savings Plan (TSP)

Is All ‘Your’ TSP Money Actually Yours?

Federal Retirement Benefit Analysis

How To Best Fund Your TSP

Will Spending Be The Same In Retirement?

Federal Retirement Spending Habits

Federal Retirement Spending Habits

For Federal Employees, spending will change in retirement.  Some federal retirees will spend more and some will spend less based on their individual financial situation.  It is useful to note that expenses today may not be expenses tomorrow.  Therefore, some projections and forecasting is needed when looking at spending in retirement.

Expenses like transportation and food costs may go down.  If you don’t choose to work or even if you work part-time, you will probably not spend as much money in transportation as you did before.  Your budget for clothing may also decrease.  Entertainment and social activities may go up or down.  Because you are retired, your social calendar may not be as busy.  But, on the other hand, because you are retired, your social calendar might be completely filled because you do have more free time.

Medical Expenses and Life Insurance in Retirement

Let’s take a look at medical expenses in retirement.  Those expenses will probably go up because it seems to follow that as we get older, we require more medical attention.   Conversely, taxes will probably go down because you will no longer have payroll taxes for Social Security and Medicare if you don’t have earned income after retirement.   For instance, someone earning $60,000 in 2009 might have paid $4,590 for Social Security and Medicare Taxes, but will pay zero dollars in retirement if there is no earned income.  The tax savings could also help to replace some of the salary we will need to cover in retirement.  Savings should be aggressive prior to retirement. Your cost for life insurance, FEGLI or private compay life insurance, may also decrease – you should compare your FEGLI coverage and costs again private life insurance to make sure you are getting the best deal.

There are many ways in which our expenses and income may fluctuate in our retirement years.  But knowing what we know, it is prudent to aggressively save prior to retirement and even more prudent to aggressively pay down debt prior to retirement.  Carrying heavy debt into retirement is a disaster waiting to happen.  Reducing your debt lowers interest and increases your net worth.  If you have a very high debt: income ratio you will have to spend a lot of money just paying interest.

I know you are still thinking about your vision for retirement.  What about insinuating “some magic dust” into your vision —- living debt free before you reach retirement?  Imagine how much bigger and fantastic your vision could be if you had no heavy debt to carry around with you.  A rule of thumb is to lay out your entire debt ranking the order in which they should be paid.  You pay off debt with the highest interest first and then you put off the debt with the lowest interest last until you have paid everything off.

You don’t want to pay off your mortgage unless you have a lot of disposal income because you may need the tax advantages from the mortgage payment.  If I had enough money to pay off my mortgage, I would do a very careful analysis of the pros and cons before taking the next step of paying off the mortgage.  Paying off a mortgage might be the right thing to do for some and not for others.  Each person’s financial circumstances is uniquely different.  Try living by this “mantra” – What I cannot pay for in cash, I cannot afford, mortgages aside.  You will be amazed how living by this mantra will curtail spending. Decision-making strategies must always be utilized when spending your money.  Sometimes credit gives us too much flight to fantasy.  We all need credit, but how we handle it will be key to our retirement success.

Remember when it was assumed when one retired the mortgage would also be retired.  That is not always the case now-a-day.   Having to make large debt payments out of a limited retirement income can easily sour one’s financial picture in retirement.  Every effort must be made to leave debt behind as you move into retirement.  Having a vision and dreams for retirement has associated costs.  If you pay down your debt then you will have money that is not obligated for expenses to spend the way you want.  It is called your vision and dream cache. The more savvy you are at managing your finances, the better that cache will look and feel.  Most retirees talk about being able to travel.  That is an expense that is outside of the normal day-to-day expenses especially if the travel is extensive.  So we have to be very careful in planning our trip and making sure we are comparison shopping.

P. S. Always Remember to Share What You Know.

RELATED TSP ARTICLES

Thrift Savings Plan (TSP) Withdrawal Options

For Postal Employees – LiteBlue and the TSP

Federal and Postal Employees – Choosing a Financial Professional

The Thrift Savings Plan (TSP)

Is All ‘Your’ TSP Money Actually Yours?

Federal Retirement Benefit Analysis

How To Best Fund Your TSP

Records To Check Before Retirement

It is best to make certain all of your records are in place when anticipating retirement.  Tips to get in shape for retirement.

-Review your designation of beneficiary for the lump sum payment of retirement contributions when no one is eligible for monthly payments.

– If a copy is not in your folder, file a new designation. The designation is made on

Standard Form 2808 for CSRS and Standard Form 3102 for FERS.  Make sure

the form shows very clearly the person(s) you want designated.

FERS transfers and any prior designation made for CSRS is cancelled.  You may want

to file a FERS designation.  Automatic transfers to FERS from CSRS,- the designation

will remain in force.

If there is no designation of beneficiary, benefits will be paid as follows:

  1.  Your widow or widower.
  2.  Your children in equal shares.
  3.  Your parents in equal shares.
  4.  Your appointed executor or administrator of your estate.
  5.  Your next of kin under the laws of the state you reside in when you die.
  • What records are needed for my health benefits?

Inside of your OPF should be a record of all of your health benefit registration forms (Standard Form 2809) and where appropriate Standard Form 2810, Notice of Change in Health Benefits.  When you retire be absolutely certain that your official records show a complete history of your health insurance enrollment for the last five years.  Your records should include your current Federal life insurance coverage on a Standard Form 2817, “Life Insurance election”, and where appropriate, a current life insurance designation of beneficiary (Standard Form 2823).

P. S. Always Remember to Share What You Know.

TSP ARTICLES

For Postal Employees – LiteBlue and the TSP

Federal and Postal Employees – Choosing a Financial Professional

The Thrift Savings Plan (TSP)

Is All ‘Your’ TSP Money Actually Yours?

Federal Retirement Benefit Analysis

How To Best Fund Your TSP

Is Your Thrift Savings Plan (TSP) Working For You?

 

Understanding The Thrift Savings Plan, By Todd Carmack

Understanding The Thrift Savings Plan, bTodd Carmack

TSP thrift savings planThe TSP is the Federal Government’s retirement account

If I asked 20 federal employees, “How much does the government match for TSP contributions?” I would get several different answers.  The correct answer is 5% if you’re a FERS employee.  Providing education is the most important part of my job and I enjoy the benefits that truly educating my clients can bring them.

One of the most important pieces of advice I can provide to employees is to make sure you are contributing a minimum of 5% to your Thrift Savings Plan (TSP).  Free money is hard to come by and if you’re contributint to your TSP its about the same as giving yourself a raise just by doing the smart thing!  Example:  If your salary is $51,450 a year, your 5% contribution is $2572.50 a year and the government will match that figure, which means you will have a total $5145 in contributions to your account – not to mention any TSP fund performance.

Knowing your TSP investment options (TSP Funds) is also vital.  Here are the six options:

TSP G Fund – government securities

TSP F Fund – government, corporate and mortgage backed bonds

TSP C Fund – Large/mid cap U.S stocks

TSP S Fund – small cap U.S stocks

TSP I Fund – international

TSP L Fund – lifestyle funds (which is a combination of G,F,C,S, & I)

As for contribution limits, for those age 49 and under, you can contribute a maximum of $17,500 a year.  For those who are 50 and above, you can contribute an additional $5500 a year.

About the Author:

Todd Carmack,

Glendale, Arizona

Other Todd Carmack Articles

Social Security for FERS Employees, by Todd Carmack

Is The Pension Survivor Benefit Best For You?  by Todd Carmack

Understanding Your FEGLI Coverage.  by Todd Carmack

The Senate Salutes Federal Employees

Senate Salutes Federal Employees

Well, not the entire Senate, yet.  Ben Cardin (D-MD) and Brian Schatz (D-HI) recently introduced a bill called the Federal Adjustment of Income Rates (FAIR) which would give federal employees a 3.3 percent pay raise in 2015.  The proposed pay raise is welcomed news for Federal employees.   Federal employees have endured a lot over the past years.  They have gone without pay increases, endured pay freezes and furloughs and even lived through the sequester.

A report from Commerce’s Bureau of Economic Analysis stated that the federal civilian workforce was the only entity that experienced a decrease rather than an increase in earnings in 2013.  Many unions are standing strong behind the FAIR Act clearly a move that leverages their membership.  Federal workers have not been exempt from the economic down-slide faced by the entire nation.  Federal workers have had to reevaluate spending and planning for their family’s future.  Federal employees were very shaken over the sequester.  Although, many knew they would be made whole, expenses and bills that are due now have no relationship with what will happen in the future.

The gap that has always separated public employees from private employees certainly widened as a result of the slow-down and the eventual shut-down of the Federal Government.  Salaries and benefits must be competitive in order to bring the highest caliber of talent to the Federal service.   It is good to know that Federal employees, often under-appreciated, have found two champions in Senators Cardin and Schatz.  The senators appreciate the hard work and dedication of public servants and want them to be rewarded for their hard work and long years of service.

The people of Maryland and Hawaii know that their Senators are not only fighting for Federal employees in their individual states, but Federal employees all over the United States.  Because the FAIR Act will benefit all Federal employees, I am certain the Senators will have no problem convincing their 48 colleagues that implementing the FAIR Act is the right thing to do.

P. S.  Always Remember to Share What You Know.

Recommended Articles

For Postal Employees – LiteBlue and the TSP

Federal Retirement Benefit Analysis

The Thrift Savings Plan (TSP)

Is The Pension Survivor Benefit Best For You?  by Todd Carmack

A Little-Known Opportunity Can Increase Your Retirement Income.  by Mark Sprague

FEGLI …. If What You Thought To Be True.  by Marty Duggan

 

Understanding Federal Employees’ Retirement System (FERS) Better

FERSThe retirement benefits for those who entered covered service with the United States Government on or after January 1st, 1984, are referred to as FERS (Federal Employees Retirement System). The Federal Employees’ Retirement System FERS is a complex, three-tiered retirement plan that has three main components:

–  FERS Basic Benefit Plan

–  Social Security Benefits

–  Thrift Savings Plan (TSP)

The FERS Basic Benefit and Social Security components require a Federal employee to make their contribution each pay period.  The agency employer withholds the cost of the Basic Benefit and Social Security from the employee’s pay as payroll deductions. After retirement, the employee receives annuity payments and Social Security payments each month for the rest of their life.

The TSP component of FERS is an account set up automatically by the agency. Each pay period, the agency adds an amount equal to 1% of the Federal employee’s basic salary into the TSP account. The employee can make their own contributions to the TSP account and the agency will make a matching contribution, both of which are tax-deferred.

General FERS Requirements

Eligibility for FERS is determined by the employee’s age and number of years of creditable service. For some employees, they should reach the Minimum Retirement Age (MRA) to be eligible to receive retirement benefits.

The following criteria can be used to understand MRA. The Federal Employees Retirement System (FERS) Basic Benefit Plan has 4 categories:

·      Immediate – An immediate FERS retirement benefit starts within 30 days from the date the employee stops working.  If he retires at the MRA with a minimum of 10, but less than 30 years of service, their benefits will be reduced by 5% a year for each year they are under 62, unless they have 20 years of service and their benefit starts they reach age 60 or later.

·      Early – The early FERS retirement benefit is accessible in some involuntary separation cases or in cases of voluntary separations due to a major reorganization or reduction in workforce.

·      Deferred – To be eligible for deferred plan, an employee must have completed at least 5 years of creditable civilian service. If he retires at the MRA with a minimum of 10, but less than 30 years of service, their benefits will be reduced by 5% a year for each year they are under 62, unless they have 20 years of service and their benefit starts once they reach age 60 or later.

·       Disability: To become eligible, the employee must have become disabled during employment in a position subject to FERS, due to a disease or injury, for useful and efficient service in their current position. The disability must be expected to last at least one year. The agency must confirm that it is unable to accommodate the employee’s disabling medical condition in his present position and that it has considered him for any vacant position in the same agency at the same grade/pay level, within the same commuting area, for which he is qualified for reassignment.

If you are looking for pertinent information about your Federal and Postal Retirement benefits, PSRetirement will answer all your retirement-related questions!

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