How to Calculate Your Retirement Annuity

It can be challenging to make the right decisions regarding federal retirement planning. After all, there are many things to consider, and the options can be confusing. However, making some common mistakes can cost you dearly down the road. It would be best to learn to avoid these mistakes before they cost you thousands of dollars.

With a few exceptions, you may only receive one of the government’s most significant benefits, the Federal Employees Health Benefits (FEHB) program coverage, beyond retirement if you’ve been registered for the previous five years or since your first chance to join. (Note: The one very unusual exception is if your agency allows you to retire early, in which case you must be registered in the FEHB program at the time the offer is made.)

Check, double-check, and triple-check your eligibility to maintain FEHB. After that, give it some time and double-check it. This is not a prank. If you retire without that eligibility, you’ll receive a one-year extension with no government contribution to premiums, and then you’re on your own.

If you lose your health benefits, you may wish to delay your leave until you continue your retirement coverage.

Once you’ve determined that you’ll have the health insurance coverage you’ll need, be sure that your retirement income will provide the financial security you’ll want. Overestimating the number of years of service that will be included in your annuity calculation is one of the most frequent errors encountered, particularly for the following:

Refunded Service

If you ever left the government, received a refund on your retirement payments, and then returned to government employment, that refund might have a significant influence on both your eligibility to retire and the calculation of your annuity. Since the requirements for CSRS and FERS vary in terms of whether you must or may redeposit the money to get credit for that period, you’ll need to consult with one of your agency’s retirement advisers to discover which rules apply. Only then will you be able to choose which alternative is ideal for you.

Military Service

If you are a CSRS worker who served in the armed forces before October 1, 1982, you will not be required to deposit to get credit for your active duty service for it to be utilized in the calculation of your annuity. You will if you served after that date. If you do not make that deposit, are retired, and are eligible for a Social Security benefit at the age of 62, your annuity will be recalculated downward by 2% for each year (5/12th of 1% each month) covered by that term of service. FERS workers are subject to distinct regulations. If you are one among them, you have just one alternative: make a deposit and get credit for that time (or don’t make a deposit and receive no credit for that time). Your retirement income will be less, though you’ll still receive a monthly annuity payment.

Other potential errors can adversely affect your annuity calculation, including errors in the application of special salary rates or leave without pay. If any of these apply to you, be sure to get expert help to make the corrections. 

Also, consider if your final annuity plus the nest egg in your Thrift Savings Plan account will be enough to allow you to live the life you wish to live in the future. That TSP account may be a lovely figure, but how and for how long will it convert into income? There are calculator features available at www.tsp.gov to assist with this study; you may be surprised at what you discover.

Make sure you have an accurate picture of your annuity, taking into account any potential cutbacks. Also, keep in mind that if FERS insures you, you will not get a cost-of-living adjustment (COLA) on your annuity until you reach the age of 62, unless you opt for a survivor benefit.

If you are eligible, the value of that annuity, plus Social Security, will be less – often considerably less – than your wage. However, you will still have to meet essential costs such as housing payments or rent, health and life insurance premiums, federal and state taxes, and so on. Experience is a terrific teacher, and it teaches us that living in retirement costs more than we anticipate.

If you don’t perform the essential math, you may have to postpone your retirement until the numbers are equal, but if you don’t, you may have to go back to work to make a decent living. So, take the time to do the math and decide that’s right for you.

It’s essential to get an accurate estimate of your retirement annuity. This number will play a significant role in your post-work life, so it’s crucial to understand all the factors that go into its calculation. 

There is no one-size-fits-all answer when it comes to retirement, but by taking these essential factors into account, you’ll be on your way to making a well-informed decision.

Retirement planning can seem daunting, but you can ensure that your golden years are everything you hope for by understanding the basics and taking a few key steps. 

Contact Information:
Email: [email protected]
Phone: 9187441333

Bio:
Mark, a lifelong Tulsan graduated from Westminster College, Fulton, Missouri with a Bachelor of Arts in Accounting. Mark served in the United States Army as a Captain in the 486th Civil Affairs BN. Broken Arrow, Oklahoma and retired in 1996. Mark is married to his high school sweetheart Jenny and has four beautiful children. Mark’s passion for his work, which includes over 20 years in the Financial Industry started as an Oklahoma State Bank Examiner. Mark examined banks throughout Oklahoma gaining a vast knowledge and experience on bank investments, small business and family investments. Mark’s experiences include being formally trained by UBS Wealth Management, a global investment firm where he served as a Financial Consultant specializing in Wealth Management for individuals & families. Mark is a licensed Series 24 and 28 General Securities Principal and an Introducing Broker Dealer Financial Operations Principal. Additionally, Mark is a Series 7 and 66 stockbroker and Investment Advisor focusing on market driven investments for individuals, businesses and their families.

Mark specializes in providing financial knowledge, ideas, and solutions for federal employees, individuals, families and businesses. We serve as your advocate, and assist you in the design and implementation of financial strategies while providing the ideas to maximize your security and wealth. Our goal is to give you maximum control of your financial future. We provide the expertise to help you with personal issues such as: practical tax Ideas, risk management, investment solutions, and estate preservation.

Additionally, we’ve counseled hundreds of employees on their transitions from careers in federal government, and private industry to their next life stage, whether that is retirement or a second career. We specialize in devising strategies that roll your TSP, 401(k), pension plan, to a suitable IRA to meet your objectives.

Disclosure:
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