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Plan and Track Your Retirement

Plan and Track Your Retirement . Focus on Federally Employed Women. Statistics on Women. 1/3 who reach 65 can expect to reach 90 Only 1/3 over 65 are married Survive their husbands by 15 years (Average) Half over age 75 live alone At age 85, there are twice as many as men

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Plan and Track Your Retirement

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  1. Plan and Track Your Retirement Focus on Federally Employed Women

  2. Statistics on Women • 1/3 who reach 65 can expect to reach 90 • Only 1/3 over 65 are married • Survive their husbands by 15 years (Average) • Half over age 75 live alone • At age 85, there are twice as many as men Whether you are currently married, single, widowed or divorced, plan on being single at some point in your life.

  3. Benefit Issues Specific to Women • CSRS or FERS • Social Security • TSP • Insurance

  4. Other Retirement Issues • Financial Planning • Estate Planning • Life After Retirement • Health Issues

  5. 1. CSRS and FERS • Eligibility for Retirement / Comfortable Retirement • Computation of benefit • Service Credit Issues • Electing a Survivor’s Benefit

  6. CSRS Minimum Age and Service Requirements

  7. FERS Minimum Age and Service Requirements

  8. Length of Service High 3 Formula Retirement Benefit

  9. CSRS Computation Years/months - 2 x 2 + .25 = % of High-three average Example: High-three $60,000 / 33 years 6 months service 33.5 - 2 = 31.5 31.5 x 2 = 63 63 + .25 = 63.25% x $60,000 = $37,950 / year or $3,162.50/month

  10. CSRS Law Enforcement Computation 20 years = 50% of High-three average Additional Service= 2% / year Example: High-three $60,000 / 33 years 6 months service 20 years = 50% x $60,000 = $30,000 13.5 years x 2% = 27% x $60,000 = $16,200 $30,000 + $16,200 = $46,200 / year or $3,850 / month

  11. FERS Computation Years/months x 1% (or 1.1%) of High-three average Example: High-three $60,000 / 33 years 6 months service 33.5 x 1% x $60,000 = $20,100 / year or $1,675 / month Remember SSA and TSP: Example: Social Security (or Supplement) = $1,200 / month TSP: Balance = $300,000 / monthly payment $1,200 / month Total Retirement Income: $4,075 / month

  12. FERS Law Enforcement Computation 20 years = 34% of High-three average Additional Service= 1% / year Example: High-three $60,000 / 33 years 6 months service 20 years = 34% x $60,000 = $20,400 13.5 years x 1% = 13.5% x $60,000 = $8,100 $20,400 + $8,100 = $28,500 / year or $2,375 / month + SSA and TSP

  13. Credit Unused Sick Leave • Add to length of service • Use for benefit computation • No limit on the amount • FERS 50% until 2014

  14. Value of Unused Sick Leave • 2087 hours = 1 year • 522 hours = 3 months FERS = 1% per year CSRS = 2% per year Example: High-Three = $80,000 / 2087 hours FERS = $800/year ($66.67/month) CSRS = $1,600/year ($133.33/month)

  15. Creditable Service Service Computation Date Retirement Leave LWOP Intermittent/WAE Part-Time Deposits Non-Deduction Service Refunded Retirement Contributions Military Service

  16. CSRS or FERS: Part-Time Work Schedule • Counts as full time for eligibility • Pro-rated in the computation • Can make up by working longer • F/T credit if performed before 4/7/86 under CSRS

  17. Part-Time Example20 Years of Service High-Three Average Salary $65,000 CSRS Full-Time 20 – 2 x 2 + .25 = 36.25% x $65000 = $23,562 FERS Full-Time 20 x 1% = 20% (or 22% if over age 62) x $65,000 = $13000 • What if 5 years of the 20 were on a 32 /hour schedule?

  18. Part-Time Example39,653 (part-time hours) / 41,740 (full-time hours) = 95% CSRS FERS 95% x $23562 = $22,383 = $1,179/year less Work 10 months longer to make up the difference 95% x $13,000 = $12,350 $650 / year less Work 1 year longer to make up the difference The real question: How much money do you need to retire?

  19. Reductions and Withholdings • Reductions: • Age • Unpaid Deposit (CSRS) • Survivor Election • Redeposit (CSRS) • Alternative Annuity • CSRS Offset • Withholdings: • Insurance: FEHB, FEGLI, FEDVIP, FLTCIP • Taxes: Federal and State (if applicable)

  20. CSRS or FERS Retirement Election • Maximum Survivor Annuity for Spouse • Partial Survivor Annuity for Spouse • No Survivor Annuity • Insurable Interest Survivor Annuity • Election for Former Spouse Which one will you choose?

  21. Maximum Survivor Annuity for Spouse CSRS Example • Almost 10% reduction to your retirement: • Survivor receives 55% of unreduced retirement • increased annually by COLA and paid for life of survivor Retirement = $50,000 / year Reduction = $4,730 Reduced Annuity = $45,270 Survivor Annuity = $27,500

  22. Maximum Survivor Annuity for Spouse FERS Example • 10% reduction to your retirement: • Survivor receives 50% of unreduced retirement • increased annually by COLA and paid for life of survivor Retirement = $25,000 / year Reduction = $2,500 Reduced Annuity = $22,500 Survivor Annuity = $12,500

  23. Married Couple Jill Jack • CSRS = $50,000 • Reduced for SBP: $45,270 • FERS Retirement: $25,000 • Reduced for SBP: $22,500 • Social Security: $20,000 • Retirement Savings (TSP, 401k): $700,000 Total income while both are living: $45,270 + $22,500 + $20,000 = $87,770 + Savings Jill (widowed): $50,000 + $12,500 = $62,500 + Savings Jack (widowed): $25,000 + $20,000 + $27,500 = $72,500 + Savings

  24. 2. Social Security • More than 25% of older women rely on Social Security for nearly all of their family income. • In 2010, Social Security kept 38% of older women out of poverty.

  25. www.ssa.gov/mystatement

  26. 2. Social Security - CSRS • Qualified for Your Own Social Security? • Beware of Windfall Elimination Provision • Counting on your husband’s Social Security? • Think again: Government Pension Offset • CSRS Offset employees are exempt from the GPO

  27. Social Security Strategy Jill Jack • $2,000 / month FRA (66) • Receive spousal benefit = $1,200 /month (50% of Jack) • Receive Delayed Credits on her account at 70 = $2,640 • Receive widows benefits at age 84 = $3,168 • $2,400 / month FRA (66) • File and Suspend at age 66 • Delayed Credits at age 70 = $3,168 / month

  28. William Meyer, Social Security Solutions

  29. 3. TSP • Maximize matching • Diversify Slow and Steady Wins the Race $1,277 /year (price of $3.50 coffee) = $107,164 in 30 years $2,555/year (price of take-out lunch) = $214,413 in 30 years Based on a 6% annual rate of return

  30. . Information in this chart assumes an annual salary of $40,000, employee and agency contributions of 5% each, and a 6% average annual rate of return.

  31. TSP Withdrawal Options • One-Time Partial Withdrawal – TSP-77 • Full-Withdrawal – TSP-70 • Single Payment • Monthly Payments • Specific Dollar Amount • Life Expectancy Computation • Life Annuity

  32. www.tsp.gov/planningtools

  33. TSP Withdrawal Option: Specific Dollar Amount / Monthly Payments Payment: $3,000 An account balance of $500,000 earning 6% will provide payments for 30 years

  34. Monthly Payment

  35. TSP Monthly Payment Example (Continued)

  36. 4. Insurance • FEHB • Federal Employees Health Benefit Program • FEGLI • Federal Employees Group Life Insurance • FLTCIP • Federal Long-Term Care Insurance Program • Medicare

  37. Health Insurance (FEHB) • Retire on an immediate annuity or postponed FERS MRA + 10 • Are covered continuously for the 5 years of service immediately preceding retirement You may continue your coverage if you:

  38. Life Insurance: What other benefits are there? • CSRS or FERS • CSRS: 55% of earned CSRS annuity • FERS • 50% of earned FERS annuity (10 years of service) • Lump Sum Death Benefit: $30,792.98 + 50% salary • Children: around $500 / month / child • Social Security • Widow’s benefits? • Children: 50% of your full benefit until 18 • Thrift Savings Plan

  39. Basic Life Coverage = Salary, rounded up, + $2,000 Cost is $0.15 per $1,000 biweekly Salary = $47,500 Coverage = $50,000 Cost is 50 x .15 = $7.50 biweekly

  40. Basic FEGLI and Retirement • Regular coverage until age 65 and retired • After age 65 and retired: • 75% reduction • 50% reduction • No reduction

  41. Cost of Basic Coverage After Retirement *per $1,000 per month

  42. Example: Cost of Basic Coverage After Retirement

  43. Option A: Standard Basic coverage plus $10,000

  44. Option B: Additional Basic coverage plus 1 to 5 times your annual base pay

  45. Option C: Family Basic coverage plus: • $5,000 for spouse • $2,500 per dependent child Additional coverage in multiples of up to 5 times the base amount

  46. It’s always a good time to apply! • Advantages of applying early: • premiums are based on your age • if you’re currently healthy, you avoid the risk that a future illness or condition may disqualify you from obtaining coverage at a later date • Qualified relatives can apply (even if you do not) • Only three plan choices – or chose a pre-packaged plan • Payroll/annuity deduction available • Coverage is fully portable • www.LTCFEDS.com/webinar • 1-800-LTC-FEDS (1-800-582-3337) TTY 1-800-843-3557 Federal Long Term Care Insurance Program

  47. How Much does Long-Term Care Insurance Cost? 50

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