THE BALANCING ACT OF RETIREMENT PLANNING TAMMY FLANAGAN RETIREMENT BENEFITS SPECIALIST MAXIMIZING YOUR FEDERAL RETIREMENT BENEFITS

TAMMY FLANAGAN – FEDERAL BENEFITS SPECIALIST PRESENTER Webinars and Seminars retirement.com/webinar/ Pre-Retirement Mid-Career New Employee Radio Co-Host: For Your Benefit WRITER Feature Columnist Webinar Presenter Weekly Column  “Retirement Planning” Retirement Readiness Webinar on June 16 th ! Send me an for the link!

Salary FERS/CSRS Social Security TSP

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COMMON SENSE PLANNING FOR RETIREMENT Income Replacement Expenses Tax Planning Future What-If Scenarios Retirement

THESE EXPENSES MAY GO DOWN WHEN YOU RETIRE:  Kids (food, clothing, schooling, weddings)  Mortgage  Professional Clothing  Commuting Costs  Hired Help

THESE EXPENSES MAY GO UP WHEN YOU RETIRE:  Kids (unemployment, emergency, grandkids)  Retirement Relocation  “Resort” Clothing  Travel Costs  Hired Help  Healthcare

CSRS Deductions Not deducted from retirement: Salary $65,000 Salary $100,000 Salary $150,000 CSRS7.5% (LEO/CSRS) 7% (CSRS) $4,875 or $4,550 $7,500 or $7,000 $11,250 or $10,500 Medicare1.45%$942.50$1,450$2,175 TSPUp to: $18,000 Plus: $6,000 (Catch-Up for 50+) $9,750$15,000$22,500 Total (15% TSP and LEO)$15,567.50$23,950$35,925 You are living on ____% of your gross income 76.1% $49, % $76, % $114,075

FERS Deductions Not deducted from retirement: Salary $65,000 Salary $100,000 Salary $150,000 FERS1.3% (LEO/FERS).8% (FERS) $845 or $520 $1,300 or $800 $1,950 or $1,200 FICA6.2% (up to $118,500) $4,030$6,200$7,347 Medicare1.45%$942.50$1,450$2,175 TSPUp to: $18,000 Plus: $6,000 (Catch-Up for 50+) $9,750$15,000$22,500 Total (15% TSP and LEO)$15,567.50$23,950$33,972 You are living on ____% of your gross income 76.1% $49, % $76, % $116,028

RETIREMENT INCOME Thrift Savings PlanSocial Security CSRS or FERS Retirement Benefit

FERS RETIREMENT BENEFIT FERS Law Enforcement High-Three Average SalaryLength of Service = 20 years: 34% 25 years: 39% 30 years: 44%

FERS RETIREMENT BENEFIT FERS Non-Law Enforcement High-Three Average SalaryLength of Service = 20 years: 20% - 22% 25 years: 25% – 27.5% 30 years: 30% - 33%

CSRS RETIREMENT BENEFIT CSRS Non-Law Enforcement High-Three Average SalaryLength of Service = 20 years: 36.25% 25 years: 46.25% 30 years: 56.25% 40 years: 76.25%

REDUCTIONS TO CSRS/FERS RETIREMENT Survivor 10% reduction 5% reduction Unpaid Deposits Temporary Service Refunded Service Military Service Deposit Work Schedule Part-Time Intermittent WAE

FERS SUPPLEMENT (CSRS: N/A) Retirement Social Security Approximately $40 - $50 / month for every year under FERS

Social Security Retirement % replacement Pre- Retirement Wages SOCIAL SECURITY

SOCIAL SECURITY: REDUCTIONS AND DELAYED CREDITS Age 62 $1,500* Reduced Benefit 70% - 80% depending on year of birth Full Retirement Age $2,000* 100% age 65 – 67 depending on year of birth Age 70 $2,640* Increase 8% / year up to 132% of full benefit *Benefit amount between age 62 and age 70 could result in more than $1,000 / month difference!

SOCIAL SECURITY CLAIMING STRATEGIES Live Long Save More Other Resources Work Longer Delay Health Issues Retire Early Eligible Children Sooner Married File and Suspend Restrict Application Strategy

Retirement Earnings Test Exempt Amounts:2015 Under full retirement age (62 – FRA) NOTE: One dollar in benefits will be withheld for every $2 in earnings above the limit. $15,720/yr. ($1,310/mo.) The year an individual reaches full retirement age (65 – 67) $41,880/yr. ($3,490/mo.) NOTE: Applies only to earnings for months prior to attaining full retirement age. One dollar in benefits will be withheld for every $3 in earnings above the limit. There is no limit on earnings beginning the month an individual attains full retirement age. NOTE: Applies only to earnings for months prior to attaining full retirement age. One dollar in benefits will be withheld for every $3 in earnings above the limit. There is no limit on earnings beginning the month an individual attains full retirement age.

May I suggest that you consider this for a future topic. Some federal employees (I am in a law enforcement position) have the opportunity to retire at a young age. This would allow us to take our annuity and benefits, collect the supplement without concern for the earnings penalty and start a second career. Retiring early allows ample time to find and start a second career and even eventually retire in that career. It could provide a time of learning, renewal, and recharging. Clearly there are financial decisions and life style decisions that go into that process, but I believe it is an interesting topic up for debate and comment. For my personal situation, I will find myself eligible to retire when I turn 50. It would seem to me that one is more marketable at 50 then at 57. The supplement would help make up any difference in salary (which I know there will be) from my current position to any new position and allow me almost 7 years in a new career to earn additional income before the supplement is earnings tested. Maybe a title like.... Second Careers. Are they Worth it? May I suggest that you consider this for a future topic. Some federal employees (I am in a law enforcement position) have the opportunity to retire at a young age. This would allow us to take our annuity and benefits, collect the supplement without concern for the earnings penalty and start a second career. Retiring early allows ample time to find and start a second career and even eventually retire in that career. It could provide a time of learning, renewal, and recharging. Clearly there are financial decisions and life style decisions that go into that process, but I believe it is an interesting topic up for debate and comment. For my personal situation, I will find myself eligible to retire when I turn 50. It would seem to me that one is more marketable at 50 then at 57. The supplement would help make up any difference in salary (which I know there will be) from my current position to any new position and allow me almost 7 years in a new career to earn additional income before the supplement is earnings tested. Maybe a title like.... Second Careers. Are they Worth it?

RETIRE AT AGE 50 / 25 YEARS LEO / HI-3 $100,000 Total Retirement: 62% replacement $39,000 + $15,000 + $ = $62, FERS LEO: 39% x $100,000 = $39,000 Supplement: $1,250 / month or $15,000 / year Social Security: Later TSP: $300,000 $ / month or $8, / year

RETIRE AT AGE 57 / 32 YEARS LEO / HI-3 $100,000 Total Retirement: 88% replacement $46,000 + $19,200 + $22,944 = $88,144 FERS LEO: 46% x $100,000 = $46,000 Supplement: $1,600 / month or $19,200 / year Social Security: Later TSP*: $640,000 $1,912 / month or $22,944 / year *Assumes TSP contribution of 15% of pay with 6% growth

SOCIAL SECURITY CLAIMING STRATEGIES Age 60 (widow) or 62 (retirement) - full retirement age Widow’s Benefit Higher of your own reduced or reduced spousal benefit Full Benefit Age Restrict application to 50% of spouse (or former spouse) Age 70 File for delayed credits

EXAMPLE: RESTRICTED APPLICATION Age 60 (widow) or 62 (retirement) -full retirement age $0… either still working or using other resources Full Benefit Age Restrict application to 50% of spouse (or former spouse) $1,500 Age 70 File for delayed credits $3,000

EXAMPLE: EARLY RETIREMENT / WIDOWED LATER 62 file for reduced benefit $1,800 Full Benefit Age Continue reduced benefit Later…Widowed – 100% of spouse $3,200

EXAMPLE: YOUNG WIDOW / DELAY YOUR BENEFIT Age 60 (widow) $1,800 Full Benefit Age Continue widow’s Age 70 Delayed Credits $3,200

Bonus : Don’t forget about taxes! NEXT SESSION: COMMON MISTAKES Understanding Risk Do you need an advisor? Withdrawal options for TSP