The Foreign Service Journal, September 2007

some states do not. Thus, retiring to certain states can increase your net income. For a state-by-state analysis, see AFSA’s annual tax guide publish- ed each February in the Journal and posted at www.afsa.org . • If you have prior military or civilian service that is creditable for FSPS retirement purposes, be sure to “buy it back” by making the required contribution to FSPS. For example, I recently paid around $5,000 to buy back three years of early-1980s U.S. Army service in order to increase my FSPS annuity multiplier by 3 percent. That will more than repay itself if I survive even a few years into retire- ment. Consult www.RNet.state.gov for information on buy-back proce- dures, which can take six or more months. • If possible, do not plan to make TSP withdrawals early in retirement. Due to the power of compound interest, the longer money is left in the TSP, the more it will grow. Also, in most cases, anyone who retires before age 55 and begins to withdraw TSP money must pay a 10-percent IRS penalty on amounts received before reaching the age of 59 1 / 2 . • As long as you are enrolled in a federal health insurance plan for the five years prior to retirement, you may keep that coverage after retire- ment. The government will continue to pay its portion of the premium just as it does while you are employed. Live Long and Prosper This article has focused on the fi- nancial aspects of retirement because that is what most pre-retirees consider to be the key to a happy retirement. However, surveys of current retirees show that they consider health to be the most important factor in that regard. After all, having all the money in the world can only do so much for someone who is in chronically poor health. Therefore, a vital component of pre-retirement planning should be to take care of your health. Obviously, little can be done about genetics or bad luck with accidents and disease, but steps such as maintaining a healthy weight, eating well, keeping fit and not smoking are keys to a longer, healthier retirement. Let’s wrap up with a short list of actions that you can take now to start planning for a happy, healthy retire- ment: • Run your annuity, TSP and annuity supplement numbers to do a reality check on the viability of your target retirement date. • Consider moving your TSP savings into funds with relatively high average rates of return to increase the chances that your funds will be around as long as you are. • Maximize your ongoing savings for retirement. • Stay (or get) healthy and fit, especially as you move through your 40s and 50s. • Take the Foreign Service Insti- tute’s excellent four-day-long Retire- ment Planning Seminar as soon as you are within five years of retirement eligibility. • Check out the Department of State retirement office’s Web site, www.RNet.state.gov , for official in- formation, particularly the “Retire- ment Planning Guide” and the exten- sive “AskRNet” question-and-answer section. • Maintain your AFSA member- ship after retirement to support the association’s efforts to protect Foreign Service retirement benefits from potential future cuts. John K. Naland is a 21-year veteran of the Foreign Service who is currently serving as AFSA president. The views in this article are his alone and do not necessarily represent the views of the U.S. Department of State or the U.S. government. The general advice con- tained in this article may not be ap- propriate for all employees, so please consult other competent sources be- fore making major financial decisions. S E P T E M B E R 2 0 0 7 / F O R E I G N S E R V I C E J O U R N A L 19 F S K N O W - H O W Those who can should contribute as close to the annual maximum ($15,500 in 2007) as possible and take advantage of “make up” contributions (up to $5,000 in 2007) after age 50. Send your letter to the editor or “Speaking Out” column to: journal@afsa.org . Note that all submissions are subject to editing for style, format and length.