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Advice on how to prepare for life after government.
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Can You Count On Social Security?

This week, I’m in Ocean City, Maryland, with my husband’s sister and her husband, Joe. They are typical American workers who are approaching retirement, so we spent a little time talking about Social Security.

Joe works for the local government near our hometown near Pittsburgh, as the chief building inspector. He has a public pension and also pays into Social Security. My sister-in-law works for a small business and is saving for retirement in a 401(k) plan (she has no defined benefit pension). She assumed that because many of her relatives had lived in retirement on their Social Security benefits, she’d be able to do the same. She said she had never been very interested in learning more about Social Security and assumed it would be there for them.

Is she right?

Earlier this week, the House Ways and Means Subcommittee on Social Security held a hearing titled “What Workers Need to Know about Social Security as They Plan for Their Retirement.” The hearing came the day after the release of the 2014 Social Security Trustees Report.

Subcommittee Chairman Sam Johnson, R-Texas, said in his opening statement: “Unless Congress does its job, full benefits can’t ...

How to Get the Most from Your Social Security Benefit

Last week we explored the benefits and disadvantages of purchasing an annuity using the proceeds of your Thrift Savings Plan. This week, I’d like to consider another another question. Steven A. Sass, program director of the Financial Security Project, an initiative of the Center for Retirement Research at Boston College, puts it this way in a briefing paper: “Should You Buy an Annuity From Social Security?

In the paper, Sass describes the three traditional methods of receiving income from retirement savings: investing the principal in bank deposits or U.S. Treasury bills to preserve savings and live on the interest; investing in stocks and bonds and drawing out a portion as income; or buying an annuity. A fourth option, suggests Sass, is to delay claiming Social Security retirement income until age 70 and use your retirement savings to provide the income needed during the earlier years.

Social Security retirement benefits can be claimed anytime between the ages of 62 and 70. The full retirement age for someone who is 62 in 2014 is 66. That means, for example, that if your full benefit would be $2,000 per month at age 66, but you choose to claim the benefit ...

Are You Afraid of Outliving Your Money?

One of the concerns I hear in my seminars over and over again is not having enough money to live on in retirement. During the first part of my seminars, we discuss the value of the government retirement benefit under either the Civil Service Retirement System or the Federal Employees Retirement System, and then most people feel somewhat better—especially the people who didn’t know they had a government retirement benefit.

Yes, it is true; I meet federal employees every week who are covered by FERS who don’t understand the value of the retirement withholding for FERS from their biweekly salary.Those employees have a fresh outlook when they realize the amount of FERS retirement benefit that they will be receiving.

Most CSRS employees know they have a retirement benefit. Under CSRS, employees are exempt from paying Federal Insurance Contributions Act taxes and therefore, Social Security retirement is not accumulating. CSRS was designed as a single benefit plan that stands alone without the Social Security benefit or an employer-sponsored savings plan. FERS employees have paid FICA taxes throughout their federal career, so they will also receive a percentage of income replacement from the Social Security retirement benefit.

There ...

When to Seek Financial Help

I recently received an email from someone who was considering hiring a financial adviser. Wisely, she had some questions she wanted to ask before she decided to turn over control of her financial future to someone else.

I told her to anticipate that her adviser would come up with a portfolio of stocks, bonds, and other types of investments aimed at keeping her on track financially to meet her financial goals. I said she needed to consider her risk tolerance (how well she can handle the ups and downs of the stock and bond markets) and her time horizon (how long the money should last).

There are also several other questions anyone considering hiring a financial adviser should ask themselves. Let’s look at some of them.

Are you going to continue to work after you retire?

If so, you probably won’t need to begin monthly withdrawals from your Thrift Savings Plan. You may continue to leave your money invested in the TSP and make interfund transfers as needed to rebalance your account to minimize risk and maximize growth.

You will no longer be permitted to contribute new money to your account or to borrow from your TSP once ...

Managing Your Retirement Money

The Thrift Savings Plan has been around for more than 27 years, so by now many federal employees who have been contributing since the beginning have sizeable nest eggs for their retirement years. In many cases, money invested in the TSP is the largest asset, besides a home, that a federal employee has control over. For many employees, the time is nearing to make the biggest decision of all: what to do with this money after they retire.

For those under the Federal Employees Retirement System, the basic retirement benefit and Social Security represent income streams that will last a lifetime. In many cases, they will cover day-to-day living expenses. But TSP savings have the potential of making the retirement years much more comfortable.

For many, the TSP has represented a significant learning experience over the years, requiring them to:

  • Figure out how much to save out of each paycheck.
  • Understand how to manage risk and volatility in the stock market and use bonds to offset some of the risk.
  • Determine how to diversify between the varieties of TSP investment options based on the time horizon of when the money might be needed in the future.
  • Understand the role retirement ...