Page 80 - The Informed Fed--Hearn Wealth Management
P. 80
His retirement contributions and interest total $112,000.
At retirement, OPM determines his life-expectancy to be 7 years
(84 months).
His monthly pension is 80% of his $64,000 high-three base
salary, or $48,000/year.
His contributions ($112,000) will be returned to him as part of
his pension for the next seven years at $16,000/year
($1,333/month).
repayment of his contributions, he will owe taxes on less than $2,700 per
month. Frank thinks this is GREAT... until he outlives his life
expectancy. After age 74, his contributions are fully repaid, and he now
owes taxes on the whole amount he receives. Because of taxes, his check
will, without warning, be reduced by $300-500 per month. Your
repayment schedule will be set at the time you retire based on the current
average life-expectancy tables and your contributions.
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