Many of you have have known experts who didn’t always practice what they preach. The married-five-times marriage counselor. The financial planner that has their mother pay his rent. The bookclub president who’s never finished the work of the week. Etc.

But every now and then an “expert” comes along who actually walks the walk. Like Abraham Grungold. He’s a long-time, successful career fed and part time financial coach. He’s done very, very well with his Thrift Savings Plan. And he’ll soon be pulling the employment plug and switch to full-time financial coach/retiree. Typically he’s got a list. It is aimed at workers under the Federal Employees Retirement System (FERS), which covers 97% of the current workforce. FERS replaced the Civil Service Retirement System (CSRS) program where the final annuity was generously based on the employee’s length of service and highest 3-year average salary. And the annuity for life is linked to inflation.

FERS workers must plan their retirement under a system (which is generous by private sector standards) that has lots of moving parts. With CSRS, your annuity is pretty much fixed. With FERS you can raise or lower its starting amount in a variety of ways.

We asked Abraham if he had a plan. He did and he agreed to share it with us today:

FERS Mistakes to Avoid

Last month, I prepared my applications for my FERS retirement and my application for social security. When you near the end of your career, it is essential to devote time and effort to understand and prepare these challenging documents. However, in the case, for new employees, they do not have the luxury of time to read and understand all the documents and forms. New employees are anxious to start their new position and training. They feel rushed to fill out their employment forms as soon as possible. I remember when I prepared my own forms in 1985. The human resource person gave you one form at a time to fill out before you got the next one. They answered questions for you as you were preparing them.

Recently, I spoke with a newly hired employee in my office. I asked her how she found preparing all the forms and how much assistance did she receive. She responded that it was overwhelming and human resources could not go over each form with her. I informed her that she does not need to worry. She simply must fill out the forms to the best of her ability and she can change them later. When you initially received the HR forms, you are anxious to start your new position and you probably did not devote adequate time to review them. Today everything is done remotely, and you lose that human interaction with co-workers and mentors. Even our discussion was scheduled and done remotely. I suggested that she spend an hour or two per week reading the human resources materials and make any necessary changes.

Thinking about your career and your FERS retirement should begin on your first day of employment. On day one, you will fill out dozens of forms and listen to presentations on benefits and TSP. It is important to get started with your TSP retirement plans, and you can adjust along the way. However, there are mistakes that employees make when it comes to basic decisions with employee benefits and retirement, but you can avoid them. So, for your benefit, here are the top 7 mistakes for FERS employees to avoid.

1. Not paying yourself first — TSP employee contributions of at least five percent guarantees a five percent employer match from the government. Thus, you should be taking advantage of this free money every year of your career. With every increase in your salary, increase your contributions to the TSP.
2. Buying government sponsored life insurance — During their career, federal employees spend a fortune on government-sponsored plans. Instead, if you shop in the private sector, life insurance can be purchased at a much cheaper rate for the same type of coverage. The one caveat is that if you have health issues, the federal sponsored plans are okay because they do not ask medical questions.
3. Not buying Long Term Care Insurance — This is a critical benefit for employees who could be injured during their federal career. And it is beneficial for retired feds who need long term care services during their elder years. Obtaining a basic long-term plan is better than having no plan at all.
4. Health Insurance — In order to have health insurance in retirement, you must carry it five consecutive years before retiring. Even an inexpensive self-plan can save you from relying on a partner’s plan since their plan could become too expensive or you could face divorce prior to retirement.
5. Do not retire at age 62 — This applies to FERS employees who are not in a special retirement category. Working to age 62 provides a 10 percent increase in your retirement. Retirement prior to age 62 will leave behind a big chunk of your retirement annuity income. This can result in thousands of dollars of lost retirement income.
6. Closing your TSP in retirement — Deciding to transfer your entire TSP in retirement and closing out your TSP account prevents you from returning to the TSP. Therefore, you should keep at least 500 dollars in your TSP to give you the right to return.
7. Forgetting your divorce agreements — You must consider what you will owe your ex-spouse when you decide to retire. This could be related to your annuity, TSP, and other retirement benefits. Be sure to check your divorce stipulation agreement.

As a financial coach, many federal employees contact me considering the early decisions of their career and their later decisions surrounding retirement. New and mid-career employees want to know which benefit choices best fit them. Employees who are within 5-10 years of retirement want to know when the best year is, financially for them to retire. I perform all their calculations and discuss their income during their retirement. We discuss and plan all their FERS decisions and how they can avoid any mistakes. Retirement is different for everyone, and many factors need to be considered.

Financial success can easily be achieved; it only takes a little effort.

Any questions or comments please contact me at Abraham Grungold – AG Financial Services or my Facebook page at FERS Federal Employees.

Nearly Useless Factoid

By Alazar Moges

The average total home water use for each person in the U.S. is about 50 gallons a day.

Source: EPA

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