Retire at 80%
FERS Law Enforcement
Tammy Flanagan
Senior Benefits Director
National Institute of Transition Planning, Inc.
Tammy@nitpinc.com
My “Hats”
Tammy Flanagan – Benefits Specialist
Presenter
 Pre-Retirement Seminars
 Mid-Career Planning
 New Employee Benefit
orientation
 Co-Host: For Your Benefit
 www.federalnewsradio.com
 http://www.nitpinc.com/
Writer
 www.govexec.com
 Weekly Column
 “Retirement Planning”
 Edited by Tom Shoop – Senior
Editor of Government
Executive Magazine
 Tomorrow’s Column based on
today’s presentation!
Statement by Acting Director Elaine Kaplan on the
Supreme Court Decision in United States v. Windsor
OPM on Supreme Court Decision 6-26-13, DC – “Today’s historic decision by
the Supreme Court that the Defense of Marriage Act is unconstitutional is
a much welcome development in the continuing quest to ensure equal
treatment under the law to all Americans. For the federal government as
an employer, it will impact benefits for our married gay and lesbian
employees, annuitants, and their families.
“In the coming days, OPM will be working closely with the Department of
Justice and other agencies to provide additional guidance for federal
human resources professionals, benefits officers, and our employees and
annuitants. While we recognize that our married gay and lesbian
employees have already waited too long for this day, we ask for their
continued patience as we take the steps necessary to review the Supreme
Court’s decision and implement it. As soon as we have updates to share,
they will be posted on our website.”
Where did the 80% rule come from?
The percentage stems from the "replacement
ratio" studies that Aon Consulting and Georgia
State University have done for the last 20 years.
Basically, researchers cull information from the
Bureau of Labor Statistics Consumer
Expenditures Survey, which details how U.S.
consumers, including older households, spend
their money.
Why 80%?
These deductions stop when you retire:
 Retirement: 1.3% or .8%
 Social Security:
• FICA: 6.2%
• Medicare: 1.45%
 TSP: 5% - 10% - 20%?
 Taxes
• Less income = less income tax
• Some states don’t tax retirement benefits
These expenses MAY go DOWN
when you retire:
 Kids (food, clothing,
schooling,
weddings)
 Mortgage
 Clothing
 Commuting Costs
 Hired Help
These expenses MAY go UP when
you retire:
 Kids
 unemployment, emergency, grandkids
 Mortgage
 good old days
 Clothing
 are you joining a nudist camp?
 Commuting Costs
 are you going to stay home every day?
 Hired Help
 cut your own grass, paint your own walls, clean your own house
 Travel, hobbies, volunteer
 Healthcare and insurance
What does it take to get to 80%?
FERS Basic Retirement Benefit
Law Enforcement
 20 years = 34% of high-three
 25 years = 39% of high-three
 30 years = 44% of high-three
Non-Law Enforcement
 20 years = 20% of high-three (22% at age 62+)
 25 years = 25% of high-three (27.5% at age 62+)
 30 years = 30% of high-three (33% at age 62+)
What else?: FERS Supplement
Approximately $40 / month /
year of FERS service
 20 years = $800 / month or
$9,600 / year
 25 years = $1,000 / month or
$12,000 / year
 30 years = $1,200 / month or
$14,400 / year
What percentage of your
salary will this replace?
 More for low salary
 Less for higher salary
 Replacement: 10 – 30%
Supplement Ends at 62, then what?
Social Security
 Eligible at 62
 Reduced by 30%
 Delayed credits
 24% increase at 70
 Tilted towards the low wage earner
 Average benefit 2013: $1,221.22
 Maximum monthly benefit 2013:
 Age 66: $2,533 (Born 1947)
 Age 62: $1,923 (Born 1951)
 Age 70: $3,350 (Born 1943)
www.socialsecurity.gov
The United States Social Security Administration
POPULAR SERVICES
 new Get your Social Security Statement online
 Get or replace a Social Security card
 Apply online for retirement, disability or Medicare
benefits
 Estimate your retirement benefits
 Research popular baby names
 Locate a Social Security office
What else? Retirement Savings
 TSP
 Other employer savings
plans - 401(k), 403(b)
 IRAs
 Savings Accounts
 Inheritance
 Use It
• Spending
 Lose It
 Taxes – CPA / CFP
 Promote It
 Legacy planning – Estate
Attorney
What else? Retirement Savings
Women: Listen Up!
• Women are more likely than men to interrupt their
careers for family
• Of the 62 million wage and salaried women (age 21
to 64) working in the United States, just 45 percent
participated in a retirement plan.
• Women live a long time!
• By and large women invest more conservatively than
men.
http://www.dol.gov/ebsa/publications/women.html
Use It
Leave it in TSP




Low expenses
G Fund
Simplicity
Monthly withdrawal
options
Transfer to IRA
 Multiple partial
withdrawals
 Many investment choices
 Legacy planning options
Lose It
 0 – 59 ½ - Be careful! 10% tax penalty
Exception: Separation in the year you reach 55
Exception: Monthly payments based on life
expectancy or life annuity
 59 ½ - 70 ½ - No rules!
 70 ½ + Complicated Rules!
TSP Web Site: Planning & Tools: Retirement Income
Calculator TSP: Retirement Income Calculator
Monthly Payments
Balance: $500,000 Growth: 5%
Dollar Amount
 $3,000 / month
Run Out at age 78
 $2,000 / month
Balance at age 100:
$209,484.99
Life Expectancy
Monthly
Age
Balance
$1,407.66
55
$508,224.49
$2,208.64
65
$557,817.99
$2,069.36
75
$572,237.19
$3,095.55
85
$539,728.21
$3,612.99
95
$347,388.27
$3,166.00
100
$212,558.69
How about an annuity?
Features
 $500,000 purchase
 Begin at 55
 100% Survivor (spouse or
other insurable interest)
 2% Interest Rate Index
 Level Payment
 No Cash Refund
Payments
Monthly
Age
Balance
$1,683
55
$0
$1,683
65
$0
$1,683
75
$0
$1683
85
$0
$1,683
95
$0
$1683
100
$0
How about an annuity?
Features






$500,000 purchase
Begin at 55
Single Life
2% Interest Rate Index
Level Payment
No Cash Refund
Payments
Monthly
Age
Balance
$1,980
55
$0
$1,980
65
$0
$1,980
75
$0
$1,980
85
$0
$1,980
95
$0
$1,980
100
$0
How about an annuity?
Payments
Features
 $500,000 purchase
 Begin at 55
 50% Survivor (you or
spouse)
 2% Interest Rate Index
 Increasing Payment
 Not available for
insurable interest
 Cash Refund
Monthly
Survivor
Age
Balance
$1,133
$566
55 $485,000 (approx.)
$1,523
$761
65 $340,000 (approx.)
$2,047
$1,023
75 $150,000 (approx.)
$2,750
$1,375
85
$0
$3,696
$1,848
95
$0
$4,285
$2,142
100
$0
Did we get to 80%?
Retire 55 with TSP Monthly
Payments
 FERS Law Enforcement 30
years
 FERS Supplement $14,400 /
high-three $100,000
 TSP Monthly payment $2,000 x
12 = $24,000
Adds up to 82.4%
 44%
 14.4%
 24%
Did we get to 80%?
Retire 57 with TSP Monthly
Payments
 FERS (regular) 30 years
 FERS Supplement $14,400
/ high-three $100,000
 TSP Monthly payment
$2,500 x 12 = $30,000
Adds up to 74.4%
 30%
 14.4%
 30%
Did we get to 80%?
Retire 50 to Work Part-Time
 FERS Law Enforcement 20
years
 FERS Supplement $9,600
(High-three $100,000)
 Part-Time Job $36,400
Adds up to 80%
 34%
 9.6%
 36.4%
Thank You!