Benchmark Financial Group

Preparing for a Financial Emergency

Posted by Gary Raetz Preparing for a Financial Emergency

We spend a lot of time blogging about the importance of planning for retirement. But there is another part of financial planning that is just as important, and deserves more attention. What would you do, in the event of a financial emergency?

According to the Federal Reserve’s latest report on the well-being of American households, 18 percent faced a financial crisis in 2015. The reasons for money-related emergencies varies, but were listed as following:

  • Medical crisis (36 percent)
  • Loss of job (25 percent)
  • Reduction of work hours or pay (18 percent)
  • Spouse or partner lost their job (13 percent)
  • Spouse or partner lost work hours or pay (12 percent)

As far as reasons for financial problems go, these situations probably don’t surprise you. The bigger picture, though, is that most of these situations can happen to anyone. That’s particularly true for medical emergencies.

How prepared are you for a financial emergency? The report also compiled data on emergency readiness. Just over half (54 percent) of respondents said that they could easily cover an unexpected expense in the modest amount of 400 dollars. These respondents said they could pull the cash from their checking or savings accounts, or put the charge on a credit card and pay it off the following month.

However, 47 percent of respondents said they would be forced to sell personal possessions,or borrow the money. And remember, we’re just talking about 400 dollars here! The types of problems listed above would likely make a much more significant impact on your finances.

So how do you prepare? You can’t always guarantee that a crisis won’t strike you, but taking these steps can help you weather a storm relatively unscathed:

  • Get debt under control – using a debt counselor, consolidation loan, and so on
  • Track your spending for a month or two – see where your money is really going
  • Cut expenses where you can. Refinance debts, where beneficial
  • Devote some of your income to an emergency savings fund. Save any windfalls (like your tax refund) instead of splurging

If you can establish an emergency fund, you can prevent having to borrow money if you get into a tight spot. Even better, you won’t feel tempted to raid your retirement fund, which could negatively impact your long-term future. For more help with financial planning, give us a call and we’ll be happy to help you.

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Should You Keep Your FEHB in Retirement?

Posted by Gary Raetz Should You Keep Your FEHB in Retirement?

Federal employees have some of the best benefits around, from your retirement system to your Federal Employee Health Benefits (FEHB, for short). Unlike many private sector employees, you can even keep your FEHB after you retire! That’s an incredible value, considering how most other workers have to wait until they’re eligible for Medicare to retire, or find some way to provide themselves with health insurance.

Of course, like anything else, keeping your FEHB in retirement is subject to some rules. Luckily they’re pretty straightforward:

  • You must be “entitled” to an immediate retirement when you leave your position
  • You have had FEHB for the five years immediately preceding retirement (or you have FEHB less than five years, but did enroll immediately when you became eligible)

There are only two basic requirements, but that first one is a bit confusing, isn’t it? To clarify, pay special attention to this rule if you’re considering a postponed or deferred retirement. If you opt for deferred retirement, you can’t keep your FEHB. But if you separate with a postponed retirement, you can. Yes, it’s complicated, so schedule an appointment with us to discuss your FEHB before opting for retirement.

So why do many federal employees choose to keep their FEHB? It’s simple, really:

  • The federal government will pay for 72 percent of your premiums.
  • The FEHB is one of the best group health insurance plans on the market, because covering a large group of people usually keeps premiums low and benefits high.
  • You have more flexibility in your retirement planning; you don’t have to purchase your own health insurance plan, with rates that can vary wildly, or wait until you’re 65 and eligible for Medicare.

These are all terrific benefits, but not every situation is the same. For more information on keeping your FEHB after you retire, call us to set an appointment. We can discuss all of your retirement plans, keep you in the loop on changes to the federal employee retirement system, and help you make the decisions that work best for your situation.

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Have You Set a Retirement Date Yet?

Posted by Gary Raetz Have You Set a Retirement Date Yet?

In the retirement planning world, one of the most common questions we hear is, “How much money do I need to save before I can retire?” However, an even more pressing one might be, “When can I retire?” After all, retirement sounds like a lot more fun than a daily commute to a boring office. Most people would retire right now if they could!

Actually, these two questions are closely entwined. Answer one, and you can get a pretty good clue that helps you decipher the other. So let’s take a look at your retirement plans so far, and see if we can use that information to help you determine a retirement date.

Your retirement dream. Are you planning to stay right where you are, in your old family home? Or do you hope to sell it and live out your retirement dream elsewhere? Are you eyeing any expensive hobbies or travel, or are you more content with community organizations and your weekly bridge club? Deciding what you want to do in retirement, and where you want to do it, can help you put a price tag on your dream.

The price tag. Now that you can envision your ideal retirement, how much will it cost? You might have heard the common rule, that retirees need to generate about 80 percent of their current income in order to continue their current lifestyle. But what if your lifestyle will vary considerably in retirement? You might need more money, or maybe you can get by with less. This information can help you decide how long to continue working.

Your health. If you decide to keep your Federal Employee Health Benefits, the government will pay a significant portion of your premiums. But remember to budget for the rest, and keep in mind that health problems are more common as we age. That means your out-of-pocket expenses, for things like medication and special equipment, will also rise.

These are just some of the things you should consider when setting a target retirement date. For more advice on financial planning, give us a call and we will be happy to help.

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10 Ways to Overhaul Your Budget

Posted by Gary Raetz 10 Ways to Overhaul Your Budget

As a federal employee, you enjoy one of the best retirement systems in the country. Once retired, you will be able to access funds from Social Security, your annuity program, and your Thrift Savings Plan (TSP). The first two tiers of your retirement plan are fairly “automatic” but of course the funds in your Thrift Savings Plan depend upon your personal decisions. This gives you a lot of power to determine just how much retirement income you will actually enjoy one day.

Of course, saving for the future requires a bit of discipline, and it can be difficult to carve some extra cash out of your budget.

Use these ten methods to save a bit of cash now, and put that savings toward your future.

Spend less on prescription medications. Generic medications are held to the same strict FDA standards as name-brand ones. But of course, you should talk to your doctor to be sure switching to generic is right for you.

Learn to haggle. Sticker prices on items like appliances and cars are almost always negotiable. You can even ask for secret coupon codes on smaller items like clothing.

Buy used. Buying new products means you’re paying for a huge markup. Before buying any significant items, check out Craigslist or other online ads for deals on gently used goods. Sometimes you can even get brand-new items, in the box, at a steep discount.

Buy in bulk (when it makes sense). Sometimes bulk purchases are a waste. Are you really going to drink five gallons of milk this week? But warehouse clubs and even Amazon can save you a lot of money on non-perishable goods, so be sure to shop around for the best deal.

Start a neighborhood co-op. Don’t purchase an expensive item that you will only use a few times per year. See if your neighbors would like to join a co-op, where you share the cost of landscaping equipment or other pricey purchases.

Don’t upgrade right away. When companies release a new tech item (like phones or TVs), the initial markup is high to help them recoup the cost of development. After a year or two, the price will drop dramatically, so wait it out unless you urgently need that item.
Research before purchasing. Before you go shopping, comparison shop online. You can find the best deals and coupon codes before setting foot in a store.

Make good use of your credit card rewards program. Research your benefits thoroughly, and use the right card for each purchase that you make. As long as you pay the balance by the end of the billing cycle, interest won’t accrue, and you can earn up to five percent cash back on everyday purchases like gas and groceries. Just remember to stay within your monthly budget!

Saving money is only the first step. Now put that money you’ve saved into your Thrift Savings Plan, and you can enjoy a more secure retirement income. Plus, now you’ve developed great habits that will help you as you transition to a fixed income!

For more information on budgeting and saving for the future, give us a call. We can help you develop a workable budget now, so that you can better prepare for retirement.

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5 Ways to Simplify Your Finances

Posted by Gary Raetz 5 Ways to Simplify Your Finances

Modern life seems more fast-paced and hectic than ever. Many of you are longing for more simplicity in your lives, so that you can relax more and worry less. One particular area of concern is probably your finances. It’s tough to keep track of everything, between savings, budgeting, fees and more. Try these four methods to simplify your finances.

Consolidate accounts. Are you holding on to two, three, or more accounts? Doing this can make it more likely that you will overdraw one of them, or overlook a card theft. You can save yourself a lot of headaches and heartbreak by consolidating those accounts. Choose a bank that offers online banking, so that you can check your account from home or on the go.

Go paperless. If your bank and other financial institutions offer digital storage, there is no need to keep paper copies of account statements. You can unclutter your desk, and feel refreshed, by getting rid of all those piles of paper.

Use cash more often. Withdraw a set amount of cash each week or each month, to be used for everyday purchases. This is a great way to get yourself on a budget and avoid impulse purchases. Using a debit or credit card less often lowers your risk of theft, too.

Automate your paycheck and bill payments. Visit human resources and get your paycheck automatically deposited into your bank account each pay period. Now, take a look at when those pay periods fall, and automate as many bills as you can. Sign into your mortgage provider’s online account and have your house payment automatically deducted from your bank account each month. Do this with as many bills as you feel comfortable paying automatically, and you can avoid frustrating late fees and a lot of check writing.

While you’re at it, automate your Thrift Savings Plan contributions too! That way you don’t have to think about retirement planning each pay period. You can just revisit your plans every year or two, to make sure your savings are on track to meet your retirement goals.

These five steps can help you free up more time, and lower your stress. But remember to meet with us regularly to continue our retirement planning contribution, so we can help you keep your saving and budgeting plans on the right track.

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Five Smart Ways to Leverage Your Tax Refund

Posted by Gary Raetz Five Smart Ways to Leverage Your Tax Refund

Each spring, millions of taxpayers are thrilled to receive a tax refund. But this isn’t free money; you worked hard for it! Keeping that fact in mind, does it make sense to blow it on something frivolous? Or would it be smarter to reinvest it in ways that will pay off in the future?

The following five suggestions can help you leverage your tax refund, to get you in even better financial shape in the future.

Donate to charity. Yes, it feels good to help other people, but you’re also helping yourself! Next year you can claim a charitable contribution deduction on your tax return, and lower your tax liability. Of course, this only works for those who itemize their taxes.

Pay down high interest debt. No one wants to enter retirement carrying a lot of debt. For that matter, none of us want to enter next year carrying a lot of debt! If you decide to pay down credit cards or other types of debt with your tax refund, choose the account with the highest interest rate. That will save you the most money.

Boost your emergency fund. If you don’t have a lot of debt, it might be smarter to put your tax refund in a savings account. If you have a “rainy day” emergency fund on hand, you won’t have to pull out the credit card (and rack up a big debt due to interest) when life pulls its unexpected little tricks.

Use it to make more money. Could you get a promotion (and a raise) if you learned additional skills? Put that tax refund toward the classes you need! Have you thought about starting a home-based side business, but need a little start-up cash? Now’s your chance!

Put the money in your Thrift Savings Plan. Set aside the money for retirement. It will potentially earn interest if you invest it well, therefore serving you even better in the future.

Of course, it can be difficult to decide which of these options is best for you. Give us a call, and we can review your financial situation. Then, together we can make a plan, using your tax refund and other available opportunities, to get you on a better track to a secure financial future.

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Retirement Planning Doesn’t Have to Be a Drag!

Posted by Gary Raetz Retirement Planning Doesn’t Have to Be a Drag!

Ask someone to picture themselves in the distant future, and they will find it difficult to do. Sure, we can think about this summer’s vacation or maybe next year’s move to a new house, but most of us can’t really see ourselves ten or twenty years from now.

Research has demonstrated that when we try to do this, we see our future selves as basically a stranger. So it’s no wonder that retirement planning can feel like a drag. Who wants to save money for a stranger?!

But of course, we can certainly remember ourselves, looking backward. So one day, when you’re retired, you might look back at Current You and feel a bit frustrated with yourself. You might wish you had taken retirement planning a bit more seriously!

Set goals. Ask yourself what you want to do when you retire. Is it travel? Settling down at the beach? Pursuing a particular hobby or even starting a side business? You need to picture the future before you can put a price tag on it.

Identify your options. As a federal employee, you will receive Social Security, payments from your Basic Benefit annuity, and distributions from your Thrift Savings Plan. You automatically pay Social Security taxes and a contribution to the annuity plan, but what about your TSP? Are you contributing enough? How much do you need, anyway? How is it performing? We can help you answer these questions, and more.

Devote some time to retirement planning. The average person spends about five hours planning a vacation. But when it comes to retirement planning, we just check a few boxes on some forms at work, and want to forget about it. But since retirement will encompass a large part of your life, you should devote significant time to planning it. Give us a call, and we can help you chart a course for your future.

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5 Financial Planning Steps to Take in March

Posted by Gary Raetz 5 Financial Planning Steps to Take in March

The birds are chirping, flowers are blooming… it’s time for spring cleaning! Most of us get that urge to scrub the baseboards and clean out our closets in the spring, but there’s another important area of your life that deserves some attention. While you’re getting organized, take these five steps to get your financial future under control.

What you should keep. As you go through your files, hang onto things like bank statements, insurance documents, and receipts from the past year. Keep original loan documents, vehicle titles, and household warranties. And of course, hang onto tax returns from the past seven years.

What you should toss. If you’ve renewed insurance policies, you don’t need older copies of the agreement. Just the current policy will suffice. You can also toss bank statements from more than a year ago, especially if they’re available online. Also get rid of ancient tax returns from more than seven years back, and documents pertaining to items you don’t even own anymore.

Create a special folder for certain items. Your birth certificates, Social Security cards, and estate planning documents should go in this folder. Keep it in a secure place, and make sure your lawyer and perhaps one other trusted person have access to your estate plan.

Since you’re spring cleaning…. Walk through your home with a smart phone, and take video of your valuables. Remember to film inside closets and drawers, also. Make a written list of valuable items, including how much they’re worth, and file this list and a copy of the video in a secure place. If you ever need to file a homeowner’s insurance claim, the process will be much easier.

Budget for this summer’s vacation. Early planning can help you score a better deal on a beach condo, airline tickets, or pretty much any travel-related expense. Set a budget for the entire trip, and figure up how much money you need to set aside from each paycheck. If you plan well in advance of the vacation, you won’t feel tempted to put it all on a credit card when the time comes.

File your taxes. You have until April 18 to file your federal income tax return, but waiting until the last minute can cause you to rush and overlook important deductions. While you’re spring cleaning, set aside any receipts or statements that might pertain to your tax return. That way everything is ready to go when you visit your accountant.

For more financial planning advice, remember you can always give us a call! We can help you establish long term financial goals and make a plan to accomplish them.

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8 Terrific Perks for Retirees

Posted by Gary Raetz 8 Terrific Perks for Retirees

When we talk about retirement planning, we often discuss how you should save enough money to retire comfortably. After all, many of us can expect to live off our retirement savings (and Social Security) for twenty years or more! That can seem like a hefty financial burden. But there is also some good news in store for retirees: You can access many great perks and resources at around age 65. Some of the following retiree benefits might reassure you that the retirement years aren’t always about scrimping and saving.

Museums, symphonies, and more. Almost every museum around the US offers a senior discount, and even free days for those over 65. If you want to take in an opera, ballet, or symphony orchestra, you can probably get discounted tickets in any city.

National Park Service. Once you reach age 62, you can purchase a lifetime pass to all National Parks for only 10 dollars.

Airline tickets. Many airlines offer discounted tickets for seniors. However, they might be subject to certain travel dates and times – often not a problem for retirees who aren’t fitting a vacation into their work schedule.

Utilities. Some cable and phone companies offer a discount to seniors, especially to AARP members. But you have to call and ask about them; they aren’t widely advertised.

Public transit. In many cities, seniors can access discounts on public transit passes for the bus or subway system. Sometimes these discounts amount to as much s 50 percent, and in smaller communities, transit might be free!

Education. If you want to keep your mind sharp, learning something new is the way to go! Every state has waivers that provide reduced or even free college tuition to seniors.

Retail discounts. Many retail stores, even grocery stores, offer discounts of 5 to 10 percent for shoppers, once they reach a particular age. It ranged from 55 to 65, depending on the store, and the discounts are usually offered on certain weekdays.

AARP member discounts. If you join the AARP, you might be eligible for discounts on everything from auto insurance to car rentals to hotel stays. Remember to ask about this discount everywhere you go. You will be surprised!

Of course, the best pathway to a stable retirement still includes early planning and regular reviews of that plan. Make an appointment with us to review your plan, and we can help you devise a retirement strategy that works for your lifestyle and budget.

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Are You Considering a Move in Retirement?

Posted by Gary Raetz Are You Considering a Move in Retirement?

Unlike some industries, federal employees can be fairly well tied to a specific community during their working years. Your presence is needed at that particular location. But as you dream about retirement, you might find yourself hoping to reinvent your life. Once you stop working, and begin drawing your retirement income, you could conceivably live anywhere you want! So where will it be?

As you plan for your retirement, it’s a good idea to ask yourself whether you want to stay put, or move somewhere else. This can aid you considerably in determining your future budget. If you’re “shopping” for a retirement location, you might be interested to know that the AARP recently conducted a poll of current retirees. The respondents listed the following community features, which significantly impact satisfaction with their locations:

  • It’s pedestrian friendly (some retirees say that driving becomes difficult)
  • There is a bus stop nearby their home
  • The community offers transportation options for seniors and disabled residents
  • There is a strong police presence in the area, and a low crime rate
  • A favorite grocery store, church, pharmacy, park, and hospital are all located within one mile of home

Naturally, some retirees are already heavily invested in their current towns. They have family and friends nearby, or they are happy with medical care providers. Even so, you still might prefer to move within your own community, for improved access to the above features.

Another important consideration is your home’s upkeep. Will you be able to keep up with yard work and housekeeping? In the future, you might hire a service to help with those chores, and you need to plan your budget accordingly. You might prefer a smaller home at that point, to save money on upkeep and repairs.

Since housing is the greatest expense for most people’s budgets, it’s important to consider how your living arrangements will affect your retirement. As always, make regular appointments with us to discuss your goals as they change, and we can help you make adjustments to your financial plan.

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Do You Talk to Your Spouse About Money?

Posted by Gary Raetz Do You Talk to Your Spouse About Money?

Most of us recognize that budgeting, careful spending habits, avoiding excess debts, and regular conversations with a skilled advisor are keys to financial health. But even if you’re doing all of these things, you might be overlooking something else that is crucial to your long-term success: Are you talking to your spouse about money?

After all, the two of you share a bank account, along with goals for the future. But some people experience extreme difficulty talking about money with their spouse. Since couples who regularly discuss money usually report greater feelings of happiness in their relationships, it’s important to learn how to approach this delicate topic.

Plan ahead. Don’t bring up a serious financial talk without planning ahead of time. Focus on a few key points that you want to discuss, and plan the talk at a relaxing time. Keep in mind that you and your spouse might have different backgrounds, and therefore differing views on spending and saving. Approach the conversation with these differences in mind, and focus building a bridge between your viewpoints.

Start by setting goals. Begin the conversation by discussing the goals you both share. Then you can transition the talk into figuring out how to meet those objectives.

Try to agree on spending limits. Many successful couples say that they have agreed to discuss purchases over a specific dollar amount, before making them. You might agree on a limit of $100 or $500, or something else, depending on your budget.

Be completely honest. In a nice way, of course, have this talk without glossing over difficult details or hiding anything. You both need to know exactly where you stand on financial matters.

Avoid derailments. It can be easy for discussions to become derailed into side topics or insignificant details. Agree ahead of time to discuss only a few important topics.

Bring in a professional. Some challenges require professional assistance, and there’s no shame in that! A marriage counselor can help if money discussions frequently dissolve into a fight. A debt counselor can help you devise a strategy to get out of debt. And, of course, a financial advisor can help with planning for the future. Give us a call, and we can help you and your spouse identify future goals, and make a plan to work toward them together.

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Get Out of Debt Before You Retire

Posted by Gary Raetz Get Out of Debt Before You Retire

Federal employees enjoy one of the greatest retirement benefits packages in the country. After your years of service are finished, you will hopefully have enough retirement income to live securely for the rest of your life.

However, your spending is also a big part of that equation. Money only goes so far, and if you carry a large debt load into retirement, you could find yourself dissatisfied with your lifestyle. That’s why paying off your debts, even if you have to work a few more years, is one of the keys to a successful retirement.

Your mortgage. If you’re like most people, your mortgage is your biggest debt. Paying it off before you retire could give your budget significantly more room. There are a variety of strategies to accomplish this goal, such as putting your income tax refund toward the principle every year, paying extra each month, or refinancing to a mortgage with a shorter term.

If you can’t pay off your home entirely before retirement, selling it and paying cash for something smaller and less expensive is another good plan. You might prefer something with less yard work and housekeeping, anyway.

Credit cards. After mortgages, credit cards are the largest source of debt for most American households. If you only pay the minimum payment each month, it could take decades to pay off the balances! A low-interest loan might be your best bet to pay them all off before you retire. Just remember to stop using credit cards, except in emergencies, or you might run up another large balance.

Auto loans. Once you retire, you won’t be making your daily commute anymore. You might consider whether you and your spouse really need two vehicles. Switching to just one car payment – or none at all, if you plan carefully and pay off a reliable vehicle before retirement – will free up hundreds of dollars per month.

Medical debt. It’s important to pay down debts before you retire, but when it comes to medical debt, this is something to watch throughout your retirement years as well. Remember that you can often negotiate your medical bills, so make phone calls before you write any checks.

For more information on your retirement benefits and managing life on a fixed income, give us a call. We work with federal employees to him them plan successful retirements.

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5 Common Mistakes That You Might Regret in Retirement

Posted by Gary Raetz 5 Common Mistakes That You Might Regret in Retirement

Retirement planning poses an enormous challenge for most of us. It can be difficult to predict how long we will live, how much money we need, and all of the potential pitfalls that can cost us money in the future. And while it’s true that you don’t have a magic crystal ball that shows you the future, we do know that certain actions are almost always mistakes that cause major regret in the retirement years. Watch out for these five mistakes now, and you’ll be less likely to suffer second thoughts later.

Relocating. Many retirees are thrilled with their relocation, but others view the move as a mistake. The difference is probably the amount of time you spent analyzing your move. Is it too far away from children and grandchildren? How is the cost of living in the area? What about state taxes on retirement income? Will the weather really match your expectations? Many retirees move south, expecting warm weather year-round, and are shocked to discover that ice storms are no more fun than snow storms!

Claiming Social Security benefits too early. If you claim your Social Security benefits before full retirement age, your checks will be permanently reduced by as much as 25 percent. It can be tempting to go ahead and claim benefits and retire at age 62, but if you wait just a few more years you’ll earn your full benefit amount, plus you have four more years to pay off debts or stash money in your TSP.

Financing college over retirement. If you have kids, you understandably want them to have the best of everything. That includes the best education. But there are a variety of options to fund college tuition, such as scholarships, grants, loans, and work study. But there’s only one way to fund your retirement. This is one situation where you have to prioritize your own needs above those of your children.

Investing in risky schemes. Remember the old adage: If it seems too good to be true, it probably isn’t true. It can be tempting to multiply your retirement savings by investing in a high-risk scheme, but too many times we’ve seen people lose everything. Shoot for steady, dependable, and relatively safe growth instead.

Procrastinating on saving. You hear it all the time, but we should all start saving for retirement at the beginning of our careers. Over thirty or forty years, those savings can really multiply. But of course, most of us fail to do that. Start stashing as much as you can in your Thrift Savings Plan (TSP) every year, and try to get caught up. You’ll be grateful for this part of your retirement package one day.

These are just some of the pitfalls of retirement planning. As you can see, potential mistakes are hiding around every corner! But retirement planning can be easy with expert guidance by your side. Give us a call, and we can help you plan for a secure future.

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6 Ways to Stretch Your Retirement Income

Posted by Gary Raetz 6 Ways to Stretch Your Retirement Income

As a federal employee, you will someday enjoy one of the best retirement system out there. And like everyone, you probably dream of your retirement, looking forward to the freedom you will feel when you leave your working years behind.

For some people, however, no matter how great their retirement system is, retirement doesn’t feel nearly as “free” as they imagined. That’s because transitioning to a fixed income can come along with its own challenges and restrictions. If you’re eyeing your retirement date sometime in the next decade, more or less, then start implementing these six steps now. You will find that they help you stretch your retirement income a bit farther, so that you can enjoy your retirement more.

Plan for healthcare needs. After housing, healthcare is the largest expenditure for most retirees. Since unexpected events can have a major impact on your budget, make sure you’re prepared for them. Setting aside some cash in a savings account can help to cover large co-pays, for example, or long-term care insurance can protect your retirement income in the event that you need specialized nursing care.

Be strategic about Social Security. There are dozens of different ways for you to claim your Social Security benefits, and many options for when you begin receiving it. Make sure you sit down with an experienced professional who can explain your options so you can make an educated decision.

Take on a part-time job. Retirees often find themselves bored after a few months of retirement. A part-time job can be the perfect opportunity to keep yourself engaged in the community, making new friends, and learning something new. Plus, the extra income is a terrific boost!

Ask for a discount… everywhere. Discounts abound for senior citizens and federal employees, but they aren’t often advertised. Ask about these discounts everywhere you go, from the hair salon to car rental companies to motels and restaurants. You’d be surprised how these discounts add up to help stretch your budget.

Adjust your budget before retirement. Some of your expenses will change once you retire, such as the cost of commuting. But it’s still a good idea to get an estimate of your expected retirement income, and then live on an adjusted version of that budget for at least a few months before you retire. This can help you ease the transition to your new budget, and let you take it for a “test drive” first.

Consult with a professional. For help estimating your expected retirement income, and other solutions to help you transition into retirement, give us a call. We help federal employees make the most of their benefits, so that you can enjoy the freedom of a secure retirement.

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6 Steps to Building a More Secure Retirement

Posted by Gary Raetz 6 Steps to Building a More Secure Retirement

When was the last time you discussed your retirement dreams? Like most people, you might have set a few goals years ago, and you’ve been steadily working toward them ever since. With our economy improving, there is a good chance you will indeed reach those goals. However, it’s always unwise to take anything for granted. Follow these six steps to ensure that you’re on the best possible track to a secure retirement.

Consider your budget. Wondering how much money you will need in retirement? Assess your spending now, making adjustments for expenses that will change in retirement. This will help you figure out how much income you need to generate in order to cover your lifestyle.

Get rid of debt. When you begin to consider a target retirement date, consider paying off your debt first. If you enter retirement free of debts like credit cards, your income will stretch much farther.

Think of ways to increase your income now. If you make more money, you have more to save for retirement (via your TSP). Alternately, you might need additional income to pay down your debts. You might be able to earn more money by learning new job skills, or you might consider a part-time second job to earn a little more money.

Decrease your current expenses. If generating more income isn’t an option, decreasing current expenses can free up some extra money. Many people increase their cost of living each time they get a raise, but you can get ahead of the game by keeping your expenses level and putting extra money into savings instead.

Conquer the thrill of instant gratification. Spending money on unnecessary things can earn you the thrill of instant gratification, but the high doesn’t last long. If you can conquer that temptation now, you will get your budget under control, plus establish good spending habits that will benefit you in retirement. Each time you’re tempted to spend money, ask yourself whether this item is more important than your long-term goals.

Create a plan. No one arrives at a great destination without first mapping out a route! Sit down with us to discuss your retirement goals, and together we can create a step-by-step plan to help you achieve them.

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How Might Rising Interest Rates Affect You?

Posted by Gary Raetz How Might Rising Interest Rates Affect You?

For nearly ten years, interest rates remained at historically low levels. This decision (to keep rates low) was due mostly to the economic crisis of 2008 and the following recession, but we all knew rates wouldn’t stay that low forever. Now that the economy has shown signs of improvement, the Fed has issues small increases to the benchmark interest rate. The first was in December 2015, and the second was just last month.

You probably have some questions about this event, which we will try to answer as simply as possible.

Why does the Fed adjust interest rates? It might seem like an arbitrary decision, but the Fed closely monitors and controls interest rates for important reasons. In a poor economy, lowering interest rates can spur economic activity. In an improving economy, inflation could get out of control if rates remain low. So, when they see signs of economic growth, the Fed responds by raising interest rates. The goal is to keep inflation around 2 percent, a manageable level of growth.

The bottom line is that an interest rate hike is a positive sign, reflecting economic growth which will benefit us all.

How will rising interest rates affect me? Understanding all of the ins and outs of economic activity requires far more than a simple blog. Many people dedicate entire academic careers to the study of economics! But the simple answer is that rising interest rates will result in some positive impact for the individual, as well as some negative results. As with all changes, we take some good with some bad.

For those with money in the bank, or certain types of investments, rising interest rates mean faster growth of funds. We all like that! But of course, if you want to borrow money, you’ll be paying a higher interest rate for that loan. With rates expected to rise at least once more this year (and maybe several more times, depending on how the economy grows), it might be a good idea to move ahead with any refinancing plans now, before rates increase. And since some investments actually lose value in times of rising interest rates, it might be time to re-balance your portfolio to reflect these changes.

These thoughts are just generalizations, of course, and you should seek more specific advice before making any big decisions. If you’re concerned about how rising interest rates might affect you, give us a call. We can help you review your financial plan and make any necessary adjustments.

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Plan TSP Distributions Carefully to Avoid Negative Consequences

Posted by Gary Raetz Plan TSP Distributions Carefully to Avoid Negative Consequences

It might sound strange, but retirement planning doesn’t end when you retire! In fact, regular and consistent planning throughout retirement is the best way to reduce unpleasant surprises on your tax returns, and to keep your budget and retirement income in line. In particular, one unpleasant surprise that everyone should avoid is the possibility of a large tax penalty at age 70 ½.

At some point after you retire, you will begin taking distributions from your Thrift Savings Account. Many people choose to delay these distributions as long as possible, accessing other forms of income such as Social Security to pay the bills. A few of you might even keep working long past your full retirement age (as defined by Social Security). Delaying distributions is a terrific strategy, as it helps your retirement funds continue to grow. But if you wait too long, this plan could backfire in a big way.

Specifically, we’re talking about the rule within most retirement plan (including the Thrift Savings Plan) that requires you to begin minimum distributions by age 70 ½. The IRS established this rule because retirement plan contributions are made free of taxes during your working years, and at some point they want you to begin withdrawing taxable income from that account. If you don’t take your RMDs on time, you could face a stiff penalty on your taxes, in the amount of 50 percent of the distribution you should have taken. Ouch!

If you haven’t begun taking distributions already, you must do by April 1 following the year in which you turn 70 ½. However, there is one potential complication to this plan: Depending when your birthday falls, you might be required to take another distribution by December 31 of that year. For some people, this could mean that they are pushed into a higher tax bracket that year, and they will owe more money than usual to the IRS.

As with all things related to retirement, required minimum distributions can become a tricky issue. Your RMDs are calculated according to a specific formula, and the rules can be confusing for most people. It’s better to plan ahead for these distributions, than to scramble to fix mistakes later. So, schedule regular appointments with us throughout your retirement years, and we’ll discuss your strategy ahead of time. We can help you anticipate your income needs, and work to prevent any unpleasant surprises.

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Before You Retire, Ask Yourself These Questions

Posted by Gary Raetz Before You Retire, Ask Yourself These Questions

Are you ready to retire? If you’re like most people, you just yelled “YES!”, and now you’re fantasizing about packing up your desk and booking cruise tickets. However, emotional readiness is just one piece of the puzzle. As your expected retirement date approaches, make sure you can answer these four questions to your satisfaction.

How is your risk tolerance? Throughout your working years, you might have selected a few riskier fund options due to their potential for faster growth. But as you near your expected retirement date, you will probably want to switch to a more conservative approach in order to protect your principal. Schedule an appointment with us, so that we can evaluate the future of your investment strategy under these new conditions.

What is your withdrawal strategy? We focus so much on saving for retirement, that many of us forget to create a withdrawal strategy. Have you assessed your true cost of living in retirement? Have you planned distributions in such a way that your income tax burden is minimized? What about the cost of medical care and the possibility of long-term care in the future? Most people don’t simply set regular withdrawal amounts. Instead, withdrawals must be strategically planned from one year to the next, in order to reap the best results.

Have you made an estate plan? You probably chose beneficiaries, years ago, when you first enrolled in a life insurance policy or opened your Thrift Savings Account. Typically, much can change over the years, so take the time to evaluate those choices before you retire. It’s time to meet with an estate planning attorney, too, to establish a Will and any other necessary legal documents.

What will you do all day? It might seem silly to wonder what you will do all day after you retire. After all, you can’t wait to get away from the office! But in reality, the happiest retirees are those who have a plan to spend their retirement years. Take some time to ponder options such as volunteer work, travel, part-time employment, community activities, and so on. Having a plan for your daily activities will keep you socially engaged and give you a sense of purpose.

These are just four questions that everyone should ask themselves before retiring. You might also face additional dilemmas specific to your situation. So give us a call, and we’ll sit down to discuss your retirement plans and create a plan for success.

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4 More Things to Do Before December 31

Posted by Gary Raetz 4 More Things to Do Before December 31

We’re all busy at this time of year, with holidays, shopping, traveling, and social engagements, but because many important financial planning decisions must be implemented before the end of the year, take a few moments to assess your situation before December 31. We want to help you enter 2017 on solid financial footing, so take these four steps before the end of the year.

Examine your Thrift Savings Plan (TSP) contributions. Your TSP not only helps you save for retirement; it also offers you a valuable tax savings opportunity. In order to reap the most advantage on your taxes, and to adequately prepare for retirement, contribute the maximum allowable amount each year. For 2016 the max is $18,000, and you can contribute an additional $6,000 if you’re aged 50 or older. At the very least, contribute enough to reap your maximum employer match, if your agency offers matching retirement funds.

Give to charity. If you itemize your taxes, charitable donations offer a valuable savings opportunity in the form of a tax deduction. But you must make your gifts before the end of the year, if you want to count them on your tax return in the spring. Remember to research first, to make sure your chosen organization is qualified by the IRS, and keep a record of your gift.

Plan for next year. Take a look at your most recent pay stub to get an idea of your savings habits. Are you contributing enough to your TSP? Do you expect a raise in January? If so, remember to divert half of the extra funds to retirement savings. You can enjoy your raise while also setting yourself up for financial stability in the future. Visit your human resources department to adjust paycheck withholding.

If you’re retired, plan your distributions for next year. As much as we wish it were true, retirement is not a “set it and forget it” exercise. Financial planning continues to be important during your retirement years, and planning distributions is a large part of your overall strategy. For example, if you expect to sell your home at a profit, you might wish to reduce your distribution amount that year in order to stay in your income tax bracket. That’s just one example, but as you can see, distributions must be carefully planned each year.

If you haven’t begun taking distributions yet, you will be required to do so during the year in which you turn 70 ½ (or else face a penalty on your taxes). If that time is approaching, give us a call to discuss your distribution strategy. We can help you plan the right time to take your required minimum distributions (RMDs) so that you avoid any potential complications with your tax return.

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Time is Running Out for these Tax Deductions

Posted by Gary Raetz Time is Running Out for these Tax Deductions

At this time of year, tax planning might be the last thing on your mind but if you are feeling a touch of the generous holiday spirit, and if you plan correctly, charitable donations can often be used as valuable tax deductions! Giving feels good and can also earn you a break on your taxes, but before writing any checks, make sure you’re following these guidelines.

Check out the organization. In order to claim your gift as a deduction on your tax return, the recipient must be a charity that is qualified by the IRS. Check IRS Publication 526 for more details. You also want to make certain that the group is legitimate, since scam charities are quite common at this time of year. Resist the urge to pull out your credit card over the phone, and take the time to research a charity first. Some con artists can be quite convincing.

Keep records. If your return is ever audited, you will lose the deduction for any charitable donations that you cannot prove. So keep those receipts! If you donate by credit or debit card, your statements will suffice to prove your claim.

Claim non-cash donations correctly. Household goods and clothing must be in good used condition, and you can only claim their depreciated values (not the price you originally paid for the items). If you donate stock, you can only deduct its current fair market value. If your non-cash contributions amount to more than $500, file IRS Form 8283 with your return. If an item is worth more than $5,000, you must attach a qualified appraisal as proof.

If you receive anything in return for a donation – for example, you win an item at a charity auction – then you can only claim the difference between your donation and the value of the item. For example, if you bid $1,000 on an item worth $200, then you can claim a deduction of $800.

Make your donations by December 31. In order to count donations toward your 2016 tax return, the gifts must actually be made during 2016.

As always, check with your tax professional if you have any questions about the income tax deduction for charitable donations. And if you have any other financial planning questions, give us a call. We’ll be happy to help.

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4 Ways to Maximize Your Future Retirement Income

Posted by Gary Raetz 4 Ways to Maximize Your Future Retirement Income

With the average lifespan increasing, and costs on everything from gas to healthcare fluctuating, you might feel concerned about your future retirement income. As a federal employee, you enjoy a terrific, three-tiered retirement system. But that doesn’t make you immune to income quandaries in retirement. The following four methods can help you boost your retirement income, so that you can feel a bit more confident about the future.

Contribute the maximum. Your Thrift Savings Plan contributions not only help you save for retirement; they also offer a valuable tax deduction each spring. So make sure to contribute the maximum allowable amount each year before December 31. For 2016 the maximum allowable contribution is $18,000.

Make catch-up contributions. If you’re like most people, perhaps you didn’t prioritize retirement savings when you were younger. Back then, it was hard to picture yourself retiring one day, or maybe you had other financial priorities like saving for a home. The good news is that even if you’ve fallen behind on your retirement contributions, you can get caught up. Once you reach age 50, you can contribute an additional $6,000 to the TSP each year.

Pay off debts. It goes without saying that lowering your monthly bills will help you stretch your retirement dollars farther. There’s not a lot you can do about the electric bill, but paying down debts before you retire can shave hundreds (or more) off of your monthly expenses. Tackle high-interest credit card debt first. It’s worth a bit of personal sacrifice, if you can enter retirement free of excessive debts.

Postpone your retirement. We’re not saying you should put it off indefinitely, but consider waiting just another year or two. You can build your retirement savings a bit more, have extra time to pay down debts, and accumulate more annual leave which you can sell back to your employer for a nice little “retirement bonus”.

These are just some of the more common ways to stretch retirement income. For more strategies and tips suited specifically to your situation, call us to schedule an appointment. We specialize in helping federal employees identify the retirement income strategies that work best for them.

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What’s Different About Federal Employee Retirement?

Posted by Gary Raetz What’s Different About Federal Employee Retirement?

Federal employees really do have one of the best retirement systems in the country, but it’s also one of the most complex and confusing! It works great when you are able to navigate all of its complexities, and that’s why we strive to keep FERS employees educated on their benefits (and updated on any news that might affect you).

So, as a federal employee, how is your retirement system different? And what decisions should you make differently, as opposed to the average American worker who is planning for retirement?

You could retire sooner. The three-tiered federal employee retirement system often allows workers like you to retire earlier than the average person. However, this superior system also comes along with added responsibility. Many FERS employees report that they have to take the initiative to keep track of their own service record, to ensure accurate benefits in exchange for time worked. It’s not a big deal, most of the time, but it does help to work closely with a financial advisor who is accustomed to the complex federal retirement system.

Typical retirement calculators can’t compute your benefits accurately. The average worker can use a retirement calculator to compute retirement income needed, pinpoint a retirement date, and determine a savings goal. It’s not so simple for federal employees, because your benefits start at different dates and can change over the course of your retirement. Therefore, it’s difficult for the average financial planner to really pinpoint your retirement needs. It takes an expert who is intimately familiar with the FERS system.

Options within the Thrift Savings Plan are unique. The TSP offers famously low expense ratios, and the opportunity to invest in certain funds that are not available elsewhere. But of course, it’s better to work with a financial planner who is familiar with the TSP, because it doesn’t work exactly like other retirement plan options.

These are just three ways that your retirement system varies from those offered to the private sector. Luckily, we specialize helping federal employees understand and navigate their retirement benefits. Give us a call, and we will be happy to answer any questions that you might have.

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Three Things to Do Before the End of the Year

Posted by Gary Raetz Three Things to Do Before the End of the Year

Over the next month or so, we’re all going to be fairly busy with holiday shopping, travel, and special events. So you probably don’t want to add anything else to your to-do list! But there are certain things you need to do before the end of the year, to help ensure that you enter 2017 on sound financial footing. Pencil these items into your calendar; they won’t take long, but it’s important to get them done before December 31.

Check your retirement savings contributions for the year. If you’re contributing to a Thrift Savings Plan, you can contribute up to $18,000, or $24,000 if you’re over age 50 and making additional catch-up contributions. Contributing the full allowable amount by December 31 helps you to reap maximum tax benefits in the spring. If your employer offers matching contributions, contribute at least enough to receive the full match.

Examine your investments. The Thrift Savings Plan offers many fund selections that have very low expense ratios. Because of that, you might feel satisfied to leave things as they are for the long term. But in doing so, you could be turning down valuable opportunities to select more promising investments. You should reevaluate your portfolio every year or two, and rebalance it to suit your changing needs.

Evaluate your retirement plan. When did you set your retirement goals? Have you reviewed your plans lately? Does your retirement plan account for inflation, and the likelihood that you will live twenty or more years after retirement?  Sound retirement planning requires ongoing assessment and alterations to your strategy, so let’s sit down and discuss your long-term strategy.

We can help you with all of these end-of-year tasks. Give us a call, and we’ll help you evaluate your financial plans so that you can enter 2017 feeling confident about the future.

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Social Security Unveils Four New Rules for 2017

Posted by Gary Raetz Social Security Unveils Four New Rules for 2017

Social Security is an important part of your retirement plan. But because it is an enormous, complicated government program, policymakers continually make adjustments to its rules and procedures. That’s why we always tell our clients that you can’t put your retirement plan on the back burner! As things change, so should your retirement plan. The following four changes to Social Security are set to take effect in 2017.

Payments will increase by a small amount. Beneficiaries count upon regular cost of living adjustments to help them keep up with the rising cost of living. And in most years, they do receive a bump in benefits. In 2017, that increase will be quite small compared to most years, due to our inflation rate remaining near zero. At 0.3 percent, the cost of living adjustment will result in an average of five dollars added to checks. These adjustments won’t always result in a lot of extra money, so remember that when you plan for retirement!

Married couples have fewer options. The loophole which allowed many married couples to utilize popular the file-and-suspend strategy has been closed. When it’s time to claim benefits, the lower-earning spouse can claim their own checks or spousal benefits, but they won’t be able to change to a different benefit type at a later date.

Working beneficiaries can earn a little more money before benefits are withheld. Some people choose to claim their Social Security benefits early, while continuing to work. But if they earn more than a certain limit (before reaching full retirement age), part of their benefits are withheld. Next year that limit will be raised from $15,720 to $16,920, allowing working Social Security recipients to earn a bit more money.

Some taxpayers will be paying more. Taxpayers support the Social Security program by paying a 6.2 percent tax on earnings up to $118,500. Next year, that earnings cap will increase to $127,200, meaning six-figure earners will be paying a bit more into the system.

As you can see, changes to Social Security can range from minor to significant, and they happen frequently. So you can’t just make a retirement plan and then forget it! Give us a call, and we’ll discuss Social Security planning as well as other elements of retirement preparation. We can double check your plan to see if it needs to be udpated, and help you make the necessary adjustments to your strategy.

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The Future of Medicare

Posted by Gary Raetz The Future of Medicare

When public systems such as Social Security and Medicare were first created, we were living in a very different world. People tended to retire with a pension or some other form of retirement income, utilize Social Security as a supplement to that income, and then live about ten more years. There were also fewer retirees supported by these systems overall.

Now, with the Baby Boomer generation retiring, we’re facing a very different scenario. Medicare, in particular, is feeling a strain from several different directions. Currently, about 57 million seniors depend upon the Medicare program, but that number is set to swell to 73 million by 2025 as more Baby Boomers retire. And while we’re all happy about the prospect of longer lifespans, that trend also places greater strain on the public healthcare system.

On top of the sheer number of seniors to be covered by Medicare in coming years, we’re also witnessing dramatic increases in the cost of healthcare for everyone. Higher prices translate into even more financial pressure, some of which is passed on to the public through higher premiums and deductibles. Medicare premiums are set to rise by about 6.9 percent each year through 2020, with unknown increases continuing each year after that.

If politicians and lobbyists want the Medicare system to remain solvent, they certainly have their work cut out for them. In the meantime, as you plan for your retirement, you have some work to do as well. Watch the upward trend in healthcare costs and Medicare premiums carefully, as well as projections for the Social Security system. The retirement plan you formulated years ago might not accurately reflect the reality of coming years, and you might need to make some adjustments to that plan.

Give us a call, and schedule a meeting to discuss these issues. We can help you evaluate your retirement plan, identify any potential pitfalls, and make a plan to generate the income you need in retirement.

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Are Your Retirement Plans on the Right Track?

Posted by Gary Raetz Are Your Retirement Plans on the Right Track?

As a federal government employee, you enjoy a retirement program that is superior to those offered by many private employers. After completing your service, you will enjoy an annuity payment, your Social Security benefits, and any income generated by your Thrift Savings Plan. By contrast, many Americans can only look forward to income generated by one retirement account (such as a 401k) and Social Security.

But don’t be lulled into a false sense of security! According to a recent survey conducted by Navy Federal Credit Union, 36 percent of you haven’t started saving for retirement yet! In the case of federal employees, this would mean that you have not elected to contribute to your Thrift Savings Plan, or save money in some other savings vehicle that you establish yourself.

As you might expect, those who earn $50,000 or more annually are more than twice as likely to have a retirement plan, and are making steady progress toward it, than those who earn less. We feel it’s important to remind you that no matter how much you earn, everyone retires someday. Even if you can save only a small amount now, the power of compounding interest will help that money grow. One day you will be glad at the difference even a small amount of savings can make in your retirement income.

However, even those of you with a plan might not be completely on the right track. Of survey respondents who are saving for retirement, only 42 percent said they feel well-informed on the topic. The rest feel either completely uninformed (10 percent felt this way) or feel somewhat informed but think they could be making better choices (48 percent).

In other words, making the decision to save, and doing it diligently, are only half of the equation. You might be off to a good start, but need to make some adjustments to your plan along the way. Remember, we’re here to help. We specialize in helping federal employees plan their retirements, and we’re always available to answer any questions you might have.

If you haven’t discussed your retirement plans with a professional, give us a call today. We can help you evaluate your plan, decide if you’re on the right track, and make any necessary adjustments to your long-term vision.

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Is a Phased Retirement Right for You?

Posted by Gary Raetz Is a Phased Retirement Right for You?

Are you feeling ready to retire, but question whether you’re financially ready? Or perhaps you need to reduce your work hours, but you don’t want to completely retire just yet. Federal government employees enjoy the option of a Phased Retirement for this very reason, and it could be a good choice for you.

There are many reasons someone might want to choose the Phased Retirement path. Your partner’s health could be failing, and they need you at home more often. Or maybe you want to retire, but you’re hesitant about living on a fixed income. A Phased Retirement can help you bridge that gap; instead of leaping directly into retirement, you undertake the process gradually and take time to adjust to your new budget.

Whatever your reason, you might be wondering how Phased Retirement works. In a nutshell, here it is: Your work hours are reduced by half, along with your salary. However, you also begin drawing part of your annuity. When you enter Phased Retirement, the annuity is calculated as if you are fully retired, but then divided by two. Your income is part salary, and part annuity.

During this time, your income will be less than your original full salary, but more than your anticipated annuity amount. It’s a good way to test the waters of retirement by gradually reducing your income and adjusting your lifestyle accordingly.

When you fully retire, your annuity will be recalculated according to your years of full-time service, plus your years of part-time service. And of course, you will also file for Social Security benefits when you reach the age of eligibility. If you have invested in a Thrift Savings Plan, you can also begin taking distributions, completing the third leg of your federal retirement program.

A Phased Retirement isn’t right for everyone, but it could be a good option for you. Give us a call to discuss your lifestyle and budget needs, and we can help you decide if this path could be the right one.

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Changes to Social Security and Medicare Could Affect You

Posted by Gary Raetz Changes to Social Security and Medicare Could Affect You

A few months ago, it was announced that Social Security might not issue a cost of living adjustment (COLA) in 2017. This prediction was made based on the Consumer Price Index (CPI), which determines adjustments, reflecting a flat inflation rate all year.

There’s been a bit of a change in that area, because the CPI’s third-quarter numbers appear to reflect a very slight rise in inflation. Now we are expecting a COLA to be issued to Social Security beneficiaries in January. However, the increase in benefits will be historically small, at an estimated 0.2 percent.

While Social Security benefits remain nearly the same as this year, Medicare is rolling out some big changes in premiums for some beneficiaries. About 30 percent, those who fall into higher income tax brackets and those who don’t have premiums deducted from their Social Security checks, will see a sharp increase in monthly premiums. Watch your mail closely, as Medicare should be contacting you with an exact figure.

On the other hand, the remaining 70 percent of Medicare recipients will see only a tiny increase on their monthly premiums, at about $2.70.

We always tell our clients not to count on Social Security to provide a majority of their retirement income, and this news is a good example of why you shouldn’t do that. Even if your expenses increase, such as Medicare premium hikes or other costs of living, Social Security’s COLA won’t always reflect your retirement income needs. We can help you plan for a stable retirement income, and show you other ways to prepare for unexpected expenses. Give us a call, and we’ll sit down and talk about your retirement income plan.

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6 Little Known Benefits of Life Insurance

Posted by Gary Raetz 6 Little Known Benefits of Life Insurance

For many generations, life insurance has been viewed as mostly a way to cover funeral expenses or replace income from the family breadwinner in the event of his or her death. Without a doubt, those are still two of the primary goals of a life insurance policy. But you might not know that these days, many people are utilizing life insurance to accomplish other important financial planning goals.

Hedge against debts. “Replacing income” is one way to look at life insurance. But you might also consider purchasing a policy that will cover your outstanding debts, such as a mortgage. This way, your loved ones aren’t left struggling to pay the bills on a lower income after your passing.

Protect against estate taxes. If you own considerable assets, your heirs could be charged a hefty estate tax penalty. A life insurance policy in the amount of expected taxes can cover that liability for them, making it much easier to process your estate.

Leave a legacy. If you want to leave a specific monetary gift to a charitable organization, purchasing a life insurance policy can accomplish that goal. Simply name the organization as the beneficiary on the policy.

Prepare for retirement. Some types of life insurance can actually be utilized to provide a stream of income in retirement.

Equalize bequeathed assets. Let’s say you want to leave a certain valuable piece of property to one child, but you don’t want to play favorites. You can purchase a life insurance policy, so that you bequeath something of equal value to your other child.

Build net worth. A life insurance policy adds to your net worth. This can be a valuable asset in the event that you need to borrow against it.

If you have a particular estate or financial planning goal, it is likely that there is an insurance policy to help you achieve that objective. But because there are so many life insurance policies on the market, it’s best to seek expert guidance before selecting one. Call us to schedule an appointment, and we can help you review the options.

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Something Important to Remember About Your Thrift Savings Plan

Posted by Gary Raetz Something Important to Remember About Your Thrift Savings Plan

As a federal employee, you enjoy a three-tiered retirement plan unlike anything else offered in the retirement industry. The plan is thorough, but also complex, meaning many federal employees are not familiar with some of the more obscure rules and regulations regarding their own benefits. And they don’t always seem to be widely publicized!

Your Thrift Savings Plan offers a valuable opportunity for you to save for retirement. But there’s one thing about the TSP that many people don’t know: It will not honor statements included in your will, court orders, trust documents, or any other legal documents if you pass away. If you want your chosen beneficiaries to receive the money in your TSP, they will only do so if you filed Form TSP-3 at some point before your death.

That doesn’t mean you forfeit the money in your TSP if you die. It simply means the plan administrators follow a default order of rule when deciding who gets the money. That order is:

  • Your spouse, if you have one
  • Your children, if you don’t have a spouse
  • Your parents, if you don’t have a spouse or children
  • The appointed executor of your estate, if you have none of the above
  • If you haven’t appointed an executor of your estate, then your state’s default rules of inheritance will apply as your estate passes through probate court

It’s best not to make any assumptions about the order of inheritance. You might currently be happy with the idea of your spouse inheriting the money, and decide not to file Form TSP-3. But what happens if you get divorced one day? Or what if you and your spouse pass away at the same time? The situation could get tricky for the person you intended to inherit your money. It’s better to fill out Form TSP-3 now, and designate both a primary and backup beneficiaries, than to leave everything up to chance.

For more help with Form TSP-3, or for advice on any other financial planning matters, give us a call. We specialize in helping federal employees manage their retirement benefits, and we can offer you expert advice geared specifically for your situation.

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Traditional vs Roth IRA – The Major Differences

Posted by Gary Raetz Traditional vs Roth IRA – The Major Differences

Most Americans with an employer-sponsored retirement plan are making “traditional” contributions to the account. If they want to open and fund a Roth account, they often take this action on their own. But as a federal employee, you have the option of choosing whether you want to make traditional or Roth contributions to your Thrift Savings Plan (TSP). Depending upon your preferences, you can choose one or the other, or make both types of contributions.

Traditional contributions are those that you make on a pre-tax basis. The money will come straight from your paychecks, before any taxes are deducted, and will be deposited into your TSP. Going this route will reduce your overall taxable income for the year, and therefore can lower your federal income tax burden.

These contributions will accumulate in your account with taxes deferred, meaning you won’t owe taxes on the earnings until you take withdrawals after retirement. If you’re a member of the armed forces and you contribute tax-free combat pay to your TSP, you will only owe taxes on the interest earned by that money.

The other option is to make Roth contributions. After taxes are deducted from your income, you can deposit money into your TSP. Now that money will never be subject to taxes again. Withdrawals in retirement will be free of taxes, and if you meet IRS rules for qualified earnings you won’t owe taxes on accumulated interest either.

Deciding between traditional or Roth contributions can be a complicated dilemma. Some people wish to establish tax-free income in retirement, and therefore opt for Roth contributions. Others feel that they benefit more from making pre-tax contributions now, and saving money on income taxes throughout their careers. Often the decision comes down to your expected tax bracket in retirement: Do you expect to move up a bracket, will your annual income stay about the same, or will you be earning less? This could be the deciding factor.

Since this is a complicated issue and there is no one-size-fits-all answer that works for all federal employees, you should discuss the decision carefully with a financial advisor. Give us a call, and we will offer our federal retirement expertise to help you make the decision that is right for you.

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The Most Important Ingredients for a Happy Retirement

Posted by Gary Raetz The Most Important Ingredients for a Happy Retirement

In the retirement planning world, we tend to focus on making sure our clients are financially prepared for their later years. After all, it’s hard to enjoy retirement if you’re forced to live on Ramen noodles! Money is certainly an important component to overall enjoyment of life.

But we also want you to truly feel happy in retirement, and money isn’t the only factor at play. In fact, in a recent study of current retirees, researchers found that health is an even larger determining quality to overall happiness. It makes sense; no matter how high your income, it’s hard to enjoy life when you’re sick or in pain.

After health, money was ranked the second most important factor in determining retirement satisfaction. Ranking third, fourth, and fifth on the list were:

  • having loving family and friends
  • having a feeling of purpose
  • continuing to try new things

As you continue to plan for a secure financial future, don’t forget to consider these other very important parts of life. Take care of your health now, by eating healthy foods, exercising, and avoiding unhealthy habits, and you will reap the rewards both now and in retirement.

Remember, also, to take care of your personal relationships, and consider where you want to live after you retire. Moving to Florida might sound fantastic now, but you could end up feeling isolated from friends and family.

As you prepare to make the transition into retirement, ask yourself how you will spend your days. Most retirees say that trying new hobbies keeps them feeling youthful and energetic, and volunteering or working a part-time job gives them a feeling of purpose. Your preferences might vary from the norm, but the important thing is to find activities that you enjoy and that keep you connected with your community.

These are the “other” ingredients to a happy retirement. But as always, give us a call if you need help with the financial planning part. We specialize in helping our clients prepare for the retirements of their dreams.

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Is Your Retirement Plan on Track?

Posted by Gary Raetz Is Your Retirement Plan on Track?

Federal employees enjoy a terrific, three-tiered retirement plan. In many cases, the retirement plan offered to government employees beats those offered in the private sector. But because of that implied security, you might not pay as much attention to your plans for the future. And if you don’t pay attention along the way, you could find that your plans for retirement have been derailed for one reason or another.

We want you to have the ability to retire on your own timeline, and enjoy a reasonable standard of living. But because many people wait too late to check up on their retirement plans, and find themselves disappointed with retirement or even unable to retire, you should take these steps now to make sure that you’re ready to retire when the time comes.

Step One: Set a budget. Do you know where every cent of your paycheck is going? You should! Not only could you be spending money that you should be using to set yourself up for retirement; you might also get yourself into the habit of living a lifestyle you won’t be able to afford later. Take the time to track all expenses for the next month or two, so you can cut out unnecessary spending and retake control of your budget.

Step Two: Pay down your debts. Many of us are spending several hundred dollars per month on credit card bills and other debts. Plan to retire only after you’ve paid off those bills, so that you have more room in your retirement budget. After following Step One to get your budget under control, now divert those extra funds to your debt.

Step Three: Save more for retirement. Once you’re out of debt and free of huge credit card payments, divert that extra money toward your Thrift Savings plan. Many federal employees forget to invest in this third leg of their overall retirement plan. Ramping up your own savings is one of the best ways to establish a comfortable lifestyle in retirement.

For more help with your retirement plan, call us to schedule an appointment. We can help you identify areas of your budget that need change, address your debt load, and make a plan to get caught up on retirement savings.

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Have You Planned for This Aspect of Retirement?

Posted by Gary Raetz Have You Planned for This Aspect of Retirement?

In the old days, many people retired and then spent the following few years, up to a decade, living off of Social Security and whatever pension or retirement savings they had managed to accumulate. They knew that a stay in a nursing home might be needed at some point, due to illness or an injury, and they planned for that expense accordingly. But, generally speaking, a senior living center was a necessity, not an option.

These days, seniors are offered a much greater variety of living options. At some point, you might need a small amount of nursing care or help with daily activities, but not so much that you need an old-fashioned nursing home. You might also desire the security and social opportunities provided by a group living situation. And that’s why senior living centers have expanded to include more options than ever.

The old style of nursing home is quickly becoming a thing of the past, reserved for only the most dire of situations. Today’s seniors can enjoy group living homes with private rooms or suites, or even a small home in a village of their peers. You might tour various facilities that include swimming pools, exercise classes, social engagements, college courses, and free transportation to community events. You might still shop for your own groceries and cook in your own kitchen, with a minimal amount of help from an assistant, rather than subsisting on cafeteria meals.

This trend is encouraging, as the diverse needs of senior citizens are being addressed with safety and medical supervision in mind. But of course, the burden of paying for these living centers will fall on you. As you plan for retirement, start considering all of your future housing options, and create a budget with this expense in mind. You might not need a senior living center right away, but at some point it may become your preferred choice.

As you plan your retirement budget, schedule a meeting with us so we can help. We’ll review your plans and financial capabilities, and help you set up a stream of income that helps you meet your retirement goals. That way, you can feel free to choose the living options that best suit you.

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You May Be Wealthier Than You Think!

Posted by Gary Raetz You May Be Wealthier Than You Think!

Did you know that you’re one of the wealthiest people in the world?

You might not think so. According to the Global Rich List, which uses World Bank data and global wealth statistics, an American earning an annual salary of $75,000 falls into the top .11 percent in the entire world. That information can certain give you a new perspective! What feels like an average lifestyle to you, is actually extravagant by comparison with the rest of the world.

But despite our relative wealth, many Americans are still technically broke, in the sense that they have accumulated little to no savings. Among households making $75,000 or more annually, one-third say they live paycheck to paycheck. And because of that lack of savings, only 37 percent of people aged 45 to 54 feel that they’re saving enough for retirement.

We can do better than this! You have the financial potential to save for retirement, but you might be falling behind due to the following factors.

You don’t know how you’re spending your money. We all have fixed expenses, such as our house payment, but many people are spending way too much on things like restaurant meals and entertainment. Check out a month’s worth of debit and credit card statements, and you will see what we mean. Then, put yourself on a budget and cut out some optional frivolous expenses.

You don’t have a plan. Most people simply earn money and spend it, without making a detailed plan for their income and expenses. When you commit to a particular budget and savings goal, you’re more likely to follow through on that plan.

You aren’t making contributions to your Thrift Savings Plan. As a federal employee, you will enjoy a retirement plan provided by the government. But because that income along with Social Security might not cover your cost of living in retirement, you should be making contributions to your Thrift Savings Plan each year.

You haven’t consulted with an expert. Most people automatically call a plumber or roofer or mechanic when something goes wrong with their home or car. But because your income is your most important asset, you should also be consulting with a financial professional. Give us a call, and we will help you analyze your budget, retirement goals, and savings. Then we can make the right decisions together, that will put your income to best use and lead to a more secure future.

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Don’t Get Your Heart Set on a Cost of Living Adjustment

Posted by Gary Raetz Don’t Get Your Heart Set on a Cost of Living Adjustment

Are you currently retired and drawing Social Security benefits? Or are you planning to retire in the next few years, and carefully watching news on Social Security? Either way, we have to share what might be disappointing news for you, but it’s important to keep you updated on these issues so that you can make the best possible plan for your retirement.

The Board of Trustees of the Social Security Trust Funds has already announced that next year’s Cost of Living Adjustment (COLA) is likely to range between 0 and 0.7 percent. That means seniors drawing benefits might not receive a much-hoped-for raise in their checks, or the increase could be disappointingly small.

Social Security beneficiaries usually look forward to each fall’s COLA announcement, and are happy to receive slightly larger benefits checks the following January. But while this is by no means an official announcement, it does appear that the forecast for a 2017 COLA is grim. If you’re already retired and drawing your benefits, remember that you can’t count upon a COLA in any given year, and start making necessary adjustments to your budget now. If you’re still planning for retirement, we want to remind you of two important things you should remember.

The first is that you can utilize strategies to maximize your Social Security benefits. Working up until your full retirement age is the only way to ensure you will receive your full schedule benefit amount, and working beyond full retirement age can net you even larger benefits when you do eventually retire. Couples also have a few different filing options available to them, and it’s important to seek expert advice on how to file for benefits before making permanent decisions. Just remember when it comes to Social Security, you must be “present” to win.

The second thing we want to tell you, is that you should plan another form of retirement income that provides for your expenses. We can never stress this enough: You can’t rely upon Social Security to fund your entire retirement. And since COLA is never guaranteed in any given year, your other form of income should provide room in your budget. You can even establish a stream of income that increases according to inflation, if you desire.

Contact us for more information, and we can help you maximize your Social Security benefits. Then, we can discuss the different types of retirement income available to you, and help you make a plan that helps you reach your retirement goals.

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Does Your Retirement Face These Risks?

Posted by Gary Raetz Does Your Retirement Face These Risks?

Federal employees are fortunate to enjoy a three-tiered retirement plan. Once you retire, you will draw income from Social Security, your pension, and withdrawals from your Thrift Savings Plan (assuming you chose to contribute to it). In some ways, you’re more fortunate than many American workers, who will be depending upon only one or two forms of retirement income. But that doesn’t mean you won’t face the same retirement risks as everyone else. The following factors could greatly impact your future, so make sure to give them careful consideration before you retire.

Longevity. Thanks to improved healthcare and nutrition, people are living longer than ever. But if you live to be 85, 90, or even 100 years old (a more common occurrence now than ever), how will you live for several decades on a fixed income? Your Social Security benefits and pension should hold out, barring any unforeseen complications, but are you depending upon income from your Thrift Savings Plan? If so, it would be smart to take a closer look at that part of your plan. How long with that income last?

Healthcare. A longer life also means more opportunity to develop serious diseases or other complications. With the cost of healthcare rising steadily each year, how will you cover this expense? Medicare will pay for a portion of your expenses, but you will be responsible for co-pays, deductibles, and premiums. Can you handle the burden of rising prices?

Long-term care. At some point, many of us will need long-term nursing care. A longer life span nearly guarantees that you will need extended care at some point. Are you prepared to face this significant expense? Remember, even if you rely upon family members to care for you, the cost to their careers and personal lives can be great. It is still best to have some money set aside to cover long-term nursing care. As a federal employee, you have the option of enrolling in the Federal Long Term Care Insurance Program, or choosing a private plan to address your needs.

Inflation. Most of us barely notice the rise in prices from one year to the next. But over the course of 20 years, your cost of living could almost double! Since you can expect a relatively long retirement of 20 years or more, you should ask yourself whether your budget will accommodate a significant decrease in your spending power toward the end of your life.

For more information on how you can hedge against these risks, give us a call. We specialize in helping federal employees estimate their retirement budgets, and make changes to their plans in order to accommodate common issues such as inflation and healthcare.

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Things Federal Employees Should Know about Life Insurance

Posted by Gary Raetz Things Federal Employees Should Know about Life Insurance

You might already know that a good life insurance policy is one of the best ways to protect your family. However, what exactly is a “good” life insurance policy? There are so many options out there, it’s easy to make a mistake when choosing your provider or plan.

A life insurance policy is an investment, and like any investment you should spend some time on research before making a final decision. As a Federal Employee, you have options but there are also a few things you need to know.

Step One: Perform an analysis. Sometimes people fall into the trap of selecting the first life insurance policy that appears to be a good deal, convenient, or some other deciding factor, but nothing is a good deal if it’s not what you need!

A full analysis of your life insurance needs will ask the important questions, to help you determine how much coverage you need and which type of policy is right for you. Take this important step first, and it will help you narrow down your options to the policies that will offer genuine protection.

Step Two: Consult with a professional who understands your Federal benefits!   Did you know that it is possible for the life insurance premiums you pay while you are working to double, triple, or even more when you retire?  Well, it’s true.  The cost of your benefits, including your life insurance premiums, is being subsidized by the Federal government.  When you retire, this stops and the result is often a shocking increase in your premiums.

Federal employees are eligible to take advantage of the Federal Employee’ Group Life Insurance (FEGLI) program, a group term life insurance program. However, there are varying levels of coverage and costs so it’s imperative to understand your options prior to making a decision – especially when you are near retirement.

It is extremely important for Federal employees to sit down with someone with experience in dealing with Federal benefits and not only explore the options, but also explore the costs.

Step Three: Continue to reevaluate your needs. Life insurance isn’t something you can purchase one time and then forget it. As your family changes, your life insurance policy should also change to reflect shifting needs. Perform a new life insurance analysis every two to three years, or after major life changes, and make the appropriate changes to your coverage.

Often, the biggest problem is that people forget to change their beneficiary designations when necessary.  For instance, a marriage, divorce, birth, or death can all trigger the need for a beneficiary change.  It is easy to forget and so critical to keep current.

Give us a call. We can help you analyze your initial life insurance needs, explain all of your options, and answer all of your questions.  We have decades of experience working with Federal employees.

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An Alternate Social Security Strategy for Couples

Posted by Gary Raetz An Alternate Social Security Strategy for Couples

Last fall, Congress made waves in the retirement planning world, when they brought an end to a long-standing loophole that allowed a popular Social Security strategy called “file and suspend”. The strategy, commonly used by couples to maximize their benefits, has now expired. Without it, some of you might be wondering whether there are other ways to maximize Social Security benefits.

Actually, yes, there is another commonly-used strategy that helps some couples to increase their overall Social Security benefit amounts. You can do this by filing a “restricted application”, and it’s a strategy that all couples should examine as they plan for retirement.

Here’s how it works:

John and Tina, a married couple, are ages 66 and 62, respectively. Once Tina turns 62, she can file an early application for her Social Security benefits (although she will receive smaller payments than if she waited until her full retirement age). Meanwhile, John has reached full retirement age, but he doesn’t file for his benefit yet. Instead, he files a restricted application, and claims spousal benefits on Tina’s work record.

Each month, Tina will receive her own benefit, and John will receive a spousal benefits check for roughly half of that amount. In the meantime, John’s benefit amount, which is based on his own work record, continues to grow by about 8 percent as he continues working. When he turns 70, John claims his own benefits instead of the spousal benefit he has been receiving. Tina then switches to her spousal benefit, based on John’s work record, because his benefit amount is much larger.

Clearly, this strategy works best if John and Tina are able to live on smaller Social Security checks for about four years. The reward comes later, when they receive much larger checks each month. This strategy is especially lucrative if John continues to work until age 70, or if the couple has establish another form of steady retirement income.

Filing a restricted application isn’t right for everyone, and you should carefully analyze your situation before making such a serious decision. As with all retirement planning decisions, we’re here to help. Come in to talk with us, and we can analyze your retirement plans and help you decide upon the best Social Security strategy for you and your spouse.

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How Will Brexit Impact US Investors?

Posted by Gary Raetz How Will Brexit Impact US Investors?

After poll predictions that Britain would remain with the European Union, we were all surprised on June 23 when Brits voted instead to exit. And as always, markets responded unfavorably to the surprise. We watched as stocks dropped, bond prices rose, interest rates fell, and the British pound declined in value.

So what’s the overall impact on us? Most investors felt alarmed at the news, but there’s really no reason to panic. Looking at the long-term consequences of Brexit, we urge you to remember two things. First, the change won’t happen immediately. Britain will undergo a gradual transition period as they renegotiate their trade relationships. Second, the British economy only accounts for about 4 percent of the global economy. While they may see a recession as the country’s economy reorganizes, it’s unlikely that the world will see the same impact.

Moving forward, we should all keep the following lessons in mind:

No one owns a crystal ball that accurately predicts world events 100 percent of the time. No matter how reliable a prediction may appear, it is never set in stone. Polls predicted that Brits would vote to stay with the EU, and yet we saw the exact opposite outcome. Remember this event in the future, if you’re tempted to make important decisions based on predictions. Diversifying your portfolio across a mix of stocks, bonds, and other investments helps protect you against the impact of unpredictable world events.

Long-term growth is most important. Rocky times will come and go, but most of the time, periods of instability in the stock market don’t last for long. Keep in mind that Europe’s economy is still growing (it gained 2 percent in the first quarter of this year) and our own economy is expected to continue growing at 2 to 2.5 percent. Don’t get too hung up on temporary conditions in the market, and focus on long-term growth.

Focus on your personal financial goals. Portfolios should be structured with long-term goals in mind. If you’ve analyzed your risk tolerance and defined those goals, then you’re prepared to weather temporary storms due to political events. Set those worries aside, and try to view the current situation as a potential opportunity. While prices are low on quality international stocks, maybe now is the time to add a few to your mix of investments!

For more information on Brexit and how it might impact you personally, give us a call. We would be happy to continue this discussion and help you decide how to proceed.

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Avoid These Tax Traps in Retirement

Posted by Gary Raetz Avoid These Tax Traps in Retirement

As you prepare for retirement, it’s normal to focus on your potential retirement income, budgeting, and making plans for the hobbies or travel that you hope to pursue. But there’s one other very important consideration that many people planning for retirement forget to analyze: You might be surprised by changes to your income tax situation once you retire.

As a federal employee, you face several potential tax pitfalls in retirement. This is due to the fact that your income will be derived from three different sources once you retire: Your pension, Social Security, and any income from your Thrift Savings Plan distributions.

Social Security. Federal employees pay taxes on 85 percent of their Social Security benefits, but Social Security does not automatically withhold these taxes from your checks each month. This could trigger a surprise at tax time, possibly the 10 percent estimated tax penalty (ETP). You can head off this problem by filling out form W-4, and having federal income taxes withheld from your benefits.

Thrift Savings Plan. If you take a single payment from your TSP, the default tax withholding rate will be 20 percent. Whether or not this is adequate will depend on your overall income situation. Otherwise, you will receive monthly payments, and the TSP will not withhold taxes unless your monthly payment is at least $1,500 per month. You can request tax withholding so that you don’t face a surprise each spring at tax time. And of course, if you take Roth withdrawals, there will be no need to withhold taxes because this type of retirement income is not taxed anyway.

Many retirees face an unpleasant surprise after their first year of retirement. When they file their taxes in the following spring, they discover that failing to have enough taxes withheld to cover taxes can trigger a 10 percent penalty (in addition to the tax). Tax are unavoidable, of course, but the penalty is not. Remember, as you plan for retirement, to estimate your tax burden and adjust your withholding accordingly. If you need help calculating these figures, give us a call and we’ll be happy to help you plan your retirement expenses.

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Retirees Face Rising Health Insurance Costs

Posted by Gary Raetz Retirees Face Rising Health Insurance Costs

Most federal employees stick with their current health insurance plan for years, often for the rest of their lives, because it is familiar and convenient. It can also be difficult for retirees to access information on costs or changes to their plans. And yet, it’s important to compare health insurance plans each year during open enrollment seasons, because many retirees overpay for their plans. When you’re on a fixed income, it becomes more important than ever to compare costs on major purchases!

Most federal retirees utilize the Blue Cross Blue Shield plan, and choose either the Standard or Basic policy. While the benefits of each plan are quite similar, the Standard plan premiums cost about two thousand dollars more per year. The difference in premiums is partly due to the fact that most retirees are using the Standard plan, and their health care costs are higher than those of younger workers.

Due to the premium difference, you might, at some point, consider switching from the Standard plan to the Basic plan. You might be considering this plan in retirement, or perhaps you are in the planning stage and considering how you can lower expenses once you retire. Either way, you should consider several important factors before making a change to your health care benefits.

First, make sure that you primary physician will included in your network if you make the switch. Under the Standard plan, you can visit out-of-network doctors, but under Basic you are limited to network providers only.

Another important consideration is how your retiree health plan works in conjunction with Medicare Parts A and B. Depending upon your specific health needs, and which type of Medicare plan you choose, either the Standard or Basic plan might offer more complete coverage.

You might have noticed that your health care plan made several changes for 2016. As you plan for retirement (or if you’re already retired), remember to re-evaluate your health insurance coverage each year. Doing this helps you to not only maintain adequate coverage, but also manage your costs in retirement.

For more information on budgeting in retirement, or planning for the years ahead, call us to schedule an appointment. We specialize in helping federal employees make the most of their retirement years.

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Federal Workers Have Long-Term Care Options

Posted by Gary Raetz Federal Workers Have Long-Term Care Options

Have you ever wondered what would happen to you, in the event that you need long-term nursing care? Many people assume that they could fall back on family help to get through a tough time, but you should remember the potential cost to your children and grandchildren. Many caregivers of elderly adults are not exactly young themselves, and beginning to face their own health concerns. And since 70 percent of caregivers perform this role for more than a year, and 24 percent carry the burden for more than five years, we aren’t necessarily talking about a temporary situation.

These issues are exactly why many federal employees choose to invest in the Federal Long Term Care Insurance Program (FLTCIP). Of course, long-term care insurance is a commitment, and you might question whether the FLTCIP program is the right option for you.

Alternatives do exist. Some people choose to self-insure, meaning they use their Thrift Savings Plan to save the money they would have spent on insurance premiums. Then, if you need long-term nursing care, you have the money to pay for it. If not, the money is available for other retirement needs. The problem with this idea is that you can’t predict how much nursing care you will need, and how expensive it will be. Unless you set aside a very large amount of money, you risk running out of funds to pay for your nursing facility or home care.

The other option is to purchase a private policy, rather than utilizing the FLTCIP program. Some federal employees prefer private long-term care insurance, because they might be able to access features such as:

  • Discounts (based on health and age)
  • Premiums based on gender
  • Discounts for couples
  • An annual payment option
  • A partnership policy which mitigates the spend-down requirements to access Medicaid

The FLTCIP website actually offers a checklist to help you compare features of the program with potential features of private long-term care insurance. Or, for more information on long-term care insurance or retirement topics in general, call us for more assistance. We specialize in helping federal employees weigh their options and plan for a successful retirement.

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A Retirement Countdown for Federal Employees

Posted by Gary Raetz A Retirement Countdown for Federal Employees

As a federal employee, you enjoy a comprehensive package of retirement options. But because the decision to retire is a complicated one, and involves significant sums of money, you shouldn’t leave anything up to chance. While you should think about retirement throughout your career, there are three major milestones you should pass on the way to your target retirement date.

About seven years before your expected retirement date. Attend your agency’s informational retirement seminar, if they offer one. Some agencies offer these retirement seminars online, so remember to look for that option as well. Most agencies who hold these seminars offer them about twice per year, to teach employees various facts about retirement such as:

  • how your retirement annuity is computed
  • how your Thrift Savings Plan will provide retirement income
  • how Social Security will provide a supplement to these other two forms of income in retirement

Attending this seminar about seven years prior to retirement can help you to ward off any surprises, and gives you plenty of time to make any necessary adjustments to your plan.

Three years before your expected retirement date. Attend your agency’s retirement seminar, if one is offered, once again. Update your information, and check to be sure your retirement plans are on the right track.

One year prior to retirement. At this point, you probably have a good idea of whether you’ll be ready to retire in the next year or so. Now it’s time to iron out the details.

Check to be sure that your work history is complete; mistakes are rare, but they do happen, and you want to be sure that you receive credit for all of your service. Once you’re satisfied, use a retirement calculator to calculate your expected retirement income. At this point, it’s a good idea to call us for help, because you will be confronted with questions on how to manage your Thrift Savings Plan and other retirement benefits. We can help you make these important decisions that will last the rest of your life.

Some agencies don’t offer retirement seminars, or the dates and times might not be convenient for you. Give us a call, and we can help you review your retirement options. We also periodically offer open seminars, and we we will be happy to extend an invitation to you.

Once you are satisfied with the final numbers, have made a decision about filing for Social Security, and have analyzed your lifestyle options, you are probably ready to retire. Get ready to mark that date on your calendar, and enjoy the countdown! In the meantime, sign up for our newsletter, and we will keep you updated on information that concerns you.


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7 Essentials for a Smart Budget

Posted by Gary Raetz 7 Essentials for a Smart Budget

As you transition into retirement, advance planning and years of hard work have hopefully provided for a satisfactory lifestyle. But most retirees do find that their retirement budgets are not quite as generous as the incomes they enjoyed during their working years. As you learn to become a bit more frugal, incorporate some of these seven tips into your life. If you begin using them now, before you retire, you might enjoy double effects: You can free up more money to save for retirement, and also ease the transition into your new life.

Pay attention. When you hear “budget tricks” you probably picture money-saving secrets or coupons in the Sunday newspaper. Truly, the best budget trick in the world is to pay attention to how much money you earn and where it goes. The accounting method you choose should feel easy to use and make sense to you. Some people prefer smart phone apps, while others use a computer program, and a few people still use the old pencil-and-paper method. It doesn’t matter how you do it; just choose an accounting method that you will use methodically and faithfully.

Compare wants versus needs. It’s perfectly fine to indulge in a “want” sometimes. But when you stay mindful about the difference between wants and needs, it will be much easier to maintain a realistic budget.

Spend less than you earn. You might often hear the advice to “live within your means”, meaning you don’t spend more than you make. In reality, living below your means is the best idea. You should structure your budget so that you have money left over at the end of each month. Now set aside that extra cash for emergencies.

Balance spending versus investing. When you spend money, you exchange it for something that does not provide long-term benefit. It’s part of life, of course, and no one is saying you should never spend money. Investing, on the other hand, means that you use your money to obtain something that will provide value over time, or even result in an increased cash flow. Understanding this difference will help you put your money to work for your budget, rather than against it.

Consider value versus price. Frugality doesn’t always mean choosing the least expensive item. If you need a new item, compare the long-term value of a more expensive item, with the price of having to replace the cheaper item several times. Often the more expensive, higher quality item is actually the better deal.

Avoid debt. Any time you are tempted to charge a purchase to your credit card, ask if you’re willing to pay more than the price on the tag. If you can’t pay off the purchase during the current billing cycle, you’re paying a higher price for each item that your charge.

Seek expert advice. Planning for the future is an essential part of a sound financial strategy. Schedule an appointment with us to discuss your retirement savings strategy, and we can help you make both long-term and short-term adjustments to benefit your budget.

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Is It Almost Time to Retire?

Posted by Gary Raetz Is It Almost Time to Retire?

Perhaps you set a retirement date years ago, but as that time gets closer, anxiety might come creeping in. Retirement is a major life change, so it’s normal to feel nervous about it. If you’re wondering whether you’re really ready to enter this next stage of your life, take these steps to assess your readiness.

Evaluate your living expenses. Your lifestyle might shift dramatically once you enter retirement. For example, you might save money on commuting, work clothes, lunches out, and so on. On the other hand, you might wish to pursue expensive hobbies or travel. Evaluate your expected retirement budget before you make the leap.

Review your retirement income. Will you be receiving income from Social Security, an annuity, your Thrift Savings Plan, or some other form of income? Do you plan to work part-time? Include your spouse’s retirement income, if they have any.

Consider your income taxes. Your income tax situation is likely to change in retirement, due to the different ways that retirement accounts are taxed. Also, if you plan to begin a second career or work part-time, some of your Social Security benefits could be taxed. If you plan to move to a new location, you might face new state and local taxes.

Pay attention to the cost of health care. Health care is often the largest expense faced by retirees. The cost of health care rises each year, and that means your co-payments and deductibles might increase as well. Leave room in your budget for these growing costs, and remember that situations such as long-term nursing care can eat an even bigger hole into your budget.

Pay down your debts. If you can, enter retirement as free of debts as possible. Taking this step will give you the ability to more freely modify your budget in the event of an emergency. Even if you have to work a few years longer, it’s worth it to enjoy a more carefree lifestyle.

Save more in the years before retirement. If you’ve paid down your debts, save as much as you can prior to retirement. Stash extra funds, such as income tax returns, in your retirement account. You might even exceed your original retirement savings goal; there’s nothing wrong with that!

Meet with a qualified financial advisor. Call us for an appointment in the years preceding retirement, and we can help you asses your plan, make the necessary adjustments, and stay on track toward a stable financial future. Retirement is a major life transition, and expert advice can make the difference between a bumpy ride and a smooth one.

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Federal Workers Can Retire Early

Posted by Gary Raetz Federal Workers Can Retire Early

The average life span of a human being has increased dramatically over the past couple of hundred years. Once upon a time, age 50 was considered “old”, but nowadays we tend to continue working until well past age 60. In fact, full retirement age – the age at which you receive full Social Security benefits – was set at between 65 and 67 years old, depending upon your year of birth.

Of course, that might appear to put federal employees in a bit of a bind. What if you reach retirement eligibility under the FERS system at, for example, age 60? Social Security comprises one third of your three-tiered retirement plan, but how can you retire if you can’t claim those benefits yet?

The FERS system actually takes that situation into account, and that is why the FERS annuity supplement was devised. If you retire before the first age of Social Security eligibility (age 62) then you annuity supplement will provide extra income to tide you over until you claim that third leg of your retirement income (your Social Security benefits). You will, of course, access your basic annuity and your Thrift Savings Plan (if you choose) during this time.

It’s important to note that the annuity supplement lasts until age 62, not full retirement age. You can claim your Social Security payments as early as age 62, although they will be permanently reduced from the full amount you would have received by waiting until full retirement age.

If you want to retire before your full retirement age, or if you need to retire due to health or other reasons, your annuity, annuity supplement, and Thrift Savings Plan might provide the income you need until you can claim Social Security. However, your annuity supplement will be means tested, meaning if you take another job during this time your supplement could be reduced.

Also, once you claim your Social Security benefits, you won’t be able to change your mind and receive your full scheduled benefits unless you repay the money you have received. There is a way to cancel your claim, but it is rarely used due to its difficulty. So the bottom line is that you should conduct very careful calculations, and compare the different potential scenarios, before you make this decision. Call us with any questions you might have about early retirement or your FERS benefits, and we can help you decide if you are really ready to retire early.

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Should You Claim Social Security Benefits While You Work?

Posted by Gary Raetz Should You Claim Social Security Benefits While You Work?

As a federal employee under the FERS system, you are undoubtedly familiar with the three main components of your retirement plan: Your annuity, Thrift Savings Plan investments, and Social Security. However, you might be locked into one way of thinking about your benefits and overlook financial strategies that are available to you.

For example, did you know that you can collect Social Security before you retire? It’s possible, if you reach full retirement age and you’re still working, to go ahead and claim your Social Security benefits. You will continue to earn your regular salary and contribute to your Thrift Savings Plan, while also enjoying the income boost of monthly Social Security benefits.

For some workers, it makes more sense to suspend those payments until age 70 ½, at which point your benefits checks will have grown larger. But you can also reap valuable benefits from going ahead and claiming your checks. For example, the income boost in your last years of employment can help you to pay down debts so that you enter retirement on more sound financial footing. Or, perhaps the extra income allows you to invest more in your Thrift Savings Plan.

You might also choose to set aside some cash in an emergency fund, so that you have a significant financial cushion in retirement. Other people choose to invest in a life insurance policy, or hedge against future risk by selecting a long-term nursing care insurance plan.

In other words, claiming your Social Security benefits while you continue to work can give you the funds to make additional retirement planning decisions. There is no single path that works just right for everyone, but having more options is always a great thing!

The timing of your Social Security claim is one of the most important retirement decisions you will make. If you’re still working when you reach full retirement age, you face an important decision: Allow your Social Security benefits additional time to grow, or go ahead and claim them right away. Call us to schedule an appointment before you reach full retirement age, and we can help you weigh your options.

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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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