“Serving Federal & Government Employees” TSP Federal Employee Service Center 2012 Welcome “AIM Members!”

The Federal Employee Service

Center“Serving Federal & Government Employees”

TSP Federal Employee Service Center 2012

Welcome “AIM Members!”

Our Purpose

To provide all Federal and Government employees with the necessary information concerning their federal benefits and retirement planning.

Our Objective

To give Federal and Government employee a better understanding of their current benefits and provide individualized information and tools to help them achieve financial success.Federal Employee Service Center

2012

THRIFT SAVINGS PLAN

The TSP is a “DEFINED CONTRIBUTION PLAN” for federal

employees that allows you to save pre-tax dollars in a Retirement account. You get to choose how to invest

thosedollars – but your choices are limited.

Federal Employee Service Center 2012

Your contributions to your TSP account are optional. Theyare separate from your FERS or CSRS pension. While youreceive a fixed amount from your FERS or CSRS Pension;

The amount of money you get from your TSP will dependon:

How MUCH you put in How WELL YOU manage it.


TSPRoth

TSP

MAJOR FEATURES

• Pre & After Tax contributions• TSP Roth (NEW)• Tax Deferred Growth • Automatic agency contributions*• Matching agency contributions*• Choice of Investments• Inter-Fund transfers• Loan Program • Spouse Protection

* FERS only


ROTH TSP

No Income Restrictions

All TSP Participants Eligible

Different Contributions Limits

ROTH IRA

‣ Income Restrictions

‣ Contribution Limits

‣ Withdrawal Restrictions


Roth TSP is NOT a Roth IRA


How “TSP ROTH” works

‣ Current Balance in TSP will not count / Can not Convert!

‣ Combined contributions ( Plus “Catch –Up”) can not exceed Limit

‣ Any contributions will apply to both TSP & TSP ROTH

‣ You can transfer 401K ROTH, 403(b) ROTH, and 457 ROTH in TSP ROTH

‣ Still Able to take Loans, In-Service Withdrawals, and Partial Withdrawals.

‣ Withdraw TSP ROTH account to IRA’s


Who is eligible to take advantage of Roth TSP?

ParticipantGroup

New Roth Contributions?

Roth Transfers into TSP / Eligible Plans

Active Employees

FERS CSRS Uniform Services

YES YES YES

YES YES YES

Separated Empl’sRetireesBeneficiary participants**

NO NO NO

YES YES NO

* Roth Earnings will be Tax-Free IF 5 years have passed since January 1 of the year you made your first Roth contribution AND you are age 59½, permanently disabled, or deceased.** Beneficiary participants may not add new Roth contributions to their accounts, but their accounts may contain Roth contribution made by the deceased spouse


The Treatment of…

Traditional TSP Roth TSP

Contributions Pre-Tax After-Tax

Your PaycheckTaxes are deferred, so less money is taken out of your paycheck.

Taxes are paid up front, so more money comes out of your paycheck.

Transfers InTransfers allowed from eligible employer plans and traditional IRAs

Transfers allowed from Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s

Transfers Out

Transfers allowed to eligible employer plans, traditional IRAs, and Roth IRAs2

Transfers allowed to Roth 401(k)s, Roth 403(b)s, Roth 457(b)s, and Roth IRAs

Withdrawals Taxable when withdrawn

Tax-free earnings IF five years have passed since January 1 of the year you made your first Roth contribution, AND you are age 59½ or older, permanently disabled, or deceased


If you transferred money to your TSP Roth balance from a Roth account maintained by

another employer plan, the 5-year clock begins on January 1 of the year your first contribution

was made to your TSP Roth balance or, if earlier, January 1 of the year you made your first contribution to the Roth account of the

other employer plan

IMPORTANT!

CONTRIBUTIONSMaximum Annual Contribution for 2012 has been reconfirmed as $17,000 per IRS §402 (g).


CSRS /Offset

•No Government Contributions(No Matching)•Always vested in all the money in their accounts

FERS •Government Contributions (Matching)•Vesting Schedule

VESTINGYou are always vested in your own contributions

including:any matching contributions, Catch-up contributions, and any earnings that you have accrued.

Most FERS Employees become vested in agency automatic contributions and earnings after three years.

FERS Employees in Congressional & certain Non-Career positions vest in two years.

Leave Government before vesting - agency automaticcontributions and it’s earnings will be forfeited to the TSP.

Death - Automatically vested in all the money in TSP.Federal Employee Service Center 2012

CATCH-UP►Must be 50 years of age (min) or over during the

current calendar year.

►Must be contributing the maximum amount.

►Invest up to $5,500 in 2012. Subsequent years after

will be indexed to inflation.

►No waiting period / Form TSP-1-C (Civilians) TSP-U-1-C (Uniformed Services). (TSP ROTH )

►Able to change, stop, or restart at any time!

►You MUST make a new election each calendar year if you want to continue your catch-up contributions.

►No Agency matching!Federal Employee Service Center 2012

INTER-FUND TRANSFERS

You can transfer money from one fund to another in the TSP (Must be received by 11:00am/About 2 days). Limited to two inter-fund transfers in a month!

Additional transfers allowed only to move in G Fund until the first day of the next calendar month.

Transfers are confirmed by TSP record keeper any errors must be reported within 30 days of notice.


IN-SERVICE WITHDRAWALS

Federal employees who are currently working for thegovernment have an opportunity to make in-servicewithdrawals from their TSP account. There are twoprograms available:

AGE BASED: A one-time lump sum withdrawal for participants who are 59 ½ or older.

HARDSHIP: Financial hardship withdrawals for participants who can demonstrate financial hardship.


AGE BASED WITHDRAWALS

Employees who are 59½ or older, can make an AGE-BASED WITHDRAWAL, a one-time withdrawalof all or any portion of their vested TSP accountbalance. The withdrawal is without interruption tothe contributions you make to your TSP account.

Age based withdrawals are subject to a mandatory20% federal income tax withholding unless the fundsare transferred directly from the TSP to a qualified account (IRA or 401(k).

Participants cannot repay the funds or convert it to aloan.


FINANCIAL HARDSHIP WITHDRAWALS

There is no age limit for FINANCIAL HARDSHIP withdrawals, but the participant MUST demonstrate a hardship.

Employees can withdraw all or any portion of their vested TSPaccount balance. However, employees cannot withdraw lessthan $1,000.

Financial hardship withdrawals are subject to an earlywithdrawal penalty of 10% if taken prior to age 59 ½.

Participants cannot repay the funds or convert it to a loan.

Employees who take a financial hardship loan are ineligible to

continue investing in the TSP for six (6) months following the

disbursement of the withdrawal. However, during that time the

1% agency contribution does continue.Federal Employee Service Center 2012

TSP

Loan Purposes:

* Purchase of a Primary Residence

* Education Expenses

* Medical Expenses

* Financial Hardship


Terms of Loans:

1) Residential is 1 to 15 years

2) Non-residential is 1 to 5 years

3) Payroll deductions 4) A Personal Check


LEAVE YOUR TSP ALONE!

IT IS NOT A GOOD IDEA TOBORROW AGAINST YOURRETIREMENT FUND!

Most people are worried if they are savingenough for retirement. Borrowing from what

youhave already saved only sets the bar higher.

Instead . . .Federal Employee Service Center 2012

Develop an Emergency Fund

If you don’t have one already you shouldestablish an adequate emergency fund. Itshould be separate from your checking

account:

1. In a place that’s safe2. Be completely liquid3. Be funded systematically

You should keep a minimum of 3 months income, preferably 6 months readily accessible.Federal Employee Service Center 2012

HOW MUCH YOU SHOULDHAVE IN YOUR EMERGENCY FUND?


A SINGLE WORKER WITH NO

KIDS

A TWO INCOME FAMILY WITH KIDS

A ONE-INCOME FAMILY

A SELF EMPLOYED

COUPLE WITH KIDS

3 MONTHS 3 – 6 MONTHS 6 - 9 MONTHS 9 – 12 Mths

THESE FIGURES ARE A SUGGESTION ONLY.


INVESTMENT OPTIONSYou may invest in:

G FUND F FUND

C FUND S FUND I

FUND

or the L FUND “Lifecycle Funds” in any combination.

TSP FUNDS ARE ON AUTOPILOT

You might be surprised to know that Blackrock Institutional Trust Company, N.A. is the company that

handles the TSP funds – not the Federal Government.

But even though Blackrock handles the money, the funds are really on autopilot. Unlike some mutual funds,

there is not a person or team of people managing the TSP

funds to get the highest return.

The funds are designed replicate a specific financial index. The goal of each fund is NOT to make the most money. Instead the goal of each fund is to make the same return as a certain index. The exception to this is the ‘G’ Fund.


FUNDS - INDEXES FUND DESCRIPTION INDEX

G Special short-term U.S. None Treasury securities issued

specially to the TSP

F Mix of government , mortgage- Barclay’s Capital U.S. backed, corporate & foreign Aggregate Bond Index

government sectors of the U.S. bond market

C Large capitalization U.S. S&P 500 Index

stocks

S Mix of small & Mid Dow Jones U.S. Completion capitalization U.S. stocks TSM Index

I Mostly large capitalization MSCI EAFE indexforeign stocks


LIFECYCLE FUNDSThe Lifecycle Funds are funds that are invested in the

variousregular funds (G, F, C, S and I).

The “L” Funds are allocated based on the expected withdrawal date of the participants, and are adjusted quarterly to becomemore conservative as the participants reach their desired withdrawal dates.

The L Funds are designed to provide the best possible return forthe least amount of risk based on the withdrawal date and notnecessarily the retirement date.


NOTE: THESE FUNDS CAN POST LOSSES

The L Funds below are listed from most conservative to most aggressive based on today’s allocations FUND ANTICIPATED WITHDRAWAL TIME

FRAMEL Income Those currently making withdrawal

or who expect to begin makingwithdrawals relatively soon fromthe TSP

L2020 Now thru 2024L2030 2025 thru 2034L2040 2035 thru 2044

L2050 2045 or Later (opening 01/31/2011)


CONSERVATIVE

AGGRESSIVE


AVERAGE OVER THE LAST 12 MONTHS

C FUND 9.26%

F FUND 7.31%

S FUND 1.01%

I FUND (11.61%)

G FUND 1.7% SAVINGS ACCT 1.6% to 2.02%

MONEY MARKET .85 %

EE BONDS .6% - 1%Federal Employee Service Center 2012

Average Annual Returns (As of 12/2011)

L Inc. L 2020 L 2030 L 2040 L 2050 G F C S I

1-YR 2.23% 0.41% (0.31%) (0.96%) 2.45% 7.89% 2.11% (3.38%) (11.81%)

3-YR 5.48% 9.78% 11.16% 12.19% 2.75% 6.86% 14.17% 18.91% 7.73%

5-YR 3.29% 1.77% 1.30% .75% 3.37% 6.62% (0.20%) 1.82% (4.51%)

Inception Date

4.08% 3.97% 3.81% 3.63% (3.81%) 5.86% 7.12% 9.23% 6.11% 2.79%

8/1/05 8/1/05 8/1/05 8/1/0 1/31/11 4/1/87 1/29/88 1/29/88 5/1/01 5/1/01



Year G Fund F Fund C Fund S Fund I Fund

2002 5.00% 10.27% (22.05%) (18.14%) (15.98%)

2003 4.11% 4.11% 28.54% 42.92% 37.94%

2004 4.30% 4.30% 10.82% 18.03% 20.00%

2005 4.49% 2.40% 4.96% 10.45% 13.63%

2006 4.93% 4.40% 15.79% 15.30% 26.32%

2007 4.87% 7.09% 5.54% 5.49% 11.43%

2008 3.75% 5.45% (36.99%) (38.32%) (42.34%)

2009 2.97% 5.99% 26.68% 34.85% 30.04%

2010 2.81% 6.71% 15.06% 29.06% 7.94%

2011

2.45% 7.89 2.11 (3.38) (11.81)

10 YEARCOMPOUN

D3.96% 5.84% 2.94% 6.76% 4.72%

10 YR SUMMARY OF FUNDS

HOW MUCH SHOULD I PUT IN MY TSP?

For most people, it makes sense to contribute at

least the “Maximum Amount” that your Agency

will match. Your TSP match is the closest thing you’ll get to Free money. Another way to

look atit is that you are putting in $1, and the agencygives you another $1.

YOU JUST DOUBLED YOUR MONEY!

CSRS Employees should also contribute to the

TSP, even though you don’t get a match.


DOUBLED YOUR MONEY!

TSP Matching for FERS


Agencies are required to contribute an amount equal to 1% of a FERS employees Basic Pay, regardless of their participation in the TSP.

Agencies are also required to match the first 5% of employee contributions.

Employee Contribution

Agency Automatic

Contribution

Agency Matching

Contribution

TotalContribution

0% 1.0% 0% 1.0%

1% 1.0% 1.0% 3.0%

2% 1.0% 2.0% 5.0%

3% 1.0% 3.0% 7.0%

4% 1.0% 3.5% 8.5%

5% 1.0% 4.0% 10.0%

WHAT IS YOUR RISK TOLERANCE

The key is to know yourself! How are you going to react if for example in aShort period of time your investment lost:

Would you have the emotional fortitude to stick to your long-term commitment and ride it out?


20%

50%

It was Will Rogers who once said . . .

“I am more interested in the

return of my money than the

return on my money!”



TSP

Goals for Investment

1. Strategy

2. Minimum Risk

3. Preservation of Principle


WHAT’S THE BEST TSP ALLOCATION?

Sometimes it can be difficult to get your Federal retirement planning questions answered. Questions about how your Federal benefits apply to your particular situation.

You probably know that your agency’s HR department can’t give personalized recommendations. They can tell you aboutyour benefits – but they can’t tell you what is the best option for you.


WHICH FUNDS ARE RIGHT FOR ME?

Equal Distribution

G FundF FundC FundS Fund I Fund


20%G Fund

20%C Fund

20%S Fund

20%I Fund

20%F Fund

Note: Hypothetical Example. Investment percentages shown are for illustration purposes only and not intended as investment advice

Rule of 100 Subtract your age from 100

Your MAXIMUM RISK exposure should not be greater than the difference between your age and 100.

For Example:

A person age 30, (100 – 30 = 70) no more than 70%

of your money should be at risk.

A person age 50, (100 - 50 = 50) no more than 50%

of your money should be age risk.Federal Employee Service Center 2012

25 Year Old ALLOCATIONusing “Rule of 100”

C, S, I FUNDSG, F FUNDS

G, FFunds

75%

25%


C, S, I Funds

Note: Hypothetical Example. Investment percentages shown are for illustration purposes only and not intended as investment advice.

SAFE

AT RISK

35 Year Old Allocationusing “Rule of 100”

C, S, I FundsG, F Funds


C, S, I Funds

65%

G, FFunds35%


SAFEAT RISK



G, FFunds


C, S, IFunds

45%55%


SAFE AT RISK


SAFE

C FUND

S FUND

I FUND

G FUND

F FUND

25%

20%

10%

25%20%45%


Note: Hypothetical Example. Investment percentages shown are for llustration purposes only and not intended as investment advice.

AT RISK

(exploded view)



C, S, IFunds

45%


G, FFunds

55%


SAFE AT RISK

Your TSP Retirement ChoicesFederal Employee Service Center 2012

POST SERVICE WITHDRAWALS

On separation from Federal Service, you become eligible to withdraw your TSP. You may choose:

1. Leave your money in the TSP

2. Take monthly TSP withdrawals

3. Annuitize your TSP

4. Transfer your TSP money into an IRA

Any combination of these withdrawal options.Federal Employee Service Center 2012

In 1935 when President Franklin D. Roosevelt signed OASDI into law, few people lived morethan 5 years inretirement.

Things have

changed!Federal Employee Service Center 2012

How many of you know that the tax law for Social Security recipients changed in 1984?Single

s• MAGI

over $25,00

0

Couples

• MAGI over

$32,000 50% OF

SOCIAL SECURITY

INCOME TAXABLEFederal Employee Service Center 2012

The Budget Reconciliation Act of 1993 added another bracket:

Singles

• MAGI over

$34,000

Couples

• MAGI over

$44,00085% of

Social Security Income

Taxable


$1 of excess income from:

Can trigger income tax on as much as 85¢ of each $1 of your Social Security Income.

Wages, PensionsTax-Exempt Bonds, Bond Funds Interest Earnings on CD’s Savings Accounts Money Market Accounts Royalties, Dividends


At age 65 your life expectancy is

85If you reach age 85 . . . chances are youwill live another 6.9 years.

Many people will be spendingas much time in retirement as

They did in the workforce.Federal Employee Service Center 2012

!

Too often people fail to address retirement needs untilThey are nearing retirement. Then they discover that theyMust adjust their expectations for the reality of their situation. The better approach is to begin thinking about how

muchmonthly income you think you will need to live on in Retirement as early as possible. Doing so will allow youto set an asset accumulation goal and calculate withreasonable accuracy how much you need to save. Be sure to take into account:


Government Pension Social Security Any Other Sources of Income

$12,809.50

$4,641.40

$2,39276

$1,306.00

$747.45$438.73

$261.21 $156.82

Years until Retirement

5 10 15 20 25 30 35 40

This chart dramatically illustrates how much money you must put away MONTHLY to reach $1M – depending on the number of years until retirement. The sample figures assume a 10% annual rate of interest


2010 2015 2020 2025 2030 2035 2040$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$50,000 $58,246

$67,851 $79,041

$92,075

$107,260

$124,948

This means that a person needing $50,000 in 2010 to cover living expenses would require approximately $92,000 in 2030 and $125,000 in 2040, just to maintain the same purchasing power.


+30 years

Since 1900, inflation has averaged an annualized rate of 3.1%*

* based on U.S. Bureau of Labor Statistics Consumer Price Index from 1900-2008

65

75

85

95

105 How long $500,000 will last at different withdrawal rates

10% 8% 5% 4% $4,166 mth $3,333 mth $2,088 mth $1,666 mth

To insure that your retirement savings last a lifetime, you to need to restrict your withdrawals the first year. Assuming you start with $500,000, that’s $1,666 per month. If you take out much more, you could run out of money.

YOUR NEST EGG

How Fast Can you Spend It?



RULE OF 72


Take the interest rate you are currently receiving and divide it into 72. That is the number of years it will take to double your money.

√72

This “Rule of 72” table will help illustrate this concept

Age 4%18 yrs

Age 6%12 yrs

Age 8%9 yrs

Age 12%6 yrs

29 $10,000 29 $10,000 29 $10,000 29 $10,000

47 $20,000 41 $20,000 38 $20,000 35 $20,000

65 $40,000 53 $40,000 47 $40,000 41 $40,000

65 $80,000 56 $80,000 47 $80,000

65 $160,000 53 $160,000

59 $320,000

65 $640,000


√72

? How much income will I receive at retirement

? How much will my spouse receive

? What is the FERS Supplement

? How much will Federal Employee Group Life (FEGLI) cost me at retirement

? What kind of penalties will I receive if I retire early

? What are my investment & retirement options with my TSP

? Can I count my accrued Sick Leave for my retirement

Are you aware of the changes that have been made to your Federal Benefits? These SHOULD be a few of the questions you have concerning your retirement:


BENEFIT ANALYSIS

By attending this Workshop and being an “AIM Member” you will receive a

Complimentary

“FEDERAL BENEFIT ANALYSIS”


A Federal Benefits Specialist will meet with you and explain your Benefit Analysis which will include:

Eligible Retirement Age

CSRS, FERS Pension (projected 10 years beyond)

FEGLI costs

Health Insurance costs

FERS Supplement and Monthly Social Security

Survivor Benefits and costs

TSP projections

and more . . . Federal Employee Service Center 2012


TaxableIncome

Tax FreeIncome

FESC Strategic Planning

Tax DeferredIncome

Stocks TSP Roth IRASocial Security 401k’s TSP Roth Pensions IRA’s Life Insurance Real Estate 403b’s (cash value)Checking Accts 457’s Muni-Bonds Savings Accts CD’sMoney Market Accts

Income Streams


Top 5 Reasons

Reference: TSP website


Compared to



Opinions




Federal Employee Service Center “Serving Federal & Government Employees”

Office 281.741.1502 Toll Free 1. 888.206.3352 Fax 713.634.2733

521 N. Sam Houston Pkwy E Suite 623www.WebFederalService.com

www.FederalBenefitAnalysis.orgFederal Employee Service Center 2012

Documents

“Serving Federal & Government Employees” TSP Federal Employee Service Center 2012 Welcome “AIM Members!”