4 Things to Know Before FERS Retirement | Financial Advisor | Christy Capital

Описание: Today we’re going over 4 things to know before you retire.

Number one is what to do with TSP. Of course you can leave your money in the TSP. But there are a handful of reasons why you may want to move the money out into an IRA. The main things are control and flexibility.

When we talk to people, we’re generally putting together a financial blueprint where we show what your retirement can look like in the future.

One scenario is you and your spouse living into your 90’s to see if you have enough money. In this scenario, we’re leaving everything traditional where you can see number one, if you have enough money and number two, what your account potentially could look like in 20 years. With traditional money, what does that look like later when all that traditional money grows.

We’ll also do a scenario where we shift money from traditional to Roth slowly over time. As we’re going over the two scenarios, you’ll see the difference it can make.

There are no in plan Roth conversions in the TSP. Whatever Roth you’ve accumulated while working, once you’re retired, that’s the only Roth you can have in the TSP. You can’t go in and take $50,000 from Traditional TSP and move it over to Roth every year. That’s not allowed. But we can show you that potentially there are benefits of doing that.

The second thing to think about is your FEGLI life insurance.

Basic is your salary rounded up to the nearest thousand with 2000 added on to it. It’s the same price your entire career and it only changes at retirement.

What changes is option B. You can get up to five times your salary and every five years it goes up in price. The FEGLI life insurance starts to get expensive around 50 years old and by 60 years old, it can be really expensive. At retirement, you have to make a selection what you want to do with it.

One of the scenarios we look at is the federal employee dying to see if the spouse will have enough money into their 90s. If you need life insurance, it doesn’t necessarily mean that FEGLI is the best way to cover it for you. There is term life insurance and other types of permanent insurance outside of FEGLI. The newer type of permanent life insurance is called indexed universal life insurance. It’s a death benefit that does not run out.

If you need coverage, you may want to get some quotes and see if an outside policy will provide better for you than what FEGLI can do, because FEGLI gets more expensive every five years, at least option B does. So at retirement what are you going to do with FEGLI? Do you need life insurance? You need to have this figured out.

The next thing to figure out is the enhanced annuity. Are you going to be retiring around age 62? At 62, if you have 20 years or more of service, you get the enhanced annuity which instead of taking your high 3×1% you take your high 3×1.1% times your number of years of service. That’s a 10% bonus if you have at least 20 years of service at age 62. So if you’re thinking of retiring at age 61, you may want to look at this.

The fourth thing to think about is your survivor benefit election. You can pick 0% and leave nothing, the 25% option and leave a quarter of your pension or you can leave 50% of your pension when you die.

The 25% option will cost you 5% of your pension and the 50% option will cost you 10% of your pension annually. If you pick the no survivor benefit, keep in mind that it does tie into the federal healthcare. If you want your spouse to continue federal health care after your death, you can’t pick the no survivor benefit option unless your spouse is also a federal employee or retiree, then they can get their own coverage. If your spouse is not a federal worker, then sometimes the 0% survivor benefit option is not an option.

We can do a scenario leaving a 25% survivor benefit to see if your spouse has enough. You may have other assets that are high enough that the 25% covers everything. If the financial blueprint shows that even with using the 50% survivor benefit, your spouse still doesn't have enough, then this is where the life insurance can step in to fill the gap. Just like with FEGLI, an outside policy can fill that gap if your health is good enough to qualify.

The information provided is not intended as tax or legal advice. Figures shown are for illustrative purposes only furthermore, the information nor the illustrations provided may not be used to avoid any tax penalties. This content represents the general views of Christy Capital Management and should not be regarded as personalized investment advice Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice. Retirement Benefits Institute, Inc., and a portion of its contents merged with Christy Capital Management Inc. Brandon Christy, former President of Retirement Benefits Institute, is also the current President of Christy Capital Management, Inc, a registered investment adviser.