Retire at 80%FERS Law

EnforcementTammy Flanagan

Senior Benefits DirectorNational Institute of Transition

Planning, Inc.Tammy@nitpinc.com

My “Hats”Tammy Flanagan – Benefits

Specialist

Presenter

Pre-Retirement Seminars Mid-Career Planning New Employee Benefit

orientation Co-Host: For Your Benefit www.federalnewsradio.co

m http://www.nitpinc.com/

Writer

www.govexec.com Weekly Column

“Retirement Planning” Edited by Tom Shoop –

Senior Editor of Government Executive Magazine

Tomorrow’s Column based on today’s presentation!

OPM on Supreme Court Decision 6-26-13, DC – “Today’s historic decision by the Supreme Court that the Defense of Marriage Act is unconstitutional is a much welcome development in the continuing quest to ensure equal treatment under the law to all Americans. For the federal government as an employer, it will impact benefits for our married gay and lesbian employees, annuitants, and their families. “In the coming days, OPM will be working closely with the Department of Justice and other agencies to provide additional guidance for federal human resources professionals, benefits officers, and our employees and annuitants. While we recognize that our married gay and lesbian employees have already waited too long for this day, we ask for their continued patience as we take the steps necessary to review the Supreme Court’s decision and implement it. As soon as we have updates to share, they will be posted on our website.”

Statement by Acting Director Elaine Kaplan on the Supreme Court Decision

in United States v. Windsor

The percentage stems from the "replacement ratio" studies that Aon Consulting and Georgia State University have done for the last 20 years.

Basically, researchers cull information from the Bureau of Labor Statistics Consumer Expenditures Survey, which details how U.S. consumers, including older households, spend their money.

Where did the 80% rule come from?

Retirement: 1.3% or .8% Social Security:• FICA: 6.2%• Medicare: 1.45%

TSP: 5% - 10% - 20%? Taxes• Less income = less income tax• Some states don’t tax retirement

benefits

Why 80%? These deductions stop when you

retire:

These expenses MAY go DOWN when you retire:

Kids (food, clothing, schooling, weddings)

Mortgage Clothing Commuting Costs Hired Help

Kids unemployment, emergency, grandkids

Mortgage good old days

Clothing are you joining a nudist camp?

Commuting Costs are you going to stay home every day?

Hired Help cut your own grass, paint your own walls, clean your own

house

Travel, hobbies, volunteer Healthcare and insurance

These expenses MAY go UP when you retire:

FERS Basic Retirement BenefitLaw Enforcement20 years = 34% of high-three25 years = 39% of high-three30 years = 44% of high-threeNon-Law Enforcement20 years = 20% of high-three (22% at age 62+)25 years = 25% of high-three (27.5% at age 62+)30 years = 30% of high-three (33% at age 62+)

What does it take to get to 80%?

What else?: FERS Supplement

Approximately $40 / month / year of FERS service

20 years = $800 / month or $9,600 / year

25 years = $1,000 / month or $12,000 / year

30 years = $1,200 / month or $14,400 / year

What percentage of your salary will this replace? More for low salaryLess for higher salaryReplacement: 10 – 30%

Social Security Eligible at 62

Reduced by 30%Delayed credits

24% increase at 70Tilted towards the low wage earnerAverage benefit 2013: $1,221.22Maximum monthly benefit 2013:

Age 66: $2,533 (Born 1947) Age 62: $1,923 (Born 1951) Age 70: $3,350 (Born 1943)

Supplement Ends at 62, then what?

The United States Social Security Administration

POPULAR SERVICES

new Get your Social Security Statement onlineGet or replace a Social Security cardApply online for retirement, disability or Medicare benefitsEstimate your retirement benefitsResearch popular baby namesLocate a Social Security office

www.socialsecurity.gov

What else? Retirement Savings

TSP Other employer

savings plans - 401(k), 403(b)

IRAs Savings Accounts Inheritance

Use It• Spending

Lose It Taxes – CPA / CFP

Promote It Legacy planning –

Estate Attorney

• Women are more likely than men to interrupt their careers for family

• Of the 62 million wage and salaried women (age 21 to 64) working in the United States, just 45 percent participated in a retirement plan.

• Women live a long time!• By and large women invest more

conservatively than men.

http://www.dol.gov/ebsa/publications/women.html

What else? Retirement SavingsWomen: Listen Up!

Use It

Leave it in TSP

Low expenses G Fund Simplicity Monthly withdrawal

options

Transfer to IRA

Multiple partial withdrawals

Many investment choices

Legacy planning options

0 – 59 ½ - Be careful! 10% tax penaltyException: Separation in the year you reach 55Exception: Monthly payments based on life expectancy or life annuity

59 ½ - 70 ½ - No rules!70 ½ + Complicated Rules!

Lose It

TSP Web Site: Planning & Tools: Retirement Income Calculator TSP: Retirement Income

Calculator

Monthly PaymentsBalance: $500,000 Growth:

5%

Dollar Amount

$3,000 / monthRun Out at age 78

$2,000 / monthBalance at age 100: $209,484.99

Life Expectancy

Monthly Age Balance

$1,407.66

55 $508,224.49

$2,208.64

65 $557,817.99

$2,069.36

75 $572,237.19

$3,095.55

85 $539,728.21

$3,612.99

95 $347,388.27

$3,166.00

100 $212,558.69

How about an annuity?

Features

$500,000 purchase Begin at 55 100% Survivor (spouse

or other insurable interest)

2% Interest Rate Index Level Payment No Cash Refund

Payments Monthly Age Balance

$1,683 55 $0

$1,683 65 $0

$1,683 75 $0

$1683 85 $0

$1,683 95 $0

$1683 100 $0

How about an annuity?

Features

$500,000 purchase Begin at 55 Single Life 2% Interest Rate Index

Level Payment No Cash Refund

Payments Monthly Age Balance

$1,980 55 $0

$1,980 65 $0

$1,980 75 $0

$1,980 85 $0

$1,980 95 $0

$1,980 100 $0

How about an annuity?

Features

$500,000 purchase Begin at 55 50% Survivor (you or

spouse) 2% Interest Rate

Index Increasing Payment

Not available for insurable interest

Cash Refund

Payments

Monthly

Survivor

Age Balance

$1,133 $566 55 $485,000 (approx.)

$1,523 $761 65 $340,000 (approx.)

$2,047 $1,023 75 $150,000 (approx.)

$2,750 $1,375 85 $0

$3,696 $1,848 95 $0

$4,285 $2,142 100 $0

Did we get to 80%?

Retire 55 with TSP Monthly Payments

FERS Law Enforcement 30 years

FERS Supplement $14,400 / high-three $100,000

TSP Monthly payment $2,000 x 12 = $24,000

Adds up to 82.4%

44%

14.4%

24%

Did we get to 80%?

Retire 57 with TSP Monthly Payments

FERS (regular) 30 years FERS Supplement

$14,400 / high-three $100,000

TSP Monthly payment $2,500 x 12 = $30,000

Adds up to 74.4%

30%

14.4%

30%

Did we get to 80%?

Retire 50 to Work Part-Time

FERS Law Enforcement 20 years

FERS Supplement $9,600 (High-three $100,000)

Part-Time Job $36,400

Adds up to 80%

34%

9.6%

36.4%

Thank You!

Questions

?Tammy@nitpinc.com