[TSPStrategy] Are you financially prepared for retirement?

https://www.govexec.com/pay-benefits/2024/09/are-you-financially-prepared-retirement/399314/?oref=govexec_today_nl&utm_source=Sailthru&utm_medium=email&utm_campaign=GovExec%20Today:%20Sept.%206%2C%202024&utm_term=newsletter_ge_today

Are you financially prepared for retirement?

If you haven't started, consider making a retirement plan. Now.

September 5, 2024 03:00 PM ET

Tammy Flanagan

Retirement Counseling and Training www.retirefederal.com

Do you like surprises? You might like the surprise of getting some money in the mail that you weren't expecting or the surprise of a visit from a dear friend you've not seen in years.

But how about an unpleasant surprise? What if you're surprised to learn that your retirement income has fallen short of replacing your paycheck and you realize that the only solution is to work longer or continue with your plan to retire and then learn to live on less.

A far better solution is to be prepared so that retirement is not filled with unpleasant surprises but is a planned event with the plan starting early in your career. Between your starting date and ending date, some twists and turns may take you off course, but with a plan, you can get back on track to find your way to a financially secure retirement.

Compare planning for retirement to planning your next vacation. Most of us don't wake up and say, "It's time to go on a vacation today." For some of us, the fun is in the planning. How are we going to get there? What do we need to pack? What are we going to do once we get there? How much is it going to cost? The answers to these questions might require a plan to save money well ahead of the vacation to cover the cost of the trip. We may need to compare when we shop for airfares, rental cars, and hotels. Exploring travel websites will take time to learn the best places to visit and how much the activities will cost. If you enjoy the details of planning a vacation, then preparing for retirement might become more manageable for you. For others, retirement planning can be tedious and considered a complicated chore.

When you plan for your retirement, you will enjoy the following benefits. Here are some ways to get started or to check to be sure that you are on track:

Plan your retirement date: Do you know when you become eligible for an "immediate, unreduced" retirement benefit under FERS? Do you understand how your length of service will be determined and how much credit you'll receive for sick leave that is leftover at retirement? Explore the retirement planning resources at the Office of Personnel Management's Retirement Center. Learn more by attending a pre-retirement or midcareer planning program, if available at your agency. You can also find webinars online through the National Active and Retired Federal Employees Association, The National Institute of Transition Planning, and other online training events.

Plan your savings: Small increments of investing paycheck by paycheck over your career, is far better than feeling the panic in the final years to try to squeeze 30 years of saving into the last five years of your career (and realizing this is an impossible task). Check out the Thrift Savings Plan's online learning events. FINRA can help you learn more about managing your retirement investments and the Securities and Exchange Commission has tools at https://www.investor.gov/. Or consult your fiduciary financial planning professional.

Reevaluate insurance needs: After electing your health insurance and life insurance coverage when you were first hired, it is important to determine if you need to make changes as your life and needs change. The basic "value" plan health insurance may not be the best option if you have been diagnosed with a chronic health problem or if you are expecting your first child. The same can be said for life insurance. Do you know how much life insurance you need to protect your family in the event of your untimely death? Have you checked the price of FEGLI to see the premium increases on the optional coverage every five years? Do you know the rules for continuing your insurance in retirement? To learn more about your valuable insurance, learn more at www.opm.gov/insure. You can also find insurance calculators as well as other financial planning tools at https://www.dinkytown.net/insurance.html

Plan for longevity: Retirement can last for decades. I once asked my Uncle Steve how he prepared for his retirement in 1980. Uncle Steve retired at 55 under CSRS from the Department of Air Force. He thought about it briefly and said, "I submitted my retirement application about 30 days before I turned 55. At the end of the month of my 55th birthday, I retired." Uncle Steve passed away in 2012 after spending 32 years living out his life after retirement which was longer than the career that he retired from. Fortunately, his "single benefit" retirement plan replaced more than 50% of his wages and it included annual cost of living adjustments that allowed his retirement to keep pace with inflation so that he and Aunt Helen could live comfortably throughout their retirement. Under this plan, there was no need to rely on a substantial amount of retirement savings or even Social Security, the only requirement was to start early and finish after completing a career of continuous federal employment. The Center for Retirement Research at Boston College has some informative articles that can get you started: https://crr.bc.edu/publications/

Plan for Long-Term Care: Along with longevity comes a greater risk of needing long-term care. Having LTC insurance isn't the only way to prepare for this possibility. There are ways you can plan to age in place, or you can explore a continuing care community for retirees who are independent but may later need some assistance. Learn more at https://acl.gov/ltc and https://www.ltcfeds.com/. Veterans may explore special long-term care benefits available through the "Aid and Attendance" program. This benefit is designed to provide financial aid to help offset the cost of long-term care for those who need assistance with the daily activities of living such as bathing, dressing, eating, toileting, and transferring. The Veterans Administration also provides resources for veterans who need long-term care and assistance.
Plan for Social Security: Social Security retirement benefits, also an essential piece of FERS, have a full retirement age of 67 for those born in 1960 or later and only 70% of the benefit payable for those who file for benefits at age 62. An important thing to understand about Social Security is the progressive nature of the benefit formula that provides a greater replacement of pre-retirement earnings for lower wage earnings and a lesser replacement for those with higher lifetime wages.
Plan for taxes in retirement: Tax planning will help you realize that your gross retirement is a lot more than the net amount that hits your bank account on the first day of every month of retirement. Not only will you pay federal income tax, but many states also tax federal retirement and TSP withdrawals. States are much more tax friendly when it comes to Social Security, with only eight states that tax your SSA retirement benefits (Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont). Have you estimated your net income in retirement after taxes and insurance premiums are withheld? Check out the following publications from the IRS (or consult your professional tax advisor):

Tax Guide to U.S. Civil Service Retirement Benefits

Individual Retirement Arrangements IRAs

Filing season reminder: Social Security benefits may be taxable

Plan for those who depend on you financially: One of the most critical elections you may have to make as you retire, especially if you are currently married, is the election of a survivor benefit. Do you and your spouse understand both the cost and the value of this election? Did you know that your spouse has a right to this benefit, by law? If you choose to provide a partial or no survivor benefit for your spouse, you will need their notarized consent. To learn more about survivor benefits, check out some earlier Retirement Planning columns such as Survivor Benefit Confusion, Part One and Part Two

Unfortunately, the days of coming into federal service straight out of high school, college, or the military and then starting the retirement countdown clock for the double nickel birthday are long gone with the old Civil Service Retirement System which was closed to new hires starting in 1984. Today's retirement for federal civilian employees goes by a different name: FERS. It is no longer a single benefit plan that attracts graduates to work their way up the GS pay scale in the same position at the same federal agency. Many federal employees come from private industry careers or have retired from active-duty military service, and some come for experience in the public sector to take those skills and the experience to help them climb the corporate ladder. Of course, there are still many federal workers who complete a career in federal service and retire in much the same way as my Uncle Steve.

Do yourself a favor, if you haven't started, consider making a retirement plan. If you have a plan, be sure to reevaluate sometimes and update when needed. If you are already retired, congratulations!

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[TSPStrategy] Thank goodness for survivor benefits

https://www.govexec.com/pay-benefits/2024/08/thank-goodness-survivor-benefits/399126/?oref=govexec_today_nl&utm_source=Sailthru&utm_medium=email&utm_campaign=GovExec%20Today:%20August%2030%2C%202024&utm_term=newsletter_ge_today

Thank goodness for survivor benefits

Even if you have never had a job where you paid into Social Security, you may still be eligible to receive benefits.

August 29, 2024 03:00 PM ET

Tammy Flanagan

Retirement Counseling and Training www.retirefederal.com

Every month, 2.7 million children receive Social Security benefits payable when their parents (one or both) either retired, died or became disabled. The average surviving child benefit is more than $1,000 per month. These benefits provide necessities for eligible family members and help make it possible for those children to complete school. After all, Social Security is a form of insurance, the acronym FICA stands for Federal Insurance Contributions Act.

Last week during the Democratic National Convention, the vice presidential nominee, Minnesota Gov. Tim Walz, credited Social Security for helping his family to get where they are today. Walz shared in an Instagram reel that his father died of lung cancer when he was 19, leaving a "mountain of medical debt." He said that Social Security benefits allowed his family, including his mother and younger brother, to "live with dignity."

Did you know that your unmarried children can get benefits if you have retired and are collecting Social Security retirement or if you have become disabled? If a parent dies and leaves behind young children, they, like Walz's family, can get benefits to help them avoid poverty. Children are eligible for these benefits if they are:

Younger than age 18

Between ages 18 and 19 and a full-time student at an elementary or secondary school (grade 12 or below).

Age 18 or older with a disability that began before age 22

Under certain circumstances, Social Security can also pay benefits to a stepchild, grandchild, stepgrandchild, or adopted child.

Children are eligible to receive Social Security benefits based on their parent's work record if the parent is retired, disabled, or has passed away. Each child is entitled to receive a percentage of the parent's benefit that would be payable if the parent lived, retired or became disabled at their Full Retirement Age, which is 67 for anyone born in 1960 or later. The amount payable at FRA is called the Primary Insurance Amount or PIA. The maximum family payment can be between 150% to 180% of the parent's PIA. If the total amount payable to all family members exceeds this limit, each person's benefit is reduced proportionately until the total equals the maximum allowable amount. The parent's benefit amount is not reduced because it's not part of the maximum allowable amount.

Deceased workers, up to 75%

Disabled workers, up to 50%

Retired workers, up to 50%

Even if you have never had a job where you paid into Social Security, you may still be eligible to receive benefits. The first way happens when one parent passes away and leaves behind young children who are eligible for benefits. Regardless of your age, if you are a parent and take care of your child who receives Social Security benefits and is under age 18, you can get benefits (in addition to benefits payable to your child) until your child reaches age 16 (unless your child is disabled and remains in your care). Your child's benefit will continue until he or she reaches age 18, or 19 if he or she is still in school full time.

The second way happens when a parent is supported financially by their child. In this case, the benefits are based on their child's work record. A parent who receives most of their support from their adult child may receive benefits in the event of the death of the child. The parent must meet the following conditions:

Must be at least 62 years old and must not have remarried since the worker (your child)'s death.

Cannot be entitled to their own, higher Social Security benefit; and

Must be able to show that they received one-half of their financial support from the worker at the time of their death.

The history of paying Social Security benefits to children dates back to 1940, when payments were provided to around 55,000 children whose fathers had retired or died before the children were 18. This number grew to 700,000 by 1950. Providing for a child whose mother died didn't begin until 1951. In 1965, cash benefits were extended to children 18 or older if they were full-time students and not yet 22 years old. After 1972, children could receive benefits on the wage record of a grandparent under certain circumstances. By 1982, the benefits for full-time students in post-secondary education began to be phased out.

When you apply for Social Security retirement or disability benefits, you will be asked about your unmarried children. Social Security wants everyone to know that if a child in your life has lost a parent, it's important for the child's family to reach out to Social Security as soon as possible. Appointments for Social Security are generally scheduled within 30 to 60 days of when you contact Social Security. Call 1-800-772-1213 between 8:00 a.m. and 7:00 p.m., Monday through Friday to schedule an appointment. Visit Social Security's website to learn more about Survivors Benefits and information for Parents and Guardians.

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[TSPStrategy] Retirement planning issues for women

https://www.govexec.com/pay-benefits/2024/08/retirement-planning-issues-women/398836/?oref=govexec_today_nl&utm_source=Sailthru&utm_medium=email&utm_campaign=GovExec%20Today:%20August%2016%2C%202024&utm_term=newsletter_ge_today

Retirement planning issues for women

There are five retirement challenges that many women face when planning for their future.

August 15, 2024 03:00 PM ET

Tammy Flanagan

Retirement Counseling and Training www.retirefederal.com

All federal employees need education, and most would benefit from some experienced assistance when planning for retirement. This is true at every stage of their careers, regardless of age or gender. Today I want to highlight some issues unique to federally employed women.

According to the Women's Institute for a Secure Retirement, there are five retirement challenges that many women face when planning for their future. Here is a modified version of this list as it may impact you, as a woman employed in federal service:

1. Women live longer than men.

Longevity risk is real. Because women often live longer, this means if currently married, someday it may be "one of us" rather than "two of us." This means one Social Security benefit stops, and the full pension benefit becomes a survivor annuity which is generally a little more than 50% pension benefit payable while the spouse was living. If single, the retirement savings will have to last longer due to the projected longer life expectancy.
Out of 408,033 survivors of deceased federal employees, there are 361,739 widows and only 27,410 widowers. The average monthly annuity payable to a widow in 2022 was $1,831/month with an average age of 81.4 years. The remaining survivors were former spouses, children and those survivors having an insurable interest in the retiree.

2. Women earn less than men during working years.

The federal government is already a step ahead of the private sector when it comes to pay equity, according to the Federal News Network. The national gender pay gap is 16%, while the federal pay gap is 5.6%, according to 2022 workforce data. In other words, in the federal workforce, women make about 94 cents for every dollar men make. This is better than the national rate of 84 cents for every dollar men make, and it has significantly improved from the 24.5% pay gap in 1992.
According to 2023 OPM Data analyzed by the Partnership for Public Service, the overall federal workforce was 55% male and 45% female, compared to 53% male and 47% female in the U.S. labor force. In general, women are employed at lower grade levels, considerably more than their male counterparts. Women made up most of the federal workforce in GS-3 to GS-9 positions. Notably, 73% of GS-6 employees are female. Men comprised much of the workforce above the GS-10 level, the SES, and positions not on the GS pay scale. Only 39% of SES positions are filled by women. As the grade level grew higher, the%age of positions filled by women grew smaller.

3. Women receive significantly lower retirement benefits than men

Almost 72% of monthly annuity benefits in 2022 were under $4,000/month (CSRS and FERS combined). At least 55.5% of those were paid to men. However, of the .2% of monthly retirement benefits paid at over $7,000/month, 70.1% of those benefits were paid to men.
As women age, they become more vulnerable to poverty. The poverty rate for all women aged 65 and older is roughly 12% with a little more than 1 in 10 living in poverty. But for widowed women aged 65 and older, the poverty rate is much higher, with approximately 51% living on less than $22,000 a year.

4. Women have fewer years of earned income.

According to the Bureau of Labor Statistics, in 2022, 67.9% of men ages 25 and older were employed, compared with 55.4% of women.
While men have higher employment–population ratios than women at every level of educational attainment, the gap between men and women becomes smaller as educational attainment increases.

5. Women are more likely to work part-time jobs.

As of January 2024, 89,960 federal employees work less than a full-time schedule (part-time, intermittent, and 193 employees in phased retirement).
In federal employment, working part-time obviously reduces the salary of an employee, but it also reduces retirement income, ability to contribute to the TSP, and earnings used to compute Social Security retirement. In addition, part-time federal employees pay more of the government share for their health insurance and earn less annual and sick leave each pay period.
According to the National Women's Law Center:
- Nationwide, over 32.1 million people (about twice the population of New York) work part-time—approximately 22% of workers.
- Nearly six in ten part-time workers (59.1%) are women. There were more than 1 million fewer women working part time in 2021 than in 2019, before the pandemic began.
- Women are about 1.6 times more likely to work part time than men: 27.9% of all working women work part time, compared to 17.2% of all working men.

Here are some resources to learn more about staying financially secure in your life after retirement:

5 Things Every Woman Should Know About Social Security

Social Security for Women

What Every Woman Should Know about Social Security

5 Things Mothers Should Tell Daughters about Money and Retirement

Financial To-Do's for the Decades Slides

and…The Pay Gap's Connected to the Retirement Gap!

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[TSPStrategy] How to decide if Medicare Part D is right for you

https://www.govexec.com/pay-benefits/2024/08/how-decide-if-medicare-part-d-right-you/398775/?oref=govexec_today_nl&utm_source=Sailthru&utm_medium=email&utm_campaign=GovExec%20Today:%20August%2015%2C%202024&utm_term=newsletter_ge_today

This is clear as mud!! dls

How to decide if Medicare Part D is right for you

Although most federal annuitants might benefit from keeping Part D, there are three instances where you could benefit from opting out.

August 14, 2024

Kevin Moss

Senior Editor, GuidetoHealthPlans.org

The Inflation Reduction of Act of 2022 included improvements to Medicare Part D, and some have already been enacted—$35 insulin, no more member cost share in the catastrophic phase of coverage, and limits on premium increases. Next year, all Part D plans must include a $2,000/year maximum out-of-pocket limit per enrollee.

To help federal annuitants take advantage of these improvements, OPM allowed FEHB carriers to offer Part D plans this year if they provide prescription drug coverage that, when combined with the FEHB Program coverage, is equal to or better than what's available through the FEHB plan coverage alone.

For plan year 2024, 17 FEHB plans auto-enrolled their Medicare members into a Part D prescription drug plan, and more FEHB plans may offer PDPs for plan year 2025.

Although most federal annuitants might benefit from keeping Part D, there are three instances where you could benefit from opting out. I'll also explain other situations where you might think opting out of Part D is the correct decision but may want to keep it instead.

Note: Starting with the 2024 Open Season, United States Postal Service annuitants and their covered family members will be receiving healthcare benefits through the new Postal Service Health Benefits Program. PSHB rules differ from FEHB, so these recommendations are not intended for people in PSHB.

Opt-out Reason #1: International Coverage

Like Original Medicare, Part D does not provide international coverage. If you live abroad or spend a considerable amount of time overseas, you may opt out of Part D and maintain your FEHB prescription drug coverage.

If you're just traveling overseas, consider keeping Part D. To help with the lack of international coverage from PDPs, you can obtain travel insurance that pays for medical expenses not covered by your health plan.

Opt-out Reason #2: Pharmaceutical Discount Coupons

Having Part D disqualifies you from using pharmaceutical manufacturers' coupons. There is a U.S. anti-kickback statute that makes it illegal for individuals enrolled in Medicare to use drug-discount programs.

If you currently use one, and the value of that discount is worth more than potential Part D benefits, opt out of Part D.

Opt-out Reason #3: Part D IRMAA

While PDPs offered by FEHB plans don't have an additional premium, individual tax filers with income above $103,000 and joint tax filers with income above $206,000 are subject to an Income Related Monthly Adjustment Amount, known as IRMAA. In the first IRMAA tier, this would add $12.90/month to the cost of Part D enrollment. Federal annuitants subject to IRMAA will need to evaluate the potential Part D benefits against the IRMAA surcharge when deciding whether to keep Part D.

Don't Opt Out of Part D For These Reasons

To receive OPM approval, PDPs must provide prescription drug coverage that combined with the FEHB Program coverage is equal to or better than what's available through the FEHB plan coverage alone. This means that the price you pay for a prescription should be at worst equal to what you pay under the FEHB plan.

However, some federal annuitants opted out of Part D this year when they saw higher prices for the same drug, dosage, and pharmacy in the PDP compared to their FEHB plan. OPM encourages federal annuitants who experienced this to contact their Plan at the customer service number on the back of their enrollment card. Annuitants enrolled in a PDP who still need assistance after speaking with their Plan can reach OPM at FEHB@opm.gov

I've heard from federal annuitants who dropped Part D coverage because they thought their PDP wouldn't cover GLP-1 weight-loss drugs. While it's true commercial Part D plans only include these medications when they're prescribed for another condition, such as diabetes or to prevent heart disease, all FEHB plans are required to cover at least one GLP-1 weight-loss drug.

The Final Word

Most federal annuitants will benefit from Part D coverage, and this is especially true next year when all Part D plans will offer a $2,000 maximum out-of-pocket limit, a prescription drug benefit not found in any FEHB plan. If you live overseas or heavily use pharmaceutical discount programs, keeping Part D will be of limited value and you'll likely be better off with the prescription drug coverage from your FEHB plan. Federal annuitants subject to IRMAA will need to determine whether the surcharge outweighs Part D benefits.

If you believe you have experienced a higher price for your prescription from the PDP compared to your FEHB plan, you can work with your FEHB plan or OPM to get the same FEHB plan price to maintain "equal or better "coverage. It's important to consider all Part D benefits before making a final decision on which prescription drug coverage path to choose.

Federal annuitants shouldn't drop Part D over GLP-1 weight loss drug coverage. The FEHB plan must maintain coverage for that drug class.

Kevin Moss is a senior editor with Consumers' Checkbook. Watch more of his free advice and check if the Guide to Health Plans for Federal Employees is available for free from your agency. You can also purchase the Guide and save 20% with promo code GOVEXEC.

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Blog Archive

[TSPStrategy] Are you financially prepared for retirement?

Are you financially prepared for retirement?

If you haven't started, consider making a retirement plan. Now.

[TSPStrategy] Thank goodness for survivor benefits

Thank goodness for survivor benefits

Even if you have never had a job where you paid into Social Security, you may still be eligible to receive benefits.

[TSPStrategy] Retirement planning issues for women

Retirement planning issues for women

There are five retirement challenges that many women face when planning for their future.

[TSPStrategy] How to decide if Medicare Part D is right for you

How to decide if Medicare Part D is right for you

Although most federal annuitants might benefit from keeping Part D, there are three instances where you could benefit from opting out.

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