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The Federal Employee Service Center. “Serving Federal & Government Employees”. Welcome “AIM Members!”. TSP . Our Purpose T o provide all Federal and Government employees with the necessary information concerning their federal benefits and retirement planning. Our Objective

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The federal employee service center

The Federal Employee Service Center

“Serving Federal & Government Employees”

Welcome “AIM

Members!”

TSP

Federal Employee Service Center 2012


The federal employee service center

Our Purpose

To provide all Federal and Government employees with the necessary information concerning their federal benefits and retirement planning.

Our Objective

To give Federal and Government employee a better understanding of their current benefits and provide individualized information and tools to help them achieve financial success.

Federal Employee Service Center 2012


Thrift savings plan

Thrift Savings Plan

The TSP is a “DEFINED CONTRIBUTION PLAN” for federal

employees that allows you to save pre-tax dollars in a

Retirement account. You get to choose how to invest those

dollars – but your choices are limited.

Your contributions to your TSP account are optional. They

are separate from your FERS or CSRS pension. While you

receive a fixed amount from your FERS or CSRS Pension;

The amount of money you get from your TSP will depend

on:

 How MUCH you put in

 How WELL YOU manage it.

Federal Employee Service Center 2012


The federal employee service center

Federal Employee Service Center 2012


The federal employee service center

MAJOR FEATURES

  • Pre & After Tax contributions

  • TSP Roth (NEW)

  • Tax Deferred Growth

  • Automatic agency contributions*

  • Matching agency contributions*

  • Choice of Investments

  • Inter-Fund transfers

  • Loan Program

  • Spouse Protection

  • * FERS only

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The federal employee service center

Roth TSP is NOT a Roth IRA

ROTH TSP

  • No Income Restrictions

  • All TSP Participants Eligible

  • Different Contributions Limits

ROTH IRA

‣ Income Restrictions

‣ Contribution Limits

‣Withdrawal Restrictions

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The federal employee service center

How “TSP ROTH” works

‣ Current Balance in TSP will not count / Can not Convert!

‣ Combined contributions ( Plus “Catch –Up”) can not exceed

Limit

‣ Any contributions will apply to both TSP & TSP ROTH

‣ You can transfer 401K ROTH, 403(b) ROTH, and 457 ROTH in

TSP ROTH

‣ Still Able to take Loans, In-Service Withdrawals, and Partial

Withdrawals.

‣ Withdraw TSP ROTH account to IRA’s

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The federal employee service center

Who is eligible to take advantage of Roth TSP?

* Roth Earnings will be Tax-Free IF5 years have passed since January 1 of the year you made your first Roth contribution AND you are age 59½, permanently disabled, or deceased.

** Beneficiary participants may not add new Roth contributions to their accounts, but their

accounts may contain Roth contribution

made by the deceased spouse

Federal Employee Service Center 2012


The federal employee service center

Federal Employee Service Center 2012


The federal employee service center

IMPORTANT!

If you transferred money to your TSP Roth balance from a Roth account maintained by another employer plan, the 5-year clock begins on January 1 of the year your first contribution was made to your TSP Roth balance or, if earlier, January 1 of the year you madeyour first contribution to the Roth account of the other employer plan

Federal Employee Service Center 2012


Contributions

Contributions

Maximum Annual Contribution for 2012 has been

reconfirmed as $17,000 per IRS §402 (g).

Federal Employee Service Center 2012


Vesting

Vesting

You are always vested in your own contributions including:

any matching contributions, Catch-up contributions, and

any earnings that you have accrued.

Most FERS Employeesbecome vested in agency

automatic contributions and earnings after three years.

FERS Employees in Congressional & certain Non-Career

positions vest in two years.

Leave Government before vesting - agency automatic

contributions and it’s earnings will be forfeitedto the TSP.

Death - Automatically vested in all the money in TSP.

Federal Employee Service Center 2012


Catch up

Catch-Up

►Must be 50 years of age (min) or over during the current calendar year.

►Must be contributing the maximum amount.

►Invest up to $5,500 in 2012. Subsequent years after

will be indexed to inflation.

►No waiting period / Form TSP-1-C (Civilians) TSP-U-1-C (Uniformed Services). (TSP ROTH )

►Able to change, stop, or restart at any time!

►You MUST make a new election each calendar year if you want to continue your catch-up contributions.

►No Agency matching!

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The federal employee service center

INTER-FUND TRANSFERS

You can transfer money from one fund to another in the TSP (Must be received by 11:00am/About 2 days).

Limited to two inter-fund transfers in a month!

Additional transfers allowed only to move in G Funduntil the first day of the next calendar month.

Transfers are confirmed by TSP record keeper any errors must be reported within 30 days of notice.

Federal Employee Service Center 2012


In service withdrawals

In-Service Withdrawals

Federal employees who are currently working for the

government have an opportunity to make in-service

withdrawals from their TSP account. There are two

programs available:

AGE BASED: A one-time lump sum withdrawal for

participants who are 59 ½ or older.

HARDSHIP:Financial hardship withdrawals for

participants who can demonstrate

financial hardship.

Federal Employee Service Center 2012


Age based withdrawals

Age Based Withdrawals

Employees who are 59½ or older, can make an

AGE-BASED WITHDRAWAL, a one-time withdrawal

of all or any portion of their vested TSP account

balance. The withdrawal is without interruption to

the contributions you make to your TSP account.

Age based withdrawals are subject to a mandatory

20% federal income tax withholding unless the funds

are transferred directly from the TSP to a qualified

account (IRA or 401(k).

Participants cannot repay the funds or convert it to a

loan.

Federal Employee Service Center 2012


Financial hardship withdrawals

Financial Hardship Withdrawals

There is no age limit for FINANCIAL HARDSHIP withdrawals,

but the participant MUST demonstrate a hardship.

Employees can withdraw all or any portion of their vested TSP

account balance. However, employees cannot withdraw less

than $1,000.

Financial hardship withdrawals are subject to an early

withdrawal penalty of 10% if taken prior to age 59 ½.

Participants cannot repay the funds or convert it to a loan.

Employees who take a financial hardship loan are ineligible to

continue investing in the TSP for six (6) months following the

disbursement of the withdrawal. However, during that time the

1% agency contribution does continue.

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The federal employee service center

TSP

Loan Purposes:

  • Purchase of a Primary Residence

  • Education Expenses

  • Medical Expenses

  • Financial Hardship

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Terms of Loans:

1)Residential is 1 to 15 years

2) Non-residential is 1 to 5 years

3) Payroll deductions

4) A Personal Check

Federal Employee Service Center 2012


Leave your tsp alone

LEAVE YOUR TSP ALONE!

IT IS NOT A GOOD IDEA TO

BORROW AGAINST YOUR

RETIREMENT FUND!

Most people are worried if they are saving

enough for retirement. Borrowing from what you

have already saved only sets the bar higher.

Instead . . .

Federal Employee Service Center 2012


Develop an emergency fund

Develop an Emergency Fund

If you don’t have one already you should

establish an adequate emergency fund. It

should be separatefrom your checking account:

1. In a place that’s safe

2. Be completely liquid

3. Be funded systematically

You should keep a minimum of3 monthsincome, preferably 6 monthsreadily accessible.

Federal Employee Service Center 2012


How much you should have in your emergency fund

HOW MUCH YOU SHOULDHAVE IN YOUR EMERGENCY FUND?

A TWO INCOME FAMILY WITH KIDS

A SINGLE WORKER WITH NO KIDS

A ONE-INCOME FAMILY

A SELF EMPLOYED COUPLE WITH KIDS

3 MONTHS 3 – 6 MONTHS 6 - 9 MONTHS 9 – 12 Mths

THESE FIGURES ARE A SUGGESTION ONLY.

Federal Employee Service Center 2012


Investment options

INVESTMENT OPTIONS

You may invest in:

G Fund

F Fund

C Fund

S Fund

I Fund

or the L Fund“Lifecycle Funds” in any combination.

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Tsp funds are on autopilot

TSP Funds are on Autopilot

 You might be surprised to know that Blackrock

Institutional Trust Company, N.A. is the company that

handles the TSP funds – not the Federal Government.

 But even though Blackrock handles the money, the funds

are really on autopilot. Unlike some mutual funds, there is

not a person or team of people managing the TSP funds to

get the highest return.

 The funds are designed replicate a specific financial index.

The goal of each fund is NOT to make the most money.

Instead the goal of each fund is to make the same return

as a certain index. The exception to this is the ‘G’ Fund.

Federal Employee Service Center 2012


Funds indexes

FUNDS - INDEXES

FundDescriptionIndex

GSpecial short-term U.S. None

Treasury securities issued

specially to the TSP

FMix of government , mortgage-Barclay’s Capital U.S. backed, corporate & foreign Aggregate Bond Index

government sectors of

the U.S. bond market

CLarge capitalization U.S. S&P 500 Index

stocks

SMix of small & Mid Dow Jones U.S. Completion capitalization U.S. stocks TSM Index

IMostly large capitalization MSCI EAFE index

foreign stocks

Federal Employee Service Center 2012


Lifecycle funds

LIFECYCLE Funds

The Lifecycle Funds are funds that are invested in the various

regular funds (G, F, C, S and I).

The “L” Funds are allocated based on the expected withdrawal

date of the participants, and are adjusted quarterly to become

more conservative as the participants reach their

desired withdrawal dates.

The L Funds are designed to provide the best possible return for

the least amount of risk based on the withdrawal date and not

necessarily the retirement date.

NOTE: THESE FUNDS CAN POST LOSSES

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The l funds below are listed from most conservative to most aggressive based on today s allocations

The L Funds below are listed from most conservative to most aggressive based on today’s allocations

FundAnticipated withdrawal time frame

LIncomeThose currently making withdrawal

or who expect to begin making

withdrawals relatively soon from

the TSP

L2020Now thru 2024

L20302025 thru 2034

L20402035 thru 2044

L20502045 or Later (opening 01/31/2011)

CONSERVATIVE

AGGRESSIVE

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AVERAGE OVER THE LAST 12 MONTHS

C FUND 9.26%

F FUND 7.31%

S FUND 1.01%

I FUND (11.61%)

G FUND 1.7%

SAVINGS ACCT 1.6% to 2.02%

MONEY MARKET .85 %

EE BONDS .6% - 1%

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Average Annual Returns (As of 12/2011)

L Inc. L 2020 L 2030 L 2040 L 2050 G F C S I

1-YR 2.23% 0.41% (0.31%) (0.96%) 2.45% 7.89% 2.11% (3.38%)(11.81%)

3-YR 5.48% 9.78% 11.16% 12.19% 2.75% 6.86% 14.17% 18.91% 7.73%

5-YR 3.29% 1.77% 1.30% .75% 3.37% 6.62% (0.20%) 1.82% (4.51%)

Inception Date

4.08% 3.97% 3.81% 3.63% (3.81%) 5.86% 7.12% 9.23% 6.11% 2.79%

8/1/05 8/1/05 8/1/05 8/1/0 1/31/11 4/1/87 1/29/88 1/29/88 5/1/01 5/1/01

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10 YR SUMMARY OF FUNDS

Federal Employee Service Center 2012


How much should i put in my tsp

How Much Should I Put in My TSP?

For most people, it makes sense to contribute at

least the “Maximum Amount” that your Agency

will match.Your TSP match is the closest thing

you’ll get to Free money. Another way to look at

it is that you are putting in $1, and the agency

gives you another $1.

You just doubled your money!

CSRS Employees should also contribute to the

TSP, even though you don’t get a match.

doubledyour money!

Federal Employee Service Center 2012


Tsp matching for fers

TSP Matching for FERS

  • Agencies are required to contribute an amount equal to 1% of a FERS employees Basic Pay, regardless of their participation in the TSP.

  • Agencies are also required to match the first 5%of

    employee contributions.

Federal Employee Service Center 2012


What is your risk tolerance

What is your Risk Tolerance

The key is to know yourself!

How are you going to react if for example in a

Short period of time your investment lost:

Would you have the emotional fortitude to

stick to your long-term commitment and ride it

out?

50%

20%

Federal Employee Service Center 2012


It was will rogers who once said

It was Will Rogers who once said . . .

“I am more interested in the

return of my money than the return on my money!”

Federal Employee Service Center 2012


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TSP

Goals for Investment

1. Strategy

2. Minimum Risk

3. Preservation of Principle

Federal Employee Service Center 2012


What s the best tsp allocation

What’s the Best TSP Allocation?

Which Funds are Right for Me?

Sometimes it can be difficult to get your Federal

retirement planning questions answered. Questions about

how your Federal benefits apply to your particular situation.

You probably know that your agency’s HR department can’t

give personalized recommendations. They can tell you about

your benefits – but they can’t tell you what is the best option

for you.

Federal Employee Service Center 2012


Equal distribution

Equal Distribution

20%

G Fund

20%

I Fund

20%

F Fund

20%

S Fund

20%

C Fund

Note: Hypothetical Example. Investment percentages shown

are for illustration purposes only and not intended as

investmentadvice

Federal Employee Service Center 2012


Rule of 100

Rule of 100

  • Subtract your age from 100

  • Your MAXIMUM RISK exposure should not be greater than the difference between your age and 100.

    For Example:

  • A person age 30, (100 – 30 = 70) no more than 70%

    of your money should be at risk.

     A person age 50, (100 - 50 = 50) no more than 50%

    of your money should be age risk.

Federal Employee Service Center 2012


25 year old allocation using rule of 100

25 Year Old ALLOCATIONusing “Rule of 100”

SAFE

AT RISK

C, S, I

Funds

Note: Hypothetical Example. Investment percentages shown are for

illustration purposes only and not intended as investment

advice.

Federal Employee Service Center 2012


35 year old allocation using rule of 100

35 Year Old Allocationusing “Rule of 100”

SAFE

AT RISK

G, F

Funds

35%

C, S, I Funds

65%

Note:Hypothetical Example. Investment percentages shown are for

illustration purposes only and not intended as investment advice

Federal Employee Service Center 2012


45 year old allocation using rule of 100

45 Year Old Allocationusing “Rule of 100”

SAFE

AT RISK

45%

C, S, I

Funds

55%

Note: Hypothetical Example. Investment percentages shown are for

illustration purposes only and not intended as investment

advice

Federal Employee Service Center 2012


45 year old allocation using rule of 1001

45 Year Old Allocationusing “Rule of 100”

(exploded view)

AT RISK

Note: Hypothetical Example. Investment percentages shown are

for llustration purposes only and not intended as

investment advice.

Federal Employee Service Center 2012


55 year old allocation using rule of 100

55 Year Old Allocationusing “Rule of 100”

SAFE

AT RISK

G, F

Funds

55%

Note: Hypothetical Example. Investment percentages shown are for

illustration purposes only and not intended as investment advice

Federal Employee Service Center 2012


Your tsp retirement choices

Your TSP Retirement Choices

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Post service withdrawals

Post Service Withdrawals

On separation from Federal Service, you become eligible

to withdraw your TSP. You may choose:

1. Leave your money in the TSP

2. Take monthly TSP withdrawals

3. Annuitize your TSP

4. Transfer your TSP money into an IRA

Any combination of these withdrawal options.

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In 1935 when President Franklin D.

Roosevelt signed OASDI into law,

few people lived more

than 5 years in

retirement.

Things have

changed!

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How many of you know that the tax law for social security recipients changed in 1984

How many of you know that the tax law for Social Security recipients changed in 1984?

50% of

Social Security

Income Taxable

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The Budget Reconciliation Act of 1993 added another bracket:

85% of

Social Security Income Taxable

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1 of excess income from

$1 of excess income from:

Wages, PensionsTax-Exempt Bonds, Bond Funds Interest Earnings on CD’sSavings AccountsMoney Market AccountsRoyalties, Dividends

Can trigger income tax on as much as 85¢ of each $1 of your Social Security Income.

Federal Employee Service Center 2012


At age 65 your life expectancy is

At age 65 your life expectancy is

!

85

If you reach age 85 . . . chances are you

will live another 6.9 years.

Many people will be spending

as much time in retirement as

They did in the workforce.

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Too often people fail to address retirement needs until

They are nearing retirement. Then they discover that they

Must adjust their expectations for the reality of their

situation.

The better approach is to begin thinking about how much

monthly income you think you will need to live on in

Retirement as early as possible. Doing so will allow you

to set an asset accumulation goal and calculate with

reasonable accuracy how much you need to save. Be sure

to take into account:

 Government Pension

 Social Security

 Any Other Sources of Income

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The federal employee service center

This chart dramatically illustrates how much money you must put away MONTHLY to reach $1M – depending on the number of years until retirement. The sample figures assume a 10% annual rate of interest

$12,809.50

$4,641.40

$2,39276

$1,306.00

$747.45

$438.73

$261.21

$156.82

5101520 25303540

Years until Retirement

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The federal employee service center

Since 1900, inflation has averaged an annualized rate of 3.1%*

This means that a person needing $50,000 in 2010 to cover living expenses would require approximately $92,000 in 2030 and $125,000 in 2040, just to maintain the same purchasing power.

+30 years

* based on U.S. Bureau of Labor Statistics Consumer Price Index from 1900-2008

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YOUR NEST EGG

How Fast Can you Spend It?

To insure that your retirement savings last a lifetime, you to need to restrict your withdrawals the first year. Assuming you start with $500,000, that’s $1,666 per month. If you take out much more, you could run out of money.

How long $500,000 will last at different withdrawal rates

10% 8% 5% 4%

$4,166 mth $3,333 mth $2,088 mth $1,666 mth

Federal Employee Service Center 2012


The federal employee service center

Federal Employee Service Center 2012


Rule of 72

RULE OF 72

√72

Take the interest rate you are currently receiving and divide it into 72. That is the number of years it will take to double your money.

Federal Employee Service Center 2012


This rule of 72 table will help illustrate this concept

This “Rule of 72” table will help illustrate this concept

√72

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Are you aware of the changes that have been made to your Federal Benefits? These SHOULD be a few of the questions you have concerning your retirement:

? How much income will I receive at retirement

? How much will my spouse receive

?What is the FERS Supplement

? How much will Federal Employee Group Life (FEGLI) cost me at retirement

?What kind of penalties will I receive if I retire early

?What are my investment & retirement options with my TSP

?Can I count my accrued Sick Leave for my retirement

Federal Employee Service Center 2012


Benefit analysis

BENEFIT ANALYSIS

By attending this Workshop and being an “AIM Member” you will receive a

Complimentary

“FEDERAL BENEFIT ANALYSIS”

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The federal employee service center

A Federal Benefits Specialist will meet with you and explain your Benefit Analysis which will include:

Eligible Retirement Age

CSRS, FERS Pension (projected 10 years beyond)

FEGLI costs

Health Insurance costs

FERS Supplement and Monthly Social Security

Survivor Benefits and costs

TSP projections

and more . . .

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FESC Strategic Planning

Tax Free

Income

Tax Deferred

Income

Taxable

Income

Income Streams

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Top 5 Reasons

Reference: TSP website

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Compared to

Reference: TSP website

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Opinions

Reference: TSP website

Federal Employee Service Center 2012


The federal employee service center

Federal Employee Service Center 2012


The federal employee service center

Federal Employee Service Center 2012


The federal employee service center

Federal Employee Service Center

“Serving Federal & Government Employees”

Office 281.741.1502 Toll Free 1. 888.206.3352

Fax 713.634.2733

521 N. Sam Houston Pkwy E Suite 623

www.WebFederalService.com

www.FederalBenefitAnalysis.org

Federal Employee Service Center 2012


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