In this issue you will find:
- Introducing AFSA’s New Retiree Counselor
- Little-Known Facts About the Annuity Supplement
- TSP Withdrawals in Retirement
- Sources on Updates for Federal Pay and Benefits
- Upcoming Events at AFSA
- Have You Joined the Foreign Service Online Community?
- Peanuts, Cracker Jack and the Foreign Service!
Introducing AFSA’s New Retiree Counselor
AFSA is pleased to welcome Dolores Marie Brown to the AFSA staff, where she has taken on the position of retiree counselor. She joins a membership team that is highly focused on retiree needs and services, and her knowledge and experiences will play a vital role in this area going forward.
Ms. Brown recently retired from the Foreign Service after a 33-year career. She therefore has very recent experience with the retirement process, the Job Search Program and the many questions and challenges that come with transitioning into retirement. Ms. Brown is available for one-on-one conversations with retired AFSA members. In addition, her portfolio includes fostering relationships with subject matter experts and other resources, writing useful retiree-focused content for AFSA’s publications and the AFSA website, developing programs and webinars of interest to retirees and members who are close to retirement, and moderating the Foreign Service Online Community.
Ms. Brown joined the Foreign Service in 1985 as a management-coned officer and retired with the rank of Minister Counselor earlier this year. Starting as a General Services Officer in apartheid South Africa, other highlights of Ms. Brown's career include Deputy Director of the Operations Center responsible for the Watch, Deputy Chief of Mission in Tallinn, Estonia, the first State Department Deputy of the Terrorist Screening Center established after 9/11, Management Counselor in Cairo, Egypt, and Deputy Assistant Secretary in the Bureau of Conflict and Stabilization Operations.
Ms. Brown has a Bachelor's degree in Russian Area Studies from Barnard College and a Master's degree from the School of International Affairs at Columbia University, again focusing on Russian history and politics. She is a four-time recipient of the Superior Honor Award and also received the Director's Award from the Federal Bureau of Investigation for her work founding the Terrorist Screening Center. Her late husband worked for Agence France-Presse, and was known for his reporting during the waning years of apartheid. She has two grown sons, Richard and Will.
Ms. Brown is available at firstname.lastname@example.org and (202) 944-5510. Her work hours are 9:00 a.m. – 5:00 p.m. on Tuesdays and Wednesday.
Little-Known Facts About the Annuity Supplement
The Foreign Service Pension System (FSPS) Annuity Supplement is a benefit paid to employees who retire on an immediate annuity prior to age 62. Since FSPS retirees cannot draw on Social Security until age 62, the Annuity Supplement bridges that financial gap by paying you the amount of Social Security benefits earned during your FSPS service. The payment is separate from, and in addition to, your basic annuity which is based on your years of service and high-three year’s average salary. You do not apply for the Annuity Supplement; it is paid automatically along with your basic annuity. If you retire after age 62, no Annuity Supplement is paid.
Here are some little-known facts about the Annuity Supplement:
First, it is subject to reduction if the retiree has substantial wage earnings from post- retirement employment (not income from pension, TSP withdrawals, investments, or other non-wage income). In 2018, reductions start if you earn over $17,040 during the calendar year. Your Annuity Supplement is reduced $1 for every $2 earned over that amount. For example, if a retiree has wage income of $27,040 in 2018, their 2019 Annuity Supplement will be reduced by $5,000 ($416 per month). One year later, their 2019 wage earnings will determine if reductions will be taken to their 2020 Annuity Supplement. Reductions are based on the annual income report that Annuity Supplement recipients are required to send to the Human Resources Service Center in Charleston, SC in early January each year.
Second, if you are receiving the Annuity Supplement but fail to file your annual income report in early January, the State Department’s Office of Retirement (HR/RET) will suspend your Annuity Supplement until you submit the required report. For the required form and instructions, see HR/RET’s Annual Annuitant Newsletter posted under “What’s New” at https://RNet.state.gov (be sure to include the “s” in “https”).
Third, the earnings test does not apply to the relatively-few people who retire prior to their “Minimum Retirement Age (MRA)” which is between age 55 and 57 depending on year of birth. Thus, retirees can earn as much as they want prior to their MRA without having their Annuity Supplement reduced.
Finally, the Annuity Supplement ceases after the last day of the month prior to your turning age 62. If you apply for Social Security at age 62 (which is not required), those payments do not start until the month after you turn 62. Thus, neither the Annuity Supplement nor Social Security are paid covering the month during which you turn 62.
TSP Withdrawals in Retirement
Starting in September 2019, Thrift Savings Plan participants will be able to make multiple in-service (for those 59½ or older) and post-separation partial withdrawals. That added flexibility is to be welcomed, but it could facilitate frequent spending splurges on short-term wants that could rapidly deplete TSP savings that are meant to help cover daily living expenses over all your retirement years. Here are some things to keep in mind when considering taking advantage of the new withdrawal rules:
Retirement experts typically advise withdrawing no more than 4 to 6 percent of your retirement savings per year. Those percentages are based in keeping your retirement savings in a portfolio that includes mostly stocks to provide gains over the long-term that allow the value of your investments to outpace inflation. For example, TSP’s C Fund grew on average by 8.55 percent per year between 2008 and 2017. In contrast, TSP’s G Fund grew on average by only 2.38 percent per year.
However, the actual returns you achieve are subject to something called sequencing risk. For example, someone who retired in December 2007 with $500,000 in the C Fund and then withdrew four percent a year would have had a balance five years later of approximately $405,000. Whereas someone who retired in December 2008 and withdrew four percent a year would have had a balance five years later of approximately $735,000. The difference, of course, is that the first retiree’s retirement savings were hit by the 2008 stock market crash.
So, carefully consider your TSP withdrawal strategy – especially during your first years of retirement.
Disclaimer: This information is provided for informational purposes only. You should conduct your own research and due diligence and/or consult with a professional financial adviser to determine what may be best for your individual needs.
Sources on Updates for Federal Pay and Benefits
Your bi-monthly AFSA Retiree Newsletter keeps you informed of major developments impacting Foreign Service pay and benefits. If you want to follow those issues on a daily basis, you can turn to one or more of the following commercial services that offer both online resources and emailed newsletters:
- FedSmith. Online at www.fedsmith.com. Offers a daily e-newsletter reporting developments in federal benefits and retirement (a subscription signup box is on the homepage in the right-hand column towards bottom of page).
- Government Executive. Online at www.govexec.com. Offers several e-newsletters (subscribe at www.govexec.com/newsletters/) including Pay and Benefits Watch (focused on current employee benefits) and Retirement Planning (features federal retirement expert Tammy Flannigan).
- My Federal Retirement. Online at www.myfederalretirement.com. Offers a weekly e-newsletter that features Certified Financial Planner Edward Zurndorfer (subscribe by clicking on “Free Newsletter” tab near top of homepage).
Note: Before acting on financial advice featured in any of these sources, please conduct your own additional research and/or consult with a professional financial adviser to determine what may be best for your individual needs.
Upcoming Events at AFSA
Please mark your calendars for two upcoming events focused on federal benefits, with expert speakers de-mystifying some of the questions that most often confound members:
On August 23 at 12 noon, Paula Jakub of the American Foreign Service Protective Association will return for an updated presentation of her popular talk, “The Coordination of FEHB and Medicare.” Click here to register.
On September 26 from 11:30 a.m. – 2:00 p.m., expert speaker Randy Urban will join us to once again give his presentation, “TSP: Everything You Need to Know.” This is an important one, as there have recently been significant legislative changes to the TSP. Click here to register.
In addition, we will host our next happy hour on September 20 from 4:30-6:30 p.m. (register here) and we are tentatively planning on a second webinar for retiree members with AFSA President Ambassador Barbara Stephenson in late October. And, of course, AFSA’s annual awards ceremony will take place on October 10.
Have You Joined the Foreign Service Online Community?
The Foreign Service Online Community is a Yahoo Group open to all AFSA members. This social media platform is intended to be a space to share ideas, perspectives, and opportunities with your professional colleagues. It’s also a source for seeking answers from the “hive”—often the best place to go for a quick and thorough answer are your colleagues who have shared experiences and unique solutions.
AFSA welcomes all members to join the conversation. To join the Foreign Service Online Community, please email FSCommunity@afsa.org and provide your first and last name and the email address you would like to use. You will receive an invitation through Yahoo Groups. You do not need a Yahoo email address to join, but you will need to create a Yahoo ID so that your email is recognized by Yahoo.
To learn more, please visit www.afsa.org/community.
Peanuts, Cracker Jack and the Foreign Service!
The third annual Foreign Service Night at Nationals Park is getting closer! Join us on Friday September 7 at 7:05 p.m. as the Nationals take on the Chicago Cubs. Members of the Foreign Service receive specially discounted tickets and concession credits, the Foreign Service will be honored on scoreboard messages, and more! Come enjoy an evening with your friends and colleagues as the Nationals take on the Cubs! We will also celebrate the centennial of the Diplomatic Courier Service during the game. Click here to buy a ticket. Sales will be cut off at midnight on Thursday September 6, so don’t delay getting your tickets and joining over 460 of your colleagues who will be there.