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Maximizing Your Federal CSRS Benefits. Offered Through: Colorado Federal Executive Board Presenter: Ann Vanderslice. Securities offered through Allied Beacon Partners, Inc. Member FINRA/SIPC. Home office 1201 S. Highland Avenue #2, Clearwater, FL 33756 727-441-1616. What We Will Cover Today:.

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Maximizing Your Federal CSRS Benefits

Offered Through:

Colorado Federal Executive Board

Presenter: Ann Vanderslice

Securities offered through Allied Beacon Partners, Inc. Member FINRA/SIPC. Home office 1201 S. Highland Avenue #2, Clearwater, FL 33756 727-441-1616


What We Will Cover Today:

Getting And Keeping Important Documents Together


What We Will Cover Today:

CSRS Magic Numbers


What We Will Cover Today:

When Can You Retire?


What We Will Cover Today:

You’re Eligible to Retire – Now What?


What We Will Cover Today:

How Much Will Your Pension Be?


What We Will Cover Today:

If You’re Married, Should You Take Survivor Benefits?


What We Will Cover Today:

What If You Become Disabled Before Retirement?


What We Will Cover Today:

Can You Collect Social Security If You’re Eligible?


What We Will Cover Today:

Do I Get Raises In Retirement?


What We Will Cover Today:

What Are Your Choices In TSP While You’re Working?


What We Will Cover Today:

Understanding The Impact Of Your TSP In Retirement


What We Will Cover Today:

The Best Benefit You’ve Never Heard Of


What We Will Cover Today:

How To Choose The Best Health Plan For You And Your Family


What We Will Cover Today:

Maximizing The Value Of The Flexible Spending Plan


What We Will Cover Today:

How FEGLI Works For You


What We Will Cover Today:

FLTCIP 2.0 – The Longest Acronym In Federal Benefits


What We Will Cover Today:

Tax Implications While Working


What We Will Cover Today:

Rules Of Thumb For

Retirement Planning


What We Will Cover Today:

What Are Your Investment Alternatives?


What We Will Cover Today:

Understanding Diversification


What We Will Cover Today:

How Do You Create Income From Your TSP In Retirement?


What We Will Cover Today:

Tax Implications for Retirement -

What You Can Do Now


What We Will Cover Today:

What Else Do You Need To Pay Attention To?


What We Will Cover Today:

Do You Really Need A Will (And All Those Other Documents)?


What We Will Cover Today:

Retirement Planning -

How Do You Get Started?


Important documents
Important Documents

Certified Copy of Birth Certificate

DD214 – Certifies Military Service

SF-50’s – Official Personnel File

Social Security Statement

Marriage Certificate (if married)

Divorce Decree (if divorced)

Beneficiary Forms

Last Paycheck – SF 1152Thrift Savings Plan – TSP 3FEGLI – SF 2823Annuity (if single) - SF 2808 (CSRS)

28


Most common reasons for retirement processing delays
Most Common Reasons for Retirement Processing Delays

  • Civil Service Retirement System offsets apply and the annuitant is older than 62.

  • Part-time service is involved.

  • Service has been refunded or a deposit for service is needed.

  • Receipt of workers' compensation is indicated.

  • Military retirement pay is involved.

  • Unpaid military deposits are present and the annuitant is older than 62, or the employee was first covered by retirement deductions on or after Oct. 1, 1982.

  • Excess leave without pay (defined as more than six months) is present on the record.

  • The application includes unverified or missing service.

  • The employees has elected an insurable interest (a survivor benefit option available under the Civil Service Retirement System)

  • No survivor election is made. (Remember - Even if you are unmarried at the time of retirement, don't leave this section of the retirement application blank.)

  • A court order for a divorce requires apportionment of the annuity.

  • The submission by the agency is incomplete and is missing key data needed for calculating interim payments. According to OPM, 23 percent of all claims received are missing one or more records and 11 percent are not received during the first 30 days.



Magic Numbers

Ages

55 = Earliest age to retire on unreduced annuity FEGLI premiums for Options A and B increase significantly Access to TSP without 10% excise penalty if you separate or retire


Magic Numbers

Ages

59½ = Access to TSP Funds for one-time withdrawal if still working Penalty-free access to IRA’s, 401(k)’s, etc.

62 = Earliest eligibility for Social Security benefits

65 = Eligible for Medicare

70 = Latest eligibility for Social Security benefits

70½ = Must begin taking at least minimum withdrawals from tax-qualified accounts (TSP, IRA’s)


Magic Numbers

Years of Service

41 years and 11 months – maximum amount of service annuity can be calculated on

30 years – needed to qualify for unreduced annuity if younger than age 60

5 years – least amount of years you can work and qualify for an annuity


Magic Numbers

Savings Amount Needed At Retirement

$1,000,000


CSRS and CSRS Offset

CSRS

Employees hired prior to 12/31/83 who have at least 5 years of service at 1/1/87

Contribute 7% of pay to Civil Service Retirement System


CSRS and CSRS Offset

CSRS Offset –

All employees hired after 12/31/83 are required to be covered by Social Security

CSRS employees with break in service of +1 year with 5 years of CSRS employment whowere rehired after 12/31/83

Contribute 7% of pay which is divided between: CSRS = .80% Social Security = 6.2%

Benefits reduced at age 62 by portion of Social Security earned as federal employee


CSRS - Retiring On an Immediate, Unreduced Annuity

Age Years of Service

55 30

60 20

62 5

Involuntary Early Out With Reduction = 1/6 of 1% for each month employee retires prior to age 55 (2% per year)

Age Years of Service

50 20

Any age 25


Best Dates to Retire

  • The last day of the month or first 3 days of a new month

  • End of a pay period

  • - Accrue sick leave and annual leave for that pay period

  • Beginning of a new year

  • - Rollover maximum annual leave

  • - Receive COLA on payout of annual leave

  • - Pay taxes in new year


Best Dates to Retire –2012

January 3, 2013 – Best of the Best

39


Best Dates to Retire –2012

February 1, 2 or 3March 1 or 2April 2 or 3May 1, 2 or 3June 1 (also end of pay period)July 2 or 3August 1, 2 or 3September 3 (also holiday)October 1, 2 or 3November 1 or 2 (also end of pay period)December 3January 1, 2 or 3, 2013


Components to Calculate Federal

Annuity

Years of Service Based on Retirement Service Computation Date

High 3 Average Salary

% Formula Based on Years of Service


Retirement service computation date
Retirement Service Computation Date

Based on time between appointment and separation where deductions are withheld. It includes:

Leave without pay (up to six months/calendar year)

Part-time service prior to 4/7/1986 - Full credit for eligibility and annuity computation

Part-time service on or after 4/7/1986- Full credit for eligibility – prorated for annuity computation

Intermittent days worked (WAE 260-day year)

Military service/Deposits/Re-deposits (SF 2803)


Csrs buying back military time to add to your creditable service
CSRS - Buying Back Military Time To Add To Your Creditable Service

Employee Under CSRS Before 10/1/1982Make Deposit of 7% ofBasic Pay + Interest = Credit for eligibility and annuity

Do Not Make Deposit and Are Not Eligible for Social Security = Credit for eligibility and annuity

Do Not Make Deposit and Are Eligible for Social Security at Age 62 = Credit for eligibility but no credit for annuity after age 62

Employee Under CSRS On/After 10/1/1982

Deposit Required = No deposit – No Credit for eligibility or annuity


Deposits

For Service Prior to 10-1-1982:

Deposit Made = 100% for eligibility and annuity computation

Deposit Not Made = 100% for eligibility and annuity reduced by 10% of deposit due

For Service After 10-1-1982:

Deposit Made = 100% for eligibility and annuity computation

Deposit Not Made = 100% for eligibility and NO credit for annuity computation


Re-deposits

Contributions Not Refunded:

100% for eligibility and annuity computation

Contributions Refunded:

Re-deposit made = 100% for eligibility and annuity computation

Re-deposit NOT made and service ended before 3-1-1991 = 100% for eligibility and annuity actuarially reduced

Re-deposit NOT made and service ended after 2-28-1991 = 100% for eligibility and NO credit for annuity computation


Part time service
Part-time Service

Any part-time service prior to April 7, 1986 counts 100% toward eligibility and annuity calculation

Any part-time service after April 7, 1986 counts 100% toward eligibility but is prorated for annuity calculation

46


Annual leave
Annual Leave

  • Can carryover up to 240 hours of unused leave per year

  • Paid out as lump sum for any unused hours at retirement

47


Sick leave
Sick Leave

Accrue 4 hours per pay period for sick leave. Sick leave is NOT included for creditable service – it is used for annuity calculation purposes only.

48



2013

1

3

Creditable Service Calculation

Year Month Day

Planned Retirement Date ____ _______ ____

Retirement SCD ____ _______ ____

Creditable Service ____ _______ ____

Unused Sick Leave ____ _______ ____

Total Creditable Service ____ _______ ____

1980

8

14

32

4

19

6

14

3 Days Left Over!

32

11


High 3 Average

Average of your base + locality pay over any 3 consecutive years of creditable service

Does NOT include:

BonusesOvertimeMilitary PayCash AwardsHoliday PayTravel Pay


74,025

High-3 Calculation

YearSalary

2008_____________

2009_____________

2010_____________

2011_____________

2012_____________

2013_____________

2014_____________

2015_____________

2016_____________

2017_____________

76,912

Add last three years together

and divide by 3

$79,219

79,219

79,219

79,219


Calculating Your CSRS Annuity

Years of Service X High 3 Average X % Formula = Annual Annuity

1st 5 years = 5 X 1.5% x High 3 = 7.5%

2nd 5 years = 5 X 1.75% x High 3 = 8.75%

Add’l years = # of years X 2% x High 3

At 30 years of service = 56.25% of High 3

Maximum benefit = 41 years / 11 months = 80%

***Sick leave counts toward your Years of Service for annuity computation but cannot be counted for eligibility***


Calculating Your CSRS Annuity

Quick Calc:

(Number of years/months of service – 2) X 2 + .25 = %


$79,219

Annuity Calculation

High-3 Average ________________

Creditable Service % ____________

= Annual Annuity ______________

/ 12 = Monthly Annuity __________

.620833

$49,181

$4,098

Present Value: $1,006,787


CSRS - Survivor BenefitsProvides 0% - 55% of annuity at a cost of $1- ~10%Available to: Current spouse Former spouse Insurable interest Minor childrenMUST keep at least minimal survivor benefit to allow spouse to continue health benefits if employee passes away

58


CSRS Survivor Benefits - Alternatives

Use portion of survivorship cost from annuity to purchase life insurance

Year Age Monthly Monthly Survivor’s Monthly Annual Accum.

Annuity Annuity Monthly Difference Diff. Annual

No Surv W/Surv Annuity Diff.

1 55 3,928 3,559 2,161 370 4,445 4,445 5 60 4,417 4,005 2,432 417 5,002 23,597 10 65 5,116 4,643 2,820 483 5,799 50,952 15 70 5,925 5,383 3,269 560 6,723 82,664 20 75 6,862 6,240 3,789 649 7,794 119,427 25 80 7,947 7,234 4,393 753 9,035 162,044 30 85 9,204 8,386 5,092 873 10,476 207,957

3,903

259

25

300

300

$8,044


CSRS Survivor Benefits - Alternatives$345/month purchases $466,400 in permanent life insurance with premiums and death benefit guaranteedCost of survivor annuity is paid prior to taxes being deducted. Cost of life insurance is paid with after-tax dollars.Death benefits are paid to beneficiary income-tax freeIf spouse passes away first – death benefit can be assigned to someone elseTotal cost in 20 years is $90,844 vs. $119,427

60


Disability Retirement

No longer able to perform in your position and not qualified for any other position in same location at same grade/pay

  • May earn up to 80% of fed pay in private sector job

  • Health and life insurance continue if previously insured for 5 years

  • Must have at least 5 years creditable service to apply

  • Employee (or agency, guardian, or interested person if incapacitated) must apply for benefits


Disability Retirement

Benefits are calculated as follows:

Guaranteed = lesser of annuity based on High-3 average salary and creditable service as of retirement date + years to age 60

OR

40% of High-3 average salary

OR

Actual earned annuity, if greater 22 years of service


Social Security Benefits

Become eligible by earning 40 “credits”

Receive full benefits based on year you were born


Social Security Benefits

Other members of your family may receive benefits based on your work history:

Spouse: 50% of yours or 100% of their own (whichever is higher)

Child (up to age 18): 50%

Former spouse:

- Married at least 10 years

- Age 62


Social Security Benefits

Your survivors may also be eligible to receive benefits on your work history:

Spouse you’ve been married to for at least 9 months who is age 60 or older

Child under age 18 (19 if still in school) or any age if disabled before age 18

Former spouse you were married to for at least 10 years


Social Security Benefits

By delaying taking Social Security until your full retirement age, you can increase your benefits by 20% - 30%. You’ll get an additional 20% for waiting until age 70.

You can also begin taking benefits and use a Social Security option that lets you repay those benefits at an older age and begin receiving the higher amount!


Social Security Benefits

Benefits are based on Average Indexed Monthly Earnings “AIME”

Formula for calculating your benefits:

90% of first $767 AIME Plus

32% of AIME from $767-$4,624 Plus

15% of AIME over $4,624

Earnings limit before full retirement age = $14,640*(For every $2 over you give back $1)

Year of full retirement age = $38,880*(For every $3 over you give back $1)

* 2012 Limits


Csrs offset @ 62
CSRS Offset @ 62

CSRS annuity is reduced by the lesser of:

The difference between Social Security benefit calculated with and without the Offset years OR

Social Security benefit as estimated at 62 multiplied by the number of Offset years divided by 40


Social Security Benefits and Your Federal Annuity

The Windfall Elimination Provision was enacted in 1986 to cause people eligible for both a pension based on non-covered employment (e.g., CSRS, CSRS Offset and FERS Transferees employees) and Social Security to have their Social Security calculated using a different formula.

The main exclusion is for workers with more than 30 years of substantial earnings under Social Security.


Windfall Elimination Provision

Substantial Earnings Years Replacement Factor30 years 90%29 years 85%28 years 80%27 years 75%26 years 70%25 years 65%24 years 60%23 years 55%22 years 50%21 years 45%20 years 40%


Government Pension Offset

If you can’t have your own Social Security benefit – can you get your spouse’s?

To determine eligibility, subtract 2/3 of government pension from spouse’s Social Security benefit. If the answer is greater than zero, you are eligible for that benefit.


Government Pension Offset

Spouse’s Social Security Benefit $1,340

Your Federal Annuity Benefit ($3,000)x .66% ($1,980)

($ 640)

You are eligible for…………. 0


Cost of living adjustments
Cost of Living Adjustments

Prior to retirement based on amount approved in legislation by Congress each year. After retirement:

% Increase of Consumer Price Index for Urban Wage Earners and Clerical Workers

Effective December 1/appears on January 1 annuity payment

Prorated if you retire in middle of year

2009 COLA = 5.8% - Highest since 1982

2010 COLA = 0% 2011 COLA = 0% 2012 COLA = 3.6%


A short history of the tsp
A Short History of the TSP

Implemented in January 1988

S and I Funds added in May 2001

Everyone could participate up to IRS limits in 2005

Largest defined contribution plan in the US with $295* Billion in assets, ~4.5 million participants with 68% of CSRS employees participating

1988 - 1999 average annual return was 19.4%

2000 - 2009 average annual return was (.94%)* as of 12/31/2011

75


What s new with tsp
What’s New With TSP

Four provisions in Tobacco Act of 2009 affected TSP:

  • Creation of Roth TSP - May 7

  • Automatic enrollment for new federal employees

  • New survivorship options

  • Option to create mutual fund choices for investment

    Updated www.tsp.govwebsite!

76



Tsp options while you re working
TSP Options While You’re Working

  • Amount of Contributions

  • Allocation

  • How Much You Borrow

  • Withdrawals After Age 59 ½

78


Thrift savings plan
Thrift Savings Plan

2012 Contribution Limits –

$17,000 – under age 50

+$ 5,500 – catch-up contributions age 50 or better

$22,500 TOTAL 2012

No Government Match

79


Accessing your tsp account
Accessing Your TSP Account

You will need:

13-digit Account Number Issued by TSP

PIN Number Issued by TSP

You may customize your User ID by logging on to TSP website:

Can change both your sign-on and your password

80


Thrift savings plan1
Thrift Savings Plan

  • G Fund –

  • Offers the opportunity to earn rates of interest similar to

  • those of long-term Government securities but without any risk of loss of principal and very little volatility of earnings.

  • The G Fund is invested in short-term U.S. Treasury securities specially issued to the TSP. Payment of principal and interest is guaranteed by the U.S. Government. Thus, there is no “credit risk.”

  • The interest rate resets monthly and is based on the weighted average yield of all outstanding Treasury notes and bonds with

  • 4 or more years to maturity.

  • Earnings consist entirely of interest income on the securities.

  • Interest on G Fund securities has, over time, outpaced inflation and 90-day T-bills.

81


Thrift savings plan2
Thrift Savings Plan

  • F Fund –

  • Offers the opportunity to earn rates of return that exceed those of money market funds over the long term with relatively low risk.

  • The objective of the F Fund is to match the performance of the Barclays Capital U.S. Aggregate Index, a broad index representing the U.S. bond market.

  • • The risk of nonpayment of interest or principal (credit risk) is relatively low because the fund includes only investment-grade securities and is broadly diversified. However, the F Fund has market risk (the risk that the value of the underlying securities will decline) and prepayment risk (the risk that the security will be repaid before it matures).

  • • Earnings consist of interest income on the securities and gains (or losses) in the value of securities.

82


Thrift savings plan3
Thrift Savings Plan

  • C Fund –

  • Offers the opportunity to earn a potentially high investment

  • return over the long term from a broadly diversified portfolio of stocks of large and medium-sized U.S. companies.

  • The objective of the C Fund is to match the performance of the Standard and Poor’s 500 (S&P 500) Index, a broad market index made up of stocks of 500 large to medium-sized U.S. companies.

  • There is a risk of loss if the S&P 500 Index declines in response to changes in overall economic conditions (market risk).

  • Earnings consist of gains (or losses) in the prices of stocks, and

  • dividend income.

83


Thrift savings plan4
Thrift Savings Plan

  • S Fund –

  • Offers the opportunity to earn a potentially high investment return over the long term by investing in the stocks of small and medium-sized U.S. companies.

  • The objective of the S Fund is to match the performance of the Dow Jones Wilshire 4500 Completion (DJW 4500) Index, a broad market index made up of stocks of U.S. companies not included in the S&P 500 Index.

  • There is a risk of loss if the DJW 4500 Index declines in response to changes in overall economic conditions (market risk).

  • Earnings consist of gains (or losses) in the prices of stocks, and dividend income.

84


Thrift savings plan5
Thrift Savings Plan

  • I Fund –

  • Offers the opportunity to earn a potentially high investment return over the long term by investing in the stocks of companies in developed countries outside the United States.

  • The objective of the I Fund is to match the performance of the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index.

  • There is a risk of loss if the EAFE Index declines in response to changes in overall economic conditions (market risk) or in response to increases in the value of the U.S. dollar (currency risk).

  • Earnings consist of gains (or losses) in the prices of stocks, currency changes relative to the U.S. dollar, and dividend income.

85


Thrift savings plan funds
Thrift Savings Plan - Funds

Lifecycle Funds - The L Funds provide you with a convenient way to diversify your account among the G, F, C, S, and I Funds, using professionally determined investment mixes that are tailored to different time horizons. Your “time horizon” is the date (after you leave Federal service) that you think you will need the money in your TSP account.

  • The five L Funds were designed for the TSP by Mercer Investment Consulting, Inc. The asset allocations are based on Mercer’s assumptions regarding future investment returns, inflation, economic growth, and interest rates.

  • The L Funds are rebalanced to their target allocations each business day.

  • When a fund reaches its horizon, it will roll into the L Income Fund, and a new fund will be added with a more distant time horizon

  • Putting your entire TSP account into one of the L Funds allows you to achieve the best expected return for the amount of expected risk that is appropriate for your time horizon.

86


Allocations as of April 2012

L2040

L2030

L Income

L2050

L2020

G Fund – 12.15%

F Fund - 9.35%

C Fund - 39.4%

S Fund - 16.7%

I Fund - 22.4%

G Fund – 3.83%

F Fund - 7.67%

C Fund - 43.4%

S Fund - 18.7%

I Fund - 26.4%

G Fund – 23.15%

F Fund - 8.35%

C Fund - 35.4%

S Fund - 13.4%

I Fund - 19.7%

G Fund – 74%

F Fund - 6%

C Fund - 12%

S Fund - 3%

I Fund - 5%

G Fund – 37.8%

F Fund - 7.33%

C Fund - 29.27%

S Fund - 9.3%

I Fund - 16.3%



Year-to Date Returns as of 3/31/12

G Fund - .39%

F Fund - .32%

C Fund - 12.63%

S Fund - 14.45%

I Fund - 10.91%

L Income-2.72%

L 2020 - 6.93%

L 2030 - 8.58%

L 2040 - 9.85%

L 2050 - 11.08%


Allocating Your TSP In Volatile Markets

Allowed 2 Inter-fund Transfers per Month

Can Move Funds into the G Fund in Addition to the Inter-Fund Transfers


Allocating Your TSP In Volatile Markets

Considerations:

Assessing Your Tolerance for Risk

http://moneycentral.msn.com/investor/calcs/n_riskq/main.asp

Past Performance Look at historical returns on www.tsp.gov

Periodic Updates from TSP Go to www.tsp.gov and Click on “Get e-mail updates” Click on the icon to subscribe and you’ll receive automatic updates by e-mail from TSP

Outside Resources


Projection of

monthly income

as if you were

age 62 appears

on back of

statement.


Thrift savings plan fees
Thrift Savings Plan - Fees

2011 Expense Fees = .025%

Use low-cost index funds

Keep it simple – only five funds available

Huge economies of scale – competitive procurement

Use commingled trust funds instead of individual accounts

- Only invest one amount per fund each day

- Individual accounts are maintained in TSP

93


Tips for maximizing your tsp
Tips for Maximizing Your TSP

Develop a strategy/plan for monitoring your funds

  • What’s the overall state of the economy

  • What are you willing to risk

  • How does your current allocation fit your retirement plan

  • If you have had a loss, what’s your recovery plan

94


Tsp loans
TSP Loans

Two Types of TSP Loans – May have one of eachGeneral – 1-5 years to repay – No documentationResidential – 1-15 years to repay – Documentation

Apply Online or Paper Application (TSP-20)

Current Interest Rate – 1.875%

Amounts You Can BorrowMust borrow at least $1,00050% of current vested balance up to $50,000

After Repaying Loan Must Wait 60 Days to Borrow Again

95


Tsp loans1
TSP Loans

Risks –

Loan payments may cause you to contribute less to your TSP

If your TSP earns a higher return than the loan interest rate, there will be less in TSP

Residential loans are not considered mortgages and interest is not deductible on tax return

Your loan is paid back with after-tax dollars

96


Creating Income From Your TSP in Retirement

Two Chances to Take Distributions at Retirement -

Partial withdrawal using Form TSP-77 Full withdrawal using Form TSP-70

OR

Create an immediate annuity through TSP (Met Life) Current Rate = 2.125%


Beneficiary Designations

Form TSP -3 to Name Beneficiaries If no TSP-3 on file at death, TSP is distributed according to Order of Precedence

* To widow or widower * If none, to child or children equally and to descendants of deceased children by representation * If none, to parents equally or to the surviving parent


Voluntary contribution program
Voluntary Contribution Program

Contribute up to 10% of base pay on ALL earnings

Cannot owe a deposit or re-deposit

Cannot have been in the program in the past and withdrawn

2012 interest rate = 2.25%

Interest accrues tax deferred

Contributions must be in $25 increments

All contributions (and interest, if desired) can be rolled to aROTH IRA AT RETIREMENT!

Use Form SF2804 to apply for a VCP account number

101


Health insurance fehb
Health Insurance - FEHB

While employed, premiums are paid using premium conversion provision – paid with pre-tax dollars. Retirees cannot participate in premium conversion.

FEHB continues into retirement if you :

- Were insured on your retirement date

- Retired on an immediate annuity

- Were enrolled or covered as a family member for the 5 years immediately preceding retirement or since first opportunity to enroll

102


Health insurance fehb1
Health Insurance - FEHB

Choosing Your Plan

Health Maintenance Organization “HMO” – Choose a primary care physician (PCP) from a list of member physicians. The PCP provides general medical care and must provide a referral to see a specialist (who must also be part of the HMO).

No coverage for out-of-network care (except emergencies)

Typically, no deductibles but members often pay a co-payment for care.

103


Health insurance fehb2
Health Insurance - FEHB

Choosing Your Plan

Preferred Provider Organization “PPO” –

Do not choose a primary care physician and can refer themselves to specialists.

Do not have to stay within network, but there is a financial incentive to do so.

Typically, deductibles are required before benefits begin and can also include co-payments that are larger than HMOs.

104


Health insurance fehb3
Health Insurance - FEHB

Choosing Your Plan

Fee-for-service “FFS” –

You go to the doctor or hospital of your choice

You (or your doctor or hospital) submit a claim to your insurance company for reimbursement

You will only receive reimbursement for the "covered" medical expenses listed in your policy, typically at 80% of reasonable and customary

105


Health insurance fehb4
Health Insurance - FEHB

Choosing Your Plan

Traditional Plan –

For people with more significant, on-going medical issues

Anticipate multiple visits with specialists

Ongoing prescription needs

Often includes higher premiums but lower deductibles or co-pays

Has annual out-of-pocket limits

106


Health insurance fehb5
Health Insurance - FEHB

Choosing Your Plan

Consumer Driven Health Plan –

For generally healthy with minor, ongoing medical issues, e.g., allergies or acid reflux

Need few specialist visits annually

Few ongoing prescription needs

Typically includes set account you can rollover each year if you don’t use

Lower premiums than traditional plans and has maximum annual out-of-pocket limits

107


Health insurance fehb6
Health Insurance - FEHB

Choosing Your Plan

High Deductible Health Plan –

No known medical issues

Routine visits to doctor, e.g., flu or broken arm

No ongoing prescription medications

Includes Health Savings Account that can be rolled over from year-to-year

Lower premiums than traditional or consumer-driven plans and has maximum annual out-of-pocket limits

108


Health insurance fehb7
Health Insurance - FEHB

Choosing Your Plan

High Deductible Health Plan “HDHP” –

Intended to cover serious illness or injury. Includes some preventative care.

Includes HSA or HRA

Minimum deductibles of $1,100 (self) or $2,200 (self + family)

Deductible must be paid before any benefits paid

Higher out-of-pocket limits

HSA and HRA can build savings for future medical expenses

109


Health insurance fehb8
Health Insurance - FEHB

Choosing Your Plan

Health Savings Account “HSA” –

Must be enrolled in HDHP to have one

Tax-advantaged savings for future medical expenses

You own account you can use to pay qualified medical expenses for you and your dependents

Account grows “tax-free” to be used for qualified medical expenses

110


Flexible savings account fsa
Flexible Savings Account - FSA

You can set aside up to $5,000/year in pre-tax dollars to pay for medical costs, deductibles, co-pays, etc.

You can set aside up to $5,000/year in pre-tax dollars to pay for dependent care including elder care

Must use it or lose it by March 15 of the following year

Enroll during FEHB open season – employees only

www.benefeds.com

111


Fedvip dental and vision program
FEDVIP – Dental and Vision Program

Available to current and retired federal and postal workers and eligible family members

Purchased on a group basis but employee pays entire premium

Pre-existing conditions are included in coverage

Premiums are paid on a pre-tax basis

You can enroll in either or both during FEHB Open Season

Do not have to be in FEHB to enroll (but must be eligible) www.fedvip.com

112


Medicare
Medicare

Part A – HospitalizationDeductible - $1,156* Pay 1.45% of pay while workingFree at age 65

Part B – Medical ExpensesDeductible $140* +20% after deductiblePay $99.90/mo* with MAGI under $85,000Pay $319.70/mo* with MAGI over $214,000

Part D – Prescription Drug Plan

113


Medicare1
Medicare

Enrollment:

Age 65 – Part A - within 7-month window of birthdatePart B – within 7-month window of birthdate if retired otherwise within 8 months after retirement

General enrollment is from January 1 to March 31 each year. Penalty for not enrolling “on time” is 10% for each 12 months late.

114


Medicare2
Medicare

Do you need Part B?

Most federal employees use their FEHB as a Part B replacement. You can have both, but you will be paying not only your portion of the FEHB but the Medicare premiums, as well.

Medicare becomes the primary payor and your FEHB acts as a supplement in this case.

115


Fegli
FEGLI

Basic coverage – Current salary rounded to the nearest thousand + $2,000Costs .15/thousand = employee shareFederal government picks up 1/3 of premium

Option A - $10,000Must have Basic coverage to participateCosts increase from $.30 - $6.00 from age 35 to age 60

Option B – Current salary rounded to the nearest thousand in multiples from 1-5Must have Basic coverage to participate Costs increase dramatically at age 55 and beyond

116



Fegli2
FEGLI

Option C– For spouse and minor childrenSpouse = $5,000 in multiples of 1-5Children - = $2,500 in multiples of 1-5Children covered until age 22 unless disabled

Costs increase from $.27 to $3.00 from age 35 to age 60

In retirement – you choose how much of the benefits to keep.

118


Fegli3
FEGLI

At retirement, most federal employees choose to keep their Basic coverage with a 75% reduction and eliminate their other coverages. This reduces or eliminates the cost at age 65.

To compare coverage and premiums:

www.opm.gov/calculator/worksheet.asp

119


FLTCIP 2.0

Federal Long-term Care

Original coverage was established in 2002 as a partnership between John Hancock and MetLife – managed by LTC Partners

John Hancock awarded next 7-year contract beginning October 1, 2009 – still managed by LTC Partners


Long term care insurance
Long-term Care Insurance

You make four choices in creating your coverage:

How much? $50 - $300/day

How long? 2 years, 3 years, 5 years or lifetime

Inflation? 4% compound, 5% compound or future purchase

Deductible? 90 days

122


Long term care insurance1
Long-term Care Insurance

All tax-qualified plans:

Pay non-taxable benefits directly to you

Start payments when you cannot perform 2 out of 6 activities of daily living (certified by your physician) or cognitive impairment

Provide for the deductibility of premium payments under certain conditions

To calculate premiums or apply for coverage:

www.ltcfeds.com

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Taxes while working
Taxes While Working

Your current W-4 dictates withholding from your salary

Contributions to Thrift Savings Plan reduce taxable income

Unused annual leave is paid in a lump sum and taxed at the higher lump sum rates (currently ~40%!)

124


Rules of thumb to consider
Rules of Thumb to Consider

70% - 80% of your pre-retirement income is required to maintain your standard of living in retirement

Your retirement savings should be allocated more conservatively as you move into retirement

Investment returns need to outpace taxes and inflation

127


Retirement Concerns in America

  • Another market downturn

  • The demise of pension plans

  • Keeping up with healthcare costs

  • Taxes may take too much of retirement plans and IRA’s


Barriers to Growing and Keeping Your Money

  • Emotion

  • Taxes

  • Inflation

  • Volatility


Emotion vs. Logic – The Cycle of Market Emotions

Sell

Euphoria

Thrill

Anxiety

Excitement

Denial

Optimism

Fear

Optimism

Desperation

Relief

Panic

Hope

Capitulation

Depression

Despondency

Buy


Emotion vs. Logic – The Cycle of Market Emotions

Buy

Euphoria

Thrill

Anxiety

Excitement

Denial

Optimism

Fear

Optimism

Desperation

Relief

Panic

Hope

Capitulation

Depression

Despondency

Sell


No Market Risk

5% to 8% guaranteed growth for income benefit

Some Risk

Most Risk

8.4% average*

5% to 7% Dividend

Capital Gains

3.15% for 5 years

5%

Fixed Index Annuities

REITs

(non-traded)

Fixed Annuities

Variable Annuities

Mutual Funds

Stocks & ETFs

Venture

Capital

Cash

CDs

Bonds

VA Fees

$20,000 to $50,000

in bank type accounts

2.50%

1.25%

Fees

0.25%

0.75%

0.25%

5.00%

Interest risk

1% to 2%

fees

2% to 3% fees


Why does wall street exist
Why Does Wall Street Exist?

  • Allocate capital to deserving new businesses and technologies (and some undeserving ones, as well).

  • Capital markets are a major contributor to our economy and society.


Is it still okay to mistrust wall street
Is It Still Okay to Mistrust Wall Street?

  • Reckless with leverage

  • Required taxpayer funded bailouts

  • Want less regulation - not more


Wall street told us to
Wall Street told us to:

  • Be a long term investor.

  • If you are willing to take higher risk, over time you will be rewarded with a higher return.



Wall Street told us to:

15-year time period 1/1/1995 - 12/31/2009

Past Performance is no guarantee of future results. The table is for illustrative purposes only, and the rates of return are not representative of any portfolio or security. Please remember that each asset class has its own unique risks and potential for rewards. Indexes referenced in the table do not include reinvestment of dividends, are unmanaged and not available for direct investment.


The bigger picture…

Change in Spending at each Age & Stage of Life

46-50

Family,

College

Kids

22-30

Young

Married

31-42

Young

Family

50+

Empty

Nesters

18-22

Single

60+

Retired

Source: H.S. Dent Foundation


The bigger picture…

Baby Boomers Are Not Different

  • Front end of Boomer generation began retiring in 2003.

  • Wave continues through 2025.

  • Spending STILL PEAKS between the ages of 48-50.


Wall street told us to1
Wall Street told us to:

MISSING THE WORST –

  • The average total return for the S&P 500 over the last 25 years (i.e., 1984-2008) is +9.8% per year.

  • If you missed the 25 worst percentage gains days in those 25 years (i.e., 25 days in total, not 25 days per year), your average total return increases to +17.8% per year. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).


Wall street told us to2
Wall Street told us to:

RISK

Indices are unmanaged measure of market conditions that is not available for direct investment. Past performance cannot guarantee future results.


Wall street told us to3
Wall Street told us to:

The S&P 500 is an unmanaged index which measures broad based changes in stock-market conditions based on the average performance of 500 widely held common stocks. The S&P 500 does not represent the performance of an investment option. This index is not available for direct investment.

Indices are unmanaged and cannot accommodate direct investments. Past performance is not indicative of future results.

Source: Morningstar. Morningstar Categories presented are for illustrative purposes only and are not indicative of the performance of any particular investment. They are not investment vehicles available for purchase.


A New Definition of Diversification

A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.


A New Definition of Diversification

Correlation measures how closely related your various investments are related to a benchmark.


A New Definition of Diversification

2008

G Fund

F Fund

C Fund

S Fund

I Fund


$100,000

$55,270

+8.3% Cumulative Return

Over the last 10 Years

+81%

$115,170

March 2009

May 2011

$56,490

October 2002-

September 2007

+101.8%

$108,330

October 2007-

February 2009

September 2000-

September 2002

105.13%

-50.95%

91.77%

-44.73%

The S&P 500 is an unmanaged measure of market conditions that is not available for direct investment. Past performance cannot guarantee future results.

149


$100,000

$55,270

September 2000

September 2002

+81%

+133% Return

$500 Monthly Distribution

$12,500

October 2006

-44.73%

$42,770


Meet david walker
Meet David Walker

Served as the 7th Comptroller General of the United States and

head of the Government Accountability Office (GAO) from 1998 to 2008

Walker left the GAO to head the Peterson Foundation on March 12, 2008

154


Taxes in the future
Taxes in the Future

Affect your income in retirement

Even if you’re earning less – you may still be in a higher tax bracket

Tax rates aren’t in your control – how you plan is

156


Two key factors are
Two Key Factors Are:

  • Historical Data

  • Private and Public Debt


One hundred dollars
One Hundred Dollars

$100 – Most counterfeited money denomination in the world.Keeps the world moving.

http://usdebt.kleptocracy.us/ Source: Federal Reserve & www.USdebtclock.org


Ten thousand dollars
Ten Thousand Dollars

$10,000 – Enough for a great vacation or to buy a used car.Approximately one year of work for the average human on earth.

http://usdebt.kleptocracy.us/ Source: Federal Reserve & www.USdebtclock.org


One million dollars
One Million Dollars

$1,000,000 – Not as big of a pile as you thought, huh?Still this is 92 years of work for the average human on earth.

http://usdebt.kleptocracy.us/ Source: Federal Reserve & www.USdebtclock.org


One hundred million dollars
One Hundred Million Dollars

$100,000,000 – Plenty to go around for everyone.Fits nicely on an ISO / Military standard sized pallet.

http://usdebt.kleptocracy.us/ Source: Federal Reserve & www.USdebtclock.org


One billion dollars
One Billion Dollars

$1,000,000,000 – You will need some help when robbing the bank. Now we are getting serious!

http://usdebt.kleptocracy.us/ Source: Federal Reserve & www.USdebtclock.org


One trillion dollars
One Trillion Dollars

$1,000,000,000,000 – If you spent $1 million a day since Jesus

was born, you would have not spent $1 trillion by now.

http://usdebt.kleptocracy.us/ Source: Federal Reserve & www.USdebtclock.org


One trillion dollars1
One Trillion Dollars

$1,000,000,000,000 – Compared to a standard sized American Football field, European Football field & Boeing 747.

http://usdebt.kleptocracy.us/ Source: Federal Reserve & www.USdebtclock.org


15 trillion dollars
15 Trillion Dollars

$15,000,000,000,000 – Unless the U.S. government fixes the

budget, U.S. national debt (credit card bill) will topple 15

trillion by Christmas 2011.

http://usdebt.kleptocracy.us/ Source: Federal Reserve & www.USdebtclock.org


114 5 trillion dollars
114.5 Trillion Dollars

$114,500,000,000,000 U.S. Unfunded Liabilities

(Medicare, Medicaid, Medicare Prescription Drugs, Social Security, Military & Civil Servant Pensions)

http://usdebt.kleptocracy.us/

Source: Federal Reserve & www.USdebtclock.org


The future of tax rates
The Future of Tax Rates

Where do you think tax rates are headed in the future?

1) Increase

2) Decrease

3) Stay the same


Top Federal Tax Rates 1913 - 2009

Source: Tax Foundation – www.taxfoundation.com and H.S. Dent Foundation


2012 Marginal Income Tax Rates

Married filing jointly

  • $0 - $17,400 10%

  • $17,400 - $70,700 15%

  • $70,701 - $142,700 25%

  • $142,701 - $217,450 28%

  • $ 217,451 - $388,350 33%

  • $ 388,351 - and over 35%

Source: Tax Foundation, 2005; CCH, 2009


Marginal Income Tax Rates

(after Bush tax cuts expire)

Married filing jointly

  • $0 - $43,850 15%

  • $43,850 - $105,950 28%

  • $105,950 - $161,450 31%

  • $161,450 - $288,350 36%

  • $ 288,350+ 39.6%

Source: Tax Foundation, 2005; CCH, 2009



How much of your annuity will be tax-free as a refund of your contributions?

http://apps.opm.gov/tax_calc/index.cfm


Taxes in retirement
Taxes In Retirement your contributions?

At retirement, you will complete a new W-4P for withholding from your federal annuity

You will need to get your state form for withholding – not included in OPM package

In Colorado – federal annuities are exempt from state tax up to $20,000 ($24,000 after age 65)

Unused annual leave is paid in a lump sum and taxed at the higher lump sum rates

175


Taxes in retirement1
Taxes In Retirement your contributions?

What about Social Security?

Depending on your income a portion of your Social Security income may be taxed, as well.

Single filers:

AGI $25,000-$35,000 – 50% benefit taxedAGI $35,000+ - 85% of benefit taxed

Joint filers:

AGI $32,000-$44,000 – 50% benefit taxedAGI $44,000+ - 85% of benefit taxed

Only 50% of your Social Security benefit counts in computing your AGI

176


Taxes in retirement2
Taxes In Retirement your contributions?

What about Thrift Savings?

Taxed as ordinary income when withdrawn

No penalty if you:

Separate or retire when you reach age 55 or better

Retire on disability retirement

Take monthly payments based on your life expectancy

177


Taxes
Taxes your contributions?

What can you do to insulate your assets from future taxes?

Three ways to get tax-free income:

Municipal bonds

Roth IRA

Permanent life insurance

178


Who Can Contribute To a Roth IRA? your contributions?

Income Limits on Eligibility to Contribute for 2012:

Based on Adjusted Gross Income

Married Filing Jointly: $173,000 - $183,000

Single: $110,000 - $125,000NO Income Limits on Eligibility to Convert for 2012


Roth ira
Roth IRA your contributions?

If eligible, 2012 Contribution Limits –

$5,000 – under age 50

+$ 1,000 – catch-up contributions age 50 or better

No Tax Deduction

Tax-free When Withdrawn

180


Three Credit Bureaus your contributions?

Experian

Equifax

TransUnion

How Can I Find Out My Score?

www.mycreditreport.com

www.annualcreditreport.com


What should your credit score be? your contributions?

850 = Pristine

750 = Very Good

680 = Minimum

300 = Dismal



Should You Pay Off Your Mortgage? your contributions?

  • PROs

  • You’ll save thousands of dollars in interest

  • Peace of mind

  • CONs

  • Possibility to earn higher returns on your money

  • Liquidity

  • Tax deductibility of interest


Techniques and strategies while living your contributions?

  • Durable power of attorney

  • Financial

  • Health

  • Living will

  • Name beneficiaries to reduce probate costs and time delays

  • Family planning


Getting Started your contributions?

  • Save!

  • Understand Your Options

  • Make Good Choices Today to Build For Future

  • Create Strategies for Balance



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