Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Recoup Some Savings During Open Season

I hope that some of you have the day off and are recovering from a wonderful Thanksgiving holiday. If you are shopping today, then you must be looking for a bargain. You need look no further than your annual health benefits open season. There may not be an actual sale going on, but by spending some time studying your options, you may find enough savings to cover the cost of what you may have spent on Black Friday.

When shopping for health insurance there are many moving parts and many choices to make, which can make this a complicated and frustrating exercise. It reminds me of Aesop’s fable about a cat and a fox. As a pack of dogs goes after the cat and the fox, the fox selfishly refuses to share with the cat the numerous ways to escape. The cat knew only one means of escape -- to run up the nearest tree. As the fox contemplated the hundreds of options, the dogs arrived and tore the poor fox to pieces. The lesson for health insurance shoppers? Don’t become paralyzed by all the options.

There are other psychological reasons why we are resistant to change. One is...

What You Need to Know about Health and Life Insurance

This week, I want to focus on some of the complexities surrounding the continuation of health and life insurance benefits in retirement and answer some readers’ questions, but first I want to clarify a point from last week’s Retirement Planning column.

There was some confusion about the number of pay dates in 2015. Some payroll offices will have 27 pay dates in 2015 and others will have 26. My point was that if there are 27 pay dates in any given year, FERS employees may need to adjust their contributions so that they will not contribute the maximum annual elective deferral limit ($18,000 for 2015 and 2016) before the last pay date so they don't miss out on agency matching contributions. Employees should check with their payroll system or their human resources office to find out if this is an issue for them in 2015. For those employees paid through the Defense Finance and Accounting Service, there will be 27 pay dates in 2015. The last pay date is Dec. 31, for the pay period that ends Dec. 26 (the pay date would normally fall on Jan. 1, 2016, but employees will be paid one day early...

You Have TSP Questions; We Have Answers

One of my favorite things to do is to answer questions from federal employees and retirees. Last week's column generated a lot of questions and commentary from readers about general retirement processing, Thrift Savings Plan issues and other considerations that affect your retirement funds. So this week I thought I’d provide some additional reference material for those who want to continue the dialogue.

Initial Steps

One reader pointed out that you will need to include a copy of your marriage certificate (if married) and the W-4P withholding certificate (federal tax withholding election) for pension or annuity payments with your retirement application. Also, if you have been divorced and your ex was awarded a portion of your retirement or survivor benefits, a copy of the divorce decree will also need to accompany your retirement application. 

It’s a good idea to do a dry run of your tax return before you retire so that you get a better idea of the taxes you will pay on your income from FERS or CSRS, Social Security, and distributions from your TSP. You can use available software or a professional tax preparer can provide this service as well.  Many federal employees underestimate...

Don’t Forget to ‘Turn On’ Your Benefits

I’m often asked what steps federal employees need to take to receive their benefits after retirement. As with most questions in life, the answer can be complex. Once an employee determines they are eligible for retirement -- and that they can afford to retire -- they must decide how and when to apply for their retirement benefits. Your agency will assist you in applying for federal employee and civil service retirement benefits and the continuation of health and life insurance benefits. But there are a number of additional things to do as well.

Here’s a list of other retirement benefits you may need to turn on:

FERS basic retirement benefit (also known as FERS pension, FERS annuity, government pension, the “new” system etc.).  You will need to complete a Standard Form 3107, Application for Immediate Retirement (this application will also serve as the application for the FERS supplement if you are entitled to it).

CSRS retirement (also known as CSRS annuity, CSRS pension, government pension, the “old system”). You will need to complete a Standard Form 2801, Application for Immediate Retirement under CSRS. Most agencies recommend this form be completed and turned in (paper forms only) at least 30 days...

How Divorce or a Job Change Could Derail Your Financial Plan

As federal employees close in on retirement, I often get some last minute questions, the answers to which can have a big impact on your post-career life. Here are a few that are at the top of the list:

I was divorced during my federal career.  How much of my retirement will my former spouse be entitled to?

Surprisingly, many people underestimate the importance of this issue. The answer to the question is found in your divorce decree or court order. Divorce papers will spell out the specific benefit payable to the former spouse. If the decree is “silent” and does not mention CSRS, FERS, TSP, FEGLI or any of your other federal benefits (sometimes, even the lump sum annual leave payment be divided in a divorce settlement), then you can be pretty sure that your former spouse is not entitled to any of your retirement or other federal benefits. If there is a mention of your federal benefits, then be sure that you understand how the benefit will be divided. A common misunderstanding is failing to distinguish between the retirement benefit under CSRS or FERS and the CSRS or FERS survivor’s benefit. Those are two separate benefits. One...