After spending several years in your federal career, now it is time to retire successfully. Unfortunately, many people don’t take out time to properly plan their retirement and then suffer from reduced benefits, which is a rude awakening. In advancing age and deteriorating health conditions, going through financial hardship can be daunting.
Retirement planning introduces you to the key elements important to prepare you for the transition and save you from becoming a victim of disappointment and expensive surprises. Several questions may pop up while you plan your retirement. How soon can you retire, what should be your TSP upon retirement, what should happen to your health and life insurance upon retirement, and how much will you get from social security every month after retirement?
Importance of federal retirement planning
You may know many things in life, but when it comes to retirement planning, there are thousands of factors to consider. Because you lack the experience necessary to identify critical questions and answers which can contribute to a successful retirement, you need to increase your awareness.
Retirement planning several years before your retirement is important because taking financial stress when you are old can further deteriorate your health. Another factor to consider is taxes; they can destroy a major part of your income and savings if you aren’t careful. Therefore, retirement planning is also important from this point of view.
After retirement, your income is relatively stable, but once you retire, there is no control over your income sources.
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- Invest in TSP
All federal employees have one retirement plan called a thrift saving plan. It is closely designed for private sector 401 (k); the contribution goes directly out of your paycheck. You can contribute to your TSP plan as much as you want.
Normally, employees start by contributing 3% of their pay in the initial stage of their career. However, they don’t increase their contribution as they reach their retirement age. This is a huge mistake. If you want 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.
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- Take care of future medical benefits
Deciding between federal employees and the FEHB plan could be confusing. The first you need to consider is, do you have any younger spouses on your plan or children; if yes, you would want to stay on that plan to not lose coverage.
On turning 65, you have an option to go to medicare and keep your FEHB plan. Either way, you are likely to have 100% coverage if you go with plan F or G.
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- Review FEGLI life insurance program after retirement
Every federal employee automatically gets enrolled under a basic benefit plan. Under this plan, the government bears one-third premium cost while a federal employee pays two-thirds. Although you can waive the plan during your service; however, it is wise to continue till your retirement because it will give you huge benefits on your retirement.
Under FEGLI, there are two types of coverage, extra BIA coverage and optional coverage. Under BIA coverage, employees under 45 are automatically eligible for extra BIA and don’t have to pay an extra premium. This extra benefit increases the amount of BIA payable to the employee’s family members if they die before age. A federal employee has to pay the entire premium cost as the government won’t contribute any portion of the premium cost. The employee has to enroll for basic BIA before they opt for optional FEGLI.
How to calculate your federal retirement pay
Computation of federal benefits is important to figure out estimates of your benefits at the end of your retirement. For that, you need to determine your high-3 average salary, period of creditable service, age, and date of retirement. The FERS retirement benefit calculator can provide you with the correct estimate, but you may face a hurdle calculating it by yourself. Our experts can give you more information about federal pension plan calculation, book your appointment today!
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