Monthly Archives: October 2017

Is Your FERS Annuity an All-or-Nothing Benefit?

Posted by Gary Raetz Is Your FERS Annuity an All-or-Nothing Benefit?

As a federal employee, you know that your comprehensive retirement package is one of the best benefits packages available. Yet, for one reason or another, you might desire to leave federal employment at some point. Perhaps you become disabled and can’t continue working, or you simply receive a lucrative offer from a private employer. With regard to your FERS annuity, you might be worried that you’ll lose it all if you separate from employment early.

It’s actually a myth that your FERS annuity is an all-or-nothing benefit. You won’t necessarily lose the entire thing just because you leave federal employment before fulfilling retirement requirements.

This myth comes about because of rules regarding “immediate annuities”. It is true that in order to receive an immediate annuity, meaning an annuity that begins in the month following your last day of service, you must fulfill the following requirements:

  • 5 years of service at age 62, or
  • 20 years of service at age 60, or
  • 30 years of service at your Minimum Retirement Age

Because of those rules, many people believe their federal annuity benefit will be lost if they don’t meet requirements. In reality, though, you could possibly receive a deferred annuity. You must work at least five years in order to claim the deferred annuity benefit, and payments will begin on the future date at which you could have received an immediate annuity.

Not everyone is eligible for the deferred annuity option, so investigate this issue carefully before making a decision. If you need help exploring your retirement funding options, give us a call. We can help you decipher complicated regulations, anticipate your benefits, decide upon a target separation date, and more.

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When Can You Access Your Thrift Savings Plan?

Posted by Gary Raetz When Can You Access Your Thrift Savings Plan?

Your Thrift Savings Plan is an important part of your overall retirement strategy. Along with Social Security payments and your annuity payments, withdrawals from your TSP will allow for some additional income in retirement. Plus, while your Social Security and annuity payments will depend upon factors (such as length of employment) that are fairly set in stone, the amount of money in your TSP can vary according to your decisions regarding the fund. This gives you a certain degree of control over your eventual retirement income.

Since your TSP is a form of investment account, it follows many rules that apply to other types of retirement or investment funds. For example, we usually say that it is best to leave your money in a retirement account as long as possible, to allow it to grow. Compounding interest makes a big difference over time, and withdrawing your money early can cost you in the long run.

But in some cases, you need or want to retire early and avoid the usual penalties that come with early withdrawal from your retirement account.

One way to do this is by implementing IRS code 72-T, which allows you to retire with no minimum age restriction and access the money in your TSP. Obviously, there are some rules that apply and it is best for you to discuss them with an experienced financial professional who is familiar with this process. (We do this quite often with clients.)

The other way you can actually access your TSP funds without triggering any sort of penalty is at age 55. What’s the catch? You have to retire from federal service before taking that penalty-free withdrawal.

For Public Safety employees, the rules can be even more loose: You just have to be retired from federal service, period. There is no minimum age requirement to access your TSP funds.

Still, it might make sense to leave your money in the fund as long as you can wait. That’s because with many people living well into their 80s or longer, retirement can last a long time. Allowing that money to grow is almost always a good plan. Call us to schedule an appointment, and we can help you decide upon a withdrawal schedule.

 

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Annual Leave and Retirement

Posted by Gary Raetz Annual Leave and Retirement

Last week, we discussed how to time your retirement in the most beneficial way, with regard to beginning your annuity payments. Since your annuity payments will comprise an important part of your income in retirement, it certainly makes sense to give extra weight to that factor in your overall retirement planning equation.

But, as we mentioned, there are other factors that should help you determine your separation date. One of those is the issue of annual leave – or, more to the point, the lump sum payment that will be due for unused annual leave. Obviously, you want to receive the largest lump sum possible for your use-or-lose annual leave.

When you leave federal employment, you will receive a payment for unused annual leave, so long as you separate before the “end of leave year”. Perhaps counter-intuitively, the end of the leave year does not necessarily fall on December 31, nor does it fall on the same day each year! Check out this breakdown of upcoming end of leave year dates to see what we mean:

  • For the leave year of 2017, the last day falls on January 6, 2018
  • For the leave year of 2018, the last day falls on January 5, 2019
  • For the leave year of 2019, the last day falls on January 4, 2020
  • For the leave year of 2020, the last day falls on January 3, 2021

Okay, so that’s a bit confusing, but all you really need to do is:

  • Remember that payment of unused annual leave is a factor in timing your retirement, and
  • Check the calendar, or keep in touch with us (preferably both) when deciding upon your separation date

Of course, if you always use every bit of your annual leave each year, this factor probably won’t matter to you. But for everyone else, keeping these dates in mind can help you maximize that payout.

As always, schedule regular appointments with us, and we’ll help you stay on top of all issues that might impact your final retirement date.

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When Should Federal Employees Schedule Their Retirements?

Posted by Gary Raetz When Should Federal Employees Schedule Their Retirements?

Planning your retirement will involve multiple variables, far beyond simply being financially ready. Aside from accumulating enough years of service, and stashing enough money in your Thrift Savings Plan, you also want to schedule your retirement at the right time.

Of course, since retirement planning tends to focus on finances, most of you don’t want to go very long between your last paycheck and your first annuity payment. That’s understandable. So for federal employees who are trying to decide upon their eventual retirement dates, it can help to understand how and when annuity payments begin under the FERS system.

Your annuity begins on the first day of the month after the month in which you retire. Then, your first actual annuity payment begins on the month after that. So, for example, if your last day of service is scheduled for March 5, your annuity begins on April 1 and you will receive your first annuity payment on May 1.

For some of you, that might equal too much of a gap between your last paycheck and your first annuity payment. That’s why many FERS employees schedule their last day of work toward the end of the month, when possible. That way, you will have one more paycheck on the way, and your annuity payments will begin shortly after that.

Of course, there is more than just annuity payments to consider when timing your last day of work. As you continue to plan for retirement, stay in touch with us. We can help you juggle all of the different issues you might face, so that you can make a retirement plan that best suits your individual situation.

 

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