I meet regularly with Federal employees about their retirement benefits and their current payroll deductions. Most are not aware of what their Paystub reflects but more importantly do not know that a few tweaks to what they are currently doing can make a huge difference in their retirement.
Some key questions you need to ask yourself is:
1) Do I know what I am getting from CSRS/ FERS retirement? This is a simple calculation that is provided in your Summary of Benefits Workbook. Knowing this number is key to setting up the rest of your retirement plan.
2) Do you know what your TSP contributions translate to a lifetime Annuity? Most people contribute to their TSP as a main source of retirement funding. It is important to know what the TSP will translate to in an Annuitized retirement vehicle.
3) Do you know when you can start taking Social Security? Do you know how much your projected monthly Social Security Payments are? If you have not received a statement from Social Security about your benefits, you should call the Social Security office and have one sent to you. As a Federal Employee you can start receiving Social Security income at age 56 through a Special Retirement Supplement. A Special Retirement Supplement is a plan put in place to help Federal employees pad their monthly income until they are eligible for Social Security Benefits. This is available in your Summary of Benefits Workbook.
4) Do you know what your FEGLI Benefits are and do you know how to interpret your FEGLI code on your paystub? Your summary of Benefits workbook, goes into detail about the FEGLI code and how to interpret it. The Workbook also shows some areas of concern that you need to be aware of when approaching retirement.
5) Are you contributing enough or too much to your TSP? Do you know about the 1% FERS contribution? Most people do not know that as a FERS employee the Government matches another 1% if you contribute all 5% to TSP. Thus you are getting a true 100% match.
What is the perfect contribution level? If you are not contributing 5% to your TSP, you are making the biggest error in your retirement investing. The Government matches the first 5% with a 100% match. So for every $1 dollar you invest you are getting $1 dollar plus the additional return of the fund you invest in.
On the other side of the coin I have seen many people invest 10% or more into their TSP and this is also a mistake. The funds within the TSP are very conservative by nature and provide a low rate of return. The maximum you should invest in a TSP is 5% of your income.
6) Do you know the minimum age you can retire with “FULL” Benefits?
Ages are 56-30, 60-20 and 62-5.
7) Do you know how to accurately determine what you are making now compared to what you will be making during your retirement? Do you know what items you will no longer need to pay at retirement? One of the key things that may bring Federal Employees comfort is the knowledge that there are several deductions that they will no longer need to pay at time of Retirement.
For Instance, you no longer need to contribute to TSP or FEGLI.
8) Is your W4 deduction status set to the proper level? Are you giving the government a tax free loan by mistake when you could be earning tax free interest? If you are getting money back each year, it may seem like a bonus but you have missed out getting interest on that income all year.
These are all key questions that will make a HUGE difference to your retirement. Take time to review your Summary of Benefits workbook.