September 24, 2010As hundreds of thousands of federal employees confront the prospect of retirement, they face a series of critical questions, including:
The first step to answering these questions is to have a good understanding of where you stand now. This involves getting information from your agency, such as:
After you've gathered such information, you need to begin to analyze it. Don't forget that first and foremost, you are your own financial planner. You know how much money you have coming in each month and how much you spend. You manage your finances by making sure your income covers your outflow of cash. In retirement, you'll have to do the same thing. But figuring out how to adequately replace your pre-retirement income so that you can maintain a comfortable lifestyle will require some technical planning. For that, you might need professional help.
Where can you find such help? Don't look to your employer. Federal agencies do not offer financial planning advice to their employees. They generally do, however, work with experts to provide pre-retirement seminars to thoroughly explain federal benefits and give some financial and tax planning advice. As a presenter in such seminars, I can't tell you how many times I've heard variations of the following comment: "I thought I knew everything I needed to know, but I learned several things today that will help me plan for a more successful retirement."
Let's explore a question that many employees have as they plan for retirement: "Should I choose to have a survivor benefit for my spouse?" If you were to ask this of your agency retirement benefits specialist, the appropriate response would be: "It's up to you." The specialist could provide some valuable information to help you decide, such as a computation of the reduction to your retirement such a benefit would entail and an explanation of the tax implications.
Then you'd have to analyze the cost and value of the benefit. That's the point at which you're no longer in the benefits area, but have crossed into the financial planning arena. Many federal employees are not sure how to evaluate the financial impact of some of the important decisions that have to be made in order to prepare for retirement. But they're also not sure how to hire a professional to help them.
The first step is to be clear on what kind of help you're seeking. You won't need someone to manage your retirement benefit since this is determined (and paid out) by OPM. But you might need help transferring your TSP funds to an individual retirement account after you retire. Or maybe you'll want to purchase a private investment product, such as life insurance or long-term care insurance, instead of using the benefits the federal government offers.
How do you find an adviser whom you can trust to help you with such decisions? Federal employees have not been immune to the actions of charlatans who take advantage of their trust.
As you consider whether a particular financial planner is right for you, here are 10 questions to ask, courtesy of the Certified Financial Planner Board of Standards:
Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.
For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on federalnewsradio.com or on WFED AM 1500 in the Washington metro area.
September 24, 2010