FEDERAL EMPLOYEE'S
ESTATE PLANNING GUIDE

Estate Planning Series
Asset Allocation, Cost Analysis, Wills, Trusts & Directives

From 3/13/06 through 10/1/06

The following journal entries runs from March 13, 2006 through September 1, 2006. Click current journal entries to return to the most recent entry. This section is devoted to preparing for retirement, estate planning, and compiling your personal "Survivor's Guide" binder.

You may have the same questions or concerns and hopefully these entries will help you prepare for your retirement and to develop your personal estate plan, wills, trusts and health directives. Visit retirement planning to get answers to many of your retirement questions. Parts of this journal may relate to your personal situation. If you would like to comment on a journal entry, this site in general, or to let us know what other areas you would like covered, send an e-mail to ddamp@aol.com. You will find other articles of mine online at Monster.com.

PREPARATION is the key to a successful retirement and this site is devoted to guiding you through the federal retirement maze and includes information on benefits, general retirement issues, and easy-to-use estate planning techniques. It was designed to help you think about the entire picture and not just your annuity and when you can leave. There is considerably more to retirement than meets the eye and this site will help you focus on the critical issues that we all must address at this time in our lives.

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Article Index

• Are You Prepared For Retirement & Insurance Update - Part I

• Preparing For Retirement; Are Your Physically Able and Ready for Retirement? - Part II

• Preparing For Retirement; Are You Financially Prepared for Retirement - Part III

• Up in the Heir — Basic Estate Planning For Feds - Part IV

• Putting it All Together - One Section at a Time - Part V

• The Estate Planning Checklist - Estate Planning For Feds - Part VI

• Caretaker & Survivor Reports - Estate Planning - Part VII

• Financial Reports, Home Inventory, Special Forms and Contact Information - Part VIII

• Wills, Living Trusts, and Health Care Directives... The Final Frontier - Part IX

• Where There is a Will There is a Way - Part X

• Revocable Living Trusts, Professional Options, & Book Reviews - Part XI

DISCLAIMER

Readers should seek professional advice concerning their retirement and benefits and for all other areas that require professional clarification and guidance. The author is not a benefits specialist or financial planner and is only relaying his personal thoughts and ideas in this forum. Readers are strongly cautioned to consult with a professional before using any information contained in this forum. No forum can substitute for professional retirement benefits and planning, investment, or medical advice. Caution is urged when using the information contained in the articles that are posted on this site. The authors and publisher are not engaged in rendering retirement planning, benefits, investment, or medical advice or services. If you have a retirement planning, benefits, investment problem or medical concern, you should consult with a qualified professional in that area. Accordingly, the authors and publisher expressly disclaim any liability, loss, damage, or injury caused by the contents posted on this forum.

March 13, 2006

Are You Prepared For Retirement & Insurance Update - Part 1

 by Dennis V. Damp (Retired FAA)
 

This article will feature the first part of a four part series covering how to emotionally prepare for retirement. Part two, three, and four will cover how to physically, and financially prepare for this momentous event including basic estate planning. Before I start I have an update on the insurance question from several weeks ago. If you recall, a recent retiree and single mom with a 5 year old adopted child asked if she should drop her FEGLI coverage to 75% reduction. She discovered that it was costing her $178 a month to maintain $100,000 in coverage. I suggested she may find a 20 year level term policy for less and then be able to drop her coverage to 75% reduction. You can read my February 20th article for the full story.

I received several quotes for level term insurance since then and have found them to be attractively priced. My State Farm Agent quoted $42 Preferred monthly rate (female) $61 (male) for a $100,000 twenty (20) year level term policy. Non preferred non smoker rates increase to $59 (female) and $93 (male). These rates were quoted for a person age 55. Transamerica Occidental Life sent an unsolicited 10 year term policy quote of $23.89 (female) and $29.75 (male) a month for preferred nonsmoker rates. The shorter term polices are better priced but subject to significant price increases at the end of the initial coverage period.

Considering that she will still have to pay $33.58 per month if she elects 75% reduction FEGLI coverage she will still save quite a bit. State Farms preferred female rate would cost her $42 a month if she is a nonsmoker for a total insurance payout of only $75.58 per month. This doubles her insurance coverage to $200,000 until age 65 and after the FEGLI decreases 75% she will still have $125,000 coverage for an additional 10 years. Her monthly cost savings would be $102.42 a month if she is eligible for the preferred nonsmoker State Farm rate. For additional benefits information including FEGLI visit http://federaljobs.net/retire.

Are You Emotionally Prepared For Retirement?

If you are an emotional wreck before retirement there is a distinct possibility that you will remain that way after you leave if you don’t make changes NOW! You are who you are....... RIGHT? Maybe to a degree this is correct, we are the by-product of our gene pool and the environment we live in. However, the good news is that we have the ability to make significant changes in how we deal with life in general and there is hope even for a workaholic like me - it’s Sunday morning and I’m writing this column and working on deadline for a new book. The key to be emotionally prepared is to plan for your departure well in advance of leaving. You can’t, or I should say it isn’t wise to leave what you will do in retirement to chance. Some do, and it works out fine, and others are left adrift without oars in a sea of adversity. Leaving a stressful job doesn’t mean that you will leave that stress behind. It tends to ride right with you wherever you go unless you learn how to let it go and get on with your life.

I suppose what I’m trying to say is that retirement in and of itself will not solve your perceived problems unless you take action to relieve the stress, whatever it is. By the way, I’m not a philosopher either, just a fellow retiree who has experienced this first hand and now feels fairly comfortable with his new life style. All change is stressful and when you retire the stress - change - is there and you have to deal with it and make some serious decisions. I suggest making a short list to address these basic questions long before you leave:

1. Why am I retiring?
2. Can I afford to leave? (Part 3 of this series)
3. Am I physically prepared for the riggers of retirement? (Part 2 of this series)
4. Is my will, estate, and directives in order? (Part 4 of this series)
5. What will I do with my time?
6. How will my life change when I leave?
7. What are my significant others expectations?
8. Do I want to work in retirement and if so doing what?
9. What do I need to do before I retire to enhance my retirement goals?

The last question will be formulated after you address the first 8. If you decide that you want to start a small business now is the time to explore that option part time while you are working full time for Uncle Sam. No matter what you aspire to do; work, pursue hobbies, golf, travel more, volunteer at your local church, NOW is the time to put those plans into action so when you leave it isn’t all left to chance. If you take action now and start the process you won’t be stressed about it when you leave and will at least know what direction you are heading when you walk out the door.

I know this is a simple concept however many don’t take it far enough. So..... in closing, if you are preparing to retire ask yourself these questions, put pencil to paper, make a plan, have meaningful discussions with your loved ones and make it happen.

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March 20, 2006

Preparing For Retirement
Are Your Physically Able and Ready for Retirement? - Part 2

by Dennis V. Damp (Retired FAA)

Many tend to ignore one of the most important aspects of not only retirement but day-to-day life, your physical well being. When you walk out that door you want to be up to the tasks at hand—whatever they might be. When I knew I was going to leave in 2004 I scheduled a complete physical, blood work, colonoscopy, and my doctor insisted on a nuclear stress test because of my heart arrhythmia problem. I passed all tests with flying colors and thought I was ready to take on the world when I retired. I highly recommend you do the same to ease your mind and get a handle on where you are at physically before you leave. Another more practical reason I did this was to confirm that it was ok to reduce my FEGLI coverage when I left. If you discover that you have major health problems or as they say, have one foot on a banana peel and the other foot wherever....., when you go out the door it may be best to keep all of the coverage you have?

What I neglected to take into consideration was that my level of activity while I was still working was far less than what retirement had in store for me. I went from a desk jockey to constantly on-the-go, exercising, running my business, starting home projects that I had put off for years, and was on my feet all day working on anything and everything imaginable. I unfortunately treated each day like I treated weekends while working; running here and there and always on the go. Well......, if you read my early journal entries you know where that got me. I was off my feet for some time with back, knee and feet problems after just one month and it took about six months to get back on track.

Retirement is like opening pandora's box. You see all of the possibilities and don’t realize you aren’t a teenager anymore or have the stamina you had in youth. It didn’t take long for the reality to catch up with me. Hopefully, those reading my column will learn from my mistakes. It’s also interesting to note that you can’t plan for everything. You simply don’t know what’s around the corner or like me didn’t think realistically about your physical condition at age 55. The quote “The best-laid plans of mice and men oft go astray” makes so much more sense to me today. I don’t care how well you prepare and plan..... things can and do happen.

Retirement today is nothing like it was in the past. Most want to be active, healthy, and able to take on new challenges. To do that you must be in shape, able, willing and ready for the rigors of your new life style. I suggest scheduling the following check-ups before you leave and for retirees who neglected to do this before they left call and make the appointments NOW:

□ Complete physical
□ Colonoscopy
□ Blood work for cholesterol, Sugar, PSI levels, etc.
□ Consider other tests recommended by your physician

I obsessed about the colonoscopy exam for 5 years, from the date my doctor first recommended this test at age 50. I decided to go forward with it and to my surprise it was not the nightmare we all anticipate. I covered this in my pre-retirement journal entry of October 22, 2004 and I suggest reading this if you have put off this valuable exam.

If your job isn’t physically challenging or you are a desk jockey now, I suggest starting an exercise routine long before you leave. Start walking at lunch and on weekends, cut out the junk food, and consider less strenuous exercise programs like Tai Chi or Pilates along with light weights. I was walking on weekends before I retired but that was only two days a week and I did little else. After I made adjustments to my exercise routing after retiring things got back to normal and believe I’m in the best shape I’ve been in for years. I went from 187 pounds to 170, my blood pressure is now 110 over 70, my cholesterol is below 200 and I feel great overall. About the only thing I have to complain about now is that I still don’t sleep well, never did, and possibly never will. The keys are to find an exercise program that you enjoy, exercise in moderation, and eat well and take supplements to insure you are getting enough of what you need to function when exercising. I now walk every other day, just under 3 miles, and on the days I don’t walk I practice Pilates and lift hand weights for about an hour each session. That all adds up to about 7 hours of exercise a week, an hour a day devoted to restoring your energy and healthful pursuits. Proper nutrients are a concern and for me I was not getting enough protein. My legs would tighten up and ache for hours when I first started until I started taking Soy Protein that Chuck Jumpeter recommended. The daily protein supplement was just what I needed and the pain subsided over time.

Now you have my story. What will yours be..........? Only time will tell. However, if you take the time now to evaluate your situation— maybe look in the mirror after taking a shower, pause to consider if you are out of breath when you climb the stairs, and just sit back a moment and think about what you are feeling you may be spurred to action. Then, make that phone call to schedule a physical and start exercising. It can only help and if you start exercising make sure you have your physician's blessing.

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March 27, 2008

Preparing For Retirement
Are You Financially Prepared for Retirement - Part 3

Much of this article is excerpted from my retirement planning site’s Cost Analysis Page. Most feds obtain annuity estimates prior to retiring and have a sense of what they need to live on after they leave. It is advisable to evaluate your expenses and income, pre and post retirement, in depth so that you and your spouse will know how much you will actually have to live on after retirement. This article will help you analyze your personal situation and determine how many dollars you will have after paying for the necessities of life. You will be able to determine if your lifestyle will change dramatically. It will also help you assess whether or not you will need to work part time to supplement your income.

To start the process locate all of your household receipts, pay statements, utility costs, insurance policies, loans and bank account information. There are many things to consider for both CSRS and FERS federal employees and the sample spreadsheet included on this page will help you see the value of completing this form. You can download a copy of this Microsoft Excel Retirement Cost analysis spreadsheet at http://federaljobs.net/retire/retirecosts.htm. Save the spreadsheet to your computer and work on it off line. This spreadsheet shows approximately what you will have left over after you pay all of your bills before and after retirement. The last column represents what your survivor will have remaining from their reduced annuity after you die. This exercise provides an opportunity for you to review and make changes to increase you retirement income and reduce your expenses.

The table listed below is not all inclusive and you can add or remove expenses as you see fit on the form that you download. The sample here is for a federal employee who will soon retire at age 55. He is a CSRS employee and worked 35 years for Uncle Sam. His top grade was a GS-11, step 6.

All expenses are listed on the chart for pre retirement per year and month and again for post retirement per year and month. The last column is for calculating what your spouse will have to live on with current expenses after you pass on. This is a very revealing analysis. Note that in retirement this person will be living on an annuity of approximately $36,985. His total expenses after retirement are $33,835 leaving him with a buffer of just over $3,000 for emergencies. If there are unanticipated expenses or increased costs this person will need to be able to tap other retirement savings such as savings bonds, his Thrift Savings plan, or other investment income. The other option, if you don't have much in your other savings plans, is to continue to work at least part time some where.

After completing this chart you may determine that it is not feasible for you to retire if you were depending 100% on annuity income. Most in the federal sector have the Thrift savings plan which can substantially augment your retirement income. Others purchase savings bonds through payroll deduction and you and your spouse may be eligible for social security when you reach age 62 or older if you worked over 40 quarters, 10 years, in the private sector. If you are in the FERS system and retire at or after your eligibility date social security offset will help you make ends meet if you are under age 62.

The last column is significant to the surviving spouse. In this example, the surviving spouse's annuity reduces to 55 percent of the retiree's annuity, or $20,341. The survivor has expenses totaling $19,680, way to close for comfort. Ideally, insurance would add a blanket of security for the survivor along with social security, Thrift Savings and other investment income. The survivor may have to change their lifestyle considerably to live comfortably in retirement. This analysis will also help you decide whether or not you can risk reducing your FEGLI life insurance coverage when you retire.

The above discussion along with this spreadsheet should get you thinking about where you need to go from here. You can cut unnecessary expenses, possibly move to a less expensive home, sell the second car. There are lots of options. Also, in the survivor's case, there are a number of cost cutting things they can do immediately such as change their health insurance from a family plan to self only. This one action alone can save thousands each year.

SAMPLE RETIREMENT COST ANALYSIS
SPREADSHEET

Pre/year = Before retirement per year costs
Pre/mo = Before retirement per month costs
Post/year = After retirement per year costs
Post/mo = After retirement per month costs