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22

may 2016

|

the foreign Service journal

Risk vs. Reward.

How you manage your TSP savings will have

a major effect on your retirement finances. Because many current

employees will need to draw on their TSP savings 30, 40 or even

50 years from now, most experts recommend investing in funds

with relatively high average rates of return (the C, S, I and the

long-range L funds) to increase the chances that your TSP savings

will be around as long as you are. Conversely, keeping all your

money in bond funds (the G and F funds) may not generate gains

in the coming decades that out-pace inflation.

Save, Save, Save.

While saving for retirement is vital, doing

so can be difficult depending on your cash flow situation. To

increase savings, some experts urge cutting back on frequent

small splurges that add up over time—for example, that daily

gourmet coffee. Others say to cut back on big purchases, such

as buying a luxury car. Most experts endorse the tactic of “pay

yourself first” by signing up for a large TSP payroll deduction so

those funds never enter your take-home pay for discretionary

spending. If you receive a hardship differential or an inheritance,

consider investing a chunk of it in retirement savings.

Location, Location, Location.

Where you retire can affect

your net income. The Internal Revenue Service taxes annuity

payments, TSP withdrawals and Social Security, but some states

do not. Thus, retiring to certain states can raise your after-tax

income. For a state-by-state analysis, see the AFSA Tax Guide

published each January in

The Foreign Service Journal

and

posted at

www.afsa.org.

I

f you want—or need—to work after retiring from

the Foreign Service, the following general rules

apply. Send any specific questions to the Human

Resources Service Center at

HRSC@state.gov

.

Your Annuity.

If you retired on an immediate annuity,

it will be paid each month unless you are re-employed in

a career, full-time federal position. Thus, you may work

in the private sector or in a part-time federal position

and still receive your full annuity. But if you take a full-

time federal job that is covered by a retirement plan,

payment of your annuity will be suspended. In addition,

Foreign Service annuitants face a cap on earnings from

part-time federal employment. The sum of the part-

time salary plus annuity may not exceed the higher of

the salary at retirement or the full-time salary of the

re-employment position.

Your Annuity Supplement.

If you are receiving an

annuity supplement, it will be paid each month until age

62 unless you are re-employed in a career, full-time fed-

eral position. After you reach the Minimum Retirement

Age as defined in the provisions for the annuity supple-

ment (between 55 and 57, depending on your year of

birth), the annuity supplement is subject to reduction if

you make more than a certain amount in wage income

($15,720 in 2016). Your supplement will be reduced by

$1 for every $2 earned in excess of the exempt amount.

Employment after Retirement

The reduction is applied the year after you have excess

earnings.

Your Social Security.

Once you start receiving

Social Security retirement benefits, they are subject to

reduction if you make over a certain annual amount in

wage income ($15,720 in 2016). Before you reach your

full retirement age (between 65 and 67, depending on

your year of birth), your Social Security benefits will

be reduced by $1 for every $2 earned in excess of the

exempt amount. After reaching full retirement age, the

reduction is $1 for every $3 earned.

Re-employed Annuitants.

Many Foreign Service

annuitants seek part-time work as re-employed annui-

tants (REAs), a category formerly known as While Actu-

ally Employed. Regional and functional bureaus both

utilize REAs to fill short-term staffing gaps and meet

workload surges. The first step is to get your name on

the centralized registry by contacting the HR Service

Center at (866) 300-7419 or the bureau coordinator (a

list can be found at

https://RNet.state.gov

) where you

want to work. The next step is to network and lobby,

since bureaus usually turn first to annuitants who are

“well and favorably known” by bureau hiring managers.

It is advisable to start networking at least six months

before you retire.

—John K. Naland