Planning for Retirement – The DROP Sponsored by: Flavio J. “Joe” Carreno

After working for many years, it can be surreal to finally plan for retirement. For some, they do all this planning without realizing that the DROP exists. If you’re hearing about the Deferred Retirement Option Plan for the first time, don’t worry. In this guide, we’re going to address the biggest questions. 

What’s the DROP?

Originally, the program was installed for firefighters and other public sector workers. At the time, industry leaders were worried about skilled firefighters leaving service early and putting pressure on the recruitment process. Suddenly, firefighters had an opportunity to continue working while boosting their retirement benefit away from the standard (and often maximum capacity) accounts. The employer would pay money into a DROP account, and this earned interest over time. 

Today, the solution is open to more workers. When in the DROP, your normal pension is held while this new benefit increases (with an interest rate of around 5%). After five years, you’ll need to retire officially. 

When is the right time to enter the DROP?

This is a common question, and it depends on your situation. For those expecting a promotion, it might be wise to wait until you’re on this higher pay scale before entering the DROP. Also, remember that you can only stay in the program for a maximum of five years. If you won’t be ready to retire in five years, now isn’t the right time. In some cases, people aren’t emotionally ready to retire, let alone financially ready. 

Should you work three more years and then do two in the DROP? Should you just do all five in a DROP? We recommend speaking with a financial professional who will provide tailored advice. 

What happens to my DROP account when retiring?

When retiring, you won’t have an option to leave the money where it is. Therefore, you’ll have to choose between three options: 

• Rollover 

• Lump sum 

• Partial lump sum and partial rollover 

With the rollover, this can go into an IRA or even a 457 (deferred compensation plan). If you choose a lump sum, remember that this will come with taxes. By rolling into an IRA or deferred compensation, you may just avoid the huge tax bill and invest the funds instead. The approach you take depends on the flexibility you desire with investments, age, and more. 

When rolling into a rollover IRA, what investments are best?

Unfortunately, this is another question that doesn’t have a universal answer. While some will want to risk more for a healthy return, others are happy with small gains and are therefore suited to conservative products. When you work with a professional financial services company, you’ll have all sorts of options. This includes: 

 

• Brokerage CDs 

• Mutual funds 

• Corporate bonds 

• US Treasury bonds 

• Index annuities 

• Variable annuities 

• Stocks 

• Fixed annuities 

Getting Help

Planning for retirement is confusing, so don’t feel like you have to make decisions alone instead of partnering with a reliable and professional service. With tailored advice, you can shape your plans to your needs both now and in the future. You’ll learn when to join a DROP, when to exit, and how to take the funds in the best way. The earlier you plan, the more control you’ll have over the whole process. 

Contact Information:
Email: [email protected]
Phone: 8139269909

Bio:
For over 30-years Flavio “Joe” Carreno of The Retirement Advantage has been a Federal Employee Retirement System specialist (FERS) as well as a Florida Retirement System specialist (FRS) independent advocate. An affiliate of PSRE (Public Sector Retirement Educators), a Federal Contractor & Registered Vendor to the Federal Government, also an affiliate of TSP Withdrawal Consultants. We will help you understand your FERS & FRS Benefits, TSP & Florida D.R.O.P. withdrawal options in detail while recognizing & maximizing all concurrent alternatives available.Our primary goal is to guide you into retirement with no regrets; safe, predictable, stable, for life. We look forward to visiting with you.

Disclosure:
Not affiliated with the U.S. Federal Government, the State of Florida, or any government agency. The firm is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Although we make great efforts to ensure the accuracy of the information contained herein we cannot guarantee all information is correct. Any comments regarding guarantees, safe and secure investments & guaranteed income streams or similar refer only to fixed insurance and annuity products. Fixed insurance and annuity product guarantees are subject to the claimsâ€paying ability of the issuing company. Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. Annuities are not FDIC insured.

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