What You Don’t Know

By Tammy Flanagan

February 27, 2009

One thing I can say about conducting retirement planning seminars is that I have both job security and a lot of job satisfaction. I think my job will be safe as long as retirement processing is not fully automated, because the current manual system leaves plenty of room for discrepancies and misunderstandings. As long as Congress keeps changing the rules on retirement benefits, there will be a need for someone like me to explain how these various rules are applied.

On the satisfaction front, it's great to be able to provide a piece of information that makes a difference to an employee's future. In my case, this happens fairly often. Here are a few examples from the past few weeks where something I've been able to clarify or correct has been able to make a difference in someone's retirement plans.

Spousal Survivor Benefits

If I had a nickel for everyone who has considered -- and then rejected -- the idea of buying life insurance instead of choosing the federal spousal survivor benefit, I might be on a beach in Bali right now. I'm not saying it should never be done. That's a personal choice. What I'm saying is that there are a lot of people who haven't considered what they give up and what they gain by providing their spouse with an annuity. Actually, it should be the spouse who truly understands this decision, since he or she ultimately is the one who will be affected by a poor choice.

Here are a few things to consider:

Continuing Health Insurance

I've encountered a series of misunderstandings about the rules regarding continuing Federal Employees Health Benefits Program coverage into retirement. Here are a few rumors I've had to shoot down:

Leaving Early Under FERS

Many people seem to think you have to be 62 or older to be eligible to retire under FERS. The fact is, if you will have 30 years of service by the time you reach the FERS minimum retirement age (55-57, depending on your year of birth), you can retire. You will be eligible for an unreduced basic retirement benefit (about 30 percent of your high-three average salary -- or more, depending on how much service you have beyond 30 years). And you'll be eligible for a retirement supplement that will substitute for Social Security until you turn 62, which will be computed using all of your civilian service covered under FERS.

You'll also be entitled to make monthly withdrawals (or purchase an annuity) from your Thrift Savings Plan without incurring a 10 percent early withdrawal tax penalty as long as you leave in the year you turn 55 or later.

Keep in mind, however, that other eligibility rules apply to people who do not have 30 years of service, and some people will not be able to make ends meet on the retirement benefit they will be eligible to receive even with 30 years of service.

Finding Answers

Can you believe I got through a whole column this week without mentioning Medicare? There are some myths about that subject, too, but I thought I'd give you a break, since I've focused a lot on Medicare in the past few months.

By the way, if you've sent me an e-mail recently (or not so recently), please be patient. I want to answer your questions, but some of them take some time. With the seminar season heating up, my time is more limited these days.

In the meantime, make use of the resources available at your agency and on the Internet. The answers are out there. You just have to find them.

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.

By Tammy Flanagan

February 27, 2009