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The Federal Employee Service Center

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

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  1. The Federal Employee Service Center

    “Serving Federal & Government Employees” Welcome “AIM Members!” TSP Federal Employee Service Center 2012
  2. 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
  3. 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
  4. Federal Employee Service Center 2012
  5. 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 Federal Employee Service Center 2012
  6. 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 Federal Employee Service Center 2012
  7. 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 Federal Employee Service Center 2012
  8. 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
  9. Federal Employee Service Center 2012
  10. 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
  11. Contributions Maximum Annual Contribution for 2012 has been reconfirmed as $17,000 per IRS §402 (g). Federal Employee Service Center 2012
  12. 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
  13. 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! Federal Employee Service Center 2012
  14. 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
  15. 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
  16. 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
  17. 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. Federal Employee Service Center 2012
  18. TSP Loan Purposes: Purchase of a Primary Residence Education Expenses Medical Expenses Financial Hardship Federal Employee Service Center 2012
  19. 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
  20. 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
  21. 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
  22. 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
  23. 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. Federal Employee Service Center 2012
  24. 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
  25. 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 S Mix of small & Mid Dow Jones U.S. Completion capitalization U.S. stocks TSM Index I Mostly large capitalization MSCI EAFE index foreign stocks Federal Employee Service Center 2012
  26. 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 Federal Employee Service Center 2012
  27. 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 Federal Employee Service Center 2012
  28. Federal Employee Service Center 2012
  29. 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% Federal Employee Service Center 2012
  30. 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 Federal Employee Service Center 2012
  31. 10 YR SUMMARY OF FUNDS Federal Employee Service Center 2012
  32. 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
  33. 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
  34. 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
  35. 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
  36. Federal Employee Service Center 2012
  37. TSP Goals for Investment 1. Strategy 2. Minimum Risk 3. Preservation of Principle Federal Employee Service Center 2012
  38. 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
  39. 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
  40. 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
  41. 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
  42. 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
  43. 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
  44. 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
  45. 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
  46. Your TSP Retirement Choices Federal Employee Service Center 2012
  47. 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. Federal Employee Service Center 2012
  48. In 1935 when President Franklin D. Roosevelt signed OASDI into law, few people lived more than 5 years in retirement. Things have changed! Federal Employee Service Center 2012
  49. How many of you know that the tax law for Social Security recipients changed in 1984? 50% of Social Security Income Taxable Federal Employee Service Center 2012
  50. The Budget Reconciliation Act of 1993 added another bracket: 85% of Social Security Income Taxable Federal Employee Service Center 2012
  51. $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
  52. 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. Federal Employee Service Center 2012
  53. 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 Federal Employee Service Center 2012
  54. 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 Federal Employee Service Center 2012
  55. 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 Federal Employee Service Center 2012
  56. 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
  57. Federal Employee Service Center 2012
  58. 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
  59. This “Rule of 72” table will help illustrate this concept √72 Federal Employee Service Center 2012
  60. 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
  61. BENEFIT ANALYSIS By attending this Workshop and being an “AIM Member” you will receive a Complimentary “FEDERAL BENEFIT ANALYSIS” Federal Employee Service Center 2012
  62. 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 . . . Federal Employee Service Center 2012
  63. FESC Strategic Planning Tax Free Income Tax Deferred Income Taxable Income Income Streams Federal Employee Service Center 2012
  64. Top 5 Reasons Reference: TSP website Federal Employee Service Center 2012
  65. Compared to Reference: TSP website Federal Employee Service Center 2012
  66. Opinions Reference: TSP website Federal Employee Service Center 2012
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  68. Federal Employee Service Center 2012
  69. 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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