The Federal Employee’s Pre‐Retirement Workshop · Agency Automatic 1% Contributions(IRC section 402 (g) elective deferral limit) Agency Matching Contributions Up to 5% “Catch‐up”

6/13/2018

Copyright 2018 Financial Workshops, LLC 1

The Federal Employee’s Pre‐Retirement Workshop ‐‐

Presented by:

© 2018 Financial Workshops, LLC www.thriftsavingsplan.org

DISCLAIMER


In the preparation of this workshop, efforts have been made to present current and correct information.

Nonetheless, tax, benefits, and legislation often change and inadvertent errors can occur. The information contained in this presentation is intended to afford general guidance and is not a substitute for professional financial, legal, tax, or investment advice.

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Investment FundamentalsInvestment & the TSP

Utilizing the Thrift Savings Plan



What is the TSP?

A defined contribution retirement SAVINGS and INVESTMENT plan for Federal EmployeesSimilar to 401(k) plansEstablished in 1986 as a portable retirement account that can move with you when you retire or leave Federal service.

The value of your TSP account may influence your retirement timing decision.


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Understanding the Traditional TSP & Roth 401‐(K)

Contributions (Pre‐tax vs. after tax)

Investment decisions

Distributions options



Traditional TSP ContributionsEmployee Contributions (Pre‐Tax)

Up to $18,500 in 2018(IRC section 402 (g) elective deferral limit)Agency Automatic 1% Contributions*

Agency Matching Contributions*Up to 5%

“Catch‐up” contributions Up to $6,000 in 2018

Must be at least 50 years old in the year catch‐up contributions are made (IRC section 414 (v))

* FERS employees only


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TSP Contributions

No Agency contributions or matching for

CSRS employees.



FERS Government Matching Contributions

If employee contributes:

Government will contribute

Total Contribution

0% 1% 1%

1% 1 + 1 = 2% 3%

2% 2 + 1 = 3% 5%

3% 3 + 1 = 4% 7%

4% 4 + .5 = 4.5% 8.5%

5% 4 + 1 = 5% 10%

6% + 5% 11% + excess


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in 2012

Roth 401K

Began to offer

TSP



A Roth 401k feature will combine:

Note: Contributions to the Roth 401‐(k) are after tax dollars but your account will grow tax‐free and future distributions are tax‐free (subject to distribution requirements).

All of the benefits of TSP retirement savings

After‐tax benefits of a Roth Savings Plan.

with


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You will pay no Federal taxes when you withdraw your Roth 401k as long as:

You are at least age 59 ½

and

have been making contributions for at

least 5 years



Maximum Contributions = IRS elective deferral limits

$18,500+ “catch‐up”

contributions for those who are eligible

2018


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Is the TSP Roth 401(k) right for me?

Will you be in a higher tax bracket when you retire than you are now?Do you want to diversify tax risk in the face of uncertain future tax rules?Do you have a long time to save and will benefit from tax‐free compounded earnings?



Financial Savings Principles

Factors to consider in saving for retirement:Always contribute the MAXIMUM amount allowed within your budgetResist the temptation to use money from your Thrift Savings Plan prior to retirement

Loss of compoundingLoss of return opportunitiesPotential adverse tax consequencesCan restrict future participation

By not maximizing, you lose out on potentially THOUSANDS OF DOLLARSthat could be invested for your retirement


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Investment Fundamentals

Three Primary Asset Categories



Higher Risk

Higher Potential Return

Lower Risk

Lower Potential Return

Investment Spectrum


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Nominal vs. Real Rate of Return: 1967‐2016

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Stocks Bonds T‐Bills

10.09%

6.66%

4.82%

8.07%

5.32%

3.86%

6.07%

3.32%

1.86%

Gross ROR

After Taxes

After Taxes & Inflation

Assumes a 20% Tax Rate and 2% Inflation


Source: Federal Reserve database in St. Louis (FRED). January 5, 2017


Investment Choices

G Fund

C Fund

S Fund

F Fund

I Fund

Average rate of return (as of December 2017)


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26%

9%

25%

20%

20%C Fund

S Fund

I Fund

F Fund

G Fund

Asset Allocation ‐ Moderate

Worst* Best* Average*

‐18% to ‐25% +18% to +25% +8% to +9%

(*) 1‐year



Fund Definition: L Funds

L FUNDS – “Life Cycle” Funds (5 options)A form of investing for retirement in which the investor chooses an expected withdrawal date Fund becomes more conservative over time as the expected withdrawal date approaches

L Funds rebalanced dailyEach quarter, each L Fund shifts to a slightly more conservative mixExperts review investment mixes periodically to be sure they are still appropriate

An allocation model that uses the existing asset classes as represented by the original TSP funds (G,F,C,S, and I)

Caution:While selecting an L Fund model based upon an expected retirement date may help manage the allocation decision, it DOES NOT insure that you will have accumulated the amount of capital needed to support a lengthy retirement (20‐30 years) at the lifestyle you desire!


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Risk

Return

G Fund F Fund C Fund S Fund I Fund

INCOME

2020

2030

2040 2050



L 2050

L 2030

L 2040

L 2020

L Income

For participants who will begin to withdraw their money after 2045.

For participants who will withdraw their money beginning 2035 through 2044.



For participants who are currently withdrawing their TSP accounts in monthly payments.


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Fund Definition: L Funds Time HorizonsChoose: If your time horizon is:L 2050 2045 or laterL 2040 2035 through 2044L 2030 2025 through 2034L 2020 2017 through 2024L Income Now Withdrawing

L Income

L 2020 L 2030 L 2040 L 2050 G Fund F Fund C Fund S Fund I Fund

2013 6.97% 16.03% 20.16% 23.23% 26.20% 1.89% (1.68%) 32.45% 38.35% 22.13%

2014 3.77% 5.06% 5.74% 6.22% 6.37% 2.31% 6.73% 13.78% 7.80% (5.27%)

2015 1.85% 1.35% 1.04% 0.73% 0.45% 2.04% 0.91% 1.46% (2.92%) (0.51%)

2016 3.58% 5.47% 7.07% 7.90% 8.65% 1.82% 2.91% 12.01% 16.35% 2.10%

2017 6.19% 9.86% 14.54% 16.77% 16.77% 2.33% 3.82% 21.82% 18.22% 25.42%

TSP Historical Returns



Distribution Options1. Receive your account in a single payment

Roll the money over into some other retirement‐eligible investment fund (anytime after age 59½)

2. Receive the account in a series of monthly payments

Based on your life expectancy or a specific dollar amount

3. Have TSP buy an annuity for you (life income stream)

Single lifeJoint life with spouseJoint life with someone other than spouse

4. A combination of Options 1‐3 (mixed withdrawal)5. Leave the money in the account

Until later of age 701/2 or retirement, then must choose one of the options


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Distribution Options

Lump Sum or Partial Distribution




Roll‐over (transfer) to an eligible retirement account

(Non‐taxable event)


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Monthly payments based on life expectancy (see IRS tables)

Specific dollar amount (subject to minimum payment)Year 1Year 1 Year 3Year 3 Year 4Year 4 Year 5Year 5 Year 6Year 6 Year 7…Year 7…Year 2Year 2

Year 3Year 3 Year 4Year 4 Year 6Year 6Year 2Year 2Year 1Year 1 Year 5Year 5 Year 7…Year 7…



Annuity

Purchase an Annuity:


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Annuity‐Settlement Options

Single Life annuityJoint Life annuity (insurable interest clause)

100% survivor (Payments continue level)(Joint annuitant >10 younger not eligible*)50% survivor (Payment cut in‐half)Level & increasing payment optionsCash refundTen‐year certain

*Former spouse payable under court order



Annuity


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TSP Modernization Act‐ Allows for unlimited age‐based withdrawals for

employees over 59 ½ years of age and for separated employees with a TSP account balance.

‐ Gives the ability to change withdrawal amounts/frequency at anytime in the year.

‐ The president signed the bill on 11/17/2017 and the Federal Retirement Thrift Investment Board(FRTIB) has 2 years from this date to enact the changes.

‐ FRTIB is changing website programming, webpages, publications, and forms to comply with new changes over this 2 year period.

‐ If you begin receiving benefits before the changes are enacted, you will still be eligible to make adjustments once the changes are in place.




Does Rolling‐Over the TSP account make sense?

Low expenses

No 10% early withdrawal penalty if retiring at age 55‐59 ½Protection from creditors.

No RMD at age 70 ½ as an active Federal employee

Non‐spousal beneficiaries can transfer TSP assets to a Roth IRA

(Roll‐over IRA)

Expanded investment options.

More withdrawal options

(non‐systematic)

Single retirement account makes monitoring easier

An IRA has estate planning opportunities

(TSP account)


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Investment Options

Asset classes available:

TSP Roll‐over IRA

U.S. Equity Yes/2 Yes

Global Equity Yes/1 Yes

Emerging Markets No Yes

U.S. Fixed Income Yes/2 Yes

Global Fixed Income No Yes

Commodities No Yes

Real Estate No Yes

Specialty No Yes

Should I roll‐over my TSP?




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99% 99% 99% 99% 99% 99%

92 94 97 98 99 99

81 83 83 80 69 42

66 65 61 43 14 1

48 43 33 12 0 0

Withdrawal

100/0 80/20 60/40 40/60 15/85 5/95

More Likely Less Likely

3%

4

5

6

7

Recommended

Risky Zone

Rate*

Stock / Bond Mix

Withdrawal Rates and a 25‐Year Retirement



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Things You May Not Know About The TSP

Federal employees working in Federal service at age 70 ½ or over are not subject to required minimum distributions.

TRUE

FALSEOR




Federal employees who separate from service at age 55 – 59 ½are subject to a 10% tax penalty for withdrawals from the TSP.

TRUE

FALSEOR


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Agency matching will always be deposited into the employee’s traditional TSP account even if the employee’s contributions via payroll deduction are directed to the Roth TSP account.


TRUE

FALSEOR



An employee will be able to transfer contributions from the traditional TSP funds to the Roth 401 (k).


TRUE

FALSEOR


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You can contribute up to the IRS elective deferral limit to each of the traditional TSP account and the Roth 401 (k) account.


TRUE

FALSEOR



Retired employees who do not withdrawal or begin withdrawing from their TSP account by the withdrawal deadline forfeit their TSP account.


TRUE

FALSEOR


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Withdrawal deadline is the later of, April 1st the year following the year you become 70 ½, or the year following your separation.

You can reclaim your account, however you will not receive earnings on your account from the time the account was forfeited.




A Roth 401K is subject to required minimum distributions beginning at age 70 ½.


TRUE

FALSEOR


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All factors to Consider:

Age and life expectancyRisk tolerance levelsRate of return goalsLiquidity requirementsInvestment alternativesIncome needs

Dollar amount neededWhen it will be neededHow long it will have to last (life expectancy)

Will I still be able to maintain my lifestyle?What kind of benefits can I provide for my family upon my death?


Retirement Planning


Types of Retirement

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Who would consider retiring if you could

replace your paycheck the day after you separated

from service?


© 2018 Financial Workshops, LLC www.thriftsavingsplan.org© 2016 Financial Workshops, LLC

Retirement Planning

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Key Retirement & Investment Challenges

Longevity

Inflation rates

Market volatility

Excessive withdrawal rates

Healthcare costs


Retirement Planning

Source: Annuity 2017 Mortality Table, American Society of Actuaries. Figures assume you are in good health. For illustrative purposes only.

At least one person has a 25% chance of living beyond 97

Couple (Both Age 65)

FemaleAge 65

Age 92

MaleAge 65

Age 88 94 100

Age 86 92 100

50% chance ofliving beyond 86

25% chance of living beyond 92

50% chance ofliving beyond 88

25% chance of living beyond 94

97 10095

9590

90

9085

85

At least one person has a 50% chance of living beyond 92

The Statistics of Longevity

Retirement Planning


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$557

$1,776

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

Retirement Income (Purchasing

Power)

Years of Retirement (Longevity)Loss of Purchasing Power Maintaining Purchasing Power

LONGEVITY and THE RETIREMENT IMPERATIVE:

2% Inflation

Creating a rising stream of income


Retirement Planning

‐1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

As measured by the Consumer Price Index


Retirement Planning

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Cash Flow Needs During Retirement

Living expenses Long term health care costs

Vacations and travelVolunteeringCharitable work/donationsA second “career”

The Basics

The Reasons for Retirement


Retirement Planning

Expenses May Shift

Retirement savingsPayroll taxesCommuting costsClothing/dry cleaning

Health careTravelEntertainmentHobbies

Reduced Expenses

Increased Expenses


Retirement Planning

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Expenses May Shift

Cost of living adjustments (COLA’s)Rising values of retirement investmentsEligibility for Military or other public pensionsSending spouse back to work

Things that could cause income to rise in retirement


Retirement Planning

Three Major Sources of Retirement Income

Employer Sponsored Plans

Social Security

Personal Savings & Investments


Retirement Planning

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Retirement Annuity/Pension

Requirements for participation and eligibilityMonthly benefits determined by formulaRisk on employer

Employer Sponsored Retirement Programs

Defined Benefit

Funds set aside by/for employeeBenefits determined by actual funds in the account

Depends on amount of contributions and rate of return

Risk on employee

Defined Contribution


Retirement Planning

Phased Retirement

Public Law 112‐141 gives federal employees the ability to “phase” in their retirement while continuing to work on a part‐time basis.

Retirement Planning


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Phased Retirement

An eligible employee will receive a CSRS or FERS annuity that is reduced proportionately by the amount of time the retired employee works.

Retirement Planning

Work 50% of the time

Receive 50% of the annuity

+

Income Sources ‐ CSRS

Single Defined Benefit Retirement System

1987:Thrift SavingsPlan Option

Added

DB:CSRS Annuity7.0% of pay


Retirement Planning

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Retirement Eligibility

Unreduced Benefits

Age 55 and 30 years of credible serviceAge 60 and 20 years of credible serviceAge 62 and 5 years of credible service

Employees contribute 7% of basic pay

Also: Unused sick leave credit


Retirement Planning

DC:Thrift Savings

PlanUp to $18,500* of pay

(2018)

DB:FERS Annuity0.8% of Basic Pay

3.1% for employees hired after 12/31/2012

+

DB:Social Security

Benefits6.2% of pay

+

Income Sources ‐ FERS

Dual Defined Benefit and Defined Contribution Plan


Retirement Planning

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Retirement EligibilityUnreduced Benefits

Age 62 and 5 years creditable serviceAge 60 and 20 years creditable serviceMRA and 30 years creditable serviceMRA and 10 years creditable service

Postpone benefit receipt until age 62 (age 60 with 20 years of service) to avoid 5% per year annuity reduction

Employees contribute .8% of basic pay(3.1% for employees hired after December

31, 2012)


Retirement Planning

Minimum Retirement Age

If you were born Your MRA

Before 1948 55 Years

1948 55 Years, and 2 months





1953 to 1964 56 Years





1969 56 Years, and 10 monthsAfter 1969 57 Years


Retirement Planning

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Credit for Unused Sick Leave

Full credit for unused hours, no limit. However, any hours that do not add up to a full month are discarded.

Note: unused sick leave cannot be used in computing high‐3 salary or for meeting the minimum length of service for retirement eligibility


Retirement Planning

CSRS General Retirement Formula

Unreduced Annuity

3 Steps:

1.5% x high 3 average salary x years of service (up to 5)

1.75% x high 3 average salary x years of service (6‐10)

Plus: 2.0% of high 3 average salary xall service (over 10 years)


Retirement Planning

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(40%)

(16.25%)

EXAMPLE

Step One

1.5% x $60,000 x 5 years = $4,500

2.0% x $60,000 x 20 years = $24,000

Age 55

30 years of service

High‐3 = $60,000

Step Two

1.75% x $60,000 x 5 years = $5,250

Total Annual Annuity = $33,750


Step Two

$33,750/$60,000 = 56.25% income replacement


Retirement Planning


Exception for lengthy service due to sick leave credit.

Early retirement penalty: 2%/year

Annuity generally capped at 80% of high 3 average salary


Retirement Planning

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FERS Basic Annuity Calculation

Unreduced Annuity

If retiring before age 62:

If at least age 62 and at least 20 years of service:

1.0% x high 3 average salary x years of service

1.1% x high 3 average salary x years of service


Retirement Planning

FERS Basic Annuity Calculation

EXAMPLE

Step One

If at Age 62, 30 years of service, High‐3 = $60,000

1.0% x 30 years = 30%

1.1% x 30 years (33%) = $19,800/year

Age 57

30 years of service

High‐3 = $60,000

Step Two

30% x $60,000 = $18,000/year*

*No Cola until age 62© 2018 Financial Workshops, LLC www.thriftsavingsplan.org

Retirement Planning

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Basic Annuity Calculation

High‐3 Average Salary includes:

Regular PayLocality Pay*Environmental differential payPremium pay for standby timeLaw enforcement availability payNight differential pay (wage grade only)Special pay/recruiting and retention

*Public Law 111‐84 applies to non‐foreign employees phase‐in until 2013


Retirement Planning


Special Category Employees

Optional

Mandatory

Age 50 and 20 years of creditable service

Law enforcementAge 57 and 20 years of creditable service

Fire fightersAge 55 and 20 years of creditable service

Air traffic controllersAge 56 and 20 years of creditable service


Retirement Planning

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Calculation

Employees contribute 1.3% of pay

1.7% of high 3 average salary up to 20 years

1.0% of high 3 average salary over 20 years


Retirement Planning



CSRS Calculation

2.5% of high 3 average salary up to 20 years

2.0% of high 3 average salary over 20 years


Retirement Planning

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Retiring Prior to Age 62

Step 1: Estimate the full career Social Security Benefit as if the employee were age 62.

Step 2: Calculate civilian service creditable under FERS, rounded to nearest full year Note: Military service is included only if performed during leave from civilian service after FERS coverage began.Step 3: Divide the years of FERS service by 40 to obtain a fraction.Step 4: Multiply the career Social Security Benefit by the fraction determined in Step 3.

Supplement Calculation

$1,000/month

30 years

30 ÷ 40 = .75

.75 x $1,000 = $750/month FERS

Supplement


Retirement Planning

Annuity Supplement

Retiring Prior to Age 62

Supplement is subject to Social Security earnings limitations

Limit applies only to income from wages Must report earnings to OPM for each year eligible to receive supplementIn 2018, earnings limit = $17,040Retirees exceeding this amount:

$1 in supplement benefits will be withheld for every $2 earned above the limit

Annuity Supplement

Example:

Earn $20,000 and receive $12,000 annual supplement

benefits

$20,000 ‐ $17,040 = $2,960

$2,960/$2 = $1,480

$12,000 ‐ $1,480 = $10,520© 2018 Financial Workshops, LLC www.thriftsavingsplan.org

Retirement Planning

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COLA

Percentage of increase determined by average Consumer Price Index for Urban Wage Earners (CPI‐W) for Q‐3 over Q‐3 average of the previous year.

A COLA* is paid to all CSRS retirees, regardless of the age at which they retire, and to their survivors.

*Subject to final approval


Retirement Planning

COLA

Amount of increase depends upon the change in the average Consumer Price Index for Urban Wage Earners and

Clerical Workers (CPI‐W) for the third quarter of each year over the third quarter average CPI‐W index of the

previous year.

If it increases by 3% or more, COLA = CPI‐W minus 1%

If it increases by 2% to 3%, COLA = 2%

If it increases by 2% or less, COLA = CPI‐W


Retirement Planning

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COLA

Retirement benefits payable to retirees age 62 and olderSurvivor benefitsDisability retirement benefitsCertain special service (LEO, ATC, FF) retirees age 50 with at least 25 years of serviceSpecial CIA employees

Benefits Eligible for COLAs:


Retirement Planning

Age and years of service combinations

Social Security Eligibility (age 62 or later)

Earned income above certain levels

Events that may cause adjustments in income:


Retirement Planning

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CSRS Off‐Set formula (age 62)

Government Pension Offset

Windfall Elimination Provision

Events that may cause adjustments in income:


Retirement Planning

Offset occurs when you become

eligible to receive Social Security

benefits

Usually age 62

If you retire at age 62 or later and

are already entitled to Social

Security benefits, offset made at

retirement

The offset will be deducted from

CSRS even if you are postponing

Social Security benefits

CSRS Annuity Offset


Retirement Planning

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If you continue to work in a job where

you pay Social Security taxes, SSA

recalculates your Social Security

benefit to take into account your

extra earnings

OPM will recompute your offset

calculation each year you have

these additional earnings

CSRS Annuity Offset


Retirement Planning

The offset reduction is then subtracted

Offset reduction is lesser of:1. The difference between the Social Security

monthly benefit amount with and without CSRS

offset service

2. The product of the Social Security monthly

benefit amount, with Federal earnings,

multiplied by a fraction where the numerator is

the employee’s total CSRS offset service rounded

to the nearest whole number of years and the

denominator is 40Social Security Benefit x Total Years of Offset Service

40

CSRS Annuity Offset Formula


Retirement Planning

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Applies if you worked for a federal, state, or local government where you did not pay Social Security taxesOffset reduces the amount of your Social Security spousal or survivor benefits by 2/3 of the amount of your non‐Social Security annuityExample

Your monthly CSRS annuity = $1,200Social Security spousal or survivor annuity = $900$1,200 x 2/3 = $800 $900 ‐ $800 = $100Amount you will receive from Social Security.

Government Pension Offset


Retirement Planning

Applies if you will receive a pension from a job where you didn’t pay Social Security taxes (CSRS) and you also have enough Social Security credits to be eligible for retirement or disability benefits

Applies to workers who reach 62 or become eligible for a monthly pension based in whole or in part on work not covered by Social Security

Results in use of modified formula to calculate your personal Social Security benefit (Up to a 50% reduction, subject to “substantial earnings” test)

Windfall Elimination Provision (WEP)


Retirement Planning

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Social Security is penalized by the lessor of 50% of the Social Security benefit expected at age 62, or $442.50/month.

21‐29 years of substantial earnings will mitigate the WEP penalty and after 30 years the penalty is not assessed.

Windfall Elimination Provision (WEP)


Retirement Planning

The Windfall Elimination Provision does not apply if:

You are a federal worker first hired after December 31, 1983; (FERS Employee)

You were employed on December 31, 1983, by a nonprofit organization that did not withhold Social Security taxes from your pay at first, but then began withholding Social Security taxes from your pay;

Your only pension is based on railroad employment;

You have 30 or more years of substantial earnings under Social Security.

Substantial Earnings Test


Retirement Planning

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Minimum dollar amount up to 55% of unreduced annuity electionElection may be a percentage or dollar amountCost: 2.5% of first $3600, plus 10% of the amount over $3600 used as a baseBenefit continues to survivor for life, unless remarriage prior to age 55

CSRS Survivor Annuity Option


Retirement Planning

CSRS Survivor Annuity OptionEXAMPLE:

Age 60

Years of service: 30

High 3 Average: $60,000

Retirement Benefit: $2,813 / month

Survivor Benefit: $1,546/ month

Cost: $274/ month

Annuities “pop up” to the unreduced amount if the

designated annuity beneficiary pre‐

deceases the retiree.


Retirement Planning

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Election is a fixed percentage of the unreduced annuity25% or 50% option25% election – 5% of unreduced annuity50% election – 10% of unreduced annuityInsurable Interest Party may be namedCost based on the age difference ranging from 10% to 40%

FERS Survivor Annuity Option


Retirement Planning

*Survivor eligible for the greater of either their own benefit or the deceased spouses benefit

FERS Survivor Annuity OptionEXAMPLE:

Age 60

Years of service: 30

High 3 Average: $60,000

Retirement Benefit: $1,500 / month

50% Option 25% Option

Survivor Benefit: $750 / month

Survivor Benefit: $375 / month

Cost: $150 / month Cost: $75 / month

+ Social Security Benefit*

Annuities “pop up” to the unreduced amount if the

designated annuity beneficiary pre‐

deceases the retiree.


Retirement Planning

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Please note: Retiring Federal Employees MUST elect a form of a

survivor annuity to continue eligibility for health insurance for

their dependents.

Survivor Annuity Option


Retirement Planning


Retirement Planning

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Retired Military Service

Cannot receive credit in your civilian annuity unless:

Waive retired payRetired military pay awarded:

Service‐connected disability incurred in combatService‐connected disability caused by instrumentality of war in line of dutyUnder Provisions of 10 U.S.C., Chapter 67


Retirement Planning

Blended Retirement System (BRS)

The Blended Retirement System (BRS) is for uniformed service members who have served fewer than 12 years as of 12/31/2017.

These members may opt‐into BRS from 1/1/2018 ‐ 12/31/2018.

Anyone enrolled after this date will be part of the BRS program.


Retirement Planning

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Members will receive TSP contributions from their employing service, in addition to a reduced annuity benefit.Members need to go through payroll system to elect personal contribution.Agency matching contributions begin immediately for participants switching to the BRS.


Retirement Planning


BRS members may be eligible to elect to receive a lump sum payment of their annuity upon retirement.BRS members are eligible to receive a one‐time, mid‐career bonus payment in exchange for an agreement to perform additional obligated service.


Retirement Planning

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Social Security



Retirement Planning

Social Security

Eligibility

Retirement40 quarters of coverage

2018: $1,320 earned equals one credit/quarter

Age (62 to 67) Early to Full Retirement AgeCost – 7.65%

6.20% OASDI1.45% Medicare


Retirement Planning

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Social Security

Earnings Limitations

Applies if you retire prior to full retirement age and continue working

Social Security benefit will be reduced $1 for each $2 you earn above $17,040 (2018)

For Special Category Employees, earnings test applies when employee reaches minimum retirement age

Example:

Earn $20,000 and receive $12,000 annual Social Security benefits

$20,000 ‐ $17,040 = $2,960

$2,960/$2 = $1,480

$12,000 ‐ $1,480 = $10,520


Retirement Planning

Age 62 Age 66 Age 70

Age$1,125.00

(monthly benefit)

$1,500.00 (monthly benefit)

$1,980.00 (monthly benefit)

62 $0.0063 $13,500.0064 $27,000.0065 $40,500.0066 $54,000.00 $0.0067 $67,500.00 $18,000.0068 $81,000.00 $36,000.0069 $94,500.00 $54,000.0070 $108,000.00 $72,000.00 $0.0071 $121,500.00 $90,000.00 $23,760.0072 $135,000.00 $108,000.00 $47,520.0073 $148,500.00 $126,000.00 $71,280.0074 $162,000.00 $144,000.00 $95,040.0075 $175,500.00 $162,000.00 $118,800.0076 $189,000.00 $180,000.00 $142,560.0077 $202,500.00 $198,000.00 $166,320.0078 $216,000.00 $216,000.00 $190,080.0079 $229,500.00 $234,000.00 $213,840.0080 $243,000.00 $252,000.00 $237,600.0081 $256,500.00 $270,000.00 $261,360.0082 $270,000.00 $288,000.00 $285,120.0083 $283,500.00 $306,000.00 $308,880.00

Break‐even Points

Calculations are based on a person

born in 1951


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Social Security

Taxability of Social Security Benefits

Single Married Filing Jointly

50%$25,000–$34,000 $32,000–$44,000

85%Over $34,000 Over $44,000

50% and 85% refers to percentage of the Social Security benefit that is reportable as income for tax filing purposes


Retirement Planning



Social Security



Retirement Planning

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Three Buckets

TAX FREE

TAX DEFERRED TAXABLE

Examples: Roth IRA and Roth 401(k)

Examples: Traditional IRA, 401(k), 403(b), TSP, etc.

Examples: Bank & brokerage accounts, CDs, savings, bonds, etc.

Tax‐free withdrawals

Withdrawals taxed as ordinary income

Withdrawals taxed as ordinary income or capital gains


Retirement Planning

Calculating the Cost of RetirementBallpark E$timate®

www.choosetosave.org

The Ballpark E$timate is an easy‐to‐use, two‐page worksheet that helps you quickly identify approximately how much you need to save to fund a comfortable retirement.

Complete the worksheet online and let the computer do the math.


Retirement Planning

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Ballpark E$timate®

www.choosetosave.org

Federal Government Employees Ballpark E$timator

Includes projected Federal annuity and Thrift Savings Plan benefits to help you quickly identify approximately how much you need to save to fund a comfortable retirement.

Calculating the Cost of Retirement


Retirement Planning

5 Years Before Retirement

Confirm enrollment in FEGLI in order to keep benefit post‐retirementConfirm enrollment in FEHB in order to keep plan eligibility post retirementMaximize contributions to TSP accountBegin paying off any loans on the TSP‐ Must be paid off prior to retirement.


Retirement Planning

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1 Year Before Retirement

Determine best date to retire‐ Plan to submit paperwork at least 60 days in advanceFinalize plans for best TSP options upon separation form serviceDetermine amount of cash on hand required to transition from work to retirement (2‐3 months)Review and revise, if necessary, all beneficiary designations Finalize Survivor Annuity election


Retirement Planning

Best Dates to Retire

*TransFERS employees are employees with at least five years of CSRS service who voluntarily transferred to FERS during on the two FERS “open seasons” held in 1987‐88 and 1998. Upon retiring, these employees receive both a CSRS annuity and a FERS annuity but follow FERS retirement eligibility rules even though they are also receiving a CSRS annuity


Retirement Planning

Calendar Year

Leave Year: Beginning Date to Ending Date

Best Days to RetireCSRS/CSRS Offset Employees

Best Days to RetireFERS/”Trans” FERS Employees

2018 1/7/2018 to 1/5/2019(26 pay periods)

Jan. 3, Feb. 3, Mar. 3, Mar. 31, Apr. 28, Sept. 1 and Sept. 29

Mar. 31, Apr. 28, Sept. 29 and Dec. 31

2019 1/6/2019 to 1/4/2020

(26 pay periods)

Jan. 3, Feb. 2, Mar. 2, Mar. 30,

Aug. 3, Aug. 31 and Sept. 28

Mar. 30, Aug.31,

Sept. 28 & Dec. 31

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Hallier’s 10 rules for investment success:


1. Select an asset allocation based on your ability to tolerate downside risk.

2. Keep your emotions out of your investment decisions. See rule 1.

3. Keep expenses within the portfolio as low as possible.

4. Maintain sustainable withdrawal rates (at or below 5% per year)

5. If you have money to invest, then invest. Don’t attempt to time the market.

Hallier’s 10 rules for investment success:


6. Anticipate the effects of tax and inflation on long term returns.

7. Maintain adequate cash reserves.8. Rebalance your portfolio.9. If it sounds too good to be true…it is!10. If you don’t know what you’re doing,

hire a professional. Make sure the professional is acting as a fiduciary.

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“REWIREMENT” Tips


• REWIREMENT is the time in our lives when the

world of work becomes who we were, not who we

are. The following suggestions will help all enjoy

their retirement:

1.) It’s time to use the money you saved up. Use it and enjoy it. Don’t just

keep it for those who may have no notion of the sacrifices you made to get it.

Remember there is nothing more dangerous than a son or daughter‐in‐law

with big ideas for your hard‐earned capital. This is a time for you to enjoy

some peace and quiet.



2.) Stop worrying about the financial situation of your children and

grandchildren, and don’t feel bad spending your money on yourself. You’ve

taken care of them for many years, and you’ve taught them what you could.

You gave them an education, food, shelter and support. The responsibility is

now theirs to earn their own money.

3.) Keep a healthy life, without great physical effort. Do moderate exercise

(like walking every day), eat well and get your sleep. It’s easy to become sick,

and it gets harder to remain healthy. That is why you need to keep yourself in

good shape and be aware of your medical and physical needs. Keep in touch

with your doctor, do tests even when you’re feeling well. Stay informed.

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4.) Don’t abandon your hobbies. If you don’t have any, make new ones. You

can travel, hike, cook, read, and dance. You can adopt a cat or a dog, grow a

garden, play cards, checkers, chess, dominoes, golf. You can paint, volunteer

or just collect certain items. Find something you like and spend some real

time having fun with it.

5.) Laugh. Laugh A LOT. Laugh at everything. Remember, you are one of the

lucky ones. You managed to have a life, a long one. Many never get to this

age, never get to experience a full life. But you did. So what’s not to laugh

about? Find the humor in your situation.

6.) REMEMBER: “Life is too short to drink bad wine.”

Websites to consider?


www.thriftsavingsplan.org

www.creativeplanning.com

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Thank you for attending today’s program!

Randall P. Hallier, CFP®

3400 College Blvd, Suite 100Leawood, KS 66211

Phone: (913) 269‐3151Fax: (913) 338‐4507

[email protected]

For more information on professional financial planning from those specializing in Federal Employees Nationwide; Go to:

www.thriftsavingsplan.orgwww.creativeplanning.com


Documents

The Federal Employee’s Pre‐Retirement Workshop · Agency Automatic 1% Contributions*(IRC section 402 (g) elective deferral limit) Agency Matching Contributions* Up to 5% “Catch‐up”

The Federal Employee’s Pre‐Retirement Workshop · Agency Automatic 1% Contributions(IRC section 402 (g) elective deferral limit) Agency Matching Contributions Up to 5% “Catch‐up”