An outstanding TSP loan must be paid off prior to retirement or it will be considered as a distribution to you. Image: karen roach/Shutterstock.com
By: By Abraham Grungold, AG Financial ServicesDr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID) at the U.S. National Institutes of Health, is going to retire December 31. Whether you plan on joining him and whether you are a CSRS or FERS employee, you need to think about many factors before you submit your retirement application. However, there are mistakes that employees make when it comes to basic decisions with employee benefits and retirement, but you can avoid them. So, for your consideration, here are the top 10 things that Dr. Fauci or any other federal employee may want to consider.
1. Can you afford to retire? Will your Annuity, Social Security and TSP provide you with enough retirement income to pay your monthly expenses?
2. Buying government sponsored life insurance – If you are retiring debt free, you may not require life insurance in retirement. If you do have debt, then you need to carry enough life insurance to cover that debt.
3. Buying Long Term Care Insurance – Retirees should consider the need for long term care insurance which will provide home health care as well as the possibility of nursing home care.
4. Health Insurance – You should evaluate your health insurance needs for retirement. Remember you need to carry FEHB insurance for five consecutive years prior to retiring in order to elect FEHB in retirement.
5. An outstanding TSP loan must be paid off prior to retirement or it will be considered as a distribution to you. And you will have to pay federal tax and perhaps a penalty to the Internal Revenue Service.
6. Closing your TSP account in retirement – Deciding to transfer your entire TSP in retirement prevents you from returning to the TSP. Therefore, you should keep at least 500 dollars in your TSP to give you the right to return.
7. Forgetting your divorce agreements – You must consider what you will owe your ex-spouse when you decide to retire. This could be related to your annuity, TSP, and other retirement benefits. Be sure to check your divorce stipulation agreement.
8. Update all your beneficiaries. This is a must do.
9. What are you going to do at age 65 regarding Medicare Part B? Will you keep your FEHB plan or will you sign up for Medicare Part B and possibly a supplemental plan as well?
10. When are you going to elect taking Social Security? The earliest is age 62. If you retire before age 62, OPM will provide you with a Social Security supplement until you reach age 62. At age 70, your Social Security benefit reaches its maximum.
As a financial coach, many federal employees contact me relative to their retirement decisions. Each person has their own individual needs and fears. Many of these decisions can make the difference of hundreds and thousands of dollars in your retirement. Do not postpone tackling these topics. Retirement is different for everyone, and many factors need to be considered.
Abraham Grungold is a retired federal employee with 36 years of federal service, and through his company AG Financial Services (https://grungold.com/) he helps federal employees with their TSP and federal retirement planning and decisions. Mr. Grungold has written over 40 articles regarding the TSP and FERS retirement and been a guest on several podcasts with the Federal News Radio and Government Executive Magazine.
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