Posted on Sunday, 11th December 2011 by

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Financial Planning is simply taking a snapshot of where you are financially today and calculating what you will have and need in retirement down the road. Federal employees have some unique planning issues that Non-Federal employees usually don’t face such as:

When calculating future needs, the general rule of thumb is to have between 70% and 80% of your current income in retirement to maintain a similar quality of life. To develop an effective plan you should first consider your personal retirement goals and evaluate whether or not you will have sufficient income and investments to maintain the lifestyle you desire. Unfortunately many approaching retirement pay little attention to this critical first step and what they must do to achieve their goals.

Many other important questions surface when developing your personal plan such as but not limited to:

  • Do you know what your approximate annuity amount will be in retirement?
  • Are you planning to take the full survivor benefit option on your annuity?
  • If not are you planning for the income gap?
  • What FEGLI options do I choose?
  • Should I purchase private life insurance?
  • How will I receive income from your TSP?

There are many things to consider and if you don’t take the time to plan effectively your retirement dream could potentially become you and your loved ones nightmare.

Things like life insurance and the FEGLI program may throw you a curve. Do you know what you really need when you retire and that electing a 75% reduction of the FEGLI basic coverage in retirement will decrease your Basic coverage to 25% and is free after age 65? Option A also decreases to $2,500 of free coverage in retirement if you elect the 75% reduction. Many retirees may need to cover mortgage debts, vehicle and credit card debts with additional insurance. Will you have enough coverage when you retire?

Are you taking advantage of the TSP? If you age 50 or over are you taking advantage of the catch up provision? What about converting to a ROTH IRA? How do you plan to take income from your TSP? Do you know you are allowed one partial withdrawal and that you can take monthly TSP withdrawals? However, you can only change the amount once a year. You can take a fixed amount from your TSP. You can also elect to roll all or a part of your TSP account into an IRA where you have additional investment choices available to you.  Another major factor to consider is how your non TSP assets come into play. A financial planner can help you make sense of it all and will recommend a plan based on your personal situation.

I believe Financial Planning is essential to a successful retirement because it helps prepares you for the future. It also helps negotiate the financial barriers that arise at various stages of life.

The first step in the financial planning process is to find a financial professional that can help you make sense out of it all. I have a personal profile questionnaire which asks specific questions about federal benefits and goals. Once the personal profile questionnaire is filled out we can then analyze and evaluate your financial status and begin the financial planning process. You can get a personal profile questionnaire by e-mailing me at prisser@tfamail.com.

Because of the unique benefits and annuity questions that can arise for federal employees, it’s important to take a snapshot of where you will be initially in retirement. The next step is to project how your assets will serve you over your lifetime. This process determines if you will have sufficient income and resources to cover expenses over time.

For information on your benefits, retirement eligibility, and annuities visit the following websites:

Paul H Risser, host of this site’s Financial Planning Forum, is an Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA. TFA and Risser Financial Services are not affiliated.

Special note

Traditional IRA’s
Taxes are deferred until distributions are made at retirement. Distributions are then taxable as ordinary income. Any withdrawals prior to age 59 ½, a 10% federal penalty tax may apply to the taxable amount. Contributions may be tax deductible depending on income limits.

Roth IRA’s
Earnings grow tax-deferred. Contributions are made with after-tax money. Qualified distributions are tax-free upon retirement when an account has been open for at least five-years and/or certain requirements have been met. Non-qualified distributions of earning are taxed as ordinary income and prior to age 59 ½, a 10% federal penalty tax may apply to the taxable amount. Eligibility to participate depends on adjustable gross income amounts.

While the author and publisher have used their best efforts in providing retirement and financial planning information, they make no representations or warranties with respect to the accuracy or completeness of the content of this article, forum and Website, replies to site visitor questions, or prepared articles, and they specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. The advice and strategies contained herein may not be suitable for your situation. You should consult with a financial professional where appropriate. Neither the author or publisher shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Learn more about your benefitsemployment, travel, and financial planning issues on our site and visit our Blog frequently at http://fedretire.net to read all forum articles.

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