1 million $ portfolio

[Spaf]

If you got a 1 mil portfolio, you don't need to read this!

If you work for the government, and are in FERS with a TSP account, you need to be informed! This site will help you.

On retirement you will recieve$ for annuity, + socialsecurity, + $ from TSP, any other incomes (ie VA benifits, etc.).

Retiring before62, = losses. On or after 62 = life expectancy. Any retirement before appropriate age brackets will result in reductions/deductions. You have to figure it out for your own needs.

Unless you are a millionaire, you need to start planning!!!!! I.E., if you saved and saved and got your TSP account to $200k. The stock market may produce a +10% (maybe). Your expense ratio is1% (maybe), yourcost of living is 3% (maybe). Thats 4%. Now depending on the market (when you entered and where it's going) you could be doing bad, even or great.

I find that there is no, set answer for, market investments. There are good times and there are bad times. The best times are when you are adequately informed, the worst times are when you are inadequately informed. Your responsibility is to ensure that you are always adequately informed. The rest is your decision!

[azanon]

Retiring before62, = losses. On or after 62 = life expectancy. Any retirement before appropriate age brackets will result in reductions/deductions. You have to figure it out for your own needs.


This is the only thing i disagree with and i'm glad you brought it up. The Federal FERS retirement system is so beautiful for those that are fully qualified, its almost a crime not to retire when you become fully eligible, or to have not prepared to have do so. I disagree with you in that actually, if you put in 30 years in under the FERS system, you can retire as early as 55, and still get a SS suppliment that basically replaces SS until you get to 62, at which point the suppliment ceases, and you then have the option to get regular SS or defer it.

Back to my point, with pension (~30%) + SS suppliment (~10-15%), its almost insane to keep working when they're willing to pay you 45% of what you make for doing nothing. Now granted you have to prepare to make up for the difference, and by my guesstimates, most of you should be ok if you put in 10% of your own money into TSP and get the 5% match. If you consider that you wont be saving the 10% post retirement, you should have at least or very near 100% of what you made before amost all monies because your tsp only has to replace the remaining 45%, or less if you buy the argument that retirement is cheaper.

Summary: continuing to work after you're fully eligible to retire is almost a crime against yourself. Only do so cause 1. you love it. 2. you didnt plan correctly (saved at least 10% or more).

My retirement age is 58. I will walk out the door that day and not come back.

[Spaf]

What I meant but didn't get it over, quite right. There are a lot of reductions, deductions, supplements etc. before age 62. Your life expectancy is a big consideration. If your family has a history of living into their 90's is very different than those thatpass on in the 70's. This has to be a factor, especially with funds that don't or do have a cost of living adjustment.

OPM has a FERS booklet "Information for FERS Annuitants" RI 90-8 which is a MUST reader. And, available on line at the OPM site for downloading.

Did you know that generally your FERS benefit is figured at 1% of your high 3 avg times years+mo of service. However, if you stay till 62 and have at least 20 years. Theannunity figure increases to 1.1%.

Anotherbooklet OPM FERS "Applying for Immediate Retirement Under the Federal Employees Retirement System" SF 3113. All of these booklets and more is available at the OPM site.

You need to figure Social Security. On a monthly pay check from SS for each year under the full benifits year that you retire early, you will have a reduction ofabout $100 for each early year

Social Security eligability starts at age 62. If you plan to retire early, you may be eligable for the supplement, its a formula, in the RI 90-8 booklet. You may have to figure it out with your own personal variables

You need to have a plan, and know the facts as soon as you can. You may need to make changes now, or tweek your plan ever so often, so when you reach the date, you can do it!!!!

I've been told that when you get ready to retire, that they will send you these booklets and the forms. Don't wait till then! Get the booklets now online. You need this information now, especially the RI 90-8 booklet.

OPM has a good site: http://www.opm.gov

[azanon]

Did you know that generally your FERS benefit is figured at 1% of your high 3 avg times years+mo of service. However, if you stay till 62 and have at least 20 years. Theannunity figure increases to 1.1%.

Yes I knew that, but IMO, working an additional 4 years just to get that little added benefit on your annuity (the extra 4 years + the 1.1 multiple factor) is not worth it unless, as i said above, you 1. love your job 2. you didnt plan to retire on-time.

Again, they're willing to pay you ~40-45% of what your annual salary is for doing nothing the day you're eligible to retire. I think it just makes sense to start early and plan to save enough on your own via TSP or IRAs to be able to retire the day you're eligible. Its such an incredible benefit of the Fed jobs, to not use it immediately, I think, is a crime.

Time is so valuable, and I imagine there's nothing like having the entire day to yourself.


You need to figure Social Security. On a monthly pay check from SS for each year under the full benifits year that you retire early, you will have a reduction ofabout $100 for each early year.

Better to think of the reduction in terms of a percent (forgot the exact number) because employees GS grades can differ so much and can swing that $100 dollars one way or the other.

That being said, what you said is basically true, but again, its a relatively large majority concensus that be it federal or non-federal jobs, most "experts" recommend that you take your SS benefit the day you become eligible (62 for most of us) as opposed to delaying it until 67-70 for the maximum benefit. There's simply no guarantee you'll live long enough to come out ahead delaying social security and most agree the cliche is true; one bird in the hand isgreater thantwo in the bush. Furthermore, the SS "prong" might be the difference in being able to afford to retire now vs not being able to.


Social Security eligability starts at age 62. If you plan to retire early, you may be eligable for the supplement, its a formula, in the RI 90-8 booklet. You may have to figure it out with your own personal variables

My understanding is this; if you're fully eligible for retirement, or get an authorized "early out", you will receive the SS suppliment if you're younger than 62. The only thing the formula is for isto determine how much you'll be getting for it. That you'll get it is a given under the aformentioned circumstances.

[Mike]

I doubt the social security rules will remain this favorable indefinitely. I fully expect the retirement age to be bumped up. I also expect that the supplement will be reduced.

With the mass exodus of workers going into retirement looming, I can't imagine it'll stay the same... unless of course, they plan on doubling the payroll tax. :shock:

My recommendation is to take social security the first day you are eligible and put 33% in aintermediate term bond fund, 33% in a GNMA fund and 34% in a high yield corporate bond fund.

Spaf,

I believe your estimates need to be changed to reflect a more pessimistic outlook that will better prepare you for retirement. The worse thing there is, is to see retirement people have to come back to work because they under estimated their true income stream needs. At the very least your portfolio/retirement/benefits should equal at least 85% of your present income. Some people spend more in retirement because they grow board and shop, eat out more and take more vacations then they normally did when they were working.

Stock market outlook (10%) for a 20 year period is about right...short term you could be underwater like the indexes have been over the previous5 years +. I am plugging in the stock market to keep up with cost of living and inflation for a net, net of offsetting each other. Meaning your stock market gains will keep up with cost of living/inflation etc.

Cost of living...I would estimate 5-7%. Just look at your property taxes, insurance costs, gas, food, etc. Keep in mind with the cost of living that does not include food or energy (which are to volility in the govts opinion to be included in cost of living/inflation). Energy and food are in special indexes and energy is up 14.3 and food is 4.0 yet the inflation rate is only 1.8 according to the BLS rate. As you know energy and food is probably two of our main expenses and really need to be counted for what their real impact will be on our retirement budget.

I believe health insurance will go up 17% starting 1 Oct as an example. Hopefully the hurricanes do not effect everyone nationwide on their house insurance.

Pay off credit cards, car loans, etc.

Good luck Spaf.

MT

[azanon]

I doubt the social security rules will remain this favorable indefinitely. I fully expect the retirement age to be bumped up. I also expect that the supplement will be reduced.

With the mass exodus of workers going into retirement looming, I can't imagine it'll stay the same... unless of course, they plan on doubling the payroll tax.

It might change, but it will be based on a new retirement system (not FERS) for new federal employees. Once you're into a system (ie: FERS), that system isnt going to change for the worse. If FERS allows you to get a SS suppliment at retirement, that's what you'll get, unless you leave FERS. Trust me, only in a last resort situation would they change the benefits of your plan.

azanon wrote:
This is the only thing i disagree with and i'm glad you brought it up. The Federal FERS retirement system is so beautiful for those that are fully qualified, its almost a crime not to retire when you become fully eligible, or to have not prepared to have do so. I disagree with you in that actually, if you put in 30 years in under the FERS system, you can retire as early as 55, and still get a SS suppliment that basically replaces SS until you get to 62, at which point the suppliment ceases, and you then have the option to get regular SS or defer it.

Back to my point, with pension (~30%) + SS suppliment (~10-15%), its almost insane to keep working when they're willing to pay you 45% of what you make for doing nothing. Now granted you have to prepare to make up for the difference, and by my guesstimates, most of you should be ok if you put in 10% of your own money into TSP and get the 5% match. If you consider that you wont be saving the 10% post retirement, you should have at least or very near 100% of what you made before amost all monies because your tsp only has to replace the remaining 45%, or less if you buy the argument that retirement is cheaper.

Summary: continuing to work after you're fully eligible to retire is almost a crime against yourself. Only do so cause 1. you love it. 2. you didnt plan correctly (saved at least 10% or more).

My retirement age is 58. I will walk out the door that day and not come back.


If you retire before you are 62, you do not receive COLAs until you are 62. If COLAis 3 % on average and you retire at 55, you effective benefits are reduced by 20% (i.e., (1+0.03)**7). So your 45% benefits are effectively reduced to 36%. And if you make more the $10k on a after-retirement-job, your SS-supplement goes away.If you retire before you are 62, you do not receive COLAs until you are 62. If COLAis 3 % on average and you retire at 55, you effective benefits are reduced by 20% (i.e., (1+0.03)**7). So your 45% benefits are effectively reduced to 36%. And fyer you are 62, COLAs for FERS-folks is reduced by 1% from what others get (i.e., if CSRS-folks get 2.5%-COLA FERS-folks get a 1.5%-COLA). THIS MAKES A BAD DIFFERENCE.
And if you make more the $10k on a after-retirement-job, your SS-supplement goes away.

MarketTimer wrote:
My recommendation is to take social security the first day you are eligible and put 33% in aintermediate term bond fund, 33% in a GNMA fund and 34% in a high yield corporate bond fund.

Spaf,

I believe your estimates need to be changed to reflect a more pessimistic outlook that will better prepare you for retirement. The worse thing there is, is to see retirement people have to come back to work because they under estimated their true income stream needs. At the very least your portfolio/retirement/benefits should equal at least 85% of your present income. Some people spend more in retirement because they grow board and shop, eat out more and take more vacations then they normally did when they were working.

Stock market outlook (10%) for a 20 year period is about right...short term you could be underwater like the indexes have been over the previous5 years +. I am plugging in the stock market to keep up with cost of living and inflation for a net, net of offsetting each other. Meaning your stock market gains will keep up with cost of living/inflation etc.

Cost of living...I would estimate 5-7%. Just look at your property taxes, insurance costs, gas, food, etc. Keep in mind with the cost of living that does not include food or energy (which are to volility in the govts opinion to be included in cost of living/inflation). Energy and food are in special indexes and energy is up 14.3 and food is 4.0 yet the inflation rate is only 1.8 according to the BLS rate. As you know energy and food is probably two of our main expenses and really need to be counted for what their real impact will be on our retirement budget.

I believe health insurance will go up 17% starting 1 Oct as an example. Hopefully the hurricanes do not effect everyone nationwide on their house insurance.

Pay off credit cards, car loans, etc.

Good luck Spaf.

MT





This sounds like very good advise.

azanon wrote:
It might change, but it will be based on a new retirement system (not FERS) for new federal employees. Once you're into a system (ie: FERS), that system isnt going to change for the worse. If FERS allows you to get a SS suppliment at retirement, that's what you'll get, unless you leave FERS. Trust me, only in a last resort situation would they change the benefits of your plan.

What do you base this statement on???????????