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2020 COLA and Annuity Projection Calculator Update

Posted on Saturday, 12th October 2019 by

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I reported in mid-September that our 2020 COLA was projected to be 1.6% according to Kiplinger’s. They were spot on. The Social Security Administration announced a 1.6% COLA increase on October 10th for 2020. CSRS and FERS annuitants will all receive the full 1.6% this year.  

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

2020 Annuity Projection Calculator Update

Everyone planning their retirement needs to know how much they will have to live on in retirement and how much their annuity and the surviving spouse’s benefit will grow over time. Unlike many private sector retirement plans, our annuities are adjusted annually – most years – with a COLA. The 45-year average COLA, from 1975 to through 2020, was 3.68%! Not bad considering so many private company plans provide no annual increase.

I entered a 2019 annuity of $50,000 as an example on the chart and selected an average 2% growth rate. After 10 years the projected annuity with survivor’s benefits grew to $60,949, $5,079 monthly. The survivor’s benefit for CSRS would be $37,082 or $3,090 monthly in this example.  A 2% growth rate increased the annual annuity amount by $10,949 over ten years from 2019 through 2029! Not bad. You can run different scenarios on this spreadsheet based on your personal situation.

Frank Cullen, a retired FAA manager and friend, developed this spreadsheet. He used it when he was retiring to project his annuity and survivor’s benefit for a period of 40 years from the date he retired. Frank updates this spreadsheet for us and with a few minor adjustments you can adapt this to FERS as well. The updated Annuity Calculator, version 1.6 dated October 2019, projects your annual and monthly annuity payment with survivor benefit, without survivor benefit, and the projected survivor annuity. The projections are based on your annuity at the time you retire and a selected growth rate (COLA). All COLAs for the past 45 years, back to 1975, are listed on the spreadsheet with the average 2, 3, 5, 10 – and 42-year COLA factors that you can consider for your personal calculation.

I used this spreadsheet when I retired and it proved accurate 10 years into my retirement. The 2% growth rate I used and the projections would have been right on had we not had 2 years without COLAs. The spreadsheet provides insight into how much a survivor’s annuity reduces your monthly benefit and what your spouse can expect to receive when the annuitant dies.

With CSRS a full survivor’s annuity is 55% of the full annuity not 55% of what you were collecting as a couple.  A CSRS full survivor’s annuity costs you just under 10% of your monthly payment however the survivor’s annuity is calculated from the full annuity prior to the survivor’s reduction. Therefore, a CSRS surviving spouse can expect to receive about 61% of what the couple was receiving prior to the annuitant’s death.  Also, if an annuitant’s spouse dies, the annuitant would notify OPM and their annuity would be restored to the full amount that is listed on the spreadsheet. OPM does not refund any prior survivor annuity deductions when an annuitant’s spouse dies.

For FERS employees the projected annuity without a survivor’s benefit will be the same; just enter your annuity estimate, enter your age, year of retirement, what you consider to be a realistic growth rate, and the spreadsheet will calculate your annuity for the next 40 years! The column reserved for your projected annuity with survivor benefits will be slightly lower since the maximum spousal benefit is 50% for FERS, not the 55% for CSRS. Also, the full FERS annuity will cost the retiree a little more because FERS employees pay 10% of their annuity for a full survivor’s benefit where CSRS pay just under 10%. FERS COLAs are adjusted down when the COLA exceeds 2%.

To determine what your initial retirement annuity will be request estimates from Human Resources for several target retirement dates. I requested at least a half dozen estimates two years before I retired. You can also calculate your estimated FERS annuity or CSRS annuity using the formulas we have available on our site.

All you need to do is enter the appropriate values in the four highlighted cells.  The spreadsheet will do the rest for you.  The spreadsheet is locked except for the 4 highlighted entry cells.  This is to ensure that formulas are not inadvertently altered.  The form’s password is provided on the spreadsheet so those familiar with Excel can adapt the spreadsheet as desired.

Scheduling A Retirement Benefits Seminar

Federal Employee Benefits Advocates (FEBA) provides comprehensive benefits briefings for Federal employees so they can make informed retirement decisions. Briefings include information on CSRS or FERS Retirement Annuities and all insurance programs including Medicare, the Thrift Savings Plan (TSP), Social Security, disability and other relevant retirement planning topics.

Schedule A Seminar in Your Area

Benefits Administration Letter 11-104 requires agencies to educate employees on how to plan for retirement. FEBA assists Federal agencies to comply with this directive. HR departments can Contact FEBA to schedule briefings for their area.

Helpful Retirement Planning Tools / Resources

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

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.

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

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2020 Leave Chart & Schedule Tracker Now Available

Posted on Sunday, 6th October 2019 by

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Each year we publish a comprehensive leave record that federal employees can use to track their annual and sick leave, comp, and credit hours. Our updated 2020 Excel Leave Chart is designed for active federal employees that are planning their retirement and need to establish realistic target retirement dates. The new Excel 2020 Leave Record Spreadsheet also helps federal employees maximize their annuity through prudent management of their leave balances.

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

Please share our 2020 leave chart with everyone in your organization. The chart tracks all leave balances and you are able to annotate your work schedule on the chart as well. Simply download the spreadsheet to your desk top for easy access.

Download the 2020 Leave Record Chart

A few leave chart users reported a problem with opening the spreadsheet last year, the Excel chart was opening in protected mode and they were not able to enter data. If your spreadsheet opens in protected view click the “enable editing” button in the yellow bar at the top of the form. However, if you don’t see the enable editing button you may have an older version of Excel or your IT department may have to allow the form to pass without restrictions. We also included a newer slsx workbook version that you can use if you have problems with the earlier version.

A Microsoft Office consulting firm advised us that If the spreadsheet only opens in the protected view status and the newer slsx version doesn’t correct the problem talk with your IT staff. Some agencies increase their security settings to lock out certain documents based on set parameters. We include several hyperlinks in our spreadsheet to link users to additional supporting information such as our sick leave conversion chart and that may be the cause.

Scheduling A Retirement Benefits Seminar

Federal Employee Benefits Advocates (FEBA) provides comprehensive benefits briefings for Federal employees so they can make informed retirement decisions. Briefings include information on CSRS or FERS Retirement Annuities and all insurance programs including Medicare, the Thrift Savings Plan (TSP), Social Security, disability and other relevant retirement planning topics.

Schedule A Seminar in Your Area

Benefits Administration Letter 11-104 requires agencies to educate employees on how to plan for retirement. FEBA assists Federal agencies to comply with this directive. HR departments can Contact FEBA to schedule briefings for their area.

Helpful Retirement Planning Tools / Resources

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

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.

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

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Health Care Premiums Rising – What Else is New!

Posted on Friday, 4th October 2019 by

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Our government reports that inflation is low yet every time we turn around prices are increasing.  I often ponder why our COLAs are so low most years when we know from firsthand experience that the costs of almost everything is going through the roof. We purchased a new car in 2016, a luxury model at a year end sale. The dealer contacted us about trading up to their new 2020 model. The new sticker price is 20 percent higher for a comparable model! That’s outrageous.

 

 

When my son and I go golfing I typically buy breakfast. I couldn’t believe the prices they charge for a small breakfast these days; on average $6 to $9 for little more than two eggs, toast, sausage and home fries. If you add coffee you are talking about $10 a person!

One of the ways the government justifies the artificially low inflation rate is by adjusting large ticket items, like new car prices, for what they consider improvements from the previous year. If the manufacturer adds a new safety feature or offers higher gas mileage, they adjust the price to compensate.  Regardless how they adjust things, the reality is we are paying MORE for everything. Fortunately, there are ways to economize that can compensate for higher prices. It just takes a little time and research but it can be done.

We are use to paying more for everything these days so it shouldn’t be a surprise to everyone that our Federal Employee’s Health Benefits (FEHB) premiums are going to rise and substantially in some cases. (OPM) announced this week that for plan year 2020, the average total premiums for current non-Postal employees and retirees enrolled in plans under the FEHB Program will increase 4.0 percent.

The Federal Employees Dental and Vision Insurance Program (FEDVIP) premiums for dental plans will increase on average by 5.6 percent, and the overall average premium for vision plans will increase by 1.5 percent.

The new rates are now posted online. My wife and I are enrolled in the Nationwide GEHA Standard Self Plus One Plan. Their premium is increasing 3% from $273.83 a month to $282.05. Brochures won’t be out for a while through OPM. The providers often have the brochures available earlier, call them to request a copy.  The Nationwide Blue Cross and Blue Shield Basic Self Plus One premium increased 4.5% to $386.99 per month. Many of the HMO plans increased more, for example the Pennsylvania UPMC HMO Health Plan Self Plus One Basic premium increased just under 7% to $421.91 per month, a $29.26 increase over last year.

OPM’s Plan Comparison Tool can help enrollees shop for coverage and will be available for 2020 plans beginning the first full week of November.

To reduce costs many signing up for Medicare Part B consider converting their FEHB coverage to a lower cost option. The article I wrote titled A Marriage of Convenience – Medicare & FEHB will help those approaching 65 determine what FEHB coverage will be most cost effective and provide the best coverage.

Request a Federal Retirement Report

Retirement planning specialists provide a comprehensive Federal Retirement Report™ including annuity projections, expenditures verses income, with a complete benefits analysis. This comprehensive 27-page benefits summary will help you plan your retirement.

Request Your Personalized Federal Retirement Report™ Today

Find answers to your questions: The best time to retire, retirement income vs expenditures, FEGLI options and costs, TSP risks and withdrawal strategies, and other relevant topics. Determine what benefits to carry into retirement and their advantages. You will also have the opportunity to set up a personal one-on-one meeting with a CERTIFIED FINANCIAL PLANNER.

Helpful Retirement Planning Tools / Resources

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

 

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.

Posted in BENEFITS / INSURANCE, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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2020 COLA and the 2019 Health Care Open Season

Posted on Sunday, 15th September 2019 by

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We can look forward to a COLA increase for 2020 of between 1.6% to 1.8%, a significant decrease from last year’s 2.8%. The Social Security Administration estimated a 1.8% increase and the July issue of Kiplinger magazine suggested it may be lower at 1.6% based on their projections.

The Social Security Act specifies a formula for determining each COLA. According to the formula, COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics. According to the Socials Security Administration, a COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective. The fourth quarter isn’t used to determine the upcoming year’s COLA because that number isn’t available from the Bureau of Labor Statistics until mid to late January. Our COLAs are adjusted on January 1 before the 4th quarter data is available.

Health Care Open Season The 2019 Federal Employees Health Benefits (FEHB) open season will run from November 11 through December 9, 2019.  Each year Open Season runs from the Monday of the second full workweek in November through the Monday of the second full workweek in December. Health care service providers are required to submit benefit and rate proposals for the contract term beginning January 1, 2020 on or before May 31, 2019. OPM generally completes negotiations in August so we should have updates and new rates shortly. When they are published, I will send out a message to all subscribers.

OPM encourages all carriers to thoroughly evaluate options every year with a focus on improving affordability, reducing costs, improving the quality of care, and protecting the health of their enrolled populations. Any proposed benefit enhancements must be offset by proposed reductions so that premiums are not increased due to benefit changes. Premium increases are inevitable for most participants again this year.

Retirees can Connect to FEHB Open Season Online to review brochures, pricing and submit changes starting in early November. You can actually chat with a Customer Service Representative using their “Live Help” feature.

Jobs Update (Retiree Opportunities) 

Employers continue to recruit federal retirees and post their job vancancies on our Jobs Board. You will find listings for both part and full time positions at locations nationwide. Those with security clearances also have many opportunities to consider. With an unemployment rate of 3.7% the country is at full employment. The only way for companies to find more employees is to attract those who voluntarily stopped working, including retirees. We recently added a part-time Business Development Manager postion for Sams Inc at their College Park, MD location.  Visit our jobs board to explore opportunities in your area.

Request a Federal Retirement Report Retirement planning specialists provide a comprehensive Federal Retirement Report™ including annuity projections, expenditures verses income, with a complete benefits analysis. This comprehensive 27-page benefits summary will help you plan your retirement.

Request Your Personalized Federal Retirement Report™ Today

Find answers to your questions: The best time to retire, retirement income vs expenditures, FEGLI options and costs, TSP risks and withdrawal strategies, and other relevant topics. Determine what benefits to carry into retirement and their advantages. You will also have the opportunity to set up a personal one-on-one meeting with a CERTIFIED FINANCIAL PLANNER. Helpful Retirement Planning Tools / Resources

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

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.

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

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Returning to Work – Rehired Annuitant Options

Posted on Sunday, 1st September 2019 by

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Updated 6/16/2025

I often receive questions from retirees desiring to return to work and from agency HR departments interested in hiring former federal employees. Agency recruiters are trying everything they can to fill critical positions.  With an unemployment rate of 4.3%, the country is close to full employment. Even with today’s downsizing initiatives, critical positions must be filled, and the most qualified are often those who have voluntarily stopped working, including retirees.

Returning to Work

Returning to work can supplement your Annuity, Social Security, and TSP payouts. Federal retirees can return to work in the private sector without any impact on their federal annuity. You will continue to receive your full annuity and all benefits if you decide to work in the private sector after retiring from federal service. This includes working for contractors that provide services to the federal sector.

If you return to work with a federal agency, your pay will be reduced by the amount of your annuity in most cases. There are exceptions to this for certain critical positions. The rules for rehired annuitants are outlined below for CSRS and FERS retirees.

There are instances where your annuity will be stopped under certain conditions, and you will be covered as a regular employee. The rules are complex and if you are considering returning to federal employment review the guidance for CSRS and FERS listed below:

Discuss any concerns you may have with the hiring HR department before accepting an offer. They can obtain clarifications from OPM if needed.

Personal Services Contracts

Agencies can also hire retired federal workers under Personal Service Contracts that will not impact your annuity. These contracts are designed for completing specific tasks for a predetermined compensation rate within a set time limit.

FEHB Premium Conversion Issue

Retirees don’t get the same FEHB premium tax break that active federal employees have. Federal employee’s contributions to the Thrift Savings Plan (TSP) and their FEHB premiums are excluded from gross pay before Federal Income taxes are applied.

If you are reemployed in Federal service in a position that conveys FEHB eligibility, you may have the opportunity to participate in premium conversion. If you participate in premium conversion, your enrollment can be transferred from your Retirement System to your employing agency. Your FEHB premiums will be deducted from your pay on a pre-tax basis as an employee not from your annuity. When you separate from reemployment, your retirement system will transfer in your enrollment. You wouldn’t suspend FEHB coverage you would transfer coverage to your new employer. Review the following reference for additional guidance.

CSRS / FERS Hanbook Chapter 100  (page 51- 53 and 55 – 57)

You can only suspend FEHB coverage under certain condition. If you suspend your FEHB enrollment because you are now covered by a Medicare Advantage plan, TRICARE, CHAMPVA, Medicaid or similar State-sponsored medical assistance program, or Peace Corps Volunteer coverage, you can restart your FEHB in the future. These are the only exceptions that allow retirees to suspend FEHB coverage. The following links provide additional information on the FEHB suspension process:

If you are interested in going back to work for Uncle Sam contact agency HR departments in your area to determine if there are any openings in your specialty. You can return to work at any agency, not just the one you retired from as long as you have the required qualifications for the position applied for. There are other advantages to going back to work, especially for those who wish to start a small business. Use our Jobs Board to explore all opportunities in your area.

Helpful Retirement Planning Tools

 

 

Disclaimer: The information provided may not cover all aspects of unique or special circumstances.  Federal regulations, medical procedures, investment, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance, including OPM’s retirement center.

Over time, various dynamic economic factors relied upon as a basis for this article may change. This service is not affiliated with OPM or any federal entity. You should consult a financial, medical, or human resource professional where appropriate. Neither the publisher nor the author shall be liable for any loss or other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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

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Alert – New TSP Withdrawal Options

Posted on Saturday, 17th August 2019 by

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On September 15th the TSP will implement new withdrawal options for all participants. I published an article last March titled TSP Changes & Required Minimum Distributions (RMDs) discussing the pending changes and how RMDs will be handled under the new rules.

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

You will have more options for how and when you can access money from your TSP account. These options fall into the following categories:

  • After you separate from service, you can take multiple post-separation partial withdrawals.
  • If you’re 59½ or older and still working in federal civilian or uniformed service, you can take up to four in-service withdrawals each year.
  • You’ll be able to choose whether your withdrawal should come from your Roth balance, your traditional balance, or a proportional mix of both.
  • You will no longer need to make a full withdrawal election after you turn 70½ and are separated from federal service. (You will still need to receive IRS required minimum distributions (RMDs).
  • If you’re a separated participant, you’ll be able to take monthly, quarterly, or annual payments.
  • You’ll be able stop, start, or make changes to your installment payments at any time.
  • You’ll have enhanced online tools to help you make withdrawals in the My Account section of tsp.gov.

If you visit the TSP site the current withdrawal options are still listed, this will change on or about September 15th.  To fully understand the new withdrawal options, download the TSP’s “Questions and Answers About Changes to the TSP Withdrawal Options.”  Print a copy of this document for your records so you will have it available when it comes time to withdraw your first RMD at age 70 ½ or require funds at any time from your account. I withdrew my first RMD this past month. If you call the TSP at 1-877-968-3778, they will provide the amount you need to withdraw for your RMD to avoid an income tax penalty. Before leaving the TSP evaluate your options. Here is a list of articles and resources that you may find helpful when considering leaving the Thrift Savings Plan.

Jobs Update (Retiree Opportunities) Employers continue to recruit federal retirees and those soon to retire. A number of companies post job vacancies on our Jobs Board and you will find listings for both part and full time positions at locations nationwide. Those with security clearances also have many opportunities to consider. The good news for anyone that wants to work is that “For Hire” signs are posted everywhere today. With an unemployment rate of 3.7% the country is at full employment. The only way for companies to find more employees is to attract those who voluntarily stopped working, including retirees. Wages are increasing so that is good news for anyone interested in supplementing their retirement income. We recently added a Senior EHS Specialist position with AECOM. They need specialists at West Point, PA, Durham, NC and Elkton, VA that may interest some of our newsletter subscribers. Visit our jobs board to explore opportunities in your area.

Helpful Retirement Planning Tools / Resources

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

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.

Posted in ANNUITIES / ELIGIBILITY, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS

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Should I Defer Social Security Until Age 70?

Posted on Saturday, 10th August 2019 by

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Many think why wait, I don’t know if I’ll live to 70! Others simply need their benefit at 62 just to make ends meet. For those who are healthy and have several decades of retirement to look forward to, and have sufficient income to see them through those early retirement years, it makes sense to hold off and apply at your full retirement age or 70. That’s what I did this year, my first check arrived this past May. Currently, only 4% of those claiming Social Security held out for the highest benefit.

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

I waited for a number of reasons, first if I applied for Social Security at 62, my Windfall Elimination Provision (WEP) would have consumed a large chuck of my payment. CSRS retirees are subject to the WEP reduction. I had 14 substantial earnings years paying into Social Security then. When I retired in 2005, I continued to work in my publishing business. By waiting until this year, I accumulated 28 substantial earnings years, dramatically reducing my WEP penalty.

In 2019 Social Security multiplies the first $926 of average monthly earnings by 90%. This is the first of three factors they use to determine your basic benefit. WEP impacts this first factor for CSRS annuitants and with 20 years or less they reduce the $926 by 40%. Essentially reducing your Social Security benefit by $463 a month in 2019.  By waiting, my WEP reduction was only $92.

Secondly, I wanted my wife to collect my larger full spousal benefit when I pass since her survivor annuity would be reduced to 55% of what I was collecting while alive.

Finally, by waiting my benefit more than doubled. My Social Security estimates from back then show the progression and they were spot on. Essentially, just by waiting until your full retirement age, in my case 66, your benefit would have increased by 30%.  Full retirement age for those born in 1960 and later is 67.

The huge benefit of waiting until age 70 is that for each year you delay applying for Social Security your benefit increases by 8%! Plus, your benefit can grow even more from adding other income you may have made either at your current job or though other employment after retirement.  Throw in the annual COLAs and it just keeps getting better. The higher your income the less you have to worry about running out of money in retirement.

By the way, those 4 years between 62 and 66 will fly by, I’m 70 and it seems like yesterday I was 62. I wrote “70 and Counting” last May that talks about issues like this and just how time flies. When you arrive at 66 and later at 70 many will think, “Why didn’t I wait!”  It all comes down to perception; early Social Security eligibility is best looked at from the perspective that you will be receiving the absolute minimum benefit that you are entitled to.

Helpful Retirement Planning Tools / Resources

Attend a 2-Hour Benefits Briefing – Check Availability

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.

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

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Protecting your Assets with Fixed Income Investments

Posted on Sunday, 28th July 2019 by

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Those approaching retirement and retirees often move to more conservative investments to avoid losing what they worked a lifetime to accumulate.  Many federal retirees live on fixed income from their annuity, Social Security, and Thrift Savings Accounts.  We only have a finite time on this earth and the older we get the less time we have for our accounts to recover from market downturns.

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

The current bull market is now the longest in history running 10 years and many forget what it was like back during the dot com bubble in 2000 and again in 2008 and 2009 when the housing collapse dropped the S&P Index 55%. From March of 2000 to September of 2002 the Market dropped an average of 47% and it took 5 years to recover to its previous high. The TSP C Fund dropped significantly during these downturns. The S&P index was approximately 1525 in March of 2000 it didn’t reach and exceed that level again until March of 2013, thirteen years later; the market ran sideways, with peaks and valleys in between.

Those who are early to mid-career, up to your 50s, generally have time to  recover and can take more risks. It’s wise for the older generations to gradually reduce their exposure to the equity markets moving a percentage of their assets to fixed income vehicles: bonds including corporate, treasuries and municipals, Certificates of Deposits and plain vanilla cash. That’s the primary benefit of the Life Cycle Funds, they progressively reallocate your funds quarterly to fixed income (Bonds) as you approach your target retirement date. Many target date funds retain 20% in equities after reaching the target date to help counter the effects of inflation.

Bond funds have their own unique risks. When interest rates rise, bond funds decrease in value. The longer the fund’s bond duration the greater the drop in the fund ‘s value. Typically, the average duration of bonds in a fund indicates how much bond prices may change as interest rates vary. According to Investopedia, “As a general rule, for every 1% change in interest rates (increase or decrease), a bond’s price will change approximately 1% in the opposite direction, for every year of duration. If a bond has a duration of five years and interest rates increase 1%, the bond’s price will drop by approximately 5% (1% X 5 years). Likewise, if interest rates fall by 1%, the same bond’s price will increase by about 5% (1% X 5 years).”

When you purchase individual bonds, you only lose when interest rates rise if you sell your bonds on the secondary market before their maturity date. When held to maturity, there is no duration risk; the full value of your investment including interest is returned to the investor. That’s why financial planners often suggest purchasing individual bonds over bond funds.

A volatile stock market can keep investors, especially retirees, up at night. U.S. Treasuries can offer a safe haven for investors. Some may ask, why should I invest in Treasuries; they are the ultimate fixed income investment guaranteed by the full faith of the U.S. Government. Treasuries are one of the safest investments available and a good place to stash a portion of your fixed income assets. Treasuries and savings bonds can reduce your taxes; they are subject to federal income tax, but not to state or local income tax. The TSP G Fund is invested 100% in special issue U.S. Treasuries that are guaranteed never to decrease in value. For taxable accounts many choose tax-free municipal bonds for a portion of their fixed income investments. However, as with all investments, municipal bonds have their own set of unique risks and rewards.

You can buy Treasuries through Treasury Direct after establishing an account with them however you can’t buy Treasuries through them for your IRA. Banks and brokerage companies will purchase Treasuries for you through the Commercial Book-Entry System for IRAs or for your taxable brokerage accounts.

Many of the larger brokerage houses offer clients the ability to buy Treasuries on the secondary market or initial issue Treasury Bills, Notes, and Bonds just like you now buy stocks and bonds in your account. Fidelity and Vanguard offer this service and don’t charge for the transactions either way. You simply look up the Treasury auction dates for initial issue Bills, Notes, or Bonds of interest and place your order.  You can elect to have them automatically reinvest in a new initial issue treasury at maturity if desired. Investors can also buy Treasuries on the secondary market, from other investors.

Currently short-term notes that mature in as little as 4 weeks to one year are paying almost as much as the 10-year Treasury Bills.  These notes come with either 4 , 8, 13, 26, or 52-week maturities and you can ladder them, so a portion of your cash is available to you each month. If you are looking for a secure place to park a portion of your fixed income assets consider U.S. Treasuries. Each brokerage company’s Treasury purchase process is a little different. Call their fixed income department to become familiar with the process before initiating your first purchase. I called Fidelity and Vanguard earlier this year to make sure I was properly setting up initial issue Treasury purchases.

New issue Treasuries are offered at auction weekly. All bidders will receive the same rate, yield, or discount margin at the highest accepted bid.

I prefer purchasing initial issue Treasuries, they are new Bills, Notes and Bonds issued by the government. They publish a quarterly schedule listing the security type, announcement date, auction date, and settlement date.  To view the current quarterly schedule, click on the “auction schedule (PDF)” link that you will find on the published quarterly schedule page. You must place your buy orders on or after the announcement date and before the auction date arrives. Typically, initial issue short term Treasuries are announced on Thursdays and the auction takes place early the next week, most of the time on Mondays.

Currently, short-term Bill yields are just slightly below the 10-year Note yields. The chart of recent auction results shows that a 4 week Note issued on July 30 yielded 2.14% where the 10 year Bill issued July 15 was 2.34%, just .2% above the 4 week Note yield. After the Bills mature the funds are either returned to your account or you can elect, in many cases, to have them automatically reinvested in new initial issue Bills at maturity. The Federal Reserve may lower interest rates by at least a quarter point this comming Wednesday. If they do, the yield on new issue Treasuries, after that date, will decrease proportionally.

It’s natural to be overconfident in a bull market that continues to impress. For those who would be significantly impacted or distressed if their retirement accounts decreased dramatically, it may be prudent to explore the U.S. Treasury and municipal bond markets. It all comes down to how much is enough for retirement. Increasing your fixed income investments will moderate account fluctuations during extended market downturns.

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

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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.

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

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