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FEHB Open Season Brochures & Updates

Posted on Saturday, 26th November 2011 by

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Rosemary, a subscriber to our Retirement Planning News Letter, asked for clarification for requesting FEHB open season plan brochures on OPM’s new web site. I mentioned that the web site was easy to use in my article on the FEHB Open Season last week. She visited the site and was confused by the numbers that are used to identify the various plans in her area.

To determine what your plan’s codes are, the 2 digit codes in front of the plan name, print out the “Open Season Health Benefits Guide” for your area that is provided on OPM’s site. The first two digits of each plan’s 3 digit code, as listed in this guide, are the numbers you need to identify the correct plan to request online.

Go to https://retireefehb.opm.gov/, register, and then click on the “Open Seasons Federal benefit Guide” link on the left side of the page in the white space. Select your state and then print out the 6 page brochure. This guide lists available plans with comparisons for your location. All plans for your area are listed with a three digit code. The first two digits of each plan are used to identify the plan number for the brochures you select to have sent to you.

I found the site and process to request brochures by mail easy to use. Retirees can order plan brochures for their area using the following procedure:

1)      Go to https://retireefehb.opm.gov/ (Register if you haven’t already)

2)      Download and review your “Open Season Health Benefits Guide”

3)      Click on “Brochures” on the upper left side of the home page in blue

4)      Click on “Mail Brochures” on the lower right bottom of this page

5)      Select your state from the drop down list

6)      Identify plan brochures (The first 2 of the 3 numbers for each plan listed in the Open Season Benefits Guide are used to order plans)

You can also view and print out copies online at this site if you prefer. Review my FEHB Open Season article and our site’s FEHB Guide for more information on this subject.

UPDATES:

1) OPM Retirement Processing Backlog (Update)

OPM is working to resolve the backlog problem. John Berry, the OPM Director, recently told Congress that 60,000 retirement applications are currently in process up from 38,000 last October. The backlog continues to grow as over 9,600 new retirement cases are added each month. OPM can only process 7,700 cases a month with current staffing levels. The backlog is expected to more than double by 2014.

OPM claims examiners are processing 3.5 cases a day on average and the average time to process a retirement start to finish is about 133 days.

The good news is that OPM has hired 35 new claims examiners and plans hiring 40 more in the near future. The committee suggested possibly rehiring retirees to help with the workload. This problem could get much worse as agencies offer VERA early outs to address their budget shortfalls. There are things that you can do to help avoid problems with your retirement. Follow the steps that I outlined in my article titled “Could You Survive on Interim Retirement Checks” when submitting your retirement paperwork.

2) Requesting a Letter From the President for Retirees

The process changed and the new guidance including format and routing information is now available online. We also updated the information for requesting flags and retiree gifts such as agency logo mugs and other presentations.

3) FREE Copies of Take Charge of Your Federal Career

Receive a FREE copy of Take Charge of Your Federal Career (a $29.95 value) when federal employees order my new Federal Resume Guide and only pay an additional $4.95 handling charge + shipping. Limited to 1 Free Copy per Order. Take Charge of Your Federal Career helps employees in mid career to within 5 years of retirement target higher paying jobs to increase their retirement annuity and TSP savings.

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

Request a FREE Retirement Benefits Summary Analysis from a local adviser. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. A sample analysis is available for your review. This service is not affiliated with www.federalretirement.net

Visit our other informative sites

Helpful Retirement Planning Tools
Distribute these FREE tools to others that are planning their retirement

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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

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Budget Cuts, VERAs, FEHB Open Season & Retiree Jobs

Posted on Friday, 18th November 2011 by

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The Office of Personnel Management expects a number of agencies to request VERA and VSIP authority in FY 2012 after appropriations are finalized.  Agencies may face substantial budget cuts next year according to the OPM director. OPM is expediting requests for VSIP and early-outs and formed a special team to assist agencies with their requests. They hope to provide expedited approvals using this new process and some requests have been approved in just two days.

President Obama also signed an Executive Order cutting agency spending in the following areas:

1) Reduce Spending on Travel and Conferences: The Executive Order directs agencies to decrease travel and conference-related spending.

2) Cut Duplicative and Unnecessary Employee Information Technology Devices. This order limits the number of devices issued to employees and establishes new policies to ensure they are not paying for IT equipment that isn’t being used.

3) End Unnecessary Printing and Post It Online.

4) Limit Motor Vehicles: The Executive Order limits executive transportation across the federal government and directs agencies to improve the performance of the Federal fleet.

5) Stop Government Promotional Handouts.  Agencies are directed to stop wasting taxpayer money on non-essential items used for promotional purposes, such as clothing, mugs, and non-work related gadgets.

  • NOTE: Most spending for retiree gifts is from employee contributions, not government spending.

If you are offered a VERA or simply planning on a regular retirement in 2012 use our FREE excel leave chart to set several target retirement dates. Use this chart to determine exact leave balances for all target dates.

FEHB Open Season Help

Open season runs from November 14th through December 12th this year. In the past, many retirees found it difficult obtaining plan brochures during open season. Recently, OPM implemented a new service for retirees that has dramatically improved the availability of FEHB plan information and now allows retirees to manage their changes and enrollments online.  I visited their new site at https://retireefehb.opm.gov to register and request plan brochures for my area on November 4, 2011 and received the requested material within the week.  This new service allows you to enroll, change, or reenroll in plans, view your transaction history, order hard copies of plan brochures, and download forms, letters and plan information. I found the site easy to use and very helpful.

One of our site visitors recently asked a question that many retirees face after leaving federal service.  Beverly is working in retirement and her new employer offers health care coverage.  She was thinking of canceling her FEHB coverage and wanted to know if she could restart it when she leaves the job she has now.

If you cancel your FEHB enrollment as an annuitant, you will never be able to reenroll in FEHB.  There are no exceptions for other employment insurance.  However, there is an exception if you suspend your FEHB enrollment because you are now covered by a Medicare Advantage plan, TRICARE, CHAMPVA, Medicaid or a similar State-sponsored medical assistance program, or Peace Corps Volunteer coverage, you can restart your FEHB in the future.

One of the main reasons for evaluating your current plan annually is to ensure that your doctors are members of that plan’s physician network.  In the Pittsburgh area Highmark Blue Cross Blue Shield and UPMC haven’t signed a new participation agreement and if they don’t come to terms UPMC physicians may not be available to Blue Cross and Blue Shield plan basic option participants.  I called Blue cross customer service and they assured me that UPMC physicians would be considered participating physicians through 2012. However, I still want to research this further before open season ends.

Employees planning to retire need to be aware of these cautionary notes concerning FEHB spousal coverage in retirement.  An annuitant can add their spouse to their FEHB plan without having a survivor benefit.  However, if the annuitant dies first, the surviving spouse can only continue the FEHB coverage if the annuitant elected a survivor annuity when they retired.  Another thing to consider: if the annuitant has self-only coverage and dies before the spouse, the spouse cannot continue FEHB coverage either.  For the spouse to continue FEHB coverage after you die there must be a spousal annuity payment and family coverage.  When the annuitant who elected a survival benefit and had family coverage dies, the surviving spouse’s FEHB premiums will drop dramatically as soon as they elect “Self Only” coverage.  There are different rules for FERS and CSRS survivor benefit elections that support FEHB coverage. Review them carefully to ensure your spouse will have the coverage desired.

Jobs For Retirees

We continue to post jobs from employers nationwide that are looking for retired federal employees. Many retirees supplement their retirement income with full or part time work and our Jobs Board continues to grow. Here are two of the new job listings that you may find interesting:

  • Coupon Merchandiser – Permanent part-time job installing and maintaining coupon machines, floor ads and other on-shelf advertising signs in local grocery stores, drug stores and mass merchants.  Duties also include all merchandising jobs within your territory.  Territory includes Old Saybrook, Waterford and New London, CT.
  • Senior Security Technician – Nationwide (Multiple Positions). Technicians perform part-time, corrective maintenance on security equipment at federal facilities. Equipment includes access control, surveillance, intrusion detection, security intercom, and access video systems; metal detectors; and security barrier arms and gates.

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

Request a Retirement Benefits Summary Analysis from a local adviser. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. A sample analysis is available for your review. This service is not affiliated with www.federalretirement.net

Visit our other informative sites

Helpful Retirement Planning Tools
Distribute these FREE tools to others that are planning their retirement

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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

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Could You Survive on Interim Retirement Check Payments?

Posted on Saturday, 12th November 2011 by

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We continue to receive horror stories from retirees waiting up to a year or more for OPM to process their retirement paperwork. It is a real problem even for those who thought they prepared knowing that delays were inevitable. David wrote us in early November stating that he retired September 30, 2010 and as of November 2, 2011 he was still receiving partial interim payments. The only paperwork that he received came on October 31, 2011. One of the documents was FEGLI life insurance form 2819 which stated that his FEGLI insurance was terminated from the date of his retirement; an election he did not make.

David expected delays and thought he had prepared financially. He put away sufficient funds to cover six months expenses to give OPM the time he thought they needed to process his paperwork. This is causing a considerable hardship for his entire family and he needed guidance on how to proceed. Retirement processing delays and errors could get much worse as agencies offer Voluntary Early Retirement Authority (VERA) incentives across the country.

Many Departments still don’t have a budget and there are rumors of cuts in many agencies, some estimate cuts of between 15-27 percent coming this year or next. Typically agencies plan for a 5 percent attrition rate not counting those who accept a VERA. VERAs could be as high as 10% or more of total staffing for some agencies especially if Voluntary Separation Incentive Payments (VSIPs) are offered. Agencies are calling these actions “Reduction in Force (RIF) abatement measures.”  RIFs are historically difficult to manage and agencies avoid them if at all possible.

If a VERA with VSIP incentive is offered, agency retirement counselors and OPM will be swamped with applications; delays are inevitable. For example, an agency that typically processes 2000 retirements a year now has to process 4000 retirements in a 2-4 week VSIP period; it would be chaotic for the retirement counselors to say the least. Each retirement counselor suddenly has 150-200 retirement actions to process in two pay periods. Can you imagine one person counseling and reviewing retirement options for 200 people in a month, the potential processing delays, and the errors that will result from this mad rush?

What Can Be Done?

This delay is unacceptable by any measure. OPM has acknowledged processing delay problems in a memo they posted online.  This document doesn’t provide immediate relief, it simply explains the many reasons for delays without providing any contact information for extreme cases.  I wrote an article titled Interim Retirement Check Issues last April that you may find helpful.  Here are a few things to consider when you are planning to retire:

  • Review What to Do starting a Year Before I Retire and complete the needed actions.
  • Thoroughly complete and review your retirement forms. OPM reported that 23 percent of all claims received are missing one or more records and 11 percent are not received during the first 30 days.
  • Send in your paperwork, if at all possible, 3 to 6 months in advance of your planned departure date. This isn’t possible with VERAs because they typically have a much shorter window of opportunity to apply. (Keep a complete copy of your application for reference)
  • Thoroughly review the package that your personnel office sends you for review. Check your SCD date, military time, and other pertinent data and make needed corrections.
  • Review What to Expect the First Three Months After I Leave.  If anticipated actions in this normal time line don’t correlate with your situation contact your personnel office and OPM immediately. This step can keep your personnel office and OPM on track.
  • Set aside sufficient funds, six months minimum, for bills and emergencies and have other savings and investments that you can tap if processing delays are extreme like in this case. Read How to Be Financially Prepared When You Retire.
  • If you have a divorce decree make sure OPM received a copy at the time of the divorce. Visit our Divorce Forum For more information on this issue. An improperly processed divorce decree can dramatically decrease interim and full annuity payments.
  • To contact OPM about your retirement payments before you receive your claim number, contact your former payroll office first for the date your records were transferred to OPM. Your payroll office should provide you with the number and date of the Register of Separations and Transfers. You will also need your Payroll Identification Number.

In extreme cases, where you can’t get satisfaction through OPM or your benefits office, call or write your Congressman or Senator for assistance.  Their staff can assist you with problems like this and they can expedite a resolution.  If you can’t get a timely resolution call them for assistance.

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

Request a Retirement Benefits Summary Analysis from a local adviser. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. A sample analysis is available for your review. This service is not affiliated with www.federalretirement.net

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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

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When CDs Come Due Earn Higher Yields

Posted on Monday, 7th November 2011 by

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A site visitor has a $50,000 CD maturing and wanted to know what she could do to increase earnings with little risk of losing the money that she worked a lifetime to acquire. Her bank is offering a meager .9% CD yield. I am not a financial advisor and I can only relate what I would do in this case. Each situation is different and my following comments assume that this individual may need these funds to maintain her lifestyle in retirement and can’t afford undue risk. If you are in this situation consult a professional Certified Financial Planner (CFP) that will evaluate your personal situation and steer you in the right direction.

First Things First – If I was in this situation I would buy $10,000 in I Savings Bonds from the Treasury now. I bonds are currently yielding 3.06%, the interest rate changes every six months based on inflation. The previous 6 month period paid I Bond holders 4.6%! Individuals are limited to purchasing $10,000 a year in I bonds, $5,000 for paper bonds that can be purchased through a local bank and another $5,000 online through Treasury Direct (a book entry system) available online at http://www.treasurydirect.gov/tdhome.htm. Paper bonds are sent through the mail and generally received several weeks after the purchase. A husband and wife can purchase $20,000 this year combined and I Bonds offer a safe haven for your maturing CDs and earn excellent yields. Many financial advisors project increased Inflation down the road and I bonds will help to protect your nest egg.

  • Note – You often hear that I Bonds are paying 0% interest. This is not true. I bonds pay two interest payments, a fixed rate and a variable inflation rate. Fixed rates on some issues are set at 0% however the inflation rate is based on the CPI and I Bonds have been paying very generous inflation rates. I bonds purchased when they were first issued in 1999 have a 3% fixed rate and are now paying owners over 6% interest after combining both components.

Paper bonds will no longer be available starting next year except for one situation. If you have a tax refund due next year, you can elect to receive a paper I bond instead of a check from the IRS. After January, except for tax refunds as mentioned above, all I bonds must be purchased online. EE bonds rates are only .6% now and they don’t increase when inflation raises its ugly head. The only downside to savings bonds is that you can’t cash savings bonds in for the first year and if you cash them in within 5 years of purchase you forfeit 3 months of interest, a small penalty. Paper bonds can be cashed in at any bank and the online bonds are purchased and redeemed through fund transfers from your checking or savings account.

Savings bonds are backed by the full faith of the U.S. Government and are one of the safest investments around. If you buy savings bonds this year you can purchase more on or after January 1, 2012 if desired. Savings bonds mature after 30 years and interest payments stop at that time. Another advantage is tax deferred income; you don’t pay taxes on your earnings until you cash them in.

Married couples can elect to either jointly own each bond or each person elect the other to be the beneficiary. It is often best for married couples, for inheritance tax purposes, to own them jointly. If you are single, widowed or divorced it is recommended to elect a beneficiary (only one beneficiary is allowed per bond). If there are multiple beneficiaries (children or family) that you wish to leave money to, divide the bond purchases into equal amounts and then assign beneficiaries accordingly.

What Next – My next step would be to purchase and ladder $30,000 in Certificates of Deposit (CDs) to provide a stream of readily available cash periodically and to take advantage of anticipate increased yields. Find a bank or credit union with the best yields in your area and offer lower early redemption penalties incase funds are needed prior to maturity. To ladder your CDs effectively buy at least three CDs that mature at different dates as noted below so that you will always have ready cash available as they mature every year in this case. If you wish to have funds available every 6 months you can change the maturities to 6, 12 and 18 months and follow the same procedure as they mature.

In the example below, renew the one and two year CDs to three year terms as they mature. This way you will always have one third of the total invested available plus accumulated interest each year and let them auto renew after they are all at three year maturities. Many recommend a 5 year ladder, however I think interest rates are going to increase over the next two years and this way you will have a CD due each year that could possibly renew at higher interest rates and be locked in for 3 years at a time. The following maturity rates were used for this example:

  • 1 year CD – $10,000
  • 2 year CD – $10,000
  • 3 year CD – $10,000

Visit our Financial Planning section and my Higher Yielding Savings Opportunities article for additional information and resources.

 

An Essential Step – Set up a $5,000 emergency cash savings account or bank money market that may pay a higher rate.

Finally – 3 options for the remaining $5,000.

1) Higher Risk Option –  If you have other income and savings and willing to assume some risk you could consider an Exchange Traded Fund (ETF), fund symbol SDY. The SPDR S&P Dividend fund (SDY) only charges a .35% annual fee and invests in the S&P 500 dividend achiever stocks. This ETF invests in companies that have increased dividends for the past 25 years, in good times and bad. Companies like Johnson & Johnson, Coca-Cola, Clorox, Abbott Labs, and Kimberly-Clark that pay higher dividends. This fund pays a 3.2% yield and has the potential to appreciate in value. It sells for $53 a share and the fund can drop as much as 50% in a bear market. ETFs can be purchased through a discount broker.

2) Moderate Risk Option – Purchase the ETF symbol TIP. TIP is an exchange traded fund that invests solely in American Treasury Inflation Protected securities. It is paying around a 4.5% yield right now and costs $117 per share. Over the past 10 years it has been as low as $91 to a high of $117 per share.  You can also buy TIPs direct from the Treasury however you must transfer them to a stock broker or bank to sell them down the road. The ETF simplifies the process.

3) Low Rick Option – Add this amount to your emergency savings or to the CDs if you prefer to stay out of the market totally.

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

Request a Retirement Benefits Summary Analysis from a local adviser. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. A sample analysis is available for your review. This service is not affiliated with www.federalretirement.net

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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

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Military Credits Increase Retirement Pay – Buying Back Time

Posted on Tuesday, 18th October 2011 by

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FERS retirees with Post 1/1/57 military service will not receive credit or annuity computation for their military time without making a deposit. If a deposit is made, the employee will receive credit towards his/her annuity computation.  Under CSRS rules, if you served on active duty and will be eligible at age 62 to collect Social Security, your CSRS annuity will be reduced by the number of years that you served unless you buy back that time.

Federal employees have the option of making military service credit payments for creditable military service before they retire. I bought back my 3 plus years of active duty military time when I discovered that my CSRS retirement annuity would decease at age 62 if I didn’t. All FERS employees and CSRS employees that anticipate having at least 40 quarters, 10 years of work under social security at age 62, should consider paying back their military time. Otherwise your annuity will decrease. In my case the cost was minimal, $650 total, and I was able to pay $25 a pay until the debt was settled. The earlier you initiate the payback the less interest penalties you will pay. I suggest buying it back early in your career even if you are CSRS and aren’t sure you will be able to collect Social Security. You can always have the payment refunded before you retire if you know for sure you won’t have the 40 quarters necessary to collect Social Security. My military pay was meager, $97 a month, in 1969 when I was in the Air Force.

There is a lot of confusion around whether or not it is worth your while to recoup your military time. If you make a military deposit, there is no effect on your other military benefits such as medical benefits, base access, commissary, or VA benefits, including any disability payments from the VA. It only affects (active duty) retired military pay; you cannot receive 2 separate retirements (military and civilian) for the exact same period of service. If you are retired from active duty and elect to buy back your 20 years or more of military service, your military retirement will stop once you start collecting your federal civil service annuity. Reserve or National Guard members under Title 32 can collect both a federal civil service retirement and a Reserve or National Guard retirement.

Another issue that comes up frequently is how your military time can be used for retirement eligibility requirements. You need a minimum of 5 years of civilian service time to be eligible for a civilian retirement annuity.  However, after the 5 years is met, military service is creditable towards years of service for all the other voluntary retirement eligibility requirements: MRA +10; MRA +30; 60 years old with 20 years of service; and even the VERA requirements – age 50 with 20 years of service or any age with 25 years of service. Review all eligibility requirements for FERS and CSRS retirement.

If you are a veteran check that your service is creditable and then determine if buying back your military time is worth your while. If you decide to pay it back, review your FERS or CSRS buy back options. Complete instructions and forms are available for your use on our site. You will also find helpful articles and site visitor comments with answers to often confusing military credit issues.

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

Request a FREE Retirement Benefits Summary Analysis from a local adviser. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. A sample analysis is available for your review. This service is not affiliated with www.federalretirement.net

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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

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A 2012 COLA! TSP Returns & Higher Yielding Savings Opportunities

Posted on Wednesday, 5th October 2011 by

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It has been a trying time for annuitants and Social Security recipients who have essentially been forced to live on fixed incomes these past two years. Finally it looks promising; we may receive a COLA in 2012 of around 3.6% if Congress doesn’t block the payout for whatever reason. If we are fortunate enough to receive the increase some of it will be absorbed by a reported 3.8% average 2012 FEHB premium increase. The FEHB average increase for 2011 was 7.3%. However, it is a relief to many who had to absorb those costs and live on less these past two years, much less when you consider how skewed the CPI-W formula is when it comes to true inflation. My personal feeling is that Congress won’t interfere because it is an election year. Time will tell.

TSP Returns

The G and F funds had small gains in September, 0.16% and .73% respectively. The S fund was the biggest looser dropping 10.73% and the I Fund was a close second dropping 10.55%. There is little good news to report, over the past twelve months only three funds are ahead, the C fund with a meager 1.11% increase, and the G and F Funds with 2.58% and 5.34% increases respectively. Visit our TSP pages for more information on the THRIFT program.

The market continues to be highly volatile and this week the S&P was at the same level it was three years ago with virtually no gain over that time period. The S&P hit 1099.23 on October 3, 2011 the same level it was on the same date in 2008!

The Savings Dilemma and Higher Yielding Savings Options

What are we to do? The administration bailed out GM, Chrysler, the banks, teachers, municipal workers, and Fannie May and Freddie Mac to name a few at the expense of those in retirement and on fixed incomes. Many retirees and those approaching retirement planned, saved, and did the responsible and right things to get ahead only to be left behind by this administration. Then, the Federal Reserve stepped in to artificially keep interest rates at or near zero and anticipate maintaining that rate for some time. The current federal funds rate has been kept artificially low at less than 0.25 percent since December 2008. Savings accounts and CD rates have followed suit and rates are often less than 1.0% no matter how much you have in your account.

One of our CDs came due last month and I complained to the bank manager about the low rates they were offering. He replied rather sarcastically, “Why would we pay more to use your money when we can borrow what we need from the Federal Reserve at near zero percent.” The Motley Fool posted an excellent article titled “Where to Park Your Cash” and summarizes savings account options that can best match your needs.

Unfortunately, there are far too few options for retires and conservative investors that like to park their life savings in safe havens. The few that are left, such as I-Bonds and Treasury purchases through Treasury Direct, are becoming more restrictive, with cumbersome new regulations to further confuse participants. The Treasury Department is phasing out paper savings bonds as of January 2012 except for savings bonds that can be purchased with your federal tax return.

What was once an easy-to-use process has now become unavailable and onerous for those who aren’t computer literate or dislike opening and maintaining online investment accounts. The Wall Street Journal recently reported the following in one of their articles, “It’s true that Americans will still be able to buy savings bonds electronically, through a Web-based platform known as Treasury Direct. But the system isn’t user-friendly, and it presupposes ready Internet access, which about 35 percent of all Americans and 65 percent of low-income Americans do not have. And the system requires a user to have a bank account, effectively excluding the 17 million American adults who are “unbanked.” This may explain why less than 1 percent of the 55 million people who own savings bonds have Treasury Direct accounts.”

Up until a year ago, federal employees and retirees could easily purchase paper savings bonds through automatic payroll deductions. A bond would arrive in the mail shortly after you accumulated sufficient funds to purchase the denomination elected. Anyone could go to their local bank, credit union, or savings-and-loan institution and purchase E or I savings Bonds for themselves, their children or grandchildren, and the bond would arrive in the mail. You can still elect payroll deduction but you must set up an online Treasury Direct account and your bonds are now held in a book-entry system.

Several years ago the Treasury decided to dramatically reduce the dollar amount of savings bonds that anyone could purchase in one year to $10,000 per person ($5,000 in paper bonds and $5,000 through the online Treasury Direct program). Starting in 2012 only $5,000 a year can be purchased. If you would have preferred converting a low interest CD to an I-Bond, currently paying 4.6%, you are just out-of-luck. Instead of making things easier for the public, everything now is considerably more complicated with new cumbersome regulations, limitations, and restrictions.

Treasury Direct doesn’t even offer regular quarterly statements or provide a customer service phone number to call if you are having major problems with your account. Imagine the fines and penalties that a private financial institution would be assessed by government regulators or FINRA if they didn’t supply these basics. For example, when you go online to Treasury Direct after setting up an account, you never receive a quarterly statement or any statement of any king, EVER! They advise you to print out the screens on your computer.

Here are a few of the issues I have with Treasury Direct

  • No official quarterly or annual statements (EVER)
  • The summary screens, when printed for your home records, don’t format correctly and they don’t have a print screen function on the site. You get overlapped content.
  • I had to log on to my account four times today because of the antiquated navigation used on their site. The site is not user-friendly.
  • Your summary screen doesn’t show accumulated Treasury bond values. You have to select each bond in your account to determine its current value and then manually add the gains. For example, if you own Treasury Inflation Protected securities you only see the face amount on the summary screen, not the accumulated inflation values.
  • No option to convert book-entry bonds into paper bonds. What happens if the Treasury Direct site is down for an extended period or there are major Internet connectivity problems?  You don’t have any statements from Treasury Direct to confirm your holdings.
  • No customer support or phone numbers to call if you have problems with your account. When you click on contact, all you have is an online form to fill out!!!
  • You have to transfer your Notes, Bills, Bonds or TIPs to a bank or brokerage account if you want to sell them before their maturity date. Book-entry Savings Bonds are cashed in on the site and the funds from the sale are transferred direct into your bank account.

We are too dependent on the Internet today and this is just one more example. The Treasury must step back and reevaluate this program and where it is going. Are there no internal audits, controls, feedback that is actually collected and reviewed? Government over regulates almost everything in our society today except themselves it seems. In this case it is just about as lax as you can get when dealing with equity accounts and financial matters.

I would hope they will reconsider and continue selling paper Savings Bonds, dramatically increase the purchase amounts, and improve their web site.

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

Request a FREE Retirement Benefits Summary Analysis from a local independent adviser. A sample analysis is available for your review. This service is not affiliated with the author or www.federalretirement.net

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

Posted in UNCATEGORIZED

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Saving Grace, Fear of the Unknown, and Keys to a Long Life

Posted on Friday, 23rd September 2011 by

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Saving Grace (Ways to Save)

I often mention just how important it is to retire with minimum debt and that means paying off your mortgage and credit cards. I’m not the only one that preaches being debt free in retirement. Money Magazine featured an article titled “Live Well On Less” in their October 2011 issue where successful retirees present six ways to save and SAVE BIG. With the market volatility, shrinking savings and THRIFT accounts, it makes even more sense today to be prepared and save anyway you can for and in retirement. If you aren’t able to pay off your mortgage consider refinancing. I refinanced my mortgage numerous times during my career to cut costs and save thousands in interest expenses. On average 25% of a homeowner’s total spending is used to pay their mortgage payments. Today more older Americans now have mortgage or home-equity loans and considerably higher credit card debt than they did just a decade ago.

Mortgage interest rates are at their lowest level in decades and if you can save 1% or more by refinancing you can potentially save tens of thousands in interest costs over the life of the loan. I used the online Bank Rate loan calculator to determine the refinancing savings for a $100,000 loan.

Your monthly principal and interest payment for a 30 year loan at 5.5% would be $567.79. By refinancing for 30 years at a 3.85% rate your monthly payment would decrease to $468.81 for a savings of $98.98, that’s just under $1200 a year that you can use for other purposes. If you refinance this same amount for 15 years at 3.25%, your monthly payment would increase by only $134.21 per month and you would pay off your mortgage in half the time. Divide the figures by 2 for a $50,000 loan or if twice the amount multiply by 2 to determine your payment and savings. There is a HUGE savings in total interest payments. The total interest payments on the original $100,000 thirty year loan at 5.5% would be $104,403. If you refinanced for 15 years at 3.35% you total interest payment would be $26,480, $78,000 less than the 30 year lone total interest! You could have purchased several cars over the life of this loan with your interest savings alone.

One of the six strategies mentioned in the Money article included working part-time. Certainly there are many options to consider. Our Retiree Jobs Center was recently updated and we added more job listings and opportunities for you to consider.  A work centered life is what we are accustomed to throughout our career and many retirees find part-time work rewarding and it helps them stay involved and active. Volunteer work provides the same benefits and for those who don’t need the income you also have the satisfaction of serving others in your community, church, or organization.

Fear of the Unknown

Turn on your TV or radio, read your local newspaper or national magazine today, and you encounter the negative sentiment now being showered on all things government, including our benefits. This sentiment is driven by the financial crisis at hand and the out-of-balance budget with government now borrowing 42 cents of every dollar they spend! Add unemployment, the housing and international banking crisis to the mix and there is no wonder why there is so much talk about the need to be fiscally responsible. All Americans are concerned. We understand the basic problems and know that things have to change and in some cases dramatically. Change is a constant in all of our lives and it’s the fear of the unknown and how these changes will impact our family’s health and well being now and down that road that concerns us most.

Knowledge and understanding can help to alleviate or at least moderate our fears until actual change comes our way. One of the best ways to stay informed about pending federal benefit changes is to join NARFE, the National Active and Retired Federal Employees association. Their informative monthly magazine focuses on federal employee benefits and retirement issues and their “Protect America’s Heartbeat” campaign fights against unfair attacks on federal workers and annuitants. NARFE sheds light on the many proposed benefit and retirement changes now being considered. Here is a short list of proposed changes:

  • Workers to pay more for their FERS defined-benefit annuity (from .8% to 5.8% of salary)
  • New employees would not receive a defined-benefit (FERS) annuity
  • Higher health insurance premiums (paying a larger share of the total cost)
  • COLAs to go down through weighted adjustment calculations
  • Future retirees would receive an annuity based on the average high-five years of salary
  • Pay freezes

None of the above changes have been implemented to date. Stay tuned for updates.

Keys to a Long Life

The oldest man in the world, Walter Breuning, died this year at the age of 111 and his life story is compelling and fits into this column nicely. He was born in 1896! Can you imagine a world without TVs, cars, air conditioning, planes and all of the technology that we have surrounding us today? His wife of 37 years died in 1957 and he retired from the railroad in 1967 with 50 years of service! He continued to work until the age of 99 and was the manager and secretary for his local Shriners chapter. He claimed five simple truths for his longevity:

1.     Embrace Change, even when the change slaps you in the face. He accepted all change as inevitable and therefore good.

2.     Eat only two meals each day. He claimed that is all anyone needs.

3.     Work as long and hard as you possibly can. He felt that the money would help you through the tough spots.

4.     Help others. His contention was to the day he died “The more you do for others, the better shape you’re in.”

5.     Accept death. It’s going to happen regardless and he was not afraid to die. He said “You’re born to die.”

Life is a journey and we have to accept it for what it is and live life to the fullest while we are able. Time passes us by at an alarming rate and unfortunately we don’t realize it until we are well along in our own personal journey. My wife’s aunt passed away at 92 twenty five years ago and the day she died I was in her room. She woke briefly and was completely alert and aware of her surroundings. She turned to me and said “Dennis I can’t believe it’s over, the years passed by like the snap of my fingers.” She closed her eyes and never awoke.

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

Request a Retirement Benefits Summary Analysis from a local independent adviser. A sample analysis is available for your review. This service is not affiliated with the author or www.federalretirement.net

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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

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Retirement Date Considerations, Timeline & TSP Update

Posted on Friday, 9th September 2011 by

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There has been some confusion around the “Best Date to Retire” and Gary, who is planning on retiring   on December 31, 2011, asked for clarification on this issue.  He has over 240 hours of annual leave to cash in and was concerned about the “Date of Final Separation” that you enter on your retirement forms and the “Official Retirement Date.” This is critical this year because the official leave year ends 12/31/2011.

If you intend to leave at the end of 2011 consider December 31 for your retirement application’s “Date of Final Separation,” especially for those who wish to sell back the maximum amount of accumulated annual leave. If you retire by this date you will receive full payment for accumulated annual leave over 240 hours up to the maximum allowable. The “Date of Final Separation” is your last day of work; retirement starts at the close of business (COB) that same day. If you plan to leave after December 31 this year, and will have over 240 hours of annual leave on the books, schedule and use your excess annual leave before you retire. Review the Use or Lose Annual Leave Scheduling Date Chart to determine when you must schedule your excess leave. Use our 2011 and 2012 Leave and Schedule Charts to select several tentative retirement dates for the annuity estimates that you should request from HR a year in advance of your planned departure date.

Don’t confuse your “Annuity Start Date” with your “Date of Final Separation” that you list in block 2, Section B of either the SF-2801 CSRS Retirement Application or SF- 3107 FERS Retirement Application forms. Your retirement annuity starts the day after you separate even though your retirement commences at the close of Business on the “Date of Final Separation.”

Retirement Planning Timeline and Assistance

There is much to consider before you leave and fortunately there are many helpful organizations, web sites, articles and free reports to help you make informed decisions.  Comprehensive retirement planning articles are offered by our Forum Hosts and we often link to other services articles and official OPM regulations for comprehensive in depth guidance. Click on the following links for retirement planning information that will help you plan your exit:

Tammy Flanagan, the Senior Benefits Director for the National Institute of Transition Planning, Inc., wrote two highly informative articles on how to evaluate retirement estimates.  They are a must read for anyone who is approaching retirement and they emphasize the importance of this critical step. Take a few minutes to read the following two articles:

We link to all of Tammy’s articles on our Resource page under the heading of “Helpful Associations / Organizations / Publications.”

TSP Update

Last month the G and F funds had small gains, 0.19% and 1.45% respectively.  The I fund was the biggest looser dropping 9.03%. The good news is that over the past twelve months all funds have gains ranging from a low of 2.6% for the G Fund to a high of 22.84% for the S Fund. The C fund was a close second with a gain of 18.46%.

The market is highly volatile now due to the depressed economic outlook here and abroad.  My last article titled TSP Panic discussed how to weather the storm and provided some insight into preparing for times like these. The market’s meteoric rise highlighted the need for caution months ago.  With Congress deadlocked on the budget and unemployment at historic highs the markets may remain highly volatile for some time.

Long term investors, federal employees in their early to mid careers are typically advised to remain invested in equity funds balanced between sectors such as what the L Funds do automatically. Those approaching retirement, that will need their TSP funds to maintain their standard of living, should be cautious as my last article addressed.

Many financial planners expect a rocky road ahead until governments worldwide get serious about addressing their national debt issues, balance their budgets, and put people back to work.

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

Request a Retirement Benefits Summary Analysis from a local independent adviser. A sample analysis is available for your review. This service is not affiliated with the author, www.federalretirement.net or Bookhaven Press LLC.

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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

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