Federal workers looking for a successful retirement must create a plan for their retirement lifestyle and review all their options for saving money for this new chapter of their life.
Retirement accounts, such as the TSP, allow the workers to make a predetermined contribution each year, and their employers may match their contributions. However, when the money is contributed to a traditional or tax deferred retirement account, it could create more costs for the retiree looking to access those funds later on.
In today’s low tax rate, it is imperative that those saving towards retirement consider the amount of tax they would pay on Roth TSP contributions today to create tax diversity in their portfolio and avoid potentially higher rates in the future.
Assess Their Beneficiaries and Update All Information
Before retiring, it is vital for the worker to review all of their life insurance policies and retirement plans. It is better to have these things sorted out while still employed so as to not run into problems once there is no longer a consistent income stream. It is important for them to update the details and ensure that if they get divorced or remarried, the correct spouse is listed on these documents. When reviewing the details, it is vital for them to ensure that the federal agency they worked for has all the contact information for beneficiaries and doesn’t make a grave mistake by sending funds to a former spouse that may not be entitled to receive the benefits.
Certify Their Federal Service
By certifying their federal service, the worker gets a certified document that lists all the federal services they have completed in their career. Some workers may face some delays from their current HR department, but it is vital that they get certified to guarantee that they get all benefits for which they are entitled. The certification could help the worker when they retire and ensure that all benefits are presented to them or their heirs as expected.
Understand Tax Implications for Their Retirement Funds
Tax implications could become the bane of an unprepared retirees’ existence after separating from service. Since retirees will be withdrawing funds from various types of retirement accounts, understanding how this income is taxed is a necessity.
When saving for retirement, employees should know what to expect in terms of the taxes and withdrawal limits that come with different retirement accounts. The last thing any potential retiree would want is to find out that a large portion of their retirement funds are inaccessible or have tax implications.
Stacking Up On Government and Private Sector Benefits
When reviewing options, federal employees must consider all retirement programs available. Federal workers have a multitude of options when retiring, and they could get options where their employer will match their contribution to their retirement accounts. By working for the government, they have access to retirement plans that are not available to workers in the private sector, and they also have access to some private-sector retirement opportunities.
For example, a federal employee can contribute up to $19,500 in 2021 to their Thrift Savings Plan which is offered through their employer. They can also take advantage of private retirement accounts such as an Individual Retirement Account, also known as an IRA. As of 2021, an employee can contribute up to $6,000 to their IRA. If they are 50 years of age or older, they can contribute up to $7,000 to one of these retirement accounts.
When they retire, they will have access to Medicare, dental plans, and be eligible to receive the Social Security benefits they earned by making payroll tax payments for years. By stacking their benefits, they could get the most out of all benefits they are entitled to receive.
Participating In Retirement Training Programs
When workers enter into the five-year gap before they are officially eligible for retirement, they have access to retirement training programs that show them the best ways to maximize their retirement benefits and downsize when necessary to maintain their preferred lifestyle.
The workers will learn how to manage their incoming retirement funds and get the most out of their new lives after retirement. Most federal employers provide them with extraordinary programs that make the transition easier for the employees and ensure that they live a long and healthy life.
Where to Get Help
Walker Capital Preservation Group provides guidance for federal employees all around the country and shows them how to optimize the retirement plans available to them. They also present information about when to start the retirement plans and how to maximize their contributions while they are still working.
For a federal employee, there are a multitude of retirement opportunities that ensure that they can maintain the same lifestyle they had while working including a pension and better ways to manage taxes when they access their retirement money. By reviewing your options with a trusted retirement expert, federal employees learn how to increase their retirement funds and better sustain their retirement lifestyle. A careful plan could also decrease the amount of taxes they pay each year when removing money from their retirement accounts.