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TSP Conversions, I Bonds Revisited & Updates

Posted on Monday, 20th June 2011 by

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TSP Conversions and Taxes

The key to what taxes, if any, are due is in the type of IRA that you wish to convert to.  When you rollover any investment account that hasn’t yet been taxed (TSP, traditional IRA, 401k) to an after-tax investment account, such as a Roth IRA, taxes must be paid to Uncle Sam at the time of the rollover.  If you want to avoid being taxed on the entire rollover amount, you can leave the funds in TSP (provided the amount is over the minimum) or roll the account over to a Traditional IRA.

Before electing to rollover the entire amount out of TSP you should consider the administrative expenses of the new investment.  If you leave a minimum balance of at least $200 in TSP and keep the funds in a pretax account (traditional IRA), you will be able to roll funds back into TSP if you elect to do so.  Also carefully examine the withdrawal reasons and age for withdrawal, as they are different in TSP than other IRA type accounts.

The 10% early withdrawal penalty does not apply to payments after you separate from service during or after the year you reach age 55. Therefore, if you retire at age 55 or later you don’t pay the 10% penalty. However, the mandatory tax withholding on all eligible rollover distributions of $200 or more paid in a single year is 20%. The 20% is tax withholding, not actual tax due; therefore, when you file your annual Federal income tax return, you may be entitled to a refund of a portion of this amount, or you may be required to pay an additional amount.

Additional Resources:

I Bonds Revisited

Are you earning close to 5% on your CDs today? I mentioned in previous columns the benefits of I Bond investing and just how easy they are to purchase and last month the current rate increased to 4.6%! Much better than what you can earn on CDs today.  You can purchase I Bonds online at www.treasurydirect.gov or you can purchase paper copies through your local bank by completing a PD F 5374 form (available at banks). With Treasury Direct you don’t receive a paper bond, all of your holdings are listed online in book entry and you purchase the bonds through direct deposit from your personal bank account. The Treasury will send bonds in the mail if you purchase paper copies through your local bank.

Why I Bonds! First and foremost the yield is indexed to inflation which we all know is here with more on the way. Just consider what we are paying for a pound of coffee, gasoline, and just about everything else today. As inflation increases I Bond Yields follow suit and are locked in for 6 months at a time and readjusted semiannually every May and November.

I Bond investment rates are based on a fixed and inflation rate. The original I Bonds, first issues in 1998, had a fixed rate of 3.4% whereas today the fixed rate is zero percent. You add the two rates together to determine the  current yield and the original first issue I Bonds are earning 8%, 3.4% (fixed rate) + 4.6% (inflation rate)! I started buying I Bonds when they first came out through payroll deduction.

Even with today’s zero fixed rate I continue to buy I Bonds because inflation is projected to be with us for some time. The I Bond inflation rate alone is better than what you can get anywhere else for a fixed income investment for the most part. There are a few things to consider before buying I Bonds:

  • The annual purchase limit per person is $5,000 in paper bonds and $5,000 through the online Treasury Direct program. You and your spouse can purchase a total of $20,000 a years if you purchase them separately. Typically a married couple adds each other as the “Pay on Death” beneficiary designation for each bond purchase or you can add your children or whomever you desire as beneficiary.
  • You can’t cash I Bonds in for the first year.  If you cash them in the first five years a penalty consisting of the current 3 months interest is assessed. They mature in 30 years.
  • You are allowed to defer claiming the interest income for tax purposes until you cash them in.
  • I Bonds are exempt from local and state taxes, another benefit which raises the effective yield.
  • Unlike E Bonds I Bonds are purchased at face value.

The Treasury is trying to encourage paper bond holders to convert them to the Treasury Direct book entry system and they have a tool you can use online to effect this change. I prefer having both online book entry and paper bonds available just in case the Treasury Direct web site goes down for an extended time. If you only have an online account, you can’t cash in any of your bonds if the site is malfunctioning or unavailable.

There are other options for purchasing Treasury Inflation Protected securities such as the Exchange Traded Fund (ETF) stock symbol TIP. These can be purchased through any stock broker for a small fee. There are no purchase limits and you can trade them daily just like stocks. Morningstar reports that, “IShares Barclays TIPS Bond is ideal for investors looking for easy and low-cost access to Treasury Inflation-Protected Securities. TIPS’ principal is linked to changes in the Consumer Price Index and provides an effective hedge against inflation in an investor’s portfolio relative to standard Treasury bonds.”  The current yield on TIP is 3.8%.

Updates

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, 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, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Six Years and Counting, Social Security Supplements, TSP penalties, & More

Posted on Thursday, 26th May 2011 by

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Six years and Counting

I’ve been retired 6 ½ years now and just turned 62… I’m eligible for SOCIAL SECURITY!!! I attended my nephew’s graduation party last week and for the first time understand how my aunts and uncles felt during similar events back in the 60s, 70s and 80s. Now Mary and I are in their shoes experiencing life’s constant ebb and flow and I might add I’m enjoying the perspective. Retirement and aging are good things as life renews and families experience life’s many twists and turns.

Unlike previous generations, many retirees today are healthy enough to stay active and involved. Opportunities abound for those willing to seek them out and staying active and healthy opens so many doors for all of us today. A recent report shows that retirees are scheduling more elective knee and hip surgeries than ever before to retain their strength and stamina. When I was 25 I told my wife I wanted to retire at age 55 to pursue other interests, travel, and grow a business and we are doing all of those things and more and I thank God every day for our good health and fortune.

Actually, I take on too many things. Just love doing about anything and everything within reason. I have too many hobbies, too many business ventures and too many irons in the fire and intend to keep things hot as long as I’m able. In preparation for our upcoming family reunion I was able to scan all of my Uncle Jack’s family slides from the 60s and 70s and will give all of my cousins a DVD with those precious memories this summer.  The slides were aging and some cracked so I had to get this done before it was too late. I purchased an “Imagelab” slide and negative scanner for $90 and went to work on the project. It was easy to do, took about a week to scan 2 cases of slides but it was well worth the effort. Most everyone that retires commits to compiling a photo album from drawers full of photos and slides accumulated throughout a life time, only a few succeed. However, scanners are making it much easier for all to do and I now hope to go through all of our old slides and photos this winter to finish the project.  I also have a drawer full of family history to organize.

After 6 years my government career is now securely in my rear view mirror and as time goes on more activities and time fade that picture a bit more with each passing year. However, I will always look back on those times, friendships, and experiences with fond memories and Mary and I focus on what lies ahead: More challenges, more opportunities, and the fascination of discovery around every corner, LIFE is a BLAST!

Social Security Supplements

Social Security Supplements paid to FERS retirees are often misunderstood and this supplement is less than what many expect. If you meet certain requirements, you will receive a Special Retirement Supplement which is paid as an annuity until you reach age 62. This supplement is somewhat similar to the Social Security benefit earned while you were employed by the Federal government. However, since the formula for the Special Supplement assumes a working life of 40 years, each year of FERS service is worth one-fortieth of the estimated Social Security benefit.  Therefore, the FERS Supplement is often significantly less than your Social Security benefits. The supplement ends at age 62 even if you elect to wait to apply for Social Security benefits.

You may be eligible for a Special Retirement Supplement if you retire:

  • After the Minimum Retirement Age (MRA) with 30 years of service;
  • At age 60 with 20 years of service; or
  • Upon involuntary or early voluntary retirement (age 50 with 20 years of service, or at any age with 25 years of service) after the U.S. Office of Personnel Management determines that your agency is undergoing a major reorganization, reduction-in-force (RIF) or transfer of function. You will not receive the Special Retirement Supplement until you reach your MRA.

TSP Penalties

A site visitor asked if she could use her TSP at retirement to purchase a home in full without having to pay an early withdrawal penalty if she is under age 59 ½. She plans to retire at age 57. After she contacted the TSP they advised her that 20% would be withheld from all payouts.

If you retire at age 55 or later there isn’t an early withdrawal 10% penalty and when you retire you can take a one-time lump sum payment for any purpose. Paying off your mortgage makes a huge difference when you retire providing you with more cash to work with plus you will save a good amount of interest whenever you pay off a loan early. All withdrawals are subject to federal taxes because the money in your account wasn’t taxed when earned. A minimum of 20% is withheld by the TSP from all withdrawals for federal tax purchases. Here is a link to the TSP Tax brochure, review page 4 for specifics. https://www.tsp.gov/PDF/formspubs/oc97-17.pdf

If you plan to pay off your mortgage when you retire it makes sense to increase your monthly mortgage payments now. Simply add the next month’s principal payment, or any amount that you can afford, to your current monthly payment to buy down the loan principal.  Call the mortgage company to find out what you next month’s principal payment is or ask them to provide an amortization schedule that lists each monthly interest and principal payment for the duration of your loan.  By paying more now, before retirement, you will have less to pay off when you retire and you will also become accustom to living on less before you leave.

 

Updates

  • COLA Update – NARFE reported the following on the 2012 COLA: “The CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) increased by 0.78 percent for the month of April 2011.  The new CPI-W index figure is now 221.743, which is 2.9 percent above the 2008 third-quarter average of 215.495, which is the base figure for determining the next COLA.  Thus, the CPI-W has surpassed the level needed to trigger COLA payments for 2012.  But because the relevant months for measurement are July, August, and September of this year, we will not know until then whether the CPI-W remains at a level high enough to trigger a COLA, and we will not know until then the magnitude of any COLA.”
  • How to be Financially Prepared When You Retire (FREE Report) – Site visitors requested a downloadable report outlining the retirement financial planning process that we offer online. Please copy and distribute this report to anyone interested in determining what they will have to live on in retirement.
  • 2011 Federal Employees Leave Chart – This free leave chart is available and we will soon have the 2012 calendar posted. This free and easy to use Leave Chart can be used to track your leave and work schedule. Pass it on to others in your organization.
  • We launched a new web site this week, www.nukejob.net for those exploring careers in the nuclear field. The site offers abundant resources including extensive job listings for anyone interested in these high paying careers and jobs.

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 and receive a personal retirement analysis. A sample analysis is available for your review. This service is provided by independent agents that are not affiliated with 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, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Capturing Your Travel Memories

Posted on Monday, 16th May 2011 by

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A Journal is a Great Way to Remember

I often plan to keep a journal when I travel but to be honest I either never put pen to paper or I start and capture a couple of days and then… well nothing.  When I have planned a particularly fun vacation with friends or the travel plans take me to an exotic or historical area I am more inclined to keep a journal before going to bed each night as a way of remembering the activities, people and adventures or discoveries of the day.

My most recent travel journal covered a vacation with my partner to Venice Italy and Greek Cruise.  We met some extremely fun people from Scotland, Australia and the English Channel Islands.  I filled pages with stories from evenings on the ship with our new friends.  One evening we attended the ship’s Karaoke show.  Our Australian friend stood up to dance and sing along with one poor sole who had lost track of the chorus and she was able to help her regain her composure, while another singer was so difficult to listen to our Scottish friend commented “where’s Ted Bundy when you need him?”.   It wasn’t always easy to understand our Scottish friend but his wife assured us that we probably didn’t want to hear everything he had to say.  We laughed so much on that cruise and my journal is a great reminder of the fun we had and the friends we made on that ship.

You will also find your journal to be a useful tool when going through photos to add a caption and notes on who is in the photos.  Another benefit in writing a journal is remembering the great places you had a memorable meal at and those places you want to make sure you never eat at again.  I enjoyed Venice enough that there is no doubt I’ll return to visit again and my journal will help me avoid a really bad restaurant while helping me recall some great places to shop and eat that I want to enjoy again.

Another favorite journal I have is from an Alaska cruise tour in 2004 that I went on with three friends.  The notes in that journal keep fresh all those discoveries in Denali National Park and the train ride getting there.  We saw just about ever wild animal you can see in Denali.  Grizzly Bears, including a mother with 3 cubs, Dall Sheep, a Wolf, a Lynx, a herd of Caribou and a few little rodents that hide in the rocks.  The photos taken and the journal really take you back to that moment and you feel like you’re back sitting on the bus and taking it all in.

Traveling across Alaska is quite an adventure in itself.  You have never seen wilderness until you’ve gone by bus through remote areas of the state.  We were there during Moose hunting season and they were scarce, almost as if they knew they needed to hide.  We did see two that quickly disappeared in the tall brush on our way from Denali to the Wrangell St. Elias National Park region.  We also found some great fruit pies along the road and a restaurant that served up a home cooked meal for our 8 hour ride that covered a mere 110 miles.  The mountain vistas were breath taking, the air cool and crisp and the peaceful sounds of nature on that ride made it worth it!  Of course being greeted at the lodge with a glass of wine didn’t hurt either.

A journal will bring those special travel memories back to life years later.  I remind myself of this when at the end of the day I reflect on the activities, laughs and discoveries.  Because late that evening when you’re exhausted from the day’s activities it is so much easier to say “I’ll write in my journal tomorrow morning”.  But when I fall into that trap that’s when I often end up losing interest in making notes about that special place I’ve been exploring or remembering the great time I’m having with my friends.  All in all a journal is priceless at the end of a special vacation.

Request a FREE Retirement Benefits Summary Analysis online at http://federalretirement.net/assistance.htm.  A benefits specialist will prepare your personal retirement analysis detailing your total benefits and expenses verses total retirement income from all sources. A sample analysis is available for your review.

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.

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances. Travel policies and packages are subject to change without notice. To ensure the accuracy of this information, contact travel providers and hotels at the time of your bookings to confirm pricing, itinerary, and all costs. The comments and observations are limited to the author’s personal experience and your results may vary significantly. This article and replies to comments are not intended to substitute for professional travel services. 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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How the National Debt Negatively Impacts Retirees & Updates

Posted on Tuesday, 3rd May 2011 by

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We haven’t received COLAs because gas, utilities, food, health care premiums, tuition, and airfares haven’t increased for two years now; RIGHT? Are you paying less for much of anything these days! The inflation rate would equal 10% or higher if the Consumer Price Index (CPI) included food and fuel increases like it did in the 1980s!

What prompted me to research and write this article was stopping for gas at our vacation destination in early May and shelling out $80 to fill up a 20 gallon gas tank! I provided links to source material throughout for anyone interested in reading more detailed information about the various issues. With prices like this I can truly appreciate Nancy Holston’s April article titled Vacation Plans and Rising Gas Prices.

Most retirees are by necessity frugal and attempt to live within their means. Unfortunately, our government has lost sight of these principles. According to CBS News our government borrows on average 4 billion dollars a day, 167 Million dollars an hour to fund about half of everything they spend annually!

How long could anyone survive like this? Our government representatives in both parties continue to spend irresponsibly and borrow more as if there was no tomorrow and that the bills will never come due. Albert Einstein described insanity as “doing the same thing over and over again and expecting different results.” Whether it’s our education system that is failing our children or the financial insolvency that could wipe out not only retiree’s life savings but bankrupt our children’s future as well; we must change course.

I’m not an economics major. However, from my perspective our excessive debt and Quantitative Easing can and will lead to dramatic price increases and retirement savings losses. Aren’t we already seeing this even though the administration tells us inflation and the increasing money supply isn’t a problem?

Our 14 trillion dollar debt and increasing money supply, along with international unrest, are devaluing the dollar. Naturally oil, gold, silver, and everything else costs more because our dollar is worth less, currently 26.3% less than it was worth just 10 years ago. What this means to retirees like you and me is that all of our savings and our annuity, that isn’t keeping pace with true inflation, will only buy three quarters of what it could buy in 2001. To add insult to injury earnings on CDs and other investments are less than 1% in most cases today. Why would a bank pay to use our money when they are borrowing all they need direct from the Federal Reserve at near zero percent and then lending it to us, at much higher interest rates, for car loans and mortgages?

When the President says that we have no control over oil and gas prices I cringe thinking about our out-of-touch energy policy. This country has a 300 to 500 year supply of oil if we would only be allowed to drill for it. New discoveries in North Dakota, Montana, offshore, Alaska and elsewhere are there for the taking if this and previous administrations supported drilling and refinery expansion in the United States. This would also create hundreds of thousands of new jobs. We could easily become more energy independent while we fine tune and improve renewable energy technology to assume more of our energy needs down the road. This is a HUGE issue considering that a good portion of our national debt can be attributed to imported oil. The Alaska pipe line is running at half capacity because of exploration restrictions and yet we suffer double digit gas price increases almost weekly now. Some expect gas to climb to over $5.00 a gallon by summer and some European countries are paying $6 to $10 a gallon now. We simply can’t afford this? During our early May 2011 vacation trip we found gas as high as $4.15 a gallon on the east coast.

Our energy policy is also attributing significantly to escalating food prices. There are huge subsidies for ethanol production that turns corn into fuel at prohibitive costs. We are subsidizing ethanol production over the farmers needs to feed their live stock and corn is an international staple. Due to this initiative, food prices worldwide have escalated causing riots in many countries.

The inflationary impact on retirees is magnified especially when you consider the low savings rates available today and the hopefully temporary suspension of COLAs. Will our government wait until we are rationing gas or bankrupt before allowing companies to resume oil production and expand refinery capacity in this county? I support viable clean energy alternatives but first things first to get our country back on track. The only way this will change is if we make Washington stop the insanity with our votes, calls, and letters to our representatives.

UPDATES:

  • New HR & Divorce Forum – We receive a number of questions each month from federal employees and annuitants that are contemplating divorce and need guidance on how to protect their assets during the settlement. Ann Ozuna is hosting our new HR and Divorce Forum to answer questions you may have on this subject. Ann is a retired CSRS Personnel Management Specialist who founded Personnel Solutions Federal Benefits Counseling upon her own retirement from federal service in 1996. If this area is of interest read Ann’s first article titled How an Annuity & the TSP Are Divided in a Divorce and sign up to receive her monthly newsletter.
  • TSP Withdrawal Tax Withholding – Arlena asked if you can use your TSP at retirement to purchase a home in full or will you get the 20% penalty if you are not age 59 1/2?
    Answer: You can avoid the penalty if you wait until you retire at which time you can take a onetime lump sum payment. Paying off your mortgage makes a huge difference when you retire giving you considerably more cash flow to work with plus you save significant interest costs whenever you pay off a loan early. All withdrawals are subject to federal taxes because the money in your account wasn’t taxed when earned. A minimum of 20% is withheld from all withdrawals for federal tax purchases. Review page 4 of the  TSP Tax brochure for specifics.If you are several years from retirement it makes sense to increase your monthly mortgage payment by an amount equal to the next month’s principal payment to  buy down the loan if you have discretionary funds available. You can call the mortgage company to find out what your next month’s principal payment is or they often provide an amortization schedule that you can use. This way you will have less to pay off  on your mortgage when you retire. By doing this you will become accustom to living on less; typically in retirement most have less income then when they were employed. This will get you accustomed to  living on less before you retire.

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 and receive a personal retirement analysis. A sample analysis is available for your review. This service is provided by independent agents that are not affiliated with 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, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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How an Annuity & the TSP Are Divided in a Divorce

Posted on Friday, 29th April 2011 by

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On the Divorce Issues and Retirement Impact section we discussed in general how your federal benefits are property up for division in divorce. Here are some of the specifics:

OPM must have all the information it needs in your decree or order to divide your retirement.  Therefore you must specify “gross annuity”, “net annuity,” or some other easily computable description of your CSRS or FERS annuity amount.  You can allocate a flat dollar amount, a percentage or an amount determined by a formula to your former spouse.  If you are using a formula, all the numbers or dates to be used in the formula must be “readily determined” from information available to OPM.  OPM alone will determine if your decree and orders are a “Court Order Acceptable for Processing” (COAP).  There are specific paragraphs your attorney can use from the “Handbook for Attorneys” to carry out what has been agreed upon.


A popular method of division is “half of the value of retirement at the time of separation/divorce” or something along those lines.  OPM usually interprets this as a “Prorata share” of the retirement check upon the fed’s retirement.  In this case, the date of marriage and date of separation (if different from date of divorce and being used as the ending date of the marriage instead of the date of the decree) must be stated in the orders.  OPM does not go back and figure a second hi-3 as of the date of separation/divorce to compute this number unless you are very specific in language as to not include any salary increases following the date of divorce/separation.  OPM will calculate the length of the marriage in months, the length of the career in months and divide to determine how many months the marriage and career overlapped.  Prorata share will give the former spouse half of the percentage this number represents.

The longer the fed works after the divorce, the smaller the marital portion of the career will be; however, the high three salary may increase with any promotions of pay increases, yielding an equal or greater dollar amount for the former spouse.

For example: John and Jane Doe married on April 19, 1994 and separated on July 3, 2010.  They have agreed to use the date of separation as the marriage ending date.  John began his federal career on February 2, 1991 and is planning to retire under FERS at the end of 2011 at age 61.  John’s High 3 Average is $65,324.  John has agreed to give Jane “half of the value of the retirement” as of the date of separation and survivor benefits but does not specify the amount of the survivor benefit; the decree is silent as to who pays for the survivor benefit.

  • The length of the marriage is 182 months; John’s career is 250 months long (days are dropped not rounded).  This means that 72.8 percent of John’s career he was married to Jane.  As they decided that she should get “half” of the value of the retirement for the duration of the marriage, Jane gets 36.4% of John’s retirement while he is alive.
  • John’s FERS retirement comes out to $13,606.99 a year or $1,133.92 a month; Jane then will receive $412.74 each month for the first year.  As his amount is increased by COLA over the years after he turns 62 so will hers be unless the decree specifies no COLA to her.  The monthly cost for the survivor benefit will also rise.

Survivor benefits have a cost in retirement.  Since the decree does not specify an amount (full or partial), OPM will assume a “full survivor benefit”, which costs 10% of John’s monthly annuity.  Since John is FERS, the choices are “full” or “partial”.  Upon John’s death, Jane will actually get an increase to 50% of his retirement.  Any subsequent spouse which John may acquire before his death will become an “insurable interest” with an age-defined additional cost for her to have survivor benefits (and keep the health insurance) upon John’s passing.  John must specifically elect this “insurable interest” annuity for his new spouse at retirement or within 2 years from the date of marriage after retirement.

In this example John’s gross retirement check of $1,133.92 a month is reduced by the costs of the survivor benefit ($113) and Jane’s portion ($412.74), leaving him only $608.18 a month before deductions for his own health benefits, life insurance, or taxes.

This is but one of the more frequently used ways a retirement can be divided.  We will discuss other ways in future articles.

Now, on to TSP.

John had $224,875 in all his TSP funds on the July 3, 2010.  As he had government service before the marriage, he should carefully watch the wording of his decree/order to insure it awards a portion of the account accrued during the marriage, not the balance as of their separation date.  In order to determine this amount, he will have to contact TSP to get the value of the account on April 19, 1994.  Only the difference will then be subject to division.

TSP requires a separate order to permit them to send Jane the amount awarded to her in the decree.  Jane can elect to have the money moved in a taxed or non-taxed way directly with TSP.  The TSP order does not have to wait for the employee to retire for the former spouse to send it to TSP and receive payment.

If the decree says “subject to gains and losses”, TSP will apply the actual fund rates to the amount awarded.  If you’re your decree is silent on this point, there will be no further adjustment.  If you have outstanding loans, be sure to decide if the indebtedness is to be split or credited to one side or the other of the ledger in your negotiations to determine the amount or percentage to be specified in your decree.

If you or your attorneys are preparing your divorce decree and orders, be sure you understand what will happen to your benefits.  Pay particular attention to any pen and ink changes that may be made when the paperwork is sent to the “other side” for signature.  You should send a certified copy of the decree and all the orders relating to your retirement to the OPM Court Orders Branch shortly after everything is finalized by “trackable“ mail and then hang on to all correspondence you get back in a fireproof safe or safe deposit box.  You will also need a certified (fuzzy raised seal) copy to send in with your retirement application if there are survivor benefits awarded in your decree, so get two copies while you are at it.

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 and receive a personal retirement analysis. A sample analysis is available for your review. This service is provided by independent agents that are not affiliated with 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 ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SURVIVOR INFORMATION, UNCATEGORIZED

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Interim Retirement Check Issues, Ordering Flags & Presidential Letters, and Updates

Posted on Thursday, 21st April 2011 by

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Richard retired last December and he is still receiving only partial monthly annuity payments. Unfortunately, he is only receiving 38% of his estimated annuity payment, too little to pay for daily expenses without digging into his savings. Retirement processing can take six months or more and for those planning on retiring soon be prepared for extended delays and potential problems with your claim. In Richard’s case he called OPM and discovered that his account was entered incorrectly in “Court Ordered” status even though his ex-spouse waived her rights to his government retirement. That is why his partial payment was so low.

When I retired in 2005 my estimated check was 70% of what I eventually received. Read the time line I published online titled “What to expect the first three months after you leave” to understand what you can expect while your claim is being processed. Be aware that processing of your claim may take longer today.

If you need to contact OPM about your retirement payments before you receive your claim number, first contact your former payroll office to find 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. This OPM FAQ can also answer many of your questions. Call OPM at 888-767-6738 if you have issues with your retirement processing and are experiencing delays. OPM is reporting an average processing time as of February 2011 of 19 weeks if there are no problems with your application.

Ordering Flags and Presidential Letters (Retiree Gift Options)

Flags make great gifts for retirees.  You can order flags that have flown over the Capitol Building in Washington DC and certified by the Architect of the capital for as little as $13.25. Generally flags are paid for with donations from the unit and they can also be displayed in attractive engraved flag cases available from Just Write Engraving. They also sell custom mugs with federal agency logos and dates of service. Flag folding instructions demonstrate how to fold the American Flag for proper display and to fit easily in the case.

Administrative personnel may request a letter from the White House for a civilian employee retiring with 30 years or more of Federal service (this encompasses those who have combined military and civilian service as well as those with straight civilian service.)  Both the flag and letter make excellent retiree gifts that will be cherished for a life time.

Updates

  • Suggestions Requested – We would like to hear from our site visitors and newsletter subscribers to find out what current federal employees and retirees wished they knew earlier in their careers about benefits, retirement, and the hiring process and what you wish to have more information about now.  We will use this information for future articles and to add content to our retirement planning site.  Use our online comment form to submit any input that you would like to contribute.
  • Travel – Nancy Holston’s travel article “Vacation Plans and Rising Gas Prices” was published last week. Discover how she evaluated her travel plans and modified them to reduce travel costs this year. She also provides links to cost saving airfare alerts and travel package deals that may save you money too.
  • Interesting Activity – I receive a catalog from The Great Courses that offer unique and interesting home study courses. The courses come in either CD (audio), DVD or download to your desktop computer. Subjects vary from history to fine arts and music, literature, science and mathematics, to better living, philosophy, religion, business and economics. There is a course for wine lovers titled “The Everyday Guide to Wine” by master of wine Jennifer Simonette-Bryan. History buffs will find 10 courses covering ancient Rome, the Vikings, the American Civil War and everything in between. There are 20 or more lectures and NO TESTS. They have tremendous discounts right now (up to 70% off) for many courses. For example the Wine course is typically $245.95; right now it is only $39.95. Use my catalog’s Priority code (52470) to receive the same discount prices I mention here. You can call them to receive a catalog at 1-800-832-2412.  I’ve not personally taken a course yet. However, when I get time I would like sign up for one of the history courses.
  • Retirement Planning Calculators (Options)

 

  1. OPM recently launched Version 2.0 of the “Federal Ballpark Estimator.” The Federal Ballpark Estimate is a retirement savings planning tool for annuity projections and TSP analysis. It is not an annuity estimate. This program covers (CSRS), CSRS-Offset, or (FERS) employees who plan to retire under the voluntary age and service rules. The current version does not perform estimates for retirement under the Minimum Retirement Age (MRA) + 10 rules, or those who are covered by special computation rules such as law enforcement officers and firefighters, or former Federal employees who may be entitled to a deferred retirement.
  2. Decision Support Software offers free software to estimate your annuity and benefits. Their free software includes a comprehensive set of tools for estimating and analyzing federal employee’s annuities, benefits, Thrift Savings Plan, social security, FERS & CSRS sick leave conversion, military credits and more. You can generate numerous reports to help you make informed decisions about your unique situation.
  3. Assistance is also available. You can request a FREE Annuity Review and Personal Summary of Benefit’s. This analysis, view sample analysis, uses the professional version of the free software mentioned here.
  • I completed my 25th book this spring, the 11th edition of The Book of U.S. Government Jobs, and need of a break! This edition is the first to feature the new HIRING REFORM initiatives ordered by President Obama and I take readers step-by-step through these changes, presenting an insider’s view of what it takes to go from job hunter to hired employee — and everything in between — to improve their chances of landing a government job. The book details what it takes to be rated “Best Qualified” under the new “Category Rating” system. This book took over a year to write due to the many changes in the recruitment process and it includes a comprehensive federal resume writing guide.

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 and receive a personal retirement analysis. A sample analysis is available for your review. This service is provided by independent agents that are not affiliated with 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 BENEFITS / INSURANCE, ESTATE PLANNING, RETIREMENT CONCERNS

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Vacation Plans and Rising Gas Prices

Posted on Thursday, 14th April 2011 by

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How much can you afford to spend on vacation this year?

Ouch!!! Gas prices went up 20 cents in one day where I live, one station raised the price twice within 2 hours!  I had travel planned for Cape Cod, Colorado, Seattle and Alaska this year.  I was wise, or maybe lucky, enough to get the airline ticket for Cape Cod just before the prices started going up.  Airfares to Seattle and Denver are already approximately $100 higher than late last week.  Of course that’s still far less than the increased cost of gas to drive to those cities not to mention how much time I would spend driving and the lodging along the way.  So it’s time to go back and look at just how much of my budget I can afford to spend on travel this calendar year.  If you’re like me you probably plan to do the same thing.

My family lives about 400 miles away, friends I would love to visit live 300 miles from my home and with gas increases it is going to take a larger chunk of my monthly budget.  In the past these visits to family and friends were easily planned and did not impact monthly expenses, however planning is a now a must if I don’t want to blow my monthly budget.  Not wanting any surprises that would require a withdrawal from my savings, I decided it is time to figure out how much I have for travel this year and adjust my travel plans accordingly.

Once I determined how much of my budget I can dedicate to travel this year, given rising food and gas prices for everyday activities, I estimated my travel plan costs for the year.  I estimate that airfares will increase $100 over the historical two year average if it’s west of the Mississippi, and $50 if it’s east of the Mississippi. Any driving will be estimated at $4 a gallon, dividing the distance by the manufacturer’s MPG rating multiplied by two.  Ten hours on the road is more than enough for one day.  I use that as a guideline to determine lodging for the road trips.  I normally fly if it takes more than 10 hours to get to my destination but if it’s a remote spot, flying may not be the best mode of travel.  There’s also the expense of a rental car if I decide to fly and that can be high for remote spots or less popular vacation areas.  Generally, a figure between $250 and $350 will get you a suitable vehicle for a week. There is always the option of choosing economy cars if your looking to save a little.

You shouldn’t be afraid to use public transportation if that will meet your needs.  For instance, when we go to Provincetown on Cape Cod in Massachusetts, public transportation meets all of our needs.  A bus takes us from Boston Logan airport to the ferry terminal and a ferry to Provincetown drops you in the center of town.  Most lodging is within easy walking distance.  Just don’t get carried away when packing your bags.  The ferry fare is around $80 for a round trip.  If you plan to spend all your time in Provincetown, there is no need for a rental car.

After I determined what I could fit into my budget for this year, I canceled the plans for Alaska and replaced it with another destination that is more affordable and will allow me more flexibility. I sign up for airfare alerts to the places I plan to visit, Kayak and Airfare Watch Dog are two web sites that offer money saving opportunities.  They will give me a jump on any last minute airfare sales.

Saving on local transportation at your destination takes advanced research and planning.  You will need to look at the options for the location you are visiting and determine what best fits the activities you plan to participate in.  If it’s a resort hotel you are staying at, you may not need to spend a penny on local travel.  Check with the resort hotel to see if they have shuttle service from the airport and ask if they provide transportation to the local shopping areas. Many resort hotels provide shuttle service as a benefit of staying at their hotel.  If you plan to go to a popular spot but you’re not staying at a resort, choose a hotel that is central to your planned activities and you may not need a rental at all.  But if you plan to go exploring for a day or two during your weeklong getaway, check to see if Enterprise has an office near where you are staying.  When I go to Honolulu I can walk to the Enterprise office and pick up a car for the day.  The cost for a one day rental is about $15 more than the one day parking fee at most Honolulu hotels.  That is a bargain.

If you want be adventurous and let your budget be your guide, as a retiree you can take advantage of those last minute vacation deals.  Royal Caribbean recently offered Balcony cabins for the price of an Inside cabin on the Oasis and Allure of the seas on cruises to the Caribbean in April. You might also find last minute flight specials to European destinations this Spring.  Explore the websites for all the hotel rewards programs and frequent flyer programs you are enrolled in and sign up for their emails on vacation offers.  If you have an American Express card, they also offer vacation deals.  You may find a fantastic getaway on last minute deals.  I found a vacation package to Australia, 9 days (11 including the flights to Australia) visiting Sydney, Melbourne and the Great Barrier Reef starting at $1799 for 3 star hotels that included domestic flights in Australia and round trip airfare from Los Angeles.  This deal is still available through early June.

The bottom line is to plan a vacation that will meet your desires without exceeding your budget.  Below are some websites that can help you find a great vacation getaway at a price you can afford!

Airfare Alerts:

Package Deals:

Request a FREE Retirement Benefits Summary Analysis online at http://federalretirement.net/assistance.htm.  A benefits specialist will prepare your personal retirement analysis detailing your total benefits and expenses verses total retirement income from all sources. A sample analysis is available for your review.

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.

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances. Travel policies and packages are subject to change without notice. To ensure the accuracy of this information, contact travel providers and hotels at the time of your bookings to confirm pricing, itinerary, and all costs. The comments and observations are limited to the author’s personal experience and your results may vary significantly. This article and replies to comments are not intended to substitute for professional travel services. 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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How to Increase Your Annuity & Updates

Posted on Tuesday, 29th March 2011 by

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Robert worked for the Federal government for 4 years under FERS. He resigned in 1995 and withdrew his FERS retirement contributions and then returned to government in 1998. He now holds a career position and was not sure if he could obtain credit for his prior service that he withdrew in 1995. We receive many questions about the redeposit process and eligibility. Significant changes to the redeposit process were enacted in 2009 under the National Defense Authorization Act (NDAA), Public Law 111-84. The provisions of section 1904 of the NDAA only apply to employees covered under FERS on or after October 28, 2009.

Prior to enactment of the NDAA, FERS employees who separated from Federal service and were refunded their retirement deductions permanently forfeited all retirement credit for the service covered by the refund.  Section 1904 of the NDAA now permits individuals who are subsequently reemployed to make a redeposit of the amount refunded, plus interest, and to have credit for the service reinstated.

OPM issued updated guidance on 2/25/2011 in their Benefits Administration Letter Number 11 – 103. The current FERS Application (SF-3108) is now being accepted to make a redeposit. Employees must indicate on the application that the period of service was refunded and send the completed application through their agency for certification.

Don’t submit a payment with the application. If a payment is sent to OPM before the service credit account is established, OPM will not be able to identify where to apply the payment. As soon as the Service Credit office processes the application, a bill and instructions for making payments will be sent to the employee.

Buying back your previously refunded federal service time will increase your annuity for life. The sooner you make the repayments the less you will have to pay in interest and for each year you buy back, your annuity will increase another 1 to 1.1% of your average high three salary in retirement. If your high three average salary was $50,000, and the calculation is 1% additional per year of service, your annuity would increase $500 a year. With 10 years restored service your annuity would increase $5,000 a year in this example!  Some only look at the annual increase and say why bother for $500 to $1000 a year when I have to pay so much back. You have to factor in the years you estimate you will collect which can be up to 30 years or more. Visit our FERS Annuity page for additional information on this subject and if you are a veteran explore your military credit options.

Updates

  • TSP – FERS employees can dramatically increase their total retirement income by contributing at least 5% to their THRIFT plan to obtain a full match from Uncle Sam. It pays to put as much into the TSP as possible to increase your potential income in retirement. The closer to retirement the more conservative you need to be with your investment mix. I personally kept most of my TSP in the G and L2010 funds the last five years of employment to preserve capital.
  • COLA for 2012! – A small 2012 COLA is expected next year, the first since 2009.  AARP reports that as much as 75 percent of the COLA increase will be used to pay for higher Medicare premiums next year.  Retirees must economize in retirement to maintain their standard of living. It is best to learn how to live on less while you are still working and I devised a plan that worked for me the last ten years I was employed. The process allowed me to pay off my mortgage while I was working so that I would have more disposable income in retirement. It is a painless process and worth reviewing now that retirees must ultimately live on less.  If your mortgage is already paid off the process will simply help you save more for retirement.
  • Correction – I received a number of messages concerning my last article where I talked about the SF-50 and military buyback time. I incorrectly stated that your military deposit is annotated on your retirement SF-50. I meant to say that your military deposit is often listed on your Leave and Earnings Statement and to keep a copy of your last Leave and earnings statement with your retirement paperwork when you retire. It can be used to verify that your deposit was made. I also stated that I received my retirement personnel action (SF-50) on my last day of employment and that you typically receive this document several weeks after submitting your retirement paperwork. Several personnel specialists reported that their agency typically sends out the retirement SF-50 after the retirement date.
  • More Job Listings – We received more new job postings in March and as before many are from federal agencies and private sector companies looking for talented federal retiree’s.   The United States Graduate School posted several new  diverse instructor positions to teach scheduled classes at their facilities around the country and in Washington.  Visit our Jobs Board often to check on new listings.
  • March Travel Article – If you ever dreamed about visiting Greece and exploring the Greek islands you will enjoy Nancy Holston’s new article titled A Greek Holiday.

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 and receive a personal retirement analysis. A sample analysis is available for your review. This service is provided by independent agents that are not affiliated with 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, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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