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Federal Employee Retirement How to prepare & What are your options

Get expert guidance on how to prepare for federal employee retirement and understand your options. Presented by Vince Bono and Carolyn Tobin, this resource provides valuable information and tools to help you make informed decisions for a financially secure retirement.

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Federal Employee Retirement How to prepare & What are your options

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  1. Federal Employee RetirementHow to prepare & What are your options Presented by Vince Bono: Founder of Federal Employee Advocates Carolyn Tobin: Editor of The Federal Employee Financial Blog. Please send your questions to Carolyn Tobin: carolyn@federalemployeeblog.com We will not reveal your identity on the call

  2. Free Resources • Our FERS & CSRS Online Retirement Calculator • Our Tax Grid that shows which States do and do not tax federal pensions and Social Security. • Our White Paper on the “Federal Employee 80% Rule” • Our White Paper on your Federal Employee Health Benefits • Vince Bono’s White Paper on Fixed Indexed Annuities • MRA and Social Security Full Retirement Age Charts

  3. Federal Retirement Seven Important Considerations • Your Life Expectancy • When you will be eligible to retire • Will you be financially prepared to retire • When you can access your TSP money • What are your financial options • Taxes (State & Federal) • Will you make an irreversible mistake

  4. Average Life ExpectancyHow many years will you need your retirement income to last? Male 45: 32.16 Years Female 45: 36.31 Years Male 50: 27.85 Years Female 50: 31.75 Years Male 55: 23.68 Years Female 55: 27.31 Years Male 60: 19.72 Years Female 60: 23.06 Years Male 65: 16.05 Years Female 65: 19.06 Years Male 70: 12.75 Years Female 70: 15.35 Years Male 75: 9.83 Years Female 75: 11.95 Years Your pension and SS alone probably will not be enough for you to retire on, so you need other sources of income to last at least this many years beyond your retirement.

  5. Will you have enough money to retire? Most federal employees should be able to retire and still keep their same standard of living, if their retirement income is at least 80% of their gross pre-retirement income. • For Sure you will no longer be paying payroll taxes. • For sure you will not be contributing to your TSP • Hopefully your mortgage will be paid off. • Hopefully your children have graduated college. • Maybe you will “downsize”.

  6. Sources of Post-Retirement IncomeHow do you get to 80% • CSRS or FERS-Defined Benefit Pension • Social Security- • Thrift Savings Plan-Similar to a 401K • Savings Accounts • IRAs • Annuities • CDs, Stocks, Bonds etc

  7. Eligibility for “Normal” Voluntary Retirement • CSRS: FERS: • Age 55 & 30 Years *MRA & 30 Years • Age 60 & 20 Years Age 60 & 20 Years • Age 62 & 5 Years Age 62 & 5 Years ---------------------------------------------------------------------------- *MRA Plus 10 Years There is a 5% per year reduction if you are under age 62 Ex: At age 57 your pension amount would be decreased by 25% ______________________________________________________________ If you leave federal service before qualifying, and have over 5 years of service, you can collect a deferred annuity at age 62, or you can a receive a lump sum for your .08% contributions

  8. How do you get to 80%Of your Pre-Retirement IncomeYour Pension • CSRS FERS 20 Years: 36.25% 20 Years: 20% or 22% 25 Years: 46.25% 25 Years: 25% or 27.5 % 30 Years: 56.25% 30 Years: 30% or 33% 35 Years: 66.25% 35 Years: 35% or 38.5% 40 Years: 76.25% 40 Years: 40% or 44% 42 Years: 80.00% Will never reach 80% )<:

  9. Your Pension Calculation FERS Employees A) If you are 62 years of age and have 20 or more years of service: 1.1% X the number of years of federal service X Your High Three If you don’t meet both criteria in A) the 1.1% drops down to 1.0% CSRS Employees 1.5% of your High Three for your first 5 years of federal service 1.75% of your High Three for your next 5 years of federal service 2.0% of your High Three for every year of federal service thereafter

  10. FERS Federal EmployeesAsk for our Free Calculator • FERS federal employee with 20 years federal service and age 62 at retirement with a High Three of $100,000: • 1.1% X 20=22% X $100,000 = $22,000 Annual Pension • If that federal employee retired at age 61 instead of age 62: • 1.0% X 20=20% X $100,000 = $20,000 Annual Pension • If that 62 year old federal employee retired with 19 years: • 1.0% X 19=19% X $100,000 = $19,000 Annual Pension

  11. CSRS Federal EmployeesAsk for our Free Calculator • CSRS Federal Employee age 62 with 20 years of Federal Service at Retirement and a High Three of $100,000 1.5% X $100,000 = $1500 X five =$7,500 1.75% X $100,000 = $1750 X five = $8,750.00 2.00 % X $100,000 = $2000 X ten = $20,000 $7500 + $8750 + $20,000 = Annual Pension of $36,250

  12. SRSFERS Special Retirement Supplement • Begins at your Minimum Retirement Age at Retirement! • Take your Social Security Estimate for age 62 and Divide that by 40, then X that by your number of years of civilian service. • If your SS Estimate at age 62 is $12,000 a year, and your # of years of FERS Service is 25: • $12,000 Divided by 40=$300 X 25=$7500 a year. • This is subject to the $15,720 SS Earnings Test. For every $2.00 you earn above it, your benefit is reduced by $1.00. Your pension is not included-only Wages & Business income.

  13. How do you get to 80%Of your Pre-Retirement IncomeSocial Security • The Minimum Age to collect is 62 , but there is a $15,720 Earnings Test until you reach your Social Security FRA (Full Retirement Age) • If you Retire & start collecting at 62 your payments will be 25% (6.25% per year) less than if you Retired & Collected at your “Full Retirement Age”. This assumes your Social Security FRA is Age 66. At age 63 the reduction is not 25% but rather18.75% (6.25% X 3 Years). • If you Retire & start collecting at age 70, your payments will be 32.5% more than if you Retired & Collected at your FRA, again assuming your Social Security FRA is Age 66. • The longer you wait, the more you get, up to age 70. • Age 80 is your “Break Even” Point.

  14. How do you get to 80%Of your Pre-Retirement Income Your Pension If you are FERS at 30 Years = 30% or 33% (Age 62/20 Year Test) If you are CSRS at 30 Years = 56.25% -------------------------------------------------------- Social Security On Average 25% (30% for Lower Paid Federal Employee-20% Higher Paid) The more you earn, the less percentage impact it has towards 80% $150,000 Earnings/$30,000 Social Security=20% $50,000 Earnings/$15,000 Social Security = 30% --------------------------------------------------------------- FERS at “Mid-Level” Either 55% or 58% towards your 80% CSRS at “Mid-Level” 56.25% towards your 80% ---------------------------------------------------------------

  15. Taxation • There is a misconception that your federal retirement, social security and TSP withdrawals are not taxed. • Social Security: Taxed Subject to the Income Test. • Federal Retirement: Taxed to the extent of the Governments contribution. There is no Income Test • TSP Withdrawals: Taxed unless it’s a Roth.

  16. When You Can Access Your TSP money • When you leave federal service • Retirement • Quitting government service • At 59 ½ if still working ___________________________________________________ • There may be early withdrawal penalties: • If you retire and withdraw the money before the year in which you turn 55 • If you quit before retiring and withdraw the money before you reach 59 ½

  17. How You Can Take Your TSP money • Single payment • No more than two total • One is allowed at 59 ½ if still working • Series of monthly payments • Can change amount annually • Can’t stop • Can change to one final payment

  18. What Can You Do With Your TSP Money Purchase a single premium immediate annuity You have no choice as to the company. This is risky because if you need money for an emergency, you have no access to it. __________________________________________________ Transfer or rollover with the company of your choice • Direct transfer avoids withholding

  19. Alternative TSP Investment Choices Nobody can deny that the TSP Funds over time have performed pretty well. But what happens if you want to retire within the next 10 years and another 2008 occurs. Then what? On January 1st of 2008 many federal employees who planned on retiring that year are still working today because they had their TSP money invested in the C Fund, S Fund, L Funds or I Fund and suffered massive loses in their TSP value.

  20. The Dow Jones Average by the Numbers “The Fall” of 2008 • September 15: -504.48 (4.42%) • September 17: -449.36 (4.06%) • September 20: -444.48 (4.85) • September 29: -777.68 (6.98%) • October 7: -508.39 (5.11%)October 9: -678.91 (7.33%) • October 15: -733.08 (7.87%) • October 22: -514.45 (5.69%) • November 5: -486.01(5.05%) • December 1: -679.95 (7.7%)

  21. A Quote From “Economy and Market Daily” • Harvard Economist Harry Dent is known worldwide for his uncanny boom and bust calls over the last 30 years, so one should pay careful attention to his new warnings that: • the stock market will collapse by 70% • real estate will plunge by 40% • unemployment will spike up to 15% (24.7% using the broad-based U6 Index).

  22. The TSP 2008 “Meltdown” The C Fund Lost 36.99% The S Fund Lost 38.32% The I Fund Lost 42.43% If after taking those loses in 2008 you put your money in the G Fund in 2008, you are still nowhere close to just breaking even. In fact you are still years away from that! Fixed Indexed Annuities Lost Nothing!

  23. Fixed Indexed Annuities A fixed Indexed Annuity allows you to participate in the upside of the stock market without any risk whatsoever to your Principal. The first annuity in the United States was “invented” by the Presbyterian Church in the early 1700s. Ben Franklin, utilized annuities to help fund the American Revolution and the rapid growth of both Philadelphia and Boston. Annuities are so popular that Ben Bernanke, the former head of the Federal Reserve, once disclosed that his major financial assets were vested in two annuities.

  24. How Does Your TSP Earn Money • BlackRock Institutional Trust Company, N.A. manages the C, S, & I Funds. “These Funds are invested in order to replicate the risk and return of their benchmark stock market index”. • They are not managed to Maximize Gains or Minimize Losses, which is why in 2008, those funds failed you. For example The C Fund's objective is to match the performance of the S&P 500. That’s why in 2008, it lost 37% of your money.

  25. How Does Your TSP Earn Money • The S Fund's objective is to match the performance of Small to Medium-Sized Companies that are in the “Dow Jones U.S . Completion TSM Index”. That’s why in 2008, it lost 38.32% of your money. • The I Fund's objective is to match the performance of the “Morgan Stanley Capital International EAFE Index”. That’s why in 2008, it lost 43.43% of your money.

  26. How an annuity earns moneyParticipate in the upside of the market, without any of the risk Similar to your TSP, the performance of a Fixed Index Annuity is tied to a stock market index. The most common “Crediting Method” is the S&P 500, but most companies offer numerous other options for you to choose from, such as the Dow Jones Industrial Average and the NASDAQ, Unlike your TSP, if the chosen crediting method in your Fixed Indexed Annuity goes down, you don’t lose money. Best yet, all prior gains are Locked-In. So say in 2015 you earned 9% in your Fixed Indexed Annuity and in 2016 the stock market crashed, that 9% can never be lost nor can any other prior gain in that annuity be lost!

  27. Access to your Funds When your annuity contract expires, you can: • Take the money in one lump sum. • Receive a guaranteed Lifetime Income. • Do combination of both #1 and #2 • Roll the money into another Annuity

  28. Failing to Plan, is Planning to Fail • Most federal employees only get one chance to retire and stay retired. Be smart. • Risking 40% of your TSP is not worth making 10%, if you are within 10 years of retirement. • When your Approved Host reaches out to you, take the time to reach back out to them. Build a “Retirement Battle Plan” with them.

  29. TSP Watch Dogwww.tspwatchdog.com • TSP Watch Dog is a TSP Monitoring service that can help you Maximize your TSP gains while minimizing your TSP Losses. TSP Watch Dog is not a substitute for having a Financial Advisor guide you and help you better plan for your retirement. That is something our Approved Hosts do, and they do that very well. • TSP Watch Dog never has access to your TSP account nor can they make changes to your TSP account. What they can do is make TSP Fund Allocation recommendations based upon the criteria you provide them with when you sign up. • We conducted a “Back-Test” analysis of how a $100,000 TSP would have performed during the past 16 years, assuming $25,000 was invested in each the C Fund, S Fund, I Fund and L Fund, and you can visit their website to see those result. They are very impressive.

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