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Federal Employee Retirement Planning

It can be challenging to make the right decisions regarding federal retirement planning. After all, there are many things to consider, and the options can be confusing. However, making some common mistakes can cost you dearly down the road. You must learn to avoid these mistakes before they end up costing you thousands of dollars.With a few exemptions, you may only receive one of the governments most significant benefits, the Federal Employees Health Benefits (FEHB) program coverage, beyond retirement if youve been registered for the previous 5 years or since your first chance to join. (Note: The one very unusual exception is if your agency allows you to retire early, in which case you must be registered in the FEHB program at the time the offer is made.)Check, double-check, and triple-check your eligibility to maintain FEHB. After that, give it some time and double-check it. This is not a prank. If you retire without that eligibility, youll receive a one-year extension with no government contribution to premiums, and then youre on your own.If you lose your health benefits, you may wish to delay your leave until you continue your retirement coverage.Once youve determined that youll have the health insurance coverage youll need, be sure that your retirement income will provide the financial security youll want. Overestimating the number of years of service that will be included in your annuity calculation is one of the most frequent errors encountered, particularly for: Refunded serviceIf you ever left the government, received a refund of your retirement payments, and then returned to government employment, that refund might have a significant influence on both your eligibility to retire and the calculation of your annuity. Since the requirements for CSRS and FERS vary in terms of whether you must or may redeposit the money to get credit for that period, youll need to consult with one of your agencys retirement advisers to discover which rules apply. Only then will you be able to choose which alternative is ideal for you. Military serviceIf you are a CSRS worker who served in the armed forces before October 1, 1982, you will not be required to deposit to get credit for your active duty service for it to be utilized in the calculation of your annuity. You will if you served after that date. If you do not make that deposit, are retired, and are eligible for a Social Security benefit at the age of 62, your annuity will be recalculated downward by 2% for each year (5/12th of 1% each month) covered by that term of service. FERS workers are subject to distinct regulations. If you are one among them, you have just one alternative. Make a deposit and get credit for that time, or dont make a deposit and receive no credit for that time. Your retirement income will be less, though youll still receive a monthly annuity payment.Other potential errors can adversely affect your annuity calculation, including errors in the application of special salary rates or leave without pay. If any of these apply to you, be sure to get expert help to make the corrections.Also, consider if your final annuity plus the nest egg in your Thrift Savings Plan account will be enough to allow you to live the life you wish to live in the future. That TSP account may be a lovely figure, but how and for how long will it convert into income? There are calculator features available atwww.tsp.govto assist with this study; you may be surprised at what you discover.Make sure you have an accurate picture of your annuity, taking into account any potential cutbacks. Also, keep in mind that if FERS insures you, you will not get a cost-of-living adjustment (COLA) on your annuity until you reach the age of 62, unless you opt for a survivor benefit.If you are eligible, the value of that annuity, plus Social Security, will be less, often considerably less, than your wage. However, you will still have to meet essential costs such as housing payments or rent, health and life insurance premiums, federal and state taxes, and so on. Experience is a terrific teacher, and it teaches us that living in retirement costs more than we anticipate.If you dont perform the essential math, you may have to postpone your retirement until the numbers equal up, but if you dont, you may have to go back to work to make a decent living. So, take the time to do the math and decide thats right for you.Its essential to get an accurate estimate of your retirement annuity. This number will play a significant role in your post-work life, so its crucial to understand all the factors that go into its calculation.There is no one-size-fits-all answer when it comes to retirement, but by taking these essential factors into account, youll be on your way to making a well-informed decision.Retirement planning can seem daunting, but you can ensure that your golden years are everything you hope for by understanding the basics and taking a few key steps.

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