Benchmark Financial Group

Maintaining Your Credit Score After You Retire

Posted by Gary Raetz Maintaining Your Credit Score After You Retire

As you reach your retirement years, you will probably notice that your financial priorities begin to shift. You might spend less on transportation, because you no longer commute to work, but more on hobbies to fill your time. You might spend more on health care, but less on clothes or restaurant lunches. In other words, a changing lifestyle means changing priorities.

Either your home and car are paid off, or you don’t expect to make those large purchases ever again. So along with these shifting priorities, you might feel that your credit rating isn’t nearly as important as it used to be. But this would be a mistake.

Older Americans still borrow money. Maybe you don’t plan to purchase another car or home in your lifetime, but emergencies can necessitate a loan. You might need to take out a second mortgage in order to cover a major roof repair, for example.

Your credit rating affects more than you think. Aside from your ability to obtain a mortgage, your credit rating can affect the rates you pay for auto insurance. It might even impact your ability to get a part-time job, in the event that you decide to boost your retirement income through employment.

“Gray divorce” is becoming more common. It’s not something most of us want to think about, but divorce in the later years is not exactly rare. In the event that you find yourself suddenly single, you might need to purchase another home or car. You will wish you had maintained your credit rating!

So have we convinced you that you need to protect your credit rating even after you retire? Take the following measures to build and maintain a solid credit history.
● Use a card – but pay it off each month. Keeping at least one credit card helps you to build a credit history, and some cards provide valuable perks. Just don’t charge more than you can afford to pay off each month.
● Don’t co-sign loans. Tell the kids and grandkids “no”. If they drop the ball on those car payments, you will be responsible for them.
● Keep your card secure. Unfortunately, older people are often targeted for theft. Keep your card in a secure location.
● Watch for ID theft. Examine your credit report at least once per year, and report suspicious activity. ID theft can ruin your credit score.
● Keep balances low. If you do carry a balance on a credit card, keep it below 30 percent of the credit limit.

As your needs and priorities shift, so should your budgeting and spending habits. For more financial planning advice, call us to set an appointment. We specialize in helping retirees identify financial needs and make adjustments along the way.

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When Should I Retire?

Posted by Gary Raetz When Should I Retire?

Federal employees enjoy terrific retirement benefits, but you still face difficult decisions. One of the hardest decisions involves setting your target retirement date. Many different factors will influence this decision, and some of them are highly personal in nature. But for most people, examining the following factors can help to establish a retirement timeline.

Calculate your retirement budget. How much money will you need in order to cover your living expenses each month? Have you paid down your debts? What about your home; will you be selling it and moving to a new location, or keeping it (and the mortgage)? If you’re moving, have you investigated state taxes on your retirement benefits? All of these, and more, are important questions to ask yourself when you begin to calculate your retirement budget. Remember to leave some wiggle room in your budget for unexpected expenses.

Estimate your benefits. Your length of service, high-3 average salary, and proration of cost-of-living adjustments will all affect your retirement benefit amount. Sit down with us before you retire, so that we can carefully estimate your benefits and compare them to your expected budget.

What about Social Security? As you know, the timing of your Social Security claim will influence your benefit amount. You can claim your benefits as early as age 62, if you’re willing to accept reduced payments. Or, you can wait until full retirement age to claim your full scheduled benefits. Waiting beyond full retirement age can increase your benefits checks by about 8 percent for each year that you wait, up until age 70.

Ask yourself if you’re emotionally ready. If the financial side of things looks good, you still have to ask yourself one more important question: Am I really ready to stop working? At first, the idea of giving up your desk sounds like a fantastic idea. But over time, some retirees miss the routine of regular employment, socializing with their coworkers, and the sense of fulfillment they gained from public service. Make sure you have planned a full schedule for retirement, including hobbies, travel, volunteer work, or anything else that interests you.

There is no perfect time for everyone to retire. But if you need some input on the matter, feel free to give us a call. We can sit down and discuss your budget, expected retirement benefits, and hopes for your retirement years. Then we can help you put together a plan for a happy retirement.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency

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Federal Retirement and Your Spouse

Posted by Gary Raetz Federal Retirement and Your Spouse

As you work and save for retirement, you aren’t just doing it for yourself. You also want to enjoy a long, happy, and comfortable life with your spouse. But what happens if you pass away prematurely? You might wonder how your spouse would be financially affected, and what would happen to your federal employee retirement benefits.

A lot depends upon the timing. But in general, the surviving spouse of a CSRS employee is eligible to receive 55 percent of the working spouse’s pension. This is figured upon the pension you would have received if you were still alive and retired, so naturally the amount does vary from one person to the next.

Your spouse would also be able to draw spousal benefits from your Social Security record, when he or she reaches full retirement age. This is assuming, of course, that your benefits are greater than your spouse’s benefit amount. Otherwise he or she will simply claim their own benefit when that time comes.

If the above two forms of income sound insufficient to provide for your spouse’s needs in the event that something happens to you, consider two additional options: Life insurance and another form of savings. There are many forms of life insurance available to you, with a lump sum death benefit paid out to your spouse (or some other beneficiary of your choosing) in the event of your death. It’s important to perform a needs analysis before selecting a policy amount, so that you can provide adequately for your survivors.

And of course, there is the Thrift Savings Plan. Any money that you contribute to this retirement fund accumulates over time, and in the event of your death will be passed to the beneficiary that you name.

For more information on your federal employee retirement benefits, or to learn how you can protect your spouse and children, give us a call. We can sit down and discuss your benefits as well as the various options you can utilize to protect the ones you love most.

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6 Essential Tax Deductions and Credits

Posted by Gary Raetz 6 Essential Tax Deductions and Credits

It’s your favorite time of year! The birds are chirping, everything is turning green again, and your federal income taxes are due. Okay, so you only love two of those things… But when you utilize as many deductions and credits as possible, paying your taxes can be a little less of a drag. Remember to check for the following deductions and credits.

State and local taxes. You can take a deduction for state and local income taxes, if you pay them, or state and local sales taxes if you live in a state that does not impose income tax. If you live in an income tax state, the income tax deduction is generally the better deal. The IRS provides a calculator to help you figure out the deduction available to you.

Charitable contributions. Remember to go back through your bank account statements or credit card records to identify any charitable contributions you made throughout the year. You can also deduct 14 cents per mile if you drove your car for a charitable cause.

Student loan interest. You can deduct up to $2,500 of student loan interest that you both incurred and paid yourself, or you can take the deduction if someone else made the payments on your loan (such as parents).

Moving expenses. Did you have to move more than 50 miles in order to take a job? Then you can count moving expenses as a deduction. Mileage is counted at 23 cents per mile, plus you can deduct parking fees and tolls.

Child and Dependent Care Tax Credit. Many people forget to claim this credit, because they pay for child care through a reimbursement account at work. You can claim up to $6,000 of child care expenses if you paid cash, or up to $5,000 if you paid through a reimbursement account. You can also claim this credit if you have an adult disabled child who needs care while you work.

Mortgage refinancing costs. If you refinanced your home, you can deduct points paid over the life of your loan. For a 30-year mortgage, that means you can only deduct 1/30th of your total points each year. But when you sell the home, remember to deduct the remaining points on the next year’s tax return!

There are many more tax deductions and credits that might be available to you, but the above are some of the most common. Since many tax deductions must be planned in advance, make sure to work closely with a tax professional. If you need financial planning advice, or information about deductions and credits related to your retirement accounts, please give us a call and we will be happy to help.

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4 Steps to Managing Your Retirement Budget

Posted by Gary Raetz 4 Steps to Managing Your Retirement Budget

As you draw closer to the end of your career, you are probably focused on reaching certain goals. You might want to save a particular amount of money, pay off debts, choose a place to retire, or some other worthwhile endeavor. But once you’ve retired, your planning will shift from those goals to more practical ones. In particular, how can you make your retirement income last for the rest of your life?

With life spans increasing and people enjoying longer retirements, this issue is more important than ever. Just before you retire, or soon afterward, take these four steps to manage your new income.

Establish a budget. For most people, their retirement income is less than what they earned during their working years. That means you need to analyze your expenses, cut out unnecessary ones, and decide upon a distribution amount from your retirement fund. It can be helpful to live on your expected budget in the months before retirement, so you can “test drive” it and make necessary adjustments.

Indulge wisely. You might have planned a major change for your life in retirement, or want to reward yourself for a job well done. There’s nothing wrong with that plan, but make sure you discuss this idea with your financial advisor preceding retirement. Any major expense such as a vacation, a new boat, or a major move should be a part of your planning process in the years leading up to retirement. That way we can help your budget to accommodate it.

Make decisions about health care. Remember that even once you reach Medicare eligibility at age 65, you can’t count on the program to cover everything you will need. You will still be subject to co-pays and deductibles, not to mention your premiums. And if you ever need long-term care, Medicare only pays for a very limited amount of nursing facility bills. Most of that burden will fall on you. Will your budget accommodate that expense? Would long-term care insurance be a smart option for you?

Continue to meet with a financial advisor. Retirement planning doesn’t stop at retirement. You will continue to reassess your goals and priorities, and will need to address new financial obstacles at times. Schedule regular appointments with us, and we will help you keep your retirement plans on the right track.

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5 Risks to Your Federal Retirement

Posted by Gary Raetz 5 Risks to Your Federal Retirement

One of the benefits to being a federal employee is the reliable retirement plan. But of course, nothing in life is ever 100 percent guaranteed. We hope that everything will go as you have planned, but you should familiarize yourself with some of the common risks to federal retirement and take the steps to mitigate them.

Outliving your money. This is a very real risk that applies to everyone, not just federal workers. The average lifespan is steadily increasing, with more people living to age 90 or even 100 than ever before. Have you considered the risk of outliving your money? If not, make that a part of your planning as you move forward.

The cost of health care. A longer life doesn’t necessarily mean a perfectly healthy life! The longer you live, the more likely you will incur serious medical expenses. Since the cost of health care is increasing at roughly double the rate of inflation, make sure your retirement budget includes room for significant out-of-pocket expenses. Remember, Medicare won’t cover everything you might need. Long-term nursing care is an increasingly common, and large, expense faced by many retirees. How would you pay it?

Inflation. Aside from the cost of health care, prices of a variety of goods and services rise nearly every year. You will notice a significant decrease in your purchasing power over the course of a 20-year or 30-year retirement. Can your expected retirement budget handle the strain?

Taxes. You might assume that you will enjoy a lower tax rate during retirement, due to your income being much smaller. In most cases you would be right. But what happens when policy changes force new or higher taxes? Nothing is guaranteed, and you might not be able to count on low taxes for the entire course of a retirement that spans two decades or more.

Risk of loss. The market doesn’t always perform as we hope, and this can leave a retiree’s future looking very uncertain. When you calculated your fixed withdrawal rate (if you went with that option), did you include the risk of asset loss? If your principal shrinks faster than expected, you might be tempted to risk more of your money to regain losses. Schedule an appointment with us, and we can help you stress-test your retirement income.

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5 Ways to Protect Yourself from Retirement Fraud

Posted by Gary Raetz 5 Ways to Protect Yourself from Retirement Fraud

During your career, you might have worried about the health of your retirement fund, and whether you would be able to retire one day. But once you have made the leap into retirement, does that mean you don’t have to worry anymore? Of course not. Retirees face a number of challenges, and unfortunately one of those is the risk of fraud. Con artists frequently try to take advantage of retirees, but you can take the following measures to protect yourself.

Simplify. We all know that we face the risk of declining mental acuity as we age. But when will it start? It can be very difficult to see the signs in yourself. One way to prevent financial problems is to simplify investments before you begin having trouble with managing them. As you grow older, you might find that it is easier to put all of your money together, where it is more stable and easier to oversee.

Get rid of credit cards. If you hold multiple active credit cards, you might not notice one is missing until it’s too late. Reduce your card count to one or two that provide good benefits, and get rid of the others.

Designate someone with power of attorney. Choose a trusted, responsible person and grant them durable power of attorney in the event of your capacity. If an accident or sudden illness occurs, it could be too late to make this decision. It’s usually a good idea to choose someone other than your spouse, who is probably about your age and subject to the same health problems. Consider an adult child or trust, younger friend instead. Make sure this person understands your financial situation, risk tolerance, long term plan, and so on.

Take advantage of technology. Set up email alerts with your financial institution, so that you and your power of attorney receive notifications any time large transactions are conducted. This will help to protect you from con artists, and from yourself in case dementia occurs.

Consult with your financial advisor on a regular basis. Perhaps the best way to protect yourself from fraud is to establish a solid long-term financial plan, and stick to it. Discuss any new ideas with us first, so that we can help you assess its validity and steer you away from trouble.

15453 – 2016/3/2

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Keeping Your Money in the TSP After Retirement

Posted by Gary Raetz Keeping Your Money in the TSP After Retirement

After you retire, you will face many different choices regarding your retirement benefits. One of these choices will involve your money that has accumulated in the Thrift Savings Plan: Should you keep your money in the TSP, or withdraw it and invest it some other way?

Unfortunately, there is not a single answer that always works perfectly for everyone. Before we can answer that question, you should ask yourself two more.

Do you want easy access to your money in retirement?

During your career, the Thrift Savings Plan provided you with an easy way to save money for retirement. Once you’re retired, it’s an entirely different ballgame. The TSP offers only one method of withdrawal in retirement, through automatic monthly distributions. That might not be very convenient for you, because you can only make changes to your distributions once per year, during a limited period in the fall, and you can only make changes for the following year. You also cannot take money out of your TSP to cover a large unexpected expense.

There are many other ways in which keeping your money in the TSP can be inconvenient. But the bottom line is that if you want regular monthly distributions and you’re okay with the other inconveniences, it’s still okay to keep your money there.

What type of investment options do you want to access?

Let’s say you want to purchase an annuity, but need cash for the lump-sum payment. If you have performed the calculations, weighed the benefits, and have decided that this is the right path for you, then you might wish to pull the money from your TSP at retirement. Or, you might wish to invest that money in some other way that suits you; the stock market, real estate, or even starting your own business. We can’t attest to the solidity of these plans, only that there are reasons you might not want to leave your money in the TSP.

One final thing to consider: Who is your beneficiary? If you decide to leave your money in the TSP, your spouse can also do that after your death. However, non-spouse beneficiaries must withdraw all of the money upon inheriting your account. That could trigger serious tax problems (and loss of some funds) for your beneficiary, so this is an issue to consider carefully.

For more information about your Thrift Savings Plan or retirement in general, call our office to schedule an appointment. We specialize in guiding federal employees through these difficult decisions.

15452 – 2016/3/2

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Watch Out for These Retiree Mistakes

Posted by Gary Raetz Watch Out for These Retiree Mistakes

You’ve never retired before, and you’re probably going to do it only once. So it’s no wonder that many people make mistakes when they stop working and begin living off of their retirement benefits and savings. Luckily, you can learn from the mistakes of other retirees, and hopefully avoid making these blunders yourself!

Don’t let your credit rating slip. Your credit score is important to securing a mortgage or a low-interest car loan. But some retirees, who don’t anticipate buying another home or car, let their credit scores slip. Maybe they’re just forgetting to make payments on time, or are too busy enjoying their new lives. But your credit rating is still important, and helps you lock-in items like extra funds in an emergency, or a reasonable car insurance rate. Continue to protect your credit score, obtain a copy of your credit history once per year, and report any errors immediately.

Don’t take on too much debt. Sometimes retirees get a bit carried away with all of their freedom, and splurge on a new boat or a European vacation. There’s nothing wrong with rewarding yourself, but make sure you have a plan to pay for these luxuries. The last thing you want to do is saddle yourself with an uncomfortable financial burden.

Don’t count on your home’s equity. If you can cash out your home’s equity and use that money to help fund your retirement, that’s great! But remember not to count too heavily upon that equity when making your retirement plans. The real estate market fluctuates significantly, and sometimes bad luck prevents you from selling your home. It’s best to make sure your retirement income is stable without your home’s equity.

Don’t forget your medical expenses. Retirees are often shocked by the cost of health care in retirement. Remember to leave room in your budget for unexpected expenses, and count upon the cost of health care rising each year. Consider, also, supplemental Medicare plans or long-term care insurance to help you manage costs.

Don’t try to go it alone. Retirement decisions are some of the most important ones you will make in your life. Seek the advice of an expert, who can help guide you through the complicated maze of your retirement system. It’s better to be prepared, than to suffer the unforeseen consequences of a hasty decision. Call us for an appointment, and take advantage of our years of experience in retirement planning.

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Assess Your Retirement Readiness: 5 Questions to Ask Yourself

Posted by Gary Raetz Assess Your Retirement Readiness: 5 Questions to Ask Yourself

It’s one thing to understand the facts about your retirement benefits system; it’s quite another thing to understand whether you’re really ready to retire! There are many different ways to answer this question, but taking the following fives steps will give you a better overview of where you stand.

Take a look at your current living expenses. Do you currently pay for a lot of unnecessary expenses, that you might not be able to afford during retirement? No one is saying that you shouldn’t have any fun, but be honest with yourself about your future retirement lifestyle. It’s often better to gradually cut back on luxuries now, in the years before retirement, than to make a sudden transition to a more frugal lifestyle. And as an added bonus, cutting expenses now will help you save more money for the future.

Be honest about your debt. Do you want to enter retirement saddled by debt? Probably not! You hope to enjoy your retirement without the added stress of unnecessary bills. Even if you have to work a year or two longer to pay off credit cards first, it will be worth it in the long run.

Consider your house payment. Speaking of debt, your house payment might be your biggest one. Ask yourself whether you need that large home, or whether another location might offer a lower cost of living. Many retirees can cash out enough equity from the sale of their old homes that they can pay cash for a smaller condo or house. At the very least, you could significantly reduce your monthly living expenses by making a single decision.

Estimate your health care expenses. Health care bills are some of the largest expenses faced by retirees. Make sure you understand the benefits and limitations of the health care plan you will use in retirement. You don’t want to be surprised by large co-pays or deductibles, or the cost of long-term nursing care. Carefully consider the additional forms of insurance available to you, such as long-term care insurance or Medicare supplemental plans.

Establish an emergency fund. When planning your retirement budget, ask yourself how you will cover the cost of emergencies. What will happen if you need a major car repair, a new roof on your home, or some other significant expense? Make sure to set aside some liquid funds in a savings account before you retire.

For more help estimating the cost of your future retirement lifestyle, call our office to schedule an appointment. We can help you make the necessary adjustments to your current and future budgets, and decide upon a target retirement date.

15318 – 2016/2/1

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9 Things About Federal Retirement that You Might Not Know : Part Two

Posted by Gary Raetz 9 Things About Federal Retirement that You Might Not Know : Part Two

The federal retirement system can be complicated and confusing, even for federal workers who have had decades to become familiar with their benefits. In part one of this blog, we revealed five lesser-known “secrets” of the FERS system. Read on for four more surprising facts about your retirement system.

You can make certain changes to your health benefits after retirement. If you and your spouse are both federal employees, you might already know that you can choose two self-only enrollments in the Federal Employees Health Benefits Program, or you can both enroll in one self-and-family plan. Once you both retire, you can change from one self-and-family plan to two self-only plans if it benefits you, and both of you will retain continuous coverage.

No earnings limit after you reach full retirement age. You might know that claiming your Social Security benefits early, while you’re still working, can result in a reduction of your benefits depending upon how much money you earn. But once you reach full retirement age, as defined by Social Security, you can file for your own benefits, survivor’s benefits, or spousal benefits without being subject to an earnings limit. You will receive your full benefits check no matter how much money you earn each year.

Death benefits for your surviving spouse. You might worry about what will happen to your spouse, in the event that you pass away before you retire. Your spouse will be eligible to receive a lump sum death benefit payment, plus 50 percent of your final basic annual pay rate. If you had accumulated at least 10 years of creditable service, your surviving spouse can also receive a spousal annuity. These rules might also apply to your ex-spouse, depending upon your divorce agreement.

Your Social Security benefits might not be subject to state taxes. Because of your income from federal retirement benefits and the Thrift Savings Plan, you might already know that your Social Security benefits might be subject to federal income taxes. However, in most states those benefits will not be subject to state taxes. Some federal retirees choose to move to a state that will not tax their Social Security benefits.

Did any of these little-known facts surprise you? If you have questions or want to learn more about your federal employee retirement benefits, call our office to schedule an appointment.

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9 Things About Federal Retirement that You Might Not Know : Part One

Posted by Gary Raetz 9 Things About Federal Retirement that You Might Not Know : Part One

The federal retirement system carries excellent benefits for government workers, but like any government system it can be confusing at best! Even those of you who have a solid understanding of your retirement benefits might be surprised by these five little-known facts.

Early benefits. If you separate from federal service in the year that you turn 55, you can probably withdraw a monthly payments or a partial payment from your Thrift Savings Plan account. This provision confers a major benefit to federal employees, because most other retirement plans require you to be age 59 ½ before distributions can begin (or you would suffer a 10 percent tax penalty for early withdrawals).

A different formula for those who worked abroad. If you performed service abroad, you might be subject to a more generous computation of your retirement benefits.

You can postpone your benefit. If you leave federal service after reaching your minimum retirement age, before age 62, and between 10 and 30 years of service, you can postpone your retirement benefit to avoid the age reduction. If you choose the postponed annuity, you might also be able to reinstate your Federal Employees Health Benefits.

No annual earnings report in certain situations. Most of the time, when you receive your FERS annuity supplement, you must complete an annual earnings report in order to maintain eligibility. But certain groups are exempt from this rule, and do not have to complete the report.

Credit for unused sick leave. Beginning on January 1, 2014, FERS employees were able to receive a 100 percent credit for unused sick leave. The old rules provided for only a 50 percent credit, so this is an important update to know if you plan to retire soon.

The above items are just some of the recent changes and unusual rule exceptions to the federal retirement system. Check out part two of this blog for more surprising information, and remember to call us if you have any questions about your FERS benefits.

15317 – 2016/2/1

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5 Signs of a Tax Scam

Posted by Gary Raetz 5 Signs of a Tax Scam

The holidays are over, and now it’s everyone’s favorite time of year: Tax season! Okay, so maybe it isn’t your favorite time of year, but you can bet criminals enjoy it. Every year, con artists scam tax payers out of millions of dollars by launching phony tax schemes. Watch out for these six signs of a scam, and remember to report any odd activity to the IRS and local law enforcement immediately.

Fake calls from the IRS. No matter what anyone tells you on the phone, remember that the IRS will not ask for payments or your checking account information this way. Con artists might try to scare you into compliance by threatening law enforcement, telling you you’ve been audited, or even mentioning something as ridiculous as deportation. In reality, the IRS will not make threats this way. If there is ever a problem with your tax return, they will send you a letter in the mail. Don’t give out personal information over the phone!

Your Caller ID might even trick you. Unfortunately, you can’t even trust your Caller ID to tell you the truth. Criminals know that’s the first thing you will check, so they use programs that make their number appear to be an official government line. If you’re in doubt, hang up the phone and call the IRS at 1-800-829-1040. A real representative can tell you if there are any concerns about your tax return.

Suspicious charities. Sadly, many “charities” are just bogus scams. You might receive a letter or phone call from a very official-sounding charity, reminding you that donations are tax deductible. However, you can only deduct charitable donations to organizations approved by the IRS, so check with them first to make sure a charity is legitimate.

You’re told that you already filed a tax return. You file your tax return, only to receive a notice from the IRS stating that you already filed your taxes. What happened? Unfortunately, this means a criminal used your information to claim a refund in your name. They can’t do this unless they have gained access to your personal information in some way, so never give out your Social Security number to anyone other than your employer and your tax accountant.

If this has already happened to you in the past, you can request a special personal identification number (PIN) from the IRS so that you can safely file your taxes in the future.

Fake tax preparation schemes. Any time someone offers to prepare your taxes for you, you should automatically be on guard. Stick with your trusted accountant, or call us for a referral. Many tax preparation “businesses” are just con artists looking to steal your information.

15253 – 2016/1/12

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9 Ways to Earn More Social Security Benefits

Posted by Gary Raetz 9 Ways to Earn More Social Security Benefits

For most retirees, Social Security makes up a meaningful portion of their income. If you’re nervous about the prospect of living on a fixed income for the rest of your life, take these steps to ensure that your reap as much from Social Security as possible.

Check your work credits. Your benefits will be based upon your earnings history, so it makes sense to double check with your Social Security representative to make sure your history is accurate. Ask for a copy of it, and scrutinize it for inaccuracies.

Earn more each year. This one is a no-brainer, since Social Security benefits are based upon your earnings history. Find a way to earn a bit more money each year, whether through a side job or going back to school to learn new skills that will advance you in the workplace.

Work for at least 35 years. Your benefits are calculated according to your 35 highest-earning years. If you don’t report income in many years, that’s a lot of zeros included in your calculation.

Keep working until your full retirement age. If you claim your benefits early, before you’ve reached “full retirement age” as defined by Social Security, your checks will be permanently reduced. Keep working so that you aren’t forced to claim your benefits early due to financial hardship.

Work until age 70. Claiming your benefits too early can result in smaller checks, but the opposite is also true. If you keep working until age 70, your benefits will increase by about 8 percent for each year that you delay claiming them.

Don’t forget your spousal benefits. If your work record doesn’t lend itself to a sizable Social Security benefit, investigate what you would receive by claiming spousal benefits instead. Your benefit will amount to 50 percent of your spouse’s checks, which could be greater than your own benefit amount. You can even claim spousal benefits if you’re divorced, so long as you were married for at least 10 years.

Don’t earn too much after you claim your benefits. If you claim your benefits before full retirement age, your Social Security checks could be heavily taxed depending upon your earnings. This is another good reason to delay claiming your benefits until later, when you’re finished working or you’re ready to work only part time.

Don’t forget your dependents. If you have a dependent child, you might also be able to claim Social Security for them once you claim your own benefits. Granted, your children are likely to be grown by this point, but this rule also applies if your adult child is disabled and dependent upon you.

Remember your survivor’s benefit. If your spouse dies, you can inherit their benefit if it is greater than your own.
For more information on Social Security benefits, or about retirement income planning in general, give us a call. We can help you find the solutions that fit your situation!

15252 – 2016/1/12

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The Most Common Risks to Retirement

Posted by Gary Raetz The Most Common Risks to Retirement

You can’t wait to retire one day, but the decision can also be a nerve-wracking one. Will you be able to live on a fixed income for the rest of your life? What if you haven’t planned for an adequate stream of income in retirement? These questions might keep you up at night.

As with most big life changes, preparation is the key to success. We’ve identified the four biggest risks to your retirement, so that you can take action now to prevent problems down the road.

Investment losses. The investment world can be an unfamiliar and scary place for a lot of people, so it’s no wonder investment losses top the list of most people’s retirement worries. Many people choose to make riskier investment choices earlier in their working years, because they have time to make up for any losses before retirement. But you might not want to continue taking those same risks once you’re living on a fixed income one day. We often advise switching to a less risky strategy as retirement nears.

Inflation. Once you retire, your income might remain the same while your expenses increase. However, it’s important to remember that the expenses you face during your working years might be very different from those you’ll confront in retirement. For example, gas and housing might not affect you nearly as much, once you no longer commute or make a house payment. But the cost of some items could impact your budget much more. As you look toward the future, try to identify ways to address those expenses, and consider establishing streams of income that can gradually increase over time.

Health care. Speaking of things that will cost more as you age, health care will probably top the list! The cost of healthcare is rising each year, and Medicare doesn’t actually pay for all medical expenses. You can choose between different Medicare plans as well as supplemental plans, and the choices you make can drastically impact your out-of-pocket expenses. If you’re eligible for a health savings account (HSA), you can actually begin stashing pre-tax dollars for these expenses now! And if you take care of your health during your working years, you might be able to prevent many costly health problems.

Long-term care. While we’re on the subject of Medicare, we should point out the fact that it often does not cover the cost of long-term nursing care. That burden could fall onto you, and it could prove to be a significant expense. As you prepare for retirement, consider whether your income could cover a stay in a nursing facility, or consider purchasing long-term care insurance.

These are just some of the problems you could face in retirement, and you might be worried about something else that isn’t on this list. Whatever your concerns, preparation can help you sleep at night. Give us a call to discuss your options, and we will help you find solutions for your own retirement dilemmas.

15251 – 2016/1/12

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An Important Reminder About Social Security

Posted by Gary Raetz An Important Reminder About Social Security

Whether you’re still planning for retirement, or you’ve already reached that milestone, your Social Security benefits are likely to comprise an important part of your income plan. However, it’s important to remember that Social Security was never meant to fund your entire retirement – and the announcement about this year’s cost of living adjustment (COLA) is a good reminder of that fact.

No COLA for 2016. During the fall of most years, the Social Security Administration announces a COLA to begin with the following January’s benefit checks. The slight raise for beneficiaries is meant to help retirees keep pace with inflation. However, for the third time in history, the Administration has announced that there will be no COLA for 2016.

COLA is tied to the Consumer Price Index. This index measures prices of a wide variety of goods and services, and then those values are entered into a formula which reflect the inflation rate for the past year. In 2015, the Index reported a flat inflation rate. When the overall cost of living does not rise, no cost of living adjustments are issues by Social Security.

But it isn’t that simple. Even though the inflation rate remained near zero in 2015, that was largely due to the huge drop in gas prices. We were all happy about that, of course, but retirees are generally less affected by gas prices, anyway. If you’re retired, you no longer commute to work every day! In the meantime, you might have noticed the 7 percent increase in out-of-pocket health care spending. Or, you might be one of the 30 percent of Medicare beneficiaries who will see higher premiums this year. Just because inflation is flat, doesn’t mean your own expenses remain the same.

Double trouble for some retirees. Some retirees rely upon pension income from a former employer. Since pension plan administrators often base pension check increases upon the Social Security COLA, these retirees might feel doubly disappointed this year.

Make your own plan for retirement. Lack of a COLA is indeed a rare event. During most years, retirees do receive a “raise” on their benefit checks. However, this even should underscore an important lesson about retirement planning: Your expenses can increase from one year to another, regardless of the overall inflation rate, and you shouldn’t rely upon Social Security to offset a rise in your cost of living. Call our office to schedule an appointment, and we can discuss different ways to establish a stable stream of income in retirement.

15250 – 2016/1/12

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How to Keep Your Financial Skills Sharp

Posted by Gary Raetz How to Keep Your Financial Skills Sharp

We tend to accept the fact that we lose some physical strength and agility as we grow older. But most of us refuse to confront the fact that mental acuity will also decline. Unfortunately, this decline may lead some retirees to begin  making financial mistakes after age 60 or so. Some mismanage their money, while others fall victim to predators who take advantage of the older population.

As with most things, admitting the problem (or the potential for a future problem) is half the battle. Then, taking the right steps to prevent mistakes can help you ward off financial disasters.

So how do you keep your financial skills sharp as you age?

Exercise. Scientific studies have repeatedly demonstrated a link between daily exercise and improved cognitive functioning. Start fitting exercise into your routine now, during your working years, and continue the habit once you retire. As you grow older, remember to consult with your doctor about the appropriate and safe amount of physical activity for your state of health. Walking, biking, and swimming are good choices for almost everyone.

Simplify your investments. In your younger years, you might have engaged in riskier investment practices to build capital for retirement. But now, it’s easier to make mistakes and you have fewer working years during which you can correct them. As you approach retirement, it might be wise to switch to investment options which carry lower risks.

Make sure that your future income will be dependable. As budgeting and making financial decisions becomes more challenging, the last thing you need is a fluctuating income. Remember to establish a stable stream of income for the future, so that you aren’t forced to make difficult decisions in your old age.

Establish a living trust. A sizable percentage of us will develop dementia or Alzheimer’s, and there is no way to predict who will be affected. In the event that you are ever incapacitated by illness, a living trust transfers control of your assets to a trusted family member or friend whom you have previously designated for the task. The time to choose this person is now, while you’re able to make a sound decision.

Ask for help. Planning for retirement involves numerous complicated decisions. Rather than placing that entire burden upon yourself, give us a call to schedule an appointment. We can help guide you through the maze of retirement planning, so that you can protect your income and safeguard your future.

15163 – 2015/12/10

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Changes Social Security Rules Impact Divorced Couples

Posted by Gary Raetz Changes Social Security Rules Impact Divorced Couples

In November, Congress passed the Bipartisan Budget Act of 2015, and it was signed into law by President Obama shortly thereafter. As you may have heard, two major changes to Social Security will begin impacting retirees in 2016. One such change was the end of the file-and-suspend strategy, which could have a surprising impact on some divorced people.

The file-and-suspend strategy actually resulted from a loophole in regulations, which allowed a higher-earning spouse to file for their benefits at full retirement age while suspending payments. This allowed their eventual benefits checks to grow larger. Meanwhile, the lower-earning spouse could file for spousal benefits, and receive payments at about half of the higher-earning spouse’s benefit amount.

If a couple had divorced prior to retirement, the lower-earning spouse (typically the ex-wife, because women tend to have fewer work credits over their lifetimes) could still take advantage of this strategy. Even if her ex-husband suspended his own benefits, the ex-wife could still file for spousal benefits when she reached full retirement age. In a sense, this loophole provided some protection for lower-earning spouses who worried about their retirement incomes after a divorce.

However, the new rules state that a spouse cannot claim spousal benefits if the higher-earning spouse has suspended their own benefits. This rule will also apply to former spouses.

The rule affects married and divorced couples equally. But while we can assume that married couples will work together to make joint decisions about their Social Security benefits, some divorced people will not have this advantage. The lower-earning spouse will now be at the mercy of their former spouse’s decisions. If they suspend their benefits, the lower-earning former spouse cannot receive spousal benefits in the meantime. The new rule could impact a number of women, and a few men as well.

The new rules will impact everyone differently, and of course the above scenario is just one possible outcome. If you’re concerned about your Social Security benefits or retirement income, call our office to schedule an appointment. We can assess your situation, determine whether the new laws will affect you, and help you put together a plan for your future.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency

15165 – 2015/12/10

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Take This Important Tax Planning Step Now

Posted by Gary Raetz Take This Important Tax Planning Step Now

In the midst of the holiday season, the last thing you want to think about is your income taxes. But since this is the season of giving, and charitable donations can add up to a valuable deduction on your federal income tax return, it makes sense to plan carefully now. Plus, you need to make these donations before the end of the year in order to count them on your taxes.

Do your research. Not all charities are created equally. Some are outright scams, particularly those that pop up at this time of year trying to take advantage of your good intentions. Others are legitimate charities, but might not spend the money as you would prefer. Ask to see spending reports for any charity that you are considering, or check their rating with the Better Business Bureau.

Learn the difference between tax-exempt and tax-deductible. As you research different organizations, you might hear these two terms. They are not interchangeable! A tax-exempt organization does not have to pay taxes on their earnings. This does not necessarily mean that your donations are tax-deductible. Make sure of that before counting upon a particular donation to help lower your tax liability.

Gather records now. If you collect your donation receipts now, you won’t have to scramble to find them when it’s time to file your taxes. If you’ve lost receipts, check your credit or debit card statements for proof of your donations. Highlight each donation and file these statements with other important tax information.

Learn about deduction limits. The higher your tax bracket, the more your donations will count as a tax deduction. Learn what to expect so you can max out your deduction. Also, keep in mind that you can give up to 20 percent of your gross income to private charities, but that amount increases to 50 percent for public ones.

Set yourself up for success in the future. If you found the above steps time-consuming, set yourself up for success next year. Set a budget for charitable giving, based upon your income and the tax deduction you want to earn, and establish regular monthly payments to your favorite charities via a single credit or debit card. Record keeping will be easier next year, and you won’t have to scramble to make donations in December.

15164 – 2015/12/10


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Why Do I Need a Fed-Focused Financial Advisor?

Posted by Gary Raetz Why Do I Need a Fed-Focused Financial Advisor?

As you plan for retirement, you will be approached by financial advisors who want to help you manage your money. Any experienced and skilled financial advisor understands financial markets, has plenty of general knowledge about retirement, and probably boasts a long list of happy and successful clients. Most people can choose from several such financial advisors in their area, and will often report high levels of satisfaction with their results.

But as a federal employee, you face unique challenges to your retirement plan. While some general facts about retirement are true for everyone, most of a federal worker’s structured retirement plan differs significantly from private sector workers. Working with just any financial advisor could backfire, because most do not specialize in the unique benefits structure offered to federal employees. Without a Fed Focused Advisor (FFA) you could overlook important opportunities and undermine your outcome.

By contrast, a Fed Focused Advisor can:

● Help you prepare for tax liability issues.
● Assist in making appropriate allocations to fit your individual needs.
● Direct funds to pursue proper diversification within the desired allocations, based on your risk tolerance as well as your income and growth needs.
● Help you manage your money with a long-term vision to elude short term “panic” moves. (Panic is often detrimental to long term goals)
● Efficiently design an income distribution plan to provide the best (most tax friendly) income strategy

Working with a Fed Focused Advisor who understands the complexities of the federal retirement system can help you reap the most benefit from your retirement plan. And yet, you might discover that you can’t find a FFA near your home. Does this mean you should settle for a general financial advisor?

Actually, no. Even if you have to work with a FFA who is located in another state, remember that licensing from organizations such as FINRA and SIPC apply on a national level. Even if you can’t meet with your financial advisor in person, and must conduct phone or Skype appointments instead, they are still bound by the same standards of conduct as financial advisors in your area. The difference is that a Fed Focused Advisor has intimate knowledge of the federal employee retirement system, and is therefore able to guide you toward the most beneficial retirement plan for your situation.

For more information on federal retirement plans and benefits, call our office to schedule an appointment. We are happy to work with federal employees anywhere in the country.

15166 – 2015/12/10

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How to Maximize Social Security Spousal Benefits

Posted by Gary Raetz How to Maximize Social Security Spousal Benefits

As you plan for your retirement, you will likely be faced with many decisions about Social Security. Many retirees focus on when to claim their benefits, but another question they should be asking is, “How should I claim my benefits?”. For married people, how they choose to claim benefits is often  more important than when.

When the Social Security program was first created, men were generally the higher wage-earners while their wives either didn’t work or worked for far less pay. Society has changed quite a bit in that regard, but we still find that husbands almost always have the higher-earning work record. Of course, in cases where the wife is the higher earner, these rules would work just as well in reverse.

Spousal benefits were created to allow the lower-earning spouse some financial security. When you claim a spousal benefit, you receive a monthly check of up to 50 percent of your spouse’s benefit check. In order to claim spousal benefits,

  • you must be at least age 62
  • your spouse must be eligible for Social Security benefits
  • your spouse must have already applied for those benefits

Here’s where things can get tricky. If the lower-earning spouse did indeed work for a number of years, he or she might be eligible for benefits on their own work record. And if those benefits are greater than the spousal benefit, why not claim them instead?

As you know, for each year that you wait to claim benefits, you checks will grow by about 7 percent. If you wait until age 70, you can see quite a significant difference in your benefit amount – something that could be important if you’re worried about inflation.

One common strategy is to file for spousal benefits based on your spouse’s work record, while deferring your own benefits until age 70. Then, at age 70, you can claim your own higher benefit amount. This allows the lower-earning spouse to draw some Social Security income until age 70, and then maximize their own benefits later.

There is one caveat to this plan: In order to take advantage of the rule, the lower-earning spouse cannot file for spousal benefits early, at age 62. He or she must wait until their own full retirement age to claim spousal benefits, while deferring their own benefits. Therefore, early consideration and careful calculation is the key to maximizing Social Security. For more information on Social Security rules and procedures, and for help with your own unique situation, call our office for a consultation.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency

15043 – 2015/11/16


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File-and-Suspend Comes to an End Soon

Posted by Gary Raetz File-and-Suspend Comes to an End Soon

Social Security will comprise an important part of your retirement planning. Whether your benefits will make up a significant portion, or just a fraction of your monthly income, you have the right to various strategies which can maximize those benefits.

You may already know that waiting beyond full retirement age to claim your benefits can result in larger monthly checks. But there is actually a way that couples can reap the benefits of waiting, while also receiving some Social Security income at the same time. This particular strategy won’t be around for long but you could take advantage of it for the next few months if you act fast.

What is file-and-suspend? Once you and your spouse reach full retirement age (65 to 67, depending upon your years or birth), you will be faced with some important decisions about your Social Security benefits. The file-and-suspend strategy allows the higher-earning spouse to delay claiming their benefits, while accumulating more work credits. Eventually, this will result in a higher monthly check when this spouse does retire and claim benefits.

Meanwhile, the lower-earning spouse can claim spousal benefits, which amount to about half of the higher-earning spouse’s anticipated benefits. This will allow the couple to reap some income from Social Security, while maximizing the higher-earning spouse’s benefits for later.

When the higher-earning spouse decides to claim benefits – say, at age 70 – they will be earning a larger check. The lower-earning spouse can now convert to their own full benefit. Now each spouse is receiving individual benefits at a higher rate than they would have received by filing at full retirement age. If the higher-earning spouse passes away first, the lower-earning spouse can even convert to survivor benefits at 100 percent of their deceased spouse’s scheduled amount.

Here’s the problem…

On November 2, Congress reached a budget deal that essentially eliminated the file-and-suspend method. However, since the new law won’t take effect for six months, couples can still take advantage of the old rules. In order to do so, you and your spouse must already have reached full retirement age, or be set to reach full retirement age during this six-month period.

The bottom line with Social Security is that there are dozens of ways for married couples to claim benefits and the only way to know for certain which strategy is best for you is to become fully educated.  You should perform an in-depth review of your financial and personal plans for retirement, before making this big decision. Call our office at to arrange a consultation. We can assess your situation and help you decide on the best Social Security option for you and your spouse.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency

15040 – 2015/11/16

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Popular Social Security Myths – Dispelled!

Posted by Gary Raetz Popular Social Security Myths – Dispelled!

Nothing about retirement planning is easy or uncomplicated, but Social Security really takes the cake. As you would expect from any large government-run program, the system is fraught with complicated rules and procedures. This tangled web of rules, along with a degree of media hype, often spins myths and misconceptions. As you plan for retirement, it will help to learn the truth about these popular Social Security myths.

All the money I pay into Social Security today is held in an account for me. When I retire, I will draw benefits from that account. Social Security taxes collected today go toward benefits paid out today. In other words, current workers are supporting those who have retired and claimed their benefits. Your taxes aren’t sitting in an account somewhere, collecting interest. You are supporting current retirees, and younger workers will continue to support you when you retire.

Social Security is running out of money, and my benefits won’t be there when I need to retire. It is true that the Social Security trust fund is running out of money, and that the influx of Baby Boomers claiming their benefits is causing a strain on the system. But since the majority of Social Security benefits are paid through current taxes from those who work, your benefits won’t disappear. At worst, they will be reduced by one-third in 2035 when the extra money runs out. But policy makers are diligently working on a solution to the shortfall. It is likely we will all receive every penny of our scheduled benefits.

If I become disabled and unable to work, it will take years for me to receive Social Security disability payments. The Social Security disability program has earned a reputation for slow processing of approvals, but that is mostly due to the number of claims due to exceedingly rare conditions or outright fraud. The Administration actually created a program called Compassionate Allowances, which provides automatic approval for individuals who have one of about 200 qualifying conditions. If your condition falls outside of this list, you could be one of the rare exceptions for whom an approval is a lengthy process. But most likely, disability benefits will be there if you ever need them.

If I continue to work while receiving Social Security benefits, my payments will be reduced and I will lose that money forever. If you file for benefits before full retirement age, part of your benefits could be withheld if you continue to work and earn more than a certain limit. However, you will receive credit for this withheld money when you reach full retirement age, so you have not actually lost the money. Once you reach your full retirement age, you can earn as much money as you want, and none of your benefits will be withheld.
This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

15042 – 2015/11/16

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Should You Claim Social Security Benefits Early?

Posted by Gary Raetz Should You Claim Social Security Benefits Early?

As you may already know, the Social Security Administration defines your full retirement age by the year of your birth, and it ranges between age 65 and 67. This is the age at which you can claim your full scheduled benefits, based upon your highest-earning 35 years of work.

However, some people decide to retire early, at age 62. By doing so, they accept a lower benefit check for the rest of their lives, but many people consider this to be an acceptable trade-off. Is claiming early Social Security benefits right for you? It might be, depending upon your answers to the following questions:

Can you still work? Social Security might have defined a retirement age for you, but that doesn’t mean you will be able to continue working until that date. If you’ve become unable to work, or cannot work in the capacity that you once did, you might now be earning much less than you did in the past. If you need your Social Security benefits at age 62, then it might be a good idea to go ahead and claim them. If you continue to work after claiming your benefits early, part of your checks could be withheld if you make too much money.

Do you really need the money? Remember that for each year you delay claiming your benefits, your eventual checks will grow by about 7 percent. If you’re claiming the money before you actually need it, will you be able to invest it in such a way that it grows at a faster rate?  In most cases, the answer is no, so you shouldn’t touch your benefits just yet.

What is your life expectancy? Depending upon your own state of health, your parents’ longevity, and perhaps a few other factors, you might have some idea of your own projected life span. If it looks like you could live well past 85 or so, it usually makes more sense to wait until full retirement age – or even later – to claim a larger benefit. On the other hand, if you suspect your days are numbered, you might wish to claim your checks and retire much earlier.

Do you draw a pension? Some recipients of certain government pensions are subject to the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO). Under these rules, your Social Security benefits can be reduced or eliminated if you receive these pensions and claim your benefits early. Never make any assumptions about your Social Security benefits. Before deciding to claim your benefits early, call our office for a consultation. We can run the numbers for you, show you what to expect, and help you decide if this is the right path for you.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency

15041 – 2015/11/16

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A Health Savings Account Helps You Prepare for Retirement

Posted by Gary Raetz A Health Savings Account Helps You Prepare for Retirement

With the cost of health care rapidly rising, all American workers must pay special attention to their retirement plans. As a federal employee, you have several options with regard to retiree health care benefits, but you will still incur some out-of-pocket expenses. If you choose a low-premium, high-deductible plan, you will be responsible for the entire deductible each year before your insurance benefits kick in. On the other hand, you can choose a plan with a low or no deductible, but you will still make co-payments toward your car. In both scenarios you might have to pay something toward your prescription medications.

The expenses are incurred throughout your career, but also after retirement. While you might be saving for retirement and counting upon your federal employee retiree benefits to cover your cost of living, unusually high health care expenses could potentially eat a hole in your future retirement budget.

Some federal employees are eligible to contribute to a Health Savings Account, which allows you to set aside pre-tax dollars for qualified health care expenses. A HSA can help you lower your tax liability while covering out-of-pocket health care expenses, but it can also help you to save for retirement. Your unused balance can be rolled over from one year to the next, and you can still access your HSA once you retire. In other words, you can start saving for future health care expenses right now.

As long as you use the funds in your HSA to cover qualified health care expenses, withdrawals from the account will not be taxed. Therefore, even those of you who don’t incur large health care bills now can still set aside money for expenses in retirement. Establishing a HSA now can be one of the best ways to offset high health care bills later, and shelter more of your retirement budget from rising prices.

For more information on establishing a health savings account, or for help planning your retirement in general, please call our office to schedule a consultation.

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Federal Retirees Have Special Options for Health Care

Posted by Gary Raetz Federal Retirees Have Special Options for Health Care

For most American workers, health care can be a major obstacle to retirement. Retiring before Medicare eligibility (at age 65) can mean many retirees must provide their own health care plans. But as a federal employee, you enjoy a special privilege: You not only receive retiree health care benefits, but you can even choose your plan.

If you enjoy relatively good health and want to lock in the lowest possible premiums, you might choose a high-deductible plan that covers mostly catastrophic health risk. Or, you might prefer a more traditional Preferred Provider Organization (PPO) or Health Maintenance Organization (HMO) plan. Under these plans, you pay a co-payment for services, and enjoy very low or no deductibles.

If you plan to retire before age 65 and Medicare eligibility, you can enjoy continued health care services under your choice of retiree insurance plan. But of course, that doesn’t mean you won’t incur any health-related expenses. Before you retire, factor the following costs into your budget:

  • Premiums for your chosen health insurance plan
  • The cost of co-payments for doctor visits
  • Annual deductibles, if any; can you afford to pay up to this limit before your benefits kick in?
  • The cost of prescription medications
  • The cost of any equipment or services not provided by your chosen health insurance plan

Carefully weigh all of the above factors, and make certain that you have room for them in your budget. Also, before choosing a plan you should carefully consider the state of your health and the length of time before you turn 65. Even if you enjoy reasonably good health now, how many years can you expect it to hold up before you’re eligible for Medicare? That low-premium, high-deductible health insurance plan can look attractive now, but it might be a bad bet in five years if you suffer an accident or severe illness.

Even though you enjoy the special benefit of retiree health insurance, you should still consider the impact of health care expenses upon your retirement budget. Set aside enough money to cover your out-of-pocket expenses, and remember to review your plan each year during the Open Enrollment season to be sure it still suits your needs.

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Federal Employee Retirement Benefits and Estate Planning

Posted by Gary Raetz Federal Employee Retirement Benefits and Estate Planning

One of the reasons you work so hard is so that you can provide for your loved ones. But what if you pass away suddenly? What will happen to your retirement benefits?

When you first began working for the federal government, you filled out beneficiary forms to answer that question. On the forms, you specified a beneficiary who will receive any after-death benefits based upon your employment. If your situation changes at any point in time, you should fill out a new beneficiary form with your personnel office. In fact, it is recommended that everyone review this information every two to three years, to make sure their beneficiary forms still reflect their wishes.

You can designate anyone to receive your Federal Employees Group Life Insurance payout, or the proceeds from your Thrift Savings Account. But if you want to leave a survivor annuity to an heir, the rules are much more strict.

In most cases, only a lawfully wedded spouse may receive the proceeds of a survivor annuity. However, under certain court orders, a former spouse may also receive this payment. There is one exception to the spousal rule in regard to survivor annuities: If you are involved in a common law relationship in a state that recognizes such as a marriage, or if you began the relationship in such a state and subsequently moved to another state, then your common-law spouse may receive payment from a survivor annuity.

A rarely-used provision in the law allows you to provide a survivor annuity to someone who has an “insurable interest” in you. However, the process for applying for this status can be complicated, and might require special expertise to help you process the application.

If you’re making decisions regarding estate planning, in most cases your non-spouse dependents are most easily served by providing them with life insurance or the proceeds from your Thrift Savings Account. However, this is an issue to discuss with your financial planner or estate planning attorney. If you call us and schedule an appointment, we can explain your federal employee benefits with regard to estate planning.

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Picking the Right Date for Your Retirement

Posted by Gary Raetz Picking the Right Date for Your Retirement

When you think of the right date for retirement, you might be thinking, “as soon as possible”! But even if you’re feeling antsy to retire, federal employees have a few things to consider before setting a date. If you’re a FERS employee, you need to carefully consider the program guidelines before submitting your notice.

If you want to be on the annuity roll during a particular month, then you have until the last day of the preceding month to retire. Then your actual payments will begin during the following month. In other words, if you want to begin receiving your annuity payments on December 1, then you must retire by October 30 in order to do so.

Delaying by even one day can make a difference in when you begin receiving your annuity payments. For example, if you don’t retire until November 1, then you won’t be on the annuity roll until December, and then you will begin receiving your payments on January 1.

The date that you choose to retire also affects your annual cost of living adjustment (COLA). After you retire, your COLA for the next year will be based upon the month in which you were first on the annuity roll. For each month that you aren’t on the annuity roll, your COLA is reduced by 1/12th. So for example, if you wait until February 1, 2016 to retire, instead of January 30, then you would lose 1/12th of your COLA in 2017.

Then, of course, is the issue of your unused annual leave. When you retire, you will receive a lump sum payment for unused leave hours. However, most federal employees are limited to rolling over 240 leave hours from one year to the next. So if you have accumulated more than 240 leave hours, it might be wise to retire before the end of the year, so that you don’t miss the opportunity to be paid for those hours.

There are many variables which will influence the timing of your retirement, and the above factors are just a few of the things you should consider. For a more in-depth review of your personal situation, or for help choosing the right time to retire, please contact our office and schedule an appointment.

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Will Distributions from My Thrift Savings Plan be Taxed?

Posted by Gary Raetz Will Distributions from My Thrift Savings Plan be Taxed?

All your life, you have paid taxes, and this fact won’t change once you retire. However, the decisions you made regarding retirement planning throughout your career will have an effect upon how your retirement income is taxed.

Federal employees are offered the opportunity to save for retirement using the Thrift Savings Plan (TSP). But the taxes you pay in retirement will depend upon how you previously chose to make contributions to your TSP.

If you chose to make traditional contributions to your TSP, this means that your contributions were taken out of your paycheck before taxes. Throughout your career, you used this strategy to lower your overall taxable income each year, while saving for retirement. Your contributions grew free of taxes as well. But when you begin taking withdrawals in retirement, that income will be taxed as regular income according to your tax bracket.

On the other hand, you might have chosen to make after-tax contributions to your TSP. These are known as Roth contributions, and the rules regarding taxation of withdrawals work the same as rules for all Roth retirement accounts. You made your contributions after paying taxes on your earnings, so when you take withdrawals during retirement, these amounts will not be subject to taxation. This rule only applies if your withdrawals are “qualified”, meaning that the money has been in the account for at least five years, and you have reached age 59 ½.

Before beginning to take withdrawals from your Thrift Savings Plan, discuss your options with a financial advisor who specializes in federal employee retirement. As a federal employee, the rules for withdrawals are a bit different from the typical 401(k) retirement plan. Make sure you’re complying with the rules correctly, so that you can avoid excessive penalties.

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Taxes on Federal Employee Pensions

Posted by Gary Raetz Taxes on Federal Employee Pensions

Once you have retired from your career as a federal employee, many aspects of your life will become much simpler. You won’t face traffic during your twice-daily commute, you won’t have those awful mornings when you run late and feel harried, and you won’t be living your life according to a clock any longer. These things are true of all retirees.

But one fact of life doesn’t change very much in retirement: You will still owe income taxes. To some extent, your pension will be taxable. Of course, you won’t be paying payroll taxes, such as Social Security and Medicare taxes.

Once you retire, all of your income will be counted as ordinary income. Your taxes will be calculated based upon the marginal tax bracket into which you fall.

Since the money you paid into your CSRS or FERS pension was taken from your after-tax paychecks, you won’t pay taxes on those amounts again. However, you will still pay tax on the employer contribution part of those benefits, and also on the earnings from both your and the government’s contributions. The amount of your pension that is taxable is based upon the age at which you retire and the amount of your contributions.

Therefore, a portion of your federal pension will be tax-free, and you will owe income taxes on the rest. The exact amount of your taxable portion will vary according to the government’s formula, and depending upon your specific circumstances.

When you retire, you will receive a packet of papers. Form W4-P allows you to have your federal income taxes deducted from your pension any way that you wish. You can choose to make monthly payments, or defer the taxes and pay them when you file your tax return in the spring.

Discuss taxes with your tax professional or financial advisor, so that you won’t be surprised once you begin living on a fixed income.

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Are You Planning to Retire Later than Usual?

Posted by Gary Raetz Are You Planning to Retire Later than Usual?

While many federal workers have their eyes on an early retirement, some choose to retire later than the norm. There can be many reasons for postponing retirement, such as:

  • You got a late start in your career, due to child rearing, changing your path in life, or some other reason, and you want to get in a full 30 years before you retire
  • You don’t feel financially ready to retire, and need to keep working and saving money
  • You’re enjoying excellent health, and don’t need to retire yet
  • You enjoy your job and find great personal fulfillment in it, and worry that retirement might bore you
  • … and many other personal reasons!

Whatever your reason for delaying retirement, you might wonder how continuing to work will affect your Social Security benefits.

If you claim your benefits before full retirement age (65 to 67, depending upon your birth year), your benefits could be taxed if your annual earnings exceed a certain threshold. However, once you reach your full retirement age, the earnings limit rule no longer applies. You will receive your full benefits without being penalized.

If you had already claimed your benefits before reaching full retirement age, and some of your benefits were withheld due to the earnings cap, you will actually be repaid that money at this point. Or, if you are just now claiming your Social Security benefits, you will simply receive your full scheduled benefits.

If you decide to keep working past full retirement age, but decide not to claim your Social Security benefits, your scheduled benefits will increase by about 8 percent for each year that you delay. Note that there is no extra benefit to delaying your claim beyond age 70. If you decide to go this route, you will retire with a larger monthly benefit from Social Security, and of course you will also your expected payments from your Thrift Savings Plan.

Retirement timing is a personal issue, and there is no perfect time for everyone to retire. But if you’re willing and able to keep working well into your 60s, you might be able to ensure a more generous monthly income when you do decide to retire.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 

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Are You Dreaming of an Early Retirement?

Posted by Gary Raetz Are You Dreaming of an Early Retirement?

Everyone occasionally dreams of an early retirement, but most of us know that we will be working until at least age 60 or beyond. Some of us even believe we will never be able to stop working. But for federal employees, the timeline sometimes looks a bit different from the norm.

Your Social Security eligibility still begins at the same time as everyone else; at some point between age 65 and 67, depending upon your year of birth, you will reach full retirement age. Of course, you can still retire earlier, at age 62, and draw a reduced benefit check for life. Or, you can wait beyond full retirement age, and early a larger monthly check. But the bottom line is that the rules pertaining to Social Security are the same for you as they are for everyone else.

However, as a federal employee you do have one distinct advantage. If you separate from your service in the year you turn 55, you can begin taking payments from your Thrift Savings Plan without incurring a 10 percent penalty on your income taxes. Most other American workers can’t take early withdrawals from tax-advantaged retirement plans before age 59 ½, meaning FERS gives you a distinct advantage toward an early retirement. However, taking TSP withdrawals at age 55 is usually a one-time distribution that can severely limit your liquidity options, so you should seek expert advice before making that decision.

Of course, in many cases, taking your benefits before age 62 could mean that your monthly checks are permanently reduced. Therefore, an earlier retirement may be possible for you, but it’s an issue to carefully consider along with your financial advisor.

If you do decide to retire early, remember that Medicare eligibility does not begin until age 65. You will be able to use your retiree health benefits, but you should carefully review the plan and estimate your out-of-pocket expenses before deciding to retire. An earlier retirement is certainly possible for some federal employees, but careful planning will help you to avoid unpleasant surprises.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

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Is Your Spouse Protected by FERS?

Posted by Gary Raetz Is Your Spouse Protected by FERS?

If you’re a federal employee, you are counting upon your FERS benefits to kick in once you reach retirement. But what about your spouse? If something should happen to you, will they benefit from your years of service? Or are your benefits lost?

For this purpose, FERS provides the Basic Employee Death Benefit, payable to the surviving spouse. The benefit is equal to 50 percent of the deceased employee’s final salary, or average salary if higher, plus $30,792.98 (as of 2011). This benefit is payable if:

● the couple was married for at least nine months, or
● the employees death was accidental, or
● there was a child born of the marriage

In some cases, the Basic Employee Death Benefit may be payable to a former spouse, provided the former spouse was married to the federal employee for at least nine months and did not remarry before age 55. There must be a qualifying court order awarding a death benefit on file with the Office of Personnel Management (OPM).

As for monthly survivor benefits, your surviving spouse may receive payments if you completed at least 10 years of credible service before your death (18 months of which must have been civilian service). The same rules outlined above still apply.

If you have children, they may also qualify for monthly benefits until age 18, or age 22 if attending a qualified institution of higher education. If your child was disabled before age 18, he or she can receive recurring payments unless they get married. All children born, adopted, or recognized by a court order of support are eligible for monthly benefits. Stepchildren may be included if they were living with you in a parent-child relationship at the time of your death.

Knowing that your spouse and children can be covered by a death benefit should bring you some peace of mind. However, it’s important to meet regularly with your financial professional to plan for retirement, and also to plan for the support of your dependents in the event that something should happen to you.

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Will I Pay Taxes on My Federal Retirement Benefits?

Posted by Gary Raetz Will I Pay Taxes on My Federal Retirement Benefits?

As you plan for retirement, your budget should be one of your primary concerns. After all, you have to calculate your expected cost of living, medical care, and other expenses to make sure you will be able to live comfortably once you retire.

But many people forget to factor the cost of taxes into their retirement budgets, and face a big surprise in the spring. Here’s what you need to know about taxation of your federal retirement benefits.

The first thing to know is whether you are retiring under the CSRS or FERS system. Either type of pension will be taxed according to usual federal income tax rates. Since your contributions were already taxed during your career, that part of your pension is returned to you free of taxation. However, the rest of it – the majority of your pension – will indeed be taxed.

If you invested in a Thrift Savings Plan, that part of your retirement income will also be taxed. Social Security income is taxed, depending upon your overall annual income and your tax filing status. In other words, pretty much all of your retirement income might subject to federal income taxes. As in any other tax situation, the exact amount will depend upon your personal exemptions, credits, dependents, and so on.

State income taxes, on the other hand, are the big variable in this equation. Ten states do not tax federal pensions at all: Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, New York, and Pennsylvania. Several states do tax federal pensions, but at different rates depending upon your years of service, your date of retirement, or the date on which you first began working for the federal government.

If you’re planning to move once you retire, the federal income taxes on your retirement income will be the same no matter where you choose to live. But before you move to a new state, consider carefully the impact of state income taxes. As always, consult with your financial professional about your plans for retirement, do your research, and review your expected budget carefully to prevent any unpleasant surprises.

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Advantages of the Federal Long Term Care Insurance Program

Posted by Gary Raetz Advantages of the Federal Long Term Care Insurance Program

As a current or retired federal employee, you have the opportunity to purchase Federal Long Term Care Insurance. But why would you choose this insurance plan over similar plans on the market? Convenience is one factor; you can make your premium payments directly via payroll or pension deductions. But the plan itself offers many benefits that you might find useful in a time of serious medical need.

You choose your care. Under the Federal Long Term Care Insurance (FLTCIP) program, you can choose whether to receive assisted living, traditional nursing home, or in-home care. The FLTCIP even pays for care given by friends, relatives, or other unlicensed providers.

Greater at-home benefits. The FLTCIP program provides the tools you need to successfully coordinate in-home care, such as necessary modifications to your home, an emergency medical response system, medical equipment, training for your caregivers, home safety checks, and care planning appointments.

Coverage is portable. As long as you pay your premiums and have not exhausted the maximum lifetime benefit, you keep your benefits. You can leave your government employment without surrendering the benefits you purchased.

Renewal is guaranteed. As long as you continue to pay your premiums, your coverage will be renewed. You won’t lose your benefits due to age or a change in your health status.

Premiums can be waived. If you need to claim your benefits, you will need to pass an initial waiting period. After that point you can stop paying premiums while collecting your benefits.

For more information on the Federal Long Term Care Insurance program, talk to your financial professional or your human resources department.

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How Much Does Long Term Care Cost?

Posted by Gary Raetz How Much Does Long Term Care Cost?

We all hope to enjoy good health for the rest of our lives, but the reality is that many of us will suffer at least one major accident or illness as we grow older. If you need long term care at some point, you might assume that Medicare will pay for a nursing home or in-home nursing care. But unfortunately, that is seldom the case. Most senior citizens must find another way to pay for the care they require.

Just how much does long term care cost? Prices can vary greatly depending upon your geographic region, but the following statistics should give you some idea.

  • The cost of home care ranges from 15 dollars per hour (Montgomery, AL) to 24 dollars per hour (Hartford, Connecticut)
  • The national average cost of a home health aide who visits for six hours per day is $29,640. The cost could be much higher if you need more than six hours of help per day.
  • Nursing home care ranges from 148 dollars per day (Shreveport, LA) to 462 dollars per day (New York City). Prices given reflect the cost of a semi-private room.
  • Costs are difficult to analyze when a family member provides in-home care. If he or she has to leave a job, factor in the price of their lost income. And of course, emotional stress is impossible measure in dollars.

With few options to cover the cost of long term care, how would you pay for the assistance you need? One option is to set aside the amount you will need in savings. But considering the fact that you might need care for months or even many years, it can be difficult to guess at the price of your future medical needs.

Unless you can set aside enough cash to cover several years’ worth of nursing care, long term care insurance might be your better option. Luckily, federal employees have the opportunity to buy into a long term care insurance program through the Office of Personnel Management (OPM). Benefits are designed specifically for federal employees. Your premiums can be paid directly through payroll or pension deductions, meaning you are never in danger of lapsing on your policy.

For more information on the Federal Long Term Care Insurance program, talk to your financial professional or your human resources department.


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Are You Really Ready for Retirement?

Posted by Gary Raetz Are You Really Ready for Retirement?

With the average life expectancy increasing, and health care costs continuing to rise, the average worker might be ill-equipped for retirement. For one thing, we will all spend more years in retirement than our parents and grandparents did. Once you add in health care expenses and inflation, many Americans are understandably nervous about retirement. We will all have to live for longer, on less money!

LIMRA’s Secure Retirement Institute recently released a report which details both good and bad points on the state of retirement in America.

● Half of baby boomers have saved less than $100,000 for retirement
● More than one-third of baby boomers have saved less than $25,000 for retirement
● Of those already retired, 49 percent had to retire earlier than expected. In the majority of cases this was due to unforeseen health problems.
● 9 out of 10 annuity owners are confident about their retirement plans, and 4 out of 5 annuity owners feel that their annuity meets their financial needs.
● 8 out of 10 consumers feel that their financial advisor helped them achieve goals they would not have reached on their own.

So what can we all learn from this report? First, if you’re among the many baby boomers with inadequate retirement savings, you should start thinking about finding other forms of income once you retire. As you can see from the many satisfied annuity owners who answered the poll, annuities are a popular way to achieve a secure income.

Also, don’t assume that you will be able to work until your expected retirement date. It’s great to have a plan, but drafting a back-up plan is also important. Take care of your health, consider disability income insurance, and save as much as you can while you’re still working.

And finally, remember to seek the advice of a financial advisor. As you can see from the LIMRA study, working with a financial advisor is one of the best ways to come up with a creative and stable retirement plan.

14642 – 2015/6/30

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What is Phased Retirement?

Posted by Gary Raetz What is Phased Retirement?

Many older Americans reach retirement age, and realize that they aren’t quite ready to entirely stop working. In some cases they need the extra income provided by part-time employment. In other cases, they enjoy their jobs and want to stay active. They may even be disabled, and unable to work full-time, but able to continue working part-time, Whatever the situation, federal employees are lucky, because they may be eligible for something called phased retirement.

Under the Phased Retirement option, federal employees can begin drawing their retirement benefits while continuing their employment on a part-time basis. This option became available on November 6, 2014.

The benefits of phased retirement are numerous, but include:

● the ability to keep older, experienced workers engaged with the agency
● providing younger employees with access to decades of knowledge and experience
● a more effective, efficient government
● unique mentoring opportunities for employees
● the ability for older workers to continue being active
● greater financial flexibility for those who might otherwise retire completely

If you’re considering retirement, it is wise to pause for a moment and decide whether you’re really ready to live on a fixed income for the rest of your life. Many retirees are ambitious about their futures, but inflation and the rising cost of healthcare quickly overtake their budgets. In these cases retirees often find themselves looking for part-time employment to supplement their retirement income. And of course, obtaining employment can be difficult in today’s economy.

The Phased Retirement option allows would-be retirees the opportunity to continue earning at their current rate, while preparing for a full retirement in the future. It can be a smart move for both financial and personal reasons! If you’re considering a Phased Retirement, talk to your immediate supervisor about the options available to you. And as always, consult with your financial advisor about how Phased Retirement might affect your future plans.

14641 – 2015/6/30

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I’m a Federal Employee. When Can I Retire?

Posted by Gary Raetz I’m a Federal Employee. When Can I Retire?

As a federal employee, you are eligible for retirement income that includes Social Security, a pension, and distributions provided by your Thrift Savings Plan. But as you save and plan for retirement, you probably want to know when you will be eligible to retire!

The rules on retirement age are fairly complicated for federal workers, and it would be best to consult with your financial advisor. That way, you can discuss your particular situation and make sure your retirement plans are realistic.  But in general, there are four type of retirement offered by the Federal Employee Retirement System.

Immediate retirement. Your retirement benefits will be calculated based on your number of years in service, along with your Minimum Retirement Age (MRA). The federal government bases your MRA on your year of birth.

Early retirement. Sometimes the federal government must reorganize, reduce, or even close entire departments. You might have the option of transferring to another federal job, or you might be offered an early retirement. This option is sometimes available for certain involuntary separation cases.

Deferred retirement. In some cases, you may leave your federal job before you have met the requirements for immediate retirement benefits. If you have accumulated at least 5 years of service, you can receive benefits at age 62. If you have between 10 and 30 years of service, you can receive benefits at your MRA, subject to certain reductions.

Disability. If you become disabled during your time as a federal employee, you may be able to claim your FERS benefits. You must be unable to continue in your current position, and your agency must certify that it is unable to accommodate you in any other open position at the same pay and grade level.

As you can see, the rules regarding retirement benefits for federal employees can be complicated. This should underscore the importance of consulting regularly with your financial advisor, to make sure your desired retirement timeline will be possible.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

14640 – 2015/6/30

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What is the Federal Employee Retirement System?

Posted by Gary Raetz What is the Federal Employee Retirement System?

The Federal Employee Retirement System (FERS) was created by the federal government to support its employees in retirement. The system is actually built upon three separate retirement benefits, which combine to provide income for retired federal employees.

The first leg of FERS is the pension program. Each pay period, a portion of your check is withheld to fund your future pension. For most employees, the amount withheld is 0.8 percent of basic pay (excluding any overtime). The FERS pension is a defined benefit plan, meaning that the amount of money you receive in retirement will be fixed. The exact amount that you will receive is based upon a complicated formula, which you should discuss with your financial advisor to be sure you know what to expect in retirement.

The second leg of the FERS program is your Social Security benefits. Like any other American citizen, you will pay into the Social Security program throughout your career. When you reach retirement age and claim your benefits, the amount you receive will be based upon your past earnings and the age at which you file for benefits.

The third leg of the FERS program is the Thrift Savings Plan. The TSP is a special retirement account created specifically for federal employees. The amount you receive in retirement will depend largely upon how much you contributed and how well you managed the money in your account. Many federal employees are eligible for employer-matched contributions, so it’s important to take advantage of those if you can.

As a federal employee, you have three opportunities for retirement income. But as you can see, correct management of your resources will be important to securing financial freedom in retirement. Consult regularly with your financial advisor to make sure your savings strategy is on track with your goals.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

14639 – 2015/6/30

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6 Tips to Make the Most of Your Retirement Income

Posted by Gary Raetz

Senior Couple Standing On Beach Taking Selfie

Once you retire, you will be living on a fixed income for the rest of your life. Hopefully, you have planned well for retirement, and your income will be generous enough to provide a comfortable lifestyle. But since you don’t have a crystal ball to predict the future, taking these steps can help to ensure that your money lasts as long as you do.

Take care of your health. Health care is often the biggest expense faced by retirees. Take care of your health now, so that you can enjoy lower health bills (and a more fun lifestyle) later. Eat healthy foods, exercise, and follow your doctor’s advice regarding preventive medicine.

Cut back on your vices. Track your expenses for one month, and you might be shocked at how much you spend on alcohol, cigarettes, or other common vices. Giving up these items, or at least cutting back, can leave a lot of room in your budget. Not to mention, taking this step will help you accomplish the first goal in this list!

Take control of your housing budget. Many older Americans are now entering retirement while still making mortgage payments. For some, renting may be the better choice, because you won’t have to worry about large unexpected expenses related to owning a home. Or, if you want to own your home, consider downsizing into a smaller one.

Reconsider your car. If you live in an urban area, the cost of owning a car may not be worth it. By using public transportation instead, you will save yourself the cost of a car payment, auto insurance, gas, maintenance such as oil changes and tires, and large deductibles in the event of accidents.

Consider a part-time job. When you first retire, you may enjoy the freedom of having a completely open schedule. But before long, you may discover that you’re bored and lonely. Not to mention, you would probably enjoy the extra cash you could earn through part-time or temporary work.

Talk to your financial planner. Before you retire, schedule a meeting with your financial planner. Talk about your goals, and make sure that your retirement income will match up with your expectations.

14563 – 2015/6/5

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Choosing Beneficiaries for Your Thrift Savings Plan

Posted by Gary Raetz

Senior man signing a contract in his attorney's office.

After years of hard work and saving for retirement, we all hope to live long enough to enjoy the fruits of our labor. But none of us can predict the future, so it’s always best to prepare for every possibility.

Did you know that the Thrift Savings Plan will not honor a will, trust document, court order, or any other estate-planning device when you die? Your intended beneficiaries will only receive the money in your TSP if you have filled out and filed Form TSP-3.

If you do not utilize Form TSP-3, the Thrift Savings Plan will follow a default order or rule when deciding how to distribute the money in your account. The money will first go to your spouse, if you have one, and then to your children if you do not have a spouse. If you do not have a surviving spouse or children, the money will go to your parents, and then to the appointed executor of your estate if you have one. If all of these options are exhausted, the laws in your state will determine next of kin for inheritance purposes.

If you want to choose your own beneficiaries, you must file Form TSP-3. You are allowed to choose one or more people to receive the funds in your account, or you can designate the money to a trust or your estate.

If you choose, you can designate primary beneficiary to receive the funds in your account. Then you can choose contingency beneficiaries who will receive the money in the event your primary beneficiary passes away before, or at the same time as you. This is a particularly helpful strategy for those who choose a primary beneficiary who is about the same age (such as a spouse). Remember, as you both grow older you might forget to regularly review beneficiaries.

There is also the chance that your spouse, or other primary beneficiary, is mentally or physically incapacitated by the time you pass away. Choosing backup beneficiaries is the best way to ensure that your money will end up in the right hands. Consult with your financial planner or estate planning attorney to be sure that you have correctly filed Form TSP-3.

14564 – 2015/6/5

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The Power of Compounding Interest

Posted by Gary Raetz The Power of Compounding Interest

It can be scary to think about retirement. Once you stop working, you have to live on your savings or pension for the rest of your life. That’s why it’s so important to save every penny you possibly can, during your working years.

Luckily, compounding interest helps your retirement account grow. When your interest compounds, that means you earn money not just on your contributions, but on the interest those contributions earn. In other words, your money continues to multiply as long as you hold the account!

For example, let’s pretend you set aside 1,000 dollars in an account with a 5 percent annual compounding interest rate. After the first year, your account balance is $1,050. But after the second year, your balance is $1,102.50. You earned $50 in interest the first year, but $52.50 the second year, because you earned interest on your interest! It’s easy to see how your money can multiply over a 30-year career.

Of course, that’s just a theoretical example. You can’t predict your rate of return from one year to the next, but one thing is certain: Your interest will earn interest. You can rest assured that every penny in your retirement account is working hard for you.

Now that you understand how compounding interest works, you can see why beginning to save early in retirement is so important. It’s also important to leave that money in your retirement account, rather than borrowing it for any reason. When you take an early withdrawal, you cost yourself not only the amount you withdraw but also the interest that would have compounded on that money.

Compounding interest helps your retirement account grow. But remember to keep contributing as much as you can each year, so that you can work to ensure a healthy retirement fund at the end of your career.

If you have questions or need assistance, feel free to contact our office. We’re here to help!

14565 – 2015/6/5

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Federal Employees Can Choose How to Save for Retirement

Posted by Gary Raetz Federal Employees Can Choose How to Save for Retirement

When you’re saving for retirement, one of the main things you need to consider is how your contributions are treated by the IRS. Unlike many workers, federal employees have the advantage of choosing how to make contributions to their Thrift Savings Plan (TSP). You can choose one or both of these options, depending upon your individual situation.

  • Traditional, pre-tax contributions
  • Roth, after-tax contributions

If you choose to go the traditional route, you will make contributions to your TSP out of your paycheck, before taxes are paid. Your overall taxable income will be lowered, so that you owe less to the IRS during tax season each year.

Traditional contributions to your retirement fund grow with taxes deferred. This means you won’t owe taxes on the money, or its earnings, until you take withdrawals in retirement. Members of the armed forces who contribute tax-free combat pay to their retirement plans will only owe taxes on the interest that money earns.

If you choose to make Roth (after-tax) contributions, you deposit money into your TSP after paying taxes. This money will never be taxed again. As long as you meet IRS rules for qualified earnings, the interest on those funds will not be taxed either.

When deciding whether to make traditional or Roth contributions, think about your tax bracket now versus your tax bracket in retirement. If you expect your income to be higher in the future, it might make sense to make Roth contributions now. On the other hand, those of you in your peak earnings years might be better off making traditional contributions. Of course, everyone’s situation is different. That’s why you should discuss this issue with your financial planner, and continue to adjust your retirement plan as your financial situation changes.

14566 – 2015/6/5

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Mark These Important Retirement Dates on Your Calendar

Posted by Gary Raetz Mark These Important Retirement Dates on Your Calendar

For most of your career, your retirement planning might focus on saving money, paying off debt, or reaching the age at which you can claim your pension. Each time you reach a milestone, like eliminating your mortgage, you are one step closer to retirement. But aside from your personal financial goals, there are many important dates which you should mark on your calendar.

Your 62nd birthday. You can claim your Social Security benefits early, when you reach age 62. Of course, your full retirement age is actually 66 or 67, depending upon your year of birth. If you retire at age 62, your benefits checks will be permanently smaller than they would have been at full retirement age. But in some cases you may need to retire early, so keep in mind that you can first file for Social Security benefits when you turn 62.

Your 65th birthday. When you reach age 65, you are eligible for Medicare. If you have already filed for your Social Security benefits, you are automatically enrolled in Medicare Part A when you turn 65. You can also purchase Medicare Part B for a monthly premium. However, if you have not already claimed your Social Security benefits, you will not be automatically enrolled in Medicare. If you forget to apply, you will actually be charged a penalty for each year that you neglect to enroll in the program.

You can begin your Medicare application starting three months prior to your 65th birthday, and he enrollment period extends for three months afterward. Beyond that point, your application is considered late and you may be charged the penalty.

Your 70th birthday. If you haven’t claimed your Social Security benefits yet, go ahead and do so. Your check will increase by 7 percent for each year that you wait beyond full retirement age, up to age 70. There is no longer any benefit to waiting, so be sure to claim your benefits now.

Age 70 ½. You are required to begin taking withdrawals from your retirement account, if you have not already begun doing so by age 70 ½. Minimum distributions will be based upon your life expectancy.

Remember to mark these important dates on your calendar. Anticipating these milestones and planning for them will keep you on course for a successful retirement.

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Social Security for Spouses

Posted by Gary Raetz Social Security for Spouses


After paying into the Social Security fund throughout our careers, we all want to be sure we receive the maximum possible benefits. While the program was never intended to provide your sole source of income in retirement, your benefit checks will certainly comprise an important part of your budget. That’s why we consider Social Security an important part of retirement planning, and advise clients to carefully consider all ramifications of filing for their benefits.

If you wait until your “full retirement age” (age 66 or 67, depending upon when you were born) to file your claim, you should receive the full amount of your scheduled benefits each month. This amount is based upon your earnings record. On the other hand, you can file for benefits as early as age 62, but your checks will be permanently reduced from their full amount. Or, if you choose to wait a few more years to claim your benefits, you can earn a larger monthly check. For each year that you delay your claim, up to age 70, your check will be about 7 percent larger. There is no benefit to waiting past age 70, however.

Retiring early. You may have already known that the timing of your claim will affect your benefit amount. But what you may not know is that spousal benefits are also affected by retirement age. Spousal benefits amount to 50 percent of the higher-earning spouse’s Social Security check. Therefore, retiring early at age 62, and accepting a smaller monthly check, will translate into a smaller spousal benefit as well.

Retiring late. But what if you wait beyond your full retirement age to claim benefits? Unfortunately, taking this route will not increase your spousal benefits. The higher-earning spouse’s check will indeed be higher, but accompanying spousal benefit will be the same as it would have been if you had retired at “full retirement age”.

Survivor benefits. If you’re a married couple planning your retirement, you know that it is likely one of you will pass on before the other. In this case the living spouse can file for survivor benefits from Social Security. This benefit amount is based on the age of the surviving spouse, but the rules for calculating the exact figure are complicated. To best protect yourself and your spouse, schedule a personal consultation with a financial advisor. He or she can review your financial situation, and help you formulate a solid financial plan to care for your spouse in the event of your passing.

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What is Estate Planning?

Posted by Katie Lightfoot

By Linda Marshall, Esq

Estate planning is about caring for your loved ones, seeing they are provided for, and making sure your hard-earned property is distributed according to your wishes.  An estate plan is your blueprint for where you want your property to go after you die, how you want it distributed, and the marching orders for those you select to manage your affairs after you die or become incapacitated.

What is included in your estate?  Your estate consists of all your property, including:

  • Your home and other real estate owned,
  • Tangible personal property such as cars and furniture, and
  • Intangible property such as insurance, bank accounts, stocks and bonds, and pension and Social Security benefits.

So, what is an estate plan?  When most people think about an estate plan, they think of a will.  But a will is far from the entirety of an estate plan.  Estate plans may include:

  • Durable powers of attorney for finances
  • Durable powers of attorney for health care
  • Health care directives
  • Living trusts, including:
    • Revocable living trusts
    • Marital trusts
    • Special needs trusts
    • Perpetuity trusts
    • Credit shelter or tax savings trusts
    • Irrevocable trusts
    • Discretionary trusts
    • Incentive trusts
    • Other types of trusts
  • Wills
  • Nonprobate transfers
    • Beneficiary deeds
    • Transfer on death designations
    • Beneficiary designations (such as for IRAs and insurance policies)
    • Joint ownership

An estate plan should be designed for your individual situation and should meet your personal goals.

If you do not have a will, the state has one for you.  In Missouri and Kansas, if a person does not have a will or estate plan, half of anything he or she owns at death passes to the surviving spouse and the other half goes to the children.  If the children are under the age of 18, a court-supervised conservator administers the children’s share of the estate.

Most parents do not believe that the age of majority set by the state (age 18) is old enough to have control of substantial amounts of money, so they want to protect their children by setting a higher age.  This can be done by an estate plan.  A trust can delay distribution of assets to children until the children reach what the parents consider a more suitable age, and the trust can name a financially mature trustee to manage the property in the interim.  The trustee can be given flexibility to expend trust funds for the children’s needs, such as support, education, and unforeseen circumstances.  If a child is disabled, a “special needs” trust can be established that will supplement government assistance rather than replace it, enhancing the quality of the beneficiary’s life without jeopardizing the existing benefits.

A revocable trust offers all the advantages of avoiding probate but still allows the person to direct how their property is to be distributed, including alternate provisions attempting to anticipate varying scenarios of life and death.  A revocable trust can be changed or revoked until the person’s death or incapacity, but it does take effect immediately upon execution and funding.  This is why such trusts are often referred to as “living trusts.”

Even if a person has a living trust, however, he or she should also have a will – a last will and testament.  This is because some assets may still pass by other means.  The primary provision of this will is a clause (a “pour over” provision) by which any assets passing by way of the will is bequeathed to the living trust.  The will is a valuable backup to insure that everything passes as intended.

Except in rare circumstances, a surviving spouse will have no estate taxes to pay.  And since January 2, 2013, estate and gift tax exemptions for anyone are $5 million, indexed for inflation (currently the exemption is more than $5.12 million).  So most people can plan their estate based on whom they want to inherit their property, at what time and under what circumstances, and whom they want to administer the plan now and in the future.  Married couples whose assets are greater than $5.12 million can plan their estate in ways to save taxes upon the death of the survivor.

Creating an estate plan is a great gift to a person’s loved ones.  It organizes the assets; it protects the assets; it eliminates all of the transfer requirements after death; it saves money; and it frees your loved ones from all the administrative burdens of an unplanned estate.  It also makes sure your wishes are accomplished.  These are things we all want, aren’t they?


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Maximizing Retirement Benefits and Perks for Federal Employees

Posted by Katie Lightfoot

By Jason Kay for FedSmith and

Traditionally ranging from six to eight percent of the entire United States workforce, federal employees serve as the backbone to our country. From small, medium, and large independent agencies to cabinet level positions, federal employees – just like yourself – are much needed and certainly appreciated. As a strong symbol of this appreciation and gratitude for your service, you may have access to the Federal Employees Retirement System (FERS) – upon retirement. Whether you are already retired and trying to understand how the system works, or you are still in the workforce and want to prepare for the future, it’s crucial that you understand how FERS works and what benefits you will have.

Strength in Numbers: United States Federal Employees

According to the most recent data from the United States Office of Personnel Management, the total federal workforce consisted of just over 4.31 million in 2012. Of those 4.31 million, 2.7 million were executive branch civilians, 1.55 million were uniformed military personnel, and 64,000 were legislative and judicial branch personnel.

With so many United States federal employees working in all 50 states, in both small and large agencies, it’s important to understand the power each individual employee has to build a solid and secure financial future through FERS. This guide will help you better understand some of the benefits offered to you and will provide some information that is otherwise difficult and challenging to find.

Understanding Retirement as a Federal Employee

Whether you just retired or are planning on doing so in the near future, you need to understand FERS – inside and out. Overlooking details can cause you to miss out on some of the great benefits afforded to you.

First off, you need to understand when you can retire. To qualify for retirement under FERS, you must meet three eligibility requirements:

  • In most cases, you will not be eligible for retirement benefits until you reach your “MRA,” or Minimum Retirement Age. Your MRA depends on what year you were born in and typically falls somewhere between 55 and 57. More information can be found by visiting
  • Years in service. Another factor that often works in conjunction with your age is how many years of service you have. For example, if you want to take immediate voluntary FERS retirement, you must be at your MRA with 30 years of experience, or age 60 with 20 years of service, or age 62 with 5 years of service. These are, however, just minimums.
  • Type of retirement. The third determining factor is which type of retirement you choose. This is the most complicated factor and will take some research and planning on your part. Some examples of FERS retirement include Immediate Voluntary, Immediate Voluntary with 10% Bonus, FERS MRA+10 Retirement, Postponed and Deferred FERS Retirement, Involuntary/Discontinued Service Retirement, and more.

After understanding when you can retire, you should thoroughly research the three main components of your FERS retirement. These components are the Basic FERS Pension, Social Security, and Thrift Savings Plan.

  • Basic FERS Pension. Also frequently referred to as your FERS annuity, your FERS pension is one of the major benefits of your retirement plan. This pension fund comes from the small portion of pay the government takes from your paycheck each month – but isn’t necessarily based on the amount you put in. It can be estimated by taking your High-3 salary, multiplied by years of creditable service, multiplied by the pension multiplier.
  • Social Security. The second major component is Social Security. Under the FERS, employees are typically able to receive benefits as soon as they retire. Your payments will depend on how much money you’ve received over the years and how long you’ve contributed to Social Security. One of the major benefits you may receive as a federal employee is the Specialty Annuity Program, which bridges the money gap for those who retire prior to turning 62 (minimum age for Social Security benefits).
  • Thrift Savings Plan (TSP). The TSP is a special account which allows federal employees to save pre-tax dollars or invest them without tax consequences. After retirement, you may receive a fixed amount that directly correlates to how much money you put in and how well you managed those funds.

Other FERS Benefits and Deals

While these are the three major, government programs for federal employees, there are plenty of other smaller benefits offered by various companies and organizations. As seen in this article, “There are literally hundreds of opportunities to save on special and everyday purchases that companies are willing to offer you as a ‘thank you’ because of your service to our country.”
While that’s great news, the problem is that many retirees don’t know these opportunities exist. This is primarily because many discounts are not publicly advertised or touted. However, that doesn’t mean they don’t exist. It just means you have to ask. As somebody probably once told you, “It can’t hurt to ask!” Whenever you are doing business with a new organization, company, or store, ask if they have special discounts for federal retirees.
One way to learn about deals and opportunities for savings – as well as to increase your chances of receiving discount benefits – is to join an association for retired government employees. Depending on where you live or what level of government you worked for, you may be eligible to join FedSave, the National Active and Retired Federal Employee Association, or the Government Employee Marketplace. Here is a brief look at some examples of where retired and current government employees can save:
  • If you’re looking to move, downsize, or get rid of items you don’t need, many storage companies offer discounted moving trucks and temporary storage units.
  • Restaurants like IHOP and Applebee’s offer daily discounts on breakfast, lunch, and dinner specials.
  • Did you know that Apple actually has its own government employee store? Well, they do, and you can receive discounts on all the latest tech gadgets – including iPhones, iPads, and more.
  • When it comes to caring for yourself and your belongings, you can save, as well. GEICO offers savings on car insurance plans, while many doctors offer discounted care programs for patients.
  • Dell frequently offer deals for federal government employees and retirees (as much as 30 percent off computer purchases and 5 percent cash back).
  • Carbonite computer backup service offers a 10% discount on all 1, 2 and 3 year subscriptions.

While these companies and hundreds more offer great deals, it’s the travel industry that takes the lead.

The Best Travel Benefits for Federal Employees
As a curremt or retired federal employee, you have the opportunity to secure large discounts on cruises, airfare, accommodations, and vacation packages each time you travel. You just have to know where and when to look for these incredible deals.
  • Have you looked at airfare lately? According to an Associated Press analysis this August, the average round-trip ticket in the United States was more than $500 in the first half of 2014. In fact, average domestic airfare has increased 10.7 percent over the past five years. Multiply that $500 by a family of three, four, or five and your trip budget is already gone before you land.

That’s where federal employee airline discounts help out. Depending on where you’re going and who you fly with, you may be able to save a considerable amount of money. Most notably, JetBlue, Southwest, and American Airlines offer great discounts.

  • As a federal employee, the savings often extend to hotel or lodging accommodations. Dozens of hotel chains offer discounts for government employees, including Marriott, La Quinta, Gaylord Palms Resort in Orlando, and Hyatt. For information about available discounts and how to save the most, is a great source.
  • Car rentals. Looking for a way to get between the airport and your hotel, without breaking the bank? Many of the top rental companies offer discounts for government employees. These include Enterprise, Alamo, Avis, Hertz, Dollar, and more. Deals include discounted rates, free upgrades, and reduced membership fees.
  • Package deals. If you are one of those people who enjoy purchasing package deals, there are savings options for you, as well. One of the best can be found through the Government Employee Travel Opportunities (GETO) program. As their website touts, government employees and retirees can enjoy vacations for just $369 per unit, per week. Other amazing travel opportunities can be found through GovArm.

Making the Most Out of Your Benefits

Whether you are a current or retired federal employee, it’s important that you make the most out of the benefits offered to you. Whether it’s the official benefits like FERS pension, Social Security, and the Thrift Savings Plan, or smaller discounts on everyday expenses and travel, every dollar matters. The more you research, the more informed you will become.
For even more information on federal retirement, check out this article on the ten things you probably don’t know about retirement. It offers information that only experts in the field know and are willing to share.
You’ve worked hard over your career, and you deserve to enjoy a happy, peaceful, secure retirement. Don’t let your finances take control of your life. Instead, take control of them by maximizing the benefits and opportunities available to you.
© 2015 All rights reserved. This article may not be reproduced without express written consent from
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What is the Special Retirement Supplement and Why Is it Important?

Posted by Katie Lightfoot


By John Grobe and also for Fed Smith

What is the Special Retirement Supplement (SRS) and why is it important for FERS employees?  A full career FERS employee with 30 or more years of Service can retire at their minimum retirement age (MRA) which is between the ages of 55 and 57, depending on the year in which the employee was born.  FERS employees who have 20 years of service are eligible to retire at the age of 60.  However, regardless of the year in which an employee is eligible to retire under FERS, their earliest age of eligibility for Social Security retirement benefits based on their own earnings is age 62.

Social Security is expected to be a part of the retirement package of FERS employees; in fact, the reason FERS was created was to bring federal employees under Social Security.  Congress created a supplemental payment to tide over FERS retirees who chose to retire before they hit the age of eligibility for Social Security.  The most common name for the supplement is the Special Retirement Supplement but some folks call it the Social Security Supplement, the Retiree Annuity Supplement or the “bridge payment”.

The SRS applies to retirees between their MRA and age 62, though there are some exceptions.  It is designed to replace the portion of an age 62 Social Security benefit that is due to civilian employment under the FERS system (military time that has been bought for FERS retirement does not count in computing the SRS).  Social Security covered wages at another job prior to federal employment is also not counted.  Therefore, it is possible that the SRS will not equal what an age 62 Social Security benefit would be.

The SRS is not paid by the Social Security Administration; rather it is paid by the Office of Personnel Management.  What follows is a simplified example of how the SRS would be calculated.

Let’s say that an employee’s MRA is age 57 and they retire at that age with 30 years of federal service.  Their monthly age 62 Social Security benefit is expected to be $1000.  In computing the SRS, the years of federal service (30) are divided by 40 (the number of years that Social Security considers to be a full career), and the resulting fraction (3/4 or 75%) is multiplied by the age 62 Social Security benefit to give the amount of the SRS.  In this case, the SRS would be $750.  If the employee were retiring with 20 years of service, the fraction would be ½ (or 50%) and the SRS would be $500 per month

The retiree would receive the SRS until age 62.  At that time the SRS would end, whether or not the retiree chose to apply for Social Security at that time.  The SRS ends when one becomes eligible for Social Security Retirement benefits – not when one applies for them.

But wait – there’s more!  The same earnings test that applies to Social Security benefits received before reaching the full Social Security retirement age will apply to the Special Retirement Supplement.  For 2014, one may earn up to $15,480 before the earnings test kicks in.  Once it kicks in, every $2 in earned income above $15,480 will result in a $1 reduction to the SRS.  The test applies only to earned income, not to pensions, dividends, etc.

But wait – there’s even more!  The SRS does not receive a cost-of-living adjustment.

What exceptions are there to the SRS?

  • Special category employees (law enforcement, firefighters, etc.) may receive the SRS at the time they retire, even if they are younger than their MRA.  They are also not subject to the earnings test until they reach their MRA.
  • Individuals who take voluntary early retirement (“early out” or VERA) are not entitled to the SRS until they reach their MRA.
  • Employees who retire under MRA+10, deferred retirement or disability retirement are not eligible for the SRS.

© 2014 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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FERS, FERS-RAE, FERS-FRAE… What Does All This Mean?

Posted by Katie Lightfoot

By Ehren Clovis for FedSmith

The alphabet soup of government acronyms got a couple new ingredients over the past year and a half:  the FERS (Federal Employees Retirement System) was joined by FERS-RAE in January 2013 and by FERS-FRAE in January 2014.  What are these new acronyms and what changes do they indicate?

Rest assured that for most employees, nothing changed.  In fact, most employees breathed a sigh of relief that the changes did not even affect current employees.  But newly hired employees and those returning to service with only a few years of government service in their past will be subject to new FERS provisions which require larger employee contributions to FERS than in the past.

A little background:  FERS provisions started on 1/1/1987 and were applied to employees who were newly hired in retirement-covered positions from that point on.  The new FERS provisions also applied to most employees first hired between 1/1/1984 and 1/1/1987, and to employees who were reinstated on or after 1/1/1987 who didn’t have at least 5 years of service that was creditable under the old Civil Service Retirement System (CSRS).

The standard employee contribution rate for FERS (the amount employees must pay for coverage under the FERS Basic Benefit pension plan) settled at .8%, after excursions to 1.3% and .94%, so for many years employees have paid less than 1% of their gross pay into FERS.  “Special group” employees such as law enforcement officers, firefighters, air traffic controllers, and Congressional employees, pay a rate that is one-half percent higher, settling at 1.3%.  For simplicity, I’ll refer to only the standard rate here; special rates are always .5% higher.

The standard FERS employee contribution rate changed with passage of the Middle Class Tax Relief and Job Creation Act of 2012.  Under this Act, a new category of FERS employees was created:  FERS-RAE.  This stands for FERS-Revised Annuity Employees. The standard FERS-RAE employee contribution is 3.1%, an increase of 2.3%.  (Special group rates went up the same amount.)  However, the new rate was to apply only to employees who are newly hired on or after 1/1/2013, or rehired with less than 5 years of civilian service that is potentially creditable under FERS.

That seems fairly clear so far:  current employees weren’t affected, but newer employees have to pay more.  Ok, we’ve got that.  HR offices have to make good decisions about what FERS code to use (K or KR) and payroll offices have to make programming changes to provide for proper deduction of the additional new coverage type.  That’s doable.  (No increase in retirement benefits, by the way.)

But that’s not all!  Along comes the Bipartisan Budget Act of 2013, which created yet another category of FERS employees thanks to a different employee contribution rate, and FERS-FRAE was born.  The new category – FERS-Further Revised Annuity Employees – has a standard contribution rate of 4.4% of gross pay, and applies to employees newly hired on or after 1/1/2014, or rehired with less than 5 years of civilian service that is potentially creditable under FERS.

The fact that this Act was signed on December 26, 2013, just six days before it was to be effective increased the potential for problems.  Although they may have known that such a change was possible, payroll and HR offices were caught short by this very last minute change.  In fact, OPM’s Interim Guidance concerning the new Act was not even issued until 1/30/2014, 30 days after the new FERS category was effective.

So here are the current FERS retirement coverage categories in table format:

Retirement Coverage Affected Individuals Standard Retirement Coverage Code Standard Employee Contribution Rate
FERS Employees first hired on/after 1/1/19871 K .8%
FERS-RAE Employees first hired on/after 1/1/20132 KR 3.1%
FERS-FRAE Employees first hired on/after 1/1/20142 KF 4.4%
  1. Or rehired after that date with less than 5 years creditable or potentially creditable service under CSRS
  2. Or rehired after that date with less than 5 years creditable or potentially creditable service under FERS

It’s easy to see the potential for errors here.  Brand new federal employees aren’t a problem, but rehires are.  HR offices usually have to make retirement coverage determinations before they have access to a rehired employee’s complete employment history.  That means they must make the retirement coverage decision based on information provided by the employee, which may not show exact, full dates of previous federal employment, or may not include all periods of previous service.  Incomplete or erroneous service histories could cause employing agencies to put new employees in FERS-RAE or FERS-FRAE when they actually belong in FERS or (heaven forbid!) CSRS.

We’ve been through this before.  When FERS hit the scene in 1987, errors in coverage between CSRS and FERS were made.  In fact, thousands upon thousands of retirement coverage errors were made – and they are still being made.  OPM’s solution to the problem was the Federal Erroneous Retirement Coverage Correction Act of 2000 (FERCCA), which provided options for affected individuals and instructions for correcting errors.  But FERCCA corrections are so difficult, time-consuming, frustrating, and confusing that finding an error that requires FERCCA action is cause for general mourning, dimmed lights, heavy drinking, and heartfelt sympathy cards.

So will we need FERCCA: The Sequel to correct errors in retirement coverage among FERS, FERS-RAE, and FERS-FRAE?  I don’t think so.  Oh, there will be errors in coverage, but they will be inherently less complicated because all of these coverage types include the same players:  FERS and Social Security.  Only the amount of the FERS deduction is different, which should be fairly easy to fix.  Nonetheless, it would benefit employees who are new or rehired since 1/1/2013 to check their retirement coverage and ask questions sooner rather than later.

© 2014 Ehren Clovis. All rights reserved. This article may not be reproduced without express written consent from Ehren Clovis.

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Caught in a Data Breach? How to Reclaim Control of your Credit and Identity

Posted by Katie Lightfoot

By the end of the first quarter 2014, more than 200 data breaches compromised millions of consumer records, according to the Identity Theft Resource Center, which keeps track of reported data breaches. Stunned? Data breach stats are even more staggering if you’re among the millions of Americans caught up in one every year.

In addition to the potential monetary loss and identity theft risks, data breaches can also rob you of your sense of security and confidence. When you learn you’ve been involved in a data breach, it’s important to take steps to help protect your identity and financial accounts, and to rebuild your sense of security.

Often, breached organizations will offer affected customers some form of credit monitoring for a set period of time (usually one year) after the breach. While such services may go a long way toward making you feel more secure, be sure you understand exactly what the offered product can – and can’t – do to help you recover from the potential impact of a data breach.

Data breaches, credit monitoring and identity theft risks

Consumers whose personal or financial information is compromised in a data breach may be at greater risk of experiencing identity theft. In 2013, more than 13 million Americans experienced identity fraud, according to a study by Javelin Strategy.

Credit monitoring products aim to help minimize identity theft risks by keeping an eye on your credit accounts, where evidence of potential fraud and identity theft may first appear. Identifying such signs early may help mitigate some of the damages associated with identity theft.

While it’s true that consumers can do on their own virtually everything a credit monitoring product does, going it alone can sometimes be time-consuming and burdensome. Convenience is a significant benefit of a credit monitoring product. Not all credit monitoring products are alike, however, and if a company offers you this product in the wake of a data breach, don’t hesitate to carefully review the product and ask questions, including:

  • Does the product provide daily monitoring of credit files?
  • Will you receive timely alerts of key changes in your credit files?
  • Does the product monitor your credit file at all three of the major credit reporting agencies, or only one? For example, Equifax Complete monitors information from all three bureaus.
  • Are financial alerts included, and is it possible to link your bank and credit card accounts to the monitoring product? This allows you to be alerted when withdrawals from your bank account and/or charges to your credit card are processed, based on threshold amounts that you define.
  • Is Internet scanning for your Social Security Number and credit card numbers included? This may help detect unauthorized posting of your Social Security number and credit card numbers on certain suspicious trading sites.

If a breached company cannot answer these questions, or you’re not satisfied that the credit monitoring product being offered is comprehensive enough for your needs, you may need to take additional steps. First, you should ask the breached company for a different product. Such companies are increasingly aware of the impact data breaches can have on their reputation, and may be more willing to engage with those customers who feel they’re not receiving an appropriate response in the wake of a data breach. If a company refuses to respond to your request, consider also subscribing to a more suitable product of your choice on your own – it can be a key step toward regaining some confidence and peace of mind when you’re a data breach victim.

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Retirement Credit for Military Service

Posted by Katie Lightfoot

By Robert F. Benson for FedSmith

Military service is generally creditable for civilian retirement, but it must be paid for by the employee. This is referred to as “buying back” the military time, or making the “military deposit.” The amount to be paid is 3% of military earnings, plus compounded interest added each year on the anniversary date of the start of civilian employment. The interest begins accumulating two years after the entry-on-duty date. If the employee pays in full any time prior to the 3-year anniversary date, no interest is charged.

Annually, the Treasury Department sets the interest rate. For an individual employee, the interest for each 12 months is calculated by a “composite” interest rate, which is pro-rated on his anniversary date from the rates of the current year and the next year. For an anniversary date of August 23, the composite rate would be 127 days at the first year’s rate plus 233 days at the next year’s rate (by law, a 360-day year is used).

Example: employee started work on November 5, 2001. Previously, he earned $60,000 while serving in the military. Three percent of $60,000 is $1,800. If he had paid the $1,800 in full by November 5, 2004, there would have been no interest charged. However, he waited until August of 2010 to pay. This would mean six years of interest, accumulated as follows:


Time Period Interest Rate Interest Total
2003 – 2004 4.0469% $72.84 $1872.84
2004-2005 4.2986% $80.51 $1953.35
2005-2006 4.1632% $81.32 $2034.67
2006-2007 4.7604% $96.86 $2131.53
2007-2008 4.7691% $101.66 $2233.19
2008-2009 4.0087% $89.52 $2322.71


In the example above, if the employee pays on/after Nov 5, 2010, he will be charged one additional year’s interest, to total $2,397.95. Once he has paid in full, he is assured he will receive full credit for retirement purposes for his military time.

Can a retired military employee pay the applicable principal + interest on his military earnings, and receive a larger civilian pension? Yes, but he must waive the military pension. There are risks in this. The larger civilian pension that results can be less than the combined military and civilian pensions.

There may be occasions when the employee believes the benefit of making the deposit is not worth the cost. For example, in the above case, the employee was in the military four years. His annuity would be an additional 4.0% of his high-three. If his high-three was $72,000, then he would get an increase of (0.04 x 72000), or $2,880 annually. Probably he would want to pay $2,322 one time to receive $2,880 more each year for the balance of his life. But what if his military service was just two years? Then he would still have to pay $2,322, but his annual “gain” would be only $1,440.

What if the high-three was $57,000 rather than $72,000? Then four years military would increase the annuity $2,280, while two years would be just $1,140, yet the payment in either case would still be $2,322.

But more than just money is involved. For retirement eligibility, the military time does not count at all, unless the employee makes the deposit. In our above example, the employee would become eligible to retire at age 57 with 30 years Federal service (26 civilian + 4 military). If he did not pay for the military time, he would not qualify for retirement until he became 60! (At age 60 he needs only 20 years service.)

Note: the above applies to FERS employees. For CSRS, there are slight, but significant, differences. A helpful tool for the arithmetic is at, menu option #1. This software will calculate the exact amount due to pay the military deposit. Also, the employee’s payroll/personnel office can provide information on repayment by payroll deduction, etc.

Ref: Chapter 23, CSRS and FERS Handbook,

© 2014 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

Tags: Retirement

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The Real Cost of Delaying Retirement Savings will Shock You

Posted by Katie Lightfoot

Recent graduates have a lot on their minds: moving, finding a job and the looming repayment of school loans. Retirement is typically low on the list of priorities, but ignoring the issue entirely can literally cost young professionals hundreds of thousands of dollars.

It’s difficult to think about retirement when you’re just starting your career and trying to make ends meet.  It sounds counterintuitive but retirement planning should really be the first thing on a recent graduate’s mind.


The examples below demonstrate of how retirement planning can unfold when funds have the longest time possible to grow:

$100 a month for 20 years starting at age 21 = $468,236

A new grad invests $100 per month beginning at age 21, and continues that monthly investment for the next 20 years, stopping at age 41. Their total investment is $24,000.  Assuming an 8 percent annual return, compounded monthly, that $24,000 will become $468,236 by the time the grad retires at age 67.

$100 a month for 20 years starting at age 41 = $95,039

Wait until age 41 to begin investing $100 per month for the next 20 years, stopping at age 61. Their total investment is, again, $24,000. However, assuming the same 8 percent annual return, compounded monthly, the nest egg will only total $95,039 by age 67.

In this scenario the total cost of delaying retirement is $373,197.  WOW that’s a real difference!!!

These numbers are jarring, but losing out on thousands of dollars does not have to be your reality.  No matter your age, starting to build your retirement now can help you maximize your options and retirement assets.

Below are some expert tips for new grads to get a head start on saving for retirement:

Save regularly

Save a portion of each paycheck. Even a minimal amount, when compounded over time, adds up. Use savings as your emergency fund or toward major purchases, such as a new car or a down payment on a house.


Track your monthly income and expenses and plan accordingly. Differentiate needs from wants and prioritize wants by happiness, rather than cost. Cut the items that don’t provide long-term happiness. That way, it won’t feel like as much of a sacrifice.  Then, set short and long-term goals. This will show what you can realistically afford now and help you avoid racking up credit card debt that will affect your future ability to save and invest.

Use employer-sponsored retirement plans

If your employer offers a retirement plan, enroll as soon as you are eligible. An employer-sponsored retirement plan, like a 401(k), deducts money from your paycheck before taxes. Many employers match your contributions, so take advantage of this important benefit at the highest match possible. This is essentially “free” money, so if you don’t take it now, you’ll lose the match and the potential tax breaks.

Continue your education

Understanding important money topics and available resources can help you become financially savvy. Subscribe to an investing magazine or podcast, visit financial websites or follow a credible financial blog.

Get a reality check

Ignorance is not bliss when it comes to your personal finances. Determine your long-term goals and use free calculators (like the ones on our website) to help assess your situation and develop an action plan to pursue your financial potential.

Talk it out

Parents, trusted family and peers can provide great insight into financial matters based on their own successes and mistakes. Use their experience to your advantage to make smart money decisions. Of course, financial decisions today do not set in stone what will ultimately happen in the market. Rather than traced back to a good or bad decision about this stock or that industry, the final results of investing are always going to be unpredictable. If you are looking for an example of the past not predicting the future, investing is just such a place. Also, no matter your age, it’s never too soon to meet with a financial advisor to go over your goals and create a plan for retirement. Be sure to consider the tax aspects of your retirement options as well, discussing these with your tax advisor is an important part of a serious look at retirement planning.

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Understanding and Getting the Most Out of FERS

Posted by Katie Lightfoot

By Jason Kay for FedSmith

For those who entered covered service with the United States Government on or after January 1st, 1984, retirement benefits are referred to as FERS (Federal Employees Retirement System).

FERS is a complex system and much depends on an individual’s status with the government when planning for what to expect upon retirement. This is a guide intended to assist readers in understanding, calculating, and maximizing their FERS.

The Main Components of FERS

FERS has three main parts:

The FERS Pension and Social Security are both fixed amounts. The amount of both depend on how much you have worked and how long. The TSP depends on the amount of money you put into it, and how well you managed it.

When Can I Retire?

The FERS system is built up on a series of rules, and tends to reward the ones who have worked the longest. In order to be eligible for FERS (barring disability or an unusual position), you must reach your MRA, or Minimum Retirement Age, which is typically between 55 and 57.

There are different kinds of retirement available, and each have their own MRAs and other requirements. This is a good place to learn more about the different kinds of FERS retirement.

The FERS Annuity

While this is referred to by the government as an “annuity,” it is more accurately a pension. Essentially, each pay period you work for the government, a small percentage (normally 0.8% of your pay) is withheld for your annuity – however, this amount does not define the amount that you will get. Upon retirement, you will receive a fixed amount each month, just like a pension. As this is a “defined benefit,” there is nothing you can do to change the amount that you will receive other than manipulating the variables that are involved with the annuity calculation. This calculation is as follows:

High-3 Salary X Years of Creditable Service X % Pension Multiplier = ANNUAL FERS pension

Here is a breakdown of each variable:

  • High-3 Salary. This is the highest annual basic pay received during three consecutive years of service. Not everything you earn counts toward your High-3. For instance, bonuses, COLA, and overtime do not. You can calculate your High-3 here.
  • Years of creditable service. This is often the hardest number to nail down. This number is calculated by the OPM and can be found by looking at your SF-50s. Calculating years of creditable service can be complex: this is a good resource.
  • Pension multiplier. For most federal employees, this is 1%. The exceptions are if you are age 62 or above at time of retirement with 20 or more years of service. Then it is 1.1%.

For example, if an individual’s High-3 is 75,000, they worked for 25 years, and they had a 1% pension multiplier:

$75,000 x 25 x 1% = $18,750/year, or $1,562.50/month

However, keep in mind that this is your gross, or total, pension. There are many possible deductions from your FERS annuity, and most employees have at least three (survivor benefit, taxes, FEHB).

How Can I Maximize my FERS Annuity?

The first, obvious steps are to work at least 20 years with the federal government and to retire at or after age 62 – this increases the pension multiplier and the more years worked ups your overall calculations. The second is to have as high of a high-3 salary as possible.

In terms of the deductions, taxes cannot be opted out of, and it is generally advised to not opt out of FEHB since the reduction of taxes outweighs that of income in most cases. The survivor benefit cannot be waived if you have a spouse.

In terms of the other deductions, most of them involve extenuating circumstances (like life-threatening illness) or deductions relating to extended periods of leave or having been a federal employee under CSRS.

Essentially, the best advice to maximize the FERS annuity is to work over 20 years and retire as late as possible.

Social Security

This is the same as the Social Security that other citizens and permanent residents of the US enjoy. Each pay period, the government will take 6.2% of your basic pay and roll it into Social Security.

The amount that you will get from Social Security depends on the amount of money contributed over your career and length of that job. You can use an estimation calculator website for your Social Security here.

How Can I Maximize my Social Security?

Just like with the FERS annuity, the best advice is to make as much money as possible (so your contribution is higher), and to work at least to the age of 62.

Thrift Savings Plan

The Thrift Savings Plan (TSP) allows federal employees to take pre-tax dollars of their salaries and invest them into various TSP funds. While Social Security and the FERS annuity will give you fixed amounts, the TSP payout depends on how much you invested and how well it was managed.

Another unique component to TSP is that it is entirely voluntary, so you could choose not to participate in this leg of federal retirement at all. It is estimated that about half of the US Army participates in TSP.

Should I Participate in TSP?

As with most investment plans, that’s a personal decision. However, the power of compound interest with TSP investments is a great benefit. Basically, every dollar put into TSP now becomes more powerful in the future.

When it comes to taxes, you have a choice with TSP: Roth (after-tax) or traditional (pre-tax) contributions. Being able to choose how to pay taxes on your investment can be a retirement powerhouse if used correctly.

How Can I Maximize my TSP?

Overall, many financial strategists recommend TSP for the above reasons. If you are looking to maximize, here are some quick tips:

  • If early in your career, choose Roth. If you are in a lower income bracket now and believe that your career will blossom, it’s better to pay lower taxes today as compared to higher taxes upon retirement. If you’re already well into your peak earning years, traditional contributions are smarter.
  • Consider your own beliefs about taxes. If you believe that taxes will overall be higher in the future, it’s better to invest with Roth.
  • Calculate your required rate of return. Figure out how much risk you’re willing to incorporate into your TSP. It’s a good idea to start from the goal point (how much money you want to get from TSP after retirement) and extrapolate based off of how much you are putting in. This will show what percentage you need on investments to get the goal number. A 7% return is considered reasonable, but only if you’re willing to take on a higher burden of risk.
  • Learn about the funds. The G Fund is entirely protected from risk, but offers low rates of return. The S Fund has a much higher amount of risk but has a far higher potential rate of return. Learn more about the different funds here.

© 2014 All rights reserved. This article may not be reproduced without express written consent from

Tags: Benefits, Retirement, TSP

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Your Life Insurance Policy May Provide Value for You Now

Posted by Katie Lightfoot

There are times in our lives when we realize the importance of what we do and how good it feels to be able to helps our clients.  Our very own Thomas Raetz, knows this feeling first-hand.  Thomas has seen how a chronic illness can adversely affect a family’s financial plan.

Thomas’ client, 64, retired, a husband and a father, who suffered a stroke and also diagnosed with kidney failure has experienced a significant depletion in financial assets due to the costs of his care.  Specifically, tapping into his pension dollars to pay for his medical bills.

Wanting to help him protect his client’s family’s assets Thomas suggested his client should apply for Accelerated Death Benefits.

Accelerated Death Benefits or Living Benefit Riders allow plan holders to access income tax-free death benefits to offset costs associated with chronic or terminal medical conditions, severe disabilities or long-term care.

For Thomas’ client it helped him eliminate debt, secured is family’s financial future and saved his dignity.

Provisions for accelerated or living benefits may be included in a policy when purchased or attached as a rider.  These are sometimes referred to as “accelerated death benefits” or “accelerated benefits riders.”  Requirements vary from company to company. Some companies only charge you for the option if you use it.  Some riders add extra cost to your monthly life insurance premium; however, an accelerated death benefit rider is usually included on most term life insurance policies at no additional cost.  These riders are usually a part of only term life insurance policies, since term policies have no cash value.  A permanent life insurance policy accrues cash value, and therefore a loan may be taken against the policy to cover the kinds of expenses that would need to be covered by an Accelerated Death Benefit rider.

Death benefits from a life insurance policy are usually left behind for your loved ones when the policy holder dies.  But what if you are faced with a terminal illness?  Certain medical circumstances can trigger eligibility for early payment of all or a portion of your policy’s proceeds, including

  • Terminal illness, such as cancer, with death expected with 24 months
  • Acute illness, such as acute heart disease or AIDS, which would drastically reduce life span without extensive treatment.
  • Catastrophic illness requiring extraordinary treatment, such as an organ transplant
  • Long-term care needed because you cannot perform a number of daily living activities such as bathing, continence, dressing, eating or toileting.
  • Permanent confinement in a nursing home

Once the insured meets the health impairment criteria, benefits are approved and the elimination period (if any) has been satisfied your fund will be available.  Funds can be used for:

  • Adult daycare
  • Assisted living
  • Family care
  • Nursing home care
  • Virtually any expense, even those unrelated to the illness

In general, accelerated benefits can range from 25% to 95% of the death benefit.  The payment depends on your policy’s face value, the terms of your contract, and the state you live in.  Some companies will permit you to accelerate 100% of your policy’s face value but will reduce the amount of your benefit to compensate for the interest it loses on early payout.  Additionally, any outstanding loans against your policy will also reduce your benefit.

Each life insurance contract or rider specifies the method of payment or options.  Payments may be made monthly or in a lump sum.  Some life insurance policies will allow the policyholder to choose the method of payment.

Since life insurance is usually purchased to protect a spouse, children, or other dependents from the financial burden of a premature death, if you use all or part of your policy benefits, there may be little left for your family.  The amount paid to beneficiaries upon the policy holder’s death is reduced by the amount they received from the Accelerated benefit.  If the policy proceeds are entirely depleted, no benefit is paid after death.

In most cases, accelerated death benefits are not subject to federal income taxes.  Under the federal tax code, a terminally ill person (defined as a person having only 24 months to live) would not have to pay taxes on accelerated benefits.  A chronically ill person is usually exempt but may have to qualify for the exemption by being certified each year.  To ensure compliance with current tax laws, check with a local tax advisor.

Accelerating death benefits may affect eligibility for Medicaid.  You cannot be forced to collect accelerated death benefits from your life insurance policy before qualifying for Medicaid, but if you choose to, that money could be considered income, which might affect your Medicaid eligibility.

Some states are now passing or trying to pass legislation that requires policy owners to sell a life insurance policy to the viatical settlement market if the face value is greater than $10K.  The purpose of such laws are to lower the financial burden on the state’s Medicaid Fund by requiring Medicaid applicants to spend down all of their assets before being accepted.

If the life insurance company denies your claim for accelerated death benefits based on their eligibility requirements, there may be other options available.  Taking a loan against the policy cash value may be an option or a viatical settlement is another alternative.

A viatical settlement is an alternative to accelerated benefits by allowing a policy owner to sell their life insurance policy to a state licensed financial institution in exchange for ownership and beneficiary rights to the policy.  With a viatical settlement, a viatical settlement company buys your life insurance policy, and pays you a percentage of the death benefit upfront in exchange for the ownership and beneficiary rights.  That viatical settlement company pays all the premiums and receives the full benefits when you die.  Your beneficiaries will not receive any benefits under a viatical settlement unless specifically negotiated as a term of the settlement agreement.



If you are a federal employee and enrolled in Federal Employees’ Group Life Insurance Program (FEGLI) you or a person holding your Power of Attorney may elect to receive a lump-sum payment called a living benefit if you are terminally ill and have a documented medical prognosis that you are not expected to live more than nine months.  Eligible annuitants may elect a full lump-sum payment equal to their Basic life insurance amount, plus any extra benefit for persons who are under age 45, which would be in effect nine months after the date of the Office of Federal Employee’s Group Life Insurance (OFEGLI) receives a completed claim for living benefits.  If the life insurance is reducing, the lump sum will be the reduced amount payable nine months after OFEGLI receives the completed claim form.  Annuitants cannot elect a partial living benefit payment; this option is available only to employees.

Your living benefits payment will be reduced by a nominal amount to make up for lost earnings to the Life Insurance Fund because of the early payment of benefits.

If you receive living benefits after retirement, no Basic life insurance will be payable after your death.  Basic life insurance premiums will no longer be withheld from your annuity.  If you elected living benefits before you retired, the amount of Basic life insurance payable after your death and the premiums withheld from your annuity will depend upon the amount of living benefits you received before retirement.

Your election of living benefits has no effect on the amount of any optional life insurance you may have.  Premiums for option insurance will continue to be withheld.

For more information or further assistance you may call the Office of Federal Employees Group Life Insurance at 1-800-633-4542 to obtain Form FE-8, Claim for Living Benefits.




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Long-Term Care: Most Asked Questions Answered

Posted by Katie Lightfoot
Have you thought about the consequences living a long life will have on your family?

Although everyone’s situation is unique, I can only imagine there are millions of individuals who are concerned with aging.  Either an aging parent or how they themselves are aging.  And to make matters worse are terrified at the thought of possibly needing care.  Everyone wants to preserve their lives through dignified care in their final years.  I can also only imagine that those same individuals are probably looking for a professional to guide them through unfamiliar territory of planning for their care or the care of an aging parent.  The need for long-term care is one of the biggest financial threats you could potentially face.

Let’s start by defining what Long-Term Care is.  Long-term care involves a variety of services designed to meet a person’s health or personal care needs during a short or long period of time.  These services help people live as independently and safely as possible when they can no longer perform many everyday activities on their own.

Have you thought about what your responsibilities would be as a care giver if a parent wished to receive care at home?

Independent activities of daily living include:  chores, finances and managing prescriptions.  These duties usually are performed by a family member in the form of unpaid labor and referred to as “informal care”.

But what about the daily activities of living – such as: eating, bathing, dressing and toileting?  Most care givers feel those activities are better suited for health care professionals.

Once the difference between informal and formal care are understood it is easy to recognize how Long-Term Care Insurance is really there to help the family through a difficult time.

The need for Long-Term Care must be discussed

Many families are spread out across the nation, which amplifies the need for long-term care plans. Adult children who are geographically distant from their parents, can really feel the weight of this issue.  They have careers and families of their own and sometimes cannot shoulder the burden of taking care of their parent(s) should the necessity arise.  At the same time, it is important to them that their parents are cared for.  This is an important lesson to remember as you plan your own retirement.  No one wants to be a burden on someone else.

Financing Long-Term Care is critical in any retirement plan.

People work a lifetime to accumulate a portfolio which will generate sufficient income in order to maintain their standard of living.  Therefore, their portfolio is reduced to the income it generates.  If the money saved for that standard of living does not have money allocated to pay for care, where will the money come from?  Have you thought about the tax consequences of liquidating assets in order to pay for care?  What if the portfolio needs to be sold in a bear market?

If long term care is not part of a retirement plan, a client is forced to rely on either a government program such as Medicare, Medicaid, or the Veterans Administration, or must ultimately reallocate retirement income and assets.

Long-Term Care Insurance is a professional tool that, when used correctly, can protect a family and their assets from the devastating cost of providing care.  Long-Term Care Insurance is meant to assist families, not replace them AND Long-Term Care Insurance is for long term care, not just nursing home care.

Most people don’t have enough money to pay for all long-term care costs on their own, especially ongoing or expensive services like a nursing home.  Often, they rely on a combination of resources to pay for care.  Resources such as:  personal funds, private health insurance plans, private financing options, such as long-term care insurance, life insurance policies, and reverse mortgages.  Lastly, government health insurance programs, such as Medicare and Medicaid.  However, government assistance would usually not kick in until not only that person’s assets were virtually depleted, but the assets of their spouse as well, if the assistance is even available at all.  Therefore, anyone with assets to protect may want to consider this insurance.

There are many reasons to purchase Long-Term Care insurance.

It is not unlikely you’ll one day need long-term care and if you do, it could bankrupt you.  Statistically, 70 percent of those 65 and older will need long-term care, either at home or in a nursing home.

A life-changing occurrence can occur at any age.  If you are left paralyzed at 30, you could conceivable need life assistance of some sort for the next 60 years.  If you’re covered, you could be set.  If not, it’s too late.


LTC policies are complicated and expensive and cover a risk that most of us would rather not think about.  These policies are typically defined by how long they pay benefits (in years) and how much they pay each day (maximum daily benefits).  All are different. Make sure you fully understand the payout policy on any coverage you are considering.

If you’re considering ways to reduce costs and are forced to choose between flexible benefits and the length of coverage, trim back length before cutting options like inflation protection and home care.  Exhausting even a three-year policy is pretty uncommon.  That’s because most care begins at home or in an assisted-living facility where you’re likely to be spending less than your maximum daily benefit.

Policies also come with a deductible (called the elimination period) which is typically 90 days.  However, a policy’s deductible may run 30 days, 60 or 120 days. Which means the insurance will not pay for the first 30, 60, 90 or 120 days of your care.  With the average nursing home more than $200 a day – how much of this can you afford to fund yourself?

There is no “one size fits all” solution.  Your cost for insurance protection will be based on your age and health when first applying, as well as how much coverage and what options you choose.  You will never be younger or healthier than you are today.  Planning now gives you the most options and you may be able to qualify for good health discounts.  Discounts that remain even if your health changes.

Many policies include a clause that increases your benefit with inflation, without raising your premium.  Most analysts expect costs to rise 4% each year.  Be sure to ask about it.

Shared Care options are available for couples who wish to link their policies in order to share benefits in the event one person’s benefits become exhausted.  This could be an effective and inexpensive addition.

According to if you live in Kansas or Missouri consider yourself somewhat lucky.

Kansas ranks 11th least expensive for Long-Term Care Costs in 2014

Average annual cost of $42,005,

Adult day care: $18,200

Licensed home care: $41,184

Assisted Living:  $44,760

Nursing home (private room): $63,875


Missouri ranked 4th least expensive for Long-Term Care Costs in 2014

Average annual cost of $38,208

Adult day care: $19,500

Licensed home care: $43,472

Assisted Living:  $30,000

Nursing home (private room): $59,860

For a complete list of cheapest states and most expensive states visit:

Top 15 Cheapest States for Long-Term Care Costs:  2014
Top 15 Most Expensive States for Long-Term Care Costs:  2014

Types of policies:

While the wording may differ per policy, there are three basic categories into which care may fall:  home settings, assisted living and skilled nursing facility.  The ideal policy will cover all three since you never know which you will need.

Sometimes a complex product to understand.

Different policies dictate different reasons for the policy to kick in, such as a cognitive impairment, failure of ability to perform daily activities, and medical impairment.  But not all policies allow for all reasons, and some policies even refuse to consider medical necessity as a trigger.

When should you buy LTC?

Again, there is no “one size fit’s all” answer, but the sweet spot is in your late fifties.  The longer you wait the higher your premium will be.  A lifetime policy that costs a 55-year old couple $4,800 would cost $6,400 for 60-year olds.  Your risk of being turned down as you age also goes up.  In your 50’s you have a 1-in-7 chance of not qualifying.  In your 60’s there’s a 1-in-4 chance says the American Association for Long-Term Care Insurance.

Who should buy LTC?

For many purchasers it is the ability to preserve assets to pass on or to protect a spouse’s lifestyle.  If you have assets of at least $250,000, not including your home to protect, you should consider purchasing Long-term Care Insurance.

Why now?

Because changes in health happen and can make it impossible for you to obtain coverage.

As always with insurance, you hope you never need it.  But what if you do????  And worse yet, what if you had the chance to plan for it – but you didn’t??

 Got a Question

What’s my next step?

Find out what coverage costs

See if you can qualify

Ask what discounts you qualify for

Contact Benchmark Financial Group



NIH Senior Health

American Association for Long-Term Care Insurance

Think Advisor


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Life Events – What Are They? And How Do They Affect Your Retirement and/or Health Benefits (for Employees and Annuitants)

Posted by Katie Lightfoot

Everyone has heard the phrase “Life Events” but do you really know what they are?  A life event can be explained as an important change, they include:

You move

You get married

You divorce

Your child reaches age 26

You reach age 65

Your spouse dies

Your former spouse dies or remarries before age 55

You die

All of the above will be address in this article.


Other qualifying events are:

You have a baby (or adopt)

You acquire a step-child or a foster child under age 26

Your child dies

You want to change your beneficiary designations

You want to assign your life insurance

You become disabled

You are terminally ill

You are injured on the job

You cannot handle your own money


Various life events may cause you to want to take actions concerning your benefits.  I will address each issue as they are listed above:

You move:   It is vital that you give your agency your new address especially if you have payroll checks or annuity payments mailed.   If state income tax is withheld, and you move to another state, you will need to stop tax withholding for the current state and authorized withholding for your new state.  Your new address will also be needed for benefits information and/or 1099R statements to be mailed to you.

Health Coverage:  You should contact your agency personnel office to review your benefit plan and confirm your service area.  You may need to complete Standard Form (SF) 2809 to change your health plan.  You have 60 days from the date of the event to make a health benefit change.

Vision and dental benefits are administered through BENFEDS and can be reached at 877-888-3337.

Change in financial institution:  You will need to give your agency the name, routing number and your account number at the new financial institution.  However, always leave your old account open until you know your payment are going into your new account.


You get married:  A copy of your marriage certificate showing the date of your marriage and the name of your new spouse will be needed along with their, date of birth, and Social Security.  If you want/need your name to be changed in the agency’s official records you will need to ask your agency personnel office to prepare the personnel action to do this.  You may also want to make changes to your family health benefits enrollment.  You have from 31 days before your marriage to 60 days afterwards to do this.  Otherwise, you will be required to wait until the next health benefits Open Season.  You will also need to complete a SF 2809.  If you already have a “family plan”, contact your carrier to include your new spouse (and if appropriate, step-children) in the coverage.

You may also want to change your Federal and State income tax withholding and/or request information about:

Beneficiary designations for life insurance or retirement; Standard Form 2808, Designation of Beneficiary (CSRS), Standard Form 3102, Designation of Beneficiary (FERS), and Standard Form 2823, Designation of Beneficiary, Federal Employees’ Group Life Insurance.



Survivor annuities:  If you want to provide a survivor annuity for your new spouse, you must notify OPM within two years after the date of the marriage.


You divorce.  When you divorce, your spouse is no longer a family member and cannot be covered under your family health benefit.  However, your children can continue coverage.  Contact OPM, if your court order instructs you to continue to provide health benefits coverage for your former spouse.  You will have 60 days from the date of the divorce to do so.

A certified copy of your Divorce Decree (court order) and all attachments must be mailed to the U.S. Office of Personnel Management (OPM).  The federal employee’s name, federal employee’s social security number and date of birth of the federal employee will also be needed.

Other items to consider would be a change to your Federal and State income tax withholding.  As well as any change to your designation of beneficiary for life insurance or for retirement.  Standard Form 2808, Designation of Beneficiary (CSRS), Standard Form 3102, Designation of Beneficiary (FERS), and Standard Form 2823, Designation of Beneficiary, Federal Employees’ Group Life Insurance.

If the court order states that you must provide a part of your future annuity, and/or survivor annuity to your former spouse your former spouse (personally or through a representative) must apply in writing to be eligible for the court-awarded portion of an employee annuity.

Note:  A court order may require you to assign your life insurance to your ex-spouse.  This court order may pre-empt the order of precedence in the payment of benefits.  See pamphlets Court Ordered Benefits for Former Spouses, RI 84-1 and Assignment of FEGLI Insurance Form, RI 76-10.   WARNING! This form permanently transfers ownership of your
FEGLI insurance to another individual, trustee, or corporation (however, premiums continue to be withheld from your salary/annuity). An assignment is irrevocable, and cannot be changed later. DO NOT USE THIS FORM if you only wish to designate a beneficiary to receive your life insurance. Instead, use the available designation of beneficiary form.

To read more about this issue see the article on our website:  RETIREMENT AND THE ISSUES SURROUNDING A DIVORCED FEDERAL EMPLOYEE.


Your child reaches age 26.   Children who are age 26 and older cannot be covered by your family health benefits coverage (unless the child is disabled before turning age 26).  However, if you wish, you may obtain temporary coverage for up to 36 months.  Contact OPM within 60 days after the child reaches age 26.  OPM Pamphlet RI 79-2 has more detailed information.  Warning You will not be informed by OPM or by your health insurance carrier when a family member loses eligibility for coverage.


You reach age 65.  Since you have reached that magic age, you are now eligible for Medicare.    Contact the Social Security Office (800-772-1213) and apply for Medicare immediately to avoid any penalties.  The decision to sign up is voluntary during specific enrollment periods.  If you don’t sign up when you are first eligible, you may have to pay a late enrollment penalty from the time you apply until your death..  The late enrollment penalty will change each year but will be included in your premium for as long as you maintain the coverage.  Employees 65 and older can get Medicare Part A benefits at no cost; however, you will pay a premium for Part B.  You first become eligible for Medicare Part A and/or Part B during the 7-month Initial Enrollment Period.  If you’re eligible when you turn 65, you can sign up during the 7-month period that begins 3 months before the month you turn 65, includes the month you turn 65, and ends 3 months after the month you turn 65.

To read more about Medicare and the decisions you need to make see our article:  Are You Between 777 Months Old and 783 Months Old?  If so, You Have Important Decisions to Make.

At this point you may decide to change your health benefits enrollment to a less expensive plan.  This change may be made 30 days before you are 65 or at any time thereafter.

Your life insurance under the Federal Employees Group Life Insurance Program will start to reduce at the rate of 2% per month, and/or your Basic life Insurance will reduce to 25% of its face value.  For more detailed information see: Information for Retirees and Their Families RI 76-12


Your spouse dies.  A copy of your spouse’s death certificate must be provided.  Items that may change due to your spouse’s death are:  Survivor Annuity, life insurance, health benefits, federal and state tax withholding.  You will need to contact your agency payroll office to complete the necessary federal and state tax withholding forms.

If you are receiving a reduced annuity in order to provide a survivor annuity for your spouse, your annuity may be able to be increased after the death certificate is provided.

Option C – Family Life Insurance coverage.  If your spouse is covered by Option C you will need to complete and file a claim for benefits (Form FE6-DEP).  If no other family members are eligible for this coverage you should cancel Option C.  This can be done at any time – but it is not automaticStandard Form 2817 will cancel Option C.

If a change in beneficiaries is needed for life insurance or for retirement due to the death of a spouse, this must be done in writing on the appropriate forms.  Standard Form 2808, Designation of Beneficiary (CSRS), Standard Form 3102, Designation of Beneficiary (FERS), and Standard Form 2823, Designation of Beneficiary, Federal Employees’ Group Life Insurance.

Health benefits:  You may want to change to self-only enrollment if no other family members are eligible for health benefits.


Your former spouse dies or remarries before age 55.  OPM will require proof of the former spouse death or the marriage certificate as they may be able to increase your annuity after proof has been provided.

You may also want to change your Federal and State income tax withholding and/or request information about:

Beneficiary designations for life insurance or for retirement use Standard Form 2808, Designation of Beneficiary (CSRS), Standard Form 3102, Designation of Beneficiary (FERS), and Standard Form 2823, Designation of Beneficiary, Federal Employees’ Group Life Insurance.


You die.  OPM should be contacted immediately for many reasons:  (1) it is illegal to cash annuity checks made out to you, (2) it is illegal to withdraw money OPM has deposited into your account after your death; or to use funds remaining on any Direct Express Debit Mastercard.  Upon receipt of a copy of your death certificate, all the necessary forms will be sent to your family or representative with full instruction about how to proceed.

Family Health benefits will also need to be changed.


Sources:  OPM website and pamphlets

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Five Secrets for Long-term Financial Success

Posted by Katie Lightfoot

By Rhiannon Williamson

Future financial success is not a guarantee that any one of us can rely upon, no matter how wealthy we are now or intend to become.

There are however five future proofing financial steps that we can take to protect our current financial status, improve our future financial prospects and secure our long-term financial success.

1) Know The Different Between Good Debt & Bad Debt

Bad debt is any debt that accrues interest month after month on outstanding balances and includes credit card debt of course, which is now the most common type of bad debt that we are all burdened with. Other examples of bad debt include store card debt, home secured loans other than your mortgage and any money borrowed from lenders dealing with high risk borrowers as they charge the highest rates of interest and have the most restrictive and inflexible terms and conditions.

Good debt is really only your mortgage, although some people would argue with me and include car finance in this category even though a car is not an essential item for most people – if we’re honest with ourselves! Good debt in the form of your mortgage enables you to afford the roof over your head and for most of us it is the only way we will ever be able to afford a home.

A mortgage with an attractive and affordable interest rate will of course cost you money but at the same time it enables you to purchase a capital growth appreciating asset that you can later sell and redeem cash from or pass to your heirs upon death and that will be a positively tangible asset to benefit their financial futures.

2) Get Out Of Bad Debt

Examine all of the bad debt you have and prioritize the amounts to be paid off first by beginning with the most expensive debt in interest and charge terms. Every month pay off as much as you can afford from your number one debt and proceed with this approach right through every bad debt you have until you have no outstanding amounts remaining.

Then – take on no new bad debt! Keep out of credit card and loan hell.

3) Pay Off Your Good Debt

Having worked hard for as long as it takes to pay off all of your bad debt you can now turn your attention to your mortgage – some mortgage lenders penalize for early repayment so consider re-mortgaging if you can get a better or same rate of interest and you won’t incur arrangement fees, or try to arrange new terms with your current lender that will allow you to make regular lump sum repayments.

The shorter the life of your debt the less interest you will pay and the sooner you will own your own home – your most significant financial asset – outright. This will give you massive security and also free you up financially to enjoy life to the full and save more towards your retirement.

4) Save For Retirement

Most governments of the civilized world reward their citizens with tax breaks on retirement savings made. Furthermore many conscientious employers add to an employee’s contribution to a works pension scheme. Find out what benefits you’re entitled to and get a retirement savings plan in place immediately. It is never too early to start saving for retirement.

Whilst paying off your debt is an essential step on the road to long-term financial success, so ensuring your future is secured through saving today for your own financial wellbeing is an essential step. After all, if you don’t look after your best interests, no one else will.

Put as much as you can possibly afford each month into the best savings or investment product to suit your requirements and circumstances – and start today.

5) Protect Your Personal & Financial Assets

Insure your life, your family, your health, your business and your home – then use the services and advice of qualified taxation and trust professionals to find out whether there are legal and legitimate ways in which you can reduce your overall taxation burden and your estate’s future inheritance or death taxation burden.

Look after your personal interests today and ensure that your financial assets are protected for life.


About the Author:
Rhiannon Williamson is a freelance writer whose many articles about onshore saving and offshore investing have appeared in financial publications around the world. Visit this link to read her latest articles about Offshore Investment

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How To Keep Your Health Up and Costs Down

Posted by Katie Lightfoot

No matter your age, you can help keep your body healthy and your money out of the health care system by eating right, exercising and avoiding habits that contribute to chronic illness.  Having the appropriate insurance may also help your bottom line more than you think.  Follow this guide to see if you have what you need at various stages in life.


Younger people tend to have fewer medical issues, but that doesn’t mean you should ditch health insurance altogether.  To save money while making sure you’re covered, consider a qualified high-deductible plan.  Also known as a catastrophic health plan, this type of insurance typically covers costs for serious illness or unexpected accidents.  But you’re responsible for minor or routine expenses.  You’ll pay a lower monthly premium and a higher deductible than with a traditional plan.  It also comes with a powerful triple tax benefit:  Not only are contributions tax-deductible, but earnings and qualified withdrawals are tax-free too.

Here’s another option:  If you’re an unmarried dependent who doesn’t have access to employer-sponsored health care, you can stay on your parents’ health plan until you turn 26.


Consider broadening your coverage.  You may want to supplement your regular health insurance with accident insurance.  It can help cover emergency treatment and related expenses, such as transportation and lodging, if you or covered family members are injured.

While a health plan may cover much of your treatment costs, a critical illness plan typically pays a lump-sum benefit if you’re diagnosed with a significant illness or suffer a heart attack or stroke.  It may provide extra money for things like child care and housecleaning while you’re on the mend.  The benefits provided by accident and critical illness insurance help take away the financial stress so you can focus on recovering.

Health insurance can pay some of your medical bills, but what about the income you could lose if you become seriously sick or are injured and can’t work?  That’s what disability insurance is for.  Your employer may provide some coverage, but it usually isn’t portable, so consider a personal policy you can take with you if you quit or lose your job.

Consider a flexible spending account.  Your employer may offer one of these tax-advantaged plans that let you use pretax dollars to pay for medical expenses and dependent care, too.


While it’s smart to begin saving for retirement in your 20’s, most people start to focus a little more on the specifics once their 40’s roll around.  As you start crunching the numbers more seriously, be sure to factor health care costs into your assumptions about your spending needs in retirement.  Out-of-pocket expenses for a 65-year old couple could suck hundreds of thousands of dollars from a retirement nest egg, according to the Employee Benefit research Institute.

Start learning about long-term care insurance.  If you equate long-term care insurance with nursing home coverage, thing again.  While it can cover those costs, it generally does something even more appealing – help give you the resources you need to stay in your home.


Stop putting off long-term care insurance.  Long-term care expenses can pose a real threat to your retirement savings and lifestyle.  This insurance can be flexible in its design – you can typically vary the features of the policy to stay within a budget while still reducing risk to your assets.

If you’ve become a caregiver for a parent or other family member, tap into information resources such as or those provided by the National Alliance for Caregiving to make your role as easy as possible.


Don’t go without.  If you retire early and lack employer-provided health insurance, don’t be tempted to cut costs and skip insurance until you’re eligible for Medicare at 65.  Consider buying an individual policy to bridge the gap, if you have no other option.  To avoid making important decisions under pressure, learn about your Medicare choices well before you have to make them.


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Thrift Savings Plans (TSP) Benefits and Challenges

Posted by Katie Lightfoot

by Carol Schmidlin for FedSmith

What can we expect from the markets and economy in the coming years and how will this affect decisions about investing in TSP? TSP is such an important component of your retirement plan and it is up to you, the contributor to utilize it to it’s fullest potential. It has been referred to as the model for 401(k) plans, however, like any type of investing “one size does not fit all,” so it is important that you have the knowledge to make prudent decisions based on your personal situation.

The Benefits:

  • There are huge economies of scale among the 5 TSP funds. While keeping it simple, it’s participants are still given exposure to the entire U.S. stock market, most of the international market, the U.S. bond market and a special government fund that yields long term bond returns without any loss of principal.
  • Access to the various Lifecycle funds, each consisting of the five (5) primary funds in varying portions, which become more conservative over time.
  • You are in control of how much to contribute up to the IRS limits: $17,500 for 2014, plus an additional catch-up of $5,500 if you are age 50 or older.
  • If you are in FERS the government matches your annual contributions up to 5%. Contributing less than 5% basically means you are giving up free money.
  • You have a choice of contributing to the Traditional TSP and getting a tax deferral on your contribution now, or contributing to Roth TSP and paying tax in today’s known tax rate environment. The goal of the Roth TSP is to accumulate and compound your earnings into a harvest of tax-free money.
  • TSP has one of the lowest expense ratios of any defined contribution plan.

The Challenges:

  • Managing your TSP is your responsibility. It is not enough to merely contribute to TSP, you need to determine what is the best investment strategy for your own goals and risk tolerance.
  • Knowing how much risk you can tolerate.
  • How should you allocate the TSP funds given your goals along with the current and future market conditions?
  • When the stock market is doing well and the TSP funds are going up, all is well. But when we are in a down or sideways moving market are there any protection strategies that can be used?
  • How do economic concerns such as: Unemployment; Fed Tapering; higher stock valuations; Euro crisis; housing rebound; The Affordable Care Act and other worries impact the TSP funds?

I am often asked what is the best approach to take in managing one’s TSP. You should first determine what approach you are going to take: a tactical or a strategic investment method. Either approach may be right for you, but it might help you to know the basic differences before choosing.

Tactical Investing

Tactical investing is a short-term approach that uses current information to determine the right tactic for an investment portfolio. This information may be drawn from market movements, specific indices, sectors, or countries. It may involve taking a long (ownership) position or using short (leveraged) positions. The tactics change as the information changes. There are many different tactical approaches to investing.

Here’s an example of a typical tactical investing strategy using the TSP:

As the pressure of rising interest rates continues to increase, it will have a direct impact on bonds in your portfolio. Over the past 15 years, the F Fund has generated solid returns and has been a cornerstone of protection for many federal employees. As the winds of change are upon us, a tactical investor with the view that interest rates could continue to rise might suggest finding better protection and potential value out of reducing this type of exposure and reallocating those assets to a position that does not have as much interest rate sensitivity, such as the G Fund.

At any given time, analysts believe certain sectors or asset classes are overvalued and that others are undervalued. Tactical investors and tactical investment managers follow this type of analysis and buy the undervalued sectors and avoid those that are overvalued.

Tactical investing requires ongoing monitoring and continuous analysis of the markets. If you do not have the knowledge or the time to do this on your own, it may help to work with a professional financial advisor. You will want to make sure the advisor is very familiar with the TSP funds, your personal objectives and risk tolerance, and can help you make smart decisions with your portfolio.

Strategic Investing

Strategic investing is a long-term approach based on asset allocation and Modern Portfolio Theory.* Strategic investors use long-term market characteristics to build portfolios they believe will equal the markets return over time periods of 5 years or more. Strategic investors generally use a passive approach composed of index funds.

Here’s an example of a typical strategic investing strategy:

An investor or investment manager builds an asset allocation of 50% equities, 45% bonds, and 5% cash.

Over the long term, the strategic investor allows this balanced position to play out. Knowing that they are well diversified and will be exposed to both good markets and bad markets, they count on a nice return through a full market cycle. They simply rebalance the portfolio periodically to maintain the 50%, 45%, 5%, weightings.

Combining Tactical and Strategic Investing

Both approaches have devotees who believe their method is better than the other. My belief is that most investors benefit by combining a strategic long-term asset allocation strategy with a shorter term, more actively managed tactical approach. The strategic approach helps investors find a balanced, diversified portfolio. The tactical approach offers the possibility of beating the market by being more defensive when asset class valuations are high and more aggressive when valuations are low. This combination of tactical and strategic methods is often referred to as “Core and Explore” investing. It provides the stability of the strategic approach with the potential benefits of tactical investing.

If any of these challenges affect you, you are not alone. TSP is an awesome tool to help you meet your retirement goals. Getting good information and knowing what to do with it can be both difficult and time consuming! So, where do you start?

* Modern portfolio theory (MPT) is a theory of finance that attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets. MPT is a mathematical formulation of the concept of diversification in investing, with the aim of selecting a collection of investment assets that has collectively lower risk than any individual asset. This is possible, intuitively speaking, because different types of assets often change in value in opposite ways. Source:

© 2014 Franklin Planning. All rights reserved. This article may not be reproduced without express written consent from Franklin Planning.

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Ask the Pharmacist: Expert Advice for Navigating Medicare Part D Enrollment.

Posted by Katie Lightfoot

If you’re confused about health care reform and Medicare you’re not alone.  Thousands of Americans are looking for answers too.

A new survey from Express Scripts titled “Fifty States of Confusion,” confirms that seniors are misinformed about how leath care reform will impact their Medicare benefits.

“It’s worrisome; one-in-five seniors think they’ll be able to enroll in health or prescription drug plan through a public health insurance exchange,” says Paul Reyes, an Express Scripts’ pharmacist and host of Ask the Pharmacist radio series.  “These exchanges are part of the Affordable Care Act, but are only for uninsured people under the age of 65.”

Although Medicare Part D has been around since 2006, with some states offering upwards of 36 different plans, the survey revealed that 60 percent of seniors still think that choosing the right Medicare plan is confusing.  And with more than half of seniors falsely believing they’ll be paying more for their prescriptions drugs as a result of health care reform, they are taking matters into their own hands.

“Seniors are skipping doctor’s appointments, delaying medication refills and skipping medication doses,” say Reyes.  “These misconceptions may not only cost seniors, but could also lead to decisions that may be bad for their health.”

Whether you are preparing to enroll into Medicare Part D plan or you’re helping a family member or friend, Reyes provides some tips to simplify the process.

1.  Know the basics:  You are eligible for Medicare Part D when you turn 65.  Each year during the Annual Enrollment Period, it’s smart to review your current prescription drug plan and compare it against other available plans in your area. Plan details and your healthcare & prescription needs can change, and you might just find a better option. Enrollment for 2014 has ended, unless you’re turning 65 this year. The next Annual Enrollment Period is October 15 through December 7, 2014, for coverage to begin January 1, 2015.

2.  Do your homework:  Consider the premium, deductible and co-pays when assessing the overall cost of the plan.  Make sure that the drugs you need to take are on the plan’s formulary (the list of covered medications).  Also, look at the plan’s network of pharmacies.   Some plans, like the Express Scripts Medicare Choice Plan, offer a preferred pharmacy network, which would save you money.

3.  Care and convenience:  Consider a plan with round-the-clock pharmacist access to help you get the support you need and the savings you want from your plan.  Pharmacists can identify shortcuts to help you stick to your treatment regimen and avoid potentially harmful drug interactions.

4.  Making the most of your Medicare dollars:  To achieve the most valuae from your Part D plan, make sure to take your medications as prescribed, use generic medications when clinically appropriate, ask about home delivery and take advantage of the free preventative screening and vaccinations under Medicare Part B.

To help seniors and caregivers make informed decisions Express Scripts’ developed a consumer eGuide titled “Navigating Medicare and Reform: A Roadmap for Seniors and Caregivers,” available at  Seniors can also visit to learn more about the available Medicare Part D plans in their region.



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Are You Between 777 Months Old and 783 Months Old? If So, You Have Important Decisions to Make.

Posted by Katie Lightfoot

Life begins at 65.  And if you figured out that at age 65 you have lived 780 months you probably also figured out that you are now eligible for Medicare.  But what if you have FEHB.  Should you still sign up?  The decision to sign up is voluntary during specific enrollment periods.  If you don’t sign up when you are first eligible, you may have to pay a late enrollment penalty.  You first become eligible for Medicare Part A and/or Part B during the 7-month Initial Enrollment Period.  If you’re eligible when you turn 65, you can sign up during the 7-month period that begins 3 months before the month you turn 65 (or 777 months old), includes the month you turn 65, and ends 3 months after the month you turn 65 (or 783 months old).

If you do not apply for one or more parts of Medicare, you can still be covered under the FEHB program.  Your FEHB premiums will not be reduced if you enroll in Medicare.  The cost will not change even when Medicare becomes the primary payer.  Currently, they will remain the same unless you change to another plan or option.


Medicare is our country’s health insurance program for people who are:

  • 65 years of age or older;
  • Under 65 years with certain disabilities, such as, amyotrophic lateral sclerosis (Lou Gehrig’s disease); and
  • Any age with end stage renal disease (permanent kidney failure requiring dialysis or a transplant).

The program helps with the cost of health care, but it does not cover all medical expenses or the cost of most long-term care.

Different types of Medicare plans help pay for different types of coverage, depending on the plan or plans you choose.  Medicare has 4 parts.

Part A:  Hospital Insurance.  Helps pay for medically necessary inpatient hospital care, inpatient care in a skilled nursing facility, home healthcare and hospice care.  Thanks in part to all the payroll taxes you paid while employed, you likely won’t have to pay a monthly premium for Medicare Part A.  However, there will be a yearly deductible.  Part A pays about 80 percent of your Medicare-approved costs.  For 2014, the deductible is $1,216 for the first 60 days of hospital care and a daily coinsurance amount (approx. $304/daily) for hospital care each day from the 61st day up to a 150 day admission.  But Free is Free.  If you are entitled to part A without paying the premiums why wouldn’t you take it?  Even if you are still working.  It will help cover some of the out-of-pocket costs your FEHB plan doesn’t.  Such as:

  • Deductible
  • Coinsurance and
  • Charges that exceed the plan’s allowable charges.

Medicare also generally does not cover inpatient hospital care received outside the U.S.

Part B:  Medical Insurance:  Helps pay for medically necessary doctor’s services, outpatient hospital services and a number of other medical service and supplies that are not covered by Part A.  Most people pay monthly for Part B.  For 2014, the cost is $104.90 each month with a deductible of $147 per yearMedicare Part B pays 80% of most approved physician charges after you pay the annual deductible.  Current law requires some individuals to pay a higher amount for Parts B and D based on their income.  Word of caution:  If you wait 12 months or more, after first becoming eligible, your Part B premium will go up 10 percent for each 12 months that you were eligible for Part B coverage.  You will pay that extra premium for as long as you have Part B.  However, if you didn’t take Part B at age 65 because you were covered under FEHB as an active employee, you may sign up for Part B (generally without an increased premium) within 8 months from the time you or your spouse stop working.  Your FEHB coverage will be your primary coverage until you retire.

The following chart shows when your Medicare Part B becomes effective:

If you enroll in this month of your initial enrollment period: Then your Part B Medicare coverage starts:
One to three months before you reach age 65 The month you reach age 65
The month you reach age 65 One month after the month you reach age 65
One month after you reach age 65 Two months after the month of enrollment
Two or three months after you reach age 65 Three months after the month of enrollment


Part C:  Medicare Advantage/Your Private Insurance Plan.  Covers all Medicare Part A and Part B services and allows individuals with Medicare Parts A and B to get Medicare benefits through private healthcare plans.  Medicare Advantage is the term used to describe the various private health plan choices available to Medicare beneficiaries.  You may choose to enroll in and get your Medicare benefits from a Medicare managed plan.  These plans are generally organized as HMOs or PPOs.  In most of these plans, you may go to doctors, specialists, or hospitals that are part of the plan.  Medicare managed plans provide all the benefits that Original Medicare covers.  Some cover extras, like vision and dental care.  Most, but not all, Medicare Advantage plans also provide some prescription drug coverage.

Medicare D:  Medicare prescription drug coverage.  The newest addition to Medicare offers  prescription drug coverage for individuals entitled to benefits under Part A or enrolled in Part B.  You will pay a monthly premium and sometimes a deductible, as well as copayments for your drugs.  Most Federal employees do not need to enroll in the Medicare drug program, since FEHB and Medicare will coordinate benefits to provide comprehensive coverage for a wide range of medical expenses.

Medicare doesn’t cover all the care you might possibly need.  Each part of Medicare has exclusions.  What’s not covered by Original Medicare are:

  • Your monthly Part B premium or Part C or Part D premiums
  • Deductibles, coinsurance or copayments when you get health care services
  • Outpatient prescription drugs unless enrolled in a Part C plan which provides drug coverage or a Part D plan
  • Most dental care or dentures
  • Routine or yearly physical exams
  • Routine eye care
  • Routine  hearing tests or hearing aids
  • Most care while traveling outside the US
  • Long-term care
  • Custodial care (help with bathing, dressing, eating, etc)
  • Cosmetic surgery
  • Most chiropractic services
  • Routine foot care or orthopedic shoes
  • Acupuncture


So who pays first?

Medicare law and regulations determine whether Medicare or FEHB is primary.  As stated earlier, Your FEHB coverage will be your primary coverage until you retire.  Your FEHB plan must also pay benefits first, regardless of your employment status, due to End Stage Renal Disease (ESRD).  Unless Medicare was your primary payer on the day before you became eligible for Medicare Part A due to ESRD.

When you or your covered spouse are age 65 or older and have Medicare and you:

Have FEHB coverage on your own or through your spouse who is an active employee or a reemployed annuitant and your position is not excluded from the FEHB – FEHB is the primary payer


Have FEHB coverage on your own as an annuitant or through your spouse who is an annuitant or are a reemployed annuitant and your position is excluded from the FEHB – Medicare is the primary payer

Are enrolled in Part B only, regardless of your employment status – Medicare is responsible for Part B services and FEHB for other services


When you or a covered family member are eligible for Medicare solely due to disability and you:

Have FEHB coverage on your own or through your spouse who is an active employee or a reemployed annuitant and your position is not excluded from the FEHB – FEHB is the primary payer


Have FEHB coverage on your own as an annuitant or through your spouse who is an annuitant or are a reemployed annuitant and your position is excluded from the FEHB – Medicare is the primary payer



TRICARE is the health care program for service members (active, Guard/Reserve, retired) and their families around the world. TRICARE is a major part of the Military Health System that:

  • Combines the resources of military hospitals and clinics with civilian health care networks
  • Provides access to high-quality health care
  • Supports military operations

For retired military or military spouses who want to find out how your retiree coverage works with Medicare, you should obtain a copy of your plan’s benefit booklet, or look at the summary plan description. You can also call your benefits administrator and ask how the plan pays when you have Medicare.




The SHINE program provides free, unbiased and up-to-date health insurance information, counseling and assistance to Medicare beneficiaries of all ages and their caregivers. The SHINE counselors help older persons (and younger disabled Medicare beneficiaries) understand their Medicare benefits and other health insurance options.


To help you further understand your FEHB and Medicare please contact: to find the resources in your area.


TRICARE  information can be found at:


Regardless of the plan you use, contact the plan provider and ask how your FEHB Plan works with Medicare.  You should be able to find contact information on your insurance card or plan’s benefit booklet.



BC/BS Federal Employee Program

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Behind in Saving for Retirement? Approaches to Catching Up

Posted by Katie Lightfoot

Does the pace of your busy personal and professional life leave you feeling like you’re always playing catch up? From finally reading that best-seller that’s been sitting on your book shelf for a year to getting a solid eight hours of sleep to making sure you have enough money set aside for the future, it can be difficult to regain lost ground. If you were among the millions whose retirement savings and investments suffered during the recession, there’s good news: you can start to catch up with a few simple steps.

On average, baby boomers say they have saved or invested $275,000 for retirement, but believe they’ll need a median of $750,000 to live comfortably, according to a Boomers & Retirement Survey released by TD Ameritrade, Inc., a broker-dealer subsidiary of TD Ameritrade Holding Corporation. That means some boomers may face a shortfall of nearly a half a million dollars as they head into retirement.

Smart retirement planning, thoughtful choices and a handy -option called a “catch-up contribution,” can help boomers regain ground lost during the recession. A catch-up contribution allows people older than 50 to increase their contributions to their IRA or employer-sponsored retirement plans beyond the usual limits for such tax-deferred retirement plans.

Anyone approaching retirement should consider different opportunities, like catch-up contributions, that might make sense for their retirement investing plans. These catch-up contributions could help workers 50 years and older save thousands more – perhaps even hundreds of thousands of dollars more – toward their retirement. When planning for retirement, every dollar counts, especially when it’s going into a tax-deferred vehicle.

Guidance for baby boomers approaching retirement:

* There is no standard target amount for retirement. When setting a target for your retirement investing or savings, you need a realistic idea of how much you’ll need to maintain the standard of living you desire in retirement. Online calculators and tools, like those found on TD Ameritrade’s online retirement center can help you set goals by exploring various real-world scenarios that might impact your assets over time and at retirement. For example, do you have health challenges that may create medical expenses? Perhaps you and your spouse would like to travel when retired. Different objectives and circumstances will influence how much you’ll need to save in order to live comfortably.

* Don’t rely on Social Security benefits, but don’t overlook them, either. They should be a part of your overall retirement plan, but not the heart of it. Unfortunately, 65 percent of retired boomers said they rely on Social Security benefits, and nearly one-third said they wouldn’t be able to live comfortably without these payments, according to TD Ameritrade’s survey. The best way to avoid having to rely completely on Social Security is to set a retirement savings goal and work toward it prior to retiring.”

* Take advantage of catch-up contributions. As long as you will be 50 (or older) by the end of the calendar year, you may be eligible to contribute an extra $1,000 per year toward your IRA until you turn 70 (which is the last year to contribute to a traditional IRA). If you save an additional $1,000 per year for 20 years and get a 5 percent rate of return, you could have an additional $34,719 toward retirement. Fully fund your IRA with $6,500 a year between ages 50 and 70, and that could amount to an additional $225,675 for retirement.

Remember, it is never too late to start planning for retirement. If you experienced financial setbacks that stalled your retirement efforts, it may just mean you have to adjust your retirement expectations, work a little longer or think of other means of support that you may have not considered before. But it’s never too late to get started.

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The Best Day to Retire in 2014

Posted by Katie Lightfoot

by John Grobe for FedSmith

The concept of a “best” day to retire is more often than not related to financial considerations, specifically maximizing your lump-sum annual leave payment.  If you do not carry over a lot of A/L from year to year, or if you just want to retire absolutely as soon as you can, your “best” day may very well be different from the ones we mention in this article.

Using 2014 as an example, let’s look at the lump-sum leave payment.  One of the biggest reasons that employees choose to retire around the end of the year is to cash in a large amount of use or lose leave.  Assume we have an employee who earns 8 hours of A/L per pay period and carried over 240 hours of annual leave into the 2014 leave year.  If that employee manages not to use a single hour of the 200 hours of annual leave they will have earned by 12/31/2014, they will have a balance of 440 hours of annual leave for which they will be paid in a lump sum shortly after they retire.  (Shortly generally means four to six weeks).

The lump sum payment will be received in 2015 when, presumably, the retiree will be in a lower tax bracket.  Retirement contributions (currently 7% for CSRS and .8% for CSRS Offset and FERS) will not be deducted from the lump sum payment, neither will insurance premiums nor TSP contributions.  This will result in a larger payment, though your payroll office might withhold taxes at a higher rate than normal.  The increases in FERS contributions for employees hired after 01/01/2013 (3.1%) or 01/01/2014 (4.4%) are extremely unlikely to affect anyone who is eligible to retire at the end of this year.

When your payroll office computes the lump sum payment, they do it by looking at how much money you would have received if you began taking your annual leave on the first workday after you retired and continued to take it until it was used up.  If there is a salary increase for federal employees, all or most of your lump sum payment will be computed using a slightly higher salary; resulting in a slightly higher payment.

The leave year ends on a different date each year, often resulting in a different “best” day to retire from year to year.  Usually the “best” day is different for employees in CSRS and FERS due to different rules that affect the starting date of annuities.

Under the FERS system, an employee must be off the rolls for an entire month in order to receive an annuity for that month.

  • A FERS employee retiring December 31, 2014 will receive their first annuity payment on or about February 1, 2015, and the payment will represent the January annuity.
  • A FERS employee who waits until January 3, 2015 to retire will receive their first annuity payment on or about March 1, 2015, and the payment will represent the February annuity.  The employee is not entitled to any payment for January, as they were not off the rolls for the whole month.

Under the CSRS system, an employee must be off the rolls no later than the 3rd of the month in order to receive any annuity for that month.

  • A CSRS employee retiring December 31, 2014 will receive their first annuity payment on or about February 1, 2015, and the payment will represent the January annuity.
  • A CSRS employee who waits until January 3, 2015 to retire will receive their first annuity payment on or about February 1, 2015 and the payment will represent the annuity payment for January 4th through January 31st.  CSRS employees who retire up to, and including, the 3rd of any month are entitled to a pro-rated annuity for that month
  • A CSRS employee who waits until January 4, 2015 to retire will receive their first annuity payment on or about March 1, 2015, and the payment will represent the February annuity.  The employee is not entitled to any payment for January, as they were not off the rolls by the end of the day on the 3rd of the month.

The above rules have resulted in a general rule that FERS employees should retire on December 31st and CSRS employees should retire on January 3rd if they wish to maximize their lump-sum leave payments.  Of course, general rules have exceptions and, back in 2010 and 2011, January 3rd was not the “best” date to retire for CSRS employees as, in those years, the leave year ended prior to January 3rd.

The following chart shows the “best” days to retire from 2014 through 2020.  Exceptions are noted and they are explained below the chart.

Leave Year Ending Date Best for CSRS Best for FERS
2014 01/10/2015 01/03/2015 12/31/2014*
2015 01/09/2016 01/03/2016 12/31/2015*
2016 01/07/2017 01/03/2017 12/31/2016
2017 01/06/2018 01/03/2018 12/31/2017
2018 01/05/2019 01/03/2019 12/31/2018
2019 01/04/2020 01/03/2020 12/31/2019
2020 01/02/2021 01/02/2021 12/31/2020

In 2014 and 2015, FERS employees who have a lot of federal service and carry-over a lot of annual leave may want to crunch some numbers to see if working to the end of the leave year and forgoing a January annuity is to their advantage.  They should calculate the amount of salary and the lump-sum payment they will receive by working until the end of the leave year and compare it with amount of the January pension and the lump-sum payment they would receive if they retired on December 31st.  Here is an example for 2014:  Bill is a FERS employee who is eligible to retire with 30 years of service and a “high-three” of $75,000.

If Bill retires on 12/31/14, his monthly unreduced annuity will be $1,875 (using the 1% multiplication factor).  He will receive payment for 440 hours of annual leave (assuming a carry-over of 240 hours and no leave used during the year, a leave accrual rate of 8 hours a pay period gives him an additional 200 hours as of the date of his retirement).  At $35.94 an hour, the 440 hours will be worth $15,813.60.

Using the same assumptions, if Bill waits until 1/10/2015 to retire, he will earn $2,012.64 for working 7 days into January (OK, working 6 and getting paid for the New Year holiday). The salary he earned is greater than the annuity he would have collected for January had he retired on 12/31/2014.  He will receive a larger lump-sum annual leave payment as well; it will be for 448 hours of annual leave (as he has completed the 26th pay period), giving him $16,101.12.

In this circumstance it is slightly better from a financial perspective for Bill to work until the end of the leave year and forgo his January annuity.  If the additional 10 days of service result in his receiving an extra month of service time in his pension calculation (roughly a 1 in 3 chance), his FERS annuity will be marginally higher for the rest of his life.

Confusing?  Absolutely!  No one ever said that understanding the federal retirement systems was easy. When it comes to choosing retirement dates, or other decisions you will need to make, forewarned is forearmed.  Prepare yourself by attending a pre-retirement seminar.  If your agency is not offering such seminars, ask them to.  Federal Career Experts delivers pre-retirement seminars for federal agencies.

© 2014 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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Overcoming the top 5 challenges of being retirement ready in 3 simple steps

Posted by Katie Lightfoot

It’s no secret that Americans aren’t saving enough for retirement. Many people are coming up short when it comes to funding their nest egg. But why is the problem so wide-spread? Insight can be found in the human behaviors that tend to get in the way of saving adequately.

The top five challenges to being retirement ready include:

1. Living longer
Did you know a baby born today is more likely to live to 100 than to be born with blue eyes? The fact is, people are living longer, and it’s hard to know how long you’ll live. You may live many years beyond retirement, a time when you’re no longer creating income. The challenge is we still believe we’re living to 70 or 75 – but think about it. How old is the oldest person you know alive today? Chances are, you know someone who is well into their 90s. Saving for retirement now prepares you for the exciting possibility of having a longer retirement.

2. Procrastination
It’s human nature to procrastinate. And while some things take the same amount of time to do whether completed today or a year from now, others only get harder to do the longer you delay them. Saving for retirement is one example – every year you don’t save for retirement is less money you may have when it comes time to retire, making it that much more difficult to reach your goals and pursue your dreams.

3. Optimism
People in general are optimistic, which is a wonderful quality, except when it comes to retirement planning. It’s easy to think bad things won’t ever happen to us – including unexpected health issues, loss of a job, or a bad accident. It’s important to be realistic when planning for retirement, and always plan for the unexpected.

4. Following the pack
Humans are social beings. If enough people are doing something, we tend to want to follow because we assume there must be a good reason. The urge to follow the pack can get us in trouble, though, particularly when it comes to saving and investing. Make sure you define your own goals for retirement and work with a financial advisor to create an individual plan that works for you.

5. Instant gratification
The newest car, computer or video game – it’s easy for Americans to feel like they need to keep up with the Joneses. Spending too much on impulse purchases rather than funding savings can be devastating, particularly for your retirement. Learning to delay gratification and keep a budget is key.

We all want to imagine living out our dreams in retirement – rather than worrying about money. Whether you’re in your 20s or your 50s, retirement savings should be top of mind. In addition to knowing and conquering the top challenges of retirement readiness, here are three simple things you can do today to ensure you’re on the right path:

1. Workplace retirement opportunities
If your place of work offers a retirement program, sign up for it as soon as possible. From employer matches to potential tax benefits, retirement programs deliver numerous positives for employees. Remember, compound interest is an important factor in building retirement income, so it literally doesn’t pay to put saving off.

2. Diversification
Putting all your eggs in one basket is risky when it comes to retirement funding. A diversified investment strategy can help protect you from the unexpected.

3. Financial planner
Working with a professional can help you learn about various savings options for reaching your personal retirement goals. The expertise of a financial planner can make the stressful and confusing process easier.

For more information about retirement challenges and what you can do to become retirement contact us.  We are here to help.

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Will I Get Both My Social Security and Federal Annuity COLAs?

Posted by Katie Lightfoot

by Robert F. Benson for FedSmith

Will you receive both a Social Security COLA and a COLA for your federal annuity?

If you are receiving both benefits, the answer is “yes,” the full COLA increase will be applied to each in accordance with the provisions of the regulations of the Office of Personnel Management (OPM).

Social Security and the various Federally administered pensions (or annuities) are independent of each other.  That is, there is no right of “offset” among them.

Here is an example: You are mistakenly overpaid in your Federal annuity.  Social Security cannot reduce your payments to remedy this.  There are, however, two noteworthy exceptions to this general rule: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

Windfall Elimination Provision (WEP)

This was a money-saving measure enacted in 1983.  It provided that if a person receives a pension from both a non-Social Security source and Social Security, the Social Security is reduced.  The first tier percent in the formula for the old-age benefit becomes 40% instead of 90%.  Example: a low earning person has been receiving an annuity.  Then he starts receiving a Social Security old-age benefit that would be, say, $620, which is 90% of $688; the 90% is changed to 40%, thus dropping the dollar amount of his benefit to $275.  The reduction is permanent.

As severe as the above might seem, there are safeguards:

  • The WEP reduction cannot be more than one-half the other pension
  • For 2013, the dollar amount of the reduction cannot exceed $395.50
  • If the person has 30 years or more of “substantial earnings” he is exempted from WEP.  (This exemption is phased in, starting with 21years.)
  • FERS retirees are not affected by the Windfall Elimination Provision, nor are those receiving a disability pension.

You can read the full explanation for more and there is also a calculator available online.

Government Pension Offset (GPO)

Like WEP, GPO became law in 1983, to save money.

If you receive a pension from a federal, state, or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s benefit may be reduced.

Your spousal benefit will be reduced by two-thirds of your government pension.  In other words, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted.  In this case, if your spousal benefit would otherwise be $500, you will receive ($500 – $400), or $100.

As with WEP, FERS employees are not affected by GPO.

There is a bill under consideration in both houses of Congress to repeal both the WEP and GPO.  This happens in nearly every session of Congress.  Just as in the past, it is not expected this bill has a realistic chance of becoming law.

Reference |  Online calculator

© 2013 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

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July 2013 LIMRA Survey

Posted by Katie Lightfoot

In July 2013, LIMRA conducted an online survey of 1,636 U.S. consumers to gauge their understanding and basic knowledge of disability insurance, government programs, and the risk of being disabled.

They asked consumers a series of true/false and multiple-choice questions on topics selected to measure how well consumers understand both disability insurance and the financial risk of disability.  Questions covered how disability plans work, common benefit features and associated costs, the risk of becoming disabled and government programs such as workers compensation and Social Security Disability.  The sample was weighted to be representative of the general population.

Correct answers are indicated in red:

What is the chance of a worker age 20 or older becoming disabled before they retire?

  1. 10% (14%)
  2. 20% (18%)
  3. 25% (19%)
  4. 33% (13%)
  5. Don’t know (36%)

What is the leading cause of disability?

  1. Serious accident (25%)
  2. Serious illness, such as cancer, stroke, heart disease (21%)
  3. Depression/anxiety (4%)
  4. Back/joint pain (17%)
  5. Lifestyle choices/substance abuse (5%)
  6. Pregnancy (2%)
  7. Don’t know (26%)

How long does the average long-term disability last?

  1. 1 year (13%)
  2. 3 years (14%)
  3. 5 years (8%)
  4. More than 5 years (18%)
  5. Don’t know (47%)

On average, how soon after someone becomes disabled will a long-term disability policy start paying benefits?

  1.  1-3 months (20%)
  2. 3-6 months (23%)
  3. 6-9 months (12%)
  4. 9-12 month (7%)
  5. Don’t know (38%)

Workers compensation covers injuries that occur on and off the job.

  1. True (18%)
  2. False (66%)
  3. Don’t know (16%)

Your disability payment may be reduced if you qualify for Social Security Disability payments.

  1. True (44%)
  2. False (11%)
  3. Don’t know (45%)

Disability benefits can be paid weekly, monthly, or as a lump sum.

  1. True (37%)
  2. False (21%)
  3. Don’t know (42%)

Disability benefits are not taxable

  1. True (28%)
  2. False (33%)
  3. Don’t know (39%)

Disability insurance replaces 100% of your salary, including bonuses.

  1. True (8%)
  2. False (67%)
  3. Don’t know (25%)

(Split sample of 50% getting part 1 and 50% getting Part 2)

Approximately, how much does an average disability policy/benefit obtained or purchased through work cost per year, regardless if you or your employer pays the premium?

  1. Less than $200 per year (11%)
  2. $200 – 400 per year (14%)
  3. $400-600 per year (11%)
  4. $800-1,000 per year (10%)
  5. Don’t know (54%)

Approximately, how much does an average disability policy that you purchase yourself outside of work cost per year?

  1. Less than $400 per year (12%)
  2. $400-600 per year (13%)
  3. $800-1,000 per year (10%)
  4. $1,500-2,000 per year (8%)
  5. Don’t know (57%)

What’s your most valuable asset?  The ability to earn an income.

When is the best time to buy Disability Insurance?  The moment you start earning a paycheck.

If you have questions or for more information, contact us.


Resource:  LIMRA


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I don’t know anyone who is disabled, so it probably won’t happen to me.

Posted by Katie Lightfoot

Did you know that disabled is more than a wheelchair?

Is your income needed each month to pay family expenses or is it extra cash?

Is there money left over after you pay your bills each month  or do you fall short?

Could you live on less?

If you are the primary bread winner how will you take care of your family?

Sick leave and vacation time can be used to cover expenses during a disability, but the benefits usually run out in a matter of weeks – at a time when the expenses are often increasing.  In many cases, a disability can last for three months.

What DO you think the chances are of becoming disabled at your age?  How about at age 40 or 50?

Do you know someone with a chronic illness?  Maybe you know someone with asthma, multiple sclerosis, cancer, diabetes, heart disease, or chronic fatigue syndrome.

Every street corner has a handicapped crosswalk.  Every building has handicap access

There are many causes and conditions that can impair mobility and movement. The inability to use legs, arms, or the body because of paralysis, stiffness, or pain is common.  It may be the result of birth defects, disease, age, or accidents.

Did you know that insurance statistics show that only nine percent of long-term disabilities actually resulted from serious accidents.  The top causes of disability are often triggered by more common, chronic conditions, including one out of four caused by muscle and bone disorders like back problems, joint pain and muscle pain.

Did you know that disabled individuals are the largest minority?

Everyone says they don’t know anyone who is disabled  ~ but that is because they don’t hang out where you do.  Yet living with a chronic illness involves more than the physical limitations created by the illness.  It also contributes to financial, relationship, and emotional challenges as well.

Family life may be vastly altered if the primary wage earner is unable to work or if treatment requires long-term changes in the family routine and activities.

What would you do?

Test your basic knowledge of disability insurance, and the risk of becoming disabled.

Click here to see the 2013 LIMRA Survey and take the test

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When Should I Start Taking Social Security Benefits?

Posted by Katie Lightfoot

You may be thinking about taking your Social Security benefits early. After all, you have paid Social Security on your earnings for years and you deserve to have them pay you for a change. And, since you are allowed by the government to take Social Security income as early as age 62, and “Normal Retirement Age” is 67 for all Americans born in 1960 or later, giving up those benefits for 5 years seems like way too much. What you may not realize is how much that early payout may cost you.

Taking early retirement benefits from Social Security affects how much you get for the rest of your life, affects your cost of living increases for the rest of your life, and affects how much your spouse will get if he or she is drawing based on your earnings. If you are in reasonable health, and can live without taking the benefits now, you may want to wait.

The biggest and most apparent bad effect of taking Social Security before your normal retirement age is that they cut the amount that you get per month — and they cut it by a lot. If you take benefits at age 62, you will have your monthly benefit cut by 30%. What this means to you in dollars is that if you were expecting Social Security of $1500 per month, your benefit is going to get cut to $1,050. Wow!

Basically, if you take your benefit early, your Social Security is cut by 5/9% per month for 36 months, then by 5/12% per month thereafter, up to the maximum of 60 months. So even taking benefits at what you may think of as still the right age for retirement — age 65 — reduces your monthly benefit and cost of living increases by 13 1/3%.

Obviously, if your health is poor and you have reason to believe that you only have a few years left, you may want to take what you can while you can, but that decision also affects your surviving spouse. The maximum survivors benefit is limited to what you received when you were still alive. So whatever percentage cut you take will affect his or her benefit (if it is based on your earnings record) for the rest of his or her life as well. Note that if your spouse would receive a benefit based on his or her own earnings record that is greater than what they would receive based on your record, they will receive the greater amount.

If you don’t need your Social Security benefits right away, you can delay taking them. Generally, if you were born in 1960 or later, you can get up to 8% more benefit each year for each year you delay taking your Social Security. So, you would have to live for as much as 12 ½ years (with no cost of living increases) for the delay to pay off, but given that your life expectancy may be as high as 88, you would get that extra 8% on both your starting benefit and your cost of living increases for as many as 20 years or even more.

The amount that you and your survivors will receive is based on a complex interaction between your own personal health and life expectancy, your normal retirement age, when you start your benefits and when your survivors take their benefits.  You can go to the nearest Social Security office to see a government employee who will explain the choices to you, but they can sometimes be rushed.  A financial planner can help you evaluate your alternatives for a fairly small fee.

Reprint with permission IARFC Register, Vol. 14 No. 10
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You’ve invested your money, but do you own it?

Posted by Katie Lightfoot

(BPT) – Many people don’t take enough ownership over what they pay when it comes to investing. A recent study by Charles Schwab in May 2013 of investors who are highly engaged in their everyday lives shows that most Americans do research before making a major purchase. Yet just 51 percent say they know how much they pay for their investments and only 16 percent who work with an investment professional have asked how fees and commissions impact their portfolio’s returns.

It can really pay to pay attention, says Mark Riepe, head of Schwab Center for Financial Research, who adds, “One way to reduce your investment return is to ignore fees.”

A seemingly small difference in fees can make a potentially big difference in your return. Here’s a hypothetical example: let’s assume you make a $10,000 investment that earns six percent each year for the next 20 years. If you were to pay one-half of one percent in fees each year on that investment, after 20 years your after-fee balance – or net return – would be about $29,000. But if your annual fee was closer to 1.5 percent, after 20 years that $29,000 would shrink to about $24,000 – or about 20 percent less.

So how can you make sure to take ownership over the money you’ve invested and your financial future? Knowledge is the first step – here are some of the most common fees to be aware of:


Commissions are the fees you are charged when you place a trade with a brokerage firm. If you trade frequently, commissions can add up fast. There are many brokerage firms that offer commission-free products, such as certain exchange-traded funds (ETFs) and no-load mutual funds.

Portfolio management fees

If you use a professional to help you with portfolio management, there are two primary fees to keep in mind. The first is an annual fee, which is usually a set percentage and can vary depending on the advisor and the amount of assets in your portfolio. For example, you might pay one percent of $250,000 you have invested, or $2,500 per year. But there can also be fees for the underlying investments in your portfolio, including commissions and operating expenses that you pay on top of the annual fee.

Mutual fund fees

Mutual fund investors are charged a percentage of the fund’s average net assets. This is called the operating expense ratio, or OER, and it covers the fund’s management expenses. These fees can vary, so investors should always compare OERs before purchasing a mutual fund, especially when deciding between two similar funds. OERs are listed in the fund’s prospectus and most can be found online. Typically, the more complex the fund, the more management it requires and the more it costs. It’s important to know that OERs are charged on top of any transaction fees or commissions you might pay to invest in the fund.

Bond fees

In most cases with bonds, when you buy or sell you either pay a percentage or flat fee, however the yield on a bond is impacted by what you pay for it, so finding the lowest cost is to your advantage. It is a good idea to compare prices from multiple bond dealers before settling.

Exchange traded fund fees (ETF)

An ETF is a fund that can be traded like a stock. Depending on how frequently you buy and sell ETFs you may be more or less concerned with some of their fees. For example, if you trade ETFs more frequently, the commission you are charged for each transaction can add up quickly. You also want to pay attention to the bid/ask spread – the prices at which people are willing to buy and sell the fund. If you’re planning to hold an ETF over a longer period of time, the commission and spread become less important, since they are one-time costs. But “buy and hold” ETF investors should pay close attention to the fund’s expense ratio, which is a recurring fee.

Of course lower expenses do not necessarily translate into higher returns, but they are important to understand. One way to be more aware of the fees you’re paying is to regularly review your statement. Being an informed and engaged investor today can have a real impact on your ability to achieve your investing goals tomorrow, whether that’s retirement, saving for your child’s education or purchasing a home.


Scenario is hypothetical in nature and not intended to predict or project the performance of any specific investment product.

Investors should carefully consider information contained in the prospectus, including investment objectives, risks, charges and expenses.  Please read the prospectus carefully before investing.

Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV).

Bond, investments are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, corporate events, tax ramifications, and other factors

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The Safety Net that Helps Americans with Disabilities Stay Afloat

Posted by Katie Lightfoot

(BPT) – John Miller never much thought about the possibility that he might one day become disabled; he was too busy building and renovating homes throughout suburban Washington, D.C. For 40 years, Miller (a pseudonym to protect his privacy) worked long days with his brother – until an unexpected illness and injury struck.

Like thousands of American workers who find themselves sidelined by illness or injury, Miller could no longer work. As in many jobs, if you don’t work, you don’t earn. Miller soon found himself in dire straits, both financially and in terms of his health. He had never accepted any kind of public assistance, but now he desperately needed help just to pay basic living expenses.

Miller knew nothing about Social Security Disability Insurance (SSDI), the federal program that provides financial support to millions of Americans unable to work because of injury or chronic illness. Learning about the program and securing benefits took months, but now Miller knows his monthly SSDI benefits will at least help him put food on the table.

“My benefits check is something I can count on every month,” he says. “I know that I’ll be able to eat and that I’ll be able to stay in my house for another 30 days.”

Established in 1956, SSDI is an important part of our nation’s Social Security system for disabled workers, retirees, dependents and survivors. Funded through payroll taxes, SSDI provides vital financial support for Americans with severe disabilities and chronic health conditions. Workers earn coverage for SSDI and other Social Security benefits through payroll tax contributions, and may only become eligible for benefits if they have earned coverage and their health prevents them from working.

Currently about 8 million Americans receive SSDI benefits. While the number of people receiving SSDI benefits has risen recently, the increase was expected, and experts say that influx will level off soon. Baby boomers reaching the disability-prone years of their 50s and 60s account for much of the increase. The growing number of women in the workforce also accounts for much of the rise, as they are now eligible for benefits in greater numbers than ever before. The rise in retirement age has also contributed to the increase.

Benefits are modest. On average, SSDI pays individuals just $1,132 a month and families just $1,919 a month. The requirements to qualify for benefits are very strict. Applicants must present extensive medical proof of significant disability. In fact, qualifying disabilities are so severe that about one in five men and one in six women receiving SSDI will die within five years of receiving benefits, and those eligible for benefits are three times more likely to die than other people their age, according to Kathy Ruffing of the Center on Budget and Policy Priorities.

Applying for SSDI benefits is a complex process, especially for people who are unfamiliar with how the system works or who are already dealing with significant illness or injury and the emotional and financial strain that accompanies poor health. Many people find that getting help from a disability advocate or lawyer can help ease the process and relieve some of the stress.

Securing approval for SSDI benefits took Miller 35 months. His experience is far from unique. Miller’s disability meant that after spending his entire career taking care of the homes of others, he wasn’t even able to perform needed maintenance on his own home. After nearly three years of waiting, he is finally able to use the benefits he earned while working on other peoples’ homes, to hire someone to repair his own home. “I’d love to go out there today and work,” he says. “Now I have to get someone else to do the work on my house that I had done for years.”

To learn more about Social Security Disability Insurance and to find help navigating the application process, visit

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Planning Your Life After Retirement: A Guide for Federal Employees

Posted by Katie Lightfoot

by Jason Kay for

A recent report from CNN stated that the United States government is about to face a large wave of retiring federal workers. About 30% of current federal employees will reach the eligible age for retirement in the next three years. But have all of these upcoming retirees adequately planned for retirement?

Planning for your retirement is a necessity, especially given the uncertainty of the current economy. As a federal employee, you have the security of receiving federal pension benefits. These benefits are considerably more generous than plans in the private sector. The first way to begin planning for life after retirement is to understand the details of the Federal Employees Retirement System (FERS). With that knowledge, you can move on to the three important variables that will impact your life post-retirement: your health, your financial situation, and your goals.

Your Retirement Plan

The first step toward planning your retirement as a federal employee is understanding the Federal Employees Retirement System, also know as FERS. FERS provides you with benefits from three sources: the Basic Benefit Plan, Social Security, and the Thrift Savings Plan.

  • Basic Benefit Plan: The Basic Benefit plan, also known as the FERS annuity, is a defined benefit plan that is based on the length of your creditable federal service and the average annual rate of basic pay of your three consecutive years of work that were the highest paid. Note that “creditable federal service” may not include the entirety of your federal service. After retirement, you receive payments from the annuity every month for the rest of your life.
  • Social Security: FERS is covered by Social Security, which is the federal insurance program that provides retirement, unemployment, and disability benefits. You will receive Medicare benefits under Social Security. If you change employers prior to retirement, your Social Security will follow you.
  • Thrift Savings Plan: The Thrift Savings Plan (TSP) is an account automatically set up by your agency of employment. Each pay period, your agency deposits 1% of the basic pay you have earned during that pay period into your TSP account. If you contribute to your TSP, your agency will make matching contributions, which are tax-deferred. TSP will also follow you to your next employer if you change jobs before retirement.

One important aspect of FERS to consider is your eligibility. The federal government’s Office of Personnel Management (OPM) provides charts to determine your Minimum Retirement Age. There are also different eligibility requirements for immediate, early deferred, or disability retirement. These requirements are based on your age and years of service. OPM also provides FAQs on retirement information for federal government employees.

Check Your Health

Now that you are informed about the intricacies of FERS and have determined your eligibility, one daunting yet necessary conversation to have revolves around your health. Your health will have a large impact both on how long your retirement will be and what financial resources you will need. Experts recommend using life expectancy calculators that take into account a variety of information about your health and lifestyle to more accurately determine how long you may live. This will allow you to both plan financially and take steps toward improving your health, which will decrease your chances of struggling with expensive medical conditions.

It’s All about Money

Considering your life expectancy leads us to the most important aspect of retirement: how much money you will need to save. The U.S. Department of Labor reports that less than half of all Americans have calculated their financial needs for retirement. You should begin saving early, continue saving throughout your career, create savings goals, and stick to those goals. As financial experts reiterate, the upcoming generation of retirees has a vastly different outlook on retirement than that of their parents.

As a federal government employee, your advantage lies in a guaranteed pension, which have been declining in number since the 1970s. Still, as a growing majority of retirees are living longer, federal programs such as Social Security are facing a large amount of strain. Creating a personal savings plan in combination with your FERS benefits is recommended. U.S. News provides some helpful tips on saving for retirement. One especially useful idea is to start an IRA. Although FERS will provide you with the annuity and TSP, it cannot hurt to set up an Individual Retirement Account, or IRA, as well. Consider using your IRA to save money that you receive outside of your normal income, such as tax refunds, inheritances, credit card rewards, or bonuses.

What Are Your Future Goals?

Finally, one piece of retirement that many fail to consider is what exactly they want to do on a daily basis once retired. While the majority may simply look forward to the opportunity to relax and conduct their daily life free of work obligations, you should consider the fact that you will likely be in retirement for 20-30 years. There are a multitude of options for what you can choose to do with that time.

  • Traveling: Traveling is often a favored choice among retirees. The National Active and Retired Federal Employees Association (NARFE), which will be open to you as a federal employee, boasts multiple member perks revolving around travel. These include discounted plane tickets, car rentals, hotel stays, and vacation rentals.
  • Volunteering: Many retirees feel at a loss without the daily commitment of a job. Becoming a volunteer is an excellent way to feel satisfied through being actively involved in a cause that helps others. Volunteering provides the opportunity to take on a job that is new and interesting, and many find that it adds meaning to their lives.
  • Furthering Education: If you are intellectually minded, retirement can give you the opportunity you have been waiting for to further your education. NARFE provides discounted tuition for online degree programs.
  • Finding a Hobby: While it may seem cliché, retirement gives you the option to rediscover hobbies you may have neglected while you worked. Developing a hobby can lead to meeting new people, provide you with an enjoyable daily activity, and even bring in some extra money.

© 2013 All rights reserved. This article may not be reproduced without express written consent from

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Protecting Your Paycheck – for Today and Tomorrow

Posted by Katie Lightfoot

(BPT) – People insure their homes, their cars and even their vacations without giving it a second thought. But many do not think about insuring their most important asset – their income – from a disability caused by illness or injury. And it’s not just income during working years that is at risk. A disability can also put a serious dent in your ability to enjoy retirement.

That can happen in two ways, according to Sandy Botcher, vice president of disability income insurance at Northwestern Mutual. “When a family loses its usual source of income due to a disability, sometimes the only alternative is to dip into retirement savings to cover normal household expenses,” she says. “And even if you don’t have to take money out of savings to replace income, the other consequence of a disability is that it decreases your potential to contribute to your retirement plan.”

Botcher adds that from the moment you start working until the day you retire, your ability to earn an income is your most important financial asset.

Consider this example: A $60,000 annual salary results in $2.4 million earned over a 40-year career, and that doesn’t take into account inflation, salary increases, or the long-term growth potential of money invested in retirement saving vehicles along the way. If a disability prevents the individual from earning this income, or requires him to access a portion of what’s already been saved (often with a tax penalty), it can have devastating impact on retirement dreams.

Recent research demonstrates the need to prepare for the unexpected. Over the past three years, 22 percent of Americans had dipped into retirement savings and 22 percent had stopped or reduced their savings contributions, according to Northwestern Mutual’s 2013 Planning and Progress Study. More than half of those surveyed say unexpected expenses are to blame. Yet 23 percent of respondents say they want to be more cautious with their money, and feel they have a lot of catching up to do.

“The Great Recession has reminded us that we cannot afford to lose our incomes,” says Botcher. “But we also need to remember that our chances of losing our incomes are determined by more than just our employers’ viability or our career success.”

In the minds of consumers, few things seem more unexpected than a disability. Yet the Social Security Administration reports that about one in four 20 year olds today will become disabled before retirement.

One way to prepare for the possibility of being unable to work is disability income (DI) insurance, designed to help pay living expenses, maintain lifestyle needs and preserve assets accumulated for retirement and other purposes. Many employees think that coverage they get through their employer’s group disability policy is enough. They should think again.

Group DI typically has a cap at 60 percent of salary; other forms of compensation like bonuses or commissions may not be covered. In addition, the benefits are taxable. So, if earning less than two-thirds of one’s current salary would make it difficult to make ends meet as well as work toward goals like continuing to fund retirement, it’s important that another option be considered to bridge the gap.

That option is an individual DI insurance policy. Premiums for individual DI policies are paid after taxes, so the benefits are not taxed, and the policies are portable.

-“We can’t forget that the source of a retirement program is the ability to work. Having individual disability income insurance is a way to address one of the key risks to achieving your retirement goals,” Botcher says.

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Should I Stay or Should I Go?

Posted by Katie Lightfoot

by Ann Vanderslice

Should I stay or should I go now?
Should I stay or should I go now?
If I go there will be trouble
If I stay it will be double
So come on and let me know
Should I stay or should I go?

~The Clash


With all the early out offers, VERA’s, VSIP’s, and RIF considerations, this punk rock song is fast becoming the federal worker’s theme song. The considerations for whether to stay employed vs. join the ranks of the retired can often be emotionally based.

Federal employees are often being asked to do more work without any more reward.  A common lament is that the work keeps piling up as more employees leave,  and it just isn’t worth it if retirement benefits are going to be re-structured, on top of it.


Not sure what to do?

Before you let your current situation get the best of you, it’s a good idea to take a look at the actual retirement figures for your own situation.  Here are some tips, tricks and traps to help you analyze the pros and cons of retiring earlier than you may have planned.

Have your annuity calculations run with the date you planned to retire (you do have a date in mind, don’t you?),  and also have the calculation run based on the early-out offer date.  Comparing the two amounts is not enough.  You’ll want to have an analysis run taking into account current taxes, implications for Social Security, and the value of your TSP at the two points in time.

If you stop working early, your Social Security estimate will be inaccurate since they’re counting on you continuing to work and contributing to the system when they provide their estimate.  The TSP can be a double whammy because if you retire early, you may need to start withdrawing from the TSP for income.  Not only are you no longer contributing, you’re depleting your funds sooner than anticipated.

The lure of a Voluntary Separation Incentive Payment can be enticing.  You were thinking about retiring, anyway. Why not just consider the $25,000 as a nice parting gift and go?

If you really were planning to retire, then the VSIP is a bonus at the end of your career.  However, if you’re thinking that the $25,000 buyout is just what you’ll need to complete your retirement plan, face the facts.  $25,000 (~$17,500 after taxes)  is not going to make or break your retirement.  It’s just not enough.

Next, you need to determine whether your assets will last throughout your life expectancy accounting for reasonable withdrawal rates, rates of return on your investments, and inflation factors.  Remember, retiring early means you’ll have saved fewer years and need retirement income for a longer period of time.  If you’re married, survivor benefits have to be a consideration, as well.

While recent studies vary on the topic of life expectancy, the averages typically show that a couple at age 65 has a better than 50% chance that one member of the couple will live to be 90 and nearly a 20% chance that one of them will live to be 100!  For many federal employees, they will live longer in retirement than they spent in their career.

Everyone’s situation is different.  There are family dynamics, workplace issues, health concerns, and just being downright tired of the rat race.  Before you make a rash decision and leap too soon, make sure you understand the ramifications for you personally.


© 2013 Ann Vanderslice. All rights reserved. This article may not be reproduced without express written consent from Ann Vanderslice.

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Boomers turning 65 face complex healthcare choices

Posted by Katie Lightfoot

(BPT) – Every day, about 10,000 baby boomers turn 65 and become eligible for Medicare. Not everyone will sign up, but it’s important to understand the importance of early choices when enrolling in Medicare for the first time.

You can enroll in Medicare three months before turning 65, the month you turn 65 or up to three months afterward.

“Turning 65 opens the door to Medicare eligibility, but it brings with it some complex choices,” says Paula Muschler, manager of the Allsup Medicare Advisor, a personalized Medicare plan selection service. “Choices seniors make at this time can impact their healthcare costs over the long term and their entire family.”

Muschler offers the following key steps for Medicare first-timers.

1. Take a look at your existing group health plan coverage and think about how it will coordinate with Medicare. Many people work past age 65. As a result, Medicare-eligible individuals who have health coverage through their employer or their spouse’s employer may be able to wait to enroll in Medicare Part B, which covers outpatient medical care. This is not true in every case, however. This option depends on other factors, such as the size of the employer and how soon you expect to retire after reaching 65. You may want to consider enrolling in Medicare Part A, which includes hospital coverage, even if you defer Part B.

2. Consider the options for first-time enrollment, keeping in mind your current health needs and financial resources. If you choose traditional Medicare, you have an average of 31 Medicare Part D prescription drug plans from which to choose. You can also choose from 10 standard Medigap policies for supplemental coverage, ranging from basic to comprehensive coverage. The price for these plans also can differ from one company to the next.

Adding to the complexity, Medigap plans are not required to accept you after your initial enrollment period. This is one reason first-time choices are crucial. Seniors evaluating Medicare Advantage plans over traditional Medicare also have an array of options – an average of 20 plans, depending on where you live. “We’ve been able to help Allsup customers find plans that cost less and match their specific healthcare needs,” Muschler says.

3. Follow Medicare enrollment rules to avoid costly mistakes. Penalties are in place for decisions related to Part B and Part D coverage. The late-enrollment penalty is 10 percent for each full 12-month period you could have been enrolled in Part B. Likewise, Part D imposes a penalty if you go for more than 63 days without coverage after enrolling in Part B.

“Your first-time Medicare plan choices also are more complicated if you have retirement dates, COBRA coverage or dependent coverage to consider,” Muschler says. “These are good reasons to contact a Medicare specialist, who can help answer the right questions and provide guidance to seniors so they make choices that match their situations.”

4. Understand how higher income and changes in your income affect Medicare costs. Higher-income beneficiaries pay higher premiums for Medicare Part B and prescription drug coverage. For Part B, the 2013 monthly premium is $104.90 for joint filers with income of $170,000 or below ($85,000 for single filers). However, the premium increases to between $146.90 and $335.70 for those with incomes above these thresholds. Likewise, higher-income beneficiaries can expect to pay from $11.60 to $66.40 more each month in prescription drug premiums.

The Social Security Administration uses IRS records when determining premiums. Social Security may reduce an individual’s income-related monthly premium with verification. “Social Security has specific requirements about how you can document changes in your income when you are requesting reduced Medicare premiums,” Muschler explains.

5. Review healthcare coverage for your spouse and dependents to determine how your choices may affect their coverage. If you are nearing Medicare eligibility, you can find yourself at a crossroads when it comes to providing healthcare for your entire family.

Some employers may continue to provide coverage to a worker’s family, or you may need to purchase COBRA coverage or private coverage for family members. “One early step is to talk with your benefits plan administrator to see what options you may have and then plan for your family,” Muschler says.

Seniors turning 65 have seven months during their initial enrollment period to make critical decisions. But you can begin evaluating your options earlier to be better prepared. For a free brochure on “Turning 65 and Medicare Enrollment” or for an evaluation of Medicare options, call an Allsup Medicare Advisor specialist at (866) 521-7655 or go to

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Making Your Money Last Through a Multi-Decade Retirement

Posted by Katie Lightfoot

by John Grobe  For FedSmith


Just thinking about the subject of this article made me think “Are we lucky, or what”?  A federal retiree has much less to be concerned about than the vast majority of American retirees.  Why is that, you ask?

First, we have a pension.  The Office of Personnel Management insists on calling it an annuity, but whatever you call it, it is lifetime, inflation adjusted income.  Not too many private sector retirees are getting old-fashioned pensions anymore; even less are receiving cost-of-living adjustments.

Let’s look at three examples, one CSRS and two FERS.  In all three examples the employee worked 32 years and had a high-three salary of $70,000.

  • A CSRS retiree would receive a pension of $42,175 before deductions/reductions.
  • A FERS retiree who retired prior to the age of 62 would receive a pension of $22,400 before deductions/reductions.
  • A FERS retiree who retired at the age of 62 or older would receive a pension of $24,640 before deductions/reductions.

The above examples are for regular retirees.  Special category retirees (e.g., law enforcement, firefighters, air traffic controllers, etc.) would receive more as would Congresspeople who took office prior to January 1, 2013.

Second, many of us have Social Security.  FERS retirees will get an unreduced Social Security benefit, as will some CSRS Offset retirees and FERS transferees.  CSRS retirees who have earned 40 or more Social Security credits will receive a Social Security benefit, but it will be reduced by the Windfall Elimination Provision (WEP).  Many retirees who are CSRS Offset or FERS transferees will also be subject to the WEP.

The average Social Security benefit is $15,132 in 2013.  A FERS retiree is likely to receive a higher benefit than the “average” as federal salaries are higher than the average private sector salary.

Let’s say our retiree wanted to keep the same standard of living in retirement that they had while working.  A rule of thumb often used by financial planners is that 80% of pre-retirement gross income is sufficient to maintain the current standard of living.  Of course there are many exceptions to this rule, so tread carefully when using it.  An individual who was still carrying a large mortgage, or who still was supporting children might find the 80% rule a little tight.  80% of our high three of $70,000 would be $56,000.  How close are our hypothetical retirees to this amount?

  • Our CSRS retiree (I assumed no SS) would be $13,825 short.
  • Our FERS retiree who retired before the age of 62 (I assumed $18,000 of SS) would be $15,500 short.
  • Our FERS retiree who retired at age 62 or older ( I assumed the same $18,000 of SS) would be $13,360 short.

All of our hypothetical federal retirees ended short of 80% of their pre-retirement gross income.  Using financial planners’ rules of thumb (here we go with those general rules again – remember that they do not apply to everyone) of beginning withdrawals at a 4% to 5% rate and adjusting it annually for inflation, we come up with an amount somewhere between $300,000 and $350,000 being necessary to generate the level of income needed to hit the 80% target.  Where’s that money going to come from?  From your TSP or other investments.  Is that possible to save that much?  Absolutely, if you began saving early enough.  I am fond of telling participants in Federal Career Experts’ mid-career and early-career retirement planning classes that “there’s no such thing as having too much money in your TSP”.

From here on in the article we will assume that you were able to save up that amount of money and are wondering how to withdraw it so that you will not run out of money before you run out of time.  We will also assume that you amassed the money within your Thrift Savings Plan.

If you are going to count on your TSP to generate a stream of income during your retirement, you will likely choose one of these two options; an annuity or monthly payments.  You can make this choice either in or out of the TSP.  First let’s look at our options within the TSP.

With the TSP withdrawal choice called “substantially equal monthly payments”, your money remains invested in the TSP and you elect a monthly payments based on two choices.  They are: 1) payments of a specific dollar amount; and 2) payments based on the IRS life expectancy table.  If you choose payments of a specific dollar amount they cannot be less than $25 per month and can be changed once a year, during an open season in December.  As long as you retire in the year in which you reach the age of 55 (or later) you will not be subject to the 10% early withdrawal penalty on any monthly payments from the TSP.

When choosing the monthly payment option, be aware that, if you withdraw your funds aggressively, you might end up running out of money before you run out of time.  With the IRS life expectancy option, be aware that when you hit the age of 70 ½ you will be switched to the minimum required distribution rate, which will significantly reduce your payments from what you were getting at age 69.  Many financial planners recommend beginning your withdrawals at a 4% or 5% rate and adjusting the amount annually by inflation.  Studies using “Monte Carlo Simulation” tools have shown that, with a balanced portfolio, your chance of running out of money in 30 years is less than 10%.  Let’s look at the annual amount that could be withdrawn at a 4% or 5% rate.

  • 4% of $300,000 is $12,000; not enough to bring our retirees to the 80% level;
  • 5% of $300,000 is $15,000; this will do it for two of our three hypothetical retirees;
  • 4% of $350,000 is $14,000; this also will do it for two of our three hypothetical retirees;
  • 5% of $350,000 is $17,500: enough to take all of them over the 80% level.

The other choice for those who leave their money in the TSP is purchasing a TSP annuity.  TSP annuities are sold by MetLife.  A TSP annuity will guarantee that you will not run out of money in your lifetime.  Joint annuities provide that protection for spouses as well as for those who have an insurable interest in your life.  There are no early withdrawal penalties with TSP annuities, regardless of your age when you begin payments.

The interest rate index used in the computation of TSP annuities is very close to its all-time low level.  When this article was written in March 2013, the index was 2%.  This results in our retiree not receiving enough annual income to achieve the 80% replacement rate.  The most generous computation for a 62 year old that was spending $300,000 on a joint annuity with a cash refund feature and a 50% survivor annuity came out at $10,476 per year.  Spending $350,000 for the same annuity increases the annual payout to $12,216.

The book, Withdrawing Your TSP Account After Leaving Federal Service, has detailed information on these two withdrawal methods (as well as other methods).  The book is available on the TSP website.

The TSP website has calculators that can help you estimate the amount of money you might be able to receive under both of the above options.  Do be aware that the calculators are not the most sophisticated ones available, particularly the monthly payment calculator.

Of course, you are not required to leave your money in the TSP.  Many retirees choose to move their money into an Individual Retirement Account (IRA).  Within an IRA you can set up monthly payments, just like you can in the TSP.  IRAs however, give you more flexibility in changing the amount of your payments.  You can change the amount at any time.  In fact, your payments do not even have to be taken monthly.  You could set them up bi-monthly, semi-annually, or however you want.

Once you roll money into an IRA, you will face the 10% early withdrawal penalty on any money you withdraw before you reach the age of 59 ½.

Money that is in an IRA can also be used to purchase an annuity.  You should thoroughly investigate any annuity investments, because all annuities are not created equal.  Make sure you completely understand what you are getting in to before you invest your money.  There are no early withdrawal penalties with annuities.

© 2013 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.


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How Much Does the Government Pay to Fund Your Annuity?

Posted by Katie Lightfoot

by Robert F. Benson user recently claimed that 95% of annuity costs are paid by the Government.  This sounded high to me.  However, unlike the complex “which retirement system is better” issue, this one is a matter of simple fact, and can thus be put to rest with a bit of research.

The retirement trust fund is administered by the Office of Personnel Management (OPM).  As stewards for this huge pool of money, they know better than anybody how much is in the fund, how fast it is being paid out, how much is deposited by who, etc.  In the OPM series of Benefit Administration Letters (BALs), there is one each year on cost factors for the retirement fund. (There is just one fund for both annuity systems, by the way.)

Note BAL 12-307, Cost Factors.  Each percentage figure below represents the nominal total paid into the fund, as a percentage of the employee’s salary.  Employee contributions ares in parentheses:

CSRS Regular CSRS Law Enforcement FERS Regular FERS Law Enforcement
29.8 (7.0) 50.9 (7.5) 13.7 (0.8) 29.7 (1.7)

FERS is the predominant retirement system, and it will continue growing for years, while the ranks of CSRS folks are dwindling to the point where they will become extinct.  So, to clarify the meaning of the above FERS numbers, let’s look at them in terms of dollars.  Both below employees have a salary of $54,000.

Type of Retirement Employee Agency* Total Percentage from Agency
Regular $432 $6,966 $7,398 94.16%
Law Enforcement $918 $15,120 $16,038 94.27%

Imputed Costs

The above cost factors are for accounting purposes and are sometimes called “service costs.”  Just to ensure confusion, “imputed costs” are the result of subtracting the actual contributions by both employee and agency from the service costs.  This is explained in BAL 03-309.

Who pays the imputed costs?  The taxpayers.  There is an annual appropriation by Congress for augmentation of the retirement fund.

FERS Revised Annuity Employees (FERS-RAE)

Most employees hired on/after January 1, 2013 are placed into FERS-RAE.  The RAE is for “Revised Annuity Employee.”  Ironically, despite the terminology, these new employees will NOT be receiving a revised annuity; instead, they will be paying a revised contribution to the retirement fund – 3.1% instead of 0.8%.  It appears total service costs will be unchanged from the “old” FERS, with the only difference being more paid by the employee and correspondingly less paid by the agency.

In other words, FERS-RAE is identical to FERS except employees must pay more.  This is the basis of the “savings” policy makers credit to FERS-RAE

In conclusion, for employees in the “old” FERS, the assertion that Government pays 95% of retirement costs is essentially correct.  For those in FERS-RAE it is a different picture.  The 3.1% they pay into the fund represents 22.6% of costs, with 77.4% paid by Uncle Sam..

(In one sense, the 95% paid-by-government claim is false.  That is, over the years, the money deposited into the retirement fund grows a great deal, due to the miracle of compound interest.  So, it could be said that the interest is a major contributor.  But this is kind of picky, or even misleading.)

This is just my opinion, but it looks like non-CSRS employees who want to ensure a decent income at the end of their Government careers need to invest heavily in the Thrift Savings Plan.

My website for calculation of federal benefits is here.

*as augmented by the annual congressional appropriation

© 2013 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.






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Are You Prepared for Your Retirement? Most of You Aren’t

Posted by Katie Lightfoot

By: Kim Kirmmse Toth

I read a lot about the lives of women after 50. Being one myself and even though I am a business coach, clearly there are other things going on for us. One of them is our retirement. It’s frightening out there and most women do not feel confident. How are you going to support yourself in your older years?One very sad statistic is that 50% of women fear becoming a ‘bag ladies’. That’s half of all women!! And yet, another statistic says women control a larger share of personal wealth in the U.S. than ever before by 66%.This worry of how to finance your retirement has gotten worse since the recession. Employer retirement plans have gone downhill and many employers have laid workers off to save their own bottom lines.

As women, older women, you are resilient, savvy and can accomplish many goals. What can you do now to be rest assured you can support yourself in the years to come?

Many women have to catch up on retirement savings, if you have any, because you either stayed at home to raise children, have been care takers to parents, got divorced, being widowed or a myriad of other reasons to not have enough sacked away. For some of you the lack of planning and preparation has put you in a difficult situation. Too many women will work into their 70’s so they can supplement their social security. It’s one thing to work because you want to, it’s another thing to work because you have to.

Another statistic: From the 2013 Women, Money & Power Study nearly half of all women have the fear of being a ‘bag lady’, even 27% who make over $200,00.00 per year. This study also stated that the root of the problem is that most women don’t know where they honestly stand financially.

So, do you know where you stand? Are you brave enough to really take a good hard look at your numbers? Your retirement depends on it. How late in life you work depends on it. How confident you feel depends on it.

In this day and age you have more earning power than ever before. Are you using it wisely? Are you really taking a good hard look and knowing where you stand?

This is not a time to put your head in the sand. I read articles all the time of the challenges and fears of older women in their retirement years. I don’t want to be a part of this statistic and I don’t want you to be either.

How are you going to take care of yourself? What is your plan? Are you working now? For someone else or for yourself?

Be brave and look at your financials. If you are not ‘retirement ready’ now or in the next 10 years, what are you going to do about it? It may be time for a plan, not a dream, a plan.


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Are You Financially Ready to Retire?

Posted by Katie Lightfoot

by Jason Kay for FedSmith

There are several considerations to make when one is considering retirement from the government. While you may have been consistently contributing to your retirement fund over the years, perhaps the recent economic downturn or receiving fewer hours at your current job have made you wonder when the right time to retire might be.

Here are some questions to ask before making such an important decision:

1)      Do you want to retire yet?

As much as retirement is a financial decision, it is also an emotional one. What is it that you wish to do if you did not have to work at your current position? Do you still feel a drive to go to work every day? Would you miss your job if it were gone tomorrow?

2)      What is your definition of retirement?

Retirement can mean different things to different people. If you are emotionally prepared for retirement, consider what sort of lifestyle you wish to live after retirement. From there, you can determine how much money you will need to put away in order to afford a certain standard of living once you retire. Traveling frequently will, of course, require greater savings than if you plan to stay close to home to spend time with family or if you intend to downsize to a smaller home.

3)       What income level will you need to retire?

After deciding on the lifestyle that you hope to live, it is then time to sit down and figure out how much money you will need to retire. Looking at the numbers on paper will bring you back to reality and will enable you to plan effectively for a satisfactory retirement.

According to financial planners, people need roughly 80% of the income they received while working in order to have a good standard of living once retired. Why only 80%? Consider that you will not be saving up for retirement as you once had been. In addition, the percentage of your wages that you were contributing to taxes will also no longer be a factor. You will no longer need to drive to work every day nor will you likely be spending as much money on food.

That being said, you might find that you will spend more on healthcare, travel, or long term care insurance.

The best thing to do is to create a worksheet that compares your current expenses with your estimated expenses after retirement to help you formulate an effective plan.

4)      What will your income be after retirement?

  • Pension: You are part of a shrinking number of people in the workforce if you have a defined benefit pension from your present or past employer. You can ask them for a projection of that pension so that you can better expect what sort of income you can plan on.

Once it is time for you to collect your pension, be sure to choose a payout option that covers your spouse or any dependents in the event that you pass away. It is also wise to consider opting for a cost of living adjustment if it is available. This will prevent inflation from reducing the value of your pension over time.

  • Social Security: You can obtain an estimate of your benefits based on your actual earnings record from the Social Security website. You can decide when you want to begin collecting those benefits. You may choose to take it as early as age 62, but it would be best to postpone it until later if you can afford to do so. This is especially true if you are healthy and predict that you will live longer than other people your age.

The reason why it would pay to wait is because your monthly benefit will grow by around 8% for every year that you delay to collect on it until it maxes out just after age 70. You can also apply for a spousal benefit if you are married and wait until you are full retirement age. You can allow your benefit to increase and then collect on it later.

If you choose to take advantage of your benefit before full retirement age, you will receive only the higher of either your spousal benefit or your reduced benefit. You cannot go back on your decision, so it is very important that you choose carefully.

  • Additional Income Sources: Consider any other income sources such as rental income or an annuity. There is also an opportunity to work part time or make one of your hobbies into a business.

5)      What do you have saved for retirement?

This is the time where you should add up all of your retirement accounts or other investments so you have an idea of what your supplementary income will be. The plan is to make this money last as long as you plan to. This way, you can better plan for what you will be investing your savings in upon retiring.

6)      How long will your savings last?

Once you determine your expenses, income, and savings, you can enter them into a spreadsheet in order to see how long they will really last. There are retirement-specific calculators you can use as well, so that you can determine factors like net income or you can predict how inflation will affect your savings.

It is always better to plan on the side of caution. Avoid the risk of outliving your money by ensuring that you would run out before you turn 95 or even 100, in some cases.

If your plan falls short of what you want, there is always the option to earn additional income after retirement as mentioned earlier by taking up a part time job or starting a small business. Cutting back on expenses is also a safe option, in addition to pursuing a more aggressive investment option.

Always keep in mind that even the healthiest people will not be able to work forever. Also, investing carries a degree of risk, so it is always safest to cut back on expenses when planning how long your savings will last you after retiring.

© 2013 All rights reserved. This article may not be reproduced without express written consent from

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Taking the Intimidation out of Saving for Retirement

Posted by Katie Lightfoot

Saving for retirement is a scary prospect for many Americans. In fact, just 14 percent feel confident they will have enough money to live on when they retire, according to the 2012 Retirement Confidence Survey by the Employee Benefit Research Institute. And 60 percent say they have less than $25,000 saved for retirement, the survey reveals.

Retirement planning and saving doesn’t have to be frightening or fruitless. Knowledge is power, and when it comes to preparing financially for retirement, the more you know, the more likely you are to succeed – and feel secure about your future in your golden years.

How much is enough?

Uncertainty over how much they need to save is a big concern among workers. Thirty-four percent of Americans have no retirement savings at all, according to a poll by Harris Interactive. How much you need to save now in order to have a good life when you retire depends on many factors, including your current income and age, the age at which you plan to retire and the expenses you anticipate you’ll face during retirement.

Fortunately, retirement calculators can help you get a better picture of how much you need to save. You’ll find plenty of calculators and information about saving for retirement from resources like The calculators can give you an idea of how much income you’ll need from investments to live on during retirement, and how much of your current income you need to save between now and retirement.

Crunching credit numbers

Another important consideration is how you will interact with credit when you retire. It’s important to manage credit wisely during retirement, just as it is throughout your adult life.

Studies show that many Americans don’t regularly monitor their credit, which can be a costly mistake. In fact, 65 percent of Americans have not ordered a copy of their credit report within the past year, and 31 percent don’t know their credit score, according to the National Foundation for Credit Counseling’s Financial Literacy Survey.

Your credit report and score are important during retirement for a number of reasons. First, your score directly affects the cost of many important financial needs, such as auto insurance and interest rates. Also, while you should strive to minimize debt during retirement, it may not be practical – or even desirable – to completely eliminate credit use in your golden years. Finally, not keeping an eye on your credit report and score may mean you fail to quickly catch instances of fraud or identity theft. Senior citizens are often a favorite target for identity thieves and scammers.

Understanding your credit – leading up to retirement and during – should be a key part of your retirement planning. Websites like can help by offering enrolled members monthly statements, credit reports, credit score alerts, identity protection alerts and fraud resolution support.

Understanding your Social Security benefits

Too often, people planning for retirement either rely too much on Social Security or overlook it altogether. Neither route is best. It makes sense to incorporate Social Security as part of your overall retirement saving plan, as long as you understand what to expect from the program.

The Social Security Administration provides every taxpayer with statements about how much they can expect to receive when they retire. Your SSA statement is now available online. Simply log on to for an estimate of the amount of Social Security benefits you could receive upon retiring. Knowing how much you can expect from Social Security can help you plan your retirement savings strategies.

Saving for retirement doesn’t have to be intimidating. It’s never too late – or too early – to take control of your retirement savings goals.

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Don’t Let These Myths Rain on Your Retirement Party

Posted by Katie Lightfoot

Do you dream of the day you can retire, but aren’t sure how to get there? You’re not alone. Many people find it easier to avoid reality when it comes to planning for retirement.

That can lead to big mistakes in your retirement income planning.

Here’s a look at five common myths that could derail your expectations for income when you retire.

Myth 1: You won’t be around long enough to go through your money

The reality: Life expectancies are at record highs in the United States, so it’s important to acknowledge that you or a family member may spend as many years in retirement as you did working. According to a 2010 report by the National Academy of Social Insurance, for a 65-year-old married couple, there’s a 48 percent chance that one spouse will live to age 90.

To help stretch your money, consider incorporating immediate and deferred annuities into your planning. Created to provide guaranteed, lifelong income in retirement, they can also offer guaranteed growth while you’re saving for it.

A long retirement extends your exposure to one of financial planning’s most subtle enemies: inflation. As you invest, it’s important to seek a mix of assets that guard against the declining value of the dollar and that is in line with your risk tolerance and goals.

Myth 2: You should get out of stocks when you retire

The reality: Stocks can help provide the long-term growth you need to make your assets last longer since your retirement could span several decades.

You’ve probably heard you should reduce your investment risk as you age. But with traditional pensions being replaced by 401(k) plans, you’re wholly responsible for making asset allocation decisions.

Dampening portfolio risk at retirement doesn’t mean getting rid of stocks entirely.  Rather, regularly reviewing, and if necessary, rebalancing your portfolio based on your risk tolerance can lock in gains from strong-performing asset classes and allow you to buy those that underperform at cheaper prices.

Myth 3: You can just keep working

The reality: Counting on being able to work as long as you want is dangerous.  Employers are feeling pressure to cut costs, and with high unemployment, finding work is always a challenge.  A disability also could force you to stop working prematurely.

Many people think they can simply work longer if they don’t have enough money to retire. According to a recent survey by the Employee Benefit Research Institute, 74 percent of workers plan to work at least part time during their retirement years, as working in retirement has become a necessity for many.

Good planning doesn’t rely on good fortune. Rather, your plan should both keep you from having to work the rest of your life and deal with the consequences of unexpected surprises that prevent you from earning a paycheck.

Myth 4: An inheritance will bail you out

The reality: You may be hoping for an inheritance as a potential retirement boost. But hope is not a strategy, and counting on an inheritance can create big problems if it doesn’t come through.

Many people who expect to inherit money never do. And even for those who do inherit money, it’s often too little or comes too late to make a difference in their retirement planning. The safer thing to do is to treat an inheritance as an unexpected bonus rather than relying on it.

Myth 5: Your taxes will be lower in retirement.

The reality: Big government deficits make future tax increases much more likely. Also, taking money out of retirement accounts, such as traditional IRAs and 401(k)s, creates taxable income that can push you into higher tax brackets.

One suggestion is to consider converting part of your eligible retirement assets to a Roth IRA. By doing so, you’ll pay taxes now, but you’ll create a tax-free pool of money to tap in retirement. Diversifying with both Roth and traditional IRAs is a possible way to handle future tax uncertainty.

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Boomerang kids: When your empty nest fills up again

Posted by Katie Lightfoot

A survival guide for parents with recent graduates and young adults moving back home

With a slowly growing economy and a still sluggish job market, there has been a continued increase in children moving back home after having lived independently on their own. These so called “boomerang kids” are popping up more frequently and when this situation is managed improperly, it can cause serious tension in a family.

However, many parents are viewing this “boomerang” as an opportunity. It can allow youth to begin saving money for the future, continue a job search or to get out of debt, but only when expectations are clear and roles are known.

This is not necessarily the troubling scenario it was once thought to be and this can actually be a very productive time for both children and parents if it’s handled well. When children move back home a closer bond can form between young adults and their parents, and this can lead to the young adults receiving financial, practical and emotional support from their parents.

In May, sociologists Karen L. Fingerman and Frank F. Furstenburg reported that “in 1988 less than half of parents gave advice to a grown child in the past month, and fewer than one in three had provided any hands-on help. Recent data show that nearly 90 percent of parents give advice and 70 percent provide some type of practical assistance every month.”

This type of increased financial co-dependence between parent and child can lead to strain when living together again after a separation. If you are a parent with a young adult at home, it is important to communicate about expectations and responsibilities and to help your child build a solid financial foundation for their future.

Reviewing these tips can smooth the transition and can guide both the child and parent through a tough time:

1. Set expectations

Discuss with your child how much he/she should contribute to household expenses and tasks. A key to making the transition easy on everyone is having clear expectations for everyone involved both financially and otherwise.

2. Review your insurance and taxes (and theirs)

Save time and money by seeing if your boomerang child is covered by your health and/or car insurance. Also see if you are able to claim your child as a dependent.

3. Consider having them “pay rent”

Consider having your child pay rent or at least a token amount for living expenses. This gets the child into the habit of paying a monthly amount. Or have a set amount of money go into a saving account monthly that the child could later use for a down payment on a house or car.

4. Help them keep busy

While waiting to get hired, your child could continue to expand their resume. For example, remind them to consider volunteering, joining a professional organization, connecting with a networking group or participating in an internship, even if it’s unpaid.

5. Focus on your own finances first

You may be tempted to use retirement dollars toward financial assistance for your child, but don’t derail your own financial plans. Make sure your savings and retirement plans remain intact. Not sacrificing your own livelihood and continuing to invest in important options like life insurance, disability income insurance and long-term care insurance is critical to maintaining your overall financial health.

Though you may not have planned on it, helping support your child after they’ve left home can be a springboard toward a healthy financial future for them. Following these tips can help ensure that the boomerang experience remains positive and the relationship remains strong.

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Tips to take charge of your financial future in the current tax environment

Posted by Katie Lightfoot

With the agreement reached at the eleventh hour of 2012 to avert components of the so-called “fiscal cliff,” nearly all taxpayers will be affected in some way.- With that in mind, there are still many things you can do this year to prepare for potential additional tax changes and to take control of your financial situation.-

Below are 10 options for you to consider as you prepare for your financial future in 2013 and beyond.

1. Consider an IRA-qualified charitable distribution.

People 70 1/2 and older, who are required to take minimum distributions from their traditional IRAs, may give up to $100,000 directly from their IRAs to qualified charities. This will satisfy the required minimum distribution, or RMD, requirements and no taxes will be due on the amount of the contribution.

2. Know your tax bracket.

Now that tax rates are higher at some levels, it’s more important than ever to know which tax bracket you fall into. Ask your financial representative and accountant about strategies to keep your taxable income at a reasonable level.

3. Consider converting a traditional IRA to a Roth IRA.

Given current historically low federal tax rates, you may want to consider locking in now and paying taxes while rates are low for most people. If you choose to convert later, you may be doing so at a higher rate.

4. Look closely at your 401(k) contributions.

You may want to consider making after-tax Roth 401(k) contributions, due to the low tax rates. Conversely, higher-income earners may want to focus on making pre-tax 401(k) contributions to decrease their taxable income.

5. Consider investing in municipal bonds.

The interest earned on municipal bonds is generally exempt of federal income tax and can help to diversify your overall portfolio.

6. Consider cash value life insurance.

In addition to protecting your family financially after you die, fixed cash value life insurance also can help you reach your broader financial goals while you’re living by helping you to diversify your assets.

7. Understand the benefits of inherited IRAs.

They can help your beneficiary take distributions over the maximum period allowed by federal required minimum distribution (RMD) rules, and give your assets the potential to continue to grow tax-deferred for your heirs.

8. Consider harvesting long-term capital gains.

Sell eligible assets while top tax rates for most taxpayers on long-term capital gains is just 15 percent.

9. Consider using unneeded life insurance and annuity contracts to pay long-term care insurance premiums.

The exchange may be free of federal income taxes and help preserve your estate and way of life. This is especially important to households hit by the 3.8 percent Medicare surtax and higher income tax rates.

10. Review your financial and estate strategies

Based on history and our debt situation, it’s likely federal (and state) income tax rates will increase sometime in the future. Review your financial and estate strategies and take appropriate actions now that estate law is permanent.

Taking the opportunity to take a closer look at the recent changes and how they might affect your financial future is critical.  Change seems to be constant and working with a financial services professional can help to ensure you’re adequately prepared no matter what happens in 2013.


The discussion of taxes in this piece is not intended to be comprehensive and is subject to change at any time. Tax law and regulations are complex and depend on individual circumstances. We make no guarantees regarding tax treatment – federal, state, or local – of life insurance or other assets.

Benchmark Financial Group, LLC and its respective associates and employees cannot provide legal, accounting, or tax advice or services. Work with your Benchmark representative, and as appropriate your attorney and/or tax professional for additional information.

Securities and Advisory Services Offered Through Client One Securities, LLC Member FINRA/SIPC and an Investment Advisor.


1 Municipal Bonds are subject to risks which include, but are not limited to, credit risk and interest rate risk. Some issues may be subject to state and local taxes and/or the alternative minimum tax. Any increase in principal value may be taxable. Bonds are subject to price change and availability. If you sell prior to maturity, you will receive current market price, which may be more or less than you paid. Interest generated from municipal bonds is generally expected to be free from federal income taxes. If the bonds are held by an investor resident in the state of issuance, state and local income taxes such as interest income, may be subject to federal and/or state AMT. Investing in municipal bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all income tax brackets. Please consult your tax advisor for detailed discussion on your specific situation. These and other risks are described in the Fund’s prospectus.

Investing in a mutual fund involves risks, including the possible loss of principal. The prospectus contains more complete information on the investment objectives, risks, charges and expenses of the fund, which investors should read and consider carefully before investing.
For additional information, please contact Benchmark Financial Group, LLC.

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Risk Tolerance and Retirement Planning

Posted by Katie Lightfoot

By Michael Canet, JD LLM, for FedSmith

Investments and planning for retirement are a daunting task and in this current economic climate, it is even more important than ever to have the necessary tools to make informed decisions.

If you are concerned that your current retirement plan may have too much risk or you are just plain tired of the fluctuations of the stock market and the risk associated with it, this article may provide you with some simple and straightforward guidance on how to navigate these turbulent times.

Let’s start with “the math” and explain the realities of loss.  If you have $100,000 invested into a mutual fund and that fund experiences a 20% loss, the resulting value on your next statement from the mutual fund company will show an account value of $80,000.

So, will a 20% gain get you back to even? No. Let’s crunch the numbers:

$80,000 x 20% = $16,000

$80,000 + $16,000 gain = $96,000 ($4,000 LESS than your original investment)

A 20% loss followed by a 20% gain does not get you your principle back.  In fact, to regain your original principal balance you will need to get a 25% return ($80,000 x 25% = $20,000; $80,000 + $20,000 = $100,000).

A recent Gallup poll indicated more and more American’s are worried about their investments.  As we get older, our investment time horizon gets less tolerant to market losses due to the amount of time it may take to get a significant double-digit return just to get back our own money.

Therefore, the best defense to market losses is often thought to be proper asset allocation and diversification but what exactly constitutes proper asset allocation?

Frequently investors think that they can reduce their risk through diversification.  As MorningStar suggests, they will invest their money among various asset classes in the stock market and feel adequately diversified.  Unfortunately, in today’s economic climate, all they really have done is purchase multiple funds all exposed to the same market risk that really does little to provide a cushion to the economic risks associated with investing in the market.

As a solution, many financial advisors take the traditional approach to reduce risk:  the old rule of thumb was to allocate your age to principal protected vehicles such as CD’s, Treasuries, EE Bonds, and Fixed Annuities.

By way of example, a 65 year old may put 65% of his retirement savings into one of the principle protected vehicles and the rest of their nest egg would be exposed to market fluctuations.

However, in a recent study from Putnam Institute, they put the old adage to test and they suggested that as you enter into retirement, no more than 5-25% of your assets be exposed to market risk if your goal is sustain your nest egg and the ability to make lifetime withdrawals.

Even Jim Cramer is quoted as saying:

“If you want to retire at sixty, I would put more than half of your retirement money in fixed income in your forties.  If you intend to work for years after sixty, I would put much less in those placeholders.  Your fifties begin the shift toward more fixed income.  And finally, in your sixties, unless, again, you keep working, fixed income should dominate.  Your opportunities to grow your money are now limited and the reward isn’t worth the risk.”

Source: Rick Bueter, The Great Wall Street Retirement Scam. May 2011.

Too often people make investments without clearly defining a goal for that investment.  The starting point is to understand the ultimate goal and then take the risk necessary to accomplish that goal.  Notice that it asks is the risk necessary.  That is different than what you may have experienced in the past where the question was “how much risk can you tolerate”.

As retirees near or enter into retirement, let caution take hold and review your diversification so that you don’t let a lifetime’s worth of savings be wiped out by a swift downturn in the market right before you need the money.

Michael Canet and his team at Prostatis Financial Advisors Group LLC have been providing comprehensive financial planning to their clients for more than 20 years. With a legal background in estate planning, a Masters Degree in taxation, and being a financial planner – Michael has the necessary skills to guide his clients into and through retirement by creating a simple-to-understand financial plan.

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What Happens to Your Federal Benefits If You Leave Before Retiring?

Posted by Katie Lightfoot

By John Grobe,  for FedSmith

What Happens to Your Benefits if You leave before you retire?  As many of us periodically think of leaving federal service for various reasons (the grass is greener or the boss from Hell are common reasons) this information is important and can help us make the right decision when or if the time comes.

You will get an automatic 31-day extension on your health insurance.  At the end of the 31-days you can convert to an individual policy or continue your current coverage for 18 months under temporary continuation of coverage (TCC).  Costs and coverage on an individual policy will vary.  The cost for TCC are your share + Uncle’s share + a 2% administrative fee.  In both situations, no physical is required and there is no ban on pre-existing conditions.

You can convert your life insurance to an individual policy.

If you leave your retirement funds on deposit, you will be entitled to a CSRS or FERS pension at a later date as long as you have at least five years of federal service.

Your annual leave, credit hour and comp time balance will be paid to you in a lump sum shortly after you leave.

Your sick leave will do you no good, unless you return to federal service.  If you return, you can have it re-credited.

You have many choices with your TSP.  You are not required to withdraw your TSP contributions and have the option of leaving them in the TSP.  You will still have the same ability you currently do to make interfund transfers.  You could also transfer the TSP to an IRA or a subsequent employer’s tax-deferred retirement plan.  If you choose the transfer option, make sure it is a direct transfer (directly from the TSP to the new plan) in order to avoid any withholding.

If you withdraw any money from the TSP before reaching the age of 59 ½, you will be subject to a 10% early withdrawal penalty in addition to taxes.

© 2013 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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Spousal Rights and Your TSP

Posted by Katie Lightfoot

by John Grobe    for FedSmith

What rights does your spouse have regarding your TSP account while he/she is still alive?  What are their rights to the TSP after your death?  This article will look at both situations.

Spousal rights to the TSP while you and your spouse are both alive vary significantly based on whether you are covered under CSRS or FERS.

The spouse of a CSRS employee/retiree will be notified of the employee/retiree’s withdrawal choice.  That’s it; the spouse has no further rights.  A CSRS retiree could empty out their TSP account and spend it foolishly and their spouse would have no legal say-so.

The spouse of a FERS employee/retiree has veto power over the employee/retiree’s withdrawal choice.  The spouse must give his/her written and notarized consent for any loan or withdrawal choice other than a specific type of TSP annuity.

Why the big difference?  There are two schools of thought as to why, and I suspect that the truth is somewhere between the two.

The first school of thought is that Congress assumed that the value of the TSP to a FERS retiree would be far greater than it would be to a CSRS retiree.  That was a fair assumption back in the late 80’s when TSP rules were being developed.  For a CSRS employee retiring in 1990, why give a spouse veto power over an account of just a few thousand dollars?  Of course, a CSRS employee retiring today might have well over $100,000 in their account.

The second school of thought is that representatives in Congress, which was composed exclusively of CSRS representatives at the time TSP rules were developed, were looking after their own interests.  They didn’t want their spouses telling them what to do with their future TSP accounts.

What happens after you die?  Following are beneficiary rules for the Thrift Savings Plan.

First and foremost, the TSP will not honor wishes expressed in a will or a trust.  They will only honor wishes expressed in form TSP-3, Designation of Beneficiary (available under “forms and publications” at http://www.tsp,gov).  If there is not a valid TSP-3 on file (i.e., no form was filed, or those named on the form pre-deceased the federal employee/retiree), the Thrift Board will follow the standard order of precedence for federal benefits.  The standard order of precedence for the TSP is:

  1. Surviving spouse;
  2. Child or children in equal shares;
  3. Parents;
  4. Executor or administrator of the estate;
  5. Next of kin based on the law of intestacy in the state that was your legal residence on the date of your death.

The information in the above paragraph and list does not mean that you cannot make your trust (or your estate) your beneficiary on your TSP-3 form.

Let’s assume that you have a valid TSP-3 on file.  How your beneficiary receives the money from the TSP depends on their relationship to you.  If your beneficiary is:

  • Your federally employed or retired spouse, he/she may roll your TSP account into his/hers, elect an inherited IRA or take the money out.
  • Your non-federally employed or retired spouse, he/she may take ownership of your TSP account, elect an inherited IRA or take the money out.
  • A non-spouse, he/she may elect an inherited IRA or take the money out.

Now that we’ve finished discussing beneficiaries, I have one question for you.  Do you know who your named beneficiary is for your federal benefits? For more information, see Should You Designate Beneficiaries For Your Federal Benefits?.

© 2013 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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Why Alzheimer’s should factor into your retirement plan

Posted by Katie Lightfoot

(BPT) – In an ideal world, you will retire and enjoy many years fulfilling your dreams and spending time with those you love the most. Your retirement years can be some of the happiest and most enjoyable years of your life. But while we all hope for the best outcome possible, it may be prudent for you to plan for the possibility that life may deal you a difficult hand.

Your retirement plan should address the very real possibility that a chronic illness could strike – whether it’s you, your spouse or another loved one that’s affected. For many retirees, there is a good chance the chronic illness they may face later in life will be Alzheimer’s disease.

Today, more than 5.4 million Americans have Alzheimer’s and nearly half of people 85 and older have Alzheimer’s. So, while living well past your retirement age is desirable to practically everyone, living a long life does come with challenges.

The financial costs associated with Alzheimer’s

Put frankly, Alzheimer’s is an expensive disease to deal with. According to the Alzheimer’s Association, payments for care associated with Alzheimer’s totaled $200 billion in 2012. That’s just for care related directly to treating the patient; it does not factor in lost wages or other expenses loved ones may incur when caring for the person with Alzheimer’s. And care received in a nursing home or assisted living facility can easily run $3,000 a month or more, according to U.S. Department of Health and Human Services.

The good news is that planning ahead can help put you in a position where you can afford chronic care. It should be part of any discussion you may have concerning life insurance and chronic care needs in retirement.

“A plan for dealing with the costs of chronic care needs to be implemented before you develop Alzheimer’s or another chronic disease,” says Dr. Robert Pokorski, chief medical strategist for The Hartford’s life insurance programs.

The Hartford offers a couple of optional add-ons to its life insurance policies that are designed to help retirees combat costs associated with chronic care. The LifeAccess Accelerated Benefit Rider(R), for example, allows an individual who becomes certified as chronically ill and satisfies the terms of the rider to access the death benefit in the insurance policy, and the benefit can be used for both medical and non-medical expenses.

You are not powerless in fighting Alzheimer’s

“It’s important to remember that while there’s no known cure for Alzheimer’s, living a heart-healthy lifestyle can help delay the onset of the disease,” Dr. Pokorski says.- He offers this “AGELESS” prescription for living a long, healthy life:

  • Attitude – see the glass as half full
  • Good medical care – see your doctor regularly
  • Exercise – it has mental benefits as well as physical
  • Learn – exercise your brain by learning new skills, playing games, reading, traveling, engaging in hobbies and interests
  • Eat right – eat a balanced diet to help maintain a reasonable weight, cholesterol level and blood pressure
  • Sleep – try to get at least eight hours each night
  • Socialize – spend time with friends and loved ones

No one wants to be diagnosed with Alzheimer’s, but lifestyle and financial decisions you make today can help you avoid many of the hardships that come along with it. For more information on life insurance policies and riders that can help you plan for a financially secure retirement, visit


The LifeAccess Accelerated Benefit Rider(R) is supplementary to the primary need for death benefit protection and is available at issue for an additional cost. Licensed health care practitioner certification of chronic illness must recur annually and must state the insured is in need of services under a plan of care that is likely to be needed for life. The Rider may not cover all of the costs associated with the chronic illness of the insured. Receiving benefits under the rider will reduce the death benefit available to the policy’s beneficiaries. Rider benefits may be taxable depending on the owner’s particular circumstances.- A tax adviser should be consulted.

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Expert Advice on the Do’s and Don’ts of Planning for Retirement

Posted by Katie Lightfoot

(BPT) – As with most things in life, it’s never too early to plan. And even if you are not at the doorstep of retirement, there are some critical do’s and don’ts related to retirement planning that anyone could benefit from.

We’re offering these tips with one goal in mind: helping Americans achieve a more secure retirement.

1. Don’t think of your home as a retirement asset.

Whether you are a new homeowner or near retirement, you should not think about your home as a retirement assets, for these reasons:

  • A home is, first and foremost, a place to live, and you will always need a place to live.
  • Your home is an inherently un-diverse investment.
  • A home may be subject to debt, which means it is less valuable than it appears and could be an ongoing expense when living in retirement.
  • Relying on a home as retirement savings tends to discourage other savings.

2. Don’t think maximizing investment return is a savings plan.

Maximizing investment return is an important focus of retirement planning. However, sometimes we fall into the trap of seeking outsized returns to compensate for our failure to save consistently over our lifetime. There is no substitute for disciplined and regular savings.

3. Do maximize Roth assets.

A Roth IRA or 401(k) can provide tax-free income, if you hold the account for five years and have attained age 59 ½. Roth IRAs also have the added benefit of being exempt from the tax rules requiring distributions starting at age 70 ½ .
Prior income limits on converting a traditional IRA or 401(k) to a Roth IRA were eliminated in 2010, which makes these unique retirement planning products more broadly available. Of course, converting a non-Roth retirement asset into a Roth retirement asset triggers recognition of the tax gain on the converted value.

4. Do have a retirement income plan.

Some financial professionals suggest 80 percent of your pre-retirement income is a good retirement income goal. With this goal you can then compare your expected monthly retirement income from Social Security and any pension plan to your target monthly retirement income amount. Any shortfall is the amount you will need to make up each month by tapping your other savings. Also consider an annuity contract from a life insurer to provide additional guaranteed lifetime income, which will both cover more of your target income and manage the risks that you invest poorly or live longer than expected.

5. Do plan for inflation and increasing health care costs.

Inflation and health care costs are twin traps that can erode the value of your retirement plan if you do not consider and plan for them. On strategy is to calculate a more modest income at the beginning of retirement and then increasing the income amount each year by the inflation rate.

6. Do maximize Social Security as insurance protection.

For most Americans the decision to defer Social Security payments as long as possible is an important action to ensure not outliving one’s assets. Social Security is typically a large source of retirement income, and its value is enhanced because it is government guaranteed and provides inflation-adjusted payments.

7. Do stress test your retirement plan.

The 2008 economic recession gave rise to bank ballouts and, in turn, the stress testing of banks to ensure ongoing viability. This thinking can and should also be applied to your retirement planning. For example, how would your retirement plan work if your investments grow at 3 percent a year instead of 8 percent? What if your income declines over time?

Stress testing your retirement plan could suggest you change your planning assumptions. You might decide to work longer, which reduces the number of years that you will need your retirement assets to support you. Other adjustment that you can make include saving more now, changing the risk profile of your investments, and buying products with a lifetime income guarantee so that you are less exposed to market risk and the risk that you will live longer than expected.

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1099R Statements, Replacement Copies, & Upcoming Changes

Posted by Katie Lightfoot

By:   Dennis V. Damp, host of

My 1099R arrived from OPM this week and annuitants should have also received their Notice of Annuity Adjustments, Form R1 20-53 (REV. 12/12), that outlines your new 2013 status and payments. The annuity adjustment statement includes the 1.7% COLA increase [2] and lists any changes to your insurance and elective payments.

Each year we receive many queries from federal and postal retirees that have not received their 1099R. If you need a replacement copy read the article titled 1099R Replacements [3] that I wrote last year on this subject. It will walk you through the process. For federal employees reading this column the 1099R replaces the W2 that you receive for your wages when still employed by an agency. Retirees must report their retirement income to the IRS and the 1099R shows how much federal tax you paid and how much of your annuity is reportable for federal tax.

Government continues to go paperless. Social security [4] payments must now be deposited into a bank account or the annuitant can elect to receive a debit card, you can’t buy paper savings bonds and soon OPM will be asking all annuitants and survivor beneficiaries to sign up for electronic 1099R and tax  withholding statements. All annuitants will be asked to visit their website at [5] and opt-in to receive electronic distribution of the 2013 1099R form. I can’t imagine that OPM will make this mandatory considering that many retirees don’t have computers to access this account.

In the meantime, if you haven’t accessed Services Online lately, you can prepare for the upcoming online elections and check on your annuity status plus much more. I use this site and it is helpful. You can change allotments, print out missing annuity statements, download replacement 1099R forms, change your mailing address, and elect state income tax withholdings and much more.

OPM advises users not to worry if you don’t remember your password. You can request a new one from the main page of Services Online. If you have set up your security questions and have an email address on file, you may choose to receive your password by email. However, if you don’t have an email address on file or haven’t set up your security questions your password will be sent by mail. Unfortunately, Services Online is currently unavailable for use by persons OPM has approved as “Representative Payees” for annuitants and survivors.

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Women Face Concerns About Reaching Retirement Goals

Posted by Katie Lightfoot

(BPT) – Women today exude confidence, juggling work and home life responsibilities seamlessly. One area where they are not so sure of themselves though is their ability to maintain their standard of living during retirement.

While women are taking greater responsibility for their own and their families’ finances, women earning more than $50,000 per year have become less confident about maintaining their lifestyle in retirement, according to a recent study. -Prudential Financial’s latest biennial study on the “Financial Experience and Behaviors Among Women” shows that a majority of women doubt their ability to achieve their retirement goals. The study also shows that with women in more control than ever of their finances, they face significant challenges when it comes to financial decision making, and admit to a lack of knowledge about financial solutions that can help them.

So what’s really behind this lack of financial confidence? Research points to a few culprits, including the country’s financial downturn. As many as 30 percent of women surveyed are struggling to make ends meet, a situation which can psychologically undermine even the most financially savvy among us.

The study also found a difference in the level of confidence between women younger than 35 and female baby boomers. Both groups have clearly defined financial goals, but younger women see themselves as novice investors and feel ill-equipped to make important financial decisions. Amid all this uncertainty, women of all ages are encouraged to begin taking baby steps toward planning for a secure retirement. The good news is some of the best confidence-boosters are fairly simple:

* Take stock. How much have you saved already? How long do you plan to work? Will having children impact your ability to save for the future? Getting a clear picture of where you are will help you see where you need to go.

* Protect yourself. If you are married, have you and your spouse established adequate financial safeguards such as life insurance or long term care insurance? While these conversations can be difficult, they are an important aspect of a solid financial plan.

* Do your homework. The Internet offers a wealth of educational materials to help you build confidence and knowledge when it comes to financial products and services. Make use of online tools and checklists to help you prepare for a meeting with a financial professional. Then take the next step and make an appointment.

Taking action can help boost your confidence and give you the tools you need to secure your financial future.

Contact us, we would be glad to help you with your financial future.

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‘Til Death Do Us Part, But How Do You Handle ‘In Sickness And In Health’?

Posted by Katie Lightfoot

Survey highlights gender differences in long-term care perceptions

(BPT) – Apparently “in sickness and in health” can mean different things to men and women. As the population ages and the need for extended health care increases, a recent nationwide omnibus survey of 1,005 American adults shows that men and women approach the issue of long-term care planning and insurance from different perspectives.

Those differences, according to the Thrivent Financial for Lutherans survey, could have a significant impact on their retirement years – and their family relationships.

Men vs. women

With women living longer than men, there should be some concern about who will actually foot the bill of the costs should a woman require long-term care. With married couples, the woman is more likely to need long-term care – she will likely care for her husband during his final days, and then may rely on long-term care herself since she is likely to outlive him.

Despite that, according to Thrivent Financial’s survey, males seem more versed in the topic of long-term care insurance than females. The survey indicated that men are more likely than women to own or plan to buy long-term care insurance. For example:

* 12 percent of females surveyed currently own long-term care insurance.

* 19 percent of males surveyed currently own long-term care insurance.

* 60 percent of females don’t intend to buy long-term care insurance in the future.

* 53 percent of men don’t intend to buy long-term care insurance in the future.

* 27 percent of both men and women surveyed plan to purchase long-term care insurance in the future.

In short, men seem to be coming around to the necessity of preparing for long-term care, while women appear to be slower to acknowledge the need.

The sandwich generation issue: stuck in the middle – but continuing to work?

When it comes to providing care, the differences between the sexes continue. When asked how they would care for both their children and one or both of their parents or another loved one at the same time, male and female respondents had differing opinions.

* Twenty-six percent of women reported they would quit their job to be the primary caregiver for a loved one should the need arise.

* Only 14 percent of men said they would consider that option.

* Thirty-three percent of men said they would rely on the savings and assets of those needing care and continue working.

* Only 21 percent of women would rely on the savings and assets of those needing care and continue working.

And what will you do in retirement?

Long-term care in retirement is an important issue facing both men and women but it is often overlooked during the retirement planning process. According to Thrivent Financial’s survey:

* Only 10 percent of women considered the possibility of caring for someone else while retired.

* Only 6 percent of men considered the possibility of caring for someone else while retired.

In contrast, 43 percent of women and 41 percent of men plan to retire fully and devote their time to travel, philanthropy and/or hobbies. Unfortunately, many don’t stop to consider the impact to those plans should the need for extended care arise. What will be given up to pay the expenses? Are family members trained to provide the type of needed health care? Who is willing to alter plans when push comes to shove?

“The disconnect between our expectations for a long, healthy and independent life and the reality of the chances of needing long-term care is staggering,” says Dean Anderson, product leader at Thrivent Financial for Lutherans. “Planning ahead is critical for both men and women, given the potential the consequences to the emotional, physical and financial well-being of your family.”

The moral of the story

Taking the time to discuss priorities and plans when it comes to future care needs can help alleviate worry and stress in relationships – and ensure that expectations are appropriately set and finances allocated. Women should be especially sure to consider all the benefits that long-term care insurance brings. For more information about long-term care, contact us.



About the Long-Term Care Insurance Survey
Data for this survey was collected via national omnibus survey by Ipsos. Interviewing took place between Aug. 31 and Sept. 4, 2012, among a national cross-section of 1,005 adults age 18+ of whom 49% were male and 51% were female.

Long-term care insurance may not cover all of the costs associated with long-term care. You are advised to review your contract carefully. The contract has exclusions, limitations, reductions in benefits and terms under which the contract may be continued in force or discontinued. Contract provisions and benefits may vary by state.

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Federal Retiree’s Contact List

Posted by Katie Lightfoot

The following list of key contacts, with links to comprehensive guidance, is available for your use.  The report provides contacts you need to plan for retirement and manage your annuity and benefits.  You may copy and distribute this report to all federal employees and annuitants.

OPM – Retirees must contact OPM to initiate changes to their benefits, change allotments or direct deposit, report an annuitant’s death, or to obtain duplicate 1099-R tax forms and request other services.

Web Address:,    E-Mail:  [email protected]

Toll Free 1-888-767-6738 (weekdays between 7:30 AM to 7:45 PM EST),

Fax requests to 1-724-794-6633, or

E-mail questions to: [email protected].

Call early in the day if possible to get through and you must have your retirement claim number or Social Security Number available.  OPM advises that “the internet is not a secure environment for transmitting personal information via email.  Replies via email typically take 15 days or more.

To report a death:  call toll free 1-888-767-6738 or our mailing address is:  U.S. Office of Personnel Management, Retirement Services Program, P.O. Box 45, Boyers, PA  16017-0045.  Be sure to include the full name of the deceased, date of death, retirement claim # and/or Social Security Number and include your name, address and phone number.

On-Line Services:  Federal retirees can sign up for online support, add or change allotments, purchase savings bonds, print out duplicate 1099-R statements, and view monthly pay statements at

You must obtain a user ID from OPM to access the site.  If you call OPM at 1-888-767-6738 they will send you a user ID and password to access their site.

For Direct Deposit forms and instructions visit:

For questions regarding:

Helpful Information:

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Government Employee Discounts

Posted by Katie Lightfoot

By:  Jason Kay for FedSmith

Government jobs come with many perks and perhaps one of the best perks is the amount of discounts that Government employees are entitled to. These discounts are offered by various companies and are meant to be sort of a thank you to all those who work for the Government. This includes military and non-military Government jobs and the savings that can be enjoyed can wind up being quite substantial.

There are many discounts that Government employees are entitled to. Some discounts are a specific percentage off and others are special offers that are far cheaper than the offers an average person would receive. Here is a small sampling of some of the welcomed discounts that are available to Government employees:

  • Geico: Geico offers discounts on auto insurance for active or retired Government employees that are GS-7 and above. The offered discounts are available in most states and the District of Columbia. Learn more about this program by visiting
  • No matter what a Federal employee is looking for travel wise, they can likely find a discount on it at This site specializes in finding special discounts for all military personnel and Federal employees in areas such as car rentals, condo rentals, vacation packages, hotel reservations, and more. Learn more about their services at
  • offers special discounted hotel rooms for Government employees. While the main page of the website focuses primarily on official Government travel, there are sections of the website that also offer ways to save when you are traveling for leisure. Learn more at
  • Apple: If your Government job requires you to use an iPad, iPhone, or any other Apple product, you are entitled to a discount. Apple offers a special discount for all Government employees on even their most popular products and more information can be found at
  • Dell: Dell is another large tech company that offers special discounts to Government employees. Dell Honors employees and retirees of the Federal Government and their families with up to 30% computer discounts and best price guarantee for members. Go to to receive your discount. To receive free 2nd business day shipping on personal purchases and get a 5% gift card back on everything you purchase in addition to your discount sign up for Dell Advantage at  and use Member ID CS25031666.
  • Carbonite: This online backup service protects your computer files by saving copies of them on a remote server. If you ever lose a file due to theft, accidental deletion, or anything else, just login and download the backed up versions. Learn more and receive a 10% Carbonite offer code at
  • Verizon: Verizon offers some Government employees a huge savings for all their cell phones, cell phone calling plans, and cell phone accessories. You can see if you are eligible to take advantage of Verizon’s savings at
  • Microsoft: Government employees can get discounts on some of the top Software that is offered by Microsoft thanks to their Home Use Program. Learn more about this special discount program at
  • American Auto Assurance: American Auto Assurance offers discounts on fully insured vehicle protection plans if you are a Government employee or current or retired military. Their service allows you to have a vehicle that is protected from break down even if the vehicle in question is soon to be out of warranty. Learn more the discount and get a free quote at
  • Absolute Security of America: Absolute Security of America is an authorized dealer of ADT and gives special packages to all Government employees seeking home security. These offers are not available to the general public and more can be learned at
  • Avis: If you are a Government employee or active military and looking to rent a car, then Avis has specials for you. Not only do they offer special discounted rates, but they also offer other specials like free upgrades and the like. Learn more about their specials for Government employees and military personnel at
  • Budget: Another rental car company that Government employees can take advantage of is Budget. Budget offers free upgrades, discounts like $25.00 off a week long rental, and even two free days of GPS use. Learn more about all the savings Budget has to offer at
  • Alamo: Alamo car rental service also gets in on the action and offers a wide variety of discounts and special services for all Government employees and military personnel seeking to rent a car. This includes unlimited miles, special leisure rates, free upgrades, and more. Learn more about these Alamo perks at
  • Pods:  Pods revolutionized self storage several years ago by making it portable. They bring a mobile container to your house and let you pack it at your convenience. Then they pick it up and store it for you or deliver it to your new home. Use a Pods promotional code and save 5% off local or one-way moves.

These are but a very small example of the many companies that offer discounts to Government employees. It should be noted that many companies will not openly advertise that they do have such specials so it always pays to ask if they do. While the savings may not be significant, any savings is good savings and if you are entitled to it as a Government employee, then you should get it.

© 2013 All rights reserved. This article may not be reproduced without express written consent from

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Your Unused FERS Sick Leave: How Much is it Worth At Retirement?

Posted by Katie Lightfoot

By Robert F. Benson For FedSmith

Until late last year, FERS employees in the twilight of their careers were faced with a dilemma: “What should I do about my sick leave?” If I use it up (“burn it”) during the year or so prior to retirement, I will be cheating. But if I am honest about it, then I will lose something of real value—the sick leave will simply    vanish at retirement. What should a FERS employee do?

Fortunately, Congress passed and the President signed into law, a bill to remedy this situation. (See President Signs Defense Bill: Includes Credit for Sick Leave and Abolishes NSPS)

FERS employees now receive credit for their sick leave, at retirement.

Here is how this works.

When a FERS employee retires, he or she receives 1% of his high-three salary for each full year of service, and one-twelfth of 1% for each month.

At retirement, the sick leave balance used for his annuity is reduced by half. Then, for each 348 hours of sick leave, one month is added to his service time. Beginning in 2014, the hours will no longer be reduced by half; instead, the employee will be credited at the rate of one month for 174 hours.

Here is an example:

  • Frank has a high-three of $74,287 and a sick leave balance of 1,292 hours. First, the 1,292 hours are    reduced by half, to 646.
  • The 646 is then divided by 174 and rounded down to the nearest whole number (646 / 174 = 3.71, rounded = 3).
  • This equates to three additional months of service, or 0.25% of the high-three.
  • One quarter of 1% times $74,287 = $185.71.
  • The $185.71 is then divided by twelve to arrive at the exact increase in Frank’s monthly annuity: $15.47.

A person with the identical figures as Frank, retiring on/after January 1, 2014, will see an increase of $30.94, because the sick leave balance will no longer be halved.

What happens to the “leftover” sick leave?

In Frank’s case this amounts to 124 hours. Unfortunately, it is lost, unless…if the leftover service time, combined with the leftover sick leave hours, is equal to or greater than one month, then Frank gets credit for one additional month.

How much is FERS sick leave worth? Not a great deal, but certainly better than nothing!

To do the above arithmetic quickly and easily, just go to and click number 7 on the menu. (Editor’s note: The program referenced will not work on all computer systems.)

© 2013 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

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Your MRA

Posted by Katie Lightfoot

By John Grobe for FedSmith

Your MRA, or Minimum Retirement Age, is based on the year in which you were born. A FERS retiree who was born before 1948 would have a MRA of 55. However, if born in 1970 or later, the MRA would be 57.

Here is a chart that demonstrates how this works:

Minimum Retirement Age + 10

Year of Birth MRA
Before 1948 55
1948 55 and 2 months
1949 55 and 4 months
1950 55 and 6 months
1951 55 and 8 months
1952 55 and 10 months
1953-1964 56
1965 56 and 2 months
1966 56 and 4 months
1967 56 and  6 months
1968 56 and 8 months
1969 56 and 10 months
1970 and later 57

The 5% penalty applies to FERS retirees who leave under the MRA + 10 provision.  FERS employees who are under age 62 and retire under other provisions face no reduction at all.

© 2013 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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Your Buyout Can Be Less Than $25,000

Posted by Katie Lightfoot

By Robert F. Benson for FedSmith

The buyout (VSIP, or Voluntary Separation Incentive Pay) is payable for resignation/retirement from specified jobs within certain agencies only with approval from the Office of Personnel Management (OPM). It is calculated the same way severance pay is calculated, with an important difference: severance pay can be as much as a full year’s salary, while the VSIP money is capped at $25,000.

To understand how the buyout pay can be less than $25,000, you need to know how it is calculated. The basic amount is one week’s pay for each of the first 10 years of Federal civilian (not military) service, plus two weeks’ pay for each year above 10. Each 3 months = one quarter of a year’s payment, with service rounded down to the nearest quarter.

Age bonus. The age bonus is 10% of the basic amount for each full year over 40, with the same 3-month proration (i.e., 2.5% of the basic amount for each quarter).

Here are four examples for an employee making $60,000 annually (weekly = $1,149.97):

Age Years Basic Amount Age Bonus Total
26 4.25 $4,887 0 $4,887
36 14.5 $21,850 0 $21,850
41 19.75 $33,924 $3,392 $25,000 MAX
46 24 $43,699 $26,219 $25,000 MAX

Note: one week’s pay is: (annual salary / 2,087) * 40

So, be advised: it is possible for the buyout to be less than $25,000.  Clearly, once an employee hits 40, the number increases faster!

To get a fast, accurate calculation, go to and click no. 2 on the menu.

© 2013 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

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What Happens to Your Federal Employee Benefits if You Die While Still Working?

Posted by Katie Lightfoot

By John Grobe for FedSmith

What Happens to Your Benefits if You Die While Still Working?

This is a question we do not want to ponder, as we all plan on living long after we retire. When it comes to Ben Franklin’s quote, “Plan like you’ll live forever; pray like you’ll die tomorrow”, we all tend to focus on the first part. However, it is helpful to know what will happen to our federal benefits, should we die while still employed.

Your health insurance will no longer do you any good, but it may be a great deal for your surviving spouse. If your spouse is enrolled with you on a self and family policy on the date of your death, he/she will be able to continue federal employee health benefits and Uncle will continue to pay his share.

Your life insurance will be paid to your designated beneficiary. If the amount of your insurance is $5,000 or greater, your beneficiary will not receive a check. Rather, they will receive a money market account and a checkbook for the account.

Speaking of beneficiary forms, do you know who your beneficiaries are? If you have any doubt, you may wish to check your Official Personnel Folder (OPF). The last thing you want is having your ex-spouse walking off with all you have saved over your career.

If you are married at the time of your death, the survivor benefits your spouse will receive are dependent on your retirement system. If you are CSRS, your spouse will receive a full survivor annuity (55% of what your annuity would be). In the unlikely event you have less than 22 years of service, your spouse will receive a “guaranteed minimum” annuity.

If you are under FERS, your spouse will receive a lump-sum death benefit of ½ of your final salary (or high-3, if higher) and $30.792.97 (in 2012). If you have worked ten years or more, your spouse will be entitled to a full survivor annuity (50% of what your annuity would be).

Under both retirement systems, if your surviving spouse remarries before the age of 55, he/she forfeits the survivor annuity.

Your annual leave, credit hour and comp time balance are considered “unpaid compensation” and will be paid to your designated beneficiary.

Your TSP will go to your designated beneficiary. Your beneficiary may either take the money all at once (paying all the deferred taxes at once) or spread it out over his/her lifetime (paying all the deferred taxes a little bit at a time). If your spouse is a federal employee, they may combine your TSP account with their own.

© 2013 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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USPS offers early outs, buyouts

Posted by Katie Lightfoot

The U.S. Postal Service said it would offer buyouts and early outs to the nation’s 21,000 postmasters.  USPS announced the voluntary early retirement authority and special incentive offer on May 9, the same day the Postal Service rolled out its plan to cut window hours at rural post offices as way to keep them open for business.
The buyout offer consists of a one-time, $20,000 cash incentive, payable in two installments in December 2012 and December 2013. Part-time postmasters who accept the deal will receive pro-rated payments on the same dates.
Postmasters who leave by voluntary resignation and those who separate under the VERA both are eligible for the cash incentive. Postal career executive service postmasters are not included in the offer. Postmasters will have until June 22 to accept the offers, and must agree to leave by July 31, USPS said.

The Postal Service said it would furnish a retirement kit and an annuity payment estimate to all eligible postmasters next week.

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Two Significant Changes to FERS

Posted by Katie Lightfoot

by John Grobe for FedSmith

Co-authored by Ehren Clovis and John Grobe

You wouldn’t expect the “Middle Class Tax Relief and Job Creation Act of 2012” to affect federal employee  retirement benefits, would you?  But it does.  In fact, it makes two significant changes to the Federal Employees’ Retirement System (FERS).

First significant change:  New employees who are hired on or after January 1, 2013 will  pay more for their FERS retirement coverage than current employees. The increase (2.3% across the board) will raise deductions for new regular employees from 0.8% to 3.1%, and deductions for new “special category” and Congressional employees from 1.3% to 3.6%.  Employees paying the new higher rate will be called FERS “Revised Annuity  Employees,” or FERS-RAE.

Thinking about returning to federal service after a break?  Be warned:  “New” employees include employees who are rehired with less than 5 years of creditable or potentially creditable FERS service as of 12/31/2012.  Employees with more than 5 years of creditable or potentially creditable service as of 12/31/2012 are exempt from the new FERS-RAE provisions and will remain under FERS at the old rates.

Example:  Eric was employed under FERS from December 1997 through June 2005, then left federal service for a private sector job.  If Eric returns to federal service in 2013 or later, he will be covered under FERS, not FERS-RAE, because he had 5 years of creditable FERS service as of 12/31/2012.  But if Eric had left in 2001, he would be under FERS-RAE when he returned.

“Potentially creditable service” is service for which there are no funds currently in the FERS system, but for which redeposits or deposits can be made to FERS.  This includes FERS service for which the employee contributions have been withdrawn (aka “redeposit service”) and service for which FERS deposits can be made (aka “deposit service,” including Peace Corps and VISTA volunteer service, most Temporary service before 1989, and most active duty military service performed while on leave from a civilian federal position).

Are you thinking that FERS-RAE employees will get a larger retirement benefit, since they are paying more?  Think again: there’s no change in the way most retirement benefits are computed (see the next paragraph).

Second significant change:  The new law changes the way pensions are computed for “new” Members of   Congress and Congressional staffers who begin service in 2013 or later.  Their pensions will be computed the same way as those of regular employees.  They will no longer receive a higher benefit similar to that of “special category” employees.  Yes, that’s right: they’ll be paying more and getting less than before.

One thing federal employees can be grateful for is Congress’ penchant for grandfathering current employees and shielding them from negative changes to federal benefits.  Those who are employed on 12/31/2012 and rehires who have at least 5 years of creditable or potentially creditable FERS service are exempt from the new provisions.  This should give some small comfort to current federal employees who are concerned about other possible changes (e.g., high-five, future contribution increases, etc.).

More information about the new FERS provisions can be found in the Office of Personnel Management’s Benefits Administration Letter 12-104, dated 10/3/2012.

Ehren Clovis recently retired after a career in retirement and benefits with the Bureau of Public Debt.  She provides individual retirement counseling (“Federal Benefits on Call”) for federal employees.

© 2013 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.


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The ‘Fiscal Cliff’ and Your Paycheck

Posted by Katie Lightfoot

by John Grobe for FedSmith

What impact will the recent “fiscal cliff” legislation have on you as a federal employee?  Will you be better off hanging around or retiring?  Should you dust off your résumé and look for work elsewhere or should you just hunker down and ride it out?  Is the brouhaha surrounding the resolution of the manufactured fiscal cliff crisis much like what Shakespeare’s Macbeth called “…[a] tale told by an idiot, full of sound and fury, signifying nothing.”?

There is no one-size-fits-all answer to these questions (except perhaps the last one).  Employees at different stages of their careers will make different decisions.  In this article we will look at the changes one at a time.

First we’ll look at the federal income tax increase (from 35% to 39.6%) on those with incomes over $400,000 (single) and $450,000 (joint).  I bet you can count the number of federal employees or retirees (excluding members of Congress) who are affected by this on the fingers of one hand.  According to OPM, the average federal salary in 2010 was $76,231.  With salaries having been frozen since then the average hasn’t increased by much.  CNN tells us that only 0.6% of the population will have incomes high enough to be hit by this tax increase.

The limitation of itemized deductions for those with incomes over $250,000 (single) and $300,000 (joint) will affect a few additional employees.  You would have to be looking at a highly paid fed with a highly paid spouse to reach an income of $300,000.  The vast majority of federal employees will not lose any deductions.  Even fewer retirees will be affected.

One change that will hit federal employees is the end of the “payroll tax holiday.”  Employees who have Social Security deducted from their salary (FERS and CSRS Offset) will now be paying the normal 6.2% Social Security tax, rather than the 4.2% they have paid for the last two years.  Our average federal employee will have about $58 more withheld for Social Security each pay period.  The payroll tax holiday was called a “holiday” for a reason; it was not designed to be a permanent reduction in the amount that workers pay in Social Security taxes.

The elimination of the payroll tax holiday will not hit retirees (unless they work during retirement), because payroll taxes are not taken from pension income (CSRS or FERS), TSP payments, or Social Security.

The permanent inflation indexing of the Alternative Minimum Tax should help many middle and upper income federal employees and retirees.

The making permanent and indexing of the $5,120,000 unified exemption for the Federal Estate Tax will impact few feds (except perhaps some of the aforementioned members of Congress).

What other items are changing for employees and retirees going in to the New Year?

  • Health insurance premiums are going up; however they go up equally for employees and retirees.

It does not appear that the Round 1 decisions made in DC over the New Year’s holiday will have much effect on federal employees’ decisions as to whether they should remain a federal employee, retire, or seek work elsewhere.

But wait! The main thing that was done by the agreement on the “fiscal cliff” was to postpone decisions on many items, including some that threaten federal employees and their benefits.  As a result, the one thing that remains the same is uncertainty about federal pay, benefits and retirement.  Some of the major items that can affect federal employees and retirees and still remain outstanding are:

Will Congress overturn the 0.5% pay increase for current federal employees?  The House has already done so.  The Senate is not expected to agree.

  • Will retiree’s COLAs (as well as all other inflation indexed federal benefits) be computed using a less generous “chained” Consumer Price Index?  President Obama and Speaker Boehner agreed on this a couple of years ago, but it was not implemented then due to lack of agreement on other issues.  Although it was part of the President’s plan in the Round 1 discussions, it did not clear the Senate.
  • Will retirement contributions be raised for current employees?  There is still some sentiment to do so.
  • Will the dreaded high-five ever happen?  It has been threatened for decades and was backed by both House Republicans and the Simpson-Bowles commission.

Federal employees and retirees cannot sit back and assume they got off scot-free.  They dodged a haymaker in the first round, but their enemies in Washington will come storming out of their corner when the bell signals the second round; and it looks like the second round will be upon us soon as discussions over the debt ceiling commence.

Will all of these items get resolved in Round 2 or Round 3?  Don’t bet on it.  It doesn’t appear that any side in the political battle has the power to deliver a knockout punch.  We may be in for a fifteen-rounder with a split decision.

© 2013 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.


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