The Foreign Service Journal, April 2020

68 APRIL 2020 | THE FOREIGN SERVICE JOURNAL annual maximum ($19,500 in 2020) and take advantage of post-age 50 “make-up” contributions (up to $6,500 in 2020). Health Insurance. One of our best retirement benefits is the ability to retain Federal Employees Health Benefits coverage as a retiree. And the government continues to pay its majority share of the premium, just as it does while you are employed. Reality Check How much money will you need to retire comfortably? Experts say that most people can continue their current lifestyles into retirement on 85 percent of their pre-retirement gross income. One reason for that reduced need is that deductions for Social Security, Medicare, TSP and FSPS contributions can consume at least 15 percent of pre-retirement gross income. Those deductions end at retire- ment, thereby reducing the drop in “take home” income. Of course, your retire- ment income needs may be higher or lower, depending on your desired retire- ment lifestyle and continuing financial commitments, such as children’s college expenses. You can judge your financial trajectory for retirement by estimating your annuity, Social Security and TSP income as of a target retirement date. State Department employees can estimate their annuity and annuity supplement using the Employee Retirement Portal on Open Net. Any- one can estimate their Social Security payments by registering for a My Social Security account on www.ssa.gov. And the TSP website at www.tsp.gov has cal- culators that generate estimates of your TSP account growth and post-retirement withdrawals under different scenarios. Unfortunately, there are several “known unknowns” that could disrupt our retirement plans. First, in our up-or- out personnel system, retirement can be forced on us before we want it, reduc- ing both our lifetime earnings and our pension. Promotion rates could slow, or your assignment pattern could be viewed by selection boards as being less com- petitive than your peers. So as you enter the middle years of your career, think carefully about decisions that might affect your career longevity—for example, when to open your six-year promotion window to the senior ranks if you are a Foreign Service officer. Also out of our control is the stock market. A market plunge a few years before or after retirement subjects us to something called sequencing risk. For example, someone who retired in December 2008 with $500,000 in the C Fund and then withdrew 4 percent a year would have had a balance five years later of approximately $735,000. But if the same person retired in December 2007 and then withdrew 4 percent a year, they would have a balance five years later of just $405,000. The difference is that, in the second scenario, the 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. Finally, Congress could cut federal ISTOCKPHOTO.COM/ARKIRA RETIREMENT SUPPLEMENT