Tag: CSRS

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

Receive a Passing Grade For Retirement

September 24, 2014 /by Dianna Tafazoli

Federal and Postal Employee Retirement Planning Report Card

Each of us should have a Retirement Planning Report Card with the expectation of doing well pretty much like when we were kids in school. If you got good grades, your parents often rewarded you with something special, sometimes even money to show the value and significance of getting good grades.
Now we have reached another milestone in our lives where once again a report card is important. The difference is if you get a good report card by planning ahead for retirement, your reward is to live in comfort and security. Proper planning allows you to retire on your own terms and take the worry out of how you are going to survive now that your income is much lower than it was as an active employee.
Your planning report card should include estimates of your federal retirement annuity income which will resemble reality the closer you get to retirement. It should also include life expectancy to help you get an idea of how long your resources need to last. Actuary charts and estimates can help you with this endeavor. Look to include your total estimated monthly retirement income and your estimated monthly expenses. Do not forget to include your Social Security benefits and other items you think relevant to giving you the best picture possible of your retirement future.

There is quite a bit of work to do to get ready for retirement, but the sooner you get started the closer you are to reaching your retirement goals.

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

Postal Employees Should View LiteBlue Related Pages

What Is LiteBlue?

LiteBlue; Online Access to More Than Just Your USPS Earnings Statement

PostalEase / LiteBlue

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

Living Trusts for Federal Employees

Living trusts were generally thought of until about 20 years ago as a planning tool for the rich. That is no longer the case as these planning tools are becoming more popular with the tax advantages offered and the privacy provided. Living Trusts are generally set up by an estate attorney while you are alive. Testamentary trusts are created after death.

Features of a Living Trust

• The Living Trust involves the individual (or a couple if you are married) who secures the Trust and is designated the Grantor or the Trustor.
• The Trustee is the individual named by the Trust as the manager or the Trust’s assets and property. The Trustee and Grantor may be the same individual or individuals.
• The third party is the Beneficiary(s). The beneficiaries are the heirs that will receive the fruits of the Trust once the Grantors are deceased.
• Living Trusts are not subject to the laws and regulations of probate. Therefore your wishes can be kept completely private and away from public scrutiny.
• Since a Trust is defined as a separate legal entity, distributions to beneficiaries can be made from the Trustee without any involvement from the courts.
• The lengthy wait and cost of probate is avoided with a Living Trust.
• Distributions can be made to beneficiaries as long as the assets have been placed in the Trust.
• Once a Living Trust is established there are few limitations, if any, about what can be placed in the trust, i.e., savings accounts, stocks and bonds, real estate, life insurance, personal property. The assets are changed from your name to the name of the Trust.
• Do your homework and find out more about Living Trusts to determine if it is an estate planning tool that might interest you.

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

Which Retirement Account Do I Withdrawal From First?

Federal Employees and Retirement Account Withdrawal Options

What account to withdraw from first in retirement to give us the greatest benefit.

Your tax-deferred status has allowed you to protect some of your money from taxes and allowing it to grow tax-free in your pension plan or other savings vehicles. Once you start receiving distributions, you will have to pay taxes on the money. Therefore, we need to be educated and wise in deciding which accounts to draw from first.

When you deposit money into your regular bank account it is likely that the money has already been subject to taxes. Therefore, when you withdraw the money you don’t have to pay taxes on it again. You also do not owe taxes on any of the interest earned. You declared the interest earned when you filed your yearly income tax return.

If you must make withdrawals in retirement, the money should come from your savings account first because it is not subject to taxes. Using the savings withdrawal method first also allows you to postpone paying taxes on those accounts that are tax-advantaged.

Roth IRAs with after-tax contributions and tax-free growth have the added advantage of exemption from required minimum distributions that may apply to other retirement accounts. After age 70.5 when you must begin to take distributions from other accounts, your Roth account can continue to grow tax-free. Monies in the Roth account after your death can be used by your beneficiaries tax-free. Given these circumstances, the Roth IRA is the account you should consider withdrawing from last or as far down the road as feasible.

How you plan to handle your accounts is very personal and depends on unique factors in your life such as the kind of account and assets you have and how long you have had the assets. It also depends on the level at which the account has already been taxed and the expected rate of return. Your estate plans must also be evaluated before you make decisions. If at any time you have questions or are not certain about what steps to take, always consider speaking to someone who has expertise in financial management and handling taxes in retirement. It should also be noted that under most circumstances, if you do not take the required minimum distribution after age 70.5, you will suffer a 50% penalty on withdrawal shortfall. The Internal Revenue determines the formula to calculate the penalty.

Otherwise it is estimated that most of your retirement account withdrawals will be subject to approximately 20% required federal tax withholdings. If you have tax liabilities in one year the Internal Revenue might require you to pay an estimated tax. Visit the Internal Revenue Service to find out more about estimated taxes in publications 590 and 554 or online at www.irs.gov.

Many retirees think about selling their homes to get a tax break in retirement. Things to consider:

If you are single selling your house for a profit of up $250,000 that amount may be exempt from taxes.
If you are married with joint ownership up to $500,000 may be exempt from taxes.
The caveat is that you must own the home and it has been your primary residence for two of the last five years.
You have not used the exclusion in the last two years.

Other retirees think about paying off their mortgage if it has not been paid off prior to retirement. Things to consider:

Mortgage debt has a tax advantage if most of the payment is going towards interest.
If the payments are basically going towards principal then you may not have a tax advantage.
If your balance remains high enough to generate a tax break, you may still want to consider paying off the mortgage if you meet the following criteria.

• You are already clearly and without doubt maximizing your retirement savings.
• You have already paid off other debt that has a higher interest rate and does not have a tax-deductible advantage for you.
• Your emergency fund is robust and will sustain you according to your financial plan and individual action plan.

Being debt-free is certainly appealing. However, any financial decisions you make
concerning you retirement future requires much thought in addition to being educated about your options and the consequences of your actions. Remember every decision we make carries an associated cost.

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

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Federal and Postal Employees – Choosing a Financial Professional

TSP Withdrawals and using IRAs correctly in TSP Rollovers

TSP, IRA Rollovers and other Options

There are three common types of IRAs – Traditional, Roth and Rollover. Finding the right IRA for you requires being educated about what each one offers. All IRAs are designed to help you for retirement but each has its unique features.

An IRA is an Individual Retirement Account (IRA) that provides either a tax-free or tax- deferred way for you to save for retirement. IRAs allow you to invest in just about any investment and these investments can grow tax deferred. Each IRA has unique eligibility requirements and benefits.

IRAs rely primarily on the power of long term, tax-deferred compounding to provide your retirement savings the opportunity to grow faster than in an account that is taxable. When you earn interest, receive dividends or sell an investment for gain, you are not obligated to pay taxes that year on the earnings. All taxes are deferred until you withdraw those earnings in retirement. Your money continues working for you while building your nest egg for year after year.

Roth IRA

Unique Benefits, Eligibility Requirements

Any earnings are tax-free if withdrawn after age 59.5 and the account has been open five years or more
Contributions (not earnings) can be withdrawn tax and penalty free at any time
Contributions are not tax-deductible
There is a single 5 year holding period when determining whether earnings can be withdrawn federally tax-free. The period begins January 1 of the first contribution to any Roth IRA account.
Regular contributions are allowed up to age 50
Catch-up contributions are allowed age 50 +
Up to age 50 – 2009 contribution limit $5,000
Over age 50 – 2009 contribution limit $6,000
Modified adjusted gross income and tax filing status determine how much you can contribute
For 2009, single tax-filers with $120,000 or less in annual income and joint-tax filers with $176,000 or less are eligible. For 2010, single tax-filers with $120,000 or less in annual income and joint tax-filers with $177,000 or less are eligible.

Traditional IRA

Unique Benefits, Eligibility Requirements

Any earnings grow tax-deferred until withdrawn after 59.5 at which time they are taxed at your current rate
Contributions and earnings can be withdrawn penalty free after age 59.5
Contributions may be tax-deductible
Allows investment earnings the opportunity to grow tax deferred until withdrawn
Your age and tax filing status (joint or single) determine how much you can contribute annually
Contributions may be tax-deferred depending on your tax filing status, modified adjusted gross income, and participation in employer-sponsored plans.
Maybe opened by anyone with taxable compensation or a spouse (if you file jointly) with earned income and who was not 70.5 years old by the end of the current year
Up to age 50 2009 contribution limit $5,000
Age 50 – 70.5 contribution limit $6,000
Over age 70.5 2009 contribution limit (not allowed)

**Rollover IRAs (TSP 70 and TSP Withdrawal)**

Rollover IRAs allow you to consolidate your TSP, possible 401(k) and 403(b) accounts along with any other employer-sponsored retirement accounts into one account maintaining the assets’ tax deferred status. Using form TSP 70, a TSP withdrawal can be a good decision because of the limited TSP investment options that exist and the much larger array of options available through Rollover IRAs.

There are a few outside companies that specialize in helping Federal employees with their TSP funds after retirement or once an employee has reached 59 1/2. Two of those companies that you may want to consider can be found at TSP-70.com and TSP-withdrawal.com.

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

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Federal and Postal Employees – Choosing a Financial Professional

Critical Ages For Federal Retirement

There are Critical Ages that Federal Employees should be aware of. These ages represent opportunities for Federal Employees who might want to maximize their retirement benefits.

Federal Employee ~~ 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 you to defer 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.
Federal Employee ~~ Age 55
• After separation from service, you may begin withdrawing from your TSP or another qualified plan without paying a 10 percent penalty tax.
Federal Employee ~~ Age 59.5
• You may begin withdrawing from qualified retirement plans, if retired, or from an IRA without incurring the 10 percent penalty. At 59.5 Federal employees can also take an in-service distribution – rolling their TSP account balance into an IRA with a private company and giving themselves more investment options.
Federal Employee ~~ 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.
Federal Employee ~~ 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 age 65 and your enrollment 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
Federal Employee ~~ Age 65 – 67
• Depending on your date of birth, you may begin unreduced Social Security benefits at some point during this age range. Further, you may earn any amount without reducing this benefit.
Federal Employee ~~ Age 65
• You may enroll in Medicare, if eligible, and purchase Medigap insurance at standard rates. Your Medigap open enrollment period lasts for six months starting on the first day of the month in which you are 1) at least age 65 and enrolled in Medicare Part B. During this period, an insurance company cannot deny you a Medigap policy, make you wait for coverage, or charge you more for a Medigap policy because of your health.
Federal Employee ~~ 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.
Federal Employee ~~ Age 70.5
• Required minimum distributions from qualified plans, IRAs, and deferred compensation plans begin the year after you turn 70.5.

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

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Will Spending Be The Same In Retirement?

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.

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Retiring In Less Than One Year

Consider the following if your retirement plans are less than one year away.

Is there any way that I could be indebted to my employer?

If you have outstanding travel advances.
Overpayment of salary that has not been resolved.
Indebtedness for failure to return government property or for damage to government property.
Advanced leave.

**When and how do I waive my military retired pay?**

If you would like to waive your military retired pay to receive credit for military service in the computation of your benefit, you can write to the Retired Pay Operations Center at least 60 days before your planned retirement. Send your waiver to:

Defense Finance and Accounting Service

U.S. Military Retirement Pay

P.O. Box 7130

London, KY 40742-7130 or you can “fax” your request to (888) 469-6559

**What Is The Maximum Federal Retirement Benefit I Can Receive?**

The basic civil service retirement annuity cannot exceed 80% of your high-3 average salary, excluding your unused sick leave. The 80% limitation is typically reached when you have 41 years and 11 months of service, not including accumulated sick leave.

Law Enforcement Officer (LEOs) Retirement Annuities

Law Enforcement Officers (LEOs) may under special computation provisions receive the 80% limit with fewer years of service.

Service beyond the years which provides the maximum benefit will not be used to compute your Law Enforment Officer annuity. The retirement contributions you made during those years will be automatically refunded to you with interest at the rate of three percent per year, compounded annually. You have the option of using the refund to purchase additional annuities as if the contributions and interest are voluntary contributions.

However, if you have federal civilian employment periods when you did not contribute to either or FERS, excess contributions are automatically applied toward any deposit due for those employment periods.

How do I find out if I am eligible for Medicare coverage?

It is recommended that you contact the Social Security Administration at least three months before you reach your 65^th birthday to apply for Medicare Benefits. The Social Security Administration will have the records pertaining to your eligibility for Medicare coverage. If there is a problem locating your records either you or your employer can obtain a statement of your earnings by writing to:

General Services Administration

National Personnel Records Center

Civilian Personnel Records

111 Winnebago Street

St. Louis, Missouri 63118

Your request should include:

Your name as shown on your payroll records;
Your date of birth;
Your Social Security Number;
Your complete mailing address;
The years for which earnings are needed;
The name and location of employer for each year;
State clearly the reason for the request;
Affix your written signature; and,
Write a statement declaring that all other sources of information have been exhausted.

When should I choose my exact retirement date?

If you have not already done so, start thinking about choosing your exact retirement date. Your benefit can be estimated based on the exact date you choose. Remember OPM cannot give you the best estimate until you have actually applied for retirement.

When should I complete my application?

You should carefully read all of the information in the application package and submit the forms. You do not need to submit a resignation letter. Your completed and signed application is equivalent to a resignation. However, if you are eligible for benefits, you should not resign with the intent of retiring at some later date. If you were to expire after separation but before filing your retirement application no life insurance, no survivor benefit and no survivor health insurance coverage would be available to your survivors. All other exit procedures required by the agency should be followed and completed.

Should I check on my military service deposit?

Your human capital office will verify with your payroll office that the deposit to give you credit in your annuity for military service you performed after 1956 has been paid, or that arrangements have been made for complete payment before you leave the agency’s rolls.

Should I sign up now to receive my retirement payments by direct deposit?

If your retirement records are electronically transmitted by your employer via the Data Exchange Gateway (DEG), the account information for direct deposit will be sent automatically. If this is not the case, then you must submit with your retirement package, a request to receive payments by direct deposit. A letter can be submitted or SF 1199A with the application. SF 1199A can be obtained from your financial institution.

Direct deposit is generally not available to persons with a permanent address outside of the United States, except for Canada. Persons with permanent addresses outside the United States may request direct deposit to a financial institution in the United States.

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

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Federal and Postal Employees – Choosing a Financial Professional

Records To Check Before Retirement

For Postal Employees – LiteBlue and the TSP

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:

Your widow or widower.
Your children in equal shares.
Your parents in equal shares.
Your appointed executor or administrator of your estate.
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.

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Federal and Postal Employees – Choosing a Financial Professional

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

Planning To Retire In One Year

When you get within one year of eligibility for retirement it would be prudent to:

Money

Confirm when you will be eligible to get a retirement benefit;
Speak with a qualified financial professional
Decide when you want to retire;
Get information about other benefits to which you may also be eligible for, such as your Thrift Savings Plan (TSP) any other entitlements based on employment, for example: Social Security, pensions from private industry, and Individual Retirement Accounts (IRAs). You should have a fairly comprehensive picture of all sources of your retirement income and when each is payable;
Tell your manager about your proposed retirement date. It would be professional protocol to give sufficient notice to allow for planning for someone to take your place.
Attend a pre-retirement counseling seminar;
Make an appointment with your human capital officer to review your Official Personnel Folder (OPF) to make certain all your records are complete and accurate, all service is verified, and your insurance coverage is documented;
Make sure that the beginning and ending dates for each period of employment is properly documented for benefit computation;
Ensure the effective dates for each promotion or within-grade increase is also properly documented during the period that will be used to compute the high-3 average salary;
Make certain the dates of pay changes or earnings and the pay rate during employment periods when retirement deductions were not withheld from your salary are properly documented;
Capture the tour-of-duty during any part-time employment. Also document any hours worked beyond the official tour of duty as actual hours worked.
Document and keep a record of periods worked intermittently or “when-actually-employed”;
Document all military service time; and
Whenever there is a conflict about time or missing documentation, always contact your human capital officer immediately.

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

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Federal and Postal Employees – Choosing a Financial Professional

How Much Money Do You Need In Retirement

Whether you are ten years, five years or just 1 year from retirement, you need to have a way of estimating how much money you are going to need to retire. Financial experts say we will have to replace about 70 to 80 even 90 percent of our annual salary in retirement in order to maintain the lifestyle we have become accustomed to. Decisions – decisions.

Let’s examine Four Steps that will help to estimate how much money you will need to retire comfortably. This is where tracking our weekly, monthly and yearly spending comes in. We need to always know what is coming in, what is going out and how much we can afford to spend. Planning for our comfort and security in retirement requires grit, tenacity and sheer will power to make a plan and follow it.

How Much Money You Will Need In Retirement:

Estimate your retirement expenses, including taxes and even one-time major purchases. Make a list and revisit it often. These are not items you think about in your head, they need to be put on paper and then they become real.

If you need help determining how much you need seek out the help of a qualified Federal Retirement Expert.

Determine how much retirement income will come from your known resources. Compare income from TSP and other savings and your Federal Annuity with estimated retirement expenses.

You could also be eligible for Social Security of a Military Pension.

Compute the gap between how much money you need to retire and the amount you will receive from your known resources. Evaluate the gap and measure its size with financial and economic scrutiny.
When doing a retirement analysis and assessment, factor in inflation and life expectancy. Look at your assessment from both ends of the spectrum – the best scenario and the worst.

Formula for Estimating Your Federal Retirement Income:

The majority of Americans will rely basically on two sources of consistent retirement income – Social Security and Employee Pensions. The other component should be savings and investments (Thrift Savings Plan (TSP) and outside investments like IRAs). Let’s be practical, we don’t all have that category separate and apart from vehicles provided through employment. However, it is never too late if you put your plan in place and stick to it.

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

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Federal and Postal Employees – Choosing a Financial Professional

What Is Effective Retirement Decision-Making

Access your TSP.gov Account HERE

For Federal Employees, when it comes to Retirement Planning, effective decision-making involves flexibility in thought and actions. One must be prepared to make sacrifices now to achieve something better later. We must also understand the value of trade-offs. Decisions you make today will inevitably impact future retirement decisions. All decisions made carry associated consequences that affect us, our families, and the society we live in.

We can all improve our skills in effective decision-making through consistent practice and application. But, there is no financial plan nor individual action plan (IAP), no matter how well designed or thought out that works if you don’t follow it. We must develop strategies that will motivate us to stay the course. No financial plan is set in concrete, rather plans are designed to be flexible, changeable and evolve over time as our lives evolve. We need to monitor plans and know when important changes need to be made. Updating your financial plan is critical to your plan’s success.

A financial plan will assist you in identifying, determining, and directing what you want to have and achieve in retirement. A financial plan helps to target the outcome desired, map out how to get there and how to stay on track.

Start our with a conversation with your spouse, a friend or someone you trust. Talk about what is important to you and your well-being in your retirement future. After the conversation, begin to put your plans to work by putting them in writing. Nobody can take what you have in your head if you are not there to tell the story. Prepare soon. Prepare wisely. Prepare to live in comfort and security.

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

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Who Is Watching the Market?

August 18, 2014 /by Dianna Tafazoli

As a federal retirement specialist and educator, I am most intimately concerned about how federal employees view retirement and how they make ready for perhaps the most difficult transition in their lives. I recently heard that Market Watch did a survey of employees to decipher whether they were most attached to large salaries or means to support their future retirement. I was very pleased with the overwhelming response.

**Six Figures or Comfortable Retirement?**

A majority of those surveyed said they would much rather forgo a six-figured salary for greater contributions to their retirement fund. If they could get a 25% match in a 401K for the private sector and the Thrift Savings Plan (TSP) for the federal force, that would be the scenario most sought. It is good to know that workers are thinking about how to fund their future given Americans are living on average, 30 years past retirement. That is a significantly long time to make certain your resources outlast you. What you save today and the plans you put in place today will determine how well you are able to live in retirement.

Getting prepared financially is a big piece of the puzzle, but we do know that financial preparation hinges upon the ability to accept the emotional and psychological paradigm that comes with making such a transition. If we are emotionally and psychologically prepared, then it stands to reason that we will be much more inclined to manage our money. It is sometimes a denial of realty that steers us away from putting very critical and necessary plans in place.

The best education any of us can receive is to fully embrace the inevitability of seasons. In most parts of the country, Winter appears after the joy of Fall. Spring alerts us to the notion that Summer is coming. Just as the seasons of the year come and go, so do seasons in our lives. Work and hopefully a stable job is a part of the season of our adulthood into the age of maturity. For the senior sect, I think the age of maturity is more fitting than saying old age. That term ill fits the new generation of seniors because they are living active, meaningful, productive lives and doing things their parents and grandparents never dreamed of.

While I don’t believe in traditional retirement as long as you are physically and mentally able to chase your passion, choices and options should certainly be on your vision board. If you choose to work or travel or play then you should have the financial means to do so. If you decide that working full-time or part-time or going back to school fit you best, then the plans you put in place during your earlier years should allow you to do that.

Another caveat and a teachable moment here is the definition of true compensation. Salary and benefits make up true compensation. If you are making a salary of $80,000 annually and your benefits package is worth $25,000 – your true compensation is $105,000. You might say, I can’t spend my benefits. Wrong – because if you didn’t have them you would have to take care of your medical concerns out of your $80,000. Can you feel the number sinking quickly to $50,000 and you haven’t even paid taxes. What about the contributions made to your retirement fund from your employer? Let’s ratchet the remaining $50,000 down to about $45,000. What if you have no sick leave provisions or vacation? You might be able to take a weekendcation or a homecation, but when you are sick, you are sick. Now since illness cannot be avoided, let move the $45,000 down to about $40,000 and we are being generous. Get the picture?

Total compensation is something that should never be dismissed in planning for your future. Having a plan that is flexible and SMART (Specific, Measurable, Attainable, Realistic and Time Sensitive) should be at the center of your vision board.

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

Dianna Tafazoli

Can I Name Any Beneficiary To My TSP

August 12, 2014 /by Dianna Tafazoli

Beneficiary Differences for TSP

There are a number of rules that exist when naming a beneficiary for your Federal Employees’ Group Life Insurance (FEGLI) and your Civil Service Retirement System (CSRS) and your Federal Employees Retirement System (FERS) survivor annuity. In most cases, the spouse a spouse is named as the beneficiary. However, the same rules do not apply for the Thrift Savings Plan (TSP). You may name anyone you choose, it does not have to be a spouse. The TSP also allows for the naming of contingent beneficiaries.

TSP Contingent Beneficiaries

Contingent beneficiaries is always a good posture to take under any circumstances because there is always that possibility that something might happen to the person you have named. The TSP also allows for the TSP account holder to name beneficiaries and designate the percentage intended for each beneficiary.

The TSP, like the Federal Government, does not honor Wills. The TSP uses the Order of Precedence in the case where no beneficiary is named. It is important to always update your beneficiary designation forms. Visit your eOPF (electronic Official Personnel Folder) and your TSP folder to review the contents and to make sure you are updating your files and keeping things in place. Updating your files means getting to determine how your assets and resources will be distributed.

The TSP-3 (Designation of Beneficiary) is the form used to select your beneficiary or beneficiaries.

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

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August 12, 2014 /by Dianna Tafazoli

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Explanation of Phased Retirement

During the public comments period for phased retirement there were a number of questions and comments that surfaced either from agencies, unions or individuals. It might add to our information to discuss a few of them and also use the questions and comments as a teachable moment.

Phased Retirement and the TSP

One question was about the Thrift Savings Plan (TSP). Will those employees participating in phased retirement still be able to participate in the TSP? The program is designed to allow phased retirement participants to work part-time and draw a part-time federal retirement annuity giving them perhaps the best of both worlds – work and retirement. Since the TSP administered by the Thrift Savings Investment Board is a defined contributions plan where contributions are made via payroll deduction, then if you are working and getting a paycheck, you can participate in the TSP. The individuals are not fully retired as in receiving a total annuity carrying the distinction of annuitant, where there are no payroll deductions. Therefore, these individuals still qualify to participate in the TSP.

Phased Retirement and Taxes

Another question came up about taxes and how OPM would look at taxes. The Office of Personnel Management in its role as custodian of all federal human capital is statutorily required to provide the Internal Revenue Service with such relevant information as requested. However, the Office of Personnel Management has no jurisdiction over administering the tax code, that matter falls completely within the auspices of the Internal Revenue Service. How the IRS manages phased retirement regarding the taxation of Social Security or a Federal Annuity has yet to be seen.

Phased Retirement – Overtime and Holidays

Then there was the concern about overtime and holidays for part-time employees or phased retirement participants. According to the Fair Labor Standards Act (FLSA) those persons falling within the category of non-exempt employees receive overtime when they have worked more than 8 hours per days or more than 40 hours in a work-week. The same would apply for compensatory time. Since the phased retirement participants are scheduled to work part-time then this factor should not impact them. If, however the situation arises, the same guidelines would be followed in accordance with FLSA. Certain categories of employees, particularly those designated as supervisors and managers are exempt from the requirements of FLSA.

If a part-time employee is scheduled to work on a day that falls on a holiday, then the day is also a holiday for the employee. If the employee works 4 hours per day, then 4 hours would serve as holiday pay. If the holiday falls on a nonworking day then the employee is not entitled to an in lieu of holiday.

The Office of Personnel Management is tasked with handling all human resource and human capital issues for the United States Government, all other matters fall within the respective agencies.

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

OTHER PHASED RETIREMENT RELATED ARTICLES

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Phased Retirement – Closing the Knowledge Gap

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FERS and CSRS – Phased Retirement

August 12, 2014 /by Dianna Tafazoli

CSRS and FERS Phased Retirement Eligibility