Latest / Federal Retirement Advisors | FedLegacy / 90 Days Before You Retire, Here's What To Do (For Federal Employees)
Transcript
- William Smith: What's going on, everybody? Tonight's session is gonna be a little different. It's gonna be more like a working session. So I wanna see who's in here. I see, I see I see a couple people in here. I wanna know is anybody retiring in the next 90 days that's in the audience tonight? Because this session is really for you. And if you're not, it's fine. You can listen to it. But tonight we're really gonna be talking to people that are retiring in the next 90 days. And the reason why is because what we realize over the years is that that last that last 90-day sprint of working in the government, you want to make sure you have your ducks in a row. And so we want to make sure that we talk to you directly. We can answer any questions you may have and make sure you land that plane correctly. So again, if you're retiring within the next 90 days, when folks get closer and closer to retirement, you know, there's hiccups along the way. And we just want to make sure that when you're when you're retiring and you're landing that plane. You landed well. Okay. Let's talk about it, right? When it comes to why 90 days is important, is because we like to break it down into three sections, three, three sections. We like to call it the setup, the sequencing time, and then the lockdown time. And so this those are the three windows. And so from 90 to 61 days, we want to make we encourage folk that we're working with to pull all their documents. I mean, that we're talking about the SF 50, we're talking about, you know, your Fegley documents, we're talking about your TSP documents. We're talking about making sure we understand your where your expenses are. We're talking about making sure you pull your social security statements. We want to make sure we get all those documents together and we want to look at everything because when you want to look at you wanna look at your entire retirement picture in that 90 day window. Why is it why is that super important? The reason why that's super important is because that gives us enough time in case there's mistakes. There are different agencies when you go in, when you go to pull pull your retirement documents. That there's a mistake on your service comp date. We've seen that many, many times. We've seen where there might be a discrepancy when it comes to Social Security. That's rare, but you might see that. You might have less in your TSP than you thought. And then we might need to plan around that. also, you might not have a whole lot of emergency funds. And so you need to be able to put some money aside because when you retire, there might not be that you might not get a check for the next six months. You just never know. And so in that 90 day window, that 90 to 61. is where we start to get that, we start to have you set things up. And mainly what that means is just laying everything out. Laying everything out, making sure you know exactly what what what what what's what's to come next. And then we can start planning. Here's the thing. As a federal employee, your retirement is gonna be better than most. And I always say this, right? You your your retirement as a federal employee is gonna be better than most because you get a pension and that's important. But what you do wanna do do want to get right You want to make sure they're giving you the right pension. I've seen clients who they go to try to retire and their their service comp date is off and their pension's less than what it didn't what it should be and they're hackling back and forth with personnel, HR, OPM, all that. And the last thing you want to do is retire and still have that stuff, that stuff just out there. You know, there's other folks that just want to retire on disability. There's whole lot of things. I don't know what your situation is, but you just want to make sure you give yourself enough time that you're not rushing. To have those conversations towards the end. Because here's the thing: the last 30 days of the year, you're retiring, but we all know the last 30 days of the year, people are barely working. I mean, people, the HR departments are overwhelmed, people are calling out. It's hard to get things done that last 30 days. You want to make sure that you give yourself ample time, especially towards the end of this year, to get those things done in order, right? And so And so you want to make sure you pull you you pull all your documents, get them lined up. Now, what do you do in the next the next the next six the next 30 days after that? We call that the sequencing time. This is when we really dig deep into the the to the to the planning. We want you to have already submitted your retirement documents by then, like signing everything. First, we're looking at it at the beginning. Then we want you to submit everything. What sign everything and that's done. And then as a as as if you work with us at Fed Legacy. We start making sure we start putting your retirement analyzer together and really digging in and really running different scenarios for you so you know what your 10-year plan is, what your 20-year plan is. Once we have those numbers that are solid and we know exactly what they are, now we know what your 10-year is, your 20-year, your 30-year. And we really start getting into that so you can clearly see what things are gonna look like on the other side of retirement. Because again, as a federal employee, your retirement's not gonna be that bad. But you have to have a plan. And so, you know, that's where we start talking about the protection bucket versus growth bucket in your TSP. Do you want to leave all your money in TSP? If so, where do you want to leave it? When do you start moving money into your Roth your Roth IRAs? We start having those conversations. Do we keep the FEGLI or do we get a outside life insurance to replace the FEGLI? Do we do the Survivor benefit or do we get a life insurance policy to to replace the survivor benefit? Once we have those numbers down, we start to We start to we start to st start to put it all together. And again, while we do 60 days out, that gives us enough opportunity to apply for a life insurance policy in case you want to keep your fake. In case you can't get approved for it, you know, okay, let me apply for outside policy. If I get approved for it, I can drop my fegley. If I don't get approved for it, then I keep my fagley. You're not rushing into those decisions in the last in the last couple of days. We want to make sure you have that ample time to land that plane correctly. That's what we do in that second 30-day window. In the last 30-day window, really, really all we're doing is just making sure our HR is delivering doing that piece. I mean, because there's not much you can do at that point. But another thing we're doing on the outside is we're making sure we're saving money to prepare for when that paycheck stops at the beginning of the year. Because the paycheck's gonna stop. you're gonna get your annual leave, not your sick leave, you're gonna get your annual leave, and then you don't really know when you're gonna get that next check. You might you you might get a partial check a couple weeks later, but you don't know when you're gonna get that full check. And so what you want to start doing is just continuing that savings plan to make sure you have money set aside. We always tell people that last year, you really wanna build up that emergency bucket. because you're you you're gonna need it. I mean, I'm having clients who retired last year at the beginning, I mean b beginning of this year. And you know, they're trying to tap into their TSP because they're like, okay, I ran out of savings. Now I need to go back into my TSP. And so you want to make sure you align yourself with with enough emergency funds that you'll be okay, once once once that once once that check no longer comes. Right. And so let me see. Are there any questions in them? Because this is really I want this to be a a work-in session in this. So, Sean. You said you were retired at the end of the year. How prepared do you believe you are, Sean? Or do you have any questions about what is good what is what it's like for you as you head into that? And same thing with you, Michael. Do you feel like you're prepared as you head into this last this this last couple of months working in the federal government? And again, if everybody wasn't here, I really want to make this a a working session where we talk through actual questions that people have regarding these last 90 days because it's it's it's super important. Oftentimes people don't get the counsel until it's too late. And I want to make sure that you're prepared. Cause I mean, you work 30 years, 20 years in the government, and a couple of mistakes at the end could make a big difference. And so we want to make sure that you're okay. And so one of the things that is is oftentimes talked about is whether to do the survivor benefit or not. when it comes to survivor benefit, it's it's really a personal choice. You know, we you know, I often say is if you have a lot of money in your TSP and your spouse has doesn't is not on your health insurance, if they're not on the federal health insurance, it probably doesn't make a whole lot of sense to do it because one of the big reasons why people do the survivor benefit is so the their spouse can keep the FEHB. but if the spouse doesn't have doesn't is not already on your health insurance and you have a lot of money in your TSP, you could just probably just go the go the life insurance route. And that way that takes care of when you pass, it takes care of that reduction in your reduction from your your pension. And that we see a lot of clients do that. And it works out just fine for them. so that's one of those things that stress folks out. one of the questions that we get a lot is, do you have to leave all your money in TSP when you retire? You don't have to leave all your money in TSP when you retire, but you also don't have to take all your money out of TSP when you retire. So like I hear people talk about that all the time. and so don't don't listen to folks to say, hey, now that you're retired, you got to take everything out. That's not the case. You do not have to do that. You can take it out, but you don't have to take it out. and you don't have to leave it in there. Another question that we get a lot is Well, is my TSP going to continue to grow when I retire? Absolutely it will. Absolutely it will. you can your your TSP will continue to grow. once you retire and it and grow in the same way. The only thing that changes is you're not putting any money in anymore. But you can still leave your TSP in the same funds that it was in while you were working. okay, I see a question here. How far in advance should I submit my federal retirement application? We like to say around that 60 day mark, between the 60 and 30 day mark is what we like to say anonymous. just because it gives it time for them to submit back if there's any mistakes or anything like that. That 60 to 30 day mark is is a good time to submit that application. You get to have it reviewed. if there's mistakes, it can come back. You're not rushed, you're not pressing at that 30 day mark. And that way they can process it and hopefully be d in in most cases, they're done by the end of the year. But I would say not even the 60-30, I would say between that sixty and forty-five day mark is a good time to submit that retirement application. Because at the end of the year, this is a log jam, especially in December, you start submitting it late. And so I would say the sixty to forty five day mark, like mid November, is probably a good time to have it at least done by where should I submit my TSP draw election form? the anonymous it just depends on your age. So I'll just give the answer to i the each way. So when you retire, you don't have to again take your money out of your TSP. Some people do, but you don't have to. and so you're not able to do that though. If you're if you're younger than fifty nine and a half, you cannot submit that paperwork until you they officially retire you. So if you know if you're fifty eight And you retire in December, you're not you're not likely you're not gonna be able to take money out of your TSP until probably about mid-January, until they process the retirement paper. It doesn't mean that you're getting your federal pension or anything like that yet, but the TS they they have to submit the paperwork to TSP for it to show you as officially retired. Once that happens, then you can go into TSP and they they don't have the and and and it's there's no restriction on it. But as far as income goes, that operates the, I mean, operates the same way if you're under 59 and a half. If you're over 59 and a half, then at that point, you just go in there and it doesn't take long, actually. It takes seven days. You just put your, you put your bank state, you put your bank account that you want the money to go to. They have to approve that. That takes seven days. By that next week, you'll start, you'll start receiving money. One, well, let me put like this. If you did it today, by today's Wednesday, if you put your bank account in there today, by next Wednesday, that will be approved. Then you submit how much you want. And within that next week, you'll start receiving the income checks. That makes sense. That's how that's how long it takes. So it takes about two weeks for you to start receiving the income. and that's it. And once you do that, that money will continue to come as long as you set it up right. All right, if I receive the supplement until I reach the age six two, do I have to s start social security or can I wait? That's a great question. So Janine is saying when you when you take so when you when you have the first supplement, meaning for those that don't know, that's what that's considered the early social security that the federal government gives you if you have fifty if you're 57 years old and have 30 years of service. Okay. And you also can get that if you're if you're 60 and have 20 years of service. All right. And so now they will pay you that out until you turn 62. And then that payment stops. At that point, you can take Social Security if you want to, but you don't have to. But the first supplement stops. So let's say, for example, you're getting $3,500 a month from their first pension and $2,000 a month from your first supplement. And are you getting that all the way up to 62? Once you turn 62, You'll still get to 3,500. You won't get to 2,000. But you're you're eligible for Social Security, which is normally higher than the first supplement. So, you know, what people do that don't take Social Security, they then start taking the income from TSP to fill that gap. And then they delay Social Security for to out in the future. That's what most people do, right? Because they probably you more than likely need that extra money to help you cover some things. But most people also just take the Social Security, but you don't have to take it. But you won't get that for a supplement anymore. Okay. And then when should I stop contributing to my TSP before retirement? most people don't stop anonymous contributing to their TSP before retirement. What now, I take I'll I'll say this. What people do do, what people what people do is, like I was talking to a married couple the other just this past two weeks ago, and they're retired at the end of the year, he's retired at the end of the year. And so what they're doing is They're he's no longer contributing to his TSP anymore because he has they have a decent amount in their TSP, over 500,000 in their TSP. And and his wife's still working. And so he said, I'm not gonna contribute to my TSP anymore because I'm gonna take the money that I was contributing contributing to my TSP and I'm gonna put it in my, I'm gonna put it in my bank because I want that to be my emergency funds when I retire, because they didn't have any. Right. So now he has gonna have about four months of emergency funds from TSP. in his bank account when he retires to fill that gap of when he might get that first payment. And so there's never a time when you need to stop. But only in, you know, in the situations like that, it could be strategic to stop because you want to just put money aside for yourself. Cause your TSP is going to be what it is, you know, at that point. I I don't know if that answered the question, but there's never a reason to stop. Most people don't stop. They just, they just stop working and there's no contribution anymore and it's done. any other questions? Okay, I turned 65 the year after I retired. Does my fedly coverage drop then? Yes. So what happens is your fegly basic will begin to drop. It will become free. Like, so let's let's say for example you make a hundred thousand. You make a hundred thousand, your fed you choose a seventy-five percent reduction. When you retire, your fegally cup your fedly basic coverage is gonna be a hundred and two thousand because it's always your salary plus two thousand. And so it it'll be that it's up until 65. Then after you turn 65, you no longer have to pay for it because you have to pay for it even in retirement up until 65. Is is is marginal bounds, like 40 bucks, 50 bucks, something like that, right? Depending on your salary. You pay that up until 65. Then once you turn 65, it becomes a free, it's free. But every month the covers drop. all the way down until it's 75%, mean 25% of whatever your last salary is. So if you if you made a hundred thousand, then the coverage will continue to drop down until it's twenty-five thousand. And then it stops dropping. So that's how it goes. It doesn't drop just completely off a cliff. It just goes down every month. If I pull a lump sum from my TSP the same year I retire, does that get taxed like my regular paycheck or is it treated differently? It depends on what you it depends on how you pull it. So if you pull it to put put it into another IRA, then it will not be taxed. But if you pull it to just put in your bank account, it will be taxed. It's it's taxed like regular income. Let's let's say going back to the 100,000, let's say your first pension and your social security equals 80,000 in taxable income. Okay. And then and then you take 20,000 out of your TSP and just put it into your Navy federal account, right? Then now you have you're going to get taxed on $100,000 in taxable income because it's going to be taxes regular income. So that's how that works. And so you just want to be strategic with it. So you might chop it up into two different years. there's a whole different whole lot of different ways you can go about how you do that withdrawal. you know, and and you know, that's something that we can help with for sure. But if when you take lump sums, you just want to be aware of what tax bracket it puts you in. It also impacts your Medicare premiums. So you just gotta you gotta know you can't just take, you mean you can do what you can do whatever you want, but I'm saying you just want to be smart how you do it so that you're not putting yourself into higher tax situations and higher ermor situations just because you just took a lump sum without understanding the impact. If I wanna re if I wanna retire at the end of December, when do I actually need to submit my paperwork so it doesn't get delayed? Like I said, I think I think mid-November's a safe time. I think mid-November is a safe time to do that. Just because you don't get caught up in the logs and have everybody filing in December. And I say mid-November the latest, probably beginning of November is the best, but but mid-November is probably the latest that you want to do it. And and and one of the things I will say too is just when you're going into retirement, make sure you understand and and and build the lifestyle you want to retire. Like, don't just retire to retire. Retire with the intent of creating a lifestyle that you want to live. I can't tell you how many times I've talked to people that I'm like, look, build travel into your retirement, build vacation, build gifts you want to give to your loved ones, build all this in to the plan so that when you do have when you do retire. You don't feel guilty about it. I can't tell you how many times I've talked to people when they're taking two and three trips a quarter and they feel great. But before we went that we w we actually wrote down the plan, they were afraid to spend money. Make sure you have a plan because if you have a plan, it allows you to vacation like you want, spoil your grandkids like you want, you you know, do the things you want to do, contribute to your church in the way you want to contribute. But having a plan makes all that difference because you worked a long time. There's no reason to go into retirement stress. There's no reason. Over the last 18 years, I've worked with thousands of f thousands of people just like y'all who have retired well. And a lot of them are nervous going into it. But once they saw how their numbers looked, it made it a whole lot easier. And they're very relaxed. We have joyful conversations where we have our annual reviews and we're going over things. And that's the way it should be. You worked a long time for the government. Driving in traffic, long weekdays. Like you deserve to let your hair down, chill out on your patio, and enjoy your retirement. All right. So what happens if you have a TSP loan and they're considering retirement before you can pay it back? So they give you two options, Kevin. You can you can pay it back, which is fine. You're paying yourself back. Or if you don't pay it back, they'll write it off as the income that they gave you. So like let's say you owe $20,000. If you don't pay it back, then they'll just write it off as if they gave you the income. So it'll just go on your the W-2 the next year as $20,000 extra on top of what they're giving you for your pension. So they'll tax it like that. That's how that goes. But it's not something to worry about. A lot of people worry about it. It's not something you need to be worried about. You you have two paths there with that. is that does that make sense, Kevin? You can pay it back if you want, but you're really just paying yourself back. Or they just take the tax, they just they just write it off as the income that they gave you and then you you're done with it. Okay, Sean. Yeah, we you you know, my team is in the chat. They'll set up a one-on-one call. My team also will call you tomorrow as well. but you can you can book a call with the link that we're putting in the chat. And and how we work, right? We we we sit down and we do four calls with you. The first call we call it our retirement readiness call. That's where we just have a conversation, sort of like how me you me and Oli are talking right now. Very casual, kind of understanding what your goals are, seeing if we're able to help. We get an idea where you are, what your service comp date is, how many years you've been in the government, what your salary is, what your social security, all that's we get all that stuff. What your goals are, what your biggest fears are, things you think you're not prepared for that you wish you were. We get all that type of stuff. Then what we do is we we we put all the information into our retirement analyzer and it just shows us like, okay, here's where there are gaps in this person's retirement plan. and then we, you know, we've We've done this a lot of times. We know where, you know, what some of the pitfalls are. And we share it with you on Zoom. We walk you through it on Zoom. And the good thing about that software is, is when we go back into it years later, we can always update stuff. Like come clients come to us, like, hey, Mr Smith, I'm thinking about buying a car. How will that impact me? And it'll show and numbers will just show it, you know? So we'll wield that. Then once we get an idea of right there, what we see together where you are. Then we have what we call our closing the gap session where it's like, okay, this person needs a tax strategy or this person needs long-term care. And then we close the gap. Like we say, okay, well, some people a lot of folks don't need long-term care to work in the government because you have enough of your TSP that you don't need to pay for a long-term care. You just need to structure your TSP in a way that, you know, if something happens to you, there's where the money is. And so we help structure that type of stuff. And then on the full court, we just set everything up for you. Right. So we just we take our time. We do four calls, we make sure we get it right. And the good thing is once we do it, it's there. It's no, it's it's it's there forever. And anytime you have need to make adjustments, we can. and anybody that's retiring in the next 90 days, like congratulations, congratulations, you've had a a great career. and you deserve to retire the way you want, you know. So here to support you in any way we can. We'll be here every Wednesday to the end of the year for these webinars. Regina, the the cost for our services, we don't charge for the calls we take. you know, but if we do things for you, we do have a fee. But it's it's based on what we do for you. So it's not something that's just like a fixed cost we do one size fits all. It just depends on how much we do. but we could discuss that on the call. But but to have the have the individual calls is is it doesn't cost you anything to book a call with us and have a conversation with us. any other any other questions by anybody else? All right. So yeah, our team will reach out to you. anybody wants to book a call that said they do, we'll we'll reach out to you, schedule that retirement readiness call with you, have a conversation with you, see where you are. And look, wishing all of y'all the very, very best. Talk to y'all later.