Category: Thrift Savings Plan (TSP)

An individual is considered a FERS annuitant if they were a FERS employee who had left federal service, was protected by and made a significant contribution to the FERS Retirement and Disability Fund, and who had fulfilled all conditions for immediate retirement and the beginning of a FERS annuity. This includes submitting or having been “deemed to have submitted” a retirement application before passing away.

A FERS-covered employee who delayed the start date of his or her right to an immediate “MRA+10” or “MRA+20” FERS retirement (also known as a “postponed retirement”) is known as a FERS annuitant.

An ex-FERS-covered worker who was eligible for an urgent retirement under the “MRA+10” or “MRA+20” retirement alternative but who passed away before submitting an OPM Form RI 92-19 application to begin receiving the FERS annuity is also “deemed” to have applied and thus qualifies as a FERS annuitant.

An individual who was enrolled in the Federal Employees Health Benefits (FEHB) program as a family (“self plus one” or “self and family” enrollment) at the time of separation from federal service is still eligible for a FERS survivor annuity if their spouse is also qualified. 

Survivor Annuity under the FERS to a Surviving Partner

A surviving spouse receives a full FERS survivor annuity equivalent to half of the deceased FERS annuitant’s pension before the cost of the full survivor annuity benefit is deducted. 10% of the annuitant’s initial FERS gross annuity is required to provide a full FERS spousal survivor annuity. 

This example demonstrates this:

Example: William, a 56-year-old federal employee, retires with a FERS annuity after 35 years of service. He decides to pay his wife, Serena, the 50% FERS spousal survivor annuity. Here is a breakdown of Serena’s early survivor annuity benefit and William’s gross and net FERS annuities (after deducting the cost of providing a complete survivor annuity):

 $45,000 William’s initial gross annuity under FERS

Less than 10%: $4,500 giving a full FERS survivor annuity

Net pension to William of $42,500 (taxable)

If William passes away before receiving a cost-of-living adjustment (COLA) on his FERS pension, Serena will receive the following amount as her initial survivor annuity:

$45,000 divided by 50% equals $22,500 (taxable)

If the annuitant chooses to offer a “less than maximum” survivor annuity, the FERS spousal survivor annuity would equal 25% of the employee’s (annuitant’s) unreduced pension. Remember that the “less than maximum” election required the survivor spouse to have given their formal consent.

 A Cost-of-Living Adjustment’s Impact (COLA) on Survivors’ Benefit

FERS annuitants who retire do not begin to receive cost-of-living adjustments (COLAs) to monthly annuities before the January of the year they turn 62. COLAs raise the survivor annuity in a proportion equal to the annuitant’s entire FERS gross annuity. The first annuity paid to the surviving spouse upon the death of the FERS annuitant will include any prior COLAs applied to the annuitant’s full gross benefit.

 The examples below demonstrate:

Example 2: Similar facts to Example 1, except that William passed away at age 75, having received COLAs for 12 years. His FERS gross annuity, initially $45,000, has been raised to $55,000. William dies while Serena is still alive. Here is a breakdown of Serena’s survivor annuity benefit, Serena’s survivor annuity cost, and William’s gross annuity:

 $55,000 William’s gross annuity under FERS

Less: ($4,500) Giving a maximal spousal survivor annuity which costs money

Net dividend to William : $52,500 (taxable)

Serena will be given the following maximum FERS spousal survivor dividend after William passes away: $55,000 divided by 50% = $27,500 (taxable)

 Annuity for Spouse’s Special Retirement Supplement

The surviving spouse must meet the following criteria to qualify for the FERS spousal Special Retirement Supplement (SRS) annuity:

• Awarded a marital FERS survivor annuity

• Younger than age 60

• Eligible for Social Security survivor (widow/widower) benefits based on the deceased annuitant’s Social Security employment at age 60

• Not entitled to Social Security disability, mother, or father payments based on account of the dead annuitant

Note that (1) the surviving spouse’s failure to apply for the Social Security “parent” benefit will prevent payment of the spousal SRS annuity in cases where the surviving spouse is entitled to a Social Security mother or father (“parent”) advantage because he or she is trying to care for an eligible kid (a child younger than age 16); and (2) the surviving spouse’s earned Social Security benefit is not taken into account when determining eligibility for the spousal SRS annuity.

The spousal SRS annuity is only payable if the dead annuitant had at least five years of reputable civilian service and a minimum of one calendar year of reputable FERS service.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Social Security will likely play a significant part in helping you pay your costs after you retire. Once your time in employment has ended, you must set yourself up with a monthly benefit that will allow you to cover your expenses and have some fun. To make the most of your Social Security payments after you retire, you must familiarize yourself with the program and devise a sound plan. To do that, you’ll need to get acquainted with a few basic principles. Let’s discuss a few things you need to consider.

The longer you wait to file, the greater your benefits will be.

To obtain Social Security, you must have 35 high-earning years. The age of enrollment determines the monthly benefit amount. Full retirement age (FRA) is when you start getting your entire Social Security payout based on prior earnings. Your birth year influences your eligibility for FRA.

You may start getting benefits at 62. Each month you register with FRA reduces your costs by one month. Delaying your file may be wise. Each year you postpone Social Security beyond the FRA, your payouts rise by 8% until age 70. This predicts a 24-32% lifetime increase.

If claiming spouse benefits is a better bargain, then go ahead.

Benefits from Social Security depend on one’s wages. However, your benefit doesn’t have to be based on your income history if you’re not a high earner. When it comes to money, you might claim a spousal benefit instead. A spousal benefit may only be worth half of what your current or previous spouse receives in benefits. Once your husband gets Social Security, you may earn spousal benefits, but you’ll have to wait. Even so, half of your spouse’s monthly benefit may be more than 100% of your own.

After your death, your spouse will be able to claim your benefits.

Even though applying before FRA means you’ll earn less money, you may want your Social Security payments as soon as possible. If you die, your spouse will earn a monthly payment equal to what you get as a surviving spouse. The higher your death benefit, the more money you’ll leave your spouse. Your monthly payment will increase after your death if your spouse is eligible for Social Security based on their employment history. Postponing your application may help your family.

Finally, make sure you understand the rules. Rules and regulations have abounded in the Social Security system. As you near the end of your professional journey, take some time to familiarize yourself with how it all works.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

With today’s complex rules and regulations, taxes in retirement can be a nightmare for most people. Even the most experienced investors are oblivious of the myriad tax traps in 401(k)s, IRAs, and other retirement accounts. As a result, it shouldn’t come as a surprise that retirees aren’t always up to date on every aspect of the tax code and, as a result, overpay taxes. Here are 8 questions that retirees frequently get wrong about taxes in retirement to help you assess your current tax knowledge.

1. Question: Is your tax rate going to be higher or lower when you retire than when you were working?

Answer: It is debatable. Many people make retirement plans based on the assumption that they will be in a lower tax bracket once they retire. However, this isn’t always the case, as several factors can push you into a higher tax bracket.

2. Question: Is it true that Social Security benefits are taxable?

Answer: Yes, you can. Federal income taxes might apply to up to 85% of your Social Security benefits, depending on your “provisional income.” Some states also tax social security. 

3. Question: Is it possible to contribute to an IRA after retiring?

Answer: Yes, you can. You can contribute to a regular or Roth IRA if you earn an income. Traditional IRA contributions used to be limited to those over the age of 70 ½, but that requirement was lifted a few years ago.

4. Question: Is it true that Roth IRA withdrawals are tax-free once you retire?

Answer: Yes, you can. Unlike its 401(k) and regular IRA cousins, funded with pretax cash, Roth IRA contributions are taxed upfront, so withdrawals are tax-free once you retire.

5. Question: Is it tax-free to roll over a 401(k) plan to a standard IRA after retirement?

Answer: Yes, if done correctly. A tax-free rollover from your 401(k) plan to a standard IRA can be done. First, you can take money from your 401(k) account and deposit it directly into an IRA. 

6. Question: Is the income you get from an annuity you own taxable?

Answer: If you bought a retirement annuity, only the portion of the payment representing your principal is tax-free; the rest is taxable. 

7. Question: When must traditional IRA and 401(k) account holders begin taking required minimum distributions (RMDs)?

Answer: At 72 years old. However, it could change to 75 soon.

8. Question: Will you have to pay taxes if your spouse dies and you receive a large life insurance pay-out?

Answer: No, there isn’t. You’ve got enough on your plate at this point, so it’s comforting to know that life insurance proceeds from the insured person’s death are not taxable.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Congress found the prior Civil Service Retirement System (CSRS) program overly costly. It’s for those who spend their careers performing one job, but most government workers don’t remain long enough to qualify for a pension. Government jobs disqualified them from Social Security.

Congress formed Federal Employees Retirement System (FERS). While this system’s retirement benefit is little, its TSP’s 5% match is more substantial. Most government or non-government personnel can take their TSP and Social Security when they depart. It protects Congress better than private-sector measures. FERS requires your hands-on participation.

The CSRS had an automatic pilot. The best non-executive retirement plan in the U.S. is probably still under FERS. Look more into FERS if you want to maximize your retirement funds.

According to some predictions, the TSP will offer retirees 1/3 to 1/2 of their pre-tax wages. Abraham Grungold was called, a successful part-time financial coach or full-time fed with his TSP. “Knowledge is Power” for FERS and TSP. Here’s what he saw:

“Federal employees must understand their agency’s HR policy, travel limits, ethical principles, and federal statutes using agency-issued material. In addition to this, they should be made aware of the risks present in the working environment and online. Statistics on pensions and TSPs must be collected independently by federal officials.

Where can federal employees learn about FERS retirement and the TSP? These disciplines don’t require much time to master. It’s never too early to familiarize yourself with OPM and TSP websites. It’s crucial to understand the basics of your TSP and FERS retirement before making financial decisions. These are my top five FERS and TSP sites. Others require a book or membership to access.

Sources	Research	Cost	Link
TSP news magazine	The performance and evolution of the TSP	No cost	tsp.gov
TSP seminars	Topics of interest to TSP members	No cost	tsp.gov
Federal News Network	Articles related to Federal Employees Retirement System and Thrift Savings Plan	No cost	federalnewsnetwork.com
FED week	Guide for Federal Employees’ Retirement (FERS)	$14	fedweek.com
AARP magazine	IRS and Medicare updates and regulatory changes	Membership is free for those aged 50 or above	www.aarp.org

Consumers have several inquiries concerning FERS and TSP. Nobody is exactly alike. Singles have distinct needs from families. External elements must be considered for a successful FERS retirement and TSP. Many of these choices may provide you with greater power and help you build your retirement savings.”

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Taking on outside work after retirement is not a luxury for some but rather a need for others. However, the double-edged sword of Social Security is that your payments may become taxed if you earn too much outside money. If you think you’ll need to work once you start receiving Social Security payments, you must know how and when they become taxable.

When Does Social Security Become Tax-Free?

Social Security payouts aren’t taxable for many Americans. Benefits are currently nontaxable if your combined income is less than $25,000 for single filers and less than $32,000 for joint filers.

Your benefit will likely not be taxable if you live solely on your Social Security check. However, if your outside earnings increase significantly, you may be subject to taxes.

When Does Social Security Become 50% Taxable?

Social Security benefits are taxed at 50% for single taxpayers earning between $25,000 and $34,000. The range of combined income for joint filers is $32,000 to $44,000, as defined above.

When Is Social Security Taxable at 85%?

After your total income exceeds $34,000, you’ll owe taxes on 85 percent of your Social Security benefits as a single filer. Joint filers with a total income of more than $44,000 are in the same boat.

Is spousal income taken into account?

If you file jointly, spousal income is considered when computing the taxability of Social Security payments. So, even if you are completely retired and do not work, you must include your spouse’s salary when calculating your “combined income.”

Ways to Avoid Paying Social Security Taxes While Working

It can be a delicate balancing act to avoid paying taxes on Social Security benefits while still earning enough to live. However, keeping your total income low makes sense to avoid paying taxes on your benefits.

One technique is to take on modest side jobs to keep you below the tax threshold. Consider the case of a single filer who receives $20,000 in Social Security benefits yearly. You can earn up to $25,000 in “combined income” yearly before taxing under SSA guidelines.

Because combined income only accounts for half of your Social Security benefits, you can earn an additional $14,999 per year and still avoid paying taxes on your benefits. This would increase your total income for the year to $34,999, and you would still be exempt from Social Security taxes.

What Kinds of Side Jobs Can You Do?

Being retired allows you the flexibility to work part-time jobs that fit into your schedule. In many circumstances, you can work a side gig that you enjoy and earn some money without worrying about your Social Security payments being taxed. Some examples include being a guidance counselor, driver, artisan, online instructor, etc.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].