Almost Every “401k” Federal Savings Plan Fund Ended Last Month (and Year) Down

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The vast majority of offerings in the 401(k)-style “401k” Federal Savings Plan did not have a good month in December—or a good year in 2022 for that matter.

The S Fund, invested in small and mid-sized businesses, had the worst performance for December, losing 6.55%. It was down 26.26% for 2022.

The common stocks of the C Fund fared just slightly better. The fund lost 5.67% last month and 18.13% last year.

The international stocks in the I Fund were 1.85% in the red for December and were down 13.94% for the year 2022, while the fixed income bonds in the F Fund lost 0.65% for the month and 12.83% for the year.

Government securities in the G Fund were the one bright spot, inching up 0.32% for December and 2.98% for the year.

For the year of 2022, L Income lost 2.7%; L 2025, 6.72%; L 2030, 10.32%; L 2035, 11.65%; L 2040, 12.9%; L 2045, 14.03%; L 2050, 15.05%; L 2055, 17.6%; L 2060, 17.61%; and L 2065, 17.62%.

So with that being said, should you look into other investments where you don’t have to take ANY losses?  We call it Zero is our Hero.  Contact one of our Financial Retirement Consultants to learn how we help you plan for a better retirement.

No Time Like the Present: Retirement and Estate Planning in Your 20s and 30s

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When you’re young, saving for retirement may be the last thing on your mind. Yet, the financial choices you make in your 20s and 30s will dictate how well-off you are decades from now, and delaying retirement and estate planning until you’re older can be a decision you live to regret. Here’s how to start preparing so you’re ready for your golden years.

Money Management: Budgeting and Handling Debt

Living within your means is a habit best formed early in life, and it becomes even more critical when you’re earning a regular paycheck that must cover expenditures like rent, auto loans, insurance, and utility bills. To ensure you’ll meet your obligations, start by tracking your income and expenses; if the latter exceeds the former, you’ll need to either cut unnecessary spending or find a way to generate more earnings. Use your tracking to create a monthly budget, and then stick to it to avoid overspending.

If you’ve used credit wisely up to now, and you don’t carry any revolving debt, keep it that way. If not, add a line in your budget for paying down your cards so you don’t waste money on interest charges. Pay as much as you can above the minimum requirements, and remit payments on time to avoid fees and build your credit history.

Money Maximization: Saving and Investing

Once you have built a budget and are following it, you may be tempted to splurge with any extra cash. Although you shouldn’t live a life of hermetic deprivation, focusing on saving rather than spending will always have a better outcome long term. That’s because interest compounds, or builds on itself, so free money is added to what you’ve saved.

Speaking of free money, if your job offers a 401(k) plan, join it. It will make it effortless to build your savings, and if your employer provides matching contributions, then company money will be added to your plan every payday.

Buying a home is also a smart investment, as house values generally increase over time. Down the road, you can use your home’s equity as a source of liquidity when needed. When you’re ready to purchase, use a helpful online house appraisal to assess the asking price so you avoid overpaying and benefit fully from any appreciation.

Money Protection: Insurance and Estate Planning

Once you’ve committed to saving and investing for retirement, take steps to ensure you’ll hold onto that money until you or your loved ones need it. Always carry health insurance coverage, as medical debt can quickly deplete your savings. Having a life or disability insurance policy will also help preserve what you’ve accumulated if you die or become unable to work.

Although estate planning may sound silly when you’re beginning to save for the future, if you die without a will, your money may not go where you wish. By creating a complete estate plan when you’re young and then updating it when you marry, buy a home, have children or go through other life changes, you’ll rest assured that your assets won’t end up in the wrong hands.

No one ever says they wish they’d waited longer to be smart with their finances. By focusing on managing, maximizing, and protecting your money in your 20s and 30s, which may include taking advantage of your home equity or utilizing your 401(k) plan, you’ll set yourself and your loved ones up for a stronger financial future.

My Federal Retirement Help can assist you as you begin planning for your upcoming retirement. This way, you won’t have to spend your golden years worrying about your finances. Contact us today by calling 254-870-5959 Ext. 700 or texting 254-301-6571.

OPM Will Suspend Long Term Care Insurance Applications as a Sizeable Premium Increase Looms

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The deadline to apply for the program before a two-year suspension is Dec. 19, but officials want applicants to go in with “eyes wide open” that rates will likely increase substantially.

The Office of Personnel Management plans to suspend applications for the Federal Long Term Care Insurance Program for two years beginning Dec. 19, in anticipation of a sizeable rate hike.

OPM announced the unusual measure last month in the Federal Register, and noted that federal workers who submit their applications by the deadline will still be considered for enrollment. FLTCIP was created in 2002 and assists with health care costs for participants who need help with daily personal functions, or who have a severe cognitive illness, and covers home care, nursing home or assisted living benefits.

“OPM is suspending applications for coverage in FLTCIP to allow OPM and the FLTCIP carrier to assess the benefit offerings and establish sustainable premium rates that reasonably and equitably reflect the cost of the benefits provided,” the agency wrote.

The program will continue to operate normally for current enrollees, although they will not be able to apply to increase their coverage. There are currently around 267,000 federal workers and retirees participating in the insurance plan, and OPM typically receives only a few thousand applications to enroll per year.

The decision to suspend applications for the program came after John Hancock Life and Health Insurance Co., the contractor that administers the program, informed OPM that it is likely that there will a premium increase sometime next year.

In recent years, the long term care insurance market has been plagued by large premium increases, in part because people have been living longer and in part because long term interest rates have been at historic lows since the aftermath of the 2008 financial crisis. The Federal Long Term Care Insurance Program last saw premiums increase by an average of 83% in 2016.

John Hatton, staff vice president of policy and programs for the National Active and Retired Federal Employees Association, said it is likely that OPM will examine whether there is anything they can do administratively to improve the stability of the program or propose legislation to alter the program.

“Reading the tea leaves, instituting a suspension of applications shows that there’s a lack of faith or trust that it’s designed in a way that can be sustainable,” he said. “The first premium increase was around 25%, the second was as high as 125% [in some cases], and 83% on average. These premiums were quoted with the intention of staying stable for the lifetime of the coverage, which is someone’s life. And it’s not just federal workers’. They were just not priced correctly to begin with.”

After the previous round of premium hikes, OPM instituted “FLTCIP 3.0,” which allows current enrollees to adjust their coverage downward in order to reduce the impact of rising premiums. Even with that change, Hatton said OPM likely made the right decision by suspending applications.

“If you can’t accurately quote someone what the cost will be for a product, it shouldn’t be open ended,” he said. “That said, the reason these premiums are going up is costs are very high, and people have to figure out how to plan for long term care costs, and there’s no public option aside from Medicaid, which only provides catastrophic coverage if you’re completely impoverished yourself.”

Ultimately, Hatton said he thinks that OPM will wind up having to request legislation from Congress to make the changes needed to stabilize the program.

“OPM, for their part, has done—within the structure of the program, I think—what they can do,” he said. “They hired an independent actuary to look at the assumptions and make sure that they’re right, they hired a consultant to look at various options, and we’ll see where that goes and what flexibility they have in the statute or whether they’ll need Congress to provide some flexibilities. But at the end of the day, the options that would emerge are going to be ones that are maybe tied more to affordability and certainty, but also less coverage.”

We can also show you a better alternative to Long Term Care insurance using certain riders on our Income Annuity Products.  Why pay for something you may or may not ever use?  Contact us today to learn more.

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FAQs Related to Federal Retirement Planning

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The number of retirees receiving social security benefits has increased from 34 million to 47 million in the US. It clearly indicates how important retirement planning is. Whether you have just kick-started or are at the mid-way of your career, it is never too late to plan your retirement.

According to a study, 39% of adults start saving for their retirement in their mid-20s. Another study suggests that an average American starts saving money for their retirement at age 31. When you want to begin your retirement planning, you need to increase your awareness, especially when you are a federal employee.

What is the federal employee retirement program?

Under FERS, a federal employee is eligible to receive benefits from three sources, a basic benefit plan, social security plan, and a thrift saving plan. A basic benefit plan is the most common type of retirement plan that every employee is eligible for. A thrift saving plan is similar to a private sector 401 (k), while social security is another type of benefit that a federal employee receives based on the eligibility criteria.

What if your employment comes under fers special retirement category?

If you fall under the category of fers special retirement, your retirement age would be less than other federal employees. They may retire at age 62, but you’ll be retiring at age 57; there will be a money gap till you become eligible for receiving social security benefits. But, you are eligible for receiving special supplemental benefits. It is an extra supplemental income that bridges the money gap till you become eligible for receiving FERS benefits.

Should you calculate your retirement benefits yourself?

You can calculate your retirement benefits yourself using a federal retirement calculator. All you need to know is your high three average salaries and year of creditable service. You can put all the values in the formula to calculate your estimate. However, you can calculate your estimate much more accurately with the help of professionals. But where can you find such professionals? Find out in the next point.

Seek professional help from My Federal Retirement Help

We are federal retirement planning specialists who offer guidance so you can choose the best retirement plan to meet your and your family’s needs. We will listen to your concerns and chart out personalized plans to meet your goals. In the end, we will make sure that your checklist is covered and that you can get the most out of federal employee retirement planning.

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Federal Employees Will Pay 8.7% More Toward Health Care Premiums Next Year

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The Office of Personnel Management said increased use of health care services as the COVID-19 pandemic has waned has led to the sharpest uptick in health insurance premiums in more than a decade.

Federal employees and retirees will spend an average of 8.7% more on their health insurance premiums in 2023, a figure that marks the highest cost increase in more than a decade.

The government’s share of Federal Employees Health Benefits Program premiums will increase by an average of 6.6%, bringing the overall increase to 7.2%, according to an OPM document obtained by Government Executive. That overall premium increase is the highest the nation’s largest health insurance program has seen since costs increased 9% in 2011.

On average, federal employees enrolled in “self-only” plans will pay an additional $8.11 per bi-weekly pay period, while feds in “self plus one” insurance plans will pay $20.34 more per pay period. Federal workers enrolled in family coverage will pay an average of $20.87 more per pay period in 2023.

For the Federal Employees Dental and Vision Insurance Program, the average premium for dental plans will increase by 0.21%, while the overall average premium for vision coverage will decrease by 0.41%.

The FEHBP’s annual open season, in which federal employees can choose from a variety of national and regional insurance carriers and coverage plans, will run from Nov. 14 through Dec. 12.

OPM’s document attributed the jump in premiums to the “unprecedented volatility” in health care costs due to COVID-19, noting that the pandemic cost FEHBP about $2 billion in the testing and treatment of the disease in 2021, or roughly double what the disease cost the program in 2020, which has impacted premiums for next year. OPM also cited an increase in usage of health care services, following a period earlier in the pandemic when enrollees used fewer medical services.

The document described the overall 7.2% increase as “aligned” with increases in premiums by comparable large employers. But three of those plans’ reported increases are lower than FEHBP’s—CalPERS, which covers California government employees, projects an average 6.75% increase; a Business Group on Health survey of large employers projected a 6.5% average increase; and consulting group Aon estimated health costs will increase by around 6.5% next year. The Kaiser Family Foundation projects a 10% average increase for individual marketplace premiums, with “most rate increases falling between about 5% and 14%.”

OPM said it has worked with insurers this year to improve coverage of prenatal and postpartum health care services, as well as increase access to gender affirming care for members of the LGBTQ+ community. Insurers are also required to provide “adequate coverage” of anti-obesity medications. And four new plan options will provide assisted reproductive technology coverage, bringing the total number to 18 plans next year, and an additional plan will provide an optional benefit for discounted ART procedures.

National Treasury Employees Union National President Tony Reardon said in a statement Friday that although the premium increases are reportedly in line with other large employers, the spike in costs underscores the inadequacy of President Biden’s proposed 4.6% average pay raise for federal employees next year.

“These premium increases may be similar to those expected by other large employers in the private sector, but they will still cause sticker shock for federal employees,” he said. “These premium increases are yet one more data point in our argument that federal employees deserve a fair pay increase in 2023. NTEU supports legislation providing federal employees, on average, a pay increase of 5.1%, which would help them keep up with rising costs and save for retirement.”

If You Make $100,000 in Average Annual Income, Here’s What You’ll Get From Social Security at 67

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For anyone born after 1960, the Social Security Administration (SSA) determines that your normal retirement age, which is when you would be entitled to your full benefit, is 67.

But deciding whether or not you should retire at that age can be difficult. You can start receiving Social Security benefits as soon as you turn 62, but claiming early can significantly reduce your amount.

You can also wait until 70 to start taking Social Security (increasing your benefit to the highest amount possible), but perhaps you don’t want to wait that long. It depends on where you are in life from a financial perspective and how your health is doing.

Given all of these factors, it’s a good idea to figure out how much you might get when you start to claim benefits. Despite its complexity, you can break down the Social Security formula into basic parts to calculate your amount. Let’s see how much you would make if you earned about $100,000 annually (adjusted) over your career and retired at 67.

Breaking down the formula

To begin calculating your benefits, the SSA first calculates your average indexed monthly earnings (AIME), which looks at the 35 years of your work history in which you made the most money.

It looks at your nominal earnings over these 35 years and then indexes them (or adjusts them) to determine what the amounts would have been if you were making them in the present. So, essentially, the SSA would take your nominal earnings, from, say, 1982 and adjust them for wage inflation over the years to reflect what those earnings would be in 2022.

An example on the SSA website shows that nominal earnings of $13,587 in 1982 would have been equivalent to about $52,000 in 2022. But the SSA also has a wage base limit for what a retiree can get credit for. That number is $147,000 in 2022.

To finish getting the AIME, you add up your highest 35 years of annual earnings, which are now indexed to account for inflation. Then you divide by 35 to get the annual amount over that period and then divide by 12 to get the monthly amount.

Once you have your AIME, the next thing you need to do is calculate your primary insurance amount (PIA), which is your actual monthly benefit from Social Security for those receiving full benefits at the normal retirement age.

This is also not a simple calculation, but it can be done easily enough using these three steps and adding the amounts from each step. Here are the numbers for someone who turned 62 in 2022:

  • 90% of the first $1,024 of your AIME.
  • 32% of any amount between $1,024 and $6,172.
  • 15% of the leftover amount above $6,172.

What is your PIA on an annual income of $100,000?

If your highest 35 years of indexed earnings averaged out to $100,000, your AIME would be roughly $8,333.

  • 90% of $1,024 = $921.6
  • 32% of $5,148 = $1,647.36
  • 15% of $2,161 ($8,333-$6,172) = $324.15

If you add all three of these numbers together, you would arrive at a PIA of $2,893.11, which equates to about $34,717.32 of Social Security benefits per year at full retirement age. That’s not too shabby considering the maximum benefit is $4,194 per month, and that assumes you delay claiming until you are 70.

The $18,984 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $18,984 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.

What You Need to Know About Social Security and Federal Retirement

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What is the average monthly Social Security retirement check in 2022?

$1,657, according to this Social Security fact sheet.

Sandy and her husband, Tom, were both born in 1956. Sandy began receiving a reduced Social Security benefit of $586 a month at 62. (This is 73.3 percent of the full benefit amount of $800 she would have received at her full retirement age of 66 years and 4 months). Tom is retiring this year and will receive $2,800 a month at his full retirement age—also 66 and 4 months. How much will Sandy receive after Tom retires?

She will get $1,115. This is a bit complicated, so don’t feel bad if you couldn’t figure out the answer. At full retirement age, a spouse is eligible for 50% of the full Social Security retirement benefit of their spouse or their own benefit—whichever is higher. But the fact that Sandy began collecting her own benefit at 62 affects the calculation of her spousal benefit when her husband retires.

Social Security will use Sandy’s full benefit amount that would have been payable at her full retirement age, based on her own work record (not the amount she has been receiving since she was 62). That amount will be subtracted from 50%of her husband’s amount. Sandy’s full benefit would be $871 (it has grown from the initial amount of $800 by cost-of-living adjustments since 2018), so Social Security would subtract $871 from 50% of her husband’s full benefit amount of $2,800, or $1,400. The resulting sum of $529 would be added to her current benefit of $586, and her new benefit amount would be $1,115 per month. If Sandy had waited until her full retirement age to apply for Social Security, then she would have received the higher of her own full benefit amount or 50% of Tom’s, which would have been $1,400 a month.

How much can you earn in 2022 if you are under your full retirement age without reducing your Social Security benefit?

$19,560. If you’re under your full retirement age for the entire year, Social Security will deduct $1 from your benefit for every $2 you earn above the annual limit. Here’s more information about how work affects your Social Security benefit.

What are the conditions under which you can receive a Social Security benefit based on your former spouse’s work record?

If you were married for 10 years or more, are not currently remarried, and are not receiving a pension from work not covered by Social Security. A former spouse who meets the requirements to receive a Social Security benefit is treated basically the same as a current spouse. This entitlement does not affect the former spouse’s own Social Security benefit or his or her new family’s. If the spouse is receiving a Civil Service Retirement System retirement benefit, then he or she will be affected by the dreaded Government Pension Offset, which will reduce the spousal benefit by two-thirds of the CSRS retirement. This will eliminate the benefit entirely in many cases. Read more in this Social Security publication: What Every Woman Should Know.

Among beneficiaries 65 and older, what percentage rely on Social Security for more than 90 percent of their income?

For men the answer is 12%, and for women it’s 15%. It’s also interesting to note that 37% of men and 42% of  women rely on Social Security for 50% or more of their income.

What is the full Social Security retirement age?

The earliest you can start receiving Social Security retirement benefits is 62, but the benefit is permanently reduced for applying early. Your full retirement age is between 65 and 67, depending on your year of birth.

What can you do to increase the amount of your Social Security check?

Here are some of your options:

  • Delay receiving payment until you turn 70
  • Claim a benefit on your spouse’s work record
  • Continue working past 62

Social Security was never meant to be your only source of retirement income. Knowing this, how should you plan your retirement?

Here are some steps you could take:

  • Learn to live on less now
  • Make saving mandatory and automatic
  • Plan for being single, even if you’re not
  • Be realistic about when you can afford to retire

Always remember that the modern federal retirement has three key elements: a government retirement benefit, Social Security and personal savings, especially through the “401k” Federal Savings Plan . Learning how to balance and maximize these elements is the key to a comfortable retirement.