Now that spring is in the air and temperatures are warming up, many of us are turning to activities such as gardening and “do-it-yourself” improvements to spruce up our yards and homes. Not surprisingly, these activities have grown into the development of a completely new living space for some of us. If you are needing extra funds to accomplish your lawn and home improvements, you may be considering taking out a loan to finance these projects. Last fall we offered you some basic information on the types and purposes of TSP loans. Today, we would like to take a deeper dive into taking a residential loan from your TSP.
When it comes to warnings, timing is everything. One second before stubbing your toe on an unseen object, hearing the words, “Watch out,” are helpful, welcome, and save considerable pain. The same warning shouted a second too late is entirely unhelpful, unwelcome, and only adds insult to injury. Verbalizing certain sayings can indicate that things are not going as well as they could have. “Oops” and “my mistake” are two of the most common of these expressions, but there are many more. For the federal employee, there are three expressions that you don’t want to find yourself saying. Let’s look at what these are, why they are bad, and how to avoid them.
FERS employees are permitted to add unused-sick-leave balance to credible years of service. This is important because determining years of service is one of the three components used to calculate a federal pension. In short, additional days of sick leave can increase total credible service and thereby increase a FERS annuity. When considering federal retirement, it is crucial to choose a retire date that meets all the needs of the individual—including maximizing benefits. Choosing a retire date that allows for the most sick-leave accrual can add real dollars to the FERS pension.
Federal retirees can either leave funds in the Thrift Savings Plan (TSP) or move the money elsewhere. After contributing to the TSP for many years and having familiarity with the platform, some retirees may feel comfortable leaving the funds in the TSP. After all, the costs of management inside the TSP are low. Many federal employees may think that since things have been working well for them for all these years, there’s no need to make a change. However, is this the wisest choice? While costs inside of the TSP are low, the underlying assumption that there will be no changes in the future is unfortunately not correct.
Preparing for federal retirement can seem like an impossibility when factoring in the vast array of plans to consider, paperwork to complete, and decisions to make. Those with careers in public service may be worried about the financial aspects of retirement. Some feel hesitant about leaving a job they love and losing the camaraderie of their co-workers. Others may wonder about what comes next. These feelings are a normal part of the retirement process but shouldn’t be used as an excuse to put off developing strategies for the future. The decisions one makes—or doesn’t—directly impacts the future. Doing nothing and “kicking the can down the road” rarely eliminates a problem but rather gives the issue time to multiply. In light of this warning, here is one more retirement question to contemplate.
The past year was a whirlwind. It’s hard to know if any area of life was left untouched by the COVID-19 pandemic. The obvious adjustments for federal employees revolved around adapting to new hours, working from home, and learning innovative ways of completing the tasks so vital to the functioning of our nation. Aside from work life, many felt the impact on a personal level—in tragic ways for some. To anyone who lost a significant other, loved one, or friend in the past year, we at Retirement Benefits Institute would like to offer our sincerest condolences. Mourning and reconciling the loss of a loved one is not done in a day, and healing takes time. Recognizing that for federal employees the loss of a loved one can be overwhelming in a number of ways, Retirement Benefits Institute created the following blog as a guide to help those dealing with this loss understand how a loved one’s death can specifically impact federal retirement.
It’s been said that the key to getting the right answers is simply asking the right questions. Undoubtedly, that pearl of wisdom rings true for federal employees seeking the best strategy for retirement; however, knowing the correct retirement questions to ask is imperative. Below are two simple but immensely useful questions for anyone considering stepping out on the path toward retirement.
The Thrift Savings Plan (TSP) is a low-cost platform where federal employees can leave their funds after retirement. There are several advantages to leaving funds in the TSP after one retires; however, the money cannot remain in the account untouched forever. One question Retirement Benefit Institute’s trainers ask is, “Did you know that participants have to take Required Minimum Distributions (RMDs) from their TSP accounts beginning April 1st of the year following the year they reach age 72 and every year after?” Often federal employees are unaware of RMDs or fail to understand their true significance and tax implications.
If you qualify for Social Security and will be receiving a retirement pension from employment in which you did not withhold Social Security taxes, your benefit may be decreased. The Windfall Elimination Provision (WEP) is a reduction to Social Security benefits due to one also receiving a pension for which no Social Security taxes were paid. For federal employees, this could apply to CSRS, CSRS Offset, and FERS transfers. In all three instances, the retiree’s pension is based on all or at least some years in which Social Security taxes were not withheld. For 2021, the maximum WEP reduction at full retirement age (FRA) is $498, up from $480 in 2020.
If you’re worried about being able to retire, you’re not alone. Millions of Americans are concerned about whether their retirement savings will be enough to keep them comfortable. In fact, many Americans fear running out of money more than they fear death.i If you’re evaluating the decision to retire, there are a few important steps you can take now to determine whether you are on track financially. You can start with a few simple calculations.