But beyond hammering out agency budgets for next year, the GOP-led House Appropriations Committee has tacked on several policy riders that could impact federal employees and retirees in other ways as well.

One policy rider included in the committee’s report language, for instance, would bar any investments through the Thrift Savings Plan that are based on environmental, social or governance (ESG) criteria.

House Republicans also tried last budget cycle to include the “No ESG in the TSP” policy rider in the spending legislation, but it ultimately did not end up in the final appropriations package.

The launch of the voluntary TSP mutual fund window in June 2022 brought more than 5,000 new mutual fund options to TSP participants who choose to enroll in the window and pay a fee for the service. But the Federal Retirement Thrift Investment Board has said if an anti-ESG policy is enacted, it would bring the TSP’s new mutual fund window to an early demise.

Keeping track of 5,000 mutual funds would become too burdensome and open FRTIB to potential legal exposure, the board has said.

“There is no practical, cost-efficient way to monitor each of the roughly 5,000 individual mutual funds’ holdings,” FRTIB Director of External Affairs Kim Weaver said in 2023.

FRTIB has publicly opposed the provisions that aim to bar ESG investments. Weaver has also said there would be ripple effects from the provision, if it’s enacted. It would cost the TSP additional money to wind down the mutual fund window, and TSP participants may be exposed to potential financial losses if they had to transfer their investments back to the main TSP funds.

Appropriations committee members plan to mark up the financial services and general government 2025 spending bill, as well as several others, on Thursday afternoon. Here are some of the other policy riders federal employees should pay attention to:

Telework, office space in 2025 spending bill

In the report language, committee members also noted previous and upcoming requirements for the Office of Management and Budget and the General Services Administration to report to Congress on federal telework and office space.

In the 2024 enacted appropriations package, lawmakers included a now-approaching deadline for OMB to share all agencies’ work environment plans with Congress. Those plans, which stem from the initial return-to-office memo in April 2023, detail agencies’ recent telework policy changes.

OMB’s deadline to submit all agencies’ return-to-office plans to Congress is coming up in late June.

“The committee looks forward to receiving the report from OMB on governmentwide telework,” House appropriators wrote in the committee’s report. “The committee [also] expects agencies under the jurisdiction of the subcommittee to reduce their office footprint if their average office space utilization rate is less than 60%, based on a benchmark of 150 usable square feet per person.”

At the same time, the committee said GSA has not yet provided its required report on how agencies can reduce office space requirements based on lessons learned from using telework during the COVID–19 pandemic.

The federal footprint has been steadily declining, but agencies still holding onto excess and underutilized office space is a main reason the Government Accountability Office has kept federal real property management on its High-Risk List for over 20 years.

In the 2024 spending package, Congress called on all agencies with an office space utilization rate of less than 60% to submit a description of their current efforts to reduce their physical footprint, the total office space costs, the average utilization rate and the estimated cost of underutilized space.

If enacted, the 2025 spending bill from House appropriators would also give GSA and OMB a new 180-day deadline to offer further data and recommendations on how to best consolidate federal office space, while disposing of unneeded federal real estate.

Continuing a few longstanding provisions

In addition to the slate of new policy riders, House appropriators are also looking to maintain numerous provisions that have been around for years, and in some cases decades. Many of those provisions have become practically standard in spending bills each fiscal year.

For example, one continued provision requires agencies to pay OPM a fee for processing retirement claims for employees who separate early from federal service.

Another would continue to direct agency employees to use official time — or time spent working on union-related activities while on the job — in “an honest effort to perform official duties,” the committee report language said.

Additionally, a provision often referred to as the Hyde amendment would maintain the current ban on any government funding from going toward abortions through the Federal Employees Health Benefits (FEHB) program.

IRS pilot, FBI headquarters and more

The full appropriations committee also maintained several provisions from the subcommittee’s initial 2025 spending and policy proposals earlier this month.

Notably, the committee plans to implement steep spending cuts for the IRS, and aims to completely defund IRS’ free Direct File platform.

The lawmakers are also looking to decline a $3.5 billion request for construction on the new FBI headquarters building during 2025. The appropriations bill would also withhold all current funds allocated for the GSA construction project.

Democrat committee members, unsurprisingly, have come out in strong opposition to the spending cuts and many of the policy riders. Some lawmakers said they’re concerned about the ability of several relatively small agencies to handle large budget cuts. Rep. Steny Hoyer (D-Md.) warned last week that the House GOP bill would force agencies to implement staff reductions to make ends meet.

The post Policy riders to watch as House appropriators mark up 2025 spending bills first appeared on Federal News Network.

The Common Stock Index C Fund posted the highest return for May with 4.96% returns, followed closely by the International Stock Index Investment I Fund which posted 4.86% return.

The Government Securities G Fund posted the lowest return at 0.41%, up from 0.35% last month.

All funds are in positive year to date territory except for the Fixed Income F Fund which posted -1.56%.  The Common Stock Index C Fund also posted the highest return for the last 12 months with 28.15%. The Small-Cap Stock Index S Fund posted the second highest 12-month return with 24.55%.

All Life Cycle funds posted positive returns. The L 2055, L 2060 and L 2065 all posted 4.67% return in May and 24.21% return for the last 12 months.

The post TSP funds make a healthy jump in May first appeared on Federal News Network.

We’re not going to bore you with the nuts & bolts of how your Thrift Savings Plan works.  We do things a little differently here at Federal Employee Benefit Advisors (FEBA).  We’re going to show you how you can maximize every bit of the TSP as possible.  There are several strategies you can employ, some immediately, to put yourself into a better investment position; ultimately leaving you more confidently prepared & ready for your retirement.  Here is what you will learn as you read through this article:

• TSP basic overview (Very brief, not too wordy, we promise)
• Unmasking the C, S, I, F, G Funds
• Enhancing the Lifecycle Funds
• Maximizing TSP with withdrawal/transfer options

TSP basic overview

TSP came into being in 1986 with the G Fund added on April 1^st 1987…no foolin’!  The C & F funds were added shortly thereafter in January 1988.  To round out the fund portfolio the I & S funds were added in May of 2001.  There are also Lifecycle Funds which are a blend of all 5 funds designed to strategically reallocate to target your desired retirement year.  Currently, there is a traditional pre-tax withholding account and a Roth after tax withholding account which was added in 2012.  A 5% matching contribution is available to all FERS employees.  The matching portion is added into the traditional pre-tax withholding account even if all contributions are directed to the Roth account.  There is also a mutual fund window available.  It is expensive and limiting; only about 1% of all TSP monies exist within this window.  TSP is managed by Blackrock Capital Advisers and is facilitated by the Federal Retirement Thrift Investment Board.

Unmasking the C, S, I, F, G Funds

C, S, I Funds

Although you have 5 fund options to pick from, in reality you only have 3 choices to invest in.  Here’s why we say that.  The C, S, & I Funds are your stock index funds.  The C common stock index fund, S small capitalization stock index fund, I international stock index fund are all one asset class: Stocks/Equities.  They are the same thing.  Even though there are 3 different indexes they are correlated assets.  Correlation means that they are moving in the same direction almost all the time.  So, when the stock market is up, the C, S, I Funds are up.  And when the stock market is down, the C, S, I Funds are down.  They almost always move in the same direction together.  Unlike individual stocks, which can move in opposite directions, indexes generally do not as they are a large group of individual stocks.  They might earn a little more or less than the other, but they are moving in the same direction.

If we know that we have 3 options/funds to invest in within the same asset class, then we want to find the BEST-in-class fund.  There is a clear winner amongst the C, S & I Funds.  Only one of these funds we advise our clients to invest in.  One of these funds has greatly out-performed the other two, and has done so with considerably less risk.  In our professional opinion, the only stock fund worth putting your hard-earned money into is the C Fund.  Here is why.  The data never lies:

• In 2008 the I Fund lost -42%…the C Fund only lost -36%
• In March of 2020 (due to Covid) the S Fund lost -21%…the C Fund only lost -12%
• In 2022 the S Fund lost -26%…the C Fund only lost -18%

These are but just a few examples of the C Fund not losing nearly as much as the two riskier funds.  Yes, the S & I have the potential to have a higher single rate of return then the C; and in fact, this has happened in the past, but what we are trying to help you understand is that not having as big of losses as the other two allows the C Fund to outperform the I & S Funds over time. This is because the C Fund is a more conservative stock index Fund; it comprises around 500 big US companies.   Let’s look at the historical return data to help cement this concept:

• Since inception (1988), the C Fund has averaged 10.88% as of 4/30/24
• Since inception (2001), the S Fund has averaged 8.87% as of 4/30/24
• Since inception (2001), the I Fund has averaged 5.09% as of 4/30/24

Something we always ask our federal employee clients is this: “Would you rather average 10.88%, 8.87%, or 5.09% taking roughly the same amount of risk?”  So, we will ask you the same question.  We now have decades of data on the C, S, I.  We know they are the same asset class, so why not invest in the BEST-in-class?

F Fund

The F Fund is the fixed income index fund.  It is a blend of over 11,000 bonds and notes.  In our professional opinion, the F fund is not a great option. Even the Lifecycle funds agree, there is no significant allocation to the F fund in any of the 10 current L funds.  Before we show you why the F Fund is not an ideal investment, let us first explain why it was originally added.  For the longest time, bonds tended to be considered the “gold standard of conservative investing.”  This is because bonds tend to be non-correlated with the stock market.  In other words, when the stocks go down, bonds are supposed to rise slightly; maybe 2%-5% on average.  This is a great hedge on the more aggressive stock market.  The problem with the F Fund is that is a huge basket of many different types of bonds.  Therefore, it behaves differently than owning a bond outright.

The F Fund has not been performing well over the last 10-15 years.  Here is what we mean:

• Over the last 10 years the F Fund has averaged 1.39% as of April 30, 2024.

Even worse, the F Fund was heavily correlated with the stocks in 2022.

• The F Fund was down -12.83%. Comparatively speaking, the C Fund was down -18.13%

Here is what we ask all of our federal employee clients: “Do you really want to risk experiencing double digit loss to potentially gain 1.39%?”

G Fund

The G Fund is the government securities investment fund.  The G Fund earns interest set by law at the weighted average yield on outstanding US Treasury securities with four or more years to maturity.  In other words, it doesn’t make much money: the 10-year return to-date is 2.36%.  This creates a very big problem for federal employees who are in the retirement horizon of their career.  The G Fund is truly the only safe investment fund the TSP main core funds have to offer.  It guarantees no losses, which is very important, but it does not keep up with inflation most years historically.  This creates an investment dichotomy, as one hand, the G fund protects the investor from dangerous market downturns, but on the other hand the value of their G Fund balance reduces as they suffer from inflationary loss each year.  Ex: Inflation = 5% & G Fund return is 2.36% means that the balance of the G fund suffers –2.64% inflationary loss.

The other problem the G Fund presents the federal retiree is that it oftentimes creates income loss.  As a federal retiree begins to withdrawal money from their G Fund in retirement, we often see folks suffering from income loss.  The national average retirement income withdrawal rate out of 401k/IRA type retirement accounts is about 5%.  Therefore, as the federal retiree withdraws 5% out of a G Fund balance only earning 2.36% then that person suffers -2.64% in income loss.  The balance reduces because the interest rate is less than the withdrawal rate.  So, in the end, both income loss and/or inflationary loss creates a negative situation in the G Fund balance and has the potential to greatly reduce retirement income over time.

Lifecycle Funds

The Lifecycle Funds, or L Funds, are target date funds.  Their main goal of the L Funds is to allow for automatic reallocation of assets from the more-risky stock funds (C, S, I) into the more conservative funds (F, G) as an employee reaches retirement age.  They allow the federal employee to “set it & forget it,” so that each year as they near retirement, the L Fund of choice will automatically reallocate to the desired conservative to risk ratio.  Investment philosophy recommends a conservate to aggressive risk tolerance ratio of 60%-80% conservative and 20%-40% aggressive once one reaches the retirement horizon in life.  Anyone within 5 years of retirement or over the age of 59.5 is considered to be in the retirement horizon.

The idea of the L Funds is a sound one.  The problem with the L Funds is that they allocate a certain percentage to all 5 of the individual funds.  And as we’ve already explained above, we know the C Fund is substantially better than the S & I Funds.  Historically speaking, the C earns more than double the rate of the return the I, and about 2% more than the S fund.  So why then would we want exposure in two riskier stock funds that have proven over two decades to underperform the C Fund?

The other problem with the L Funds is the exposure you have in underwhelming F Fund.  TSP considers the F Fund a conservative income fund, therefore, they place some of your money in the F Fund within the chassis of your desired L Fund.  Let us remind you: the F fund is averaging only 1.39% over the last 10 years, and worse yet, the F Fund lost -12.83% in 2022; which was heavily correlated with the double-digit losses of the C, S, I Funds.  No thank you.  We believe you can make your own L Fund & potentially greatly outperform any of the L Funds available for you to choose from.

Customized and optimized L Fund

How to make a customized & optimized L Fund: First off, only use the C & G Funds.  These are the only two funds which are worth it.  Secondly, keep it simple:.  You don’t need to worry about adjusting your C/G asset allocation ratios every single year.  Follow this simple risk tolerance chart of our recommended re-allocation strategy*:

Maximizing withdrawal/transfer options

Before the TSP Modernization Act of 2019, Federal Employees were only allowed to make one In-Service Withdrawal out of their TSP during their entire career.  Wisely, the Federal Thrift Retirement Investment Board urged the members of Congress to pass the bill which now allows unlimited withdrawals from a federal employee’s TSP while they are still in service (up to 4 times per 12 months).  Anyone over the age of 59.5 has the privilege & power to take their retirement account into their own hands and transfer a portion or all of their TSP into an outside account in the private sector.  As long as the funds are being transferred into an IRA or a Roth IRA then there won’t be any taxes, penalties, or fees for the transfer.

That said, this is one of the most under-utilized opportunities federal employees miss out on.  TSP is a savings plan.  It is designed to allow younger employees to save money in inexpensive funds for the sole purpose of building a healthy balance for when they reach the retirement horizon.  The TSP is not a great place to keep all your money when you reach the retirement horizon.  The main reason is because of the simple fact that someday soon, the federal employee in the retirement horizon will need to begin taking income from their balance.  We have already explained why taking income from the G Fund is not ideal.  And it is NEVER recommended to take income out of an account/Fund which is down; especially when that fund could easily be down double digits in a single year (C, S, I, F).

TSP maximization

We highly recommend any federal employee who is of the age of 59.5+ or retired to strongly consider a savvy investment strategy we call: TSP Maximization. Which is simply: transferring some/all of their TSP balance & placing the funds into an IRA/Roth IRA in the private sector.  There are considerably better retirement account options waiting for you in the private sector.  You have the opportunity to take control of your TSP & maximize it this way.  Now, this does not affect your current TSP account and you will still be able to contribute into the TSP each paycheck and continue getting the government matching contribution.  It simply takes some/all of the balance and moves it out of TSP.

There are hundreds of options for you to consider in the private sector, so instead of overwhelming you in this article with the details on all of them, we have gone through the pain-staking measure of identifying what we believe to be the Top 2 private sector investment options to consider with TSP Maximization.  Each month we facilitate a live 1-hour nationwide webinar titled: TSP Maximization.  Not only will we break these two different IRA/Roth IRA investment options in detail, we will also go into greater detail with other ways you can maximize TSP no matter what age you are or where you are at in your career.  Additionally, we will follow the education with a 30- minute Live Q&A where we will answer your questions in real time.

Below you will find a link to our TSP Maximization webinar registration page so you can find a day & time that works for your schedule.  As a small preview, one of the IRA/Roth IRA options we will cover in detail guarantees no losses due to market volatility, has averaged over 8% over the last 10 years, offers a 10% cash match/bonus, and is low fee.* ,**  Lastly, we are not affiliated, endorsed nor hired by the federal government.

*Disclaimer: This article is not intended to be personal investment advice. These are general concepts and historical data. We cannot make any personal investment recommendations without understanding your personal financial situation, goals, and risk tolerance.

**Available in most states. Average annual return based on last 10 calendar year historical market data. Exact fees and limitations will be disclosed based on company and state availability.

The post How to maximize your TSP first appeared on Federal News Network.

The Thrift Savings Plan might be the easiest way to accumulate wealth ever devised. Still, people find ways to mess it up, or not get the most out of it. Joining the Federal Drive with Tom Temin with five of the most common TSP mistakes, retired federal manager Abe Grungold of AG Financial Services.

Interview Transcript: 

Abe Grungold Tom, I always analyze my TSP from day one, and I always tried to make sure how to avoid any type of a financial error that would cost me money down the road. But what I have learned from my business and from listening to, other coworkers and clients, is that there are five common mistakes that TSP participants should avoid. And let me run down through the five.

Tom Temin Yeah, the first one I really like and that is, you know, not being in with both feet.

Abe Grungold Certainly the participants who are not contributing the 5% to the TSP are simply giving away free money that they could be receiving with the 5% match from the government. If you’re only contributing 4%, you’re going to get a 4% match. If you’re contributing 5%, you get the full 5% match. And that is free money that the government is giving you.

Tom Temin Plus, there’s the compounding effect.

Abe Grungold You lose the compounding effect of all those contributions that you could be receiving year after year, and that could be going through a 20-to-25-year retirement. And that really is a bonus that the government gives you every year to invest in your retirement.

Tom Temin Yeah. So, it’s really important to develop that 5% savings habit early on, even early in your career when you think you can’t afford stuff. Maybe one less brunch a month?

Abe Grungold Absolutely. I always made sure that I contributed 5% in, especially in the early part of my federal career. I was contributing 10% so I could be ahead of the gig. But unfortunately, there are some federal employees that cannot afford the contribution because they live in expensive cities such as New York City and San Francisco. But if you could contribute that 5%, you must do it to get the 5% match.

Tom Temin Okay. And then, where you get information can be a mistake or an advantage.

Abe Grungold Yes. Unfortunately, a lot of people go to these media, locations such as TikTok, YouTube and Facebook groups to get their financial information. And basically, what you’re doing is you’re getting information from unreliable sources, basically strangers. It’s okay if you’re looking for a restaurant or a movie to watch on Netflix, but you don’t want to receive financial advice from a stranger in a Facebook forum. You don’t know who this person is. You don’t even know if they’re a federal employee. So why are you taking the risk of getting financial information from this person? Just a big mistake by doing it right?

Tom Temin If anything, you should get advice from an actual fiduciary that you can see in person and shake hands with and check the credentials of.

Abe Grungold Certainly a financial, advisor is a good source, but just look to your own office. There has to be a well-seasoned employee in your office, or a federal retiree that you know who was successful with their TSP. Speak to that person. Ask for the mentor in your office and see if they had contributed 25 years to their TSP and ask the for advice. And that is really the person you should be speaking to.

Tom Temin Many years ago, I worked for a man who had a child with severe and lifetime care needs. And so, his investment strategy as a family, you know, he had two other kids and was driven by the need to leave sufficient legacy such that that young man would be taken care of for the rest of the child’s life after the dad was gone. And so, he was one of the savviest investors I ever knew. And, you know, it’s a different economy then. Different stocks were good. But his advice was, you know, solid.

Abe Grungold Unfortunately, Tom, when I started with the government. There was no TSP, there was no one to ask and you had to really figure it out on your own. But today, with so many employees who are active TSP millionaires who are still working, try to find that person in your organization, pick their brain, and certainly don’t rely on strangers in a Facebook forum to get that information.

Tom Temin We’re speaking with Abe Grun gold, a retired federal manager and owner of AG Financial Services. And then timing or bad timing?

Abe Grungold Yes. You know, I hear this from a lot of clients who subscribe to these monthly investment magazines, and they’re trying to time the market. No one can time the market if you’re able to figure that out. It’s somewhat pure luck. You have the financial wizards like Warren Buffett and many of his friends that do not try to time that market. They buy and they hold for the long term. And if you try to time the market, you’re going to lose gains by making a mistake. No one can predict the ups and downs of the market by for a 20-to-25-year career and consistently invest over time. And you will be successful just by, you know, listening to television and the economics is just not going to give you that guidance.

Tom Temin No. And the TSP funds themselves abstract the need for timing and shifting among stocks for you. That’s the reason you buy those kinds of funds.

Abe Grungold The TSP has a 35-year history Tom, just simply look at the last 10 or 20 years and see which funds perform well. That really should be your guide. You should not be trying to predict what I call the roller coaster of the market, the ups and downs. Just buy and hold and keep buying and time is on your side. It will prove to be your friend.

Tom Temin And you are advising people not to buy a shiny object with your TSP balance.

Abe Grungold Yes, you certainly do not want to buy an annuity, which is offered as a withdrawal option on the TSP. People that, are buying annuities with their TSP balance, they lose the flexibility of their TSP worth, and they lose potential income because if there is no beneficiary, that money is going to simply go to the insurance company. If you want to receive an annuity with your TSP, simply do a monthly withdrawal on your own and divide that by 30, year payments, and you will receive your own annuity that you can set up yourself. But buying an annuity is simply a mistake. And the only person that really should be buying an annuity is someone that has no heirs that they’re going to leave any money to, and they don’t want to leave it to a charity or a legacy. So really, that is the only person that would qualify for an annuity purchase.

Tom Temin Okay. And then the last idea that you’re promulgating is on the borrowing side of things.

Abe Grungold During my federal career, I had four TSP loans. During my federal career, I read many articles that taking out a TSP loan is a mistake. It’s not a mistake as long as you do not treat your TSP like an ATM machine, you need to make a loan from your TSP when you really need to make a loan, and you need to pay that low back in full. If you do not, you’re losing potential retirement income. And what’s worse is when you do not pay that loan back, it becomes a distribution to you. It becomes a tax liability. So, you must pay that low back. And again, I had four TSP loans during my federal career. Never hurt me in the growth of my TSP balance in retirement.

Tom Temin And you probably didn’t buy an expensive pickup truck on a 72-month payback period either.

Abe Grungold I actually did buy two vehicles and I bought two homes using four separate TSP loans. But I made those decisions very carefully, very wisely. And I accelerated my payments back to the TSP so that money could get back in there as soon as possible to grow even further. And remember, when you’re making your TSP load, you’re pay yourself back the interest. That is the most important key feature of the TSP loan.

The post Five ways to really louse up your Thrift Savings Plan account first appeared on Federal News Network.

An Army financial counselor will spend years in prison after his conviction on defrauding Gold Star Families. If nothing else, the story should alert members of the military and their families to use care in picking a financial adviser in the first place. The Federal Drive Host Tom Temin spoke with someone who has witnessed this sort of bad advice, and he has some tips for avoiding it: Thiago Glieger of RMG Advisors.

Interview Transcript: 

Tom Temin There’s some really bad advice that happens out there, isn’t there?

Thiago Glieger Yeah, there’s a lot of really bad actors that are very interested in enriching themselves at the cost of other people. Which is a really unfortunate part of the industry. And it can be seen in a lot of industries, but particularly in the field of finance, given its complexities. And so oftentimes, people are not exactly certain about what’s happening with their accounts, such as was the case in this scenario where people were not really sure about what was happening, what was occurring, what kind of fees were being charged on the account. And ultimately, they paid the price.

Tom Temin Yes. Well, in that case, they were actually defrauded out of some of their principal as opposed to just paying fees for bad advice. So at some point you can get that advice, but it’s not necessarily criminal and theft. In this case it devolved over to fraud. Are there signs that people can watch for possible fraudulent activity?

Thiago Glieger Yeah, I think the big thing that you want to stay on top of is making sure that you’re looking at account statements. I’m a big proponent of not following every single day, because if you’re watching the markets, that could make you very nervous, but you don’t want to neglect looking at what’s happening in the account. There should be the place or the custodian that the money is there is going to be reporting dollars that are coming in, dollars that are coming out. In this case, I understand there were fraudulent signatures that were a part of it as well. And so money was leaving the account. And if you’re staying on top of those accounts statements, you’ll be able to see, hey, wait a minute, where is this distribution going? Did I authorize this? Does it look right to me?

Tom Temin Especially if it’s a TSP account or an equivalent, an IRA account. Then there would be normally, until you retire, no disbursements at all.

Thiago Glieger That’s right. Unless you’re the one that’s initiating a distribution directly with the TSP, there should be no distributions coming out of there. So if you’re working with a financial planner or an advisor or someone who is positioning themselves as a financial counselor and they’re presenting you with forms, or they’re talking through how to make a distribution, moving money from the TSP, you really need to understand exactly what’s happening there. Where is it going? Why is it being done? How is that going to help you in the long run? Questions like that.

Tom Temin And then of course, this particular person who is just convicted, whatever his name was, was just a piker compared to the greatest Ponzi thief of our time, which was Bernard Madoff. And the issue there was the returns were so good and so consistent that he was hiding in plain sight. And so if you see the market fluctuating and you keep rising, I guess nowadays, in the latter days after Madoff, that itself is a sign.

Thiago Glieger That’s right.

Tom Temin Too good to be true.

Thiago Glieger That’s exactly right. Advisors are not miracle workers. When we create portfolios for clients, we are participating in the markets for clients. And so if the markets are going up, clients should be going up. If the markets are going down, you should be going down with that. There are a lot of products out there that pitch guarantees. A lot of federal employees are often pitched, these products where they will say, well, you protect your principal, the money can’t go down, ever. And those are usually built around insurance policies. So that’s how there is some protection there. But again, that too good to be true should always be in your mind. If something is seemingly like it’s going to protect you constantly asking those deeper questions, how does this work? If you’re not fully comfortable or you don’t fully understand how the investment product works, I always like to start asking more questions and make sure clients understand.

Tom Temin And sometimes the assumptions might be rosy, even though it’s a legitimate investment. About a year ago, I was somehow on a mailing list for people that operate wells, oil wells, and I did some research and they seemed like a legitimate company going back some time. I looked at third party sources and not just their website. I also looked at the map of where they said these sites will be. And yes, it’s a huge area of the country where some drilling is going on, but there assumptions on crude oil prices seem to be pretty good. And plus they wanted a substantial investment in a piece of this and so forth. And our advisor said, well, just buy some oil stocks if you want to do that rather than try to be a well person. So that kind of exotic thing also, it’s something to maybe, take a second look at.

Thiago Glieger Yeah. The commercials invest in Belize that maybe you’ve seen on TV and those kinds of things. Those are they’re called direct participation programs where you go in essentially as a limited partner. So you sign this agreement saying you’re going to contribute X number of dollars, and there can be some interesting tax benefits from that kind of stuff, write offs and things like that. But I would venture as far as to say for most federal employees that I have seen, it’s really not the most advantageous thing because it’s so hyper specialized. And again, thinking about an investment as a tool, you got a Home Depot, you go to Lowe’s, you’re grabbing a tool for a project. Investments are the same thing. What kind of tool is best going to be available in useful for you to support whatever you’re trying to accomplish, whether it’s retirement, college funding, buying a house, whatever it is.

Tom Temin We’re speaking with Thiago Glieger, a private wealth advisor at RMG Advisors of Rockville, Maryland. And there’s ads on TVs for firms that are fiduciaries. And that’s considered, I guess, the gold standard, someone who has no alliance to a particular fund or set of investments. But is that always the way to go? Our fiduciary is really the gold standard. Or can you do well with someone connected to an operation that makes a profit off investments?

Thiago Glieger Yeah, I think that when it comes to your personal financial future, you have to understand whether somebody is giving you advice toward that end or if somebody is offering you a specific product. And so if you go when you buy a car or you buy a life insurance, you buy a house, those are very transactional types of businesses and that can be totally fine. Somebody is selling you a policy. They’re not necessarily operating in a fiduciary capacity, and that’s okay. But if somebody is giving you advice about your financial future and really these very large transactions that are happening, I feel that somebody should be a fiduciary because, legally, somebody that is a fiduciary is one who has to act on behalf of somebody else and is legally bound to act in their best interest. And so, I think beyond that legal obligation, I think it’s also an ethical one. In this case, there was a tremendous breach of ethics from this counselor when he was making recommendations to people to do things in their accounts that was really more beneficial for him, in the terms of commission and all kinds of other things, rather than what’s going to help that family.

Tom Temin So what are some of the questions you should ask then, of anyone trying to sell you something, or fiduciary or otherwise?

Thiago Glieger I think the first question is always asking them, are you operating under a fiduciary duty? Is that in an agreement somewhere? Because if they are, there has to be a legal statement that’s written that they signed saying they are acting in a fiduciary capacity to you. I think there’s also questions surrounding whether or not they can help you beyond just the investments. I think someone who is is operating in a fiduciary capacity is talking to you about things like taxes and health care and things that matter to you, like your family. And how do you want to spend your time? Those are signs that someone is interested in your well-being, not just necessarily interested in getting you the best or hottest investment.

Tom Temin One of those areas is as you approach retirement, there’s a lots of complicated decisions with deadlines connected to it, especially if you’re going to be anywhere near Medicare, which is a Byzantine system. Someone should be able to help you with questions like that, for example.

Thiago Glieger Yeah, and Medicare planning, Social Security planning. There’s over 500 different iterations of filing for Social Security, and sometimes even the information online is very overwhelming. And so doing the planning, looking at different options, whether one scenario was better for you if you’re married, should one of you file first and then the second? Wait until 70. Should you both wait till 70? All kinds of other things that are well beyond just what are you invested in?

Tom Temin And the other issue is tax policy or your reaction how you deal with tax policy. So can a fiduciary, are they necessarily tax experts? Or can they know enough to make sure that you don’t make a mistake and pay taxes you shouldn’t have to.

Thiago Glieger Yeah. There’s a pretty fine line between tax planning and tax advice. The IRS wants to make sure that somebody who is not registered as an accountant is not giving somebody tax advice. But I would go as far as to say tax planning is a big part of a financial planning process. When you’re retired especially, it’s the first time that you are in control of generating your income. If you have a first pension as federal employees do obviously that’s taxed. You don’t have too much control over that. Big part of Social Security is also taxed. But everything else, all of your savings, how you choose to make withdrawals, what you’re invested in, the kinds of things you’re doing during the year with your assets. Those are all things that are influencing your taxes and making sure that you’re making use of Roth. I know we’ve talked about that before, so that you don’t have huge RMDs down the line. Those are all very important questions in planning considerations that can add a lot of value to somebody that doesn’t necessarily pay an advisory commission. And so if they’re interested in those conversations with you, it’s I don’t want to generalize, but they’re probably interested in your well-being, not necessarily just trying to earn a buck off of you.

Tom Temin In some ways your TSP account is like artificial intelligence. The experts say part of the issue is the data you put into it. But an important way to get good results is what you ask of it. If you ask the wrong question, you’ll get crazy results. By the same token, you’re withdrawal strategy should be something you consider as carefully as your input to it strategy.

Thiago Glieger That’s right. I recently was talking to a family who, they were looking at a large tax bill that they were going to need to deal with, and they thought the best circumstance was to make a TSP distribution. And at the time, they were a little bit more limited in terms of their options. But as a result, a huge TSP distribution also came with its own tax problem for the following year. And so really coming up with strategies, what is the best way to deal with this? Rather than how do I just pay the tax bill? It’s thinking about other things that are all interweave together.

Tom Temin And by the way, what about those tax help firms that advertise on the radio so much? Sometimes you hear them and they have actors saying, I didn’t pay my taxes for 11 years. I was in trouble. My response is, well you should go to jail. The rest of us paid for the last 11 years. Are those firms tend to be worthy of what it is they’re trying to sell you.

Thiago Glieger I think those firms are mostly targeting people who are in tax trouble. People who maybe didn’t file their tax returns, they forgot to do it. They didn’t want to do it, whatever the case is. They’re more so looking at working with the IRS and keeping you out of jail, because at this point, it’s a crime. And so they are not really looking at reducing your tax liability on a regular tax planning basis. They’re working backwards to make sure that you don’t end up in prison for a really long time, for owing all those back taxes.

Tom Temin Because they imply that they can make the tax bill go away. But I don’t think too many people can do that.

Thiago Glieger Yeah, there is some degree of negotiating that they can do and working with the IRS on your behalf and having conversations, sending letters back and forth, much what an accountant would be able to do for you too. But you can’t just vaporize your tax liability. That’s something that’s going to be around.

Tom Temin They’ll vaporize you. And then I guess the final question is, what is the right number of calls, meetings that you can demand of a fiduciary? You don’t want to call them daily, but you also don’t want to wait once a year to check in.

Thiago Glieger Yeah. With our clients. Especially in the first year of working with people, I like to see people anywhere between 6 to 10 times in the first year. There’s just so much, especially when you’re first retiring. There’s so much to look at. Beyond that, I really encourage folks to check in with their advisors a couple of times a year. I think that’s a really healthy number every six months or so, just to get on each other’s calendars, but also have communication open through email, open communication of quick questions that come along. Anything with a dollar sign attached to it should be fair game for someone who’s looking out for your best interest. Whether you’re going to file an insurance claim because there’s a hole in your roof. Is that a problem for you down the line? Because you may be uninsurable for XYZ reason. And so those are conversations that I think are important to have. And you shouldn’t feel ashamed or bothered of asking your advisor a question. They’ll tell you if it’s out of bounds or something that they’re not comfortable giving you an answer for, but raise the question. That’s what they’re there for, there are your advisors.

Tom Temin And probably it’s good to remember by the same token, most things in life do have a dollar sign attached to them, but they’re not psychiatrists.

Thiago Glieger Yeah. That’s right. I think there’s a Nobel Prize that has been won in behavioral economics, which is really just the study of why we make decisions around money. And some advisory firms do take a more therapeutic approach with folks. But you’re right. I think you’ll get a sense for what they’re comfortable with.

The post How to avoid bad advice or outright fraud when finding financial advice first appeared on Federal News Network.

With negative returns for the rest of the funds, the year-to-date for the fixed income index investment F fund shrunk to 5.22%, while the G fund remained at 4.65% for the last 12 months.

The common stock index C fund still posted the highest year-to-date return at 6.03%, and a 10.88% return over the last 12 months.

All Lifecycle funds also posted negative returns. The L 2055, L 2060 and L 2065 all posted a -4.06% return, with year-to-date returns of 4%, and 12.50% returns for the last 12 months.

The post TSP funds post mostly negative returns in April first appeared on Federal News Network.

Stocks and bonds. Both have gyrated badly in recent weeks. It’s not a fun time to be invested and yet you have to be. For an assessment of the recent few weeks, the Federal Drive with Tom Temin talked to certified financial planner Art Stein of Arthur Stein Financial.

Interview Transcript: 

Art Stein So the C and the S and the I funds, the first quarter of this year up through March 31, they had done great. The C fund was up 10.5%, S was up seven and the I fund 6%. So that was a really good three months. But then through last Friday, the end of last week, all of a sudden things completely turned around. And during that three week period, all three of those stock funds were down considerably. C fund down 5%, S fund down 6.9%, I fund down 4%. So all of a sudden today C fund is still up. The S fund is down, I fund is pretty flat. So it just completely turned around. Now the bond funds, again, during the first quarter the F fund was down about 0.7%. But now year to date it’s down 3%. And the reason for this, in my opinion, is that the Federal Reserve has a very ambitious goal to reduce inflation in the United States to 2%. It looked like inflation was going down pretty much monthly. I’m not saying prices were going down, but the rate of inflation was decreasing each month. And as a result, people expected there would be about three interest rate reductions by the fed during this year. Well, that declined and the inflation rate has stalled. And now commentators say, well, we may not get any interest rate reductions this year. And partly as a result of this, interest rates have increased. The ten year bond, the interest rate went from 4.2% to 4.6%. That’s a big change in the interest rate on the ten year bonds, it’s a very high rate. Of course, mortgage rates are over 7% again, and things just look very different, in terms of the financial markets. Now in terms of the economy, the economy continues to do extremely well. Employment is very strong. The economy’s strong. We’re not really seeing problems there. But of course the stock market and the bond markets, they are affected by the economy, but they’re affected by a lot of other things too.

Tom Temin Well, sure. If you have high interest rates, though, that can depress housing. Although some parts of the country housing is going gangbusters. Other parts of the country not so much new housing starts. Those affect the economy at some point, because housing, like automobiles, are drivers of lots of other related commodity sales.

Art Stein But the mortgage rate in the rate for new mortgages really has not changed that much. It’s over 7% now. It’s been over 7%. It was last year at various times, went down maybe a little under 7%. We’re not seeing big changes. And one thing that I would point out is that the inflation rate, which is the change from the previous year in prices, last month was 3.5%. People are saying, well, that’s so high, but actually the average annual inflation rate in the United States since 1950 has been 3.5%. It’s exactly the same rate. The inflation rate we have now is just average compared to the historical rate in the United States. And I don’t know why the fed wants to get it down to 2%, thinks it can get it down to 2%. We have had inflation that low, but that was so unusual. And with these huge budget deficits that we’re running, huge budget deficits, and there’s big increase in the amount of money the federal government owes and has to finance every year. It makes it very hard to get inflation down.

Tom Temin Right. I think that might be a daunting factor in some of these markets. For example, the interest on the public debt by the federal government that outlay now exceeds the defense budget and saying, gosh, and when you look at it in terms of percentage of GDP that is represented by debt and all of these things, those numbers are beginning to become visibly and unassailable, unsustainable. And you’ve got people in the government saying that as well.

Art Stein So, for individual investors, which is your listeners. I would say one thing I really would like to emphasize is that if you’re worried about inflation, keep in mind that historically, stocks, which we mean the C and the S and the I fund have historically been a very good hedge against inflation, because they tend to go up in price along with inflation. Their sales tend to go up with inflation. Their dividends tend to go up with inflation. Now bonds are not a good hedge against inflation. And both the G and the F fund, whether it’s low inflation or high inflation, people should expect that after you take into account taxes and inflation, the rate of return on the bond funds is probably going to be negative, i.e. your purchasing power is going to go down even though the value of the bond fund might go up, but it will not go up enough to compensate for taxes and inflation. So we’re really back where we’ve been, well, forever. Past performance is no guarantee of future performance, but historically, stocks considerably outperformed bonds over longer periods of time, and they’ve done it by enough to increase purchasing power after taking into account taxes and inflation.

Tom Temin In some funny sense, bonds are like money because they are based on loans ultimately, whereas stocks are based on different types of securities. So it’s kind of like the old rule your money may go down in value, but if you can have your holdings rise in value with the degree your money’s going down like you’ve been describing, you’re going to be in better shape.

Art Stein Exactly. So if you want to look at the 15 year average rates of return, the C fund has averaged 14.5% per year for 15 years. The G fund only 2.4%, the F fund only 2.6%. That’s a big difference.

Tom Temin Right. So whatever instrument you’re in, you want to stay at least ahead of inflation to be able to tread water.

Art Stein Yeah. If you’re trying to finance your retirement with investments that are going to lose purchasing power over time, that makes it very difficult to do. And of course, FERS retirees, any time inflation is over 2%, the adjustment in their FERS retirement is less than the full inflation rate. The purchasing power of their FERS annuity is going to go down over time. So if they’re all in the F and G fund then that purchasing power is going down over time. That’s a problem.

Tom Temin All right. So then like you say, the eternal advice is try to stay in the historically high growth funds and don’t lose your nerve because they’re gyrating now.

Art Stein Exactly. I’m not saying don’t have investments in the F and G fund. I think those are very worthwhile, but you need to have a solid percentage in the C,S and I funds.

The post Don’t look now, but your TSP is swooning first appeared on Federal News Network.

In frequent flyer plans, the more you take-to-the-air, the closer you get to elite status. And, the more you put away in your Thrift Savings Plan (TSP), the closer you will get to having TSP-millionaire status. For more on what that money can do for you, the Federal Drive Host Tom Temin talked with retired federal manager Abe Grungold of AG Financial Services.

Interview Transcript: 

Abe Grungold We always talk about how to become a TSP millionaire, but we really need to talk about why it’s so important to be a TSP millionaire. And I have three critical, reasons to be a TSP millionaire. And the first one is, in retirement, you may need to supplement your income. The second one is, how will you pay for your long term care needs in retirement? And the third one is, you never want to run out of money in retirement.

Tom Temin Well, those are pretty good reasons. And how does it fit in? We’re talking about the bulk of federal employees are [Federal Employees Retirement System (FERS)] retirees. And maybe just review for us what the FERS annuity is all about, in addition to Social Security and the relation of those two.

Abe Grungold Yes. The FERS annuity is based on a formula of the number of years that you have as a federal employee service time, multiply times your salary. And then there’s a multiplication factor. So you get a FERS annuity. It comes out to about one-third of your salary prior to retirement. So that is built together with Social Security. And you can have Social Security at age 62 or a later year, whichever year you decide to select it. So let’s say you are 62 and you are receiving a FERS annuity, and you have elected to take Social Security. What happens when both of those monthly, income payments to you cannot pay for your monthly expenses? How will you pay that difference in your monthly expenses? And if you’re a TSP millionaire, you would make a withdrawal from your TSP to supplement your income. And a lot of federal retirees have to do this. They have to, and it’s called filling the gap of your monthly expenses, especially if you don’t want to work part time in retirement.

Tom Temin Well, at some point you have to take a minimum withdrawal, by law. But 62 is way ahead of when that would happen. So it sounds like to supplement your income before the required minimum distribution of your TSP, your RMD, then you would have to withdraw from the principal at that point.

Abe Grungold Yeah it’s a required minimum distribution mandatory. It starts around age 73. But if you decide to retire at 62 and you still are carrying a mortgage, you want to start doing some travel and you want to do some other things, before you know it, your monthly expenses may far exceed your monthly income of your FERS annuity and your Social Security. So you need to make up the difference. And if you do not want to work part time in retirement, making up the difference can be done with making a withdrawal from your TSP. I did that when I first retired from the government, and I did have a part time job. I wasn’t collecting Social Security. I did have my FERS annuity, but I was making a TSP withdrawal to make up the difference.

Tom Temin Now 62. How realistic is that for people to retire in mass? Some people may want to work because they like their work, but 62 is kind of young these days to retire unless you’re rich.

Abe Grungold It is. There are federal retirees who retired at 57. There’s a large bulk of them. Law enforcement, air traffic controllers, they face mandatory retirement at 57. And certainly I have clients who are working for the government in their 70s. But 62 seems to be a popular time for retirees. And they start thinking about it very seriously at 62, because they know that they can collect that early Social Security. So they think that, oh, if I get my FERS annuity, along with my Social Security, that should be enough. But you may have to draw a little bit from your TSP, or you’re going to have to go back to work part time.

Tom Temin We are speaking with Abe Grundgold, proprietor of AG Financial Services in Florida and a retired federal manager. And we know how many millions you had in your TSP from earlier interviews. But if you retire at 62, you can have a reasonable expectation of living at least 20 more years. Very likely 30 more years. And so at some point, that you have to make sure that your investment strategy supports the required minimum distributions and not shrinking the principal.

Abe Grungold So that falls under my third reason, Tom. And that is you do not want to run out of money in retirement. So let’s take that scenario. Let’s say you do have $1 million in your TSP. You retire at age 62 and you want that million dollars to last. So let’s just assume that you have your entire million dollars in the G fund. You have invested in the G fund. At age 62 you have $1 million. And you start withdrawing $30,000 a year from your TSP to supplement your income or to do anything extra that you want to do travel wise, etc.. Spoil your grandchildren. That million dollars is going to last 33 years, and you’ll be 95 years old. Now, even if you invested in the G fund, you’re still going to have a balance in your TSP at age 95. And we should all be so lucky to live to be 95. But this is important that if you want to be in a position that you do not want to run out of money.

Tom Temin A couple of points. 95 can be a curse or a blessing. I’ve seen 95 year olds that are both ways, but their RMD is more than $30,000 on $1 million, wouldn’t it? Isn’t it 4%, so that would be 40,000.

Abe Grungold Yes.

Tom Temin So how long will it last then?

Abe Grungold It should still last, because your TSP will be growing in the G fund. But if you want to make sure that it’s going to be, certainly enough money to 95, you may have to invest a little bit more aggressively other than the G fund. But yes, it will last to 95. Even if you have to take out, your RMDs, you still will have a significant balance at age 95.

Tom Temin And if you spend like a few years, say, from 90 to 95, and you’re pulling out more than the RMD and reducing the principal, so what, you’ll still probably check out before the principal disappears.

Abe Grungold So let’s say you are 90,  you may have to go into a nursing home that falls under my second critical reset. So how will your long term care needs be paid for your nursing home? Well, nursing homes cost anywhere from 75,000 to $150,000 per year, depending where you are in the United States. And your TSP is going to fund that. It’s going to fund that, because you’ll be giving the nursing home your FERS annuity. You’ll be giving them your Social Security. And you can still have money from your TSP that covered that large expense of long term care from the age of 90 to 95. And that is a very important reason to have a TSP of $1 million.

Tom Temin So a very good rule of thumb might be to develop a budget and see where it stacks up against FERS plus Social Security plus withdrawal of TSP, followed by a replaced by the required minimum distribution when you reach that age.

Abe Grungold Right. It’s always good to have a budget, but it’s always better to know that you have a pile of money that you can go to. That rainy day fund that our parents always tell us. It’s good to have that available for whatever you need. Supplement your income, needing to go to a nursing home and you never want to run out of money during your retirement, so it is critical.

Tom Temin And don’t forget to budget $2 a week for a Powerball ticket.

Abe Grungold Absolutely, I still play.

The post Three good reasons to save toward TSP-millionaire status first appeared on Federal News Network.

The year-to date for the F fund is still positive, rising to 5.30%, as is the G fund, which is up to 4.65% in the last 12 months.

With all funds seeing positive returns in March, the common stock index C fund posted the highest Year-To-Date return at 10.55%,  and a 11.03% return over the last 12 months.

All Lifecycle funds posted positive returns. The L 2055, L 2060 and L 2065 all posted a 3.26% return, with year-to-date returns of 8.38%, and 14% returns for the last 12 months.

The post TSP sees all positive returns in March first appeared on Federal News Network.

With the era of near-zero inflation over, retirement planning has taken on some new urgency, simply because a fixed income and rising prices do not make a good combination. For some of the latest think on all that, the Federal Drive with Tom Temin spoke with Thiago Glieger, with RMG Advisors of Rockville, Maryland.

Interview Transcript: 

Tom Temin And you’ve got a lot of good advice for retirement planning at the season when people start to think about the end of the year, and this is when you start putting in papers and so forth. And inflation, though, can really be something. I think people have forgotten about how corrosive it can be.

Thiago Glieger They certainly have. Tom, I loosely call inflation the silent retirement killer. Because for a very long time we’ve not really had inflation like we have, here very recently. And when people think about risk, they often just think about volatility. So, investments in the TSP like the CSI funds but if you think about not growing your money fast enough, that’s also a pretty big risk. So having too much money inside the G fund, especially as you enter retirement, makes sense because you want to protect your wealth. But if you stay in the G fund, that could mean over time you may not be able to keep up with your spending. Imagine having to pay for things today, but with a salary from ten years ago, it would be very difficult to keep up and the concept is pretty much the same.

Tom Temin You would either have to trim your spending or figure out a new investment strategy, and I guess then you might be saying that don’t be overly conservative even though you are retired, you don’t want to bet in Bitcoin and futures and commodities, but maybe you should be a little more aggressive in the funds you pick.

Thiago Glieger Yeah, especially retiring feds who tend to be a little bit more conservative. You have to be prepared for an environment where you’re going to need to be growing your money fast enough to both outpace inflation, as well as replacing some of the spending that you’re doing. Because if you look at 10 or 15 years down the line, you may not be able to have the same kind of spending power if you’re just not keeping up because you’re in things like the G fund for the next decade.

Tom Temin Yeah. And if you look at things like automobiles or replacement roofing and other capital, so to speak, expenditures on your home if you are in your home, these things have gone well, no pun intended, through the roof.

Thiago Glieger They really have. The cost of material has gone up, the cost of labor has gone up, and people generally just spending money on things that they do most, which is food, travel in their home expenditures. Those are the things in which people are really seeing those price increases and struggling to be able to keep up.

Tom Temin And that gets to the topic of being realistic, simply about how much it’s going to cost you to live in retirement.

Thiago Glieger That’s right. I think that a lot of people just think about replacing their income. But really, that might not be all that you need. You know, the first thing is you always have to be thinking about, well, when are you going to file for Social Security? You’re potentially going to have a FERS pension that’s going to kick in at some point. And with those two, the third leg of the three-legged stool, as it’s commonly known, is your portfolio. So, then you start to determine how much do you need to take from your portfolio. But often I suggest to people be thinking about a higher degree of spending, especially in an early retirement. You know, Tom, you were telling me, last time we talked about that amazing trip that you went on recently, and that’s the kind of thing that people want maybe 2 or 3 times a year, while they still have their health and their energy. There’s more travel, there’s more experiences, more spending. You know, maybe you have grandkids at that point. And you start to see a whole lot of one-off expenses that creep up that you need to start beginning to plan for.

Tom Temin Right. So therefore, then the required minimum distributions from that third leg, if that’s all you can do and you’re worried about that, that gets back to the idea of being a little bit more aggressive. So maybe you could take more than the RMD. Confident that the principal will keep growing more than you’ve taken out as your withdrawal.

Thiago Glieger Right. Especially with RMDs where there’s a minimum amount that you have to take out. And so, you’re accelerating these distributions. And at some point you may want to be considering being a little more aggressive.

Tom Temin And how do you plan on what your withdrawals should be. Just simply whatever’s not covered by your FERS pension and Social Security.

Thiago Glieger I think that’s one way to start, you know, is really getting a base for what are your needs? But also, retirement is a time. We call them the golden years. Right? It’s a time where you really want to enjoy your time doing things, and you want to have these experiences that maybe you’ve been putting off for a while. In fact, with our clients, we call the first several years of retirement, maybe 5 or 10 years. We call that the Gogo phase. And that’s when you have the most time that you’ve had the most money you’ve ever had, and you still have a whole lot of energy. And so, thinking about how do I want to design these years? What kind of memories do I want to create? Is it more travel? Is it more this? Is it helping the grandkids? And that will begin to help you understand what kind of cash flow you’re going to need. Then you think you factor in Social Security and FERS and figure out how much more you need to draw from your portfolio.

Tom Temin Right. So that presupposes, at least for that first 5 or 10 years, when you have the intersection of some wealth you’ve accumulated and you’re still able because you won’t be able to forever. Nobody is. Even though the guy peddling pills on cable TV that’s 90, you know, and bench lifts 500 pounds. That’s not really what most people are going into. Then you need to plan for higher spending, perhaps, than you have been just commuting to the drudgery of your cubicle or your dining room.

Thiago Glieger Exactly. And that’s where it becomes really important to begin to finalize and implement that, initial short-term bucket of your portfolio. So, this is the part of your portfolio that’s going to have to be the most conservative, because it’s going to be the one that’s supporting you when you first retire. You know, the problem in investing in stocks is that they tend to be very volatile. And if you are close to retirement or you’re starting to use your money, then you really have to be cautious about how much you’re investing in stocks. The closer you are to using that capital, the more diversification you’re going to need in your portfolio. And one of those buckets is your short-term bucket. I often use the example of when you visit a doctor and the doctor says, Tom, we’re going to need to prescribe this medication for you to take. How much of it do you want to take? Your answer is, obviously, I don’t know as little as possible. Right. The medicine often comes with side effects, and investing for growth is very similar. Having too much in the form of growth investments can actually begin to hurt you in the long run because of that side effect of volatility and other risks that it introduces.

Tom Temin And there’s also tax planning, which can get complicated.

Thiago Glieger That’s right. Taxes are a huge part of every decision in retirement because when you’ve been working you don’t really have very much control over your taxes. You get a W-2 salary and maybe you’ve got some investment income and perhaps some rental properties, things like that. But in retirement, you’re the one that’s designing your income. And so, you get to pick which accounts the money comes from. You get to pick when you take those distributions. And if you think about what your cumulative lifetime tax liability is going to be, where you can estimate what that will be. It’s to the tune of several hundred thousand. Sometimes for some clients, it’s millions of dollars in estimated taxes throughout their whole retirement. And anything you can do to begin to keep some more of that capital for yourself is more living and more spending that you get to do yourself.

Tom Temin And you mentioned the go phase of retirement. What are the phases past that or should I ask?

Thiago Glieger Yeah. After you go through your go phase, we call the next phase the slow go phase. This is where life tends to slow down a little bit. You’re still active, but life has settled into retirement. And maybe your kids and grandkids are a little bit older now, so your priorities will begin to change. Maybe you’re spending more time with the kids rather than traveling. And then beyond that, once you hit the later stages of life, we call that the no go years. So, you have the go, the slow go and the no go and the no go years. You’re really focusing more on your health and taking care of yourself, maybe spending more time with family. And so, the expenses that tend to go for lifestyle are now maybe going towards medical.

Tom Temin And you may have disposed of your house by that point and living in a lower cost situation. Although some of the assisted living and independent living places, they are not low rent.

Thiago Glieger That’s right, many of those are very expensive and despite the cost, I think people are just generally looking for less maintenance. At that point, they may not be able to upkeep with the size of their house or all of the things that are required. So, either they downsize to something more manageable, or they actually move into a place that has some assistance for them to be able to live.

Tom Temin All right. So, you mentioned the go, the slow go and the no go. I guess beyond that is the undergo. No, I mean, it doesn’t matter at all anymore in some sense. Right. What are some good practical ways that if you’re still working to actually do this, start with a budget. Is that what everybody says? Or I mean, what should you be doing to plan for it because you don’t really know when the go will morph into the slow go.

Thiago Glieger Right? I think if you are still working and you are, at least 5 to 7 years from retirement, your priority at that time is still continuing to grow your wealth. And so, utilizing the TSP choices like the C, S and I funds, make sure you’re doing at least the agency maxing, matching contributions amount. If you can match your TSP. Absolutely put more into that every time you’re getting a raise. If you’re not yet maxed, split that raise in half and put half of it as a TSP contribution. And beyond there, as you begin to phase to retirement, that’s when you can start to be thinking about the more. Conservative portions of your portfolio, maybe start diversifying a little bit less. Maybe start taking some risk off the table. Because if you think about how long it takes for a bear market from what we call peak to trough, so that’s from the top to the bottom and back up again, it’s somewhere on average about two and a half years. And so, we tell people to really be thinking about twice that long. So about five years’ worth of a short-term bucket. If you know you’re coming up to that phase of life, that gives you enough time to be able to ride out some of that market volatility, if you’re going to use that money in the very short term, and the bottom falls out.

Tom Temin And right now at this as we speak, we seem to be in a peak. I think the Dow headed toward 40,000, although that’s a really terrible indicator because the Dow has almost no relation to anyone’s actual portfolio, does it?

Thiago Glieger That’s right. The Dow represents a market index, and most people are not invested 100% in the Dow. Same thing with the S&P 500 right. The TSP fund the fund. Those are representative of some of those market indices. But you’re really not 100% invested in that actual index.

Tom Temin And you can probably make yourself prematurely crazy if you watch your portfolio minute by minute.

Thiago Glieger Yeah. And we find that the stress level tends to increase the closer people get to retirement, they start to pay a little bit more attention to what’s happening in the markets than the economy. And the minute it reverses on you because that’s just a natural part of investing. It causes a lot of stress and anxiety for folks. So, we tell people, make sure you’re keeping track of things, but don’t look at it every single day because it’s really not necessary for you to do so.

The post Retirement planning enters era of renewed inflation first appeared on Federal News Network.

No one avoids death and taxes. But you can make sure an element — that is crucial to a comfortable retirement — lasts the rest of your life. For what it is and how to preserve it, the Federal Drive with Tom Temin talked with certified financial planner Art Stein of Arthur Stein Financial.

Interview Transcript: 

Tom Temin  All right, give us the big story. What needs to last the rest of your life?

Art Stein Tom, federal retirees or, you know, let’s talk about FERS retirees. They have two sources of income during retirement. And one, of course, is guaranteed income. And guaranteed income is Social Security and their FERS annuity. And those are great. They’re guaranteed to last the rest of their life. And they both have cost of living adjustments. But most FERS retirees at some time during their retirement are going to have to start taking money from their investments to supplement their guaranteed income, and that’s something that may happen to them. You know, as soon as they retire, it may be 5 or 10 years into retirement. Of course, one problem for FERS retirees is that any time inflation is more than 2%, the purchasing power of their annuity declines. And for most FERS retirees are going to have to make that up by taking money from their investments.

Tom Temin But the investment presumably it’s a TSP. I mean, you’ve got to make the minimum withdrawal at some point.

Art Stein Yeah, absolutely. But you don’t have to spend it. You can reinvest it, you know, after you pay the taxes.

Tom Temin Got it.

Art Stein So it means that they never have to worry about running out of money because they’ll always have the guaranteed income. What they need to worry about is running out of investments. And that’s when being too conservative over a long period of time can really hasten the day that people run out of investments. Because the G fund, which is, you know, the most popular fund and even the F fund pretty much guaranteed to lose purchasing power once you take into account taxes and inflation. And that’s also true of bank accounts. And lots of federal employees and retirees have very significant amounts and bank accounts. And those lose purchasing power over time too. So let me just give you a really simple example. And the simplest example is going to be about bank accounts. Let’s say you’re going to give a party in 12 months. A couple is going to give a party in 12 months. And they estimate the cost of the party to be $1,000. So, they want to be very prudent. So, they take $1,000 and invest it in a bank account, money market fund. It’s considered 100% safe, guaranteed by the federal government. And it does not fluctuate in value. So, if they leave it in there for 12 months and they earn 2% simple interest, at the end of 12 months, I’ll have $1,020. Now they have to pay tax on the interest. They paid $6 in tax. They’d have $1,014 left. So, it sounds pretty good. They had $1,000 party. Now they have 1014. But we forgot to take into account inflation. Inflation’s only 3%. The thousand-dollar party is now costing $1,030. They only have $1,014 after taxes. So, they’re $16 short. They lost purchasing power after taxes and inflation. Now clearly in this example not a big deal. It’s only $16. It only compounds over, you know one year. But many retirees have heard and read that when they’re retired, and even as they approach retirement, they should have the majority of their money in bonds and bank accounts, which for the TSP means the G fund in the F fund. And for most TSP participants, it mainly means the G fund because they don’t like the F funds. So yeah.

Tom Temin That’s the preaching of safety. In other words, above all else.

Art Stein Preaching safety above all else. And that’s because those types of investments, when we say they’re safer, that’s very misleading, Tom. What they are is less volatile. And volatility is not the only investment risk. And really, for long term investors, the most important retirement risk is taxes and inflation reducing the purchasing power of their investments. It’s very difficult because people put their money in the G fund, and they see it gradually increase in value and they don’t think about, well, is it keeping up with taxes and inflation. And many people, you know, really, when they judge the amount of money they have, if they look at the amount in the TSP and say, I have $1 million in the TSP, I’ve got $1 million to spend. Well, of course that’s not true. It’s $1 million minus taxes, so it’s a much lower amount.

Tom Temin We’re speaking with certified planner Art Stein of Arthur Stein Financial. I guess I’m still trying to get my mind around the idea of $1,000 party. I guess in today’s inflation, that means a case of Budweiser. And four of your best friends at this point.

Art Stein What other kind of party is there?

Tom Temin That’s right. But if you take that million versus 1000, and you take your calculations out for 20, 25, 30 years, it’s tens or hundreds of thousands of dollars you might be forgoing in intrinsic value of your investments. That will never be.

Art Stein Absolutely. You know, I can tell you that, you know, with the cost-of-living adjustment for FERS retirees, if inflation were 3% a year, they’re only going to get a 2% per year inflation adjustment after ten years. That would reduce the purchasing power, their annuity 8%. After 20 years, you would reduce at 17%. They’re going to have to make up that difference.

Tom Temin So you really have to look at your future life and retirement, not so much from how many dollars are sitting in the different accounts, but what those accounts are doing and also what you actually need to maintain your lifestyle.

Art Stein Yes. And that’s what you know, retirement planning is all about, is looking, well, how much do I have? What kind of rate of return can I expect based upon, you know, what funds I’m invested in and how much do I expect to spend in retirement? And this is where, again, I think a lot of people make a mistake. How long a retirement do I need to plan for? Now, none of us know how long we’re going to live, but if we’re healthy now and say we retire at 65, people need to assume that they’re going to have a 30-year retirement, at least because many of us are going to live that long. And, you know, ten years from now, medical care is going to be much better than it is now. And same thing, true 20 and 30 years from now. Medical system, it’s great at keeping us alive. And it means that we could live a very long time and be very healthy. And a lot of people don’t think of it that way. I mean, I just spoke to a couple of yesterday and the wife is 82, and, you know, I was explaining this, and she said, well, you know, I’m 82. How long a retirement do I need to plan for? And I said, well, how’s your health? She said, well, I got some vision problems on there and that I’m 100% healthy. How long did your parents live while their mom lived to 92? Well, her mother died 20 years ago. If her mother could live to 92 with the medical care they had 20 years ago, why couldn’t she live another 10 or 15 years?

Tom Temin And just a practical question. Some people feel they need, and they do need, people need liquid assets. You might want to pay cash for a car or vacation or something, and that would not be in your TSP, because you don’t want to try to withdraw the principal if you can avoid that. What is a good way to keep cash? Or let’s say not so much cash, but a liquid asset that you can turn to cash quickly because you have a legitimate call for it.

Art Stein Yeah, absolutely. Everybody should have an emergency fund, which is not a great name for that, because it sounds like something bad happened, a new car and need to pay for a wedding for my son or daughter, or I want to get money to my grandkids. And you know, banks are great for that. But you also want to make sure you don’t have too much in low yielding bank accounts. I mean, if you look around in today’s world, you can find online bank accounts that are paying five, 5.25%. But many people are letting money just sit in their local bank account and getting a quarter of a percent, a half, a percent, 1%. That’s a big loss.

Tom Temin Then with respect to your TSP distributions. You can always change the distribution if you want to. You may not get that 25 years’ worth of better growth, but you can get better growth while you’re at it.

Art Stein Yeah. And money, you know, you expect to take out and spend in the next 3 or 4 years. I mean, the G fund is a good place for that. And the F fund in most normal years is also a good place for that. The stock funds C, S and I, the money that’s in there is money that you would need ten, 20, 30 years from now because stocks are much more volatile than bonds. But over long periods of time, historically, stocks have outperformed bonds by enough to make it worthwhile to put up with the bad years.

Tom Temin Good advice for making sure you can have that $1030 party, certified planner. Art Stein of Arthur Stein Financial. As always, thank you so much.

Art Stein Thank you Tom.

Tom Temin We’ll post this interview at Federal news network.com/Federal Drive. Subscribe to the federal drive wherever you get your podcasts.

The post How to make sure you outlive your investments after you retire first appeared on Federal News Network.

Because our tax-law is relatively friendly on inherited assets, many of the items that you inherit – including the house and any non-retirement investment account – receive a step-up in basis. This means, according to the IRS, it’s as if you purchased them on the date that your relative passed away and you don’t have to pay taxes on any of the gain that happened during their lifetime. Pretty nice, right?

But if those rules only apply to non-retirement assets, how do retirement investment accounts get considered?

Since the passing of the SECURE Act in 2019, here are the basic rules for inherited retirement accounts for owners that passed after Dec. 31st 2019:

• If you are the spouse of the original owner, you may move the account into your name and treat it as your own, following the required minimum distribution rules based on your own age.
• If you are not the spouse of the original owner you have 10 years to distribute the entire balance of the account.

Now this is where the tax considerations come into play.

Inheriting traditional retirement accounts:

If the retirement account was “traditional” or “pre-tax” (like the traditional TSP) all of the distributions are taxable to the beneficiary.

In other words, you are required to distribute and pay tax on the entire account balance within 10-years. And the distributions count as income, so the more money the recipient makes, the higher the tax rate on the withdrawals.

For a sizable TSP, 401(k) or traditional IRA, that could be a hefty tax bill each year – especially if the recipient is already a high-income earner.

Inheriting Roth retirement accounts:

Because taxes on traditional retirement accounts have been tax-deferred, the IRS wants to make sure they get their hands on those tax dollars eventually. So if they don’t get them from the original owner, they get them from the beneficiary.

Taxes on Roth accounts, on the other hand, have already been paid by the original owner when they funded the account.

Because of that, if you inherit a Roth retirement account, you still have to fully distribute the account within a 10-year period, but the distributions are tax-free for that entire ten years!

Now let’s be honest with each other for a moment.

If you were to inherit a large traditional retirement account and had to pay taxes on the withdrawals, would you be upset about it? Probably not. Paying taxes isn’t the end of the world, especially considering you’re only paying more taxes because you have more money.

That being said, if you knew there was a way that some or all of it could have been tax-free, would you be slightly disappointed? Probably.

Let’s look at an example scenario where recipient 1 receives a $500,000 traditional IRA and recipient 2 receives a $500,000 Roth IRA.

In both scenarios, we’ll assume that the account grows at 5% per year.

Recipient 1: Traditional retirement plan

In this scenario, the recipient decides to distribute the account in equal portions over the 10-year period to make sure they don’t spike their income in any given year.

They’re able to take a $60k distribution each year, which comes out to $46k after taxes (assuming they’re in the 24% tax bracket).

In the end, they’re able to receive a net after-tax total of $460,000.

Recipient 2: Roth Retirement Plan

In this scenario, the strategy changes.

Because a Roth retirement plan can continue to grow for 10 years without any tax liability, the beneficiary decides to wait until the very last year to withdraw the funds.

Since the entire balance is able to grow over that time period, recipient 2 is actually able to withdraw $815,000 from the account tax free.

That’s a difference of $355,000.

And 5% is a relatively conservative growth rate. Imagine if the growth was higher.

Planning with the end in mind

So what should you do, now that you know it’s so much nicer to inherit a Roth retirement account instead of a traditional account?

First, it may be helpful to explore if Roth contributions to your TSP or Roth conversions outside of your TSP are helpful to you during your lifetime. Because of our current “friendly” income tax brackets, there are many scenarios where making Roth contributions now can save an individual tens of thousands of dollars over your lifetime alone.

We don’t have enough space here to take a deep dive into the individual benefits of Roth contributions and conversions, but we wrote another article that does just that.

If it’s mutually beneficial, and choosing Roth benefits you and your loved ones, then your answer becomes pretty easy.

There are, however, situations where Roth contributions and conversions may not be beneficial to you in your lifetime. Then the question becomes what would the contributions or conversions cost me, and am I willing to pay that cost to ultimately provide a larger benefit to my heirs?

In our work with federal employees, we run into retirees all the time who are fully supported by their pension and social security, and have no need to touch their TSP. In this scenario, some may say “well, since I’m not going to need it, and I have an opportunity to pay the taxes at a lower rate than my beneficiaries will, I’ll go ahead and convert this to Roth as a ‘gift’ to my heirs.”

Of course, this decision is unique to each individual and there’s no right or wrong answer, but for those that want to be mindful of how they pass down money to the next generation, it’s a question that’s worth considering.

It’s also worth noting that this article only explores accounts being passed to individuals – not charities, trusts or any other entities. If passing funds to one of those other entities is in your plans, the strategies mentioned above could change.

Austin Costello is a certified financial planner with Capital Financial Planners.

The post The Roth TSP advantage: A closer look at tax-free inheritances first appeared on Federal News Network.

The fixed-income investment index F fund was the only fund in the negative for February with a -1.41% return. The F fund is negative year to date, still up 3.29% in the last 12 months.

With most funds in the positive column for the month, all funds are also in the black for the year-to-date. The common stock index C fund is posting the highest year to date return at 7.10%, and a 30.41% return over the past 12 months.

All Lifecycle funds posted positive returns. The L 2055, L 2060 and L 2065 continue to show healthy growth with year-to-date returns of 4.95% and showing 23.25% returns for the last 12 months.

The post TSP returns for February bring investors mostly positive news first appeared on Federal News Network.

• The Thrift Savings Plan board said it is ready to pivot in the case of a government shutdown this Friday. TSP operations continue normally during a shutdown, but the TSP offers some relief to participants who are affected. During a shutdown, if TSP participants miss a loan payment, they do not get placed in a default loan status. And for any fed who gets furloughed during a shutdown, the TSP automatically pauses paycheck deductions for loans. If there is a shutdown, about 100,000 federal employees could be furloughed. Congress, of course, still has a couple days to come to a government-spending agreement.
  (February board meeting - Federal Retirement Thrift Investment Board)
• A plan to roll back civil service protections would impact more federal employees than expected, according to the National Treasury Employees Union. The Trump administration planned to reclassify a large swath of federal employees who shape government policy, making them easier to fire. Former President Donald Trump said he’d bring those plans back if reelected. But new documents show the Office of Management and Budget also planned to reclassify lower-grade feds in HR, IT and other administrative positions. The NTEU, which obtained the documents, said more federal employees would fall under Schedule F than it previously estimated.
  (Schedule F plans show 'far higher' impact on federal workforce than first anticipated, NTEU warns - Federal News Network)
• Federal agencies have a role to play in a new effort to make sure the sensitive data of Americans is protected from foreign adversaries. President Joe Biden will sign an executive order today designed to safeguard sensitive U.S. data, like biometrics, personal health data and geolocation information. The Justice Department will issue regulations aimed at establishing clear protections for that data from being accessed by so-called countries of concern. And the departments of Health and Human Services, Defense and Veterans Affairs will be tasked with ensuring that federal grants, contracts and awards are not used to facilitate access to Americans’ sensitive data.
  (President Biden issues sweeping executive order to protect Americans’ sensitive personal data - White House)
• After getting direct-hire authority, agencies have even more help for AI hiring from the Office of Personnel Management. OPM’s latest guidance to agencies details how and when they can offer incentives to federal employees working in AI. In many cases, agencies already have the authority to give feds pay bonuses, telework opportunities and faster accrual of annual leave. Now OPM said those flexibilities, along with many others, should be extended to AI professionals. The guidance comes after President Biden signed an executive order telling agencies to start rapidly recruiting AI professionals to the federal workforce.
  ( Agencies should promote existing workplace flexibilities in federal AI hiring, OPM says - Federal News Network)
• The Army is cutting about 24,000 military positions, including about 3,000 positions from special operations forces, as it restructures itself for large scale combat operations. The service plans to get rid of positions that were created to support counterinsurgency efforts during the Iraq and Afghanistan wars, but are no longer needed given current strategic priorities. The cuts will not affect active-duty soldiers.
  (Army cutting jobs in major force structure transformation - U.S. Army)
• The Office of Personel Management and Office of Management and Budget have released a strategic plan to assist agencies with hiring and recruiting military-connected families. OPM has released the first-ever governmentwide military-connected strategic plan for fiscal 2024 to 2028. The plan will support agencies in recruiting, hiring and retaining military-connected families and caregivers. Agencies should identify barriers that prevent recruitment, hiring and retention of military-connected families within the federal workforce. Agencies are also encouraged to develop strategies and potential legislative proposals to address those barriers and promote employment opportunities. OPM will provide resources to support agencies in meeting the goals outlined in the plan.
  (OPM releases first-ever government-wide military-connected strategic plan - OPM)
• The Office of the Special Counsel has a new leader. The Senate yesterday confirmed Hampton Dellinger to be Special Counsel by a vote of 49 to 46. President Joe Biden nominated Dellinger in October. OSC has been without a leader since October, when Henry Kerner left after serving in the position for six years. Before coming to OSC, Dellinger served in the Justice Department as an assistant attorney general overseeing the Office of Legal Policy from October 2021 to June 2023.
  (Senate confirms OSC leader - U.S. Senate Majority Floor Updates on X)
• Big changes are coming to how the Defense Department measures its own cyber defenses. Instead of getting pass-fail inspections, commands can expect to see more nuanced assessments that try to measure how cyber risks affect their actual missions. The new process takes effect tomorrow and is called a Cyber Operational Readiness Assessment. It replaces the Command Cyber Readiness Inspection DoD has used for more than a decade.
  (DoD cyber readiness tests get a major overhaul - Federal News Network)
• The Biden administration has established a council of chief AI officers across the federal government. Austin Bonner, the deputy U.S. chief technology officer for policy at the White House Office of Science and Technology Policy, said that it is one of the latest steps under a recent executive order on AI in government. “This is a really important place for federal leaders to come together, share best practices, and coordinate their work. Not every federal agency needs to reinvent the wheel," Bonner said. The Office of Management and Budget directed agencies to name a chief AI officer last fall and accelerate the adoption of AI tools within agencies.
  (OSTP’s Austin Bonner on ‘leading by example’ as agencies implement AI executive order - Federal News Network)
• The Energy Department is doling out $45 million for 16 new cybersecurity projects. The goal is to develop tools and technologies that can protect energy systems from cyber attacks. The Biden administration has warned U.S. critical infrastructure, including the electric grid, is increasingly being targeted by hackers. The funding for the energy cybersecurity projects comes from the 2021 Infrastructure Investment and Jobs Act.
  (DOE announces $45 million to protect Americans from cyber threats and improve cybersecurity in America's energy sector - Energy Department)

The post Thrift Savings Plan board prepares for government shutdown first appeared on Federal News Network.

Retirement itself has an uncertain meaning, since people do things after they leave government that seem like work. Sometimes they actually do launch new careers. Others feel fine with traditional retirement.

I’m still dazzled by the fact that Abe himself managed to accumulate $3 million in his Thrift Savings Plan before retiring. As far as I know, he and his family ate normally, not Purina Cat Chow. So it shows what’s possible if you maybe skip the Lexus and the G-Fund. Yet, Abe said, his wife still regularly asks if they have enough money.

Specifically, Abe advised planning on a requirement of 80% of your pre-retirement gross income. For many retirees, that would come from a combination of FERS annuity, Social Security and TSP monthly withdrawals. I say “many” deliberately because “average” people don’t exist. Variables like health, spousal career, inheritances and lottery winnings mean everyone has a unique situation.

About that 80% rule of thumb, one reader asked whether that level “would allow for additional travel, fun etc. or just status quo.” Also, whether the 80% level included TSP contributions, which stop upon retirement.

The answer: Yes, the 80% takes into account that you won’t be adding to the TSP. But it doesn’t allow for a lifestyle expansion. “It’s a good starting point to continue your pre-retirement lifestyle,” Abe wrote. Abe himself is living on 110% of his pre-retirement gross, he said. He’s got his FERS annuity, withdrawals and part time work (advising people on finances).

In other words, if you weren’t buying expensive cars and luxury cruises before retirement, you probably won’t be able to start doing so after you retire.

Retirement planning often takes taxes into account. One reader wrote, “Living in New Hampshire – no income or sales tax.” He added, “And very skimpy services.” My recollection of New Hampshire is that state and local officials were superb at snow removal. I don’t know enough about the other services in the “Live Free or Die” state. New Hampshire, decades later, still holds a place in my heart, though.

This reader also paid off his mortgage, which has tax implications. His car is paid off, but he still makes payments to a savings account so he can pay cash for the next car. And this: “I will not leave that much to my children, but I do give them money from time to time and also help them when needed.” Sounds like a good balance.

Some people opt to work after retirement. My headline for the interview, “How to avoid wearing a Walmart greeter’s vest after you retire,” was perhaps too dismissive of those who must work after retirement, as a couple of readers pointed out.

I’ve known scores of senior and sort of senior federal managers who put in substantial careers after government. Dozens have hung out consulting shingles. They like their fields and they want to stay relevant. Others say sayonara and pursue passions they haven’t had sufficient time for.

One regular pointed out, “You (Temin) are up there in age and still working. Maybe YOU need to listen closely to your guest.” Actually I do. I’m working well past the standard retirement date of 65 by choice. I still like it. This reader said of himself, “I retired at 56 and still have a nice portfolio. I started saving from day one of my federal service and I maxed out on my TSP.” Which, in 17 words, forms a great summary of the universal strategy.

A friend and neighbor worked for 36 years in the civil appellant division of the Justice Department. Ed was not just a good lawyer, he was a respected mentor to many a young colleague. He also lived a full and exemplary private life. He died months before retiring from an emergent health issue you could describe as a bolt of lightning. Sometimes the fates laugh without humor at our plans.

At his shiva I asked a mutual friend, still working at 72, if he had any plans to retire. He answered, “No, because I don’t know what I would do when I get up in the morning.” I thought, if I, Tom, ever do retire from the vocational scene, on that first morning after I won’t know what to do first. But it will likely involve a motorcycle.

Nearly Useless Factoid

By: Michele Sandiford

Based on a March 2022 survey, without Social Security, about 4 in 10 adults aged 65 and older would have incomes below the poverty line.

Source: Center on Budget and Policy Priorities 

The post Maybe you want that Walmart greeter’s vest after retirement first appeared on Federal News Network.