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

Why Your Retirement Income May Depend on Where You Live

There are lots of different taxes in this country: federal income, state income, capital gains, sales and property, to name a few. When it comes to planning for retirement, it’s important not to forget about taxes.

In previous columns on taxes, I’ve focused mostly on federal income tax, but today, I want to discuss state tax planning.

When it comes to taxes, I always consult my favorite CPA, Bob Leins of Turner, Leins, and Gold, for advice. Here’s what he has to say about state income tax planning for retirement:

The first step is to find out if you will have to pay state income taxes on your Civil Service Retirement System or Federal Employees Retirement System benefit, Social Security income, and Thrift Savings Plan distributions. The following states don’t have a state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, New Hampshire and Tennessee. But the latter two states tax dividends and income from investments. Some other states exempt some retirement income from taxation.

The TSP and Social Security Administration will not withhold any state income tax. As a result, generally your source for state income tax withholding will be the Office of...

3 Things You May Not Understand About the TSP

In last week’s column, we got into some Thrift Savings Plan issues that were fairly complicated, such as whether or not to take a lump-sum payment and use it to eliminate debt. This week, the TSP is the focus again, but I’ll keep things a little more simple.

Here are the top three things that employees sometimes misunderstand when it comes to their TSP accounts.

How Does Matching Work?

One of the key features of the Federal Employees Retirement System is that employees receive agency automatic and matching funds in their TSP accounts.

Here’s how it works: Your agency automatically contributes 1 percent of your basic pay (including locality pay) to your TSP account. It also starts matching your own contributions as soon as you start making them. So if you contribute 1 percent of your basic biweekly salary, you will receive 1 percent in matching contributions, along with the automatic 1 percent agency contribution.

If you contribute up to 3 percent of your basic pay, the matching is dollar for dollar. If you contribute 4 or 5 percent of your basic pay, the matching on the additional contributions is fifty cents per dollar of your contribution...

Plan Ahead and Reap the Benefits You’ve Earned

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...

Thinking About Getting Out of Government? Here’s What You Need to Know

Lately, it seems like I’ve been conducting seminars for as many mid-career employees as for those nearing retirement. It’s great to see younger workers planning for the future.

One difference with midcareer employees is that many of them aren’t planning to complete their careers as federal employees. I always try to point out the value of working long enough to retire and be eligible for lifetime health benefits and the other advantages enjoyed by federal retirees. Still, some employees are going to leave government service before they are eligible for immediate retirement.

If you’re in this group, there are some things you should know before you leave.

Deferred Benefits

Under the Federal Employees Retirement System, even if you leave early, you may be entitled to a deferred retirement benefit. To qualify, you must meet the following requirements:

  • Have at least five years of civilian federal service before you resign.
  • Do not elect to receive a refund of your FERS retirement contributions.
  • File for your future retirement benefit as early as your minimum retirement age (55-57, depending on your year of birth) if you had at least 10 years of prior service. The benefit will be reduced...

4 Things You Need to Know About Retirement Rules

On many occasions, someone tells me that they’re worried that there is something about their retirement that they may not realize that they don’t know. Often, this is why they attend a retirement seminar or end up hiring a professional to provide advice.

There are good reasons for federal employees to be concerned about gaps in knowledge about their retirement benefits. Let’s look at a few.

The rules have changed many times over the years.

Civilian employees have had retirement benefits for almost 100 years. In that time, the rules that apply to it have been overhauled and amended many times. Here’s just one example: differences between the newer Federal Employees Retirement System and the old Civil Service Retirement System. Under FERS, civilian service that was not covered by retirement deductions is not creditable towards eligibility or computation of the basic retirement benefit if it was performed after 1988. This includes most temporary service, such as seasonal work for the National Park Service. However, if such service was performed before 1989, it can become creditable by making a contribution to FERS (with interest) prior to retirement.

Under CSRS, this type of service counts towards eligibility and...