Three Sources of Retirement Funds Under FERS, by Flavio J. “Joe” Carreno

Everyone looks forward to retirement as the time to relax and kick back. Everyone would retire, but the relaxation part can only become a reality for retirees with significant financial backing. That is why government-backed schemes are available. The big question for workers under the system is, where will the money come from after retirement?FERS-covered workers can expect money from three sources upon retiring from service. These are:

• Annuity
• Social Security
• Thrift Savings Plan

Having these options, workers can look forward to spending majorly from the first two sources and only dipping into the last source in special cases. Let’s examine what each source offers federal workers under the system.

Annuity 

 The calculation to decide how much money a worker under the system will have after retirement is relatively simple and straightforward. It uses three parameters: High three, years of service, and multiplier. The high three is the highest pay a worker gets in three successive years, followed by the number of years of active service, then a multiplier of 1% or 1.1% for older workers leaving service at a minimum of 62 years and who have put in 20 years.For instance, a worker under the system who has worked for 21 years, collected $200,000 as the highest pay in three years, and is 64 years old will have the following calculations.$200,000 × 21 × 1.1%  = $46,200The worker with this calculation will receive $46,200 yearly minus deductions. Such deductions include insurance premiums and taxation. Recall that the multiplier will be less than 10% for workers who are younger than 62 years and have put in less than 20 years.Workers should work out the details of their finances shortly before retirement and request an estimate from their agencies to ensure that they receive their dues in full.

Social Security

Federal workers might not be able to make the complete calculation for their Social Security funds themselves, so we advise that they check it out on ssa.gov. There, they would get a statement that details their expected Social Security payment. A crucial thing to note is that the best time to activate the benefits is between ages 65 and 67.Activating before the full retirement age will mandate a decrease of the benefits. In contrast, workers who wait until after their full retirement age to activate the benefits will enjoy an increase. The difficulty is being able to wait to get the right payment. If you can, ensure you do not withdraw too many funds from your Thrift Savings Plan.Above all, adequate planning beforehand will help stop impulse buying and other avoidable expenditures during the waiting period.  For those who will retire before 62 years with full years of service, the system provides supplemental benefits in terms of funds. The benefit will continue until age 62, when workers can finally tap into their Social Security without bearing any form of deductions.

Thrift Savings Plan

Lastly, a source of income upon retirement is the pre-saved money that sits in TSP accounts. The funds are sitting right there, and it is often very tempting to tap into them, but it is essential to have a target and stick to it. To arrive at a target, write out your expected monthly expenses during retirement, subtract your monthly net income of annuities and Social Security, and make up the difference with small withdrawals from your TSP.It is also essential to keep adding to funds by investing with your TSP instead of just dipping into it. Life after retirement still stretches into many years for some people. Just ensure you do all you can to avoid spending on irrelevant things during retirement.That’s it; now that you have full knowledge about post-retirement finances, it is time to make plans for those years after retirement. Doing that will make those years memorable and relaxing.
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.