Federal Employee Retirement Planning Using TRAK-Online

Transcript

Welcome to this short tutorial on TRAK-Online’s Gap Analysis calculator. Hello, my name is Ed Dressel, Owner and President of Trust Builders, I’m glad to show off some of the features in the Gap Analysis calculator geared toward Federal employees. I’m going to do a quick overview of the calculator, how to get into it, how to create a new client and then we’ll to show some of the calculation pages, how to print and we’ll hop right back out.

On the top of the page the website is found at online.asktrak.com. It remembers my login credentials from last time. If you’re a new user and you click on New User you can create an account with your email address and it will send you an email with a new password and login instructions. Here I’m going to click on Login and we’ll just take a quick look around the Home screen. Up at the top it tells us where we’re at: Home. And we have a welcome message over here. Recently used client files I’m setting up here. It shows me which one is Active. With an active client file any of the programs that I enter would be working with that file. So I wanted to work with John Blue, I click on that. John’s file becomes active and I would be working with that. I’m going to click on Mary Smith. Over on the right we have a training class for the TRAK Online tools.

That’s the basic layout screen for the Home place. I’m going to create a new client file so under here we’ve got Home, About a little bit of info about the User. I’m going to go to the Client menu and I’m going to create a brand new client. Create Mary Wise as a client and I’ll leave everything else as blank and click on Add New Client and you’ll see Mary Wise is now the active client. And I’m going to open up the Gap Analysis calculator for this session and just get started. So let’s open that up and we’ll take a look around there. Just takes a moment.

You’ll notice across the top are different tabs, a Setup tab, a Client Tab, etc. All the way over to Calculations and Reports. I’m going to work my way left to right on those and talk about some of those in detail. The spouse’s information we can include or exclude. And you’ll see that when we include a spouse the spouse tab is visible and vice versa. I’m not going to cover this in too much detail. TRAK-Online is going to calculate any additional savings needed and the rates of return on those additional savings are marked right here. For all the cash balance accounts we can have the same distribution options. And typically we’re going to leave restricted distributions. That’s kind of an advanced feature about how we work with cash balance accounts. Is the income distributed if we don’t want it to be? And we’ll leave it at that for now.

Let’s click on the Client tab and take a look. We have some information about the client so we’re going to start with entering their date of birth. Female, we can confirm their age over here. When they want to retire, at what age, we’ll go down to 62 and the end of which month. Right over here we can see the information on that. You can see 62 in June is following their 62nd birthday and how old they are and then down here the monthly income and number of times they’re paid per year. So if we’re working with a Federal employee we’ll enter 26 times per year. Information about their raises. Federal employees typically get their raise on check number 1. We’ll put it in as every year. And information about Social Security. This will be a FERS employee that we will be working with so we’ll allow it to calculate. We can set up the start times or if we know the value at retirement we can simply enter that if we have information from Social Security. If you want to allow TRAK to calculate it you can select calculate. It’s going to make a lot of assumptions there so be careful with that one. Or Today’s Value and that’s the value that Social Security says it’ll be today. Typically that’s the value you get from Social Security Administration when you go out and do the calculations. Life Expectancy, we can use IRS Tables, IRS Tables plus a specific number of years. If you want to set the specific age so we could say we live to 95. And you can say percentile, so we can say the 80th percentile. Notice that the IRS Tables, just a note that it’s going to recalculate it at retirement age. A new study just came out that the longer you work, the longer your life expectancy is. So maybe you retire early, it’s not all its cut out to be, we can set that out and it’s going to recalculate it. So if you retire at 66 it’s going to use a different life expectancy than 65. If you don’t want to do that, select Specify Age and you can enter the specific age there. I’m going to select IRS Tables here and then we can scroll to the top and we go on to the client’s retirement plan information and talk about that.

This is going to allow for a lot of options on their retirement plan. We can select Private Plans and those are for private situations. We’ve got Generic Plans, so there’s some generics like 401(k) Custom, Generic Defined Benefit with specific crediting. We’ve also got Custom Plans. Like I’ve got Joe’s Tool Shop set up here. Its s a Defined Contribution. It’s actually set up as a 401(k). You can setup those plans under the Menu, Custom Plans and setup all the plans that you want. So if you’re working with a Defined Contribution plan a lot, the specific one you can set it up here and it can be configured right here very easily. And we can also select state pension plans so say we want to work for the state of California, you’re going to see that we have a whole bunch of state of California plans. Specifically a whole bunch of PERS plans, some county plans, university, if we wanted to select Cal STRS, there are two Cal STRS plans, two tiers based on the hire date of the employee. And once we select that, you will see that there is some specific information about the plan. Some breaks in service. Specifically today I want to talk about working with a Federal employee. So I’m going to click on Federal and there are three Federal plans: CSRS, CSRS with Offset and FERS. I select FERS and now we can enter information specific to the FERS plan. We have some Federal information and the Federal Savings Plan. This is a FINRA compliant way of talking about the TSP. So which annuity option are they going to select. We’ll select Unreduced Annuity. Service Computation Date I’ll put 01/01/1995 leave the dashes. Spouses date of birth, I’ll put ‘72. Final Average Salary calculation method. If there are any future breaks in service we can enter those here and if there is a divorce reduction option we can enter that here. That’s the retirement plan.

Some Federal information, we will start the distributions as early as we can with no penalty. Or you can say if they are retiring when there might be penalty we can start at early as possible of we can enter a specific age. Typically it’s not more than 62, there’s no reason to defer past 62. Employment type, what type of employment they are. Retirement type: if they are being given a government offer even though it may be early, it’s going to be different if they take an early election offer here; or mandatory. If they are a transferee we can select Yes and then the transfer date. If they are retiring prior to 62 and they qualify for the FERS supplement we can enter the Social Security value at age 62 and that will provide information about the calculation for the FERS supplement. Here I’m going to leave this is calculate value. It’s not relevant since we are retiring at age 62. We could change that later; we can enter the data here if we needed to. Military service, if they have any military service and unused sick leave. Average hours saved per week between now and retirement we’re going to put 4 and they have 1000 hours saved up at this point and that’s going to provide an additional 1.25 years of service. So that’s information about the Federal information about the client.

We go over to Federal Savings Plan if we select how they are contributing to the plan, we can include or exclude the Roth account. If we include Roth account there are 2 different tabs that are exactly alike, we’re going to put No, not many are contributing. Enter the current balance. Three percent contribution per paycheck and the estimated pre-retirement rate of return we’re going to use funds as needed. We have a number of distribution methods, typically you’ll use the funds as they’re needed. Interest rate and distribution start at retirement. When we select FERS there will be the employer match right down at the bottom.

So we’re good there and then we can go over to the Accounts tab and we can add outside assets. There are three different types of account: Retirement Investments, Known Incomes, such as an annuity they have already purchased, maybe they have a military pension we can set that up right there and then also Lump Sum. The sale of an asset, maybe they have a rental house as a known income and they’re going to sell that at age 70, we can set that up as a lump sum. I’m going to create a retirement investment and we’ll call it an Old 401(k) worth $50,000. There’s no ongoing contribution there, if there was we can set it up here. And distribution start at retirement and we can select use funds as needed. So that gives us the ability to add different types of accounts. I’ve added these, you can add as many as you want or need. Just note that the more that you add, the more confusing the chart can be related to this. You could join accounts when that makes sense and show them as one retirement savings investments if you want to set it up that way.

On the Retirement Income tab we can setup the income that the person needs in retirement. We can select percent of income in retirement or can say a dollar value; we can simply say 80%, any cost of living prior to and during retirement. And any special retirement expenses, this could be long term care event; you could illustrate very quickly and set that up right here. We’ll just leave it right there. And then we’re done. These are the data tabs that we’ve worked our way through already and now we’re ready to look at the calculations. I click on the Calculations tab, and you can see that there are some general tabs that we can calculate; we can look at retirement years. And some tabs specific to Mary’s situation. So if I want to look at a retirement years chart, we can see that they are fully funded. I didn’t intend that. That’s social security, I must have entered something wrong here, percent of income, go back to the Client tab, let’s go back to the Personal tab. Oh, I wanted another zero in the income, so $3000 per pay period. Now we can go back and look at the calculations, retirement years and now’s it’s much better. If we wanted to look at the balances we can come in down here to the bottom, change it from income to balances and they’re very well-funded here. I want to create a shortfall just for illustration and also illustrate how easy it is to change the data. So I’ll go to the Retirement Income tab and rather than choose 80%, let me select 100%, come back to Calculations and come back to Retirement Years and there are still balances that are growing. So let me come back to the Retirement Income tab, oh I’ve got to type all my characters. Calculations, Retirement Years and now we see that the balances will run out about 2048 and the income tab we can see that the money is running out about 2050 for this client, 2049-2050. So that gives us some information there. Back to the Calculations tab here and I want to look at some specific Federal reports. Before I get there the General Values tab shows that this person is 93% funded, now you looked at their Retirement Years chart and you can say that they look pretty good and you come here and they are 93% funded and they can feel pretty good about this. Then you ask them how they feel about a 7% cut in pay today. Based on what they needed that’s a pretty significant cut. So that’s one way you can really help them connect.

The other information here that really germane is we can talk about the effect of inflation over retirement. At retirement they need $9000 a month but the average for retirement, not even the high dollar value but the average is almost $13000 a month. So that explains the effects of inflation over the retirement years. Savings $300 more a month today, $350 if they wait a year before they start additional monthly savings. We can show some other calculations. Under the Calculations, another really popular tool is the Retirement Solutions. What do they need to save? And here we’re going to look at life expectancies, if they didn’t live as long or if they out-live their life expectancy. I can come down here and I can illustrate the impacts of inflation. We can compare Retirement Ages and if they wanted to retire year later it significantly reduces the amount of income that they need to save. So providing some quick analysis on how much additional savings do they need for the various scenarios that we can set up. So that’s there as well.

Finally, I want to talk about some specific Federal calculations pages. Specifically FEGLI for the Federal Employee Group Life Insurance and the Long-term Care. The FEGLI right here, we can set up the information, the FEGLI coverage. And if we have a code from FEGLI we can come in here and select it and type C0 and apply FEGLI Code and it automatically configure FEGLI for here and sets it up and if you want to select a multiplier I can change it based on the code. Now we can look at a summary of the information. What’s really good information here is the chart showing them the premium by age and we can see how dramatically it increases when they retire and the steps up it takes over the years. And if we look at accumulated premium we can see that if they live very long the premium significantly increases and we can look at life insurance coverage as well by age. Some really powerful ones if you want to look at the details of this there is the grid right there showing the details.

Also if we go back the Calculations page the Long-term Care Insurance we can set up the calculations. We have the calculations here we cans set up if we want it to be a specific plan and I can add an illustration and select plan B we can compare the illustrations, compare them here, the cost and they will also print out when we go to the printouts.

Finally, we’ll talk about the Reports tab. Over on the left we have the list of reports. We can select a cover page in here and if you wanted to see what each cover page looks like you can click on the little icon to the left of it and select the one you want and you can see that it’s going to select that. If you want the disclaimer included we can select that. General reports and we can set up the information here so if I wanted a FEGLI report and you can select the one you want. You might, the first time, just print all of them out and find out which reports you want and then after you’ve set that up you can come down here and create a standard report set. Or you can call it First Meeting or Second Meeting you can see that it automatically selected those. I’m going to FEGLI to that and the Long-term Care Insurance. Save the setting. I’ll call it Federal Reports. I can create a new one and next time I come in here you can see that I could select Standard or I could select Federal and it changes the list of reports up here. Now I’ll generate the report. It’s going to create a PDF for this. It may take a moment depending on how many reports you have selected and the content of those reports. And there will be three options here: I can open it in a new tab, I can download it right to my computer or I can email it. It will email it to the account that’s setup at initiation. I’m going to open it in a new tab and here is a copy of the PDF. If you want to download it it’s here, if you want to print it out. So there’s the information for the report and the configuration, there’s FEGLI right here with the charts right there, and the Long-term Care Insurance.

So very quickly I’ve walked you through some of the really cool features in the Gap Analysis in TRAK-Online. If I go back on the Menu and go on Home you’re going to see Mary Wise as the new client. It’s going to save Mary’s data and we’ve got a lot of options here. We could drill down and look at the other calculators. Just one quick note, the Strategic Social Security tool will allow you to integrate your models into the Gap Analysis calculator but that is beyond the scope of this intended video. The Split Annuity, the Paycheck and we’re also working on some other calculators that we hope to have out there shortly. It’s a la carte; you pick the tools that you want on a monthly basis. We’re excited about TRAK-Online. We’ve got a lot of wonderful features there and designed it to make it really easy to use.

My best wishes as you use it, and get plugged in and get working with it. And as you work with Federal employees, helping them retire successfully and understand what retirement looks like. My name is Ed Dressel, I’m President and Owner of Trust Builders and it’s been a pleasure sharing this information with you. You have a wonderful day.