FERS Retirement Planning - Still confused

[Anonymous]

I admit that I have asked this question before, but I am still not clear on an answer (and I have asked others offline as well.) Basically, I'm not sure how much to weigh the annuity in my calculation of what to save for retirement.

I know that if I wait until 62 and 20 years of service, FERS will pay 1.1% of my high-three salary per year of service. At that point, being very conservative, I would guess that it will be approximately $2000 per month (not adjusted for inflation). That is not enough money to live on comfortably, but it is real money. I am also putting 10% of my gross into the TSP, plus my 5% match, so a total of 15% of my gross invested per month.

In the abstract, I feel like this should be "enough." But then I notice that many feds seem to disregard the annuity when planning for retirement and pretend it isn't going to happen. IS that out of concern that the plan will change to eliminate the annuity? Because the annuity is not a meaningful number? I gather there must be something wrong with my reasoning, but I do not know what it is.

Thanks in advance

[Anonymous]

I don't think people ignore the annuity, they ignore the Social Security part of the retirement plan.

So there is annuity, thrift savings and social security.

I assume SS will not be there.

[Anonymous]

Anonymous wrote:I admit that I have asked this question before, but I am still not clear on an answer (and I have asked others offline as well.) Basically, I'm not sure how much to weigh the annuity in my calculation of what to save for retirement.

I know that if I wait until 62 and 20 years of service, FERS will pay 1.1% of my high-three salary per year of service. At that point, being very conservative, I would guess that it will be approximately $2000 per month (not adjusted for inflation). That is not enough money to live on comfortably, but it is real money. I am also putting 10% of my gross into the TSP, plus my 5% match, so a total of 15% of my gross invested per month.

In the abstract, I feel like this should be "enough." But then I notice that many feds seem to disregard the annuity when planning for retirement and pretend it isn't going to happen. IS that out of concern that the plan will change to eliminate the annuity? Because the annuity is not a meaningful number? I gather there must be something wrong with my reasoning, but I do not know what it is.

Thanks in advance

Do they adjust the annuity for inflation? Wasn't sure why you put that in parentheses OP...

[Anonymous]

Do they adjust the annuity for inflation? Wasn't sure why you put that in parentheses OP...

FERS annuitants receive an annual cost of living adjustment.

[Anonymous]

I would not, and don't, ignore SS. Worst case scenario is that it pays 70-80% of current benefits (or that it's means tested which is about the same thing probably).

I think FERS get "COLA-lite"-- something like 1-2 percentage points below the calculated COLA.

[Anonymous]

Anonymous wrote:I would not, and don't, ignore SS. Worst case scenario is that it pays 70-80% of current benefits (or that it's means tested which is about the same thing probably).

I think FERS get "COLA-lite"-- something like 1-2 percentage points below the calculated COLA.

Why is this the worst case scenario? I admit that I do not pay too much attention, and I am not a doomsday type person. But is it really outside the realm of possibiltiy that Congress could pas a law severely curtailing SS to a MUCH lower benefit?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I would not, and don't, ignore SS. Worst case scenario is that it pays 70-80% of current benefits (or that it's means tested which is about the same thing probably).

I think FERS get "COLA-lite"-- something like 1-2 percentage points below the calculated COLA.

Why is this the worst case scenario? I admit that I do not pay too much attention, and I am not a doomsday type person. But is it really outside the realm of possibiltiy that Congress could pas a law severely curtailing SS to a MUCH lower benefit?

Worst case scenario was shorthand for "if the social security trust fund goes broke and is not replenished". I suppose we can all come up with theoretical possibilities, but I don't think repealing social security is a reasonable one, just like I don't think entirely repealing medicare, medicaid, or vested federal pensions is a reasonable possibility.

Personally, I think the only way we lose social security is if the wealthy right wingers convince the current/next generation that we can't afford it and they shouldn't expect it (just like they almost convinced people to repeal the estate tax, which would have been a tax increase for 99.9% of people, but huge windfall for the super-rich).

[Anonymous]

FERS is a three legged stool - SS, 1% annuity (pension) and Thrift Savings. The problem is the first two are promises, which can easily be broken. Thrift Savings is tangible and in the here and now. Thrift Savings can be confiscated through both taxation and/or inflation, however.

Life's a risk, do the best you can, that's all you can do.

[Anonymous]

I see it as a four-legged stool -- i.e., at age 56 I will be free to try something new, earn less money, take a job for love not for the paycheck. But I will still have to work. My pension will be something like $37,000 pre-tax, my TSP will be something like $600,000 +/-, other savings maybe $300,000. The SS benefit kicks in at age 56 but will be minimal ($1000/month). So pre-tax at age 56 I would get something like $50,000, after tax about $35,000. I would have lower expenses but our household income would be roughly half of what it would be working at this same job. So I would need to work to make up for that missing half. I could work part-time or do something paid less well, but I will still need to work, probably for another 15 years at least.

[Anonymous]

Anonymous wrote:FERS is a three legged stool - SS, 1% annuity (pension) and Thrift Savings. The problem is the first two are promises, which can easily be broken. Thrift Savings is tangible and in the here and now. Thrift Savings can be confiscated through both taxation and/or inflation, however.

Life's a risk, do the best you can, that's all you can do.

The annuity is an obligation(at least that portion that you have already accumulated) not a promise.

[Anonymous]

Anonymous wrote:

Anonymous wrote:FERS is a three legged stool - SS, 1% annuity (pension) and Thrift Savings. The problem is the first two are promises, which can easily be broken. Thrift Savings is tangible and in the here and now. Thrift Savings can be confiscated through both taxation and/or inflation, however.

Life's a risk, do the best you can, that's all you can do.

The annuity is an obligation(at least that portion that you have already accumulated) not a promise.

I hope you will be Speaker of the House when I'm ready to retire!

[Anonymous]

In a conservative scenario, I'd count on the annuity, I'd calculate the SS portion at 75% of current estimates, and I'd calculate TSP growth at 2%. Remember, you can also contribute to an IRA. And whether it will be "enough" depends on how much you spend in retirement.

[Anonymous]

For 26 yrs. I maxed out my non deductible IRAs and also saved another 6-10% of my salary, on top of maxing out my TSP contributions.

I never figured SS + FERS annuity + TSP would be sufficient.

I just retired after 26 yrs. and if I take SS at 62 under current calculated benefit, SS + FERS Annuity + 4%/yr. TSP withdrawal will be slightly more than 50% of my salary.

The IRA and other investments (withdrawn at 4%/yr. or less) are what put me over the top to nearly matching my last/highest salary in retirement.