Retire at 80% FERS Law Enforcement Tammy Flanagan Senior Benefits Director National Institute of...
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Transcript of Retire at 80% FERS Law Enforcement Tammy Flanagan Senior Benefits Director National Institute of...
Retire at 80%FERS Law
EnforcementTammy Flanagan
Senior Benefits DirectorNational Institute of Transition
Planning, [email protected]
My “Hats”Tammy Flanagan – Benefits
Specialist
Presenter
Pre-Retirement Seminars Mid-Career Planning New Employee Benefit
orientation Co-Host: For Your Benefit www.federalnewsradio.co
m http://www.nitpinc.com/
Writer
www.govexec.com Weekly Column
“Retirement Planning” Edited by Tom Shoop –
Senior Editor of Government Executive Magazine
Tomorrow’s Column based on today’s presentation!
OPM on Supreme Court Decision 6-26-13, DC – “Today’s historic decision by the Supreme Court that the Defense of Marriage Act is unconstitutional is a much welcome development in the continuing quest to ensure equal treatment under the law to all Americans. For the federal government as an employer, it will impact benefits for our married gay and lesbian employees, annuitants, and their families. “In the coming days, OPM will be working closely with the Department of Justice and other agencies to provide additional guidance for federal human resources professionals, benefits officers, and our employees and annuitants. While we recognize that our married gay and lesbian employees have already waited too long for this day, we ask for their continued patience as we take the steps necessary to review the Supreme Court’s decision and implement it. As soon as we have updates to share, they will be posted on our website.”
Statement by Acting Director Elaine Kaplan on the Supreme Court Decision
in United States v. Windsor
The percentage stems from the "replacement ratio" studies that Aon Consulting and Georgia State University have done for the last 20 years.
Basically, researchers cull information from the Bureau of Labor Statistics Consumer Expenditures Survey, which details how U.S. consumers, including older households, spend their money.
Where did the 80% rule come from?
Retirement: 1.3% or .8% Social Security:• FICA: 6.2%• Medicare: 1.45%
TSP: 5% - 10% - 20%? Taxes• Less income = less income tax• Some states don’t tax retirement
benefits
Why 80%? These deductions stop when you
retire:
These expenses MAY go DOWN when you retire:
Kids (food, clothing, schooling, weddings)
Mortgage Clothing Commuting Costs Hired Help
Kids unemployment, emergency, grandkids
Mortgage good old days
Clothing are you joining a nudist camp?
Commuting Costs are you going to stay home every day?
Hired Help cut your own grass, paint your own walls, clean your own
house
Travel, hobbies, volunteer Healthcare and insurance
These expenses MAY go UP when you retire:
FERS Basic Retirement BenefitLaw Enforcement20 years = 34% of high-three25 years = 39% of high-three30 years = 44% of high-threeNon-Law Enforcement20 years = 20% of high-three (22% at age 62+)25 years = 25% of high-three (27.5% at age 62+)30 years = 30% of high-three (33% at age 62+)
What does it take to get to 80%?
What else?: FERS Supplement
Approximately $40 / month / year of FERS service
20 years = $800 / month or $9,600 / year
25 years = $1,000 / month or $12,000 / year
30 years = $1,200 / month or $14,400 / year
What percentage of your salary will this replace? More for low salaryLess for higher salaryReplacement: 10 – 30%
Social Security Eligible at 62
Reduced by 30%Delayed credits
24% increase at 70Tilted towards the low wage earnerAverage benefit 2013: $1,221.22Maximum monthly benefit 2013:
Age 66: $2,533 (Born 1947) Age 62: $1,923 (Born 1951) Age 70: $3,350 (Born 1943)
Supplement Ends at 62, then what?
The United States Social Security Administration
POPULAR SERVICES
new Get your Social Security Statement onlineGet or replace a Social Security cardApply online for retirement, disability or Medicare benefitsEstimate your retirement benefitsResearch popular baby namesLocate a Social Security office
www.socialsecurity.gov
What else? Retirement Savings
TSP Other employer
savings plans - 401(k), 403(b)
IRAs Savings Accounts Inheritance
Use It• Spending
Lose It Taxes – CPA / CFP
Promote It Legacy planning –
Estate Attorney
• Women are more likely than men to interrupt their careers for family
• Of the 62 million wage and salaried women (age 21 to 64) working in the United States, just 45 percent participated in a retirement plan.
• Women live a long time!• By and large women invest more
conservatively than men.
http://www.dol.gov/ebsa/publications/women.html
What else? Retirement SavingsWomen: Listen Up!
Use It
Leave it in TSP
Low expenses G Fund Simplicity Monthly withdrawal
options
Transfer to IRA
Multiple partial withdrawals
Many investment choices
Legacy planning options
0 – 59 ½ - Be careful! 10% tax penaltyException: Separation in the year you reach 55Exception: Monthly payments based on life expectancy or life annuity
59 ½ - 70 ½ - No rules!70 ½ + Complicated Rules!
Lose It
TSP Web Site: Planning & Tools: Retirement Income Calculator TSP: Retirement Income
Calculator
Monthly PaymentsBalance: $500,000 Growth:
5%
Dollar Amount
$3,000 / monthRun Out at age 78
$2,000 / monthBalance at age 100: $209,484.99
Life Expectancy
Monthly Age Balance
$1,407.66
55 $508,224.49
$2,208.64
65 $557,817.99
$2,069.36
75 $572,237.19
$3,095.55
85 $539,728.21
$3,612.99
95 $347,388.27
$3,166.00
100 $212,558.69
How about an annuity?
Features
$500,000 purchase Begin at 55 100% Survivor (spouse
or other insurable interest)
2% Interest Rate Index Level Payment No Cash Refund
Payments Monthly Age Balance
$1,683 55 $0
$1,683 65 $0
$1,683 75 $0
$1683 85 $0
$1,683 95 $0
$1683 100 $0
How about an annuity?
Features
$500,000 purchase Begin at 55 Single Life 2% Interest Rate Index
Level Payment No Cash Refund
Payments Monthly Age Balance
$1,980 55 $0
$1,980 65 $0
$1,980 75 $0
$1,980 85 $0
$1,980 95 $0
$1,980 100 $0
How about an annuity?
Features
$500,000 purchase Begin at 55 50% Survivor (you or
spouse) 2% Interest Rate
Index Increasing Payment
Not available for insurable interest
Cash Refund
Payments
Monthly
Survivor
Age Balance
$1,133 $566 55 $485,000 (approx.)
$1,523 $761 65 $340,000 (approx.)
$2,047 $1,023 75 $150,000 (approx.)
$2,750 $1,375 85 $0
$3,696 $1,848 95 $0
$4,285 $2,142 100 $0
Did we get to 80%?
Retire 55 with TSP Monthly Payments
FERS Law Enforcement 30 years
FERS Supplement $14,400 / high-three $100,000
TSP Monthly payment $2,000 x 12 = $24,000
Adds up to 82.4%
44%
14.4%
24%
Did we get to 80%?
Retire 57 with TSP Monthly Payments
FERS (regular) 30 years FERS Supplement
$14,400 / high-three $100,000
TSP Monthly payment $2,500 x 12 = $30,000
Adds up to 74.4%
30%
14.4%
30%
Did we get to 80%?
Retire 50 to Work Part-Time
FERS Law Enforcement 20 years
FERS Supplement $9,600 (High-three $100,000)
Part-Time Job $36,400
Adds up to 80%
34%
9.6%
36.4%