Year End Financial Checklist

The end of the year is one of the best times to check in on your financial health. Here’s a list of recommended items from your friends at GPIS.

1. Review your beneficiary designations
2. Select your benefits for next year through open enrollment
3. Review your TSP contributions and allocations
4. Evaluate your insurance coverages and amounts
5. Review your credit report and score
6. Adjust your budget and spending plan
7. Set goals for next year
8. Complete a federal benefit & retirement review

Review your beneficiary designations

Many federal employees don’t realize they have multiple beneficiary designations to keep current. It’s important to review these annually to ensure the right person will receive the correct funds. These designations apply to your federal benefits, and also any external policies or accounts you have.

Examples include:

• FEGLI
• FERS Benefits
• CSRS Benefits
• TSP
• IRAs / Roth IRAs
• Life Insurance Policies
• Investment Accounts
• Annuities
• 529 Plans

Feel free to use our “Beneficiary Review Checklist” to help make the asset transfer process smooth and easy for your loved ones.

Select your benefits for next year through open enrollment

2021 Open Season is from November 8, 2021 through December 13, 2021. During this time, you can review and change your existing coverages for the following:

• Health Insurance (FEHB)
• Dental/Vision (FEDVIP)
• Flexible Spending Accounts (FSAFEDS)

Outside of Open Season, you will be unable to enroll, make changes or cancel coverages unless you experience a qualifying life event.

Review your TSP contributions and allocations

Throughout 2021, the market has continued an upward trend and all TSP funds outside of the F-fund are positive year-to-date. Review your portfolio and make any necessary changes based on where you are in your career and your retirement goals.

Now is also a good time to decide whether or not to increase or decrease contributions for next year.

To estimate how much you’ll have in your TSP at retirement, you can use OPM’s Growth Calculator.

Evaluate your insurance coverages and amounts

Now is a great time to take inventory of your home, auto and life insurance policies. Make sure the coverages are still correct based on your current situation. It never hurts to shop around and ensure you’re getting the best rates at the best prices.

Mortgage rates continue to hover near historic lows, so refinancing might be a good idea if you plan on staying put.

Review your credit report and credit score

If you haven’t done so in a while, make sure to check your credit report. There are plenty of free apps (Credit Karma) that allow you to keep tabs on any changes to your credit score. You’ll want to make sure there are no discrepancies, you haven’t been a victim of identify theft, and there aren’t any big decreases in your overall score.

Adjust your budget and spending plan

It always helps to know where you’re money is going every year. Now is a good time to evaluate your spending habits over the last year.

If you currently keep a budget, ensure you’re taking into consideration any income changes for 2022. This would include retirement, switching jobs, etc. Also make sure to include large outflows or major life events, including relocation, major purchases, and others.

If you don’t keep a budget, now is a great time to start — you can use our Budget Worksheet.

Set goals for next year (2022)

Review any and all goals you might’ve set for 2020 and update your progress. If you haven’t set any goals, now would be a good time to map them out for 2021. We suggest breaking your goals down into short-term goals and long-term goals. We also suggest making an action plan to achieve those goals — it always helps to break down the larger goals into smaller, actionable goals.

When goal-setting, make sure you include the total amount needed, the timeframe to achieve the goal, and the monthly contribution amount. You can make the monthly contribution a part of your monthly budget.

Complete a federal benefit & retirement review

Your federal benefits are complex. And there’s tons of information online. But it’s typically geared towards a large audience. Which means…it doesn’t always take your specific situation into account.

At GPIS, we specialize in federal benefits and retirement income. We look at your benefits now, and we show you how they change over time. We try to ensure you’re maximizing every dollar spent— and that you aren’t paying for things you don’t need.

How does it work?

The process is simple.

In our review, we’ll walk through your federal benefits and cover the following:

• Your current federal benefits and how much you’re paying and contributing
• The earliest dates you become eligible to retire
• The different retirement options available to you (disability, early, voluntary, deferred)
• How much you’ll receive as a pension in retirement and how it’s calculated (FERS or CSRS)
• Your FERS Special Retirement Supplement amounts and if you’re eligible
• How your survivor benefits work and important items to consider
• How to keep your health insurance coverage for yourself and your family
• Your 4 TSP options in retirement
• All your combined income sources to give you an estimate of your monthly income
• What the retirement process looks like and a timeline you can follow
• How to fill out your retirement packet correctly the first time

At the end, you’ll receive a personalized workbook you can keep for your records.

What’s the cost?

There is no cost for our reviews.

We focus on providing value first and foremost.

If there’s areas where we believe we can improve your situation, we’ll let you know.

Simply click the link below and our office will reach out to find a time that works best for you.

Federal Benefits Review & Retirement Analysis

For additional information, you reach us by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

-Sam Wiss, RICP

This material is intended for information purposes only. By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency. Contact your tax advisor regarding your specific situation.

“Hi GPIS. I’m a postal employee with 28 years of service. I want to retire at some point within the next three years. I have a large balance of sick leave and annual leave built up. I’m not sure if I should try and use the leave or keep it until my retirement date. How will they affect my retirement numbers? Can you provide some guidance?” -Michael

Sick Leave

Sick leave is a paid absence from duty. It can be used for things like personal medical needs, family care or bereavement, care of a family member or adoption related purposes.

It accrues at a rate of 4 hours each bi-weekly pay period for full-time employees.

There is no limit on how much sick leave can be accumulated.

How Sick Leave Affects Your Retirement Numbers

Your sick leave balance adds to your years of service in your annuity computation.

1 year of sick leave = 2087 hours.

The sick leave balance used for your annuity computation is based on the nearest month (it always rounds down to the nearest whole month increment.

*This is an important planning point.*

For example, if you had 336 hours of sick leave at the time of retirement, you would only be credited for one month, or 174 hours, and would lose the remaining balance (336-174 = 162 hours lost).

Below is a sick leave conversion chart based on the balance you have built at retirement.

Keeping with the same example, for an individual retiring at age 62 with a salary of $75,000, one year of extra sick leave would equal $825 more annually.

Our specialists work with you to determine a plan for maximizing your sick leave balances.

You can schedule a no-cost review here: https://gpis4u.org/free-analysis-review/

Make sure you don’t leave sick leave on the table at retirement.

Annual Leave

Annual leave may be used to vacations, rest and relaxation, personal business, or emergencies.

The accrual rates below are from OPM’s website.

However, only a certain amount of annual leave may be carried over into a new leave year.

The current amount is 30 days or 240 hours for federal employees within the United States.

Any unused leave above this amount is forfeited at the end of the leave year.

How Annual Leave Affects Your Retirement Numbers

Your annual leave balance is paid out in your last paycheck from federal service.

For an approximate estimate, take your hourly salary multiplied by your annual leave balance.

For example: Michael has 220 annual leave hours and has an annual salary of $75,000.

75000 / 2080 = 36.06 * 220 = $7,932.69

Michael would receive an additional amount in his final paycheck equal to $7,932.69 less any federal and state taxes.

What It Means For You

Your annual leave balance can help bridge the gap before you receive your first, full FERS pension check.

Do you know how much leave time you have saved?

Do you have a plan for using it or maximizing it as you near retirement?

Our financial professionals can help you put together a plan.

“You Don’t Know What You Don’t Know” and having the information you need can help you plan ahead properly.

Contact a financial professional from GPIS today — it’s complimentary!

For additional information, you reach us by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

-Sam Wiss, RICP

This material is intended for information purposes only. By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency. Contact your tax advisor regarding your specific situation.

Social Security Statement Redesign

For most federal retirees, Social Security is a foundational source of retirement income.

It’s one leg of the “three-legged stool” of retirement income.

It’s important to know your estimated benefit amounts so you can plan accordingly for retirement.

Recently the Social Security administration announced a redesign to the statements you receive online and by mail. The Social Security Statement is one of the easiest ways retirees can learn about their future social security entitlements and earnings history.

The new look aims to give individuals a simple, easily digestible format.

According to the Social Security announcement, “The new Statement is shorter, uses visuals and plain language, and includes fact sheets tailored to a person’s age and earnings history. It also includes important information people have come to expect from the Statement, such as how much a worker and family members could expect to receive in Social Security benefits and a personalized earnings history, in a clear, concise manner.”

Acting Commissioner Kilolo Kijazakai stated, “One of my top priorities is to provide information to people in clear and plain terms about Social Security’s programs and services. The streamlined Social Security Statement contains clear messaging and makes it easier to find information at a glance, helping to simplify our complex programs for the public.”

An example of the new Social Security statement is shown below.

Source: ssa.gov

What It Means For You

When was the last time you checked your estimated benefit amounts?

It’s recommended to check your statement at least once per year for accuracy.

Also, only online statements are available for those under age 60 — mailed statements are available upon request.

One of our financial professionals can walk you through the following:

• Help you set up your Social Security Account
• Obtain a new estimated statement
• Review your statement and figures
• Explain you and your spouse’s options
• Assist you in claiming strategies

“You Don’t Know What You Don’t Know” and having the information you need can help you plan your retirement income.

Contact a financial professional from GPIS today — it’s complimentary!

For additional information, you reach us by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

-Sam Wiss, RICP

This material is intended for information purposes only. By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency. Contact your tax advisor regarding your specific situation.

The Effect Of Taxes On Your Federal Retirement

“In this world, nothing is certain but death and taxes” – Benjamin Franklin.

We all want our retirement income streams to last as long as possible.

And, the unfortunate truth is taxes could have a large effect on your retirement benefits.

Many federal employees fail to take taxes into account when planning for retirement.

We see many people unpleasantly surprised when they receive their actual take-home pay.

When sitting down with your spouse and drafting your retirement budget, be sure to take the below into consideration…

How Will Your Retirement FERS/CSRS Pension Be Taxed?

Your FERS or CSRS pension, is taxed as ordinary income.

However, the contributions you’ve made throughout your working career will come back to you tax-free.

You’ve already paid tax on these contributions when they initially came out of your paycheck.

These tax-free payments are incorporated into your monthly pension check in retirement, but they’re spread out over your life expectancy.

In summary, a large portion of your pension will be subject to ordinary income taxes.

As you create your monthly retirement budget, make sure you’re taking state and federal taxes into account on your pension.

How Will Your FERS Special Retirement Supplement (SRS) Be Taxed?

The FERS SRS is a benefit available to certain FERS retirees’ who retire before age 62.

Its purpose is to supplement Social Security income until a retiree reaches age 62 (you don’t become eligible for Social Security withdrawals until 62).

You can read more about the SRS here.

Unfortunately, up to 100% of your FERS SRS will be subject to taxation.

The specific tax rate you’ll pay will depend on your earned income and also the applicable state and federal tax laws at that time.

Another note about the FERS SRS: it is subject to an earnings limit.

According to OPM, this earnings limit was $18,960 in 2021.

For every $2 over earnings of $18,960, your FERS SRS will be reduced by $1.

Fortunately, for the purposes of this rule, most earned income is from W2-income — your FERS pension and TSP withdrawals would not count.

How Will Social Security Be Taxed?

Good news for you – social security isn’t always taxable.

However, up to 85% of your social security benefits can be in certain circumstances.

One of the ways Social Security becomes taxable is when you have other substantial income outside of your Social Security benefits.

This would include wages, self-employment, interest, dividends and other taxable income.

The amounts below and associated tax rates are directly from Social Security’s website (ssa.gov).

“You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you:

• file a federal tax return as an “individual” and your combined income is
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $34,000, up to 85 percent of your benefits may be taxable.
• file a joint return, and you and your spouse have a combined income that is
  • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $44,000, up to 85 percent of your benefits may be taxable.
• are married and file a separate tax return, you probably will pay taxes on your benefits.”

How Will TSP Withdrawals Be Taxed?

The Thrift Savings Plan is a fantastic accumulation account for retirement savings.

As a federal employee, you have the option of making either Traditional or Roth contributions.

Any Traditional TSP contributions you withdrawal will be subject to ordinary income tax rates at that time.

In most circumstances, a withdrawal prior to age 59.5 will incur an additional 10% penalty.

You can defer taking any withdrawals from your Traditional TSP until age 72.

At age 72, Required Minimum Distributions must be taken.

Distributions from Roth TSP will be tax-free, assuming guidelines are met:

• Age 59.5
• The account has been funded for at least 5 years

Which States Give You A Federal Retirement Tax Break?

• Your pension will be fully taxable at the federal level.

However, there are certain states that don’t tax pension income.

They include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming New Hampshire, Alabama, Illinois, Hawaii, Mississippi, and Pennsylvania.

• Up to 85% of your Social Security may be taxable, depending on income.

However, at the state level, 37 states do not tax Social Security benefits.

The 13 states who do include Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia.

• Most states will tax and TSP distribution as ordinary income.

However, there are 12 states who don’t tax TSP withdrawals: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming, Illinois, Mississippi and Pennsylvania.

Conclusion

Connect with your financial professional to see how taxes can impact your future retirement income and savings.

By planning ahead, you can ensure you’re equipped with the information you need to make informed decisions about your retirement.

“You Don’t Know What You Don’t Know” and having the information you need can help you plan your retirement income.

Contact a financial professional from GPIS today — it’s complimentary!

For additional information, you reach us by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

-Sam Wiss, RICP

This material is intended for information purposes only. By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency. Contact your tax advisor regarding your specific situation.

Federal Pay Raises For 2022

A plan has been sent to Congressional leadership to provide civilian federal employees with an average of a 2.7% pay raise in 2022.

Based on this new plan, federal employees would receive a 2.2% increase in basic pay and would also receive an additional .5% raise in locality pay.

This 2.2% increase is well above the 1% increase civilian employees saw in 2021.

Most pay raises would be set to take effect the first pay period of January.

The proposed pay raise will be welcomed for all federal employees as households are contending with rising inflation which has eaten into wages.

For those approaching retirement, a pay increase can help you indirectly in a few areas (outside of just a larger paycheck).

How A Pay Raise Affects Your FERS Pension

First, for FERS employees, a pay raise will ultimately increase the High-3 average salary used for calculation purposes.

The end result is a higher pension for life.

As a reminder, the FERS pension is calculated using the following:

Years of Service * 1% * High-3 Average Salary

Or if age 62 and over with atleast 20 years of service the formula is:

Years of Service * 1.1% * High-3 Average Salary

How A Pay Raise Affects Your Thrift Savings Plan

The other area is TSP matching.

With a higher salary, and a matching contribution of up to 5% of basic pay, more money will be contributed to the TSP account.

OPM.gov has great tools and resources when it comes to maximizing the TSP.

Among these is “How Much Can I Contribute?”

This tool determines how much can be contributed each pay period, while ensuring you receive all matching amounts.

You won’t hit your annual contribution limit until the last pay period of the year.

And lastly, “How Much Will My Savings Grow” shows the amount you’ll have saved by the time you reach retirement.

Conclusion

With these changes happening, it might be a good idea to run your new retirement numbers with a financial professional.

If you’d like to learn more, schedule your complimentary federal benefits review and retirement analysis here with a licensed insurance professional.

For additional information, you can also contact your friends at GPIS by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

-Sam Wiss, RICP

By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency.

TSP Contribution Limits

Are you making the most of your TSP contributions?

In 2021, the maximum amount you can contribute to TSP is $19,500 annually.

However, if you’re age 50 or older, you can contribute an additional $6,500 which is known as a “catch-up” contribution.

For those age 50 and older the maximum contribution amount is $26,000 ($19,500 + $6,500).

How Your Contributions Are Matched

The maximum amount you can receive for a TSP match is 5% of basic pay from your agency.

If you started federal service on or after October 1, 2020, you were automatically enrolled at 5% contributions.

The first 3% of basic pay is matched dollar-for-dollar.

The next 2% of basic pay is matched 50 cents on the dollar.

Plus, your agency will automatically contribute 1% of basic pay per year.

The infographic below shows the breakdown.

Source: OPM.GOV

 You can contribute more than 5% of basic pay, but it won’t be matched by your agency.

Your individual contributions can be made to either the Traditional TSP or Roth TSP.

With the Traditional contributions, you receive a tax-break now, but pay taxes on the withdrawals in the future.

With the Roth contributions, you pay the tax now, but receive earnings and distributions tax-free (subject to certain requirements) down the line.

Also, a quick note on the Roth contributions…

If you make Roth TSP contributions, you’ll receive the matching amounts outlined above, but they will be contributed to your Traditional TSP account.

The matching amounts from your agency cannot be made to your Roth account.

Should You Front Load Your TSP?

One question we get asked often is “should I front-load my TSP?”

This is especially common among high earners who reach their contributions limits each year.

The thought process entails contributing a large percentage early in the year, reaching your contribution limit, and then letting the interest accumulate the rest of the year.

This might work well in a favorable (bull) market, where contributions are guaranteed to grow for the duration of the year.

However, there are no guarantees on the performance of your selected fund for the rest of the year.

Most importantly, the employee will lose out on any matching funds if they reach their contribution limit prior to year-end.

The agency matches 5% of basic pay each pay period — if there’s no contributions in pay periods at the end of the year — there’s no match!

Maximize Your Contributions

OPM.gov has great tools and resources for you to utilize.

Among these is “How Much Can I Contribute?”

This tool will allow you to determine how much you can contribute each pay period, while ensuring you receive all matching amounts.

You won’t hit your annual contribution limit until the last pay period of the year.

It’s a win-win for you.

Conclusion

It’s always good to check with a financial professional before making decisions around your retirement.

If you’d like to learn more, schedule your complimentary federal benefits review and retirement analysis here with a licensed insurance professional.

For additional information, you can also contact your friends at GPIS by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

-Sam Wiss, RICP

By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency.

Which survivor benefit is right for you?

When you retire from federal service, one of your primary income streams will be your FERS pension (FERS annuity). You can elect to receive your full FERS pension, which will pay you a monthly income until your death. You have options, however.

You can elect what’s called a Survivor Benefit. With a survivor benefit, you take a reduction in your FERS pension, but if you pre-decease your spouse, they will receive a monthly income for the duration of their life. You can also elect someone other than your spouse (who has an insurable interest in you) for the survivor benefit, although we won’t cover all the details of those scenarios here.

You’ll make this decision as part of your retirement packet. If you elect any option other than the Maximum Survivor Benefit, it must be signed by your spouse and notarized.

Let’s jump into each option below…

Maximum FERS Survivor Benefit

The maximum survivor benefit would reduce your pension by 10%, and give your spouse 50% of your full monthly pension at the time of your death. The reduction to your pension is permanent, and your time or date of death doesn’t matter. Let’s look at an example with some easy numbers to illustrate.

Full FERS Pension: $2,000

(minus 10%): $200

Reduced FERS Pension: $1,800

Surviving Spouse Monthly Income: $1,000

By choosing the maximum survivor benefit, instead of receiving $2,000 for your FERS pension, you receive $1,800. At your death, your spouse will receive $1,000 for the rest of their life.

Minimum FERS Survivor Benefit

The minimum survivor benefit would reduce your pension by 5%, and give your spouse 25% of your full monthly pension at the time of your death. An example for the minimum FERS survivor benefit is below.

Full FERS Pension: $2,000

(minus 5%): $100

Reduced FERS Pension: $1,900

Surviving Spouse Monthly Income: $500

By choosing the minimum survivor benefit, instead of receiving $2,000 for your FERS pension, you receive $1,800. At your death your spouse will receive $500 for the rest of their life.

Again, both of these reductions under the Maximum and Minimum Survivor benefit options are permanent.

It’s also important to note that these FERS pension numbers are ‘gross’ numbers, which means they aren’t taking into account and taxes or deductions (health insurance, etc).

No Survivor Benefit

It’s not required to choose any of the survivor benefits. You can simply elect to receive your full, unreduced FERS pension. As stated previously, you will need your spouse’s consent when electing no benefit (which is a section in your retirement packet).

Even if you’re in a position where you spouse might not need the money, it might make sense to consider one of the survivor benefits for one reason — health insurance.

Health Insurance Implications

Your spouse can continue coverage under your FEHB (health insurance) when you retire. However, they will not be eligible to continue FEHB after your death unless they are receiving either the minimum or maximum survivor benefit.

The cost of getting private insurance could be extremely high. It might make sense to consider the survivor benefit solely for this purpose.

Making Changes After Retirement

What happens if you made a survivor benefit election at retirement but changed your mind?

According to OPM, If you want to change your election option, and it’s within 30 days of your “first regular annuity payment” you may change your election in writing to OPM.

If the change you’re making is to anything other than the maximum benefit, you must obtain your spouse’s consent.

If it’s less than 30 days, as stated above, you can cancel or reduce the survivor benefit. However, if more than 30 days has passed, you cannot cancel the survivor benefit previously elected.

After 30 days, but less than 18 months have passed, you can choose to elect a survivor annuity if you didn’t previously, or you can increase the survivor annuity from the minimum to the maximum.

Conclusion

It’s always good to know your options before you decide to retire.

Our expert staff fields questions and walks through situations like these every day.

If you’d like to learn more, schedule your complimentary federal benefits review and retirement analysis here with a licensed insurance professional.

For additional information, you can also contact your friends at GPIS by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

-Sam Wiss, RICP

By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency.

Largest COLA Adjustment Ever?

The cost of living adjustment for federal retirees is shaping up to be one of the largest in recent memory.

Skyrocketing consumer prices are putting pressure on Americans’ wallets.

Much of the rise has been fueled by gasoline, home, used car, travel and food prices.

2022 CPI-W (COLA) Adjustment

For federal employees, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) determines each annual COLA.

According to a press release from the Bureau of Labor Statistics, the CPI-W increased 6.1% over the last 12 months to reach a level of 266.412.

The current trend is a 5.1% 2022 COLA adjustment.

To put that in perspective, the last 5 years of FERS COLA adjustment have been 1.3%, 1.6%, 2.0%, 2.0% and .3%.

There have also been three, zero-percent, or “no-COLA” adjustments in the last 10 years.

The CPI-W will still fluctuate as prices rise and fall throughout the months of July, August and September, however.

The actual COLA for 2022 will be determined in an announcement made in mid-October.

COLA adjustments apply to CSRS annuities, FERS annuities and also Social Security benefits.

CSRS vs FERS COLA Calculation

There are small differences in the COLA percentage received between CSRS and FERS employees.

FERS employees receive the same CSRS COLA adjustment if the amount is between 0 and 2.0%.

When the CSRS COLA is between 2.0% – 3.0%, the FERS COLA received is 2.0%.

If the FERS COLA is above 3.0% the FERS COLA received is the CSRS COLA minus 1.0%.

To illustrate, here are two examples.

CSRS COLA = 1.5%. FERS COLA would also receive 1.5%.

CSRS COLA = 5.1%. FERS COLA would be 5.1% – 1% = 4.1%.

How COLA Adjustments Affect Employees

For FERS employees, the COLA applies to your basic annuity amount (the monthly pension you receive) — it does not apply to the special retirement supplement.

The COLA adjustment also applies to the survivor annuity.

One caveat, in order to receive the full FERS COLA increase, annuitants need to be over age 62 (there are a few exceptions to this rule).

CSRS employees receive the full COLA increase for all annuities, regardless of age.

Conclusion

It’s important to maintain your purchasing power in retirement. As the costs and goods and services rise, it’s smart to have strategies in place to offset the rise in prices.

 

If you’d like to learn more, schedule your complimentary federal benefits review and retirement analysis here with a licensed insurance professional.

 

For additional information, you can also contact your friends at GPIS by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

 

-Sam Wiss, RICP

By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency.

FERS Postponed Retirement

In last week’s blog we discussed a Deferred FERS Retirement.

While they might sound similar, a Postponed FERS Retirement is different, and has the potential to be a good option for federal employees when available.

There’s not an equivalent postponement election in the CSRS system.

What’s a FERS Postponed Retirement?

A FERS Postponed Retirement is an option for you if you’re a federal employee who separates from service and has at least 10 years of creditable service.

You must also have reached your minimum retirement age (MRA).

Like the name ‘postponed’ implies, rather than taking your pension right away, you postpone it until a later date.

One of the biggest reasons you might decide to postpone your pension is to avoid a reduction in your overall FERS pension amount.

Each year prior to age 62 is a 5% reduction on your pension.

Let’s take a look at a hypothetical example with numbers to illustrate.

Example of FERS Postponed Retirement

Jessica is a postal clerk with 11 years of creditable service.

She’s currently 57 years old and has reached her minimum retirement age.

Jessica decides she wants to retire from her job at the post office.

She’s going to continue working in another private-sector job, and she doesn’t need the FERS pension income right away.

Instead, she wants to wait and start receiving her FERS pension at age 62.

During her working career, Jessica’s High-3 was $58,000.

Her FERS pension amount at 62 will be $58,000 * 1% * 11 = $6,380 annually or $532/month.

If Jessica decides to start receiving her pension at her federal retirement age of 57, it would be reduced by 25%.

62-57 = 5 * 5% = 25% reduction in benefits

This equates to a reduced FERS pension of $4,785 annually or $399/month.

By waiting until age 62 to collect her pension, Jessica will receive $6,380 per year, rather than $4,785.

*This hypothetical example is for illustration purposes only and is not indicative of an actual person. Your experience/results may differ.

Postponed Retirement and FEHB

As we learned in last week’s blog, under a FERS Deferred Retirement, you lose FEHB coverage on separation.

However, with a postponed retirement, eligible employees can keep their FEHB coverage so long as you were enrolled in the five years prior to separation.

In Jessica’s case, when she retires at 57, she will no longer receive FEHB.

But, when she begins receiving her FERS pension at age 62, she can re-enroll for FEHB coverage.

This is could be an extremely valuable benefit to her financial well-being in retirement.

Conclusion

It’s always good to know your options before you decide to retire.

Our experienced staff fields questions and walks through situations like these every day.

If you’d like to learn more, schedule your complimentary federal benefits review and retirement analysis here with a licensed insurance professional.

For additional information, you can also contact your friends at GPIS by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

-Sam Wiss, RICP

By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency.

Is a deferred retirement right for you?

Do you ever feel like you can’t continue working until your eligible retirement date?

Maybe it’s the physical nature of the job or maybe you want to switch careers — and you haven’t met the age requirement for a full, immediate retirement.

One of the great things about the FERS system is you can still receive a pension in certain situations if you decide to leave early.

Let’s discuss one of the options available to you.

FERS Deferred Retirement Eligibility

A FERS Deferred Retirement is available for many federal employees who separate from service prior to their scheduled full, immediate retirement date.

Most often, this option best fits someone who has at least 5 years of service. (When having at least 10 years, a postponed retirement typically makes more sense).

In order to qualify for a FERS Deferred Retirement, you must meet the following conditions:

• You have at least 5 years of service before separating from service
• Your FERS contributions stay in the system (no refund of contributions)
• You are under age 62 (if you were age 62+ with 5 years of service, you would qualify for regular retirement)

How FERS Deferred Retirement Works

Like the name deferred implies, when you leave service, you’ll defer your pension until a certain age.

Below are the guidelines for when you’d be eligible to start receiving the deferred pension.

With at least 5 years of service, you can start receiving your FERS pension at age 62.

With at least 20 years of service, you can start receiving your FERS pension at age 60.

With at least 30 years of service, you can start receiving your FERS pension when you reach your MRA (minimum retirement age).

With at least 10 years of service, you can start receiving your FERS pension at your MRA, however it will be reduced by 5% per year, prior to age 62.

Example of FERS Deferred Retirement

Michael is a postmaster with 13 years of creditable service. He is currently 42 years old.

Michael decides he would like to switch careers to go into coaching, so he leaves his federal employment.

During his career, Michael’s high-3 was $68,000.

Approximately 20 years from now, Michael would be eligible to receive his full federal pension at age 62.

(He would be age 62 with at least 5 years of service).

The pension amount would be: 68,000 * 13 * 1% = $8,840 annually or $734 per month.

Another option for Michael would be receiving a reduced pension under the MRA+10 years of service provision once he hits age 57 (his minimum retirement age).

Because age 57 is 5 years before age 62, and the penalty is a 5% reduction per year, Michael’s pension amount would be reduced 25%.

$8,840 would be reduced to $6,630 annually or $553 per month.

This reduction is permanent.

Michael would then be eligible for his first COLA adjustment at age 62.

*This hypothetical example is for illustration purposes only and is not indicative of an actual person. Your experience/results may differ.

Deferred Retirement and FEHB

One of the major considerations with a deferred retirement is the inability to keep your FEHB (federal health insurance) in retirement.

Make sure you take this into consideration when deciding to separate from service.

The FEHB is one of the most important benefits you have as a federal employee.

You can, however, keep your FEHB under a postponed retirement, which is what we’ll discuss in next week’s blog.

Make sure you check back to read more on the options available to you.

Conclusion

Everyone’s situation is unique.

But it always helps to know your options.

Our experienced staff fields questions and walks through situations like these every day.

If you’d like to learn more, schedule your complimentary federal benefits review and retirement analysis here with a licensed insurance professional.

For additional information, you can also contact your friends at GPIS by calling 866-201-7829 or by sending an e-mail to info@gpis4u.org.

-Sam Wiss, RICP

By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products. Not affiliated with, or endorsed by, the federal government or any government agency.