The Foreign Service Journal, July-August 2013

20 JULY-AUGUST 2013 | THE FOREIGN SERVICE JOURNAL earnings in retirement, you will pay no income taxes on them, as long as five years have passed since you made your first Roth TSP contribution and you are age 59½ or older, permanently disabled or deceased. The Roth TSP may be most beneficial to persons facing higher tax rates in retirement, persons wary of future tax rates who wish to protect their invest- ment, and younger enrollees who wish to earn the maximum amount on their compounded contributions tax-free. Unclear about Options for Survi- vor Benefits: Thirty-two percent of respondents had little or no under- standing of the options and associated costs for electing survivor benefits for their spouse, other relative or close acquaintance. At retirement, an employee enrolled in FSPS may make his or her spouse eligible to receive a survivor annuity equal to 50, 25 or 0 percent of the employee’s unreduced base annuity. Selecting one of the latter two options may be done only with the spouse’s notarized consent. The retiree’s annuity is reduced by 10 percent if the 50-percent survivor annuity is elected, and is reduced by 5 percent if the 25-percent survivor annuity is elected. The percentages for FSRDS participants are slightly different. Survivor annuities may also be elected for other relatives, close acquaintances or former spouses. A key consideration is that a survivor’s Federal Employees Health Benefits coverage will terminate upon the annuitant’s death if no survivor annu- ity was elected. Unclear about TSP Withdrawal Options: Thirty-one percent of respondents had little or no under- standing of the TSP withdrawal options at retirement. When you are ready to withdraw your TSP account after retirement, you can choose: (a) a single payment; (b) a series of monthly payments that are either a specific dollar amount or based on your life expectancy; (c) a life annuity; (d) transfer to an IRA; (e) a one- time partial withdrawal; or (f ) a combina- tion of the other options. Unclear about Long-Term Care Options and Their Usefulness: Thirty percent of respondents had little or no understand- ing of long-term care insurance options and costs, or of how they would cover long-term care expenses absent such insurance. Long-term care insurance pays for long-term care services at home, in a nursing home or at another long-term care facility. According to the Department of Health and Human Services, at least 70 percent of people over age 65 will require some long-term care services at some point—expenses that most health insur- ance (including the Federal Employees Health Benefits Program) does not cover. Thus, employees who are concerned about their long-term finances should weigh the costs and benefits of long-term care insurance. For information on the Fed- eral Long-Term Care Insurance Program, go to www.ltcfeds.com . Several private insur- ance companies also offer policies. Unclear about TSP Risk versus Reward: Twenty-nine percent of respondents had little or no understanding of the fact that TSP bond funds that offer the safety of capital preservation may not generate long-term gains that out-pace inflation. Over short periods of time, stock funds Far too many employees don’t know how retirement benefits are taxed and what strategies could reduce or defer those tax consequences. You Are Our Eyes & Ears! Dear Readers: In order to produce a high-quality product, the FSJ depends on the revenue it earns from advertising. You can help with this. Please let us know the names of companies that have provided good service to you — a hotel, insurance company, auto dealership, or other concern. A referral from our readers is the best entrée! Ed Miltenberger Advertising & Circulation Manager Tel: (202) 944-5507 E-mail : miltenberger@afsa.org