The Foreign Service Journal, July-August 2013

THE FOREIGN SERVICE JOURNAL | JULY-AUGUST 2013 17 FS KNOW-HOW survey administered to 200 Foreign Service members at the start of a recent Retire- ment Planning Seminar at the Foreign Service Institute highlighted both strengths and weaknesses in their retirement planning. Strengths included the fact that most of the respondents already had at least a basic understanding of 10 key retire- ment planning topics. But the survey also identified 12 shortfalls in pre- retirement preparations and knowledge. This article lists those shortfalls, along with information to help you bridge any similar gaps in your own retirement planning. While this guidance applies to Foreign Service members from all five foreign affairs agencies, employees from outside the Department of State will need to ask their agency’s human resources office about agency-specific processing pro- cedures. Four Gaps in Pre- Retirement Actions Are Not Contributing Enough to Thrift Savings Plan : Ten percent of those eligible said that they were not con- tributing enough to their TSP account to obtain the full government match. In addition, 39 percent of the survey respondents were not contributing the maximum amount. The TSP is one of three pillars—along with Social Security and a federal annu- ity—of the retirement financial security of employees hired after 1983. Foreign Service Pension System employees who are not contributing significant amounts to their TSP are not building up that crucial nest egg. They are also missing out on an upfront tax deduction resulting from the fact that TSP con- tributions are excluded from taxation when they are made and are only taxed upon withdrawal years later. (This is not true of the Roth TSP option, however.) In addition, FSPS employees who are not contributing at least 5 percent of their salary to TSP are not receiving the maximum agency matching contribu- tions that could significantly boost their financial security in retirement. Foreign Service Retiree and Disability Sys- tem employees may also make pretax TSP contributions, but do not receive matching government contributions. Have Not Updated Beneficiary Des- ignations: Ten percent of respondents said that they knew that their benefi- ciary designations were not current for life insurance, lump-sum salary payment, and/or TSP savings. Another 17 percent of respondents were unsure if their beneficiary designations were up-to-date. Every year, there are cases of death benefits not being paid to the immedi- ate next-of-kin because the employee or annuitant had not updated their beneficiary designations after marriage, divorce or other relationship changes. So please check your Electronic Official Personnel Folder to make sure that your beneficiary forms reflect your current wishes. The forms are: retirement ben- efits designation (DS-5002), Federal Employees Government Life Insurance (SF-2823) and unpaid compensation (SF-1152). In addition, check the benefi- ciary listed on your annual TSP account statement to make sure that your TSP designation (TSP-3) reflects your cur- rent wishes. Retirement Planning Shortfalls BY JOHN K . NALAND A John K. Naland is the director of the Office of Retirement at the Department of State. A 27-year Foreign Service veteran, his overseas assignments include Colombia, Mexico and Iraq. He has twice served as AFSA president and published more than 80 articles and columns in these pages, including a previous FS Know-How column on this topic, “Assistance after Retirement” (November 2012). Here are some simple steps all FSOs can take to protect and maximize their retirement benefits.