Planning for Your FERS Retirement Jill Stetzer, CPLP Senior Human Resources Training Specialist Tom Turner Senior Human Resources Specialist U.S. District Court, U.S. Probation, & U.S. Pretrial Services Western District of Texas
Planning Your Retirement Federal Employees Retirement System (FERS) Determining Eligibility for Retirement How Annuities are Computed FERS Annuity Supplement Unused Annual Leave and Sick Leave Cost of Living Adjustments (COLA) Military Service Re-Deposits Social Security
Planning Your Retirement Thrift Savings Plan (TSP) Federal Employees Health Benefits Program (FEHB) Federal Employees Dental and Vision Insurance Program (FEDVIP) Federal Employees Group Life Insurance Program (FEGLI) Survivor Benefit Medicare Choosing a Retirement Date What s Next?
Your Retirement Plan FERS
Law Enforcement Officers Mandatory Retirement = 57 years
Age and LEO Service 50 20 Any Age 25 Military or non-leo service credit cannot be used to meet the minimum service requirements.*
Crunching the Numbers Your Basic Annuity = Length of Service + High-3 Average Salary Includes all employment periods creditable for retirement service High-3 is the highest average gross earnings during any three consecutive years of service
Quick Calculation - LEO 25 years of service and a High-3 of $80,290 1.7% x 20 years of LEO service x High-3.017 x 20 x $80,290 = $27,298.60 Plus 1.0% x all additional service x High-3.01 x 5 x $80,290 = $4,014.50 $27,298.60 + $4,014.50 = $31,313.10
FERS Annuity Supplement Paid in addition to your FERS annuity Designed to bridge the gap between when you retire and age 62, when you are eligible for Social Security benefits
FERS Annuity Supplement Ceases at the end of the month in which you turn age 62 Subject to the same earnings test that applies to the payment of Social Security benefits at age 62 EXCEPTION Law Enforcement Officers are not subject to the earnings test until they reach their minimum retirement age (MRA).
Your Birth Year = Your MRA In 1952 Year of Birth Minimum Retirement Age 55 and 10 months In 1953-1964 56 In 1965 In 1966 In 1967 In 1968 In 1969 56 and 2 months 56 and 4 months 56 and 6 months 56 and 8 months 56 and 10 months In 1970 and after 57
FERS Annuity Supplement Calculation Example: Est. monthly Social Security benefit at age 62: $1,510.40 Years worked under FERS: 25 years $1,510.40 40 x 25 = $944.00
Unused Leave Annual Leave: Entitled to a lump-sum payment for unused annual leave Sick Leave: May receive service credit for unused sick leave
Cost of Living Adjustment (COLA) Paid annually to all FERS-LEO retirees beginning at retirement
Military Service Deposits Deposit made for post-1956 military service Service was honorable and active duty Service was performed before the date of civilian separation Not included in the computation of military retirement pay (with the exception of disability incurred in combat)
Military Service Deposits - Calculation Deposit will equal between 3% and 3.4% of your base pay plus interest
Re-Deposits for FERS Refunds Redeposit = amount of the refund plus interest from the date of the refund Pay at any time between re-employment and when your retirement claim is finalized Pay the amount(s) in full as early as possible to avoid additional interest
Your Retirement Plan Social Security
Social Security Based on earnings averaged over most of your working career Social Security deducts 6.2% of your earnings, up to the maximum taxable amount ($127,200 for 2017) Deductions are Fed OASDI/EE on your earnings statement Quarter = $1,300 of earnings for 2017 Cannot earn more than 4 quarters per year Number of credits to qualify for retirement = 40
Social Security Affected by your age at the time you start receiving benefits If you start at age 62, your benefit will be lower than if you waited until a later age Access Social Security Benefit Statement online Reflects your estimated benefits The Earnings Test applies to Social Security benefits
At full retirement age or older Under full retirement age In the year you reach full retirement age The Earnings Test Applies Age Information ONLY To Receive for if people you Full who are Social receive below Security Social Full Benefits Security Retirement benefits Age (FRA) Full Retirement Age (FRA) TABLE Year of Birth The limit for 2017 is $16,920.00 In 1943-1954 66 In 1955 In 1956 In 1957 In 1958 No limit on earnings 2017 Full Retirement Age $16,920 For 66 every and 2 $2 months over the limit, $1 is withheld from benefits. 66 and 4 months $44,880 For 66 every and $3 6 months dollars over the limit, $1 is withheld from benefits until the month your reach full retirement age. 66 and 8 months In 1959 66 and 10 months In 1960 and later 67
Your Retirement Plan Thrift Savings Plan
Thrift Savings Plan (TSP) Max IRS limit = $18,000 for 2017 Matching contributions up to 5% Contribution options Traditional Roth Both Start, stop, or change elections at any time
TSP Investment Funds G Fund Government Securities Fund F Fund Fixed Income Fund C Fund Common Stock Fund S Fund Small Capitalization Index I Fund International Stock Index L Funds Lifecycle Funds
Eligibility: Catch-Up Contributions Year you reach 50 or thereafter Currently employed and in pay status Catch up contribution = $6,000 Contributing the IRS maximum by the end of the year o $18,000 in 2017 No agency matching contributions
TSP Withdrawals The TSP provides three basic ways to withdraw your account: Lump Sum Monthly Payments Annuities
Withdrawals and Taxes Bye-bye penalty tax! Age 70½: Must make an election no later than April 1 st of the following year Submit your election by March 1 st for processing
Your Retirement Plan BENEFITS
FEHB Coverage Health Insurance Must be enrolled for five years before you retire Premiums the same as active employees Monthly instead of bi-weekly Eligible family members may continue coverage Survivor annuity election at retirement is required for spouse to keep health insurance after your death Enrollment options
Dental & Vision Insurance FEDVIP Coverage No "five-year rule Premiums are the same as an active employee No employer contributions Enrollment options
FEGLI Coverage Life Insurance Retire on an immediate annuity Insured for the 5 years prior to retirement Have not converted to an individual policy Still enrolled on the date of retirement Limited changes available in retirement Choice of reduction options
Life Insurance Reduction Options Basic Option: No reduction 50% reduction 75% reduction Option A: Automatic 2% decrease per month beginning at age 65 until 25% of value remains ($2,500) Option B and Option C: Choice of No reduction or Full reduction beginning at age 65
Survivor Benefits Deciding on a survivor annuity Full survivor annuity = 50% Reduced survivor annuity = 25% o Must be in writing Spousal annuity must be elected to preserve right to FEHB coverage Full survivor annuity = 10% reduction in your annuity Reduced benefit = 5% reduction in your annuity Insurable interest annuity
Medicare Health insurance program for people 65 years of age and older 1.45% is deducted from earnings Medicare is identified as Fed MED/EE on your earnings statement Medicare and its relationship to FEHB In most cases, Medicare becomes the primary payer of benefits
FERS annuities Your Retirement Date Begin on the first of the month Retire within the last three days of the month to ensure a timely annuity payment
Your Retirement Plan FERS Social Security Your Retirement Income Thrift Savings Plan
What s Next? The difference between eligible and ready Determine if all of your federal service is eligible Know your high-three What about survivors? Up-to-date beneficiary paperwork? Social Security Look at big investment picture Think about insurance What s next after retirement?
Thank You For Attending!!!