Weekend Reading on Your Federal Benefits 31-18.jpg

(for the week of July 28th – August 3rd)

You’re too busy during the week to keep up on all the news around your employee benefits and pay. My weekly summary of the most interesting and relevant news stories could help you and includes my comments and insights.

By the way, if you’ve read something about your employee benefits that you think is important or interesting, share it. And, let me know about news sources that you follow. Have a great weekend.

George Ray
Federal Benefits Online

In this week’s benefits news for Feds, we’re focused on retirement. You probably know that retirees are very protective of their retirement savings, some will have more than enough to spend, but many aren’t so sure and they’ll live cautiously during retirement. And since we’re at it, how about discussing the five biggest retirement decisions that you’ll have to make. Let’s get started.

Note: You may have noticed that last week there was no weekend reading. This was because I really needed to take a few well-deserved (at least I thought so) leave days. I hope you enjoyed your summer weekend just the same (maybe even more), but we’re back at it this weekend.

Retirees at All Wealth Levels Are Protective of Assets

From Fedweek.com

The Employee Benefit Research Institute (EBRI) conducted a study to look at how retirees use their assets in retirement. They divided retirees into three levels based on their assets (minus their house). The levels were 1.) less than $200,000 in assets 2.) $200,000 to $500,000 in assets, and 3.) more than $500,000 in retirement assets. Groups at each level were cautious about spending down their assets. The bottom group spent down about 25% of their assets after 18 years. The top group spent down only 12% of their retirement funds after 20 years.

The report mentions three reasons for this. First are the uncertainties. Retirees don’t know how long they're going to be around or if they’ll incur any catastrophic medical expenses. That makes sense. Secondly, they may want to pass some of the assets to their heirs. Many people do want to try to give something to their kids after they’re gone. Thirdly, according to the report, is a lack of financial sophistication. Retirees just aren’t sure how much to spend or what is a safe rate for drawing down their assets. So, they err on the side of caution. Some folks, who have been trained to be savers throughout their lives, have a difficult time when it comes time to actually spend their hard-earned retirement dollars. But, . . .

Here’s the Good News

From govexec.com

I’ve talked with thousands of Federal employees over many years about their benefits and I can relate to some very common issues that Tammy Flanagan talks about in her article this week for Government Executive.

As mentioned above, many employees are afraid to retire because they just don’t know if they’re going to have enough money to carry them through to ‘the end’. Of course, no one knows where ‘the end’ is until we get there, which makes this fear understandable. But the package of benefits available to Federal retirees will leave most in a relatively comfortable financial situation, compared to most private sector retirees; however, you must take advantage of these benefits early and throughout your career.

As you near retirement, a key issue revolves around your retirement budget. Will your budget change after retirement? The answer most likely is yes. In fact, you may find that you’ll have extra money in your budget because we tend to forget that we no longer are contributing to the TSP, the pension plan, or paying Social Security taxes and Medicare wage taxes. But other expenses may increase, so it’s important to begin thinking about your budget and how it will change well in advance of your retirement. And, you just might also want to begin thinking about . . .

The Five Biggest Retirement Decisions Feds Have to Make

From Fedsmith.com

In Tammy Flanagan’s article above, she wants to give us some motherly advice. Tammy says, “Don’t worry. Everything’s going to be okay.”

I think Alexis Hongamen is playing the fatherly role. He’s saying ‘You’re Mom is probably right, you’re going to be okay, but there are five big decisions you’ll have to make, so pay attention. You’re going to need to decide’:

When to retire
When to start receiving your Social Security
When to start drawing money out of your TSP (and how much)
When (and should) you sign up for Medicare, and
Should you stay in your home, downsize, or move somewhere with a lower cost of living?

When it comes to your retirement date, Alexis begins with the FERS rules on Minimum Retirement Age (MRA), but if you look around your office you will probably see many of your associates who have already reached their retirement age and date but are still working. Many continue to be fulfilled by their work, but others may simply not be ready psychologically or financially.

The question of when to start taking money from your TSP is also a tough one because there are so many variables involved. What kind of return will you continue to get on your savings after you retire? How much risk should you take? How much income can you draw out without depleting your account too soon? How soon is too soon anyway? Well, it’s not too soon to say . . .

See you next week. Thanks!

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