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Advice on how to prepare for life after government.
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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 ...

More Best Dates to Retire: Middle of the Month

Last week, I presented my annual Best Dates to Retire column and calendar, and generally described some of the best times to consider ending your federal career. They’re often at the end of a month (or the first few days following the end of a month).

Sometimes, though, the end of the month may not provide as much of an advantage as the middle of the month for those under the Federal Employees Retirement System, or even those under the Civil Service Retirement System who are retiring with less than 25 years of service. This is because for most FERS employees and some CSRS employees, one month of retired pay is worth less than two weeks of salary.

Let’s look at this from the FERS perspective. To compute your FERS retirement benefit, multiply your high-three average salary (the highest average basic pay -- including locality pay -- over any three years of your career) by 1 percent (or 1.1 percent if you’re retiring at age 62 or later with at least 20 years of service). Even a 40-year career under FERS is only going to be worth 40 percent of your high-three average salary.

Suppose your salary is ...

Best Dates to Retire 2015

Download the Calendar: Best Dates to Retire 2015

Are you financially ready to retire? Consider all your potential sources of retirement income: Will they provide enough money to cover your expenses for the next 20 to 30 years or more?

Are you mentally prepared? Are you looking forward to your life after retirement, rather than dreading the loss of your identity?

If you can say yes to being both financially and psychologically ready for retirement sometime next year, then it’s time to begin assessing your options, which are highlighted in the new Best Dates to Retire 2015 calendar. (And if you’re really ready to go and are thinking about retiring this year, check out the Best Dates to Retire 2014 column from last year.)

Whether you are planning to retire now or in the future, there are some general principles you should take into account. For example, you should consider retiring at the end of the leave year to accumulate the maximum leave accrual. That way, you’ll get a generous lump sum annual leave payout. But don’t be in too big a hurry: You’ll accumulate additional retirement benefits if you postpone leaving for six months ...