Posted on Thursday, 6th July 2017 by

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It’s hard to believe that only 2% of the active workforce is CSRS retirement eligible! When I was hired in the early 1970s all were CSRS eligible. A sea change from those days. Now FERS will soon be the only game in town and we don’t know what changes will come down the road for new hires. There is talk of eliminated the fixed annuity FERS option for new hires and if that comes to pass FERS will sunset 30 to 40 years down the road as well.

The July edition of the NARFE magazine published the latest annuity statistics. There are a total of 2,625,261 annuitants for the federal and postal systems of which 533,884 are survivor annuitants.  Add to this active federal and postal workers and you have a total annuitant and employee count of 5,361,427!  The average monthly employee annuity was $3,586 ($31,032 per year) for CSRS and $1,392 ($16,704 per year) for FERS in 2016, a survivor’s average monthly annuity was $1,575 ($18,900 per year) for CSRS and $557 ($6,684 per year) for FERS for that same period. Fortunately many also have the TSP plan and Social Security to add to their monthly income in retirement plus personal savings and investments to draw from. Many CSRS annuitants aren’t eligible for Social Security because they didn’t work 40 quarters in the private sector and pay into the Social Security System.

According to the Social Security website, “The average monthly Social Security retirement benefit for January 2016 was $1,341. The amount changes monthly.”  For FERS annuitants adding this to their annuity takes them up to an average of $2,733 a month, closer to what CSRS annuitants take home. Adding the more generous FERS Thrift savings accounts, CSRS employees were limited to a 5% contribution with no government match if memory serves me, FERS employees total take home in retirement could easily exceed that of the CSRS retiree. FERS employees were permitted to sock away the maximum each year and they received a 5%  match if they contributed at least 5% to the TSP.

Financial planners often recommend that FERS employees contribute as much as possible to their TSP plan for a number of reasons. First, you get an immediate tax break because TSP contributions are tax deferred until withdrawal years later. Secondly, the compounded interest earned will grow your balance significantly over time and your retirement nest egg can and will be substantial at the time of retirement if you manage it properly.

The key phrase is “manage it properly.” Too few know little about finances in general and that can dramatically reduce your retirement savings when you really need it. If you are unfamiliar with finances or not interested in learning about investing a target date fund will manage the mix of funds for you.

My daughter is a federal employee and she asked me to help with her fund selection. I suggested the L-2040 target date fund. Each year she adds half of her annual pay increase to her TSP contributions and intends to continue with this approach until she reaches the maximum amount allowed.  I advised her to ignore the stock market’s erratic behavior and let the target date fund balance her account every quarter to a more conservative mix until she retires around 2040. By the time Sabrina retires approximately 85 percent of her entire account will be in the G Fund and high quality private sector bond fund.  Currently the G Fund is the only fund that I’m aware of that is guaranteed never to decrease in value! Can’t ask for more than that.

Both retirement systems have their advantages and no matter what plan you are in a federal retirement far exceeds what most in the private sector can expect. If FERS employees pay attention to their THRIFT account and opt to fund it to the maximum many will potentially have hundreds of thousands available for them when they need it.  Even as a CSRS annuitant I can attest to the advantages of the TSP. My account balance, even though I was only able to contribute 5% of my annual earnings, has increased to over three times my total contributions. I elected to keep my TSP active for a number of reasons that I discussed in an earlier article titled, The TSP Advantage (Show I Stay or Go).

Now that we are midway through another year it’s a good time to review your retirement options, possibly request annuity estimates from HR for several target dates, and perform a comprehensive retirement cost analysis. Take a breather from your hectic schedule and sit down with your significant others and talk about retirement and your expectations.

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

Helpful Retirement Planning Tools

Distribute these FREE tools to others that are planning their retirement

Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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    Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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    Posted on Tuesday, 30th May 2017 by

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    Many agencies are now either considering or have already applied to OPM for approval to offer Voluntary Early Retirements (VERAs) and possibly Voluntary Separation Incentive Payments (VSIPs) as well. Now is the time to assess whether or not a VERA, if offered, would be the right thing for you to do based on your circumstances and desire to leave early.

    Currently, at least three agencies plan to offer early retirement incentives, the Department of the Interior, EPA, and the State Department. The Office of Management and Budget (OMB) requires all agencies to develop plans to reduce their workforce based on the President’s proposed cuts including a 12 percent reduction in the Interior Department’s budget.  These cuts are predicated on the final budget enacted by Congress and there will likely be significant changes as it works its way through the process.

    Most agencies try to accomplish reductions through attrition first, before initiating other actions which are more disruptive, costly and difficult to implement. Agencies may also offer a Voluntary Separation Incentive Payment (VSIP)of up to $25,000 for select positions to encourage more to leave. If all else fails agencies may have to use Reduction in Force (RIF) procedures to meet their targets and stay within their allocated budgets and still provide essential services.

    The vast majority of an agency’s budget, up to 90% in many cases, is used for payroll, compensation, and benefits (PC&B).  When I was with the FAA I recall that PC&B consumed over 80% of the entire agency budget. When agencies need funds they often delay hiring until the end of the fiscal year to use the money saved from PC&B to cover needed services, fund lower priority projects, and to purchase supplies that were put on hold.  That’s why at the end of the year many agencies have excess funds that they allocate to the field to purchase a laundry list of projects and purchases. One of my managerial tasks was to compile annually a comprehensive list of projects and supplies and to be ready to spend the funds before September 30th.  Hiring was the same way, at the end of the fiscal year we pushed to fill critical vacancies in fear of losing those funds next year if we didn’t fill the positions.

    The high PC&B costs agencies naturally incur narrow their options when it comes time to cut. If only 10 to 20 percent of your entire budget funds operations, staffing reductions are often their only option to reduce costs and still provide required services.

    If an offer comes your way are you prepared to take it?  It takes time and planning to evaluate where you are at now, what your expenses and income is currently and will be if you take a drastic pay cut, and are you ready to change your life dramatically.  Many dream of an early retirement but can you and your loved ones afford to make that move. It isn’t as big of an issue if for example you just have three years invested in federal employment and they offer you a $25,000 VSIP payment to leave and you are young enough and talented enough to find another job in the near future. However, if you are 45 or 50, in your high earning years, with 20 to 30 years service can you afford to make this change? Are your skills and resume ready to find another job to make up lost wages? The last 10 years of service racks up the biggest benefits; higher wages, annual pay increases, a bigger federal pension plus the potential to significantly grow your TSP account!

    Do you know what you would do if you leave? Start out by reading these two free reports:

    My agency offered early outs in the mid 1990s for selected occupations and I applied. Prior to receiving feedback that my position was not included in the offer I had already determined I could not afford to take advantage of it. My annuity would have only been about 20% of my salary and I had two children still living at home. I was 45 at the time and ended up working another 10 years before retiring at 55 with 36 year’s service and a nice CSRS pension.  I’m glad that I didn’t get the opportunity to seriously consider an early out offer and I can tell you that 5 to 10 years is a cake walk and that time FLYS by. I’ve been retired for 13 years now!  More than a decade just past me by and I find it difficult to comprehend just how fast the next 10 years will evaporate before me.

    I did have other employment options when I applied for a VERA in the 1990s. I owned a part time business that I wanted to grow into fulltime employment when I did decide to retire. However, at age 45 I was uncertain about my business prospects and didn’t envision how dramatically the business would grow after I retired in 2005.

    The long and short of it is that anyone considering a major move such as accepting an early out needs to investigate the opportunity from all perspectives. If you think early retirements will be offered in your agency the earlier you start your research the more prepared you will be when the offer comes. Plus, this early look at your finances and prospects will help you with your overall retirement plans down the road. Perform a Retirement Cost Analysis and use our free downloadable spreadsheet to help with your personal review.

    Here is a list of information and articles that will help you better understand the VERA and VSIP programs so that you will be able to make an informed decision if one comes your way. The grass always looks greening on the other side of the mountain. Until you actually get there your view is distorted with oft unrealistic expectations and obstacles that you may find along the way.

    VERA & VSIP Information

    The sage saying “look before you leap” applies here. Take your time to evaluate your situation, discuss the options with your significant others, and obtain needed support and clarifications from your agency’s human resource specialists. They will be able to provide early retirement annuity estimates and clarify benefits issues that you may have. Be open to your spouse’s and significant others input and try not to be defensive, they too have to live with your decision.

    Helpful Retirement Planning Tools

    Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

    Distribute these FREE tools to others that are planning their retirement

    Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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      Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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      Posted on Sunday, 14th May 2017 by

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      I’ve been working to place my wife’s and my life on auto pilot as much as possible. Each year I up my game and work to either consolidate, eliminate, or simplify another process, program, or function that will free up our time, space, and just make life less hectic and worrisome. We are preparing, while we are still capable and healthy, for whatever may come our way and at the same time consciously deciding not to leave things to chance or burden our children down the road.

      My articles chronicle my personal journey and I thank those who have taken the time to follow me along the way through my newsletters and blog. I’ve talked about everything from starting out early in life, updating our estate plans to end-of-life planning and most things in between. It takes planning, like all things, to right size our life as we age and move on to the next stage of our lives.

      It doesn’t matter where you are at in your life; just starting out, mid career, or retired. Anytime we can make changes to better suit our lifestyle and goals we are ahead of the game. I recall when my wife and I started out in Biloxi Mississippi we had literally nothing to our name; no car, no money, and living on a military salary of $98 a month! Life was so simple then with few world belongings and not a clue where life would ultimately take us.  When I completed my military training Mary and I transported all we owned to our next duty station in a used 1963 Chevy Impala that I purchased from an airmen in my squadron.

      When we started out at age 20 we thought little about the future. At the time I could have just as easily been ordered to Vietnam after training instead of being blessed with a stateside assignment to Topeka, Kansas. Our life was driven by the desire to make a life together, work hard at whatever came our way, and hope for the best. Thankfully, we succeeded and built on those early years, one day at a time.  Even in those early years we started planning, our first goal was to purchase a car and to that end I landed a part time bar waiter job at the local NCO Club.

      We collectively took risks, moved many times and struggled though those early years and yet without those struggles and sacrifices we wouldn’t be where we are today. It seems that today so many starting out insist on having it all even though they can’t afford it. They aren’t willing to do without and I believe that is why many fail.

      Some of the tasks I’ve accomplished over the past few years were to restructure my company to streamline operations, update our estate plans, and evaluate investments to reduce risk and involvement. I’ve been retired 13 years this November and as age creeps up on us it’s a reminder that it’s a good time to downsize and prepare for whatever may come next.

      I’ve completed the first two of the above list and the investment review is ongoing. Basically, I was tracking a good number of individual stocks, mutual funds, and bonds in our taxable and retirement accounts which consumed a considerable amount of time each week. After two years of research I moved much of our investments to lower risk managed and indexed mutual funds that are less susceptible to market swings.

      I looked for funds like the Vanguard Wellesley fund (VWINX) investor shares that is 60% bond and 40% stocks and only charges an annual .22% management fee. The funds total gain since its inception in 2001 is 6.92% annually. Their Admiral shares(VWIAX) only charge a .16% annual expense ratio however they require a larger initial investment. This fund only dropped about 9% during the 2008 market collapse and recovered within a year. Another Vanguard fund that I researched and included was their Wellington Fund (VWELX). This fund typically invests 60% in stocks and 40% in bonds and has a .25% expense ratio, with a 8.23% average annual return. This fund has been around since 1929 and both of the Vanguard funds listed above are rated 5 Star by Morningstar. If you don’t buy them from Vanguard most other brokers charge a fee and you can only buy the Wellington through Vanguard right now.

      I also found a number of the American Fund F1 shares desirable. American Fund A Shares carry a hefty 5.75% front end load fee, however the FI class does not charge a sales fee. I was able to purchase the class F1 shares through Fidelity and only pay the annual expense ratio which is reasonable for a high rated managed fund. In particular I like the American Funds Income Fund of America (IFAFX), another 5 star rated fund, with a .65% annual expense ratio. It invests 60 to 70% of their assets in mostly dividend paying stocks and 30 to 40% in fixed income securities to generate a moderate level of income.  Currently this fund invests 54.7 % in U.S. stocks, 16.3 % in non-U.S. stocks, and 22.8 % in bonds with 3.4% in cash and 2.8 % in other investments.

      My goal was to have one third of all investments in mutual funds, one third in cash or cash equivalents, and one third in high quality stocks that are rated # 1 for safety. This mix worked out for me to a conservative 55% stock and 45% bond or cash equivalent mix. I’ll discuss some of the mutual funds I researched in an upcoming article.

      Another facet of our streamlining initiative was to go through our entire home, one room at a time, and purge all things no longer used, or desired. We asked our children what they wanted and the rest I have sitting  in my garage waiting for a good weekend to sell it at Trader Jacks, a local flea market; still working our way through the home, garage, and backyard shed.

      Mary and I moved 11 times during our 47 year marriage and have always been fairly organized and prepared for the next move so it hasn’t been a traumatic experience going through our belongings. I can imagine it might be a challenge for anyone who has stayed in the same home for 30 plus years.  My son and I frequently go to estate sales and many home are full top to bottom with things I’m sure the original occupants haven’t needed or used for decades.

      I also watch the series American Pickers and am amazed at homes they visit that are filled to the gills as they say. The collection (mostly junk from my perspective) overflows to out-building, storage sheds, attics, basements and you often find the entire home stuffed full of anything and everything. An heirs nightmare.

      My streamlining initiatives are working and I now have a reduced work schedule. This is a good time to contemplate what needs attention in your life and set a time table to work on YOUR PLAN. I’m no longer spending most of my Sunday mornings reviewing individual investments and our home is basically in order. I’m now able to spend more time with our precious grandchildren. A goal worth achieving.

      Featuring Federal Retirees in Our Blogs 

      We are interviewing federal retirees for our Career and Jobs Blog. If you would like to be featured email Betty Boyd, our feature writer, with your job title and series at betty@boydwritingservices.com. She will review your request and if accepted send you questions to answer and request a photograph. We coordinate interviews with active federal worker’s PR offices and retirees directly to present insider perspectives for the many jobs available in government service.

      Helpful Retirement Planning Tools

      Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

      Distribute these FREE tools to others that are planning their retirement

      Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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        Posted in ESTATE PLANNING, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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        Posted on Saturday, 15th April 2017 by

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        Veteran Identification Cards – New & Expanded Benefits

        Until recently the only way veterans could prove their military status was either with a VA Health Service card, a retired military card, or provide a copy of their DD-214 discharge paperwork. Veterans that aren’t signed up for VA health care or didn’t retire from military service had few options other than carrying around a copy of their discharge papers. Our DD-214 forms don’t include a picture and most times a photo ID is required.

         

        A New Way to Prove Veteran Status

        On July 20, 2015, the president signed into law the Veterans Identification Card Act of 2015. This act allows Veterans to apply for an identification card directly from the Veterans Administration. The VA identification card will allow Veterans to demonstrate proof of service for discounts at private restaurants and businesses. This new photo ID can be used at Home Depot, Lowes and other civilian establishments that offer veterans discounts.

        Starting on November 11, 2017,  Veterans Day, all honorably discharged veterans will be able to shop online at discount military exchanges. Part of this process includes verifying veteran status and the Defense Manpower Data Center (DMDC) has to create the software to do this. The exchange services will provide registration information for their online sites and the call center for the Army and Air Force Exchange Service (AAFES) will help veterans sign up and navigate the system. Veterans will also be able to shop at the online Navy Exchange Services managed by NEXCOM.

        Veterans with honorable discharges will be authorized to shop online at any of the military exchange sites regardless of service branch, but they won’t be able to receive a DoD identification card through the program, or gain access to DoD installations and other DoD property where exchanges are located.

         

        How to Obtain a Veteran Identification Card

        The VAntage Point blog article titled Veteran ID Cards: What your options are now and in the future published on March 24, 2016 describes the new program and the process for obtaining a temporary letter to use until the cards are available. The new VA identification cards can’t be used as proof of eligibility for any federal benefits and they don’t grant access to military installations. The VA will charge a fee, the cost hasn’t been established as of yet. I thought the fee was a little over the top since we did serve our country and many, like myself, didn’t have a choice since I and many others received draft notices in the 1960s.  My initial military pay was a meager $98 a month, well below minimum wage at the time. When I married the love of my life in 1969 they increased my pay to $148 a month because I had to move off base! However, that being said, I don’t have a problem with a reasonable fee, it would just be nice to have the official card for use at Lowes, Home Depot, and other establishments.

        Until recently I was using my Pennsylvania state drivers license for proof of service. In Pennsylvania the Department of Transportation adds a flag and place VETERAN under it to denote military service. You just have to take your DD-214 with you when you renew your driver’s license.  Now both Home Depot and Lowes refuses to accept the PA license as proof of identification for some reason and that is why I was researching how to obtain a VA ID card. I first called to see if I would be able to obtain a VA Medical card. Many veterans don’t qualify for a Medical Card because of income limits. I fit into that category and so would many federal retirees due to our retirement annuity often combined with our Social Security benefit.

        According to the VA You can access and print a free Veterans identification proof of service letter through the joint VA/DoD web portal, eBenefits. This serves as proof of honorable service in the Uniformed Services, as defined in laws about the Department of Defense (DoD).  Veterans are able to obtain a free eBenefits account by going to https://www.ebenefits.va.gov/ebenefits/homepage. You have to sign up for a premium account to be able to print out the Veterans identification proof of service letter.

        I was able to sign up for the premium service however when I went to print out the proof of service letter an error code popped up on my screen and I had to call the eBenefits tech support office for assistance. Basically they were unable to correct the error and they submitted a ticket for upper level support. When I asked them when I could expect this to be resolved, they stated that it could be anywhere from a month to a year or longer! I at least have my account now and hopefully it will get resolved and hopefully the new cards will be available later this year before November 11th.

        If you are a veteran and need an identification card sign up for a premium eBenefit account today to get ahead of the curve. If you have problems with your account they will hopefully be able to resolve the issues before they implement the program. Your records may be in tact especially if you served from the 1980s on. I understand that veteran’s records prior to 1980 are archived and they have to take additional steps to retrieve them.

         

        Featuring Federal Retirees in Our Blogs 

        We are interviewing federal retirees for our Career and Jobs Blog. If you would like to be featured email Betty Boyd with your job title and series at betty@boydwritingservices.com. She will review your request and if accepted send you questions to answer and request a photograph. We coordinate interviews with active federal worker’s PR offices and retirees directly to present insider perspectives for the many jobs available in government service.

         

        Helpful Retirement Planning Tools

        Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

        Distribute these FREE tools to others that are planning their retirement

        Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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          Posted on Monday, 13th March 2017 by

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          According to Kiplinger’s, core inflation will increase in 2017 above last year’s rate. Higher inflation generally results in higher Cost of Living Adjustments (COLAs) the following year. The Federal Reserve is expected to raise interest rates soon and several more increases are anticipated this year. This alone will provide relief to all savers including retirees living on a fixed income. The Federal Reserve has only raised interest rates twice since 2006 and the current rate of .75% is well below their 2.5% target rate.  We can expect Certificate of Deposit (CD) rates to increase accordingly.

          Financial Planning Pen and Calculator and Review of Year End Reports

          Interest rates have been so low for so long that fixed income investments such as CDs and savings deposits lost money since the meager interest earned didn’t offset inflation all of those years. Low rates also pushed many into higher risk investments that are subject to dramatic prices swings. The government decided to penalize (tax) savers to pay the interest on our national debt!  The lower interest is really a tax on those who sacrificed, saved, and did the right things in life to prepare for retirement and their future in general.

          The downside to a higher COLA is that costs are projected to increase this year in several areas including health care.

          As interest rates increase savers can park a part of their next egg in higher interest rate CDs and I Bonds rather than in higher risk investments. With the bull stock market just surpassing its 8 year anniversary, the second longest bull market in history, many are seeking conservative investment options to protect their core savings.

          I Savings Bonds now earn 2.75% interest! The I Bond rate increased last November and this rate is good through April 30, 2017. The rate is adjusted every six months. If you buy an I Bond from www.treasurydirect.gov you will receive this rate for 6 months from the date of purchase and then it will change to the new rate that will be announced May 1.  I Bond interest changes with inflation every six months and as interest rates increase so do the return on I Bonds.  I bonds and inflation protection securities including Treasury Inflation Protected Securities (TIPS) value increases with inflation and are generally considered to be a good place to park some of your savings when interest rates are rising.

          I originally purchased paper I bonds through payroll deduction when they were first released in 1999. Those early I Bonds had a high fixed rate and they are paying 5.75% today and have paid as high as 8% over the past eight years. The first I bond I purchased for $200 in 1999 has a cash value of $528 today, over two and a half times what I paid for it; an excellent and safe investment overall.

          There are certain limitations that you should know about before purchasing I Bonds.

          Individuals are limited to purchasing $10,000 in I Bonds each year, a husband and wife can purchase $20,000 total for the year. You can’t cash them in for one year and if you cash them in within the first 5 years you own them they charge you 3 months of the earned interest. I asked the Treasury the question; “if a bond owner dies is the 1 year waiting period and interest penalty waived like it is for Certificate of Deposits?”  They said no, you can’t cash them in early and the penalty stands.

          By the way, EE Bonds are only paying .1%! What most people don’t realize is that if you hold your E Bonds for 20 years or more the Treasury guarantees that an EE paper Bond, purchased at half its face value, will be worth at least its face value after the first 20 years. (This equates to approximately a 3.5% yield) If an EE Bond does not double in value (reach its face value) as a result of applying the fixed rate of interest for those 20 years, Treasury will make a one-time adjustment at the 20 year anniversary of the bond’s issue date to make up the difference. When you buy EE Bonds online the Treasury guarantees that your investment will double in 20 years.

          NOTE: EE Bonds are also an attractive option for many who are still working and won’t be needing their savings for 20 years or more. I’ve purchased E Bonds through payroll deduction starting when I first entered federal service after the military in the early 1970s! I cash in bonds over 30 years old and reinvested the proceeds as they mature. The nice thing about savings bonds is the interest earned isn’t taxed until you cash them in!

          You have to purchase Savings Bonds and Treasuries online direct from TreasuryDirect.gov. They no longer issue paper bonds except for those who select them as an alternative to receiving a check for their income tax return.  I liked Savings Bonds better when you could go to your local bank and purchase paper bonds. The only way you can verify ownership with the new program is to visit your account online and print out your statement. If you have paper I or EE Savings Bonds you can cash them in at your local bank for the most part. Some banks no longer accept them so call first before taking them in.

          Funds from the sale of savings bonds and Treasuries held in a TreasuryDirect.gov account are paid out direct to the financial institution account of your choosing and electronically transferred the day of the transaction. You also buy bonds that way; funds are transferred direct from your designated account to TreasuryDirect.gov. If you buy US Treasury notes, bills, or bonds the interest earned is also directly deposited to your account on the date of issue.

          Savings bonds over 30 years old no longer pay interest and you may wish to cash them in and either buy new ones, invest the money elsewhere, or put the money into a CD or savings account. When you cash in savings bonds the interest is reported to the IRS and you will have to report the interest on your tax return for the current year.  If you are signed up for Medicare Part B your premium is income adjusted. Cashing in savings bonds and taking capital gains from other investments can increase your Modified Adjusted Gross Income (MAGI) sufficiently to dramatically increase your Income Adjusted Medicare Part B premiums. It should also be noted that interest earned on tax free municipal bonds is included in your MAGI for determining your income adjusted Medicare premium.

          A number of financial institutions are offering more attractive rates for money market and special savings accounts. I earn .8% interest on special savings accounts at my local bank and .5% at our credit union. Even though these rates are low they are higher than most financial institutions are paying today. CDs are now paying up to 2.3% for five year and 1.1% for one year certificates if you look around. I was able to purchase CDs earning 1.5% for a fifteen month term last year from our credit union. The ten year Treasuries are paying 2.4%. Again, not that great but better than we have been able to get for some time and rates may be going up dramatically this year.  The Federal Reserve is expected to increase interest rates several times this year to normalize rates.

          Stock market corrections can dramatically decrease many retiree’s retirement account balances near term. If you can’t weather the storm or tend to panic when stock prices fall it’s wise and prudent to seek out conservative fixed income investments such as higher interest FDIC insured savings accounts, CDs, Treasuries, and savings bonds.

          For Thrift Savings Plan (TSP) participants the L Income Fund is designed for retirees that want to keep up with inflation but still have the majority of their investment protected from market fluctuations. The L Income Fund invests 74% of the account in the (G) Government Bond Fund, 6% in the (F) Fixed Income Fund, 11.2% in the (C) S&P 500 Index Fund, 2.8% in the (S) Small Cap Fund, and 6% in the (I) International Fund. The G Fund is guaranteed not to decease in value and the bonds are special issue federal government bonds.

          Take some time to evaluate your accounts and look at ways to increase your yields wherever possible. It takes time and energy to review where you are now but the energy expended can pay off handsomely down the road, plus you will potentially be reducing your risk which is especially important for retirees on fixed income.

          Helpful Retirement Planning Tools

          Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

          Distribute these FREE tools to others that are planning their retirement

          Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

           

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            Posted in BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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            Posted on Sunday, 12th February 2017 by

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            The saying that “It’s Never Too Late” doesn’t apply to certain aspects of retirement and estate planning. I can attest first hand to this; my father died when I was one and my mother, at age 37, was left with 4 small children of which I was the youngest. My father died without life insurance and my mother was left to raise us during the hard times ahead.

            Final arrangements are a necessary part of everyone’s estate plan yet it is the one facet of the plan that many neglect… UNTIL IT IS TOO LATE! Now is the time to put pen to paper and let your loved ones know your wishes and determine what services you desire when that time comes. Another critical aspect of pre-planning for federal employees and annuitants is that It will help your surviving spouse and family members retain their benefits, reduce their health care costs, and cash in your FEGLI life insurance.

            Pre-planning Steps

            • Identify an interment site (cemetery)
              • Purchase a plot, crypt, or elect cremation
            • Selecting a funeral home
              • Funeral Director to prepare a “Statement of Funeral Goods and Services Selected”
              • Prepare a Funeral Planning Record
            • Payment options
              • Prepay or,
              • Pay with an insurance policy
              • Identify funds to be used for payment
            • Report Death to OPM (Procedures & Form)
              • Confirm FEHB changed from Self Plus One to Self Only if appropriate
            • Report Death to FEGLI (Procedures & Form)

            I started planning our final arrangements when we updated our estate plans several years ago. I should have completed this task long before; you never know what’s just around the corner. Our estate plan included all of the essentials except for detailed final arrangements; what funeral home we would use, services desired, and other necessary details.

            What brought the subject up was an out of town trip.  We passed the National Cemetery where we originally planned to be buried. Burial is free for veterans and their spouses and it was a natural choice for us. I wrote an article about Final Arrangements and the National Cemeteries that you may find informative. My wife was concerned that the National Cemetery was too far from home for her to visit.

            Identify an interment site (cemetery)

            Use the following resources to find a suitable location:

            I researched local cemeteries in early 2014 and upon our return home we purchased a crypt in a cemetery only three miles from our home. We received a substantial pre-construction discount with a no interest loan from the Catholic Cemeteries Association. The association also offered a prepaid funeral plan that we used to compare prices at local funeral homes. Catholic cemeteries now accept all faiths.

            I compared standard grave burials to crypt interment. With a grave you have to pay for the plot, a headstone which can cost up to $5,000 or more, a vault, and have the grave excavated and filled in. The cost for a crypt in a mausoleum, especially with a pre-need and/or pre-construction discount, wasn’t much more and everything is included with the purchase.

            Selecting a funeral home

            I contacted three local funeral homes and requested copies of their General Price List. Most, if not all,  funeral homes will provide price lists upon request. I visited two on the list and we discussed options, services, and they answered my many questions. Each provided a detailed Statement of Funeral Goods and Services Selected.” The statements included the total cost for all of the essential services, casket, viewing duration, up to required clothing that we desired. We selected the funeral home best suited to our needs and prepared a Funeral Planning Record for them to hold on file until notified of a death.

            The costs listed on their statement are only good for 30 days. Prices generally increase over time. The good thing is that you have exactly what services you desire on paper so there won’t be any confusion at the time of death.

            Pre-planning helps loved ones cope at a very difficult time and lets them know exactly what the deceased desired and how to pay for it. The Funeral Planning Record lists all of the important information the funeral director needs when the time comes. It lists your name, address, birth date, church affiliation, marriage information, family members, and so much more. The information is used for many purposes including writing an obituary and notifying Social Security and Medicare. They also ask for a copy of a veteran’s DD-214 and coordinate VA benefits. If desired you can also write a draft obituary and include it in the record.

            All funeral directors provide a Funeral Planning Record for you to complete. However, most funeral homes aren’t automated to the point where you can enter this information into a database or on a fill-in PDF form. I converted the Funeral Planning Record to a Microsoft Word document because I don’t like to manually fill in forms. Keep a copy with your estate plan or include it in a Funeral Arrangement file like I did for my wife and children. All they have to do is take a copy with my DD-214 form, I placed a copy in the file, to the funeral home when they go to finalize arrangements and sign the forms. It’s best to review your final arrangements with your children or heirs so they know what to expect.

            Payment options

            The average cost of a funeral today is just over $7,000 and then you have to add thousands more for the cemetery plot and headstone or a crypt. Cost is the major reason why cremation has become so popular now accounting for almost 50% of all burials.

            • Pay with an insurance policy using a “Funeral Home Assignment”
            • Prepay in advance with a Final Arrangement insurance policy
            • Pay with estate assets at time of death

            Funeral homes typically allow 30 days for payment after a funeral and they will have death certificates within 2 to 3 days from the date of death. You will need to send a copy of the death certificate to the insurance companies to have them release funds.  You can elect to have the insurance company pay the funeral home direct for their services and the remainder will be sent to the beneficiary. This is called a Funeral Home Assignment and FEGLI allows this. I advised my wife to do this with my FEGLI policy.

            If you have sufficient savings the costs can be paid from estate assets or from the surviving spouse’s accounts at the time of death.

            Many funeral homes offer prepayment plans using a final arrangement insurance policy. These policies require a lump sum payment to the insurer for the total amount listed on the funeral home’s Statement of Funeral Goods and Services Selected contract. The insurance policy earns dividends that take care of any additional costs at the time of death. If you decide to use this option check the AmBest insurance ratings for the company. According to AM Best, “A Best’s Credit Rating provides a forward-looking independent and objective opinion of the insurer’s creditworthiness.” You have to register to use their free service.

            Another more desirable option, if you don’t have sufficient insurance, is to set aside the amount specified and place it into an interest bearing savings account or a Certificate of Deposit (CD) that has a low early withdrawal penalty. Let it grow there to cover future cost increases. Place a copy of the CD or a note about the savings account in your Funeral Arrangement file and advise your heirs so they will know where the funds are located.

            Reporting a Death to OPM (Procedures & Forms)

            This is a critical and time sensitive issue for annuitants and survivor annuitants. You must report the death of an annuitant or survivor annuitant to OPM and complete an Application for Death Benefits shortly after the death. Reporting the death to OPM will stop the annuitant’s payment and start the survivor’s reduced payment. They should also contact the surviving spouse about reducing their FEHB coverage from a family or self-plus one plan to a self only plan that will substantially reduce the surviving spouse’s monthly premium.

            Three Ways to Contact OPM:

            Call, it may take a number of tries to get through. Call early in the morning and just keep redialing until you get through. Long waits are typical.

            1. Telephone at 1-888-767-6738 —hours of operation are 7:40 A.M. until 5:00 P.M (Eastern Time)
            2. Send email: retire@opm.gov (Don’t send confidential info by email)
            3. Report a death to OPM online

            All payments received from OPM after the annuitant’s date of death must be returned to the Treasury Department. 

            Complete an SF-2800 “Application for Death Benefits” for CSRS annuitants or a SF-3104 and SF-3104B forms for FERS annuitants. OPM will send a package for the survivor to complete.  I downloaded and completed the SF-2800 (Application For Death Benefits) form in advance for my wife and added sticky green arrow markers where my wife will have to enter my date of death, sign and date. This form must be sent to OPM along with a copy of the death certificate and marriage license. I advised my wife to check with OPM to make sure the form I completed is still valid, it was last revised on November 2011. I included a copy of our marriage license in the file attached to this draft form.  Send it to the Office of Personnel Management, P.O. Box 45, Boyers, PA 16017-0045.

            You will need the following information when reporting a death to OPM and FEGLI:

            • Deceased CSA Number:
            • Retirement System: CSRS or FERS
            • Copy of death certificate (Funeral home will have death certificates within 2 days of the death.)
            • Copy of marriage certificate (Attached to the SF-2800 or 3104 form in folder)
            • SSN:
            • Date of Birth:
            • Health Benefit Enrollment Code at time of death:
            • Spouse’s birth date:
            • Spouse’s SSN:
            • Spouses Date of Marriage:
            • Address & Phone Number:

            Reporting a Death to Federal Employees Group Life Insurance (FEGLI) by MET LIFE:  Call FEGLI (1-800-633-4542) to report the death and complete their Form FE-6 Claim For Death Benefits form. I also downloaded this form and completed it in advance and added sticky green arrow markers where my wife will have to enter my date of death, sign and date. If you should decide to do this your survivor should call and ask FEGLI if the form you completed, the current one was revised December 2016, is still current. If a newer form is available have them send a copy or downloaded it from the Internet. Attach a copy of the death certificate.  Send this completed form to OFEGLI, PO Box 6080, Scranton, PA 18505. This address is in the instructions with the form.

            FEGLI will pay for the funeral costs and send the difference to the surviving spouse or designated beneficiaries if desired. The funeral home will have you sign a document, a Funeral Home Assignment letter, agreeing to this and provide a copy to attach to the FE-6 form. You must check YES in Part F authorizing them to pay the funeral home direct.

            The time spent preparing your final arrangements will make it much easier on your family and friends. Take the necessary steps to prepare your final arrangements now. I feel relieved now that I’ve done what was needed to help my wife and children when that time comes and I hope that time is far, far away! If you decide to put this task off, print this article and keep it in your retirement or estate planning folder for future reference.

            Helpful Retirement Planning Tools

            Request a  Federal Retirement Report™  today if you would like to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

            Distribute these FREE tools to others that are planning their retirement

            Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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              Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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              Posted on Friday, 27th January 2017 by

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              OPM issued a “Benefits Administration Letter,” number 16-102, announcing that “effective immediately, we will not accept corrections (scratch-outs, white-outs, line-outs, or any other type of correction actions) in the named Sections on the following forms. New forms must be completed in lieu of any alterations to previously entered information.”

              A manually corrected retirement application could delay disbursement of the applicant’s annuity and lump sum payments. Most of the new forms are PDF and the information can be reentered on your desk or laptop computers. Unfortunately, in many cases,  you can’t save completed fill-in forms.  Don’t manually line out or correct the noted sections on the following list of forms:

              Civil Service Retirement System (CSRS) Forms

              • CSRS Immediate Retirement Application, SF 2801: Section F- Annuity Election
              • CSRS Immediate Retirement Application, SF 2801-2: Spouse’s Consent to Survivor Election
              • CSRS Deferred Application OPM Form 1496A: Section C- Annuity Election
              • CSRS Deferred Application OPM Form 1496A: Schedule A- Election of Former Spouse Survivor Annuity or Combination Current/Former Spouse Annuity
              • CSRS Deferred Application OPM Form 1496A: Schedule B- Spouse’s Consent to Survivor Election
              • Designation of Beneficiary SF 2808 (CSRS) Sections B and C

              Federal Employees Retirement System (FERS) Forms

              • FERS Immediate Retirement Application, SF 3107: Section D- Annuity Election;
              • FERS Immediate Retirement Application, SF 3107-2: Spouse’s Consent to Survivor Election
              • Application for Deferred/Postponed Retirement FERS, RI 92-19: Section F-Annuity Election
              • Application for Deferred/Postponed Retirement FERS, RI 92-19: Schedule A-Spouse’s Consent to Survivor Election
              • Designation of Beneficiary SF 3102 (FERS): Sections B and C

              Federal Employees Group Life Insurance Forms

              • Continuation of Life Insurance Coverage (SF 2818): Items 7-14
              • Designation of Beneficiary for FEGLI (SF 2823): Sections B, C, and D

              Helpful Retirement Planning Tools

              Request a  Federal Retirement Report™  today if you would like to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

              Distribute these FREE tools to others that are planning their retirement

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                Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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                Posted on Wednesday, 18th January 2017 by

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                Normally, federal annuitants don’t received their 1099R Tax Forms until the end of January or the beginning of February by regular mail. If you are registered to use OPM’s Retirement Services Website your 1099 R is now available for download. I visited the site on January 18, 2016 and was able to download my copy that I will use for my 2016 tax return. I’ve been visiting the site each day to see when it would first be available.

                To get a head start on your taxes visit OPM’s web site and download a copy. You must be registered to use the site. If you aren’t registered read the article titled “Connect to OPM’s Online Services” to understand the registration process and sign up. It doesn’t take long however you may have to wait for your password to be sent via regular US mail and that can take several weeks. If you haven’t signed up yet do it now. The site offers retired federal employees many helpful options such as changing your direct deposit information, address changes, 1099 R copies, and much more.

                Helpful Retirement Planning Tools

                Request a  Federal Retirement Report™  today if you would like to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

                Distribute these FREE tools to others that are planning their retirement

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                  Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, FINANCE / TIP, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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