Federal Employee Retirement How to prepare What are

Federal Employee Retirement How to prepare & What are your options Presented by Vince Bono: Founder of Federal Employee Advocates Carolyn Tobin: Federal Employee Blog Editor Todd Ensing: Retirement Income Advisor Contact: Vince Bono: bono@vjbono. com Carolyn Tobin: carolyn@federalemployeeblog. com Todd Ensing: todd@federalincomeconsulting. com bono@vjbono. com 1

Retirement Five Important Considerations � � � Your Life Expectancy When you will be eligible to retire Will you be financially prepared to retire When you can access your TSP money Your financial options bono@vjbono. com 2

Average Life Expectancy How many years will you need your retirement income to last? Male Male 45: 50: 55: 60: 65: 70: 75: 32. 16 Years 27. 85 Years 23. 68 Years 19. 72 Years 16. 05 Years 12. 75 Years 9. 83 Years Female Female 45: 50: 55: 60: 65: 70: 75: 36. 31 Years 31. 75 Years 27. 31 Years 23. 06 Years 19. 06 Years 15. 35 Years 11. 95 Years Your pension alone probably will not be enough for you to retire on, so you need other sources of income to last at least this many years beyond your retirement. bono@vjbono. com 3

Eligibility for “Normal” Voluntary Retirement � CSRS: � Age 55 & 30 Years � Age 60 & 20 Years � Age 62 & 5 Years FERS: *MRA & 30 Years Age 60 & 20 Years Age 62 & 5 Years -------------------------------------- *MRA & 10 Years There’s a 5% per year reduction if you are under age 62 Ex: At age 57 your pension amount would be decreased by 25% _______________________________ *MRA is your “Minimum Retirement Age. bono@vjbono. com 4

VERAs & Phased Retirement Voluntary Early Retirement � � The Voluntary Early Retirement Authority allows agencies that are undergoing substantial downsizing, transfer of function, or reorganization, to temporarily lower the age and service requirements. Both CSRS and FERS �Age 50 with 20 years �Any age with 25 years bono@vjbono. com 5

Will you have enough money to retire? Most federal employees should be able to retire and still keep their same standard of living, if their retirement income is at least 80% of their gross pre-retirement income. ◦ ◦ For Sure you will no longer be paying payroll taxes. Hopefully your mortgage will be paid off. Hopefully your children have graduated college. Maybe you will “downsize”. bono@vjbono. com 6

Sources of Post-Retirement Income How do you get to 80% � � � CSRS or FERS-Defined Benefit Pension Social Security. Thrift Savings Plan-Similar to a 401 K Other Sources IRAs �Annuities �Other accounts �Inheritance (My Favorite) bono@vjbono. com 7

Social Security for CSRS � Many CSRS employees will not be entitled to Social Security � 40 credits needed for coverage � CSRS Offset employees will be eligible…But Your Social Security benefits may be reduced by The “Windfall Elimination Penalty” � Numerous Iterations-Go to OPM website and in the Search Box type in “WEP” bono@vjbono. com 8

How do you get to 80% Of your Pre-Retirement Income Your Pension 20 25 30 35 40 42 CSRS Years: Years: 36. 25% 46. 25% 56. 25% 66. 25% 76. 25% 80. 00% FERS 20 Years: 20% or 22% 25 Years: 25% or 27. 5 % 30 Years: 30% or 33% 35 Years: 35% or 38. 5% 40 Years: 40% or 44% Will never reach 80% )<: bono@vjbono. com 9

How do you get to 80% Of your Pre-Retirement Income Social Security � Minimum Age to collect is 62 But. . � There is an Earnings test until you reach your “Full Retirement Age” � � � The longer you wait (up until age 70), the higher your benefit will be. If you Retire & start collecting at 62, your payments will be 25% less than if you Retired & Collected at your “Full Retirement Age”. If you Retire & start collecting at age 70, your payments will be 32. 5% more than if you Retired & Collected at “Full Retirement Age”. All FERS are eligible-Assumes the Full Retirement Age is 66 bono@vjbono. com 10

How do you get to 80% Of your Pre-Retirement Income Your Interim 80% Report Card 1) Go to Slide 9 to see what your Pension % is: If you are FERS at 30 Years = 30% or 33% + Social Security If you are CSRS at 30 Years = 56. 25% + Social Security -------------------------2) Social Security: If you’re a higher paid FERS Federal Employee: (+or-) 20% If you’re a Mid-Level paid FERS Federal Employee: (+or-) 25% If you’re a lower paid FERS Federal Employee: (+or-) 30% If you are CSRS that number could be 0% If you are CSRS-Offset (you might have “WEP” to consider) ---------------------------- Add them up to see what you need to get to 80% bono@vjbono. com 11

When You Can Access Your TSP money � When you leave federal service �Retirement �Quitting government service At 59 ½ if still working __________________________ � There may be early withdrawal penalties: � �If you retire and withdraw the money before the year in which you turn 55 �If you quit before retiring and withdraw the money before you reach 59 ½ bono@vjbono. com 12

How You Can Take Your TSP money � Single payment �No more than two total �One is allowed at 59 ½ if still working � Series of monthly payments �Can change amount annually �Can’t stop �Can change to one final payment bono@vjbono. com 13

What Can You Do With Your TSP Money Purchase a single premium immediate annuity You have no choice as to the company. This is risky because if you need money for an emergency, you have no access to it. _________________________ Transfer or rollover with the company of your choice �Direct transfer avoids withholding bono@vjbono. com 14

Alternative TSP Investment Choices Nobody can deny that the TSP Funds over time have performed pretty well. But what happens if you want to retire within the next 10 years and another 2008 occurs. Then what? On January 1 st of 2008 many federal employees who planned on retiring that year are still working today because they had their TSP money invested in the C Fund, S Fund, L Funds or I Fund and suffered massive loses in their TSP value. Neither Vince Bono, Carolyn Tobin, Federal Employee Advocates, or Federal Employee Blog sell any form of investments, annuities or insurance products bono@vjbono. com 15

The 2008 “Meltdown” The C Fund Lost 36. 99% The S Fund Lost 38. 32% The I Fund Lost 42. 43% If after taking those loses in 2008 you put your money in the G Fund in 2008, you are still nowhere close to just breaking even. In fact you are still years away from that! Fixed Indexed Annuities Lost Nothing! bono@vjbono. com 16

Fixed Indexed Annuities A fixed Indexed Annuity allows you to participate in the upside of the stock market without any risk whatsoever to your Principal. The first annuity in the United States was “invented” by the Presbyterian Church in the early 1700 s. Ben Franklin, utilized annuities to help fund the American Revolution and the rapid growth of both Philadelphia and Boston. Annuities are so popular that Ben Bernanke, the former head of the Federal Reserve, once disclosed that his major financial assets were vested in two annuities. bono@vjbono. com 17

How Does Your TSP Earn Money � � Black. Rock Institutional Trust Company, N. A. manages the C, S, & I Funds. “These Funds are invested in order to replicate the risk and return of their benchmark stock market index”. They are not managed to Maximize Gains or Minimize Losses, which is why in 2008, those funds failed you. For example The C Fund's objective is to match the performance of the S&P 500. That’s why in 2008, it lost 37% of your money. bono@vjbono. com 18

How Does Your TSP Earn Money � The S Fund's objective is to match the performance of Small to Medium-Sized Companies that are in the “Dow Jones U. S. Completion TSM Index”. That’s why in 2008, it lost 38. 32% of your money. � The I Fund's objective is to match the performance of the “Morgan Stanley Capital International EAFE Index”. That’s why in 2008, it lost 43. 43% of your money. bono@vjbono. com 19

How an annuity earns money Participate in the upside of the market, without any of the risk Similar to your TSP, the performance of a Fixed Index Annuity is tied to a stock market index. The most common “Crediting Method” is the S&P 500, but most companies offer numerous other options for you to choose from, such as the Dow Jones Industrial Average and the NASDAQ, Unlike your TSP, if the chosen crediting method in your Fixed Indexed Annuity goes down, you don’t lose money. Best yet, all prior gains are Locked-In. So say in 2015 you earned 9% in your Fixed Indexed Annuity and in 2016 the stock market crashed, that 9% can never be lost nor can any other prior gain in that annuity be lost! bono@vjbono. com 20

Access to your Funds When your annuity contract expires, you can: 1. Take the money in one lump sum. 2. Receive a guaranteed Lifetime Income. 3. Do combination of both #1 and #2 4. Roll the money into another Annuity bono@vjbono. com 21

Annuities with a “Unique Twist” Long Term Care Protection According to the Wall Street Journal, 70% of people over age 65 will require long term care, whether it be in a facility, or their home. The biggest misconception is that Medicare, or a Medicare Supplement Plan will cover your long term care expenses, but they don’t; the money has to come from your savings or retirement sources. With costs reaching or exceeding $250. 00 a day, that can deplete your financial reserves in no time! bono@vjbono. com 22

Annuities with a “Unique Twist” Long Term Care Protection There are Fixed Indexed Annuities on the market offering significant Long Term Care protection, that can actually exceed your annuity deposit amount by 200% to 400%. As an example, if you put say $50, 000 into one of these “Hybrid Annuities”, it could provide you (and your spouse) with up to $200, 000 of Long Term Care protection, while at the same time growing your money just like a conventional Fixed Indexed Annuity, and in some cases on a tax free basis! bono@vjbono. com 23

Life Insurance with a “Unique Twist” Long Term Care Protection The same principle can hold true with a handful of Life Insurance policies. They too can offer significant capital appreciation, long term care benefits potentially tax free, with the same 200% to 400% long term care accelerator, and of course a death benefit. Ask your Host for details when they contact you! bono@vjbono. com 24