The Foreign Service Journal, May 2016

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