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Checklist for Federal Employee Retirement Planning

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Federal employees have the opportunity to save money for retirement just like any private sector employee. FERS is designed at par with generous corporate plans replacing the outdated provisions of CSRS. The benefits received by a federal employee depend on the employee’s salary and years of service.

FERS benefits are distributed in four categories, including-:

    • Immediate

You can retire immediately on reaching 62 with five years of service or at age 60 with 20 years of service. Your benefits may drop by 5% every year until you reach 62. Individuals with 20 years of service must wait until 60 to receive full benefits. You’ll start receiving benefits 30 days after retirement.

    • Early

An early retirement option is available in case of involuntary separation.

    • Deferred

Deferred retirement means you have retired from your service but will receive pension later. The disadvantage is that you can start your FERS pension later but can’t resume FEHB when you are separated from your service.

    • Disability

Individuals may retire when they become disabled while employed in FERS due to illness, disease, or injury. If disability lasts more than a year, you can retire or shift to another internal position to continue working.

Under whatever circumstances you retire, early, immediate, or deferred, you can get the most out of your retirement; here is the federal employee retirement planning checklist-:

    1. Avail full FERS benefits

A federal employee receives monthly benefits based on years of service, income, and retirement age. If you are not eligible to receive full FERS benefits, the reason could be early retirement or fewer years served. So, how does all this affect your basic benefits? If you have taken early retirement, you must meet MRA with 30 years of service, reach age 62 with five years of creditable service, or reach age 60 with 20 years of creditable service. People who have reached MRA with ten years of service will have their basic benefit permanently reduced by 5% each year until they reach age 62. If you fall under any of these categories, you may be able to avail yourself of the full FERS retirement benefits.

    1. Save in TSP up to retirement age

The thrift saving plan is a retirement investment plan for all federal employees. It is closely designed to 401 (k), the contribution goes directly out of your paycheck. You can contribute to your TSP plan as much as you want. Usually, employees start by contributing 3% of their pay in the initial stage of their career. However, they don’t increase the contribution as they reach their retirement age. To avail of more benefits at the end of your retirement, you must increase your contribution to 5% because it will let you receive more matching dollars.

    1. Don’t ignore health care needs

The ordinary expenses may decrease after retirement, but your health care cost increases. According to Fidelity Investments, a 65-year-old US couple spends $315,000 in health care expenses. This value is 5% higher than the previous year. By no chance can you ignore health care costs.

FERS retirees can cover their medical expenses with Federal Employee Health Benefit. FEHB is important to bridge the money gap unless you become eligible for Medicare at age 65. After your medicare benefits start, FEHB will get reduced or eliminated.

    1. Taking social security at the right age

Social security is one of the three benefits under FERS that you receive after turning 62. It is one of the guaranteed sources of income that you’ll have after retirement. Some financial experts suggest delaying social security till age 70, so you can maximize the benefits. But, for some, delaying social security benefits could be the worst idea. Many federal employees claim social security at 62 to put the money into other investment options.

    1. Careful financial planning

To ensure you live a comfortable life after retirement, consider your financial planning and assets, retirement age, desired lifestyle, and expected life span. The date you retire can significantly impact your FERS benefits. Effective financial planning can save you from pitfalls in your retirement planning. Find a professional who can help you with federal retirement planning.

 

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