The Foreign Service Journal, April 2020

THE FOREIGN SERVICE JOURNAL | APRIL 2020 67 W ho in their late 20s to early 50s, preoc- cupied with the demands of work, family and daily life, has time to plan for a retirement that is many years away? The answer is that we all had better give retirement some advance thought if we wish to be well positioned to enjoy life after the Foreign Service. I know you’re busy, so here is a quick guide for employees who realize that retirement planning is important but have not yet gotten started. Show Me the Money Many Foreign Service members have only a vague idea of what makes up their retirement package. That, obviously, makes it impossible to do even basic planning. So here is an overview focused on those of us who joined after 1983 and are thus in the Foreign Service Pension System. Once FSPS participants reach the age and years of service required to qualify for an immediate retirement, here is what we receive: Pension. Our monthly annuity check is based on our “high three” average salary and years of service. The “high It may be years away, but the sooner you think about and plan for your retirement, the better it will be. BY JOHN K . NALAND Retirement Planning 101 annuitant’s death, the employee’s annuity is reduced by 10 percent to $35,100. Social Security. FSPS members pay into Social Security throughout our careers and thus qualify for Social Secu- rity benefits, beginning as early as age 62 for those willing to take reduced monthly payments in return for a longer benefit period. Because most Foreign Service members qualify to retire before age 62, federal law affords us an FSPS annuity supplement until age 62. This supplement is an additional payment that is essen- tially what Social Security would pay if it could pay before age 62. The annuity supplement ends at age 62 when the annuitant is eligible to apply for Social Security. It ends even if the annuitant does not apply for Social Security then. Thrift Savings Plan. No matter how many years you serve, your FSPS annuity plus Social Security will not come close to replacing your pre-retirement income. Thus, the Thrift Savings Plan must be a key part of your retirement planning. Contribute 5 percent of your salary and Uncle Sam will match it—“free” money that no one should pass up. To position yourself well for retirement, you should contribute as close as possible to the three” salary is calculated by adding our average basic pay for our three highest- paid consecutive years and then dividing by three. Basic pay includes regular pay, domestic locality pay and overseas virtual locality pay, but excludes allowances, dif- ferentials and overtime. This “high three” salary is then multiplied by 1.7 percent for each of the first 20 years of service, plus 1 percent for each additional year. For example, an employee retiring with 25 years of service and a “high three” salary of $100,000 would qualify for an annual annuity of $39,000. If the employee elects to provide annuity and health insurance benefits to a surviving spouse after that RETIREMENT SUPPLEMENT ISTOCKPHOTO.COM/ARKIRA