Plan Ahead and Reap the Benefits You’ve Earned

Get started early, and don’t just follow the crowd.

This week, I had the pleasure and honor of addressing the annual leadership training conference of Women in Federal Law Enforcement in Houston. I’m always inspired by the bravery and integrity of these officers as I hear stories of their challenging and sometimes dangerous careers. Besides leadership and other work-related training sessions, there were awards ceremonies honoring courage, heroism and outstanding service.

All of these women are very proud of the work that they do and are grateful to the women who entered the law enforcement field before them. The event highlighted for me why it’s so important for these and other federal employees to receive their earned retirement benefits after completing dedicated and productive careers in public service.

What I love most about presenting to the WIFLE audience is the fact that understanding retirement benefits and planning for the future is just as interesting and important to the Drug Enforcement Agency agent who has less than five years of federal service as it is to the Customs and Border Protection officer who is at midcareer. And of course, it’s definitely on the minds of the agents, analysts, and officers who are ready to retire within the next three to five years.

The length of a federal law enforcement career is strictly defined: There are a finite number of years before an officer faces mandatory retirement at age 57. So if officers want to retire in their 50s and not immediately embark on a second career, they need to plan ahead.

Younger workers (and not just those in law enforcement) need to know that starting the planning process early is critical. Not thinking ahead or making mistakes early in your career can be difficult to address when you’re five years away from retirement.

The WIFLE audience in Houston was made up almost exclusively of people covered under the Federal Employees Retirement System. That means they need to understand how Social Security, the FERS basic retirement benefit and their Thrift Savings Plan accounts will provide the income needed to replace their wages while employed.

Some of these women began their careers out of high school, first serving in the military and then embarking on a career in civilian federal service. That means they could meet their service requirement before they are old enough for retirement, but I reminded them of how a longer career would allow more time to save and for their savings to grow. In addition, accumulating more service allows for a more generous FERS retirement benefit.

At the WIFLE conference, I learned the importance of not following the crowd when it comes to planning your retirement. Members of the audience noted that they knew people who had already retired who had taken lump-sum payments from their TSP accounts to pay off debt, such as eliminating a mortgage. This doesn’t mean it’s the best decision.

In fact, my colleague Bob Leins of the National Institute of Transition Planning told me that it’s never a good idea to withdraw the amount of money in a lump sum from your TSP that would be required to pay off a substantial mortgage balance. First of all, the TSP will withhold 20 percent for federal tax pre-payment. But that may not be enough to meet your full tax obligation. In April following the year you received your distribution, you may be shocked to find out you owe an additional 5 percent to 15 percent federal tax on the amount of your withdrawal.

Bob suggested retirees use monthly payments from the TSP to continue to make mortgage payments as they did during their careers. To learn more about rebalancing and allocating your withdrawals from different types of investments, you may need to consult a financial adviser.

That brings me to another piece of advice I gave attendees: Choose an adviser very carefully. According to the Securities and Exchange Commission, undisclosed conflicts, fees and overcharges have become a recurring theme in commission cases involving investment advisers. Earlier this week, the SEC filed charges against four former Atlanta-area brokers for fraudulently inducing federal employees to roll over holdings from their TSP accounts into higher-fee, variable annuity products.

All in all, this week, for me and the other participants in the WIFLE conference, was a time of learning and being inspired to do better. I realized that all of us support each other, whether it is bringing justice to our communities or simply becoming better-informed federal employees who are able to plan for a secure financial future.

Photo: 401kcalculator.org