Lots of people find Facebook a waste of time. And/or boring.
Until they don’t! Like me.
I got two Facebook posts/messages this week about three old friends. A married couple and a former work buddy.
The couple’s posts are often interesting. Lots of travel. Visiting grandkids, etc. He worked for the Public Health Service for 30 plus years. She had a little less time with the World Bank. They retired in their early 60s. With good, and good-for-life monthly retirement benefits, and health insurance with the employer paying most of the premium. Now they have His and Hers Volvos. Beach home. This week they’re in West Palm Beach watching the Washington Nationals trying to regroup in spring training. But that’s another story…
The other Facebook item was from a former coworker asking about someone we worked with for years. Now he’s dropped off the grid, at least to us. Maybe intentionally. He retired about 20 years ago on a decent but fixed (no inflation adjustments, ever) pension from our old employer. He took his 401k with him (about $200k I think) and devoted full time to managing his portfolio. Day trading. He apparently lost everything within a year. Then a series of jobs in big box stores. Then nothing.
The couple did their homework, understood their annuity and TSP, and crunched the numbers. They are living at least as well in retirement. And not working.
My former buddy took another route. He left with a smaller (noncontributory) fixed pension benefit. He counted on it, and building his portfolio to provide for him in retirement. Except when last heard from, in his 80s, he was still working.
So, you want Palm Beach? Or peanut butter? Or something in between, but comfortable. Important consideration: Know when to quit! And often later is better, even if you could get by leaving the job earlier. So how do you maximize your retirement income? We asked benefits expert Tammy Flanagan who plans fed retirements for a living. She’ll be my guest this morning at 10 a.m. on Your Turn (www.federalnewsnetwork.com or 1500 AM in D.C.) talking about how relatively easy — and smart — it is to boost your retirement income. Meantime, she sent this outline of what we’ll be talking about at 10 am. In this example it shows how it would work for an employee making $80,000:
Length of Service at age 60: 19 years
19 x $80,000 x 1% = $15,200 x .90 = $13,680 (10% reduction under the MRA + 10% retirement because employee didn’t have 20 years of service at age 60 to qualify for an unreduced retirement)
Length of Service at age 61: 20 years
20 x $80,000 x 1% = $16,000 + $12,000 = $28,000 (The extra $12,000 represents a FERS supplement of $1,000 a month payable to age 62 when retiree could file for SSA and get an even larger SSA benefit based on their lifetime of FICA taxed wages)
Length of Service at age 62: 21 years
21 x $80,000 x 1.1% = $18,400 + $24,000 = $42,480 (The $24,000 represents the SSA benefit payable at age 62 of $2,000 a month from their lifetime of FICA taxed wages)
Of course the person who left at age 60 could claim their SSA benefit, but the gap would still be close to $5,000 a year or $600 a month in their FERS basic retirement benefit — for life! They would have benefited from two more years at their presumably highest earning years added to their SSA record, and two more years of contributions and growth to their TSP account.
They could withdraw $24,000 a year from their TSP account so that they could receive $43,000 a year by delaying claiming SSA to age 70, and then take much smaller payments from the TSP so that they will satisfy the required minimum distributions at age 72.
So is it worth considering working longer to protect your buying power in retirement? Or is that too horrible a concept? Many will probably conclude it’s worth putting it high up on their retirement planning checklist. And passing on to a younger FERS friend who is living with the thought he or she may leave sooner than they should.
Tammy Flanagan works full-time-plus as a retirement consultant. She’s helped lots of feds make life-improving decisions. And she can be reached at Tammy@retirefederal.com.