June 20, 2005

Retirement Time Line Review

I retired December 31^th of 2004 and my first journal entry was August 17^th, about 4 months before I retired.  This article outlines the steps you need to take before you retire based on my personal experience. You will find excerpts from my journal entries for key events. Go to the dated entry in the journal located on http://federaljobs.net/retire to review the entire entry for a specific date. If you know of anyone that is anticipating retirement feel free to forward this article to them. I’ll cover what to expect the first 3 months after you leave in next week’s article.

One year before retiring 

• Contact your personnel office and obtain annuity estimates for several tentative retirement dates. Also, review your benefits, financial position, and draft a basic estate plan.

August 17^th, 2004 

Time does fly, or at least it seems to. Here I am 55 years old - could have retired May 18th of this year - and I'm still working. Even after two years of research I'm just getting things wrapped up so that I can leave knowing I'll have a sufficient annuity and other income to live comfortably. I also worked to reduce debts and towards completing, signing, and funding our wills and trusts. Still not quite there yet but will be soon.

Note: I used  WillMaker Plus software and the book  "Plan Your Estate"  to draft our estate plans, wills, and trusts before leaving. You can review these resources and use the annuity calculator located on http://federaljobs.net/retire.

• Set your retirement date and complete your forms.

September 20, 2004

This week I set my retirement date for November 30, 2004… I also reviewed my paperwork to make sure I had all of the forms filled out properly. All I have to do is put the date on the forms and mail them to personnel in New York. I intend to do this in Mid October so they will have them about 6 weeks before I actually leave.

(Note: I changed my retirement date to 12/31/04 several weeks later.)

·        Schedule a comprehensive physical – BEFORE YOU LEAVE

October 22, 2004

Well, time continues to fly by and I just got back from the doctor's office. I went in for a colonoscopy. I mentioned in an earlier journal entry that I scheduled a physical this year and that I was dreading going in for this check. My doctor tried to get me to do this at 50, again at 53 and when he suggested it earlier this year when I turned 55 and I reluctantly agreed. It wasn't half as bad as I had thought it would be and it is an excellent preventative check for detecting colon cancer. If you have been putting this check off, don't. The worse part was the prep the evening before and it was tolerable. I now have a clean bill of health - and for that matter a very clean colon at least for the time being.

·        Send in your forms (6 to 8 weeks before your departure date)

October 26, 2004

Well, I sent my retirement paperwork in to personnel today and feel relieved that I finally put a date down on paper. Not the date I originally mentioned earlier in my journal but a new slightly later date, December 31, 2004....

I called personnel today to advise them that my paperwork is on the way. I also sent in a SF 2808 Beneficiary election form that personnel will certify and return to me for my records. I sent in the following forms and paperwork:

¨       SF-2801 Application for Immediate Retirement (CSRS)

¨       SF-2818 FEGLI election form

¨       SF-2808 Designation of Beneficiary Form for CSRS

¨       SF-1199A Direct Deposit Sign-Up Form

¨       A copy of my DD-214 Military Discharge Record

You will also need to fill out your agency’s Employee Clearance Record and Security Termination Statement. On your last day you have to take your signed clearance record to your office and turn in any personal items such as computer, cell phone, pager, credit cards, Ids, keys, etc. If you neglect to do this your lump sum leave payment and first estimated annuity check will be withheld until this is done.

Note: FERS employees must submit a SF-3107 instead of the SF-2801. Visit http://federaljobs.net/retire and select the forms menu selection to download forms.  

• Personnel Office Acknowledgement Letter Received

November 3, 2004

…I received an acknowledgement letter today from our personnel office advising me that my retirement package was received and is being processed. They listed the personnel specialist that was assigned to process my package and directed me to call them if I had any questions. The personnel office suggests that you send in your paperwork at least two months before your retirement date. This gives them sufficient time to process and check the paperwork so that your first interim annuity check will arrive on time.   

I reviewed my sick and annual leave balances this week and I checked my FAA issued personal property in preparation for turning it in when I leave. I can use my year of unused sick leave towards my annuity and I intend to sell back 448 hours of annual leave. The one year of sick leave takes me to 36 years and seven months total service and increases my annuity by 2% of my high three average salary. 

I met with my reporting office management team this week to discuss transition plans for when my assistant and I leave on December 31^st. We discussed who would be assigned to backfill my position and when he or she would be coming over for briefings and general familiarization before my departure.  

• Review Your TSP Account Withdrawal Options

December 6, 2005

I replied to a visitor’s questions on TSP accounts.

The key is whether or not you need the funds to live on. I'm retiring from the Federal Aviation Administration at the end of December and I'm leaving my TSP intact for the time being…  

I can tell you that the TSP is one of the safest investments you can have considering that you have NO market risk with the G-Fund. The G-Fund won't decrease in value. Private sector mutual funds that offer government bond funds can fluctuate in price and most, if not all, charge much higher management fees than the TSP. You do have to be cautious of the fund mix though…. 

Here are some links to help you decide what to do with your TSP when you retire:

http://www.nitpinc.com/NITPITK/Columns/wealthpart1.asp  What to do with all of this wealth? Part 1 of a 4-part Series
http://www.nitpinc.com/NITPITK/Columns/wealth2.asp  (Part 2)
Link to Parts 3 and 4 on the left column of either of the above listed articles. Very informative.

http://www.tsp.gov/features/chapter13.html
http://federaltimes.com/index.php?S=235395

The four articles from the National Institute of Transition Planning (NITP) are very helpful. I hope this helps with your personal decision.

• Retirement Luncheon

December 16, 2004 

My retirement luncheon was yesterday and I have to say it caught me off guard. Even though I’m looking forward to leaving, it was humbling to see the turnout and to be on the receiving side of so many kind words…  

One thing that I wanted to say was that retirement for me is similar to publishing a new edition of one of my books. When I update a title I often add a new chapter or appendix, and revise outdated data as necessary throughout the book. I’m just adding a new chapter to my life. I can’t change or edit the earlier chapters — if we only could — but I do have control, to some degree, over what goes forward from this point on. I'm really looking forward to this new chapter in my life, however. It is always difficult leaving good friends and that’s why it was difficult addressing the people that I respect and have worked with for all these many years…   

I suggest that when your retirement luncheon or dinner is planned write down the names of the key people to thank and key events in your life that you want to talk about. Emotions run high for the retiree during these events and the best way to remain in control and to stay calm is to be prepared…

• Departure Date

December 29, 2004 

I’m between Christmas and New Years and so close to retirement that I can taste it. This morning I called our division office because I still didn’t receive a copy of my Voluntary Retirement SF-50 personnel action form or my SF 2801-1, Certified Summary of Federal Service.  Typically you receive this information 4 to 6 weeks after you submit your paperwork along with OPM contact information that you will need to follow-up on the status of your annuity and benefits. The person I contacted went to the personnel office and verified that my package had been sent out Monday and she faxed me a copy of my SF-50.

The SF 50 listed my retirement date, salary, current benefits, and in the remarks column it stated that I elected to continue health benefits coverage. It also stated that a SF-8 was issued to the employee. I’m not sure what that is yet since I still don’t have my package. Hopefully it will be in the mail today or tomorrow at the latest.

A comprehensive list of questions for those within one year of retirement is posted on OPM’s site at http://opm.gov/retire/html/faqs/faq10.html .

On a personal note I had an interesting and productive week. I purchased an IPOD Shuffle and it is amazing. You can load up to 120 songs on the IPOD from your computer and play them direct from your play list or randomly shuffle the list for your listening pleasure. For about $99 you get 512 Meg memory that holds 120 plus songs and it weighs less than an ounce. I loaded about 15 music CDs on to my computer hard drive using IPOD’s Itunes program and it condensed them to less than a gig memory. The fidelity is great and my wife and I use it for walks and to work around the house. You can even burn random selections from your play list to hard CDs for the car. Overall, an exceptional product. You can also use it for flash memory and optional equipment is available for some models that allow you to use it like a tape recorder or play it through your car stereo system. 

Dennis V. Damp (Retired)
http://federaljobs.net/retire
ddamp@aol.com

June 27, 2005

Retirement Time Line Review (Cont)
What to Expect the First Three Months After Retiring

This article outlines what to expect the first three months after retiring based on my personal experience. I retired December 31, 2004. You will find short excerpts from my journal entries for key events. Go to the dated entry in the journal located on http://federaljobs.net/retire to review the entire entry for a specific date. If you know of anyone that is anticipating retirement or recently retired feel free to forward this article to them.

First Three Months After retiring 

• Learning to slow down and smell the roses.

January 7, 2004

It has been a week since I retired and I have to say that I’m pleased with my new routine. It has been a little difficult slowing down. I still catch myself pushing to get things done and have to remind myself that I’ll be home tomorrow and can pick things up then. I’m as busy as I ever was, however I’m having a lot more fun with the freedom that you have in retirement. I still hesitate to call this retirement! My routine is to get up at about 7:30 am, make coffee, eat a light breakfast and then commute about 20 feet to my home office... I intend to reintroduce myself to one of my hobbies this weekend and also hang some of my FAA retirement plaques and pictures… 

• Sew up loose ends and starting new activities.

January 13, 2005

…It took awhile, several days after leaving, for the reality to set it – this was going to be my new routine for the foreseeable future. I’m adjusting well and I haven’t had any panic attacks about leaving too early. It is almost like I haven’t missed a beat and there hasn’t been one day where I was bored and had little to do. 

I called my auto insurance company last week to advise them that I retired and no longer commute. They reduced my auto insurance premiums about 10%. Not a bad deal…

I’m doing other interesting things. For example, last week I purchased Ben Hogan’s Five Lessons: The Modern Fundamentals of Golf, walking 2 miles each day, and I purchased Pilates work out bands and additional weights for my hand bar bells…

With all that said I suppose what is really enjoyable is the ability to forget about doing anything… I went upstairs yesterday at 1:30 in the afternoon to get a cup of tea. An old movie just came on and I sat down and watched the whole thing – in the middle of the day!  I haven’t done that in YEARS. I’m sleeping better, more relaxed and oh well, I don’t what to rub it in so suffice to say I’m having too much fun.   

• Received last pay check and pay stub.

January 21, 2005

I received my last government pay check this week and discovered that once you retire you can’t access Employee Express… I called their help line and discovered that retirees are automatically removed from the list when their retirement personnel action is processed. The good news is that at least I know that my SF-50 was processed. I haven’t heard anything from OPM yet but it’s early yet, only three weeks into retirement. OPM offers similar online services for retirees. However, you need your retirement claim number to log on to their system… 

…My office sent me a copy of my pay stub and I suggest that you keep this copy with your retirement records. For one thing it shows exactly how much you contributed to the Thrift Savings Plan. You can calculate your total gains by dividing your current TSP account balance by what you contributed, the amount on your last pay stub. Since you can’t contribute any additional funds to your account your total contribution listed on your last pay stub is your investment basis…

Another reason to keep a copy of your statement is that you will have an official document that shows the deposits you made during your career...

• Correcting last pay errors and first visit back to office.

January 28, 2005

Last Friday Nick and I stopped over at work after meeting for an early breakfast. It was strange going into the office and having to go through a full security inspection and pick up visitor's badges

Our agency administrative officer called this week to let me know that my pay problem will be resolved shortly. They inadvertently charged me 9 hours annual leave instead of coding the 31^st of December as an observed holiday. I'm still waiting to hear from OPM. Hopefully, I'll hear from them soon and I should receive my lump sum leave payment by mid February at the latest.

• First annuity payment received.

February 4, 2004

…I received my first annuity payment on February 2^nd and it was about 70% of what I anticipated my full annuity would be. OPM sends out an estimated annuity payment until they review and certify your retirement paperwork... On Wednesday of this week I received a letter from the FAA Human Resource office advising me that my paperwork was sent to OPM on 1/21/05 along with my register number and new pay office number. I was surprised that just one month after leaving I had my first payment automatically deposited into my checking account.

• Received Lump Sum Payment and Thrift Plan account summary

February 14, 2005 

…The Thrift Plan sent me a summary of my account along with a pamphlet on withdrawal options. I received a pay stub for my lump sum payment only 6 weeks from the day I left, not bad. So far this month I received my first estimated annuity on the 2^nd and 448 hours of pay for my annual leave today. There is still one small pay problem left to resolve. I and many others who retired on December 31^st were charged 9 hours annual leave instead of holiday (observed) pay. Uncle Sam still owes me 9 hours of annual leave buy back. Our AO is working on the issue and assured me that it was an error and would be corrected soon.

Caution: I overdid my exercise routine. I did too much too soon. I may need arch supports to be as active as I want to be. I really enjoy walking and was disappointed that I had to stop my daily walks until my feet  get better. 

• Received annuity statement and letter received from OPM.

February 22, 2004

...I received a letter from OPM explaining the interim deductions and payment process. I also received an annuity statement form R138-23 that looks similar to the pay stub I received while working. There was a large discrepancy between the letter and statement’s federal tax deduction. I used OPM’s federal tax on-line estimator before retiring and my estimated federal tax was about $150 more than the statement indicated however the letter almost doubled the federal tax deduction and my interim check was reduced by the larger amount. I called to clarify the issue early today.

The retirement coordinated explained that OPM takes double the tax due out of the first estimated payment. They offered to refund what I overpaid in the next estimated allotment however I declined the offer. I generally owe taxes each year anyway. The letter goes on to say that I will soon receive a W-4P-A form that I can use to adjust my federal tax withholding if desired.

It can be difficult reaching OPM by phone especially on the first day of the week. However, just keep redialing the toll free number and you can generally get through. Expect to be on hold for 5 to 15 minutes or more.

The retirement coordinator further explained that my health care and life insurance payments will be deducted and paid to the providers when they finish processing my application. She was very helpful. I also discovered that you can have two additional allotments sent each month to banks or credit union accounts. I am fairly impressed with OPM’s retirement services…

• Received new health care cards and received 2^nd estimated annuity check.

March 3, 2005

..I went online to check my bank account statement and discovered that another annuity deposit was made on March 1^st, just like clock work. The annuity check increased because they took out the correct amount of federal taxes this time.

My wife and I received new Health Care cards this week. I called Health America to see why new cards were issued when I had already received new cards in early January . They explained that retirees are assigned a different group number. They changed the last digit in the group number to an 8. The coverage remains the same.

I still have one outstanding issue concerning my last pay before retiring.  Our Administrative Officer called this week and said that the problem will be resolved shortly…

• OPM processed my retirement application.

March 10, 2005

I received a letter from OPM early this week telling me that my retirement paperwork is complete, and in approximately 4-6 weeks I will receive a booklet entitled, Your Federal Retirement Benefits. The booklet is personalized with the retiree's specific information including related benefits. They also sent me official copies of two forms for my records, my SF-2808 Designation of Beneficiary for my Civil Service Retirement and a copy of SF-2821 Agency Certification of Insurance Status for my FEGLI coverage…

·         Received OPM Retirement Booklet outlining my government retirement benefits.

March 15, 2005

WOW!!!  Do you remember watching the Wizard of OZ while growing up? Dorothy, towards the end of the movie, clicks her heels together and says over and over again, “There’s no place like home, there’s no place like home, there’s no place like home………” That’s how I felt when I opened my mail this weekend. I received my OPM retirement benefits book entitled, “Your Federal Retirement Benefits.” The letter I received last week said I would receive this in 4 to 6 weeks. It was a pleasant surprise when I opened my mail Saturday to find this jewel.

My annuity was exactly $1 less than the estimates I received before retiring. What a relief. The booklet gives you tons of valuable information ─ about all you need to know about your retirement. It includes toll free phone numbers, Internet, and e-mail addresses to contact if you have questions… The only thing that I still need is my PIN number to access the OPM retirement site. The booklet says that it will be sent under separate cover in several weeks… 

Exactly 3 months after retirement my paperwork was processed and it all came out as planned thanks to a lot of pre planning and forethought. If you want to be at peace in retirement I suggest that you go through the analysis I did, evaluate where you are and where you will be financially when you decide to exit the government. You will find a sample and easy to use evaluation spreadsheet with a free downloadable copy at http://federaljobs.net/retire/retirecosts.htm, Click on "Pre and Post Retirement Analysis." …

·         Received OPM web site access PIN number.

March 24, 2005

I received my OPM PIN number last Wednesday, only a few days after receiving my Federal Retirement Benefits booklet and I signed on to the OPM retirement benefits site late last week at www.servicesonline.opm.gov/. You can do just about everything that Employee Express offers employed workers. You can elect a savings bond deduction, initiate various allotments, change benefits, and much more...

I was also pleased to receive a final "Statement of Earnings and Leave" from the FAA correcting the annual leave that I was incorrectly charged on December 31st. Overall, I have to say that my initial concerns were unfounded, everything has gone smoothly and so far without a hitch.

While reviewing my Federal Retirement Benefits booklet I discovered a very interesting fact that spouses of federal retirees will appreciate knowing. I should have been aware of this but I didn't focus on it until I sat down this week and did the math. When you sign up for full survivors benefits your spouse will receive 55% of your full annuity. Your annuity decreases by approximately 10% when you elect full survivors benefits. What this means is that your spouse will receive 55% of your full annuity and in my case my wife will receive 73% of our current reduced annuity. The only reason I mention this is that spouses know what you get per month and automatically think they are going to get 55% of what you are getting now. That's not true. Your annuity is reduced when you elect survivors benefits. My wife was pleased to hear that she will be getting 73% of what we are getting now, not 55%...

• Received Annuity Adjustment notice from OPM. Also received FAA retirement plaque.

March 30, 2005

I received a Notice of Annuity Adjustment, form R138-23, in the mail this week. It shows the final annuity with standard deductions for FEGLI, health benefits, and federal taxes. My first full annuity check will be deposited April 1st into my checking account. Last Thursday I stopped in at work to pick up my retirement plaque…

I called Long Term Care Partners to check on how to have my Long Term Care payments deducted from my annuity. All they needed was my CSA number. They notify OPM and the deduction will start with the June 1st payment..

Dennis V. Damp (Retired)
http://federaljobs.net/retire
ddamp@aol.com

July 1, 2005

Having Too Much Fun, Investments, and OPM Update

Its been six months since I retired and the weeks just fly by. I attribute the time warp to “time flies when you are having fun.” I have to say I’m having a ball and each week brings new insights, challenges, and just down right fun and enjoyable things to do. I suppose it’s a matter of attitude. First and foremost I’m still vertical – not sick or six feet under – a blessing of and in itself. Secondly, I’m at the point where my business is on autopilot. Thankfully, I started Bookhaven Press 20 years ago and developed numerous strategic partnerships that perform the tedious work and I kept the creative and fun work in-house. 

I received an annuity adjustment notice from OPM this week. My Long Term Care allotment was incorrect. OPM was only taking out half the monthly payment. I called the insurance company and they arranged with OPM to increase the allotment. 

In previous journal entries I discussed the advantages of government “I” bonds and how attractive they were compared to Certificates of Deposit. One year ago I purchased “I” bonds through the “Treasury Direct” purchase program. My intent was to confirm that the interest advertised fully accrued over a year. After reviewing my account I discovered that the interest was less than expected and I called the Treasury to investigate. The difference is the 3 month early withdrawal penalty. If you cash your bonds in within five years of the purchase date the Treasury deducts 3 months interest. Your balance reflects the penalty until your bonds are a full five years old. The interest is a little hard to calculate because it changes every 6 months. There were three different interest rate periods for the bonds that I purchased in May of 2004. The overall yield was 4.4% which was better than any CD that I could have purchased for that period. The current “I” bond rate is 4.8%.  

I transferred all of my Thrift savings account funds on June 28^th to the “G” Fund. I was concerned that the “Feds” were going to increase rates - which they did on June 30^th by ¼ point - and I was concerned about the negative impact of rising oil prices on the economy. One of the major shipping companies significantly missed their projected earnings target due to increased fuel costs. If I was still employed and had 10 years to go before retiring I would have ignored it all. However, now that I’m retired I’m more conservative.  I also have more time to evaluate my investments. 

On the fun side of the equation I restored a circa 1910 traditional Seth Thomas oak cased mantel clock with Westminster Chimes. I purchased the clock many years ago at a flee market with the intention of restoring it when I retired. I ordered a new mechanical movement last week and am waiting for delivery.  

On a personal note, my feet and legs are finally getting caught up to my retirement routine. Before leaving I thought both my mind and body were ready to take the plunge. I assumed too much. It has taken a full six months for me to physically handle the much more active life that I’m living in retirement. I’m now walking every day in the early morning for 1 ½ miles and still have plenty of energy to do all the other things that keep me busy during the day. I still have some discomfort but each week it gets less and less.  

More to come next week and I wish you and yours a pleasant and safe 4^th of July holiday.  

Dennis V. Damp (Retired)
http://federaljobs.net/retire
ddamp@aol.com

July 7, 2005

Your Investment Mix, Annuity & Helpful Information
(Yes, retired feds get an annuity)

I’ve received several email messages this week from journal readers. One asked why I switched my Thrift Plan mix to 100% G fund. I’m only 56 and some advisors suggest that your investment in stocks should be limited to a factor of 100 minus your age. For me that equals 44% in stocks and 56% in cash equivalents such as Certificates of Deposits, money market and checking accounts, Treasury Bills, Notes and Bonds, and I and E Savings Bonds. That formula or investment mix doesn’t necessarily apply to federal CSRS retirees because we receive a fixed monthly benefit that is adjusted annually for inflation. Federal retirees have more latitude because of our fixed benefit than most. 

The primary reason I switched to the G fund is that I use my Thrift Plan more for my cash equivalents accounts. I was concerned about the market in general due to high oil prices, pending interest rate increases, and wanted to preserve my capital. The G-Fund has NO market risk and the rate of return, even in low interest markets, is well above the average. Last year the G-Fund earned 4.30% and over the past 10 years the compounded rate of return was 5.75%. A financial advisor that I know was also surprised that I have all of my Thrift investment in the G Fund and further indicated that the average yield last year for all government bond funds was around 2.2%. I showed him the statistics on the G Fund and he understood why I switched. The advisor wasn’t aware that the fund has NO market risk and that the average yield was twice what the private sector bond fund yields were. Other federal retirees use their Thrift Plan for basic stock investments and mix their investments between all or several funds of choice and that’s fine as long as you have cash accounts that you can tap for major expenses and emergencies. I looked at my account balances earlier today and noted that the G-Fund share price increased from $10.91 to $10.92 this week. All of the other funds have decreased since I switched on 6/29/05.  

Another person asked why I purchased an annuity. He saw several of my journal entries where I mention my government annuity and assumed that I purchased an annuity with my Thrift Plan or though other means. I didn’t. The annuity that I mention frequently - and with reverence - throughout my on-line journal is my Civil Service Annuity (CSA). OPM calls your monthly benefit an annuity and it does fit the definition when you think about it. All of the money you contribute throughout your career buys you a lifetime annuity at a very attractive price I would say. Several others either called or emailed requests to be added to my weekly article mailing list. If you would like to receive a direct copy of my articles send an email message to ddamp@aol.com . I’ll add you to my list.  

All in all it’s been a very busy week. I called my FAA replacement today and asked him how it felt to return to work after a very long weekend and holiday. I forgot what that feels like!!!  I know I’m rubbing things in a bit – but it’s my journal. I also did something I’ve wanted to do for years. I attended two estate auctions and plan to attend more this summer and fall. They were a ball and both offered free lunches and refreshments – right up a retiree’s alley I would say.

I inadvertently discovered a very informative and free on-line newsletters for retirees and those planning to retire soon. Its called The Goodlife and I discovered it while searching online for information about a family medical condition. The subtitle of the publication is "A Monthly look at senior lifestyles."  The May issue had articles on Tai Chi, Supplements and a healthy lifestyle help your eyes, Medicaid cuts, good foods for the heart, Looking at long-term care options, and much more. Visit there web site at http://paradisepost.com to read and print out their informative newsletter

More to come next week.

July 14, 2005 

Determining Take Home Retirement Pay and General Investing Issues

 I was recently asked what percentage of my pre-retirement take home pay I receive in retirement. Many aren’t fully aware of what they will have to live on relative to their federal take home salary when they elect to leave. It’s a valid question. My percentage of take home pay in retirement is 71.3% of what my pre-retirement take home pay was. I get 71.3% of what my take home pay was when I worked. My retirement was based on 36 years and 7 months of service. The annuity estimate that I obtained from personnel before leaving was only $1.00 less than my actual annuity. You will find a helpful annuity calculator at http://federaljobs.net/retire/annuity.htm. 

These are exact figures from my retirement and FAA pay records. To calculate this I deducted all standard non-elective deductions from both my FAA pay and retirement pay. In other words, I subtracted the amounts I paid for Medicare, retirement, taxes, FEGLI, and health insurance when I worked to come up with these figures. In retirement I don’t pay state tax and my only deductions are for FEGLI, federal Tax, and health insurance. 

Another interesting fact is that my take home pay while working was 69% of base pay after all of those deductions. In retirement, because they take out much less, my take home pay is 84.41 % of my base annuity. Not bad at all. You keep a much higher percentage of your gross monthly retirement annuity than you did your salary when working.   

I developed a spreadsheet that you can use to calculate you pre and post retirement income and survivor’s income. You will find a sample of the spreadsheet with instructions and a free downloadable form that you can use at http://federaljops.net/retire. Just click on “Retirement Cost Analysis.” This spreadsheet will help you evaluate where you are at now and what you can expect to have in retirement. This evaluation can also help you make decisions before you leave that will make the transition to retirement palatable for you and your loved ones.   

I received another comment from a reader who suggested that my Thrift Plan 100% G Fund investment was too conservative. I'm a fairly conservative investor and have about 25% invested in government bonds, cash, and CDs. Remaining funds are invested in stocks and real estate holdings. My Thrift G Fund is included in the 25% figure mentioned above. When you retire you are able to take a one time lump sum withdrawal from your Thrift Plan. This is often referred to as the “Winnebago” option.  Some retiree’s take advantage of this option to buy a motor home and travel around the country while others simply withdraw funds for major purchases. The Thrift Plan can be a good vehicle for emergency cash as long as you have that option available. If I didn’t have other growth investments, such as brokerage accounts and mutual funds, I would have maintained a mix of several of the funds. Maintaining a Thrift fund mix in stock and bond funds offers feds an excellent diversified portfolio for long term growth potential. However, if you are retired or near retirement and think that you will need to tap your Thrift plan you need to be ultra conservative. The G fund is a good place to park your funds if that is the case. 

Several readers were having trouble locating the Good Life News Letter for retirees that I mentioned last week. If you go to http://paradisepost.com/ look to the left. Under advertising click on “The Good Life.” This will bring up a list of all issues. The news letters are listed by date and they are downloadable PDF files.  

Overall I had an excellent week. I met several former FAA associates for lunch on Wednesday and talked with a half dozen feds who called or emailed me concerning retirement and benefits issues. If you email a question or comment to me at ddamp@aol.com I’ll generally get back to you by end of week. 

July 22, 2005 

Investment Thoughts and Retirement Timelines

There was a lot of news this week about the new Life Cycle Thrift Plan Funds. They will provide those who either don’t have time to follow the stock market or feel uncomfortable managing their own accounts. Actually, they are long overdue. The new L funds provide a logical mix of sound and good performing funds based on your age and risk tolerance. Overall, the concept is sound. My only concern is how the managers are going to rebalance the funds as you age. If you don’t time your moves – fund allocation changes – you could loose money.  

I talked with Claudia at the U.S. Treasury earlier this week concerning interest accrual on my I Savings Bonds. She was very knowledgeable and helpful. Basically, I was still questioning the calculated Savings I Bond yield. My yield calculations were slightly off and I wanted to know why my calculated yield was different than what was reported on my Treasury Direct account in July. I Bond rates are adjusted every May and November. I originally thought that your yield automatically changed each May and November. Claudia explained that if you buy a bond anytime within a rate period the rate doesn’t change for a full 6 months from the date of purchase. For example, if you buy an I Bond on October 1, 2005, your yield will be 4.8% through March 31 ^st of 2006. The rate will change on April 1, 2006 to the rate that was announced in November of 2005 and you will receive that rate for a full six months.  If you expect interest rates to increase in several months it may behoove you to put the money you will eventually invest in I Bonds into a short term “Ready Access” CD to get the higher rate. That’s what I did last March since I knew interest rates were going up it made sense to hold off purchasing I Bonds until May. It works the other way as well. If you anticipate interest rate decreases it makes sense to buy before the next I Bond adjustment to lock in the higher rate for 6 months.       

I received a good number of email messages this week. One correspondent wanted to know when to expect his lump sum leave payment. I received mine 6 weeks after leaving. OPM is very prompt with payments. It could be longer if you don’t submit your retirement paperwork well ahead of your departure date. I published a time line on what to expect the first three months after you leave in my journal. If you just retired or will soon visit http://federaljobs.net/retire/journal.htm and read my June 27^th journal entry. For those who would like to know what to do starting 12 months before you leave read the June 20^th entry.  James emailed a question about the benefits of retiring in Pennsylvania. He works in DC and is thinking of retiring in PA due to various tax benefits, etc. I replied that Pennsylvania doesn't tax your annuity and we talked about desirable locations and relative costs for real estate taxes, etc. James is doing what we all have to do when we plan to retire. You have to assess your costs and look for what will be most beneficial for you and yours. The more questions you ask the better prepared and knowledgeable you will be when you leave. Visit http://federaljobs.net/retire to review online resources that you can use to prepare for your exit.  

On a personal note I finished restoring the Seth Thomas mantle clock that I was working on. I wasn’t able to purchase a mechanical movement that would fit the original case. Seth Thomas made their own movements and they are hard to find. I had to temporarily install a quartz movement. It still looks antique with original dial and case but the movement isn’t mechanical. Hopefully, I’ll run into a Seth Thomas movement that I can restore at one of the auctions I'll be attending this year. 

Next week I’ll talk about other easy to start investment options including Dividend Reinvestment and Direct Stock purchase plans.  

July 28, 2005 

Taxes on annuities, FEGLI, and Long Term Care Insurance Options

Taxes on annuities, FEGLI, and Long Term Care insurance are key issues to consider before you retire. A reader was surprised that Pennsylvania doesn’t tax federal annuities. He asked what other States offer this benefit. He was considering moving to Ohio when he retired and was thinking it might be beneficial to move to Western Pennsylvania instead. Ten States exempt your entire annuity including Alabama, Kansas, Hawaii, Illinois, Louisiana, Massachusetts, Michigan, Mississippi, New York, and Pennsylvania. Four other States may exempt parts of your annuity. For example, North Carolina started exempting federal annuitants in 1998 as long as they had a total of five years creditable service as of August 12, 1989. Kentucky only exempts pre 1998 retiree’s annuities. Oregon taxes apply only on the portion of annuity contribution earned after October 1, 1991, and Wisconsin exempts annuities established prior to 1964.

Nine States don’t have personal income taxes including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. I retired in Pennsylvania and pay no state or local income tax on my annuity. That is a savings of over 4% a year. I added this information to my retirement web site at http://federaljobs.net/retire/annuity.htm .

I was asked this week why I selected the 75% reduction in FEGLI life insurance coverage when I retired. For me and my wife it made sense because we have other private policies and the cost of maintaining 50% or no reductions is considerably higher. You pay just under 34 cents per thousand dollars of coverage for the 75% reduction option. If your base pay is $50,000 your FEGLI basic insurance coverage would be $50,000 + $2000 or $52,000 total coverage. It would cost you $17.46 per month to maintain the $52,000 of coverage – very reasonable costs. After age 65 your insurance coverage is free and it reduces 2% a month until it reaches 25% of your basic coverage or in this example $13,000. The cost for 50% coverage in this example would be $48.14 per month and at age 65 your coverage would reduce 2% each month until it reached $26,000. You would have to pay $30.68 a month for this coverage for life. You do have the option of dropping your coverage to 75% reduction at any time if you decide the coverage isn’t needed. Go to http://federaljobs.net/retire/benefits.htm for more information on your FEGLI and benefits.

Another consideration is Long Term Care. I highly recommend investigating and purchasing this coverage BEFORE you retire. The government plan is very reasonable compared to most private plans that I researched. My wife and I decided that we needed Long Term Care insurance coverage more than we needed additional life insurance coverage. We elected the future purchase option and $125 a day coverage for 5 years, total insurance coverage of $228,125. There was one inflation adjustment since I enrolled and my coverage is now $135 a day with total lifetime coverage of $246,375. My coverage costs $41.22 per month and my wife, who is a year younger than me, pays $38.63.  You don’t have to accept inflation adjustments if you don’t want them with the future purchase option. Call 1-800-582-3337 to request their benefit booklet. One of the key advantages of this program is that you can op to pay family members to take care of you for up to one year of coverage and you have so many more care options available. You will be less likely to deplete your estate or become a burden to your family if you have this coverage.  I added Long Term Care to my web site today and will expand the information shortly to include the various options.

Take a look at our sales at http://federaljobs.net/retire/resources.htm. We have Quicken WillMaker Plus 2005 on sale for only $45.95, normally a $79.95 software package. This software is excellent for drafting wills, living trusts, living wills, and many other helpful estate planning documents. The prices will go up when the 2006 version comes out shortly and we only have 3 copies remaining in stock.

On a personal note I’m busier than ever and the farther that I get from my retirement date the more routine my new life is becoming. My wife and I went on a short day trip Tuesday. There were considerably less crowds and we had an enjoyable trip. I’m still exercising daily, walking several miles, and today I decided it was too humid to walk outdoors so I went to the mall. I like to go before the shops open, about 9:30 am, and after walking stop at Starbucks for coffee. Today, Verizon was setting up a display across from Starbucks for their DSL service. I’ve been wanted to purchase DSL for several years now and they had a great deal that I couldn’t pass up. I got the first three months for $19.95 and the remainder of the year for $29.95, a free wireless modem, two free concert tickets, a tee shirt, and a water bottle. The self installation package should arrive by end of week. I’ve also been working on a major upgrade for http://federaljobs.net and hope to launch the updated site by mid August. It is a major undertaking to say the least.

That’s about it for this installment. More to come next week.         

August 5, 2005 

RETIREMENT MYTH # 1 – By Dennis Damp

Now that I’ve been retired from federal service for going on 8 months, I can tell you first hand to watch out for this retirement myth.  

Myth # 1 - When I retire I’ll spend less!

I completed the cost analysis form on my web site several times before retiring and anticipated spending more for entertainment, travel, and eating out and less for commuting, taxes, and other expenses associated with working full time. I didn’t foresee the many opportunities to pick up bargains, actively pursue hobbies, and find interesting travel opportunities that you couldn’t take advantage of when working full time. You can spend more and some times much more when retired. You will find it hard to pass up the many bargains that tend to come your way or to say no to a short weekday escape.  

I would advise anyone who is looking forward to an active and enjoyable retirement to save while you are working. There are many opportunities to do this including fully funding your Thrift Plan, buying savings bonds through payroll deductions, investing in blue chip stock dividend reinvestment plans (DRIPs), ROTH IRAs, and through buy direct stock programs.  

Pay yourself first each and every pay. For example, enroll in the savings bond payroll deduction program or have a small amount sent direct to a savings account or dividend reinvestment plan each payday.  

Another way to save is to take at least half of you annual pay raise each year and invest it. You could increase your savings bond allotment, initiate or increase an allotment to your local credit union or savings account, or send more money each pay to other investment accounts.

If at all possible pay off your home mortgage before you retire. The tax deduction that you get each year isn’t near as much as you will save by paying it off. Paying off your mortgage will free up cash that you can put to much better use when you retire.  

It’s also advisable to continue to save after you retire. The younger you are the more you should save each pay. After retiring I initiated an allotment to the credit union and buy savings bonds each month. 

To determine what you will have to spend in retirement complete the retirement cost analysis spreadsheet located at http://federaljobs.net/retire. Click on the menu selection titled “Retirement Cost Analysis.” A sample is included along with a free blank downloadable spreadsheet.  

Fortunately, I subscribed to a number of the listed savings initiatives while working and it has paid off many times over in retirement. If you don’t want limitations - within reason - in retirement, start savings initiatives now. 

Myth # 2 will be discussed next week, titled, “In retirement you will have more time than you know what to do with!!!”

August 11, 2005

RETIREMENT MYTH # 2 – By Dennis Damp
You will have more time than you know what to do with when you retire!!!

When I thought of retirement I dreamt of lazy days, travel, and lots of free time. Well, I can tell you that these self evident truths are certainly attainable; however for me they have been allusive. Time literally flies by and it’s hard to believe that I’ve been retired for going on 8 months. I’ve accomplished much of what I set out to do in my business and other venues this year; however, there just isn’t enough time in a day to get everything done that you would like to do. 

It seems that you no sooner get up on Monday and the weekend is here. I was talking to a former associate and friend this week that plans to retire soon. He said that he will do absolutely nothing out of the ordinary the first two months he is off. He just wants to lay back and decompress after 36+ years of service. I certainly understand his point of view. The first two months I too took some liberties that I normally wouldn’t have such as exploring old hobbies, working on physical fitness issues, and improving my golf game, but I was always on one schedule or another due to my writing, business, and other ventures.  

Time generally flies by when you are truly have fun and enjoying life. Just think about the best vacation you ever took and remember just how soon it was over! Yes, I am quite content and even though I don’t have the time to do everything, the things I do I enjoy more. I had several discussions with one retiree who after several months experienced the opposite. He seemed disenchanted with the routine and was finding it difficult to enjoy his new found freedom. He admitted to not planning for retirement.  

If you are considering retiring draft a plan and make it happen. It doesn’t have to be a formal plan as long as you and yours have a good sense of what your expectations are and what will occupy your time. Before leaving I envisioned what I wanted to do and actually drafted a basic retirement plan that included more time with my wife, increased travel, and of course more business activities. I also drafted a five year business plan so that I would stay focused on what I wanted to accomplish. I can see where retirement could become routine and mundane if you aren’t engaged and have a purpose and direction.  

A shining example of a purpose driven retirement is my very good friend Jack, a former neighbor. He is 87 years old and retired 32 years ago. He and his wife are more engaged with life than most 40 year olds. I love to visit and talk with them and when I first retired I set up a computer system so they could email their family and friends. I spent a few hours each week training Jack on how to use the internet and email and signed him up for Net Zero. Both he and his wife are very active and involved with many activities and hobbies. When I visited them last month they just completed staining their 12 by 24 foot deck. Recently, Jack was approached by Robert Dinero’s staff, yes – the famous actor – to work as a consultant on a new movie he is producing. Jack is an internationally known expert and builder of ships in bottles and is designing and building the models for this new movie. Jack also works three days a week as a volunteer for the local high school track team and has done this since his kids attended high school oh so many years ago. When I asked Jack how he was doing with his computer and internet connection he said fine and that he and his wife signed up for cyber classes at the high school this fall. 

All in all, retirement – like most things in life - is what you make of it and I’m still committed to making mine as active and successful as I can physically stand. At times the pace can be exhausting and at those times you simply have to step back, reevaluate, prioritize, and pace yourself.   

Myth # 3 Next Week 

Dennis V. Damp, Retired FAA 

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