Post on 21-Dec-2015
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TAMMY FLANAGAN – FEDERAL BENEFITS SPECIALIST
P R E S E N T E R
Webinars and Seminars
www.nitpinc.com
http://www.fers-route-to-retirement.com/webinar
/ • Pre-Retirement
• Mid-Career
• New Employee
Radio Co-Host: For Your Benefit
www.federalnewsradio.com
W R I T E R
www.narfe.orgFeature Columnist
Webinar Presenter
www.govexec.com
Weekly Column “Retirement Planning”
Retirement Readiness Webinar on June 16th!Send me an email for the link!
Mistake #1
Avoiding risk
Playing it too safe
Mistake #2Believing
others who know less than you
Who do you trust?
Mistake #3Focus only
on accumulation and not
distributio
n
No plan, but cash
out anyway
https://www.youtube.com/user/TSP4gov
MISTAKE #1: AVOIDING RISK AND PLAYING IT TOO SAFE
• When do you want to retire?
• How much income will you have from other sources?
• How much will you depend on the TSP?
More risk and
volatility, higher
potential for reward
Less time to invest and more money needed to replace income
More time to invest and less money needed to replace income
RISK
Market Risk: C, S, I Funds
Interest Rate Risk: F Fund
Inflation Risk: G Fund
Longevity Risk: Withdrawal Choices
Equities:
C, S, and I
funds
are essenti
al
For a diversified retirement portfolio
(mix of investments)
The key to investing for and
during retirement isn’t
to avoid risk, but to diversify it.
Due to rising life
expectancies, retirement can last 30+ years
https://www.youtube.com/user/TSP4gov
https://www.youtube.com/user/TSP4gov
IS THIS A DO-IT-YOURSELF PROJECT?OR
THIS IS A DO-IT-YOURSELF PROJECT!
MISTAKE #2: WHO CAN WE TRUST TO HELP US?
How much do you know
about CSRS, FERS and TSP?
How will I pay you for your
services?
What is your experience?• CFP, CPA, RIA • Fiduciary
What services do you offer?
Can you provide
references?
Where is my money
invested?
How’s your record?• CFP Board• FINRA• SEC
How often will we interact? Do I like you?
Time to move money to G
Fund (sell high)
Time to move money from the
G Fund (buy high)
That’s great…I’ll keep doing what
I’m doing
Time to rebalance
The C Fund earned 11.89%
return over the last 12
months
Time to move money to G
Fund (sell high)
Time to move money from the
G Fund (buy high)
That’s great…I’ll keep doing what I’m doing
Time to rebalance
The C Fund earned 11.89%
return over the last 12
months
Month
L Income L 2020 L
2030L 2040
L 2050
G Fund
F Fund
C Fund
S Fund I Fund
2014Jun 0.58% 1.19% 1.52% 1.77% 1.96% 0.19% 0.14% 2.07% 4.45% 0.99%
Jul (0.26%) (0.97%) (1.34%) (1.63%) (1.86%) 0.19%(0.19%
)(1.37%
)(4.38%
)(1.95%)
Aug 0.84% 1.64% 2.07% 2.40% 2.61% 0.20% 1.12% 4.01% 4.98% (0.14%)
Sep (0.42%) (1.36%) (1.84%) (2.18%) (2.50%) 0.18%(0.58%
)(1.40%
)(5.10%
)(3.82%)
Oct 0.61% 1.09% 1.36% 1.58% 1.70% 0.20% 0.96% 2.45% 4.11% (0.63%)
Nov 0.55% 1.04% 1.27% 1.42% 1.55% 0.17% 0.74% 2.70% 1.33% 0.51%
Dec (0.04%) (0.50%) (0.67%) (0.76%) (0.94%) 0.18% 0.21%(0.24%
)0.99% (4.13%)
2015Jan (0.08%) (0.58%) (0.83%) (1.02%) (1.18%) 0.18% 2.13%
(2.99%)
(1.85%)
1.19%
Feb 1.19% 2.95% 3.80% 4.39% 4.99% 0.13%(0.91%
)5.75% 6.05% 5.97%
Mar (0.07%) (0.44%) (0.58%) (0.64%) (0.76%) 0.16% 0.47%(1.57%
)1.24% (1.43%)
Apr 0.37% 0.81% 0.95% 1.00% 1.16% 0.15%(0.28%
)0.96%
(1.50%)
4.11%
May 0.30% 0.50% 0.62% 0.72% 0.78% 0.17%(0.26%
)1.29% 1.84% (0.42%)
YTD 1.72% 3.25% 3.96% 4.43% 4.97% 0.79% 1.13% 3.26% 5.71% 9.59%
Last 12 mo
3.61% 5.41% 6.38% 7.08% 7.51% 2.11% 3.57% 11.89%
12.07%
(0.21%)
Move everything to the G Fund
Evaluate my retirement
income from all sources
Consider my cash flow needs
Call that guy from the free lunch seminar
I’m planning to retire
next year, so I will
Move everything to the G Fund
Evaluate my retirement
income from all sources
Consider my cash flow
needs
Call that guy from the free lunch seminar
I’m planning to retire
next year, so I will
MISTAKE #3: FOCUS ONLY ON ACCUMULATION
How much of my income will come from…
• FERS/CSRS?• Social Security?• Other sources?
… at my • 1st Eligibility for CSRS or FERS?• 5 years later?• Are there any other milestones?
HOW MUCH DO I NEED FROM TSP TO REACH MY GOAL?
WHAT DO YOU NEED THE TSP TO DO FOR YOU?
Create Income
• Monthly Payment
• Annuity
As Needed
• Partial Withdrawal
• Transfer to IRA
A Little of Both
• Mixed Withdrawal• Monthly
Payments
• Transfer to IRA
• Annuity
THRIFT SAVINGS PLAN
TSP
Cash or Transfer to
IRA
Monthly Payments
Life Expectancy
Specific Amount
Annuity
EXAMPLE OF PARTIAL WITHDRAWAL
$300,000 TSP
Withdraw $100,000
Transfer $80,000 to
IRA
Cash out $20,000 to
you
$200,000 remains in
TSP
EXAMPLE OF FULL WITHDRAWAL
$300,000 TSP$100,000 keep in L Income
Fund / withdraw $2,000 monthly payment
Transfer $1,000 to
IRA
Transfer $1,000 to
bank
$200,000 transfer to
IRA
May change amount
REQUEST FOR PARTIAL WITHDRAWAL TSP-77
23
REQUEST FOR FULL WITHDRAWAL TSP-70
24
MONTHLY PAYMENTS
Age 50
• Retire• TSP: $500,000• Investment Return: 6%
Age 62
• Use $500,000• Begin to withdraw
$3,000 / month
Age 90
• Balance: $0
MONTHLY PAYMENTS: LIFE EXPECTANCY
Age 50
• Retire• TSP: $500,000• Investment Return: 6%
Age 62
• Use $500,000• Begin to withdraw $1,833 /
month ($22,000 / year)
Age 90
• $4,000 /month
• $48,000 / year
• Balance: $543,203
MONTHLY PAYMENTS: ANNUITY
Age 50
• Retire• TSP: $500,000• Investment Return: 6%
Age 62
• Use $500,000• Payments: $1,476 / month• $17,712 / year• Cash Refund / Increasing
Payments
Age 90
• $3,378 / month
• $40,536 / year
• Balance to beneficiary: $0
6% Rate of Return
ONE MINUTE VIDEO
BONUS MISTAKE: FORGETTING ABOUT TAXES!
Taxable Accounts: usually 15% capital gains• Investments (stocks, bonds, real estate)
Tax-deferred Accounts: ordinary income tax• TSP, IRA’s, 401(k)
Most interest taxed at ordinary income tax• CD’s, savings accounts, etc.
Pensions: ordinary income tax• CSRS and FERS (small portion tax-free)
Social Security: It depends
Roth IRAs and Roth TSP: TAX FREE!
ORDINARY INCOME TAX: 2015 FEDERAL TAX BRACKETS
Rate Single Married (Joint Return)
10% $0 - $9,225 $0 - $18,450
15% $9,225 – $37,450 $18,450 - $74,900
25% $37,450 - $90,750 $74,900 - $151,200
28% $90,750 - $189,300
$151,200 - $230,450
33% $189,300 - $411,500
$230,450 - $411,500
35% $411,500 - $413,200
$411,500 - $464,850
39.6% $413,200+ $464,850+
Other IRS Publications:• Credit for the Elderly
or the Disabled• Pension and Annuity
Income• Contributions to
Individual Retirement Arrangements (IRAs)
• Distributions from Individual Retirement Arrangements (IRAs)
• General Rule for Pensions and Annuities
SOCIAL SECURITY MAY BE TAXABLE
SingleUnder $25,000
$25,000-$34,000Over $34,000
Tax-Free50%
taxable85%
taxable
Married
Under $32,000$32,000 - $44,000
Over $44,00
Tax-Free50%
taxable85%
taxable
Provisional Income: adjusted gross + tax-free interest + 50% of Social Security benefit
Kiplinger State by State Tax Guide/
Kiplinger State by State Tax Guide/
MARITAL STATUS
If you get married, get divorced, or become widowed as a retiree, you may need to change your:
Survivor benefit election for your retirement benefit.
Health insurance coverage.
Beneficiary designation forms for FEGLI, CSRS or FERS, and TSP.
Social Security benefits payable to your new spouse or from your new spouse.
MARITAL CHANGES: CSRS AND FERS
Add survivor benefits
Within 2 years of marriage
Pay back to when last benefit stopped (or retirement)
Marry
Election made at retirement is void
Divorce decree determines division of retirement and survivor benefits
Divorce
Elect to stop reduction for survivor benefit
U.S. Office of Personnel ManagementRetirement Operations CenterPost Office Box 45Boyers, PA 16017
Widow