A Retirement Guide for FERS Employees

4.5.24: Audio automatically transcribed by Sonix

4.5.24: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Welcome back to the federal retirement show. I'm your host, Bo whiskey with American Benefits Exchange. Really appreciate taking time out of your schedule to join us. To view the content that we put on this podcast radio show. It is for you, the federal employee. It's information that we believe you need to know. It's information that we believe is important. So really encourage you not just to watch the rest of this episode, but to go back and see the previous episodes that we put out a lot of great and valuable content conversations that stem from, uh, meetings I've had with federal employees, conversations with other representatives with our company, and how they go about helping and assisting federal employees just like you. So go back, do the other episodes, and be sure to tune in for every future episode as it comes out. And we're trying to keep things fresh and and keep it current. And that's where we lead to today's conversation. So as you know, and as I've talked about, I talked with federal employees both on a one on one basis as well as in groups, and do presentations in front of five, ten, 15 all the way up to 500 people in a room at one time. And this comes from a conversation I had this past week with a federal employee who was going over their projections as they're going through their working career and into retirement. So what we normally like to do when we sit down with the federal employee is, is give a full understanding, a full snapshot of where they are today, and we do a full benefits and retirement analysis and just give a full paint a picture of what it is that everything looks like today.

Speaker1:
And then we can look and see how it's projecting as we get closer and closer to retirement. And you can see if you're on the right track, and if you're not, then we can make some adjustments. And that's what this conversation came to. It was a question that the federal employee asked me when it came to part of their retirement income. This person is a Fers employee, was at the beginning or start of their career and and looking for some guidance on how to properly prepare. And as a first employee, we went over the fact that they have a three part retirement system. They've got a retirement income system, they have their first annuity, Social Security, or the first supplement, depending on when a federal employee retires. And TSB, those are the three main retirement income sources that are part of the first system. And you want to take advantage of all three of those. Now, how do you take advantage of the first one, the retirement system, the first annuity? Well, there's really not much that you can do to affect that. That was where we were talking. Say you can really just you can work longer and try to earn more money, okay. Because your pension is based on your high three, which is the highest consecutive 36 month period, the average of that highest consecutive 36 month period during your career.

Speaker1:
You can work longer to try to not get more time term, because your calculation also revolves around the amount of years you've worked as a first employee. So there's really there's not much you can do other than try to work longer, earn more money with regard to your Fers annuity. The second part, Social Security, is where the conversation started, where the question came from. But let me just jump to the third part. And then there's TSP, right? Tsp's. Based on the amount of money that you put aside, the matching money that you get, then the investment choices that you make and how that grows over time, and then ultimately what you want to use it for. And if you you've been blessed and lucky enough to have a really nice sized nest egg in your TSP, when it's all said and done, you've got some options and you can determine how you want to utilize that money once you're separated from the government. But the question revolves around Social Security because this being the second part, and there's really not much that you can do to affect your Social Security either, other than try to make more money and work longer, because Social Security will have its determination based upon the the income that you've made over the years. And and when you take the Social Security benefit. Now, this person was going to retire right at 62, and they were going to decide to turn Social Security on at 62, but they have some time until they do that.

Speaker1:
So the projections that we're showing them today may not be true for what they're going to look like in the future. And why? Because the question they asked was, what if Social Security is not there? Now, we've had other conversations on this radio show about Social Security, and we've talked about what the Social Security trustees report even said recently, at the end of 2023 about the future of Social Security. But this better employee had heard and had done their own research and asked me the question of, you know, what do we do if Social Security is not there or if it's not there at the same capacity that we believe it will be? Projections that we're seeing today. They were not thinking that, oh, my Social Security money is going to go up in the future. They were thinking, what if it goes down? Or worst case scenario, which I hope would never happen, it gets eliminated. Now, look, this is not an unfounded, uh, thought process or fear that that this person had, because the trustee's report is telling us that by 2033, without any changes to the contributions to the Social Security fund, that it's going to be exhausted and they're only going to be able to pay a certain amount of money on the dollar. This, this reports at $0.77 on the dollar going forward.

Speaker1:
So there's a chance that benefits could be reduced. But they said, hey, what if they're reduced or eliminated. What if I'm relying on this as part of my retirement income and it's not there for me or not there in the same capacity that we anticipate? So the conversation turned to what do we do about it? How do we prepare? And that's what we help better employees out with. I mentioned it earlier is preparation. And in most cases we want to make sure that you are over preparing. Why is that? Let's look at this example. Let's say that, uh, this person, they're going to get their pension, their first pension, and they're going to be saving money in TSP. Let's just go the most drastic thing ever. Let's just X out the income stream coming from Social Security. Right. Again, I hope that's not going to happen. And I'm not saying it's going to happen, but let's just prepare as if it's not going to be there. And that's what we talked about. Prepare is it. Social Security is not going to be there. What would that do for you? Number one, it would make sure you had you thought in your head your mindset would be, I've got to replace that. I have to prepare as if that's not going to be there. And it's in fact it is down the road. Great. You're going to have some bonus money. You're going to have enough in retirement and then some to live on because you prepared to live comfortably without Social Security.

Speaker1:
But what if your greatest fears actually become reality and Social Security is there in a diminished capacity or eliminated entirely? Well, you're still going to be okay because you've prepared for it. You haven't put your hope in something that the government can change down the road. And I'm not knocking Social Security in any way, trust me. But when you read the reports and you see what's going on and you know there's a ton of baby boomers and more people are turning 62 every day, then at any point in history, uh, there's a lot of recipients of this Social Security benefit, and they're not making any changes to what people are putting into it. And there's a lot more people that are going to need to get benefits, and they're living longer. So, you know, common sense was telling you that changes will probably have to be made. And that's what they're putting in their report. So let's go back to this question that they were asking. What do we do if Social Security is not there? Let's plan for the worst case scenario doomsday scenario here. When it comes to your retirement income, Social Security is not there. Well, you've got to take care of that yourself. And in this particular federal situation, they have the luxury of time on their hands. They were newer in their career. And we're mapping out a plan to say, okay, how much today this can change over time, but how much today can you comfortably set aside for your future in addition to what you already are doing now? I certainly, certainly do not want somebody to say, I'm going to put as much as I possibly can towards my future now, and I it means you're going to have to, you know, live a different lifestyle today, right? You're going to have to eat, uh, saltine crackers and ramen noodles, uh, you know, forever, just so you can provide for your future.

Speaker1:
Not that there's anything wrong with those things, but I don't want you to have to live off of that forever and ever just to supply or prepare for tomorrow. So how much can you comfortably set aside today for your future, in addition to what you're already doing? And we determined a number. Then down the road, as this person gets pay raises, step increases promotions, and they're making more money, they can increase that amount gradually and put more and more money aside. That way we are projecting and preparing as to how much that's going to be, and if it can be a full replacement or substitute for the income that they're going to receive from Social Security. Now everybody's number is going to be a little different. But it is a wise move just to look at your entire situation. And this is my opinion, but I think it's also kind of common sense, a wise move to look at your entire situation and make sure you have a full understanding of what it looks like today and how you're projecting.

Speaker1:
If you have not gotten a Social Security estimate, I would recommend you do that. You can go to socialsecurity.gov or tsa.gov and get an estimate. Nuggets of information. You can see what they're projected to pay you at different time frames, whether you take it right away at 62, or wait until your full retirement age or wait till age 70. Now, the other thing is, okay, if if you're in the same belief as this better employee that I was chatting with this past week, and you're thinking the worst could happen at Social Security, might not be there or might not be there in the same capacity, then you should be preparing to replace that with other things potentially outside of your TSP, right? Setting yourself up with a fourth income stream, money that you can set aside somewhere in some kind of plan, depending upon your risk tolerance and what you want this to do, so that it can be either a replacement of what you get from Social Security, or now you've got bonus money. You've got four income streams coming as your first annuity DSP, Social Security and this additional account. But you've heard the old adage, right, failing to plan is planning to fail. And we don't want to assume anything. If you work for the government long enough, you know, assuming it's going to do what to you and me, right? So just make sure that you're not caught with any gun in your face when it's all said and done because you heard the message, you saw the warning signs and didn't prepare or do anything about it.

Speaker1:
Again, this is not meant to be a scare tactic whatsoever. This is not meant to say this is what I think is going to happen with Social Security. I think it it should be there. It better be there. Heck, I've been paying into Social Security ever since I've started working too. I want it to be there in the capacity that it should be because I paid into it. But they've been telling us it may not be so. It's best if you prepare as if it's not going to be there, and that way, if it is great you've over prepared for retirement, you might actually make more money in retirement. And we were able to do it comfortably along the way, as long as we mapped it all out and set a plan in place. As I said, I'll say it again failing to plan is planning to fail. I don't want you to fail when it comes to your retirement. I don't want you to fail when it comes to your future. I don't want you to have to change your lifestyle when it's all said and done, or be forced to keep working because you're not going to have enough money in retirement. We talked about this all the time on this show, and the importance of getting a full benefits and retirement review, the importance of understanding where you currently are and where you're going to be in the future, because you do not want to assume, you do not want to have that false sense of security that, hey, I'm going to work for the government by 30 years, I'm going to get that gold watch, I'm going to retire, and the government is going to take care of me.

Speaker1:
I've given my service to them. They're going to take care of me. You can talk to your colleagues. That is not the case. There are steps that you need to take, things that you need to do to ensure 100%, that you're going to be able to take care of yourself. The government will not entirely take care of you. So fill out our form. You can go to, uh, federal retirement Show.com. And I kind of jumped right into that, but go to federal retirement Show.com. And you might be thinking, well, what are my next steps? Right. I'm going to back up a second here. What are my next steps? What should I do? How do I find out? What are my concerns? And I just said it. I say go to our website, Federal Retirement Show.com fill out the form on there and one of our reps, if it's not me personally, will reach out to you. Do a full benefits and retirement review, map out what your future retirement income looks like, whether you have five years to retire or you have 35 years until you retire, we could project what that's going to look like.

Speaker1:
We can hold you accountable to making sure that you're on the right track. Set up a plan if you need additional help to get you where you want to be, where you need to be in order to live comfortably in retire. And we can monitor that plan all the way, right every year or every couple of months, however long that you want to talk and make sure you're on track, we can have a further conversation, pull up the numbers, redo the reports, and make sure you're still heading in the proper direction. So that being said, uh, I hope that all of you go to our website, fill out that form, ask for some assistance, get that complimentary benefits and retirement review done. I really do appreciate it. As I said earlier, you taking the time out of your schedule to view our content. It means a lot, but what we do and why we do it is for you, the federal employees. So if there's topics, there's information that you want to hear, things that we are not presenting on this radio show podcast, reach out to us and say, hey, I want to hear more about this. I want to have a discussion of this topic. When are you going to talk about X, Y, and Z? We'd be happy to do it because again, this is all for you, so have a great rest of your day. Look forward to seeing you on a future episode.

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