Presentation on theme: "Just what am *I* GOING to GET Anyway? And When?. What’s in this presentation? Overview When can I retire? What will be my FERS Retirement Benefit? How."— Presentation transcript:
What’s in this presentation? Overview When can I retire? What will be my FERS Retirement Benefit? How much will my Social Security payment be? What about Thrift Savings? What I will be living on combining these? Summary This presentation is meant to be general explanation. Please see your HR professional for an actual estimate.
The Federal Employees Retirement System ( FERS ) became effective in 1987, and almost all new Federal civilian employees hired after 1983 are automatically covered by this new retirement system. The retirement system is a three- tiered retirement plan: 1. Basic Benefit Plan financed by a very small contribution from the employee and Government. Monthly payments depend on the employee's pay and length of service. 2. Thrift Savings Plan tax-deferred retirement savings 3. Social Security Benefit provides monthly payments if you are retired and have reached at least age 62.
Note the sick leave of over 1,000 hours- more on that credit later…. This pay stub is a few years old, so the amounts seen here may be more. The FERS retirement deduction for 2 week pay is 19.37 (Circled) OASDI= Old age survivor disability insurance – (Social Security), is $147.00 Note the TSP deduction- this is now increased with an additional after 50 deduction. Here’s where the money is coming from!
Age Service MRA 30 years Full Benefit 60 20 years Full Benefit 62 5 years Full Benefit MRA10 years Reduced Benefit 50/20 may be offered – “ reduction in force”
YOUR Minimum Retirement Age (MRA) If you were born……then your MRA is: Before 194855 years In 194855 years + 2 months In 194955 years + 4 months In 195055 years + 6 months In 195155 years + 8 months In 195255 years + 10 months Between 1953 -196456 years In 196556 years + 2 months In 196656 years + 4 months In 196756 years + 6 months In 196856 years + 8 months In 196956 years + 10 months In 1970 or later57 years
The basic benefit portion is financed by a very small contribution from the employee and from the Government. Basic Plan Benefits are a monthly payment depending on the employee's pay and length of service. The Government averages the highest 3 consecutive years of basic pay. This high 3 average pay, together with the employees length of service are used in the benefit formula. 1. Basic Benefit Plan
Example of age 60 with 20 years: 70,000 x 20 x 1% = $14,000 70,000 x 20.5 x 1% - $14,350 (Sick Leave credit added on) Example of age 62 with 20 years: 70,000 x 20 x 1.1% = $15,400 Basic Benefit Plan As in most retirement plans, a formula is used to compute the payments under the Basic Benefit Plan. Income x Years x 1% = Annual Income (High 3 average) (credible) (or 1.1%) (Just the Basic Income) “Credit” is given For unused sick leave. For Example- the 20 years Would be changed to 20.5 years if approx 1,044 hours were available.
At 60 (if you have at least 20 years) At 61 (if you have at least 10 years) Subtract 5% At 60 (if you have at least 10 years) Subtract 10% At 59 (if you have at least 10 years) Subtract 15% At 58 (if you have at least 10 years) Subtract 20% At 57 (if you have at least 10 years) Subtract 25% At 56 (or MRA) (if you have at least 10 years) Subtract 30% What is your Benefit?
I am estimating my “high 3” to be: A _______________ I want to retire at age: B _______________ By that time, I will have C ____________ years 1% or 1.1% if 62 or more. D ______________ A x C x D = $________________ Subtract 5% per year For each year under 62, (unless you have 20 at 60 or 30 by MRA) $_______________ Divide by 12 = $_______________ Your monthly paycheck
I am estimating my “high 3” to be: A $76,200.00 I want to retire at age: B 56 By that time, I will have C 24 years 1% or 1.1% if 62 or more. D $18,288.00 A x C x D = $5,484.00 Subtract 5% per year For each year under 62, (unless you have 20 at 60 or 30 by MRA) $12,804 (What’s left) Divide by 12 = $1067.00 MY monthly paycheck
What still has to come out: A Taxes B Health Insurance C Life insurance ? D Long Term/ disability By that time, I will net ??? $700 ??? $1067.00 MY monthly GROSS paycheck
Employees who meet the criteria also receive a "Special Retirement Supplement" which is paid as a monthly benefit until the employee reaches age 62. This supplement approximates the Social Security benefit earned by the employee while they were employed by the Federal government. 5 years + 62= Full Basic, NO Supplement 10 years + 56= Basic (minus 5% reduction for each year under 62)- up to 30% LESS NO Supplement 20 years + 60= Full Basic + Supplement 30 years + 56= Full Basic + Supplement (or your minimum retirement age) 1. Basic Benefit Plan (part B)… Little Known Fact! FERS MAGIC NUMBERS!
How much can I contribute? You may contribute any percent Of your pay, but once you have exceeded $15,000 annually, (or $20,000 if you are at least 50 years old), you may not contribute for the rest of the year. This may cause you to loose your matching money for your remaining months. Try to hit your limit by your last pay for the year.
TSP INVESTING Salary: $30,000 5% Contribution into TSP 5% Contribution to Savings Account 5% Government Match No Government Match 5% Annual Interest Rate 2.5% Annual Interest Rate (CD) Year Contribution Gov't MatchTotal Year Contribution Total 115001500300011500 1500 215001500615021500 3037.5 3150015009457.531500 4613.44 41500150012930.3841500 6228.78 51500150016576.951500 7884.5 61500150020405.7461500 9581.61 71500150024426.0371500 11321.15 81500150028647.3381500 13104.18 91500150033079.791500 14931.78 101500150037733.68101500 16805.07 Take Home less 30%Taxes/Penalty: $26413.58 versus $16805.07
What to do with TSP Funds? Leave it in until 70 years old Cash all or some of it out – 59 1/2 Buy an Annuity Roll it over OR - Any combination of the above
Before 1984, the law excluded from Social Security coverage all federal civilian employment that was covered under a retirement system established under the laws of the United States, such as the Civil Service Retirement System (CSRS). Federal employees newly hired after December 31, 1983, are covered by Social Security and they therefore pay Social Security taxes (currently 7.65 percent of pay). FICA contributions consist of Medicare + OASDI taxes. 3. Social Security
Possible monthly benefit at age 62 http://www.ssa.gov/cgi-bin/benefit6.cgi
Don’t forget to consider: My new monthly income may eventually consist of 1. Basic Benefit $ 750 (net pay after tax, insurance) 2. + Tsp payment (What ever I withdraw, should have a total around $250,000 by 2011) 3. + Social Security $1,000 (guesstimate) starts at age 60 if you count the Social Security Supplement. Longer life expectancy. Income from casual employment
Summary If you retire without 56 years (MDR) + 30 years service… If you retire without 60 years + 20 years service….. You may need to work again in another job! ….your chances are less with an early out plan. SEE HR Specialist To discuss your unique situation. This presentation is for general information only.
Prepare for take off! Aren’t you glad your eyes are opened up to this NOW?