Listen to the final Your Turn with Mike Causey show. It’s a special tribute to Mike, who passed away in late September 2022, hosted by Federal Drive anchor Tom Temin and executive editor Jason Miller.

Current and former Federal News Network colleagues and long-time guests of Your Turn joined this hour-long, commercial-free discussion about Mike’s impact on the federal community, shared stories and memories of a man who impacted all of us with his wit, his knowledge and his desire to share and explain the intricacies of the federal world.

Guests include:

FNN General Manager Joel Oxley
WTOP Program Director and former FNN Web Operations director Julia Ziegler
FNN reporter Jory Heckman
Tammy Flanagan
Jessica Klement
Art Stein
Abraham Grungold
Former FNN Editor-in-Chief Lisa Wolfe
Former In-Depth anchor Francis Rose
Former Federal Drive co-host Jane Norris
Former Your Turn producer Lauren Larson

If you want to add a tribute to Mike, feel free to send us a comment.

The post Final Your Turn episode: Tribute to Mike Causey first appeared on Federal News Network.

Retiring from the federal government is no longer the no-brainer decision it once was when your mother was a GS-13 with the Labor Department or Uncle Ned was the friendly neighborhood postal letter carrier! Prior to the mid-80s feds who worked long enough could retire on lifetime benefits, fully indexed to inflation, that equaled 40%, 50%, even up to 80% of their final salary. When inflation went up 9%, 14.3% or 11.2% percent (as it did in 1979, 80 and 81) so did the annuity. Gone are the days…

In the mid-1980s Congress changed the federal retirement program. It replaced the long-time CSRS program with a private-sector style program, the Federal Employee Retirement System. FERS gave workers a more generous 401k option, Social Security coverage and a less-generous (lower cost to them) annuity. The kicker was the provision that said when the inflation hit 3% or higher, FERS benefits would go up one percentage point less. The diet-COLA kicker. Not a bad deal in times of low inflation. But a horrible long-term option in times like now when inflation is at a 40 year high. If the January COLA turns out to be 7%, 8% or 9% for CSRS, military and Social Security retirees, folks under FERS would get 6%, 7% or 8%. Not a huge amount — if it happens infrequently. But it’s catastrophic reduction if inflation stays at current levels, or gets worse, for an extended period of time. So what, if any, are your options? Especially if you want to leave your federal job sooner rather than later?

Enter benefits expert Tammy Flanagan, who knows the FERS-CSRS programs inside out. And she is my guest today on our Your Turn radio show. That’s 10 a.m. ET, streaming on www.federalnewsnetworkcom or 1500 AM in the DC-Baltimore area. And consider a couple of new twists to retiring now:

• Many people say that if they are forced to return to the office full-time they will quit or find another job. It is unclear how far Uncle Sam will/can go in the drive to get teleworkers back on the roads and into their offices. But if it picks up steam lots of people could vote with their feet.
• We’ve been enjoying a long, long period of low inflation (2-3%). But it looks like that is gone. Maybe for a long, long time. So do you retire now, knowing that your annuity vs. inflation may shrink, for years? Or do something else?

It is possible to work for Uncle Sam long enough to get and qualify for benefits and an annuity, but still leave government earlier. Benefits expert Tammy Flanagan thinks that may be about to happen. That thousands, maybe more, current feds would like to leave their jobs before becoming eligible for traditional, immediate retirement benefits. She says there is a way many could leave now, or sometime in the future, take up another career, but then, years from now, qualify for a reduced (but lifetime) federal retirement benefit. And in some cases qualify for the Federal Employee Health Benefits program. With coverage for life for them and their spouse/partner. With the government paying up to 75% of the total premium.

The secret, she says, is understanding the MRA+10 (minimum retirement age) option. If you do it right, you can leave earlier than planned, for whatever reason, and still retire down the road from the government. This is something you should be aware of, even if you never need or use it. Because today’s show is prerecored we won’t be taking any live phone calls. But listen up. And tell a friend. This could be a major life-changer (or life raft) coming at a very good time.

Nearly Useless Factoid

By Daisy Thornton

Peter Benchley, the author of Jaws, later regretted the fear and misunderstanding of sharks that his novel and the movie based on it fostered among the public. He spent the rest of his life advocating for shark conservation, and was the first host of Discovery Channel’s Shark Week in 1994.

Source: Wikipedia

The post Inflation and your retirement date first appeared on Federal News Network.

In many ways, the way you handle your final affairs will determine how your family and friends remember you. So it’s important to get it right.

Years ago, my uncle died and left his large, 700-plus acre farm (for comparison, New York’s Central Park is about 840 acres) to his daughter.

Not his wife.

On purpose. Or so he thought!

He knew exactly what he was doing! That is, he thought he knew what he was doing. But instead of making a postmortem point, he messed up. Big time.

It was not his first will. Nor (maybe) his last. That’s because he wrote wills all the time. Sometimes to punish some individual or group. And that may have made him feel good, or at least satisfied. But in the end it created a mess. Why? Because the only will that counts is the last one you wrote (or that your family finds) that was done properly. The notarized copy his wife found became the official one. It cut her out of the farm. Or so he thought. What apparently happened is that my uncle, acting as his own attorney-estate planner, managed to leave the farm (as in land, creek, trees, etc.) to his daughter but somehow all the property on the farm — several houses, some barns and other buildings — went to his wife. Cut to the chase. Bottom line is the will that took effect was the only one (or most recent one) found. It left his daughter the land and his wife the buildings on that land. Probably not what he had planned!

After a bitter period of time his daughter bought the property on her land even though she was in debt for years paying for it. His wife got something. But nobody, including my uncle (who was a great guy), got what was intended. Lesson (if there is one): be careful who does your will. And your estate plan. And your trust. Do you know what you need? What’s best for your family? One of the first things to consider is do you have an estate? Many, if not most, career feds and retirees do. Worth more than they think. So what do you do?

We tapped Washington attorney Tom O’Rourke for some estate planning help. He’s a former IRS lawyer who specialized in taxes and estates in private practice. He’s going to be the guest on today’s Your Turn radio show. Streaming live at 10 a.m. EDT on www.federalnewsnetwork.com or on 1500 am in the Washington-Baltimore area. The show will be archived so you can listen again, or pass it on to a friend.

We asked Tom for a sneak preview and he’s given us this guide to the eight most common mistakes people making in planning (or not) their will, estate and powers-of-attorney. Here they are:

1. Overlooking beneficiary designations, or failing to keep beneficiary designations up to date. For federal employees, virtually all of your job-related benefits (annuity, TSP, accumulated salary, life insurance) are governed by beneficiary designations. These beneficiary designations always supersede the terms of any will or trust.
2. “Selling” property for a nominal amount (i.e. selling your home to your child for $1). This can cause a variety of estate, gift and income tax issues.
3. Naming specific investments in your will or trust. How does the sale or disposition of the named asset before your death affect any specific bequests you may have made?
4. Not thinking through the practicalities of leaving real estate to your children in equal shares.
5. Making a specific bequest to a minor. Until a person becomes an adult, they cannot legally own property. Who is going to manage this bequest for the child? Most likely, it will be the child’s guardian — who could be your former spouse. Is that what you intended?
6. Failing to plan for the death of a person named as a beneficiary in your estate plan. If you leave a bequest to a beneficiary and that person dies what happens to the bequest? Does it pass to the beneficiary’s children, or does it revert to the estate?
7. Failing to include a residuary clause in a will or a trust. A residuary clause disposes of all assets not specifically mentioned in a will or a trust. For example, Mary writes a will that makes specific gifts of $500,000. What happens if the value of her assets is more or less than $500,000? A residuary clause should address this issue.
8. Failing to deal with unexpected contingencies. What happens if a primary beneficiary (often an adult child) develops a substance abuse problem or divorces his/her spouse?

Developing an effective estate plan requires a consideration of the “what ifs” and hopefully can avoid problems that may occur after your death.

Nearly Useless Factoid

By Daisy Thornton

A survey conducted by language and e-learning app Preply found Philadelphia is the rudest city in the United States.

Source: Preply

The post Your estate plan: How to secure (or tarnish) your legacy first appeared on Federal News Network.

Many people consider Michelangelo’s statue of David to be the most perfect sculpture ever. It was done in the early 1500s and stands 10 feet tall. Pretty impressive.

Yet a friend of mine, Bill B, claims that his brother in-law, who has seen it in the flesh, thinks the masterpiece is overrated. After studying it for a few minutes, he concluded that virtually anybody could have done it.

“All you have to do,” brother-in-law-said, “is get a really good piece of marble, then chip away all the pieces that don’t look like David.”

Of course he’s right. Up to a point! But he’s leaving out some important details. The sort that face federal, postal and military personnel deciding how — and how much — to invest in their Thrift Savings Plan accounts. For some, TSP (with its generous government match) will provide one-third to as much half the money they have to spend in retirement. Regardless of the percentage, it’s a lot. So how do you become a TSP millionaire? We asked D.C.-area financial planner Arthur Stein if there is a magic formula. Several of his clients are TSP millionaires. The recent stock market nosedive reduced that number. And it has many investors rethinking their situation. Which is the subject of today’s Your Turn radio show (10 a.m. EDT) with Art Stein. If you have questions for him send them to me before showtime: mcausey@federlnewsnetwork.com

Meantime, here’s what he says about doing the right things to become a TSP millionaire, and also what’s caused the drop in current and former feds with million dollar nest eggs:

Market declines reduce the millionaires club

After positive returns in July, all TSP funds (except G) declined in August. So fund returns continue to be negative year-to-date and over the last twelve months.

The L Funds also declined year-to-date and over the last twelve months.

One result is that the number of TSP millionaires (TSP participants with balances over $1 million) has also declined. According to an August 2022 study of TSP participant balances, the number of “TSP Millionaires” is down 36% from the end of 2021 through August 2022.

At the end of 2021 there were 112,880 TSP investors who were members of the TSP Millionaires club. That was a record high. Now, with markets in decline, the number of TSP Millionaires has declined from 112,880 at the end of 2021 to 72,241 as of August 2022, a 36% drop. The new number is the lowest number of millionaires since 2020 when there were 75,420 TSP Millionaires.

Key differences between the average TSP millionaire and participants with smaller balances are that the millionaires:

• Have been investing longer.
• Are more concentrated in the stock funds (C,S and I).
• Continued to invest during market declines.

Nearly Useless Factoid

By Daisy Thornton

Orcas engage in social trends that resemble human fads. Examples include snapping the rudders off of boats, playing with crab pots and wearing dead fish on their heads like hats.

Source: LiveScience

The post Wanna be a TSP millionaire: Have you got the right stuff? first appeared on Federal News Network.

Whatever your plan and goal, there are many cases where people don’t get the best deal for themselves. That’s because they don’t know all the rules, or the questions to ask, about their annuity, and the timing to get the best deal. There are a number of “best dates” to retire. Mostly for tax purposes or to get a piece of the new pay raise. Days like Dec. 31 or Jan. 3 depending on your retirement plan. But in addition there are definitely best times to retire, based on the answers to what seem — to we laymen — simple. But aren’t. By a long shot.

Example: Recently, a reader/listener sent us a “simple” question about retirement. Like most “simple” questions it turned out to be complex. So we passed it on to Tammy Flanagan. She’s a retired fed who now makes her living advising clients on retirement, and other job-related issues. Tammy will be my guest on today’s Your Turn radio show at 10 a.m. EDT. And we’ll talk about general retirement questions. Meantime, here’s an example as to why many people should get help in planning their retirement. The question is seemingly “simple.” The correct answer, anything but! The Defense civilian writes:

I am a federal employee with DoD and currently have 30 years of service but am 52. I’ve invested in TSP since 1992 at max allowance. I believe my retirement age eligibility is 57 — five years. Is there any benefit to taking an early retirement? I am married with two sons, currently 13 and 11, so by the time I am eligible to retire they will be entering/preparing for college.

Simple, right? Turns out not so much. Here is Tammy’s professional answer:

There are three main options to consider for this employee to plan her retirement.

1. It is important for her to run estimates of all three parts of FERS (FERS Basic Retirement benefit; FERS Supplement or Social Security retirement; various TSP distribution options).
2. Consider that all three benefit streams will be subject to federal income tax and depending on the state, also state income tax.
3. She will continue paying premiums for her insurance on a monthly basis in retirement using after-tax dollars.
4. If she is married, a spousal survivor election must be considered that will result in a 10% reduction to her FERS basic retirement benefit.
5. It is also important to plan for long term care so that future needs for care won’t derail her financial plan.
6. When planning for TSP withdrawals, be conservative with projecting future rates of return as the market will fluctuate over time and may not provide returns that have occurred over the past years of a bull market.
7. Years of lower returns can be devastating and stressful if her FERS retirement and Social Security retirement benefits aren’t adequate to stand up to these fluctuations in rates of return.

Here are the three options along with some considerations to keep in mind for each one:

• Resign before her MRA and apply for a deferred retirement at her MRA.
  • Her future benefit will be based on her high-three average salary at the time she separates from federal service.
  • She will not receive any cost of living adjustments to her FERS retirement benefit until age 62. The benefit will be the same value for 10 years if she leaves federal service at age 52. Consider what your salary was 10 years ago. How much different was it from today? If high inflation continues, this will substantially erode your buying power of your FERS benefit and may cause you to deplete your retirement savings too quickly.
  • It is going to be difficult to stop working and not receive income for the next five years. Life expectancy payments from the TSP based on $500,000 starting at age 52 with a 3% future rate of return would provide a starting monthly payment under $1,300 / month. Use the TSP payment and annuity calculator to run different scenarios (remember that these payments will be subject to federal and possibly state income tax withholding, depending on what state you live).
  • Payments other than life expectancy payments or a life annuity will result in a 10% early withdrawal penalty tax.
• Continue working to age 57 (MRA)
  • This is her first eligibility for an “immediate” unreduced retirement.
  • The FERS retirement supplement will be payable to provide another source of immediate income in addition to the FERS Basic Retirement Benefit.
  • There are no cost of living adjustments on the FERS supplement and the FERS basic benefit will be a level payment until age 62 when cost of living adjustments will commence.
  • There will be no 10% early withdrawal penalty on TSP distributions, allowing more flexibility in the type of withdrawal option selected.
  • Depending on the TSP balance, this may be the first realistic opportunity for retirement with enough income to replace your net income while employed.
• Continue working to age 62
  • Eligible for the 1.1% annuity computation factor for the FERS basic benefit which is a 10% increase besides having more service and a more generous high-three average salary as a result of continuing to work.
  • Eligible for Social Security retirement which is more tax friendly than the FERS supplement.
  • FERS and Social Security retirement receive annual cost of living adjustments.
  • There is a better chance of having TSP distributions that will be adequate to last for a 30+ year life expectancy that will allow for future market fluctuations and years of higher inflation.

Age	Length of Service	Retirement Option	Computation of benefit (using $80,000 high-three average salary)
52	30	Not eligible for immediate retirement; resignation with deferred retirement payable at age 57	30 x 1% x $80,000 = $24,000; Social Security payable at age 62*; May take TSP withdrawals without penalty at age 59 ½ or life expectancy payments at any age.
57	35	First eligibility for immediate retirement	35 x 1% x $80,000 = $28,000; FERS Annuity Supplement = 35/40 of age 62 SSA benefit*; eligible to withdraw payments from TSP without a 10% early withdrawal tax penalty.
62	40	Eligible for immediate retirement and higher calculation factor	40 x 1.1% x $80,000 = $35,200; Eligible for Social Security*; eligible to withdraw payments from TSP without a 10% early withdrawal tax penalty.

*www.ssa.gov estimate SSA benefit at age 62 – 70.

https://www.ssa.gov/benefits/retirement/planner/stopwork.html

Your Retirement Age and When You Stop Working

Your retirement age is the age you begin receiving Social Security retirement benefits. For many people, this is not the same age you’ll stop working.

The age you stop working can affect the amount of your Social Security retirement benefits. We base your retirement benefit on your highest 35 years of earnings and the age you start receiving benefits.

If You Stop Work Before You Start Receiving Benefits

If you stop work before you start receiving benefits and you have less than 35 years of earnings, your benefit amount is affected. We use a zero for each year without earnings when we calculate the amount of retirement benefits you are due. Years with no earnings reduces your retirement benefit amount.

Even if you have 35 years of earnings when you stopped working, some of those years may be low-earning years. When you file for retirement benefits, those years are averaged into your calculation, creating a lower benefit. However, if you continue to work, your low earning years are replaced with your high earning years. Higher earnings increase your benefit amount.

If You Stop Work Between Age 62 and Your Full Retirement Age

You can stop working before your full retirement age and receive reduced benefits. The earliest age you can start receiving retirement benefits is age 62. If you file for benefits when you reach full retirement age, you will receive full retirement benefits.

If You Stop Work After Full Retirement Age

If you choose to work beyond your full retirement age, you have two options:

• You can work and get full retirement benefits no matter how much you earn.
• You can delay getting retirement benefits and earn credits that increase your benefit amount.

Imagine if that had been a complicated question? Gulp!

Nearly Useless Factoid

By Daisy Thornton

The sound of Darth Vader’s breathing is trademarked.

Source: Gizmodo

The post Finding your retirement sweet spot(s) first appeared on Federal News Network.

What does a Las Vegas gambling expedition have in common with timing the stock (or bond) markets? Often the same thing: In many/most cases people let their emotions rule whether at a casino or home monitoring Wall Street. Nervous folk zig when they should have zagged. They were lost before they left the starting gate.

So how should you handle what counts most — your retirement nest egg, the TSP — during these, uh, interesting times? A time period of unknown duration. A series of situations, from the war in Ukraine to record inflation and rising gas prices, are likely to get worse before they get better. Maybe lots worse! And for most feds, their TSP account is most vulnerable in troubled times. Remember, it could provide anywhere from one-third to one-half of the money you have to spend in retirement. And the bigger the amount, and the later you start spending it, the better.

The 100,000-plus TSP millionaires (as of December, 2021) had a couple of things in common:

• Most, except for some politicians, political appointees and federal judges, were NOT already millionaires.
• Most spent an average of just under 30 years investing regularly in the TSP’s stock funds, especially in hard times (2008-9) when the markets were down. Market timers sold low, as it turned out, while those steady-as-she-goes investors bought stocks at bargain prices.

Many investors know the conventional thing to do, when times are good. But when things go south, which they do regularly, the fight-or-flight instinct kicks in. Times like now. So we asked D.C. area financial planner Arthur Stein what he’s telling active and retired clients these days. Several of them are self-made TSP millionaires, which is a very good sign. He’s going to be my guest today at 10 a.m. (EDT) on our Your Turn radio show. That’s 1500 AM locally or on our home page. So you can listen live today or catch it later. As usual we asked him to write-up a sneak preview of today’s show which he did. Here goes:

The TSP Has a double dose of down

By Arthur Stein, CFP©

All the TSP funds — except G — fluctuate in value. That means down as well as up. And last quarter was a double dose of down as both the stock and bond funds — except G — declined.

How bad was it? Here are the first quarter returns for the five traditional funds:

Also, all L Funds declined in the first quarter, including L Income.

According to the April 1, 2022 Wall Street Journal, bond markets declined at a rate not seen in over 40 years and stocks suffered their worst quarter in two years. Reasons include:

• Interest rate tightening by the Federal Reserve,
• Inflation surging to its highest level in forty years,
• Russia’s invasion of Ukraine, and
• A slowdown in the Chinese economy.

Both bond and stock markets continued declining during the first week of April.

So that’s scary. But what does it mean for TSP participants?

It means that participants need to concentrate on longer-term returns for funds they will need to spend five years and more in the future. Past performance is no guarantee of future performance but longer-term returns for the U.S. stock funds strongly outperformed bonds and international stocks.

For employees who are not near retirement, the declines are a reminder of two investment risks: volatility and market declines. But the declines are also an opportunity to “buy low” with bi-weekly contributions.

Retirees withdrawing from the TSP to supplement their Annuity and Social Security payments should try to withdraw from their G Fund balances until the other funds recover. Unfortunately, the TSP does not allow participants to withdraw from just one of the funds where they are currently invested. Withdrawals are made from each of the funds a participant owns, in the same proportion as their current allocation. If you have 50% in G and 50% in C, half of a withdrawal is coming from G and half from C.

There are several workarounds to this, which I will discuss on the show.

Nearly Useless Factoid

By Daisy Thornton

Wheel of Fortune hostess Vanna White clapped an estimated 3,721,446 times across 32 seasons.

Source: Guinness World Records

The post TSP tactics: Are you managing the market? Or is it playing you? first appeared on Federal News Network.

Or you can get a good steady job. Pick an outfit that is going to be around a long time and has an excellent 401(k) plan. Very important. Uncle Sam is a good example. And make sure that your employer is willing to kick in money to match your contributions. The government matches 5% for 99.5% of its employees. Many private companies have no match. Which is huge. That 5% tax-deferred contribution is a head start that keeps on going. Then invest for the long haul in stocks, through good and especially bad times, like the C, S and I funds of the federal TSP. There is no guarantee of earnings and great performance, but so far, so good.

If you choose the invest-for-the-long haul course you may, as 112,000 rank-and-file federal and postal workers have done, become a TSP millionaire. Maybe with $2-3 million which, along with your steady federal annuity and inflation-indexed Social Security will guarantee you a better retirement. As in much better.

But the keys are long-term investing and doing what the proven winners have already done. Like Abraham Grungold. He’s a long-time fed who has found a good financial coach: himself. He’s been practicing what he preached to some others. And its worked. He’s our guest today on Your Turn (10am EST) here on FederalNewsNetwork.com or in the DC area at 1500 AM.

He’s going to talk about his “simple” 5-step recipe for becoming a TSP millionaire. This is one you can’t afford to miss. Tell a friend. If you miss the show, or want to hear it again, it will be archived on our home page. Meantime, here’s a sneak preview which he calls:

The Simple Recipe to become a TSP Millionaire

“There are approximately 4.5 million federal employees and approximately 2% of them, 112,880, are Thrift Savings Plan millionaires. These are the employees who contributed to the TSP their entire federal career and invested aggressively. They weathered every financial storm and crisis. They lived through the COVID-19 pandemic and showed no fear.

It is an elite club. And this club welcomes new members.

What does it take to become a TSP millionaire? What is the recipe? It takes a few basic ingredients and several important steps.

1. Contributions: Put in as much as you can afford.
2. Investing: Invest your account aggressively.
3. Time: Let your account grow for 30 years.
4. Ignore every financial crisis.
5. Ignore everyone who is not a TSP millionaire.

To become a TSP millionaire or a TSP multi-millionaire, it has nothing to do with skill or luck. Investing in any of the TSP funds is not gambling. But if you are jumping from fund to fund trying to time the markets’ fluctuation, that is simply a recipe for disaster. An old fed friend of mine who is also a successful TSP member would say to me “Just Let It Ride.”

I started in the TSP from the beginning, in 1987. There was no computer technology for checking your daily balance. Making a simple interfund transfer took several weeks to accomplish. It was all done manually by mailing the forms and receiving your statements through the mail. And for employees with less than three years of federal service there were restrictions on which funds you could invest in.

So what does it take to be a TSP multi-millionaire? Well, my story is not just about making contributions and investing aggressively.

My story was about making the sacrifice to contribute the maximum every day of my federal career. I invested the maximum for 35 years. During the first twelve years of my federal service, I did not earn more than $50,000 per year. I worked a second job so I could maximize my contributions. I did not deny myself the pleasures of life. I still traveled and played golf but I lived on a budget so I could pay my living expenses. Also, during my career, I had four TSP loans, two personal loans and two residential loans.

I reached my first million in May 2014. It took me 27 years. My second million was achieved in February 2020. So why did it only take six years to do that? Well, I was contributing the IRS maximum including the over-age-50 contribution and the stock market grew rapidly during 2016 through 2019. My third million came in December 2021. So how could it have been accomplished in just 22 months? Due to the COVID-19 pandemic, I saw my account drop in 2020 but it bounced back and skyrocketed in 2021. Also, I kept buying shares when the market experienced any setbacks. Looking at my account now seems so surreal. Looking back, I made some sacrifices, but they certainly paid off.

I have many clients who are TSP millionaires and many who want to be TSP millionaires. I always ask them how much risk and sacrifice are you willing to make to achieve your goals? The key to be a TSP millionaire is making those important contributions and investing aggressively.

Financial success can easily be achieved; it only takes a little effort.”

Any questions or comments, please contact me at Abraham Grungold – AG Financial Services or my Facebook page at FERS Federal Employees

Nearly Useless Factoid

By Daisy Thornton

Source: SciNews

The post Wanna be a TSP trillionaire? Ask one! first appeared on Federal News Network.

While Mike Causey is away, please enjoy this column which originally published March 30, 2022.

One of the things your mother never warned you about, but maybe should have, is probate. As in how, and why, to avoid going through that legal ordeal that Charles Dickens turned into a book whose title says it all: Bleak House! It was supposedly inspired by several real English probate cases, at least one of which took more than 100 years to settle. So how much time do your prospective heirs have?

If you don’t have a will and an estate plan, probate is an after-you’ve-gone legal struggle. One which could last months, if not years, in a battle over what you intended your family (or friends) to have: your estate! And while that sounds a bit posh to many, the fact is most of us are worth more dead than alive. And that’s especially true of long time federal/postal workers. Most have life insurance, lifetime survivor benefits, maybe a home or other investments, including TSP or other 401(k) accounts. Who gets them and when depends on what you have done, or should do, sooner rather than later. That is, learn what you need to legally protect your family/friends and be sure they get what you want them to get.

So today’s guest on our Your Turn radio show (10 a.m. EDT) is attorney Tom O’Rourke. He’s a veteran of the IRS and a long-time specialist in taxes and estate planning. Some of his clients are TSP millionaires. Most aren’t. But all recognize they needed legal help to insure that their wishes will be fulfilled in a timely fashion when they are no longer calling the shots, dead or alive! If you have questions for Tom, send them to me (mcausey@federalnewsnetwork.com) before showtime. Meanwhile here’s an intro Tom wrote about why you need to avoid probate and what we’ll be talking about today:

How to avoid probate

A common goal is to simplify your estate plan to make the administration of your estate as easy as possible for your loved ones. This often involves structuring your plan to avoid probate. While probate in most cases is not unduly burdensome, it does take time and does involve certain costs. For many individuals, probate is easy to avoid.

Common tools that will allow you to avoid probate are jointly owned property arrangements, beneficiary designations, and the use of a revocable trust. Two of these, beneficiary designations and joint property arrangements, many times do not require the involvement of a lawyer.

Many individuals hold title to property in joint names. Property held jointly, or as a tenant by the entirety with a spouse, passes by operation of law to the surviving owner upon the death of the first owner. This always avoids probate and supersedes the terms of a will or a trust. A third form of joint ownership is a tenancy in common and property held as tenants in common does not avoid probate. Rather, the distribution of such property is governed by a will, if you have one, and if you do not have a will, by state law. It is always subject to probate.

A word of caution for persons using joint property arrangements — the property may be subject to the claims of the creditors of your joint owner.

Beneficiary designations provide a simple way to transfer property. The designations may be in the form of a POD (payable on death) or TOD (transfer on death). Federal employees can designate beneficiaries for all of their job related benefits including their annuity, TSP, accumulated leave or salary, and life insurance. In addition, virtually all types of financial assets allow the designation of a beneficiary. Some states (Maryland) allow the designation of a beneficiary for a motor vehicle

If you have designated a beneficiary, any assets covered by the designation pass to the beneficiary at death. They are not subject to probate and supersede the terms of any will or trust.

If you have assets other than joint property or assets that allow a beneficiary designation (most commonly real estate) and want to avoid probate, you may establish a revocable trust to hold this property. The trust must own property for it to achieve the goal of avoiding probate. In most situations, you should enlist the assistance of a knowledgeable estate-planning attorney to establish a revocable trust.

Nearly Useless Factoid

By Robert O’Shaughnessy

Source: Beer Institute

The post How (and why) to avoid probate: A slap at your family! first appeared on Federal News Network.

Have you got what it takes to make the final cut, and maybe become a contestant on the popular TV show Jeopardy? Maybe become a millionaire? Interested? Take this test.

If you dare…

What weighs 990 million pounds, is worth $743 billion and has 6.6 million units found in every country of the world, every U.S. state, as well as Greenland and Antarctica. Oh, also in outer space.

Correct answer:

What is the federal Thrift Savings Plan, Uncle Sam’s in-house 401k for active and retired civil servants and government officials, and members of the military?

Everything about the TSP is big. It has more people than many countries. It has a net worth larger than many nations of the world. By almost any measure the TSP is the biggest kid on the block. Nothing in the 401k world in the private sector can touch it in size, scope, membership and value. It is an optional part of the retirement program for feds hired in the mid 1980s who are under the Civil Service Retirement System. CSRS covers most currently retired government workers or their survivors.

For most people currently on the federal payroll, under the Federal Employee Retirement System, the TSP is a must. FERS employees who invest at least 5% in the TSP can qualify for a match of up to 5%. FERS workers also qualify for, and pay into, Social Security. But because their starting annuities are smaller than their CSRS counterparts (same salary and length of service), and because their annual cost of living raises don’t match inflation once it exceeds 2% (it’s now about 9%), they must invest in TSP to have the same total income in retirement.

When Congress set up the TSP (which also covers members of Congress) the rule was KIS: Keep It Simple. And keep it cheap (as in low administrative fees) so investors could keep more of their earnings. As to earnings, Congress said give investors a wide range of choices. Up to a point. That included a C fund which covers large cap U.S. stocks, the S fund which covers small caps and an international fund, the I fund. Plus the unique never-has-a-bad day Treasury securities G fund. And the F fund invested in bonds. Plus a series of self adjusting target date funds. But all relatively easy to operate and manage.

Now there is a new kid on the block. Earlier this year the TSP announced that in addition to a number of streamlining changes, it would allow participants to invest some of their total TSP nest egg into 5,000-plus mutual funds. Including ESGs, which are defined as “portfolios of equities and/or bonds for which environmental, social and governance factors have been integrated into the investment process. This means the equities and bonds contained in the fund have passed stringent tests over how sustainable the company or government is regarding its ESG criteria.”

Some would call the ESGs “passion funds” because, in addition to returns, the investor wants to put their money where their mouth is. Whether its save-the-whales or environment to political or social causes. There was also heavy, bipartisan political pressure on the TSP for decades to give private mutual funds a piece of the lucrative federal market, with its 5% government match. The TSP is doing it, with a special group of new fees both for participation and for each transaction. Those fees will not apply to people who keep their investments inside the TSP.

The changes in the TSP have pleased many. And rattled a lot of others. There have been widespread complaints about unanswered phone calls or e-mails. Difficulty in getting quick answers, etc. Rep. Eleanor Holmes Norton (D-DC) wants Congress to probe the new TSP program.

The TSPs’ governing body, the Federal Retirement Thrift Investment Board, met yesterday for its monthly meeting. Federal News Network’s Drew Friedman covered it. She’ll be my guest today (10 a.m. EDT) on our Your Turn radio show. In addition to the many TSP changes, and likely congressional hearings, she’ll talk about the outlook for a bigger-than-usual federal pay raise, and possibly the highest inflation catch-up adjustment in decades for retirees. If you have questions for her please send them to me (mcausey@federalnewsnetwork.com) before the show begins, and I’ll ask her.

Nearly Useless Factoid

By Daisy Thornton

Contrary to popular belief, George Washington’s dentures were never made out of wood. He owned multiple sets, including one carved out of hippopotamus ivory.

Source: Washington Library at Mount Vernon

The post TSP Jeopardy quiz: Do you dare take it? first appeared on Federal News Network.

After one of the best, longest bull market runs in history, the continuing downhill trajectory of the stock market has lots of investors wondering what — if anything — they could and should be doing. At a time of an evolving pandemic, an expanding European war and major climate concerns, at first glance the answer is: probably not much!

And in financial times like this, doing nothing — either by design or inertia — may be the best choice for many. Should investors bail out of floundering stock funds and head for the ‘safety’ of the Treasury securities G fund? At least until things get better, which begs the question: when do you know that?

Those with doubts and concerns include many of the 6 million-plus people in the federal Thrift Savings Plan, Uncle Sam’s in-house 401(k) plan. People in it range from former U.S. Presidents to both the people who print our money and those who take it back in taxes. And the person who delivers your mail as well as active and retired members of the armed forces.

For many investors, the Thrift Savings Plan will provide anywhere from one-third to half their income in retirement. Assuming, of course, there is income!

So what should you do, or not do? We’ll find out today on our Your Turn show with guest host Arthur Stein. He’s a Washington-area financial planner whose clients include many active and retired feds, including several self-made TSP millionaires. The show Is at 10 a.m. EDT today, streaming at www.federalnewsnetwork.com or in the D.C.-Baltimore area at 1500 AM. It will also be archived so you can listen later, or pass it on to a friend. Meantime, here’s a sneak preview of what he’ll be talking on. If you have questions send them to me mcausey@federalnewsnetwork.com before showtime. Here goes:

Financial markets in the first six months of 2022 broke many records, all of them bad. According to the New York Times:

• The stock markets suffered the worst January through June performance “since at least 1970.”
• The S&P 500 Index and other stock markets are now in a bear market, meaning they have declined 20% or more from a previous peak.
• Many bond markets suffered their worst declines in about 40 years, and 10-year Treasury bonds suffered their worst declines since the late 18^th century.
• Inflation is the worst it has been in more than 40 years.
• Bitcoin is down more than 50%.

The table below indicates the depth of losses year-to-date and over the last 12 months. The F Fund is negative over the last three years, which is certainly unusual.

The graph below illustrates the positive effects of staying invested when times are difficult.

Note that:

• COVID caused the most economic damage during 2020, and there was a significant bear market (-35%). But at the end of that year the C Fund had increased 18% and the F Fund 7.5%.
• Economic damage continued during 2021, but at the end of that year the C Fund had increased another 29%. The F Fund had a slightly negative return of -1.5% but was still higher than at the beginning of 2020.
• The C and F Funds declined significantly during the first six months of 2022. But the C Fund was still 22% higher than at the beginning of the COVID pandemic. The F Fund decline was mainly because of actions by the Federal Reserve to lower the rate of inflation.

If forecasters knew in January 2020 that there would be a pandemic and the economic damage it would cause, they would have predicted major, long lasting stock market declines. And they would have been wrong.

Successful investing is a marathon, not a sprint. It’s important to stay invested, remain patient, and stick to a plan — a plan that includes a personalized allocation target based on your financial position, risk tolerance, and investment timeline. All investments go through cycles and there will be periods of time in which the investment objectives are not met. This is one of those periods.

Nearly Useless Factoid

By Daisy Thornton

Wembley Stadium has more toilets (2,618) than any other venue in the world.

Source: Wikipedia

The post TSP returns: Who hit the down button? first appeared on Federal News Network.

The trick for many people — like federal and military folks who are building their own retirement nest eggs — is not to panic. Easier said than done when your regular 401(k) or TSP statements drop quarter after quarter, even though you are putting a chunk of your paycheck in it each week. With a match from Uncle Sam.

Many investors saw then, and see now, an opportunity as the stock market drops and Elon Musk has second thoughts about buying Twitter. Many continued to buy stocks via the C, S and I funds. Or through target date funds. Most made out like bandits when the market came roaring back big time until, well, until now. Turns out they bought low, when stocks were in effect on sale.

But investing for retirement is like conducting a real fire drill. They go much smoother when there is no heat. Once the world economy hits obstacles — Ukraine, oil shortages, record high gas price, and a pandemic that won’t go away — it is tougher to see the light at the end of the investing tunnel as anything other than a fast-moving train.

The market downturn also hits at an interesting time, when the largest bloc of investors in the nation — the six million active and retired investors — is getting the option to go from 15 to more than 5,000 fund choices, with fees they’ve never had to deal with before. Many financial planners have ideas to help their clients cope with bad times, like now. Especially if they get worse before they get better.

So my guest today is financial planner Arthur Stein, who helped clients weather the last bear market. And in several cases, not only survive, but actually thrive to become self-made TSP millionaires. The show start at 10 a.m. EDT. It will be streaming on FederalNewsNetwork.com or you can listen live in the D.C.-Baltimore area at 1500 AM.

Nearly Useless Factoid

By Daisy Thornton

In 1924, I.C. Bahr, the early sales manager of the Akron Candy Co. of Bellevue, Ohio, named the company’s new ball-shaped lollipops “Dum Dums” on the basis that it was a word any child could say.

Source: Spangler Candy

The post Surviving, maybe even thriving in the bear market? first appeared on Federal News Network.

If an IRS agent calls you at home or office and asks you to send him or her a gift card, don’t do it! Even if you owe money, that is not the correct (or legal) way to get back in Uncle Sam’s good graces!

By the same token if someone from a nature fund or a save-the-kittens group asks for a donation, check them out BEFORE you send a check.

When a company advertises it can reduce your tax bill by tens of thousands of dollars put a cold cloth on your head and lie down until the urge to respond is gone.

All of the above, plus some things you wouldn’t dream up, are part of the IRS’s Dirty Dozen list. It’s part of the agency’s effort to protect taxpayers, tax preparers and corporations from scams ranging from the incredibly stupid to brilliant. All designed to take you for all they can get. Even if it’s all you got!

And if you think some of the long-distance scams you see on the Dr. Phil show: She (or he) wires money to soulmate they’ve never met so they can pay kidnapper’s ransom, get their mother a new body part, or repay a small debt to free millions of dollars from frozen account. The fact is it happens every day. Sometimes to otherwise savvy people. Like you, maybe?

So what are the scams and schemes on the Dirty Dozen list? Could you spot them? Or have you ever been had?

To talk about the ploys used to trick people we’ll be talking to tax attorney Tom O’Rourke. He’s a former IRS attorney, and he’s my guest today on our Your Turn radio show: 10 a.m. EDT on www.federalnewsnetwork.com or in the D.C.-Baltimore area on 1500 AM.

Most of us think we are too smart to be conned. But even geniuses have fallen for a ploy. Full disclosure: For three consecutive years on my first job I joined a bottle club. All I had to do was buy three semi-expensive Bourbons. Pass them on to the bottle club chain and wait while dozens, potentially hundreds of bottles, arrived at my apartment door. It cost me nearly a week’s pay, but the payoff was worth it. Almost. The thing is I’m still waiting for the happy clinking sound of a mass delivery! And I’m beginning to think I was had. Maybe. In any case Tom is an expert on what the scams look like and how to avoid them. Here’s his lead in to today’s topic, The Dirty Dozen:

The IRS has been publishing “the Dirty Dozen” for much of the past twenty years in an effort to advise taxpayers and tax preparers of scams and schemes that are in some way related to taxes. It is a list of questionable (or fraudulent) transactions designed to gain access to your money.

In recent years, the items on the dirty dozen lists have included bogus calls, texts, emails and online posts. A common scam during the past two years includes online text messages or emails about your entitlement to stimulus payments that often include a link. The link promises to help you get all you are entitled to under various stimulus programs. Accessing a link in such a message may compromise any security measures of your computer system.

Phone scams often include threats that the IRS or local law enforcement agents will arrest you if you do not immediately remit payment by way of a gift card. The IRS cautions that it always initiates contact by mail and never demands payment by gift card. You always have an opportunity to appeal any determination that you owe additional tax.

The dirty dozen also lists strategies that are many times fraudulent that offer to help you avoid taxes. Some of the more common tax avoidance schemes identified in the current list of the dirty dozen include:

• Captive insurance arrangements.
• Charitable remainder annuity trusts.
• Offshore pension arrangements.
• Monetized installment arrangements.
• Conservation easements
• High-income taxpayers who simply do not file tax returns.
• Companies that promise to settle your tax liabilities for pennies on the dollar.

All of these schemes involve transactions that on the surface involve legitimate transactions. They typically offer very significant tax benefits, but little else in the way of economic benefits.

Always exercise caution in investing in any transaction that promises benefits that sound too good to be true.

The post Gift cards for the IRS? Probably not! first appeared on Federal News Network.

If you are working, retired, building a nest egg or living off one, these are tough emotional times. If you want good news, you’ve learned to avoid the financial news or stock market reports. Also national news, international news and, if you are a baseball fan in certain cities like Washington, D.C., you avoid the sporting news, too.

Hopefully you have a good cable package and a personality that lets you sort and live with the good news vs. the not-so-good-news. Which is the purpose of today’s Your Turn radio show: It’s a double-header on the good, the bad and the ugly. We are going to try to cover the waterfront. Our show begins at 10 a.m. EDT on www.federalnewsnetwork.com or 1500 AM in the Washington-Baltimore area. First up, financial advisor Arthur Stein will talk about the future course of your TSP account, and the pros and cons of investing heavily in the never-has-a-bad-day G fund. Many consider it the “safest” investment. But that begs the question: How do you define “safe” when building a retirement nest egg? Federal News Network reporter Drew Friedman will talk about the very latest on the federal pay raise. Then we’ll get into the prospects for a large retiree COLA. Last, but definitely not least, the issues TSP investors are having with the new system.

Hopefully this has something for everyone. Here’s a preview from Arthur Stein on the place of the G-fund in your TSP portfolio:

There are two advantages to the G-fund: Zero volatility and all holdings are guaranteed by the government.

However, G (and F)-fund investors need to recognize that, historically, long-term investments in the G and F-funds lost purchasing power. G-fund annual returns have gradually declined since it was introduced in April of 1987. In 2021, the return was 1.4%, 84% lower than in 1988. The cost of living (inflation) more than doubled over this period.

That leaves TSP participants with a dilemma. Should they invest for:

• The lower volatility and lower chance of losing principal (“safety”) offered by the G and F (bond) funds, and accept the higher chance of declines in purchasing power; or
• The higher potential growth historically offered by the stock funds, accepting higher volatility and market declines for the opportunity to increase purchasing power?

Nearly Useless Factoid

By Daisy Thornton

Source: Sci News

The post Pay Raise, COLA, TSP troubles and the G-fund first appeared on Federal News Network.

When Social Security was launched in 1935, the average life expectancy for men was 59.9 years and 63.9 for women. Full benefits started at 65, so do the math! It sounded almost like a safe, government-guaranteed Ponzi Scheme, minus the scheme part.

But times have changed. The bad news, from an actuarial basis, is that we are living longer. A lot longer. A growing number of people are and will spend more time in retirement, getting Social Security, than they did working and paying into it. Again, do the math!

People who get Social Security — or hope too someday — got some good news recently. Sort of. The good news is that Social Security will not run out of cash reserves until 2034. Some earlier estimates said it would go broke sooner. So where is it going?

Optimists predict Congress will fix it. Maybe make millionaires pay Social Security taxes on all of their income. Maybe raise them for everybody. Others, including many young people, say it’s too late, or soon will be. That there won’t be anything for them 99 years after the program began. For an update on the fate of your Social Security, we invited Tammy Flanagan to be on today’s Your Turn radio show. This is one you can’t afford to miss. Listen live at 10 a.m. EDT on federalnewsnetwork.com or 1500 AM in the Washington area. Or listen to it later by clicking on our home page. But please listen. If you have questions for Tammy shoot them to me before showtime at mcausey@federalnewsnetwork.com. In the meantime, here’s an overview, including possible changes to save Social Security, she prepared for today’s show:

Is Social Security really going broke?

The reserves of the larger trust fund (OASI), from which retirement benefits are paid, were nearly depleted in 1982. No beneficiary was short changed because the Congress enacted temporary emergency legislation that permitted borrowing from other Federal trust funds and then later enacted legislation to strengthen OASI Trust Fund financing. The borrowed amounts were repaid with interest within 4 years.

As Congress did in 1983, it is apparent that Congress will need to enact changes to Social Security in the near future to avoid the problems that are foreseen in the annual trustees report.

According to the 2022 Social Security Trustees report, lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.

By law, there are six trustees, four of whom serve by virtue of their positions in the federal government: the Secretary of the Treasury, the Secretary of Labor, the Secretary of Health and Human Services and the Commissioner of Social Security. The other two trustees are public representatives appointed by the president, subject to confirmation by the Senate. The two public trustee positions have been vacant since 2015.

Part of the problem is that there are a lot of us who are eligible to receive, are becoming eligible to receive or are already receiving benefits. We’re called the baby-boom generation. There are 71.6 million boomers.

Using their own definition of baby boomers as people born between 1946 and 1964 and U.S. Census data, the Pew Research Center estimated 71.6 million boomers were in the United States as of 2019. According to Census Bureau projections, older adults are projected to outnumber children under age 18 for the first time in U.S. history by 2034. And we’re living longer, despite the many deaths that occurred as a result of the pandemic.

Many policy makers have developed proposals and options to address this long-range solvency problem, and we will talk about them today.

Nearly Useless Factoid

By Robert O’Shaughnessy

Source: Arizona State Library

The post Social Security: On life support? first appeared on Federal News Network.

It’s hard to think about next summer’s vacation at the beach in February when there is a blizzard outside and your roof is groaning under the weight of all that ice and snow. There are times when it is important to live in the moment and focus on how to minimize your losses. But that is not always the best plan for ordinary people who are investing for a retirement that could last 10, 20 or 30-plus years. Like now!

After decades of mostly good — often great — news, the stock market is wobbling. For good reason. Thrift Savings Plan investors have grown accustomed to big returns with hiccups replacing bear markets. Generally speaking, things have been good-to-excellent since May 2009, the end of the Great Recession. The TSP is critical to federal/postal workers under the FERS program. It could provide anywhere from one-third to one-half of their total income-for-life in retirement. Their federal retirement annuity and Social Security are the other parts of that three-legged system Congress designed in the 1980s. The changes, while excellent in many respects, mean that FERS employees must work harder/plan smarter and show more discipline in order to match what they would have gotten under the CSRS program. They need to invest smarter and harder (as in more) to match or exceed what they would have gotten under CSRS. But it can be done. Most of the current TSP millionaires are FERS employees/retirees who maxed out on their contributions (ensuring the 5% government match) and who continued to invest in the stock indexed C, S and I funds during the Great Recession when the market tanked, producing a scary buyer’s market for investors.

It’s easy to talk about long-haul, no-panic investing during good times, like we’ve just experienced for an unnaturally long time. But when the going gets tough, and markets decline — sometimes rapidly — it is harder to stay the course and sleep at night.

Now we’ve got Russia in Ukraine, China and the Taiwan problem, a seriously divided nation here at home, big-time inflation and record high gasoline prices. Oh, and a continuing pandemic that has altered the world and killed at least one million Americans. And a critical shortage of life-or-death infant formula. What next, monkeypox?

So what if this period, right now, turns out to be the good old days?! What if things get much worse before they get a little better? So who did we call for advice? How about Arthur Stein, a well-known Washington-area financial planner. Most of his clients are active or retired feds. Several are TSP millionaires, in some cases because-not-in-spite-of the Great Recession. He’ll be my guest today on our Your Turn radio show (10 a.m. EDT) on federanewsnetwork.com or 1500 AM in the Washington-Baltimore area. If you have questions for him, send them to me before showtime at mcausey@federalnewsnetwork.com/alert. Meantime he’s written an introductory column of his own explaining what we’ll be looking at and talking about today.

Longer return periods make everything look better

Through May 20, 2022, returns for 14 of the 15 TSP funds were down. Down a lot.

So where can you find some good news? It’s easy, just look a little further back and, like magic, all those negative returns disappear.

And you don’t have to look back too far. Just three years.

The stock funds (C, S and I) all performed well over the last three years, even with the recent declines. Well enough to produce average annual rates of return that were much higher than the bond funds (G and F). And the horrible F fund declines, probably the worst ever, disappeared.

This should be a reminder to TSP participants that allocation decisions need to consider when funds will need to be withdrawn to supplement annuities and Social Security. For instance:

• The G fund is an excellent choice for funds that will be withdrawn in the next 1-5 years.
• F is a good choice for funds that will be needed in the next three to ten years.
• The stock funds make sense for funds that won’t be needed for ten years or more.

The L funds work differently. They began with 80% to 99% invested in stocks (C, S and I) and the remainder in bonds (F and G). Over time, the percentages in stocks decline as the percentages in bonds increases. When they reach their target dates, L funds close and investments transfer to the L Income fund, which is currently 75% bonds, mostly G.

That doesn’t protect from losses. Current returns are negative for all L funds, including L Income.

Nearly Useless Factoid

By David Thornton

There are only about 25 blimps still in existence.

Source: Reader’s Digest

The post The TSP in troubled times: Go long! first appeared on Federal News Network.