The Foreign Service Journal - January/February 2018
58 JANUARY-FEBRUARY 2018 | THE FOREIGN SERVICE JOURNAL these early investments has a profound impact on retirement success.” William Carrington, a For- eign Service family member, financial planner and retire- ment management analyst who founded Carrington Financial Planning, advises FS members to create a writ- ten retirement plan. Additionally, he recommends that you buy a home as soon as you can. Christine Elsea Mandojana, a certified public accountant and financial planner currently posted in Barcelona with her FSO spouse, agrees that “a solid real estate investment can help diversify your overall invest- ment portfolio, and it helps you plan for housing needs when you leave the Foreign Service.” Be sure to consult a tax adviser if you invest in a rental prop- erty, because rental properties can create complicated federal and state tax issues. Beagle also recommends looking for hous- ing outside the Beltway to reduce costs. And, he says, “try to hold housing costs to less than 35 percent of your income.” You might not be making much money in those lean early years. Still, Hui-Chin Chen, a certified financial planner and For- eign Service family member who runs the website Money Matters for Globetrotters, reminds her clients that “any extra pay goes to savings.” Additionally, she says, “when you get a raise, put at least 50 percent into savings” rather than spending the extra cash. Halfway There: What to Do in the Mid-Career Stage This is the “decade of complexity,” says Carrington. Mid- level officers and other Foreign Service members are making more money, but they often face more expenses. Perhaps they have children and need to save for college and other related expenses. Some have gone through divorce and the accom- panying financial distress. Still others have increased medical expenses, or expenses incurred caring for elderly parents. Cymer suggests that married couples “discuss and priori- tize” their goals in order to decide what expenses to priori- tize. He asks his FS clients to think hard, for example, about whether paying for their children’s college is more important to them than retiring early. Max out that TSP, says Mandojana, and maintain a solid emergency fund. At this point in your career, she also recom- mends that you review your will and life insurance needs and consider college savings if you have children. But, she warns, do not save for college at the expense of saving for retire- ment. Hui-Chin Chen recom- mends making “a household financial plan to give your savings purpose and strategize your investments.” She also says that now is the time to “develop networks and skills for careers or income potential after the Foreign Service and outside the federal government.” Twenty Years In: Ready to Retire? “Remember that retirement eligible does not mean ready ,” says Beagle. “Just because you can, doesn’t mean you should .” Before you make a move, you need to “take stock of investing suc- cess, future job prospects, retirement goals and family demands.” At this stage of the game, it’s time to re-evaluate your goals. If you’ve been through a divorce, asks Cymer, how is the loss of income and assets going to affect you? If you have children who live elsewhere, you need to think about where you’d ideally like to retire. It’s a good time, too, to check in on your spending—have you accumulated enough to slow down on savings or start a second career? “Most FSOs are in the ‘golden handcuffs’ at this point,” warns Carrington, adding, “leaving the FS is simply not an option.” And if you’ve gone through a divorce or other financial calamity since joining the Foreign Service, you’ll need “five to 10 additional working years to recover a pre-divorce standard of living.” Mandojana urges her clients to take tax planning seriously at this point, because “a mix of assets, higher salary and life complications such as college and/or divorce can create oppor- tunities and pitfalls that need careful planning.” She recommends that you maintain an annual spending and saving budget and an estimated retirement budget. Check annually if you are on target to meet your retirement goals, and make adjustments as needed. Going Beyond 20 Can you really leave the Foreign Service when you hit 20 years of service? Should you? There are actually quite a few benefits to staying on after you reach the 20-year milestone. According to Carrington, your pen- sion will continue to increase by 1 percent per year, meaning TSP contributions can add $30,000 in new money each year. “Very few FSOs seriously consider leaving after 20 years, in my experi- Most people aren’t thinking about retirement on their first day on the job. But all of our experts agree that now is the time to begin taking action for a secure retirement.