Navigating the complexities of federal retirement benefits can be challenging, and seeking professional advice can make a significant difference. A knowledgeable federal retirement advisor can provide you with personalized guidance tailored to your specific situation. An experienced advisor can help you understand your benefits, optimize your investment strategy, and make informed decisions about your retirement planning. Retirement Mistakes to Avoid
www.psretirement.com 2 202408PSRRetireMistake Table of Contents 1 Not Starting Early Enough 3 2 Underestimating Retirement Expenses 4 3 Failing to Maximize Thrift Savings Plan (TSP) Contributions 5 4 Ignoring Health Insurance Options 6 5 Not Understanding Survivor Benefits 7 6 Mismanaging Federal Employees Retirement System (FERS) Benefits 8 7 Overlooking Social Security Integration 9 8 Not Diversifying Retirement Investment 10 9 Neglecting Estate Planning 11 10 Underestimating the Impact of Inflation 12
www.psretirement.com 3 202408PSRRetireMistake The Importance of Early Retirement Planning: Start planning for retirement early. The sooner you begin, the more time you have to save and invest. This helps your money grow over time. Early planning gives you more options and helps you be ready for the future. Benefits of Long-Term Financial Planning: Long-term planning helps you set clear goals, make smart choices about saving and investing, and avoid problems later on. Setting Retirement Goals: Set clear and realistic goals. Think about when you want to retire, how you want to live, and what you will need. Clear goals guide your saving and investing plans, keeping you on track. Creating a Savings Plan: Make a savings plan. Include regular contributions to your TSP, IRAs, and other accounts. Automate your savings to make it easy. Increase your savings as your income grows. Diversify your investments to manage risk. Not Starting Early Enough 1
www.psretirement.com 4 202408PSRRetireMistake Common Expenses in Retirement: Many retirees underestimate their expenses. Common costs include housing, healthcare, travel, utilities, food, and leisure activities. It's important to account for these costs and create a detailed budget. Healthcare Costs: Healthcare is a big expense in retirement. As you age, your healthcare needs increase. Plan for these costs. Travel and Leisure: Many retirees plan to travel and enjoy leisure activities. These can be costly, so budget for them. Unexpected Expenses: Life is unpredictable. Unexpected expenses like home repairs, car maintenance, or medical emergencies can arise. Build an emergency fund to handle these costs. Creating a Detailed Budget: Develop a budget that includes all potential expenses. Track your spending to stay within your budget. Update it regularly. Underestimating Retirement Expenses 2
www.psretirement.com 5 202408PSRRetireMistake Overview of the TSP: The TSP is a retirement plan for federal employees. It offers various investment options, including lifecycle and individual funds. Tailor your investments to your risk tolerance and goals. Contribution Limits and Matching Contributions: Maximize your TSP contributions. In 2024, the limit is $23,000, with an extra $7,500 for those 50 and older. Take full advantage of matching contributions from your employer. Increasing Contributions Over Time: As your income grows, increase your TSP contributions. Even small increases can have a big impact over time. Investment Options: The TSP offers several investment options: G Fund, F Fund, C Fund, S Fund, and I Fund. Understand each fund and diversify your investments. Lifecycle Funds: Lifecycle funds adjust your asset mix based on your retirement date. Consider these funds if you prefer a hands-off approach. Regularly Reviewing and Adjusting Contributions: Review your TSP contributions and investments regularly. Adjust based on your financial situation and goals. Failing to Maximize Thrift Savings Plan (TSP) Contributions 3
www.psretirement.com 6 202408PSRRetireMistake Overview of Federal Employees Health Benefits (FEHB): FEHB offers federal employees a range of health insurance plans. Understand your options and how they work with Medicare to manage costs. Understanding Medicare: Medicare is federal health insurance for people 65 and older. It has several parts: Part A (hospital), Part B (medical), Part C (Advantage), and Part D (prescription drugs). FEHB and Medicare Integration: Keep your FEHB coverage and enroll in Medicare. Medicare becomes your primary insurance, and FEHB acts as secondary. Choosing the Right Plan: Review your FEHB and Medicare options yearly. Compare plans to get the best coverage at the best price. Long-Term Care Insurance: Long-term care insurance covers services not typically covered by FEHB or Medicare. Evaluate your need for this insurance. Health Savings Accounts (HSAs): If you have a high-deductible plan, contribute to an HSA. HSAs offer tax benefits and can be used for medical expenses in retirement. Ignoring Health Insurance Options 4
www.psretirement.com 7 202408PSRRetireMistake Importance of Survivor Benefits: Survivor benefits provide financial support to your loved ones after your death. Understand and manage these benefits to protect your family. Overview of Survivor Benefit Options: Federal employees have several options: • FERS Survivor Annuity: Provides a portion of your pension to your spouse or children. • FEGLI: Life insurance coverage for your beneficiaries. • TSP Beneficiary Designations: Designate beneficiaries for your TSP account. Choosing the Right Options: Evaluate your options and choose the best for your family. Consider the financial needs of your survivors and the cost of benefits. Designating Beneficiaries: Keep your beneficiary designations up to date. Review them regularly, especially after life events. Communicating with Your Family: Discuss your plans with your family. Ensure they know what benefits are available and how to access them. Not Understanding Survivor Benefits 5
www.psretirement.com 8 202408PSRRetireMistake Overview of FERS: FERS includes three parts: pension, Social Security, and TSP. Each is important for a secure retirement. Common Mismanagement Mistakes: Many employees don't understand how the parts of FERS work together. Common mistakes include underestimating the TSP, not coordinating Social Security, and failing to plan for survivor benefits. Optimizing Your FERS Pension: To maximize your pension, increase your years of service and high-3 average salary. Consider buying back military time or periods of leave without pay. Coordinating Social Security Benefits: Understand how your pension and Social Security work together. Delaying Social Security can increase your benefits. Maximizing TSP Contributions: Contribute the maximum to your TSP and take advantage of matching contributions. Choose investments that align with your goals. Planning for Survivor Benefits: Choose appropriate survivor benefits to protect your family. Understand the costs and impact on your retirement plan. Mismanaging Federal Employees Retirement System (FERS) Benefits 6
www.psretirement.com 9 202408PSRRetireMistake Understanding Social Security Benefits: Social Security provides important retirement income. Understand how benefits are calculated and the factors that affect them. Calculating Your Benefits: Benefits are based on your highest 35 years of earnings. Ensure you have a complete earnings history to maximize benefits. Best Age to Claim Social Security: The age at which you start claiming affects your benefits. Waiting until the retirement age or later increases payments. Impact of Working While Receiving Benefits: Working while receiving benefits before the full retirement age can reduce payments. Understand the earnings limits. Coordinating Social Security with FERS Pension: To maximize income, integrate Social Security with your FERS pension. Consider the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). Spousal and Survivor Benefits: Social Security also offers spousal and survivor benefits. Understand these to secure your family's financial future. Overlooking Social Security Integration 7
www.psretirement.com 10 202408PSRRetireMistake Importance of Diversification: Diversification manages risk and maximizes returns. Spread investments across different asset classes. Common Investment Mistakes: Many employees concentrate investments in one asset class. This increases risk. Asset Classes for Diversification: Diversify across stocks, bonds, real estate, commodities, and cash. Creating a Balanced Portfolio: Develop a portfolio that aligns with your risk tolerance and goals. Rebalance regularly. Lifecycle Funds: Lifecycle funds adjust the asset mix based on the retirement date. Consider these for a hands-off approach. Seeking Professional Advice: Work with a financial advisor to create a diversified strategy. They provide personalized advice and help with complex decisions. Not Diversifying Retirement Investment 8
www.psretirement.com 11 202408PSRRetireMistake Importance of Estate Planning: Estate planning ensures your assets go to your desired beneficiaries and provides security for your loved ones. Key Components of an Estate Plan: An effective plan includes: • Will: Specifies asset distribution and guardians for minors. • Trusts: Manage assets, reduce taxes, and avoid probate. • Beneficiary Designations: Keep these up to date for accounts and policies. • Power of Attorney: Authorizes someone to make financial decisions if you're incapacitated. • Healthcare Directive: Specifies medical preferences and appoints a decision-maker. Minimizing Taxes: Estate planning can minimize taxes, ensuring more assets go to your beneficiaries. Regularly Reviewing and Updating Your Plan: Update your plan regularly, especially after life events. Communicating Your Plan: Discuss your plan with your family and key individuals to prevent misunderstandings. Neglecting Estate Planning 9
www.psretirement.com 12 202408PSRRetireMistake Understanding Inflation: Inflation increases the cost of goods and services over time, reducing purchasing power. Impact of Inflation on Retirement Savings: Inflation can erode savings. Investments must outpace inflation to maintain your standard of living. Investing to Outpace Inflation: Invest in assets that typically outpace inflation, like stocks and real estate. Adjusting Your Financial Plan: Regularly review and adjust your plan for inflation. Increase savings and adjust investments. Income Strategies to Combat Inflation: Consider annuities with inflation protection and dividend-paying stocks. Budgeting for Inflation: Create a budget that accounts for rising costs. Update it regularly. Underestimating the Impact of Inflation 10
www.psretirement.com 13 202408PSRRetireMistake Disclosure: Not affiliated with the Thrift Savings Plan or any government entity. The content, listings, links, location data, or references provided in this eBook and related website are for informational purposes and convenience only and should not be considered personalized financial advice. Opinions expressed reflect the author's judgment as of the publication date and may change based on economic and market conditions. Prior to implementing any discussed ideas or strategies, seek counsel from a qualified professional. The suitability of every investment varies based on individual factors such as financial goals and risk tolerance. Utilizing policy cash value may reduce benefits and incur tax penalties. Insurance product guarantees depend on the issuing company's claims-paying ability. Taking withdrawals from certain accounts prior to age 59½ may have tax implications. Investment, tax, and legal information presented are general and should not be construed as specific advice. Consult an attorney, tax, or financial professional for tailored guidance. Working with a highly-rated advisor does not ensure superior performance. Ratings may be based on visitor evaluations and advisor activity. Contact the advisor directly for criteria details. The professionals listed on this website are independent entities and are not affiliated with the website. Any marketing and/or compliance requirements are the sole responsibility of the professional listed. Their listing, inclusion, or published content does not constitute an endorsement or recommendation. Conduct due diligence and verify credentials before engaging in their services. By accessing this eBook or associated website, you acknowledge your responsibility to conduct thorough research and seek professional guidance before making financial decisions. The website and affiliates disclaim liability for actions taken based on the content provided. This eBook and associated website are for informational purposes only and do not recommend purchasing any life insurance, annuity, or investment product. Information herein has not been reviewed by any relevant companies, and mentioning such does not establish mutual liability or responsibility between parties. By following these essential steps and avoiding common mistakes, federal employees can navigate retirement planning confidently and achieve a secure and comfortable retirement.
www. psretirement.com
www.psretirement.comRkJQdWJsaXNoZXIy MjEyMTc2MA==