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Years ago a friend, friend of the military and employee of the Ministry of Labor, said something quite profound. Especially for an 18 year old child. What he said was that the day a person starts planning for retirement is the day they unofficially reaches adulthood! At the time, I didn’t find it worth carving it out of stone. But upon reflection and as the birthday cake candles look more and more like tiny forest fires, what he said makes a lot of sense. It makes a lot of sense. Its federal service began a long time ago. He retired under the Civil Service Retirement System (CSRS), with his more generous retirement formula. And it got a regular cost of living adjustment (COLA) every year.
Ultimately, like many of his peers, he’s in good shape. In fact, he is happier than a pig in all the countries where pigs are happiest. And he began to seriously plan for retirement in his thirties. Which is better than the 40’s, 50’s or 60’s. Certainly don’t wait until you really qualify for retirement.
Time, especially for federal and postal workers under the Federal Employees Retirement System (FERS), may be on your side. If you plan wisely and start early. This is especially true with the decisions of TSPs. How much to invest, where to invest, what to do when the market collapses. Because when they retire, IRS people are not completely protected from inflation. If the cost of living exceeds 2%, FERS retirees benefit from a COLA plan. One percentage point less than the actual increase in what you pay for food, transportation, shelter and recreation.
A lot of the things you do in your 20s, 30s, and 40s, especially with TSP, will have a huge impact on your lifestyle when you retire. Especially when a growing number of people are retired for at least as long as they have worked. 30 years with a bi-weekly paycheck replaced by 30 years of a single smaller monthly deposit can mean a dramatic change in lifestyle. Especially in times when inflation exceeds cost of living adjustments for IRS retirees.
So, how do you have a happy and comfortable retirement if you are covered by IRS? We asked Abraham Grungold for advice on surviving and even thriving under the FERS program, which covers most current federal employees. For the credentials, he’s a career-fueled part-time financial coach and a very successful TSP investor. Here is what he wrote:
IRS retirement errors
Thinking about your IRS retirement should start on your first day on the job. In your new role, you’ll fill out dozens of forms and listen to benefits presentations. It’s important to start with your retirement plans, and you can always adjust along the way. However, there are mistakes employees make when it comes to retirement, but you can avoid them. So, for your benefit, here are the top 7 retirement mistakes for FERS employees to avoid.
- Pay Yourself First – Employee contributions of at least 5% of the TSP guarantee a 5% employer match from the government. So, you should enjoy this free money every year of your career.
- Life Insurance – During their careers, the FEDs spend a fortune on government sponsored plans. Instead, if you shop around in the private sector, life insurance can be purchased at a much cheaper rate for the same type of coverage.
- Long Term Care – This is a critical benefit for employees who could be injured during their federal careers or once they reach old age. It’s better to have a basic long-term plan than to have no plan at all.
- Health Insurance – In order to have health insurance when you retire, you must purchase it five consecutive years before you retire. Even an inexpensive personal plan can save you from relying on a partner’s plan as their plan might get too expensive or you might have to get a divorce before retirement.
- Retirement at 62 – Working until 62 can increase your retirement by 10%. Retirement before age 62 will leave a large portion of your retirement annuity income.
- TSP and retirement – Deciding to transfer all of your TSP to retirement and close your TSP account prevents you from reverting to TSP. Therefore, you must keep at least $ 500 in your TSP to be eligible to return.
- Divorce Agreements – Selecting a retirement date that doesn’t match what your ex-spouse’s contributions are worth can be a costly mistake. Be sure to check your divorce agreement.
In my business as a financial coach, many federal employees contact me to consider retirement and ask me to help them determine what is the best year for them to retire. I do all their calculations and discuss their income during retirement. We discuss and plan all their IRS decisions and how they should avoid any mistakes. Retirement is different for everyone and there are many factors to consider.
Financial success can be easily achieved; it only takes a little effort.
Any questions or comments please contact me at Abraham Grungold – AG Financial Services or my Facebook page at Federal employees of the FERS.
Almost useless factoid
Through Alazar Moges
During his May 8, 2015 visit to South Dakota aboard Air Force One, President Barack Obama became the fourth president to visit all U.S. states during his tenure. Only Richard Nixon, Bill Clinton, and George HW Bush also visited all 50 states during their tenure.
Source: American embassy
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