Federal Retirement NEWS
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Are Federal Employees Prepared To Retire?
Are Federal Employees Prepared to Retire?
Although federal employees continue to retire, it is increasingly evident that they are not prepared to retire. The culprit is not only an economic one, but a lack of understanding of how their benefits really work.
How can the largest workforce in the world who performs some of the most critical work in the nation, sustain themselves in retirement if they are not equipped to fully maximize their benefits.
It is increasingly alarming to learn just how many federal employees do not understand how their benefits will work in retirement – From how to maximize the benefits in their Thrift Savings Plan (TSP) to whether or not to carry their FEHB into retirement, the lack of knowledge suggests the need for much more access to training or trained professionals to help in the education of these employees. Many do not understand the basic concepts and structure of the retirement system they are a part of. Many FERS employees erroneously determine their Thrift Savings Plan to be their total retirement. They are unaware that the Thrift Savings Plan is but one component of the FERS 3 tier retirement system.
Knowing that a great deal of federal employees have a lack of understanding about the basic principles of a retirement system so important to how they will live out their lives in retirement, is a frightening thought. It is, however, not a position of last resort. It is simply a call-to-action as government agencies are asked to make deeper budget cuts; training and staff development are often sacrificed to the detriment of the federal workforce.
Federal employees may be left with some knowledge gaps in fully understanding their retirement systems, but those gaps can be filled by rethinking how we educate the federal workforce about their retirement benefits. What to do? Although it seems an enormous problem for federal employees, the problem is easily cured by providing on-going training on retirement as a part of orientation, on-boarding and beyond.
Acquainting a workforce 3 to 5 years prior to retirement as to how their benefits will work in retirement accomplishes far less than what could be achieved if the engagement were started at the beginning of the employee’s career as opposed to the end.
P. S. Always Remember to Share What You Know.
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Phased Retirement – Who Can Participate
Who can Participate in Phased Retirement?
Phased retirement is a voluntary program where both employee and employer must mutually agree to be a part of the program. There are some conditions that exist both for CSRS and FERS employees. Each group must have had full-time work status for three years prior to participation.
CSRS employees must be eligible for an immediate retirement annuity. The years of creditable service must be at a minimum of 30 years and an age of 55 or 20 years of service with an age of 60.
Under FERS similar conditions must exist. The individual must be eligible for an immediate annuity with 30 years of creditable service and a MRA of 55-57 based on the year of birth or 20 years of creditable service and 60 years of age.
As with any program or service impacting your retirement future, it is very important to clearly understand all provisions, rules and regulations. Further it is your responsibility to analyze each situation to see if it is a good fit for you and your family.
P. S. Always Remember to Share What You Know.
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Phased Retirement – Has Its Time Come?
Phased Retirement
The Office of Personnel Management (OPM) has proposed a “Phased Retirement” program. Although implementation has not been announced, it may be valuable to our readers to get a jump start on what Phased Retirement is all about.
The Office of Personnel Management realizes the importance of preserving and protecting institutional knowledge. As federal employees leave the federal service, it is apparent that their physical-selves are not the only aspect of their presence that is leaving the service. The knowledge and know-how acquired over a life-time of federal service is also leaving, an invaluable and irreplaceable resource, and a resource that can only be preserved and protected by the passing on of knowledge.
Knowledge unshared is truly knowledge lost. Through Phased Retirement, OPM is exploring a way to harness some of that knowledge by introducing a mechanism by which potential retirees can stay a little longer, until that knowledge and expertise can be ingested and digested by the next generation of federal workers.
In essence that is the core concept of Phased Retirement. The idea of Phased Retirement is a very clear signal as to the trajectory of the federal workforce. It also is a clear indication that the leadership of the largest workforce in the world has seen the flaw of reactionary management. Every successful workforce, no matter its size, is better served by recognizing the value of knowledge and working proactively to preserve and protect a resource of unparalleled importance to the growth and prosperity of a nation.
P. S. Always Remember to Share What You Know.
RELATED ARTICLES
Explanation of Phased Retirement
Phased Retirement – Closing the Knowledge Gap
Phased Retirement – Participation
For information on your Thrift Savings Plan click HERE
For information on how to use LiteBlue click HERE
For information on FSAFEDS click HERE
For information on FEHB click HERE
Is The FERS Annuity Reduced Prior to 62
Are there consequences for collecting your annuity under FERS before reaching age 62?
The FERS regulations state that if an employee completes 10 years of service but less than 30 years of creditable service before separation from service, the proposed annuity will be reduced if it commences before reaching age 62.
There is one exclusion in the regulation. If a FERS employee had 20 years of service prior to separation, and the annuity begins at age 60, then the employee is not subject to an age reduction of the annuity payment. Otherwise all things being equal, the annuity will be reduced prior to reaching age 62 by approximately 5% each month you begin receiving your annuity before your 62nd birthday.
Postponing receipt of your annuity until you reach age 62 will eliminate the age reduction provision. OPM asks that persons submitting applications for retirement annuities, submit the application at least 60 days in advance so as to avoid delays in processing.
When submitting applications and any other information to the Office of Personnel Management make certain that the information is correct and complete. Fashion a checklist so that you will be sure that all requested information has been included. The more accurate and complete your information, the quicker it can be processed.
P. S. Always Remember to Share What You Know.
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Deferred Retirement – Early Separation
Deferred Retirement
When you separated from Federal Service under FERS, but did not retire, what steps did you take? Are you still eligible to receive an annuity?
Employees covered under FERS with 5 years of creditable service may be eligible for deferred retirement at age 62 or if the employee completed 10 years of service, 5 years of civilian service, with eligibility upon reaching the Minimum Retirement Age (MRA).
When an employee reaches the MRA he or she may choose to postpone the date they receive their annuity so as to avoid the age reduction provision. MRA depends on the year of your birth. Persons born between 1953 and 1964 have a MRA of 56. Those born after 1969, which represent a significant portion of the federal service, have a MRA of 57 years.
FERS employees are eligible for an immediate annuity the first day of the month after the MRA is reached given the creditable service requirements have been met. When federal employees separate from service without retiring and with no plans to return to service, it is a good idea to contact the Retirement Division at OPM and speak with a specialist about your options.
Your situation is very much as if you had retired as far as who has jurisdiction over you as a separated federal employee. You separated from your agency and the agency is no longer responsible for you, but OPM is. As a separated employee, you do not have a CSA number because you have not retired. Nonetheless, all of your questions should be forward to OPM.
P. S. Always Remember to Share What You Know.
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What Postal employees should do on LiteBlue before Retirement
TSP Loans
The Thrift Savings Plan (TSP.gov) is a savings, retirement and investment vehicle available to federal and postal employees. Although different guidelines for FERS and CSRS, the TSP loans are nonetheless a supplement to grow your retirement wealth and retirement income.
Your TSP.gov account is structured so that participants may take out TSP loans from their TSP.gov account. There are two types of TSP loans – a general purpose TSP loan which has a 5 year term limit and a residential TSP loan carrying a 15 year term. You can change the amount of your payments up or down (re-amortize) as long as it is within the period or term of the TSP loan.
Individual borrowers are responsible for making TSP loans payments on time. It is important to always check your quarterly participant statement to make sure your TSP loans payments are being made and made on time. Generally TSP loan payments are payroll deductible; many things might happen that can change when the payments are being deducted. Your pay cycle may change or you may transfer to another agency or assignment and deductions from your pay may be delayed. It is still your responsibility to make sure the payments reach your TSP.gov account in a timely manner. You may pay by personal check or money order directly to the TSP with a payment coupon (TSP-26). Include your TSP loan account number, your loan number and the TSP-26 to make certain that you are properly identified and payments are credited to your account.
Missing a payment on your TSP loan could have tax consequences. If you do miss a loan payment the TSP loan will notify you of the missed payment and you will have until the end of the following calendar quarter to rectify the problem. You cannot suspend your TSP loan payments nor stop them. If you witness a financial hardship, you should consider recalculating (re-amortize) your TSP loan to an amount you can afford.
TSP Loans
For information on TSP Fund choices click here
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
Is All ‘Your’ TSP Money Actually Yours?
Thrift Savings Plan: Saving for Your TSP
Saving for Your Thrift Savings Plan
Funding your Thrift Savings Plan (TSP) account through TSP.gov, with the specifc goal of getting the maximum benefits, is a good goal to set. The IRS sets a limit on how much federal employees can contribute to the TSP. The great design of the TSP is that agencies participate in a matching scenario. Although the IRS sets a limit on contribution levels, the rule of thumb is to make certain you don’t reach that limit too early and miss out of the agency match paid over 26 pay periods in a year.
Paying attention to your TSP matching contributions is possibly even more important than what TSP fund you select. This is because the TSP match can act like ‘Free Money’ because for every dollar you contribute (up to the maximum match) your Agency contributes an identical amount to your TSP. – Its like doubling your money, Day-One.
You can also wait too late to get all of your matching benefits of our TSP accounts.. Therefore, you want to pay close attention to your contribution levels and the time it will take to reach the maximum limit and still receive matching funds. This situation is of particular concern if your salary changes. The level of contribution necessary to reach your maximum contribution changes depending on your salary.
If you set out to reach your contribution level too quickly called front-loading, you run the risk of reaching the level prior to the end of the 26 pay periods; depriving you of the maximum agency match. It is important to watch your TSP contribution levels so that you can contribute your 5% in all 26 pay periods to get the TSP match the agency offers.
You can also visit your agency TSP.gov representative or go online at and view your TSP.gov Account to see how much you need to contribute each pay period to make certain you are not reaching your contribution limit too early in order to realize the agency’s 5% TSP match.
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
Is All ‘Your’ TSP Money Actually Yours?
Thrift Savings Plan and Investment Partners
Investment Partners: You and the Thrift Savings Plan
When federal employees invest in the Thrift Savings Plan, the Thrift Savings Plan invests in them by way of agency contributions. It is a partnership of unparalleled financial planning benefits. The IRS maximum contribution remains at $17,500 for 2014. Employees may contribute up that amount. When employees contribute 5% to the Thrift Savings Plan (access your TSP.gov account), the agency matches their contribution at a rate of dollar-for-dollar on the first 3% and then 50 cents on the dollars for the next 2%. So if you contribute 5% into your TSP.gov account, regardless of the Thrift Savings Plan Funds that you select, the agency will contribute 4% to the fund with an automatic contribution of 1% of your basic pay.
Employees may contribute more than 5% so as long as they do not make contributions over the IRS limit. However, if employees contribute over 5%, the agency will only match the first 5% of the contribution. Again, the 1% of basic pay automatic agency contribution is made to the Thrift Savings Plan account of each eligible employee, even if the employee is making no contributions. The money is vested, the automatic 1%, when the employee has worked for 3 years under most circumstances in the federal service.
Mind you, the 3 year tenure requirement does not mean that you must participate in the Thrift Savings Plan for 3 years, but must be employed for that period of time. All civilian service in the federal government counts towards the 3 year requirement. Employees do not have to contribute any money to their Thrift Savings Plan account in order to receive the agency automatic 1% contribution. The only requirement is the vesting requirement of 3 years.
I also think it is important to reiterate here that if you leave the federal service before meeting the vesting requirements, the automatic 1% and its earnings will be forfeited. If, however, you die before leaving the service and have not met the vesting requirements, all of the monies in your TSP.gov account is considered vested.
Read the quarterly report newsletter of the Thrift Savings Plan, Highlight, to stay abreast of important information and details that can add to retiring with safety and security.
P. S. Always Remember to Share What You Know
Dianna Tafazoli
Thrift Savings Plan: Why The TSP?
Why choose the Thrift Savings Plan?
The Thrift Savings Plan (TSP) is a retirement savings vehicle designed to help federal and postal employees increase their resources when planning for retirement. But why not take your earnings from the federal government and take your chances in the open market? Maybe you could do better and your money could grow faster or maybe not.
The TSP is an easy way to save with little or no strain and stress on the employee. TSP contributions are payroll deductible once you sign up to participate in the TSP. The TSP offers extremely low administrative fees which external investment firms cannot match. Vanguard which has probably the lowest expense ratios available to investors are still higher than the expense ratio for the Thrift Savings Plan.
Your TSP Account also provides a fund where you will never lose money, the TSP G Fund. The G Fund, Government secured allows participants to earn interest without any risk or loss of principal. There is also very low earnings in the G Fund with only very modest inflationary protection (speak to a TSP expert or licensed and trained financial professional).
So why the TSP, because it offers participants the best way to safely plan for their retirement future while still employed. If you know what the rule of 72 is and how it related to compounding interest; interest built on top of interest that helps your money grow faster. That is yet another advantage offered by the TSP is the fact that while your money is within it or rolled over into an IRA your TSP interest and earnings are tax-deferred.
With the TSP you get to choose the level of contribution you wish to make. Although, employees currently joining the federal service are automatically enrolled in the TSP at a contribution level of 3%, you have the option of disenrollment. But why would you want to? The TSP is hands down the best way for federal employees to start early managing their retirement future.
To access your TSP Account click here
Click here for TSP Roth information.
Have a TSP L Fund – want to know more
P. S. Always Remember to Share What You Know
TSP: Is All ‘Your’ TSP Money Actually Yours
Is All Your TSP Money Yours?
Within your TSP.gov Account the money you invest in the Thrift Savings Plan (TSP) and the agency match is yours immediately and you are therefore vested. However, the agency’s automatic 1% contribution has a few strings attached.
For individuals in the Civil Service Retirement System (CSRS), this is not a concern. CSRS employees may participate in the TSP but are not eligible to receive any matching funds. Nonetheless, it is still a useful tool for deferring taxes and helping to save for retirement. Your TSP.gov Account acts as a supplement for CSRS employees in planning their retirement.
FERS employees on the other hand receive matching funds into their TSP.gov account along with an automatic 1% contribution. FERS employees are eligible to keep the 1% contribution after becoming vested by acquiring tenure of at least 3 years with the Federal Government. FERS employees who work in the Congress and certain other non-career employees need only 2 years to become vested in the Thrift Savings Program.
If you are participating in the Thrift Savings Program and decide to leave the federal service prior to the 3 year vesting period, the automatic 1% and the earnings from the agency 1% contribution will no longer be yours to keep. However if you die before leaving service you are vested in all the monies in your Thrift Savings Program account.
Your TSP.gov account (see your account here) is a wonderful vehicle for not only managing taxes but helping federal and postal employees save for retirement.
P. S. Always Remember to Share What You Know.
You may also find information on your TSP Funds interesting, or certain Tax implications of your TSP.gov investments.
RELATED TSP ARTICLES
Thrift Savings Plan (TSP) Withdrawal Options
For Postal Employees – LiteBlue and the TSP
Federal and Postal Employees – Choosing a Financial Professional
Tax Season for the Federal and Postal Employee
Federal and Postal Employees during Tax Season
The tax season is upon us and federal and postal workers – active and retired – might want to take a very careful look at all of the tax savings options available to them. Many of us get very excited around tax season because we think about big, fat, juicy refunds.
If you have ever worked in retail sales, it is very cyclical with tax season being one of the high points. The Retail Sales industry enjoys those refunds because they boost sales like crazy not to mention how they make commission checks look. As a very young woman I sold furniture part-time. I knew during the months of February through August I would make enough money to cover my tuition for the entire year with some left over to put away in my rainy-day fund.
A good scenario for retail sales, but a scenario that requires a strong evaluation for tax filers. Receiving a big refund, barring some extenuating circumstances, is not a good tax management strategy. It is nothing short of giving your money to the IRS without the ability to charge the IRS for using your money.
When you take out a loan you must pay the lender for the use of the money through interest and sometimes other fees. So why would you give your money away for free? The big refund may look good when you receive it, but in most cases, it is just the IRS returning your money they have used free-of-charge, with you gaining not a single cent in interest.
The IRS is not to blame; not understanding the refund myth is just one more important way to build wealth most of us missed out on. People have been celebrating tax refunds for years, because we did not have our hands on the pulse of managing our money wisely. Your refund is money that could have been working for you to increase your personal wealth.
You might say, that refund money whether I get it or not won’t make me wealthy. Perhaps not, but giving your money away just to get it back after a year with no interest being added will not increase your bottom line. If you are getting big refunds consider going to a financial advisor or tax professional to evaluate your tax situation. You might need to adjust your exemptions or you filing status. Maybe things have changed since you last filled out your W-4 (tax withholding form) at work. Your financial advisor or tax professional can help you review your papers and tax situation and suggest ways to make necessary adjustments to protect your earnings.
Ideally, the tax situation you want is to break-even. You don’t want to owe the IRS and you certainly don’t want them to owe you. When you can reach that balance, then you are making your money work for you. The IRS is not a savings depository, they are charged with collecting taxes from the nation’s citizens and businesses as a source of revenue to take care of the nation’s business. The free money you are giving away earns interests for the IRS.
Make the adjustments you need so that your money can earn interest for you.
Instead of setting your heart on a big refund, consider contributing more to your Traditional Thrift Savings Plan.
Imagine the impact that would have; If, for example, you are due to receive $3,000 as a refund from the IRS and instead chose to use those funds as TSP contributions.
- That would amount to roughly $250.00 per month that you could have saved in your TSP.gov account.
- If you changed your Thrift Savings Plan contribution and added an additional $250.00 per month to your contributions you would also have $3,000 LESS in taxable income, because your Thrift Savings Plan contributions are not taxable in the year you make the contribution.
- That would also mean you would likely be eligible to receive an additional refund at the end of the year based on the contributions you made (and reduced income and therefore taxes owed).
- Moreover, if you are not yet taking full advantage of your employer’s TSP.gov account matching contribution then this is essentially giving yourself a raise.
You can’t go back in time and change last year’s Thrift Savings Plan contributions, but you can effect a change this year. If you are owed money from the IRS, think about giving yourself even more money next year in the form of additional TSP savings. You’d be amazed at how much of an impact that small amount can have on your future retirement comfort.
Because of the complexity of this topic we highly recommend that you work with a FERS, CSRS & TSP expert so that you can make sure whatever plan you are implementing is best for your individual circumstances.
P. S. Always Remember to Share What You Know.
Nursing Homes and Your Assets
Your Assets with Nursing Homes
It is estimated that 70% of Americans will need long-term care at some point in their lifetime.
Choosing to put a family member into a facility outside of their home carries a high emotional as well as a huge financial price tag. Family members struggle to find resources to locate care for family members who need it. If the decision comes down to putting a family member in a nursing home, then there is the question of what will happen to the family member’s assets.
There are some assets that are protected when individuals are placed in nursing homes and apply for Medicaid assistance. Many individuals enter nursing homes and pay for the services initially out of pocket. If they are on Medicare the cost of long-term stays is generally not covered. Therefore, when the resident’s resources are exhausted they may become eligible for Medicaid assistance.
In the event the resident qualifies for Medicaid it does not means that all of the individual’s assets will necessarily be turned over to the Nursing Home in order to recoup the cost of services rendered. If a spouse is in a nursing home and the other spouse is not, the couple’s home is not compromised or sold to pay the nursing home charges. The family is entitled to one car or truck, a burial plot and prepaid non-refundable funeral costs. Certain other dependents living in the home may qualify for the same protection to stay in the home as the spouse.
There is a federal law identified as the ‘spousal impoverishment’ rules that protect spouses of nursing home residents from losing all of their income and assets to pay for the care of a spouse receiving care in a nursing home. Medicaid laws differ state-by-state. It is therefore suggested that you visit the Medicaid Office in the state where you reside for additional information and resources or work directly with a financial advisor who understand Medicaid rules and can help you during this trying time.
It should also be noted that all nursing homes do not accept Medicaid. If you are looking for assistance when having to use the services Medicaid then you would want to locate Medicaid Certified Nursing Homes. There may also be nursing homes that are not necessarily Medicaid facilities but may have Medicaid beds. So if your ability to pay for services while in such a facility is depleted, it is always a good idea to ask if the facility has any Medicaid beds which would prevent families from having to move their loved ones to another facility.
Pre-planning ahead of time allows families to make better decisions. This is when having a well constructed financial plan can make such a huge difference. If you’ve been working with a good financial professional then it is likely that you’ve covered this contingency. Possibly purchased a long-term care insurance policy or maybe even established a Trust that specifically works to protect assets in the event of extremely high nursing home costs was put in place. It is important that families know the rules and laws that govern Nursing Home facilities and assets, exemptions and non-exemptions. Laws may vary from state-to-state making it urgently important to read carefully and collect needed information to make an informed and timely decision.
Contact the National Academy of Elder Law Attorneys to find out how the laws work in your state.
P. S. Always Remember to Share What You Know.
MORE ARTICLES
FEHB Is Catching Up – Self Plus One
FEHB – Self Plus One
For a number of years as the Director of Human Capital for a private concern, I was constantly working with my Benefits Manager to save our employees money while designing a highly competitive benefits package. One year we decided to overhaul most of the FEHB benefits program because it was not answering the call and concerns of a majority of our workforce.
Many insurance carriers were invited to showcase their menu of insurance services and the best fee offer for the organization. We had a relatively young, highly educated workforce. Many were thinking about beginning families and of course, another population already had growing families. The one item I was looking for that would seal the deal was a carrier who could offer something other than a ‘self’ and ‘family’ option. I wanted a plan that could cover self and spouse, but most importantly, parent and child or parent and X number of children that did not necessarily rise to the high cost of covering a family.
Household structures have been changing for a long time and most of the insurance industry has not made the adjustment to accommodate the change, most notably in the federal government.
Good news is here. The Office of Personnel Management (OPM) announced that beginning in 2016 federal employees and retirees will have the option of self-plus one coverage through the FEHB. Bringing this additional option choice to the federal workforce will save money for employees and the government. The move also underscores how OPM continues to seek out the best benefits for the largest workforce in the world.
P. S. Always Remember to Share What You Know.
Postal Retirement – Preparing the Workforce
Preparing for Postal Retirement
The Postal Service has several programs designed to secure upward mobility for its workforce. There is an Advanced Leadership Program, an Associate Supervision Program, a National Center for Employee Development and a Managerial Leadership Program and an online platform to access your benefit information and make certain elections, LiteBlue.usps.gov. All of these programs are designed to help the Postal Employees grow in their career and prepare for retirement.
Each program, from LiteBlue to the Thrift Savings Plan, is designed to help and to develop a workforce of excellence, equipped with the knowledge, skills and abilities to implement operations required by high-tech equipment and practices necessary to carry-out the complex work of the Postal Service and to retire comfortably.
In order to reach the Postal Service’s large and multi-jurisdictional workforce, the service uses a plethora of e-learning tools and other technology to train its employees. The Postal Service’s training profile is designed to recruit and train program leaders and managers up to the executive level of operations.
An unfortunate reality, however, is the fact that the USPS has chosen to remove most HR functions from local Post Office with the creation of the Shared Services. The need for direction, therefore, on HR and Retirement related questions often falls to potentially untrained individuals at your Station and word of mouth recommendations. The need for financial professionals has never been more important to the Postal employees and soon to be retirees because of the demographic shift and the aging of the workforce, along with the ever increasing complexity in TSP funds and recommendations, FEGLI comparisons and ways for these employees to protect their lifestyle and financial well-being in retirement.
If you’re a Postal employee and have questions on your benefits and postal retirement, PSRetirement.com can provide you with introductions to local FERS, CSRS, TSP and FEGLI experts and may be able to facilitate a free Benefit Analysis for you and members of your office or Local Union looking for direction or help. Regardless of where you turn, make sure that you are getting the information you rely upon from a competent expert in your complex benefit and retirement options.
Information on the unique benefits for Postal Employees is also important to understand
Other Postal Retirement and LiteBlue Related Pages
What Postal Employees Should Do On LiteBlue Before Retirement
Changing Your LiteBlue / PostalEase Password Through ssp.USPS.gov
eRetire for Postal Employees – Retirement Applications on LiteBlue
Use LiteBlue to Manage your FEHB
You can use LiteBlue and PostalEase to manage your Allotments
Requesting Duplicate Postal Employee W-2 Forms Using LiteBlue
(TSP) Thrift Savings Plan
Thrift Savings Plan (TSP)
The Thrift Savings Plan (TSP) is a program created to help federal employees save for retirement with an investment arm through payroll deduction. The Thrift Savings Plan is a defined contribution plan, a key part of the Federal Employees Retirement System (FERS). As of 2010, employees are automatically enrolled in the Thrift Savings Plan with 3% of their basic pay going into the Traditional Thrift Savings Plan. The agency contributes an automatic 1% with a 3% matching contribution. Employees who are automatically enrolled in the Thrift Savings Plan can choose to withdraw from participation.
When the automatic inclusion into the Thrift Savings Plan was implemented, those funds were deposited into the G Fund. The TSP G Fund represents government securities in the diversified portfolio of the Thrift Savings Plan. The G Fund is the only fund that is internally managed by the Thrift Savings Board. The G Fund never loses money. After being automatically enrolled in their TSP.gov account, participants may contact their agency representatives to choose to allocate their funds at their discretion among the TSP L Fund (age-based combinations of other TSP Funds), the C, S, F and I Funds. These funds are contracted out and managed by Black Rock Institutional Trust Company.
The Thrift Savings Plan is, of course, operated through payroll deductions meaning you can no longer make contributions when are not an active employee either full or part-time and in a pay status. As a retiree, with an established TSP.gov account, you can participate in the Thrift Savings Plan interfund transfer feature.
The Thrift Savings Plan also accepts funds from other eligible plans. The Traditional Thrift Savings Plan accepts transfer and rollovers from Traditional IRAs and Simple IRAs. The Roth TSP accepts transfers from the Roth 401(k), 403(b), and the 457(b). The Thrift Savings Plan does not accept transfers and rollovers from Roth IRAs.
The Thrift Savings Plan is managed by the Federal Retirement Thrift Investment Board (FRTIB) made up of 5 board members appointed by the President of the United States and an Executive Director. The FRTIB also has an Advisory Council, the Employee Thrift Advisors Council (ETAC) made up of employee organizations, unions and the uniformed services.
The Thrift Savings Plan, although a part of the FERS retirement plan, it also is a vehicle that can be used by CSRS employees to plan for retirement. There are no matching contributions made to the Thrift Savings Plan for CSRS employees.
To access your TSP.gov Account click here
Postal employees can access their Thrift Savings Plan through LiteBlue
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
Is All ‘Your’ TSP Money Actually Yours?
Financial Advisors and Federal Employees
I was recently asked if my trainer of financial advisors and planners interested in the federal workforce differed from training federal workers? Without missing a beat, I said most emphatically “It certainly does.” It is more intense because financial advisors for federal employees need to know more about the Federal Retirement Systems than the federal workforce themselves.
The Federal Retirement Systems probably have some of the best benefits you will find all things being equal. It, too, is a system of immense rules and regulations that can be undeniably complex, even for someone who has spent a career absorbing all of the nooks and crannies.
The Civil Service Retirement System (CSRS) often referred to as the old retirement system was enacted in 1920. The world has changed a number of times since then and many amendments have been made to the system. One must be constantly updated on the changes so as to be an excellent source of information dissemination. I find that many financial advisors and planners I work with who wish to begin helping the federal workforce think of simply helping the workers manage their money. There is nothing wrong with that premise only that would leave the federal employee missing out on a great number of potential benefits
Federal Employees Partnering with Financial Advisors
Financial Advisors and Financial Planners (really the same thing) are important pieces of the partnership needed to guide the federal employee workforce to safe harbor so that their sails can withstand the uncertainty of storms that will surely come in their lives. To strategize such a journey requires acquiring a very sound knowledge of the Federal Retirement Systems (FERS, CSRS, FEGLI, FSAFEDS, etc.).
We are not talking about becoming Federal Retirement Specialists, but we are talking about partnerships that will equip these professionals to help manage the financial resources of a very unique group of employees. When you cast your net to work with the federal workforce in helping to plan their retirement, it needs to be cast wide because federal employees are as diverse as their many duties and responsibilities.
Although there are two retirement systems technically, there are a number of aspects that apply to special categories of employees as well, like firefighters, air traffic controllers and law enforcement officials.
Yes, my approach to conversational training with financial professionals is much more intense and absolutely focused on ensuring they know the language of the federal retirement systems and its workforce so that they can give them the tools necessary to retire in comfort and security.
If the federal workforce gets a course in the basics of the Federal Retirement Systems, then the professionals they entrust to handle their hard earned money – get the ADVANCED-ZERO TOLERANCE version with lots of hand-holding collaboration. I learn as much from Financial Advisors and Planners as they learn from me. We are all invested in making life in retirement and before a little easier to maneuver for federal workforce.
Financial Advisors who are knowledgable in federal and postal benefits need to be able to help you with your TSP account and Thrift Savings Plan fund choices, your Federal Employees Group Life Insurance (FEGLI) selection (both while employed and any potential reduction elections that you might want) and also possibly help you with your FSAFEDS and FEHB elections.
P. S. Always Remember to Share What You Know.
Recommended Articles
For Postal Employees – LiteBlue and the TSP
Federal Retirement Benefit Analysis
Is The Pension Survivor Benefit Best For You? by Todd Carmack
A Little-Known Opportunity Can Increase Your Retirement Income. by Mark Sprague
Financial Professional – The Right Choice for Federal Employees
Federal Employees and Choosing a Financial Professional
Retirement planning for federal and postal employees can get pretty complicated, which is why we recommend that federal employees should seek out the guidance of a qualified financial professional to help them. Many individuals do their own retirement planning; while others seek the advice and counsel of a professional to set them on a path to retiring well. Below are some tips and recommendations for choosing a financial professional to help you handle your financial future.
• Seek a financial professional who has demonstrated they are experts in the federal or postal retirement market. These professionals have fulfilled the rigorous training, testing and ethical standards required to achieve various designations.
• Find a local financial professional who knows about your Thrift Savings Plan along with the in’s and out’s of Federal Employees Group Life Insurance (FEGLI), Federal Employees Retirement System (FERS) & Civil Service Retirement System (CSRS).
• Ask for references, preferably current and past clients, before you begin any legal work.
• If you decide to use an attorney for your estate planning needs choose one that has at least 10 years of experience in estate planning. This is a very complex field with different probate and wealth laws in every state. The attorney you choose must be keenly aware of these laws and how they apply to your personal circumstances.
• Make sure that the attorney you choose is licensed to practice law in your state of legal residence.
• Check organizations and licensing boards for background information. Also check with continuing education associations focused on estate attorneys. These associations generally draw well qualified attorneys to their ranks.
• Evaluate the listening skills and communication style of any advisor or attorney you are considering. If the professional is short and impatient and does all the talking without giving you the opportunity to chat and ask questions, no matter how talented, you may want to keep searching.
• Do your homework. Ask the professional if they’ve received any special training in federal employee retirement. Check their credentials, see if they have any third-party endorsements or have been published on subjects similar to your questions.
In choosing a financial professional you are selecting a partner – a person who will likely be working with you for years to come. Therefore, you want to make sure that you are hiring the most qualified financial professional you can find.
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
Is All ‘Your’ TSP Money Actually Yours?
Planning Your Retirement
Getting Help Planning Your Retirement
Getting involved early in planning will allow federal and postal workers the opportunity to create additional financial resources to increase their retirement comfort. We always hear the phrase, “Know Your Number” – the amount of money you will need to retire with financial security. This is especially important when you consider your Thrift Savings Plan and also your CSRS or FERS annuity.
There are many on-line calculators that can be used for that purpose to evaluate estimates. There is really no guaranteed formula for calculating exactly how much money you will need in retirement. There are strategies and planning, however, that will give you a fairly good estimate and ways to get there. Although every situation and circumstance is unique to the individual it is still a good plan to gather all of your financial information and to engage a financial planner or adviser who has been trained in your federal retirement benefits.
Finding a financial adviser is not one-stop shopping. Finding the right fit for you requires some research, some investigation, perhaps a referral and just trusting your gut. Putting all of your plans in place to retire well is one of the best gifts you will ever give to yourself.
P. S. Always Remember to Share What You Know.
The Rule of 72
One of the key traits federal employees need to understand is how compound interest works and the importance of making your money grow faster. The Rule of 72 is a very basic way of demonstrating the value of compound interest. Compound interest is simply interest on top of interest. This is especially important as you understand the importance of you TSP account and the growth of your money – along with the matching contributions of your employer.
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
– Albert Einstein
In simple terms – the number 72, when divided by the rate of interest your earn on your savings will equal the number of years it takes to double your money. The Rule of 72 demonstrates the value of compound interest over simple interest and how your money doubles at a faster rate.
Ex. If you earn 9% on your money it takes approximately 8 years to double your money.
or 72 / 9 (%) = 8 (years)
Putting away 40.00 and earning interest of 5% or $2.00 increases your savings to $42.00. The period of earnings will not be calculated going forward on $40.00, but on $42.00 and so on and on allowing the rate of interest to compound, thus building up your savings quicker.
There is no strategy or mechanism that should not be reviewed and analyzed that will help to strengthen the performance of your money in your retirement years and beyond.
P. S. Always Remember to Share What You Know.
For more information on your TSP account and how to maximize your retirement income click here.
Different TSP funds have different rates of expected growth – to learn more read this.
Retirement Planning: Critical Ages
It is a personal decision to decide when to retire but there are some age-based considerations that will help to guide federal and postal employees when planning and making retirement decisions. Retirement planning can never take place too far in advance.
The rule of 5 is important in the Federal Service (FEHB for instance). Generally speaking, if you have worked for at least 5 years you may be entitled to a number of benefits.
In addition, the chart below illustrates some important age-based considerations for your retirement planning.
Age 50
• Begin age-based catch-up to defined contribution plans and individual retirement accounts (IRA). Beginning with the year you reach age 50, federal law allows for the deferment of a certain dollar amount per year to a qualified defined retirement plan. The catch-up amount is $5,000, indexed in $500 increments. The age-based catch-up amount for IRA contributions is $1,000.
Age 55
• After separation from service, you may begin withdrawing from a qualified plan without paying a 10 percent penalty.
Age 59.5
• You may begin withdrawing from qualified retirement plans, if retired or from an IRA without incurring the 10 percent penalty.
Age 62
• You can begin receiving your Social Security benefits; however, the amount may be reduced by as much as 30 percent, depending on the date of your birth.
Age 63.5
• The Federal Consolidated Omnibus Budget Reconciliation Act (COBRA) law makes health insurance in most employers’ group health plans available for at least 18 months after separation; however, you bear the full cost, including the portion previously paid by your employer (plus a small administrative fee). Upon reaching age 65 and you enroll in Medicare Part B, federal law requires access to Medigap health insurance at standard rates. Combining COBRA and Medigap effectively ensures access to health insurance beginning at age 63.5.
Age 65 – 67
• Depending on your date of birth, you may begin receiving unreduced Social Security benefits without being impacted by earnings limits.
Age 65
• You may enroll in Medicare, if eligible, and by keeping your FEHB coverage, you will have sufficient coverage in retirement. Medicare pays about 80% of coverage and your FEHB will make-up for any outstanding portions for services covered. When you reach Medicare eligibility, Medicare becomes the primary in most cases, while your FEHB acts as a supplement. Note there are some services that Medicare covers and FEHB does not, the reverse is also true.
Age 70
• You may begin maximum Social Security benefits, if the starting date was delayed to this age. There is no advantage to delaying benefits past this age.
Age 70.5
• Required minimum distributions from qualified plans like your TSP, IRAs, and deferred compensation plans begin the year after you turn 70.5.
There have been many changes in health care laws; therefore it is always recommended that you review your policies and plans often. You should also find a good, highly trained, financial professional to help you with your retirement plan and benefit and insurance selections.
FEHB and Postal LiteBlue Access
P. S. Always Remember to Share What You Know.
