OPM also saw improvements in the inventory backlog shrinking it by 2,786 bringing the current number of claims to 16,823. This is the lowest backlog the agency has seen since December 2023. OPM is still 3,823 claims above the steady state goal of 13,000.

After seeing improvements in February, OPM ‘s average processing time increased from 47 days to 55 days in March.

OPM said March retirement cases completed in less than 60 days on average took 39 days to process, while cases that took more than 60 days on average took 134 days to fully process.

The post OPM retirement backlog continues improvement in processed claims for 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.

• Open Season is not until this fall, but some feds may want to start looking at their health care early. A special enrollment period starts today for Postal Service annuitants. USPS retirees who are eligible for Medicare Part B, but do not have it, can sign up between now and September 1 without having to pay a penalty. The USPS is covering the cost of the penalty for any annuitants who do choose to sign up. The special enrollment period comes ahead of the launch of the brand-new Postal Service Health Benefits program for plan year 2025. And for everyone else, Open Season will run Nov. 11 to Dec. 9.
  (Postal Service Health Benefits program - Office of Personnel Management)
• Nearly a two-year effort has concluded with agencies receiving their first update to the standards for collecting federal data on race and ethnicity in more than 25 years. The Office of Management and Budget's Chief Statistician Karin Orvis said the interagency working group made several significant changes to the standards, including adding Middle Eastern or North African as a new minimum category. Agencies are to begin updating their surveys and administrative forms as quickly as possible and must submit an agency action plan for complete compliance within 18 months. Orvis said the working group reviewed 20,000 comments and held almost 100 listening sessions as part of its effort to finalize the new standards.
  (OMB updates standards to collect federal data on race, ethnicity - White House)
• The Defense Department has established the Office of the Assistant Secretary of Defense for Cyber Policy. The new office, officially launched on March 20, will oversee all cyber-related policy issues at the Pentagon. That includes certifying the department's cyber operations budget and overlooking cyber workforce development programs. Ashley Manning will serve as the official performing the duties of the assistant secretary until the Senate confirms an official for the position. President Joe Biden nominated Michael Sulmeyer, who is currently serving as the principal cyber adviser to the Army Secretary, to serve in the new role.
  (Establishment of the Office of the Assistant Secretary of Defense for Cyber Policy - DoD)
• There is a new section to the FAR and it may be the most important change in decades. Get used to hearing about FAR Part 40. It's the new consolidated section of the Federal Acquisition Regulations for all things cybersecurity and supply chain security. The FAR Council issued the final rule today establishing this new section, bringing together clauses and regulations covering broad security requirements for most acquisitions. The new FAR part will provide contracting officers with a single, consolidated location to find these requirements. While the new FAR section does not create any new requirements or contract clauses, the council currently is reviewing three rules that would be added to Part 40 when finalized.
  (FAR Council formally established new cybersecurity section - Federal Register)
• Senate lawmakers are pushing to bring federal record-keeping practices into the 21st century. Agencies would need to make sure employees back up their texts and other digital chats used for official business under the Strengthening Federal Records Act of 2024. Sens. Gary Peters (D-Mich.) and John Cornyn (R-Texas) are co-sponsoring the bill. They say the Federal Records Act needs to keep with rapidly changing technology. The bill would also strengthen the role of the National Archives and Records Administration in holding agencies accountable to record-keeping rules.
  (Senate bill aims to bring federal records law into the age of ‘WhatsApp’ - Federal News Network)
• The Navy has created a sort of one-stop-shop of efficiency when it comes to Navy Culture. A new initiative dubbed Culture of Excellence 2.0 aligns several Navy programs and concepts, allowing the leadership to better understand the needs of its sailors. New materials released as part of the initiative include a playbook on mental health and a suicide-related behavior response guide. The women’s initiatives team and the new policy for the assignment of pregnant sailors also fall under the umbrella of Culture of Excellence 2.0. And there will be a new tool for commanders to better understand the risk of destructive behaviors within their commands.
  (Navy updates its culture campaign - U.S. Navy)
• A new leader has taken the reins at the National Security Agency’s Cybersecurity Directorate (CSD). Dave Luber formally took over as CSD Director on Friday, replacing Rob Joyce, who had led the directorate since 2021. Luber previously served as CSD’s deputy director. He is a longtime veteran of the intelligence community, having also served as executive director at U.S. Cyber Command and in various positions throughout the NSA. The Cybersecurity Directorate is responsible for helping to secure defense industrial base networks and issuing public advisories on cyber threats.
  (New NSA CSD director - X)
• When candidates go online to apply for a federal job, they will see a brand new look. USA jobs.gov has updated its homepage design and some key features of the website. There is now a "search tips" option for anyone who might need help narrowing down a search. A link at the top of the homepage will take users to a list of upcoming hiring events and information sessions. And there is info about what career fields are hiring right now, and how the federal hiring process works.
  (Website homepage update - USAJobs.gov)

The post Medicare Part B special enrollment period for USPS annuitants begins today first appeared on Federal News Network.

Nobody has a guaranteed tomorrow. That doesn’t mean you shouldn’t plan for a good retirement. Presuming you don’t climb 1,000-foot rock cliffs without ropes or scuba dive to pet tiger sharks, you can expect some good years after work. The Social Security figures show a man at 65 — the classic retirement date — will live on average another 17 years. A woman at 65 has another 20 years on average. In reality more and more are making it to 90 and beyond.

Why a retirement column today? With two weeks until the tax incoming filing deadline, people are thinking about their finances. Baseball opened yesterday, and wouldn’t it be great to get to those precious few day games without a lot of schedule rigmarole? Plus, given that most federal employees pick December 31st to retire, April 1 still gives you some time to get retirement affairs lined up.

I credit Thiago Glieger of RMG Advisors in Rockville, Maryland, and a regular Federal Drive guest, for the idea. He said his federal clients often knuckle down to retirement planning now, with the holidays, winter and tax filing behind them. My own two cents: Solid retirement planning is also good financial planning generally, no matter how far away your retirement.

Glieger says to think of retirement in three phases — go-go, slow-go, and no-go. Go-go, you’re still relatively young and active. This is when you pack in the more active or strenuous things you want to do while you can. Slow-go, you’re still okay, but maybe slowing down to enjoy more chilling, say with younger family members. No-go is later old age, which might entail assisted living or other forms of help.

You can’t control anything fully. Inflation, though, lies in the zone of totally uncontrollable. Glieger calls inflation the silent retirement killer. You can control how your react in terms of Thrift Savings Plan or 401K strategy. He cautions against substituting  the volatility of higher growth funds like the C  Fund or S Fund for the steadiness of, say, the G Fund, on which inflation will have the most corrosive effects.

In that sense, your TSP is the one element in the TSP-FERS annuity-Social Security trio that is not fixed, or at least not tied to nominal inflation adjustments. Certified financial planner Art Stein, also an alarm-ringer on inflation, points out that FERS and your annuity won’t run out, either, whereas you can wipe out your investments fairly easily. You might be tempted to take more from your savings if inflation reduces the buying power of your FERS annuity, Stein adds.

Like a noxious vapor, inflation seeps into everything.

So, don’t shy away from keeping relative to wide swings, “if you think about not growing your money fast enough, that’s also a pretty big risk. Over time, you may not be able to keep up with your spending,” Glieger said.

Any retirement plan must include a spending plan. Glieger cautions against underestimating what you’ll spend. Some people spend more when they retire; say, because of more travel. Plus, cars, roofs, furnaces and washing machines don’t last forever.

Or at least initially, you buy that bass boat or sewing machine or Beretta shotgun you now feel you’ll have the time to use. Therefore, you’ll want a TSP investment strategy that grows your nest egg at no less than the rate at which you take withdrawals. Or at least ensure the principal lasts until you’re 95 or 100. You don’t want to undershoot the runway.

Nearly Useless Factoid

By: Michele Sandiford

The ratio of women to men over 65 years old is 100 to 76. The ratio of women to men over 85 years old is 100 to 49.

Source: DoSomething.org

The post Planning on retirement? Beware of killer 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.

What’s the old saying? Never a lender nor debtor be? For most of us, no problem not being a lender. But for buying a house or a car — that entails taking on debt for the average working stiff. Not all debt is evil if you manage it correctly. Retired federal manager Abe Grungold of AG Financial Services joined the Federal Drive with Tom Temin with some advice.

Interview Transcript: 

Tom Temin And people retire even with debt and people carry debt and the debt levels if you look at it nationally Abe. It’s not a pretty picture, is it?

Abe Grungold In preparation for today, I looked up some statistics, and the numbers were just staggering. For credit card debt. There is $1.1 trillion of credit card debt, and that pertains to 49% of all credit card holders. And with respect to mortgage debt, there’s $12.2 trillion in home mortgage debt. And that is for 70% of all households. That number made a little bit more sense to me. But if you are a federal employee, and I remember this early on in my career, that when I first got the job with the government, I was a GS-9, and I immediately started looking to buy my own home. And I realized something very important that with my mortgage and my other expenses, I wanted to make sure that I was going to be able to contribute to the TSP as much as I could afford to do. And what I learned was I needed to put my money in the TSP first before I paid my other bills. It’s very important if you are an active federal employee or a young federal employee is to pay yourself first, and you must at least put in 5% of your salary in the TSP so you can receive the government match of 5%. You have to do that at a minimum. And I heard a statistic recently, I think there’s about 85% of all federal employees who are at least putting in 5%. So, there are some active employees who cannot meet the 5% because they are possibly in a very expensive city like New York or San Francisco, or they just feel it financially cannot do it. So, this is very important, very important to pay yourself first and to put in as much as you can afford.

Tom Temin You know when I started out. People were content almost to be house poor. And the reason was real estate values just went up and up and up in the 70s, 80s, 90s, you know. Well, till they didn’t. Now they’re going up again in most places, but it’s not a guaranteed thing. I think the thinking now is, you know, maybe don’t be house poor, but live in what you can afford comfortably again. So, you can do some of those other things for your long-term financial benefit. Now, like you say, investing in your 401 K or your TSP. What’s your thinking on house poor and housing cost?

Abe Grungold This is an excellent question, Tom. When I first was a federal employee, I was a GS-9 and I was looking for a condominium, and I was single at the time. And I wanted this two-bedroom condominium, and I couldn’t afford it Tom. I could not afford it. So, I ended up buying a one bedroom in the same building. And I said, you know, as my federal career advances, I will be able to afford a bigger home. But right now, I need to buy what I can afford. And I ended up buying the one bedroom. I owned it for ten years, and then later on I did buy the two bedroom, and then later on I bought a home and etc. etc.. So, you really need to be realistic with buying what you can afford. That’s the most important thing. But before you buy something, you have to factor in your contribution to your retirement. That has to be part of your budget, and you need to think about that immediately as a new federal employee. To start right away contributing.

Tom Temin And if you are making comfortable, say, mortgage payments and you are headed to the retirement end of things, a lot of people psychologically say, I got to get rid of my mortgage, sell the house, buy something less, whatever the case might be, or sell the house or pay it off. That’s not necessarily the right knee jerk thing to do, though, is it?

Abe Grungold Well, certainly if you can afford to pay your mortgage, while you are in the latter part of your federal career, it’s okay to carry that mortgage with you into retirement. If you are doing your calculations properly, you have at least, 80%, retirement income stream from your salary going into retirement. That’s fine. That’s fine. But what happens is a lot of people, when they get into retirement, they tend to spend more. And I see it, you know, in my own neighborhood, I live in a retirement community, and my friends and neighbors are spending like crazy. They’re going on, you know, trips, and they have their grandchildren over a lot, and they’re buying motorcycles and they’re buying a boat. And that’s fine, too, if you can afford to do all those things, if your budget doesn’t allow for that, your retirement is not going to be what you expect it to be Tom. And there is a possibility that you are just creating more debt in retirement, and you may have to end up getting a part time job to supplement your income. It’s always wonderful to go into retirement with no debt, but if you do have some, you certainly have the budget for that before you put in your retirement papers.

Tom Temin But it could be that the mortgage tax deduction, you know, is a factor that would weigh in favor of maybe not paying off the mortgage. Again, if the mortgage is a reasonable piece of your income, even in retirement. Yes. I always tell my clients to continue paying their, mortgage into retirement. But most important, try to maximize your contribution to the TSP before retirement. Try to build up that retirement, nest egg as much as you can before you actually go out the door. And I remember I had two months left, in the beginning of the year in which I retired, and I was doubling my payments to the TSP every paid period because I knew I was leaving at two months. I wanted to put in the absolute maximum that I could.

Tom Temin And what about credit card debt? Because that’s a really tough thing, people. We just use cards now. You can’t even. They’re places that don’t even take cash. We’ve got an expensive coffee shop, you know, near our studios. And for a little tiny, it looks like a teacup. Teensy little cup of cappuccino. They want seven bucks. They don’t take cash. You’ve got to use a credit card.

Abe Grungold That’s true. Many retail places just do not take cash. And I have found myself lately using a credit card wherever I go. But the most important thing about your credit card is you have to pay it off at the end of the month. Because if you’re not doing that, you’re spending 13 to 18% in interest on that money that you have spent on coffee and, going to, you know, McDonald’s or wherever you went. And really, you should not be spending that extra money, Tom. You shouldn’t spend that extra money. It’s okay to use a credit card, but you have to know and understand, I have to pay this off at the end of the month. My daughter is learning this now at the age of 22. So, it’s a life skill that that everyone has to work on every day. It’s so easy to give them the card, swipe it. It’s painless, but it’s something that has to be built into your DNA.

The post Federal retirees especially have to pay attention to their debt profiles first appeared on Federal News Network.

After seeing a large increase in the inventory backlog in January, OPM made small improvements, shrinking the backlog by 1,231  to a total of 19,591 claims in February. With a slight decrease in the backlog, OPM is still over 6,000 claims above the steady goal of 13,000.

OPM also saw improvements for the average processing time for February,  reaching 47 days, setting a new record.

OPM said February retirement cases completed in less than 60 days on average took 29 days to process, while cases that took more than 60 days on average took 135 days to fully process.

The post OPM retirement backlog sees new low in average processing time for February first appeared on Federal News Network.

For a couple of decades, the For Your Benefit show has aired here on Federal News Network. It was regular listening for anyone planning to retire someday. Host Bob Leins broadcast his final show this past Monday. Because he was such a fixture for our listeners and for those of us at the station, the Federal Drive with Tom Temin didn’t want Mr. Leins to get away without a final interview.

Interview Transcript: 

Tom Temin Now just review for us. How many years have you been doing for your benefit?

Bob Leins How many years? I’d have to say close to 30.

Tom Temin But on Federal News Network, since we started about 24 years ago. Where did you do it before that?

Bob Leins I would go on a radio station. And I have a friend, would you come on and talk about taxes? And I said, you want me to talk about taxes? How long do you expect the show to last? And I said, I’m going for about 5 or 10 minutes but I don’t think I could do an hour. And that’s how I got into it. Actually, I learned how to stand on my feet and talk in front of a group of more than one. And it was my boss in the 70s. Hot tempered Irishman. But if you got beyond the tough part, he was a piece of cake. Very nice, extremely smart. And he took me out. It was a franchise for him and we had franchises all around the country to do consulting work. So he says, we’re going to do the annual tour. And I said, does that mean I have to talk or do I just carry the phone? He said no, you’re going to talk. I didn’t sleep for a month. I looked at everything I could. The first time we went out, I forget what state it was, and he looked up at me and said listen, you’re doing pretty good. I’ll see you at lunch.

Tom Temin Left you there in front of a crowd.

Bob Leins In front of a crowd on your own. And I had lunch, and I said, do I have to do this again after. He said you should be a pro to this now, yeah.

Tom Temin He knew you better than you knew yourself.

Bob Leins Yes he did. And very, very thankful.

Tom Temin And we should tell people that have been listening to the show for 24 years at 10:00 on Mondays. Who is Bob Liens? What’s your actual job and profession?

Bob Leins Well, I didn’t graduate at the top of my class in college. So I took a job and it paid decent, but it wasn’t particularly pretty, and it was like working in a closet. But I learned things that I would have never learned otherwise. And we have some really sharp people. And I would ask, and then my boss would come out and he said, look at this. And they come back and give me a brief on this. All he was doing is trying to find a way to beat me up, verbally. And he says, now, next time you come in here, do better homework. And again, I’ll go to the grave thanking him. And he didn’t let many people in behind the fence. Somehow I got there. I don’t know what it was, it certainly wasn’t talking about taxes. And that’s what I did. And then I said, I think I can do this. And I went to work for my friend Don Gold.

Tom Temin What exactly are you? You’ve described herself as an accountant who doesn’t like accounting.

Bob Leins But what I realized when I got out of school is, I could do the accounting, but to me it was boring. And so I kind of looked at doing tax work. Taxes, generally speaking, there’s no balance sheet. You don’t have to do this or that. You should do things if they’re aggressive. You can be aggressive, but you can’t be overly aggressive because once that hits IRS’ computers, they’re going to come after you. So I can give them ideas that I like. And that’s what I did. And then I went to work for my friend Don Gold. And we grew a large firm, more so from taxes than it was for the accounting. And Don liked accounting more than I did. And that’s where I am.

Tom Temin And how did you get into the idea? What interested you in helping federal civil servants with their not just taxes, but general financial advice and life advice that you’ve been giving them through you and your guests all these years?

Bob Leins Well, when I went out on my own, I started a firm and called it For Your Benefit. The radio show was that too. And that’s what I did. So I would go out and talk, and then after a while, I was talking to the people in government agencies, can you do this with other people? And I go, yeah, we got somebody that can do benefits, we got somebody tax, somebody can do this or that. Everybody’s got their own niche.

Tom Temin And you get a lot of feedback too, don’t you? The listeners, they write to us about you. So you must get a lot of ideas from the listeners as to what concerns them.

Bob Leins That’s it. So you get the feedback from that, you get the feedback from clients and it just grew.

Tom Temin And some of your regular guests have become well known in the market in their own right.

Bob Leins Oh, yeah. Well known in the market. Tammy Flanagan, when I first met her, she just left the government. And, it was just started [National Institute of Transition Planning (NITP)], the retirement firm. And I said, Tammy, we’re going to go down to. And she like me the first time, studied and studied and studied and studies. Well, Tammy didn’t need to study. So I said to her, I said, as we go along, as I see that you got a firm grisp, I’m going to be walking backwards. She goes, why? I said, because it’s your show, not mine.

Tom Temin Yeah. So you did to her what your boss had done to you, knowing she could handle it.

Bob Leins That was it.

Tom Temin What happens to the National Institute of Transition Planning?

Bob Leins We got a fair number of people. Admin, probably got ten admin people. And then we have the speakers. And why are there speakers there? To get clients. But they can’t sell. We have a rule. You can talk, but if you try to sell, you’ll be talking to yourself.

Tom Temin Yeah, that’s the best way to sell, is to not sell in some cases like that.

Bob Leins Create the need.

Tom Temin And earlier you mentioned you weren’t at the top of your class. What was the class? Where did you go to school, where did you grow up? Where do you come from?

Bob Leins I’m a born and raised Wheaton kid, so people around here would know where Wheaton was.

Tom Temin And not Wheaton, Illinois, by the way.

Bob Leins Oh no. Wheaton was a nice place to grow up. Maybe not to stay, but a nice place to grow up. And so I left Wheaton as quickly as I could. I got married, and I went to work for General Business Services. That’s it. That’s my work history.

Tom Temin Right. And we won’t reveal your age on the air, but you’re still a vigorous guy for the age that you are. And what are you going to do next?

Bob Leins My father was like this, so my mother, we paid no attention to age. And my mother, how old are you? I don’t know, and she probably didn’t know. My dad, he would know and they were smooth. And I didn’t hear a lot of arguments, maybe a couple raise voice discussions, but nothing nasty. No throwing books around. My dad would take us up to Wheaton High School to play football. Not for the team, but we could play as little kids, and he would do this or that. So I grew up normal. And then, I graduated from school and I went to work for this place called General Business Services. And that’s it. Ten years there and then I said, I can do this. And I told my boss, and I think I can do this. And he says, well, then why don’t you get out.

Tom Temin Now, this coming Monday morning, of course, there will be no ForYourBenefit show.  What will you do when you get up on Monday morning?

Bob Leins I’ll read the paper. I’ll figure out if somebody had emailed me with a question, and then I go to work, and maybe there wasn’t a lot to do, but it was better than sitting at home.

Tom Temin But what are you going to do now on Monday mornings? Every morning?

Bob Leins That’s a good question. It’s an unknown, but it all has something to do with something other than accounting. Sure, I like taxes, but I never liked accounting.

Tom Temin But you don’t make Lego ships, or you don’t pin butterflies on boards or paint pictures.

Bob Leins No. Whatever suits me for the day. Somebody will call up and say, hey, you want to go out and have lunch? Okay. Or somebody else will say, you want to go out and shoot hoops? And I go, okay. It’s that kind of stuff.

 

The post We say goodbye to a trusted voice for federal retirees and those who will retire some day first appeared on Federal News Network.

The show in fact appeared on other stations before the formation of what was then called Federal News Radio. Bob, in my interview, couldn’t quite remember how many years back it went.

Bob is alive and well, but he’s no spring chicken. He retires from the air having built a large and loyal following of people, mostly federal employees. Bob and his guests served regular plates of advice on financial and estate planning, wealth accumulation, taxes, Social Security and a myriad of related topics.

Low key and self effacing, Bob glided into our studios faithfully every Monday until the pandemic, so I’ve only seen him sporadically in the last few years. For his last show he was here, so we could give him a proper sendoff, complete with cake. He was joined in studio by regulars Marc Levine, an estate and wills lawyer, and Tom O’Rourke, a retired tax attorney. On the phone were benefits consultant Tammy Flanagan, who may know more about Social Security than anyone at the agency itself; and Karen Schaeffer, a certified financial planner.

Couple of things you may not know about Bob. For one, he’s got a dry but sharp sense of humor. A Christian Scientist who eschews most conventional medical practice, he recalled the time, as a child, he was playing football in the street. A Jewish kid, taller and heavier, demanded to know, if Bob were to fall, break an arm and have a bone protrude through the skin, whether he’d go to the hospital.

“I answered,” Bob said, “well, if you were starving, would you eat pork?” That ended the confrontation.

For another: Although soft spoken, Bob has real skill in speaking and guiding a conversation, which explains the steady success of For Your Benefit. Bob explains how an early boss, the late Mr. McCarthy, would give traveling seminars to promote his tax return preparation business. One day McCarthy, without warning, handed full responsibility for the presentation to Bob and left the room.

“I’ll see you at lunch,” the boss said. Bob handled the presentation just fine, and realized, he said, that Mr. McCarthy in some sense knew Bob better than the young Bob knew himself.

More than a guy who knows taxes, Bob is a creator with good business acumen. Early on he co-founded a CPA firm, Turner, Leins & Gold, which operates to this day. He founded the National Institute of Transition Planning, a leading training outfit for federal retirement.

Bob has helped others realize their potential, having learned a lesson from Mr. McCarthy. He sort of pushed Tammy Flanagan to the front of an NITP stage, telling her, “I’m going to be walking backwards,” leaving her to lead the presentation. Now, she’s one of the best.

A couple of columns ago I commented on how, if I do eventually retire, I have so many things I’ll want to do beyond work. Whatever one’s retirement plans, it takes planning for what will give your life meaning. It takes takes planning, and in some ways decades of discipline, to make sure you can pay for it all.

That’s been the appeal of For Your Benefit. Bob and his guests have provided not only information, but some assurance that you can in fact build a secure retirement. The singular voice may be gone, but our coverage of these issues will continue.

Nearly Useless Factoid

By: Derace Lauderdale

Social Security recipients get a 3.2% raise in 2024, compared with the 8.7% increase that beneficiaries received in 2023.

Source: AARP.org

The post We salute a long running voice for federal employees 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.

Retirement is supposed to mean you don’t work any more or at least only work because you want to. Most people wonder, how much income is enough for me to retire? For some answers, the Federal Drive with Tom Temin spoke with federal retiree Abe Grungold of AG Financial Services.

Interview Transcript: 

Tom Temin  And I mean how much you need, depends on a lot of things, doesn’t it, Abe?

Abe Grungold It really does. It varies from person to person and whether you’re married a single. But it’s funny, even when I’ve been retired now for two years, my wife will still ask me, do we have enough money to retire on? And really, the goal for every individual should be at a minimum 80% of your pre-retirement income, so it should be 80% of your gross. That is a good number to start with.

Tom Temin Yeah. So that means the type of life you can have in retirement is unless you’re really, really good at investing and saving, will be in some relation to how you lived while you were working.

Abe Grungold Exactly. You know, if you can pay your bills now based on your salary, and you should be able to pay your bills in retirement. Now, it’s also important. It also depends on your lifestyle, because when we retire, we spend more. And a big factor is your health. The other factor that you really have to consider is how much debt are you going to carry with you into retirement? And that’s crucial.

Tom Temin Maybe it’s more crucial how much debt you’re willing to carry into the grave, because then you don’t have to worry about it anymore.

Abe Grungold Yes. Unfortunately, a lot of people like to buy large ticket items when they retire, a retirement home, motorcycle.

Tom Temin Now you’re talking.

Abe Grungold A boat. That’s fine. That’s great. It’s wonderful. But you have to make sure that is within your budget. And you should be starting your budget for retirement five years prior to retiring. You should get in the habit of seeing on a monthly basis, how much are you making? How much are you spending, and will you have enough income in retirement? And these numbers, these income numbers would be coming from your first annuity. It’d be coming from Social Security, your thrift saving plan, your personal savings. And if you want to, employment in retirement.

Tom Temin Right. Some people choose to do some work in retirement, but it should be something you choose to do. Maybe not something you have to do.

Abe Grungold People. It’s very important in retirement to be active both mentally and physically. And a lot of, federal retirees do a part time job in retirement just to keep them active mentally and physically. Now, I know a lot of people, a lot of coworkers, clients of mine who had a desk job in the government, they don’t want to be sitting at a desk in retirement. They want to do something physically active, and a great job is a school crossing guard. It’s a part time job. You’re out there physically walking around, you’re doing something good for the community, and you’re also earning some part time income. So, these are important things for a lot of retirees to do.

Tom Temin Yeah, for that matter, even if the income is slight, you could probably volunteer in jobs similar to that.

Abe Grungold Yeah. For those retirees who really do not have to worry about their financial income, volunteering is very important. I do a lot of volunteering, in addition to my business. And it really, helps me feel good about myself. And it’s an excellent way to give back to the community. It’s a great way.

Tom Temin Well, you’re definitely the type of person I would want to referee my pickleball tournament.

Abe Grungold I would be more than feared, Tom. I’d be more than feared, but I don’t know. My eyesight is not as good as it once was.

Tom Temin Well, my pickleball is not existent at all. I’ve never touched one. And getting back to that budget idea of doing a detailed budget over a period of time can also maybe show up areas where you could probably cut back a little bit without really harming your lifestyle.

Abe Grungold Yes, there are many ways that you can cut back. You know, you have to really think about your spending. Like if you still have cable, maybe you ought to think about doing some, streaming services which are much less than the cable service. If you have a home telephone, maybe it’s something you don’t need anymore. In retirement, you can just rely on your cell phone. You have to take a look at your insurance, auto insurance, life insurance, and see whether it’s a good idea to shop around. These are great ways to save an extra few hundred dollars here and there, and they add up quickly. They do.

Tom Temin We’re speaking with Abe Grungold. He’s retired federal manager himself and owner of AG Financial Services out of Florida. And you said start thinking about this five years in advance. I mean, most people probably don’t think about it until about six months to go. And they wake up and say, Holy, jumping Jehoshaphat. What am I going to do here?

Abe Grungold Yeah. It’s really you should be thinking about it five years ahead of time. You should be looking to see where that retirement income stream is going to come from, what your expenses are going to look like in retirement. And you really need to focus on this five years ahead of time and have a good plan going into retirement. Now. The thing that’s also very important when you are calculating these numbers are what I call the unknown factors, when you retire. The unknown factors are health care, long term care, grandchildren and inflation. So if you want to provide for your grandchildren, where is that money going to come in your budget? If you know you have to deal with health care issues and we most people do when they retire, you have to have an emergency fund to handle medicines, medical procedures. And you have to always think about inflation. And the other factor, which everyone may or may not have to deal with is long term care. And that is very expensive. That can be anywhere from 75 to well over $100,000 a year to be in a nursing home. Very expensive situation right now.

Tom Temin If you have any assets whatsoever above a couple of thousand bucks or something beyond your home, then you will not be eligible for Medicaid, God forbid, which will cover a nursing home. It’s basically the provider of last resort.

Abe Grungold Yes, the Medicaid. In order to qualify for Medicaid, you really have to be in a low-income situation. And when you go to a nursing home, they’re going to want a very detailed listing of all your assets, and they want to be sure that you can pay the nursing home bills, whether they’re going to come from your personal savings, from your TSP, or whether you’re going to be a Medicaid eligible, resident. So, you really have to think about all these things ahead of time.

Tom Temin Right, and for purposes of Medicaid, you can’t say, oh, gosh, I’m going to give away everything to the grandkids now and then a month later, become on Medicaid because they have a five year, I believe it is lookback, right?

Abe Grungold Yes, they definitely have that five year look back and they will carefully look at all those things. State has a lot of resources where they can look to see when you transferred your house to your children and when you transfer, your assets to your children. Now, that situation did happen with my old parents. They did it 20 years prior to them going into a nursing home. And both my parents did end up at the nursing home. So that situation was taken care of long before. And it was something that they thought of. It wasn’t something that I approached them with. So, you know, you really have to think of these things that unfortunately, that you do.

Tom Temin And you also have to plan not only for your health care costs, but also for your minimum required withdrawal from your TSP. Now, they keep moving the goalposts on when that has to occur. I think it’s now, if I’m correct, 72 or 72.5 years old. Congress moved it up.

Abe Grungold Yes, the age is going to change over the next few years depending on how old you are. It could be 73 and a few years later it could be even a higher age. But yes, you do have to make required minimum distributions. Now the TSP is going to help you make those required minimum distributions. And if you have your money sitting in a company like Fidelity or Charles Schwab, they also will help you to figure out what those numbers are. Basically, they’re about 3% of your total balance. So, if you have a traditional I.R.A., a traditional TSP, it will be about 3% of your balance. So yes. And so, they will have to come out.

Tom Temin And that’s the number that you plug into your monthly income. Is that roughly 3% of your balance. And that’s going to vary depending on the market and so on. And what about tax planning. Because that’s another bugaboo that people sometimes overlook. You’re going to be in a different income bracket perhaps, and you’ll have different deductions and so on.

Abe Grungold Well, Tom, you know, what I always tell everyone is I don’t mind paying taxes because if I’m paying taxes, I’m financially doing very well. But yes, when you retire as a federal retiree, you should be in a lower income tax bracket. And you need to plan for taxes by diverting your funds where you can avoid paying taxes on money that’s sitting in the bank. You could buy savings bonds you can to other measures to avoid paying taxes. But you do have to pay taxes. You could be in a tax bracket of anywhere from 15% all the way up to 30%. And I honestly don’t mind paying taxes because I know financially I am doing better than, a lot of people out there and I don’t mind paying my taxes.

Tom Temin Of course, you didn’t stay in new Jersey or New York. I mean, you are in Florida, so people like paying taxes, but they like buying. They like paying less than paying more if it’s if they have that option.

Abe Grungold Well, that’s good tax planning on my part. Yeah. I do avoid the state income tax in Florida. And there are a number of states across the U.S. where you do not have to pay state income tax and federal retirees do move to those states, and that it’s just part of tax planning. But unfortunately, a lot of people can’t move away from their families. So, I have many neighbors who live here in Florida. They’ve been here 1 or 2 years, and now they’re moving back up north because they can’t be away from their family. So that is a decision that you have to make. What’s more important, your family and friends or tax planning.

Tom Temin Or whether you can afford a fractional Learjet and go back and forth any time you want.

Abe Grungold That’s true. That is true. But, you know, snowbirds, it’s a difficult situation today because snowbirds have to maintain two properties. And that is a very expensive undertaking in retirement. That is something you have to plan for five years prior to retiring. Can you afford to carry two properties? And it’s a difficult, scenario.

Tom Temin All right. So, the main message then is plan. Plan for health care, plan for tax planning. Plan for gifts and plan for your own income and your own way of life.

Abe Grungold There’s an old expression time. Proper planning prevents poor performance. And if you are planning your retirement income and expenses and the unknowns prior to retirement, you’re going to have, an excellent retirement, you’re going to have very little stress and you’re going to be able to enjoy yourself. And yeah, planning is the key.

The post How to avoid needing to work after retirement first appeared on Federal News Network.

If the 2023 stock market showed anything, it is that you cannot predict the stock market. Instead, you need a strategy you can stick with. To find out what the rear-view mirror is telling investors, the Federal Drive with Tom Temin spoke with Arthur Stein of Arthur Stein Financial.

Interview Transcript: 

Arthur Stein Last year was a very good year, and that was a welcome relief because 2022 was a historically bad year. I mean, not only were stocks down, but bonds were down, you know, double digit declines. And it was just, you know, was very unusual. It was two years in a row of bond declines, which almost never happens. It was the first time the TSP F fund and the stock funds had gone down in the same calendar year. And, you know, just looking at financial markets in general was the first time that anybody can remember maybe since the Great Depression or something like that. So, it’s pretty discouraging for investors. Then last year, there were a lot of ups and downs, but especially the last two, last two months of the year, everything really jumped. And we ended up the C fund was up 26%, the S fund 25%, the I fund 18%. And finally, the bond funds went up 5.6%, which is a good return for bond funds and outperformed the G fund for the first time in a long time. So, we finally saw what, you know investors are looking for. And it really benefited people who obviously stayed invested. So, if you were a TSP participant and became discouraged and either pulled out of the stock and the funds and the F fund, or whose, biweekly investments were not going into those funds, you really lost out. And actually, since the last two months of the year contained all the bond fund gains, all the fund gains, and a very large proportion of all the stock fund gains. You had to be in there for those two months especially.

Tom Temin It seems like people make the mistake of, you know, if they want a swing around their investments of taking what’s going on in the news and somehow overlaying that with what they think the market will do. And there’s been lots of bad news in the last quarter of 2023. The war in the Middle East, Ukraine situation droning on, the political paralysis in the United States. But the market doesn’t necessarily follow those things, which means you’re putting yourself in potential danger if you try to beat the market based on the news.

Arthur Stein Absolutely. And one way to put it, Tom, is the economy is not the stock market, and the stock market is not the economy. And one of the reasons that’s true is that the stock market is what’s called a leading indicator. It tends to go down before the economy starts to decline, and it tends to go up before the economy starts to recover. And so, it makes it very hard to time the market based upon what’s going on now. And it’s one of the reasons why trying to time the market, trying to get in and out of the stock or bond funds based upon what you think is going to happen, has really been a losing proposition.

Tom Temin Right?

Arthur Stein The better strategy is just to decide what allocation you want between stock funds and bond funds, and then invest accordingly. And stick to that allocation.

Tom Temin Yeah, people that have great stories about how they beat the market or time this or that stock sometimes remind me of people who went to Las Vegas and came back, and they never tell you about the losses. They only tell you about how they could do no wrong at the crap tables or something. And you would think that you actually could have a chance of winning at the long term in Las Vegas, which nobody does.

Arthur Stein Yeah. And there’s actually an academic term for this. It’s called recency bias that we tend to think that that whatever has happened recently is going to happen in the future because it’s, you know, what we remember most closely.

Tom Temin We’re speaking with Art Stein, certified financial planner with Arthur Stein Financial in Bethesda, Maryland. And so, looking ahead to 2024, people are, you know, we’re here already and the same wars are going on. The same political paralysis is in the country. And so, you know, the underlying situation hasn’t changed because the calendar turned over. So, what are you advising people with respect to thinking about strategy for the coming year?

Arthur Stein Okay. Well, first of all, we have to remember that there is a lot of good news about the economy. Employment has remained very strong and interest rates have come down a little bit. Inflation has certainly come down. And, you know, economic growth has continued. So, our economy continues to do well. You know, the general forecast for last year was that there would clearly be a recession. I mean, that was just, you know, most people who forecasted, that’s what they were forecasting. And now I’m seeing the same forecast. So, the people will keep forecasting a recession and eventually they’re going to be correct. Maybe not this year. Maybe it’d be ten years from now, but. And then they will be crowned the king or queen of forecasting because they got it right. I think a key thing for people to do in the early part of the year, it’s a great time to review your financial situation and see where you are and whether you are on the right path. So of course, you want to look at your TSP allocation. With all the ups and downs. I mean, is the allocation what you want, and if not, you can rebalance. Employees, of course, want to look at the allocation of their biweekly investments, which, you know, can be very different than their current allocation. And one thing we often recommend is that your bi-weekly investments can be much more aggressive than your current allocation, because that you just have smaller amounts going in every two weeks. And if the markets go down, that’s good for you at that point because you are buying low. Then another question you need to ask yourself is, do you want to be in the Roth TSP, or do you want your money in a Roth IRA? You know the whole Roth question. So current participants, employees have the choice of their contributions going either into the regular TSP or a Roth TSP or the Roth TSP. And the major difference is that the money put in the regular TSP, whatever you put in reduces your taxable income by the same amount for that year. So, if you put in 10,000 in the TSP you’re going to reduce your taxable income $10,000. Now of course when you take that money out it’s fully taxable. With a Roth the money that you put in does not reduce your taxable income. But when you take it out there’s no tax on the withdrawals. So, you’re forgoing a tax deduction on a smaller amount for a tax-free withdrawal on hopefully a much larger amount in the future. One downside of that is that for employees, the reduction in because there’s no tax break on contributions, your taxable income is going to be higher. And you want to make sure that you can afford that. Now you can split up, you know, so that some of your contribution goes to the Roth and some to the regular. But people need to look at that. And there are a lot of advantages to a Roth account. For retirees they can decide to do what’s called a Roth conversion. So, they can take money out of an IRA and put it in a Roth IRA. And but then the amount they transfer is fully taxable at the time. That’s a much more difficult decision and requires a lot of planning. And it’s very whether it’s a good idea or not depends upon one’s personal situation.

Tom Temin Right. So, in deciding, though, Roth or regular TSP 401 K style, you have to understand, or you have to kind of have an anticipation of what your tax rate will be when you withdraw. Presuming that it’s going to be lower. And if you get some great private sector job where your salary triples, when you when you turn, you know, and you’re still working at the age of the minimum withdrawal, then you might have a higher tax than you would have if you’d done the Roth years earlier.

Arthur Stein Absolutely. See the especially with the Roth conversion. You have to look at one how long do you think the money is going to be invested in the Roth? And, you know, if you’re. 85 years old on a Roth conversion makes less sense. And if you’re. A 35-year-old employee. And it also makes a difference how aggressively you’re investing. You know, if all the money’s going in the G fund, it really doesn’t make much of a difference. But if you’re an aggressive investor, you’re putting a lot of money into stocks, into the stock funds C, S and I and you expect those to grow very rapidly. Then it makes more sense. Now those are not the other variables. Another way to look at that is that if you think that your tax rates are going to be lower when you withdraw the money, then just in terms of doing the calculations, a Roth conversion doesn’t make as much sense. But we have to look at the fact that, you know, taxes may be higher in the future because we’re running huge deficits.

Tom Temin All right. So have a plan. Have a strategy. Don’t time the market and some eternal truths you might say.

Arthur Stein Yeah. Another thing to look at is life insurance. And I find many people are under-insured, especially if you are, for instance, married, you have kids, and only one spouse works. You need a lot of life insurance on that spouse. Like ten times salary is not too much. And for a healthy person, they need to compare what it costs for FEGLI, the federal government life insurance, group policy with what they can get in the private sector. And healthy feds are going to probably find that the private sector policies are cheaper and no reason not to get them. I would say that everyone should calculate their net worth every year. It’s value of everything you own, minus your debts. And that should be going up every year. Or if it’s not, it’s a real warning signal. Now, if you’re retired and you’re older. You don’t expect to see that increase in net worth. Perhaps. But it’s still nice if it happens. So, life insurance, calculate net worth. Again, an area where I see a lot of mistakes being made is in homeowner’s and auto insurance, because many people do not have enough liability insurance. And this is if you have an accident, you’re at fault, you get sued. Or if someone’s at your house. And they fall or slip, and they’re seriously injured, and they sue you. How much is your insurance actually going to cover. And what you’re going to find? Is that for most people it’s going to be somewhere around 100 to maybe $500,000. And so, think of it, you know, like you have someone over to your house, your kids have friends over. Some kid falls down the stairs. Can’t walk for the rest of her life. You could easily get sued and lose 1 million or $2 million lawsuit. And your homeowner’s insurance is going to say great we’ll cover that up to $250,000. And the rest of it that’s on you. Well, you don’t want to be in that situation. You want to look at what’s called umbrella liability insurance, which is sold in million-dollar increments. To cover that excess liability and home and auto. And one of the great things about umbrella liability insurance is it’s very cheap. Like I’d say, most people get $1 million covering auto and home of umbrella coverage for about six, $800 a year. Why not have the extra coverage for that? And then finally. Make sure you have emergency funds sufficient to cover you for two, three, four, five, six months of expenses, especially for FEDs who are working. But even for retirees. You know, if the government closes down, we could be in a situation again where salaries are not being paid and it even it would be pretty extreme. But, you know, maybe, annuities are not being paid either. And people should be prepared for that. So, beginning of the year, it’s a great time to review your situation, make some decisions and do that every year.

The post When it comes to your TSP stocks, no use looking backward first appeared on Federal News Network.

• The possibility of repealing Social Security's so-called 'evil twins" is closer than ever to the finish line. There are now 303 House cosponsors on the Social Security Fairness Act. It is the second highest number of cosponsors on any pending bill in all of Congress. If enacted, the legislation would repeal the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). The two provisions reduce, and in some cases eliminate, Social Security benefits for certain federal retirees. The National Active and Retired Federal Employees Association (NARFE) is urging the House Ways and Means committee to mark up the bill and advance it to the full House for a floor vote.
  (Letter to House Ways and Means committee - NARFE)
• More Thrift Savings Plan participants than ever are getting full matching contributions from the government. About 87% of the seven million total TSP participants are contributing at least 5% of their paychecks to their retirement accounts. That means they are also receiving a full 5% match from their employing agency. The better contribution rates are a record high for the TSP. The improvements show progress in the strategic goals for the TSP board. For the past couple of years, the board has been aiming to provide more information to participants to help them make the most informed decisions possible about their retirement savings.
  (Number of TSP participants receiving a full match reaches record high - Federal News Network)
• The Government Accountability Office has determined that agencies need better data to help speed up some important security-clearance decisions. Employees who want to quickly take their security clearance to another federal agency or contractor position face a lot of challenges. That is because security clearance IT systems frequently contain incomplete or inaccurate information and are not always available when needed. GAO also said agencies don’t do a good job communicating with each other and with contractors when a security clearance reciprocity decision is delayed. GAO recommended Defense and intelligence agencies to improve the data and IT systems that underpin the clearance process.
  (Actions needed to improve the transfer of personnel security clearances and other vetting determinations - GAO)
• Short on funding, the Labor Department’s watchdog office is offering buyouts and early retirements to reduce its workforce, as the workload remains challenging. Criminal investigators, auditors, analysts and administrative staff at the department’s inspector general office are eligible to take the incentives, as the office looks to shrink its workforce by about 20% by the end of the fiscal year. The IG’s office is dealing with budget problems, because COVID-19 emergency funding is running out. Congress also gave the watchdog about half the annual budget it asked for last year. The watchdog office is raising concerns it won’t have enough resources to go through 166,000 open unemployment insurance fraud complaints before time runs out. The statue of limitations of some of these pandemic-era cases expires next year.
  (Labor Dept. watchdog offers buyouts, early retirement to cut staffing by 20% - Federal News Network)
• The Defense Department inspector general said the Pentagon continues to spend too much money on noncompliant and outdated financial systems. DoD could potentially save up to $728 million if it gets rid of old systems that it has no plans to modernize, the IG said. In addition, DoD doesn’t plan to retire several systems that will never be compliant with the Federal Financial Management Improvement Act (FFMIA) until fiscal 2031. The DoD inspector general recommended developing a strategy to ensure that all financial management systems either become FFMIA compliant or are replaced promptly. The IG also suggested obtaining justifications from systems owners on why they continue to use a particular system in the Defense Business System Audit Remediation Plan.
  (DoD can save $728 million if it retires old financial systems early - DoD IG)
• Some new software is expected to simplify the decorations approval process for Airmen and Guardians. The Air Force’s new app, called "myDecs Reimagined," will be a one-stop shop for processing the award nominations for service members. It will give Airmen and Guardians a dashboard to track decorations. The app will allow decorations to be edited until they are signed and service members will be able to add notes and comments. Streamlining the decorations approval process is part of a larger initiative to simplify over 100 software applications within the service's human resources systems.
  (Air Force streamlines decorations approval process - U.S. Air Force)
• Federal agencies would have 90 days to respond to the Federal Protective Service’s facility security recommendations, under new legislation in the Senate. Leaders on the Homeland Security and Governmental Affairs Committee introduced the Improving Federal Building Security Act this week. The bill would also require agencies to provide an explanation when they reject security recommendations. The Government Accountability Office previously found agencies ignored 57% of the facility security recommendations issued by the FPS between 2017 and 2021.
  (Peters, Scott introduce bipartisan bill to strengthen federal building security - HSGAC)
• The State Department is trying to get more mid-career professionals to join the Foreign Service. That is the focus of its new Lateral Entry Pilot Program, which employs a new approach for the department to fill in some of its workforce gaps. The Foreign Service is looking to bring in experts in a number of fields, including cyberspace and emerging technology, climate science, and global health. Congress is requiring the department to run the pilot program as part of legislation it passed in 2017.
  (Lateral entry pilot program - State Department)

The post Congressional repeal of Social Security’s ‘evil twins’ nears finish line first appeared on Federal News Network.

Leaders on the Federal Retirement Thrift Investment Board saw 2023 as a relatively successful year of progressing toward long-term strategic goals for the Thrift Savings Plan (TSP).

Perhaps most notably, more TSP participants than ever are now contributing enough to their retirement accounts to receive a full match from the government.

Currently, 86.8% of feds in the Federal Employees Retirement System (FERS), as well as 84.9% of active-duty military members in the Blended Retirement System (BRS) are putting at least 5% of their biweekly paychecks into the TSP. Contributing at least 5% to the TSP is the amount required to receive the maximum 5% matching contribution from an employee’s agency or a military member’s branch of service.

Additionally, the TSP now has $845 billion in total assets — another record-high for the government’s 401(k)-esque retirement savings program for federal employees. And setting yet another record, 36% of the now roughly 7 million total TSP participants have Roth balances.

“These numbers tell me that 7 million current and former federal employees in both civilian and uniformed services have trusted us with $845 billion of their hard-earned money,” Ravi Deo, executive director of the FRTIB, said during a board meeting Tuesday. “It is a trust we must continue to earn.”

Jim Courtney, director of FRTIB’s Office of Communications and Education, has credited the growing number of participants who receive the full matching rate to the FRTIB’s switch in 2020 to auto-enroll participants at a 5% contribution rate, rather than the previous 3%.

The improvements during 2023 also show progress in the goals FRTIB set in its strategic plan for fiscal 2022 through 2026. For the past couple of years, the board has been aiming to provide more information to participants to help them make the most informed decisions possible about their investments and retirement savings.

One of the steps toward the strategic goal is encouraging best practices for savings, FRTIB said, including contributing enough to receive a full matching rate.

“TSP funds, when combined with regular savings and an employer match, can improve retirement security for millions of families with a TSP participant in their ranks,” Deo said. “And the $845 billion [in total assets] does have one big benefit — it allows us to provide our services at an extremely low cost, allowing our participants to keep more of their money.”

Over the last year, the FRTIB also learned of slight changes in participants’ views of their own financial wellness, and their confidence in their goals for retirement savings.

Currently, a little over half of TSP participants are confident they are on track for retirement, according to a survey the FRTIB conducted during June and July 2023.

The last time FRTIB conducted a financial wellness survey was in 2020. In the past couple of years, participants who are still employed but who have separated from public service have become noticeably less confident in their retirement goals.

With the survey now complete, National Association of State Retirement Administrators (NASRA) Executive Director Dana Bilyeu, a TSP board member, turned her attention to what comes next.

“What do we do now that we have this great information from our folks?” Bilyeu said during the board meeting. “What do we do to create action plans in the next year, two years, five years — however we’re going to do it — to address those areas that they feel most vulnerable?”

Tom Brandt, FRTIB’s chief risk officer and director of planning and risk, said the goal is to use the survey and new information when considering any changes, decision-making and communications going forward.

“It’s also used by the training team as they’re looking at what additional training might be appropriate, or perhaps when we want to make some adjustments,” Brandt said. “As we look through this data, we can see some areas where there might be some benefits from making some adjustments, making some enhancements, or perhaps adding some new components to our training and communication elements.”

In addition to improving communications and resources for FERS participants in the TSP, the board is also trying to adjust the way it reaches younger military members who are newly enrolled in BRS.

“They’re young, they’re transient, they’re hard to find,” Brandt said. “They have the hardest time at that age imagining retirement.”

The BRS is a relatively new retirement system, which many military members got access to as part of the fiscal 2016 National Defense Authorization Act. BRS offers a “blend” of two major sources of retirement income: a traditional retirement pension and a TSP account.

In addition to automatic enrollment into the BRS for new military members, TSP ensures that participants are enrolled at the 5% matching rate, and that they’re enrolled in the right lifecycle (L) fund for their age. In September 2023, for the first time since the launch of the BRS program in 2018, the number of BRS participants surpassed the number of participants in the military’s legacy retirement system.

Similar to the FRTIB’s goals for FERS participants, the board tries to communicate and inform BRS enrollees as much as possible.

The Defense Department “has identified 14 milestones in the career of a uniformed services person — touch points where they have to teach them something,” Brandt said. “We make sure that our TSP materials are part of those touch points.”

Deo said while enrollment in the BRS is certainly not the end of military members’ savings toward retirement, it’s a step in the right direction of trying to create good habits early on.

“To the extent that we can take someone who is spending 12 hours a day figuring out how they get really good at something that is completely unrelated to the TSP — whether it’s Army, Navy, Air Force — we stick them in automatically, we give them the match,” Deo said. “If they do nothing, they will reach the age of 22 better off than most 22-year-olds in America … We are — hopefully — pushing the boulder down the hill and we will continue to roll fast.”

The post Number of TSP participants receiving a full match reaches record high first appeared on Federal News Network.