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
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 atHRSC@state.gov
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
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
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.
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 athttps://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