All the latest articles covering the information that you will be craving to devour will be available via this category. From getting to know how indebted our company is to reading about the presidential elections; from knowing about new retirement plans to finding out how security breaches can affect your life; you can browse it all!
For more articles, visit our articles’ section.
TSP Guarantees Rights to Spouses/by Aubrey Lovegrove
Whether married or separated, you should know that the law gives your spouse certain rights regarding your funds’ withdrawal from your TSP. TSP will always put these rights into considerations whenever you want to make withdrawals.
If you are married and you are a FERS participant who wants to make full withdrawal rather than the joint life annuity, your spouse must agree and is entitled to a joint life annuity by the law, with 50 percent level payments, survivor benefit, and no refundable cash. If your spouse does not surrender his/her rights to the annuity, then you cannot make withdrawals through any other method.
If you fail to get your partner’s waiver on the by the required timeframe or date when you should make the withdrawal, the TPS will have to purchase a survivor and joint annuity for the two of you (you and your spouse) with your TSP account.
If you’re a CSRS participant and you are married, TSP has to notify your partner before letting you make withdrawals, informing them on the annuity option you have chosen for withdrawal.
However, there are some cases where exceptions are granted to your spouse’s rights requirements. An example is when their whereabouts are unknown. You need to apply for such exemptions by filling in Form TSP-16 titled as Exception to Spousal Requirements and submit it handy with the required documents to the TSP Service Office as directed on the form.
The requirements for the exceptions are stringent, and you must have proof that the circumstance indeed exists. If it is in a case of separation, prenuptial, restraining or protective agreement, or divorce, you there has to be a further explanation on why you want to apply for exceptional circumstances.
Questions to Ask When Working With a Financial Advisor/by Aubrey Lovegrove
Thrift Savings plans investments are typically easier to comprehend than other retirement planning options so dealing with a financial professional regarding TSP investments is not required, but still highly recommended. Reaching out and working with a financial advisor is recommended in order to give you the opportunity to ask questions that relate to things such as investing as well as other topics.
“Ask Questions” is a very helpful brochure found in the Securities and Exchange Commission website, and it includes many questions to be asked of any financial advisor you are opting to work with. Some example of these types of questions that follow are adapted from the most recent SEC’s brochure.
Regarding financial products:
Are these investments registered with the SEC and in my state securities agency?
Why do you think the investment is appropriate for me?
Are there fees associated with the investment?
What about the risks related to this investment?
About mutual funds:
What is the performance of these funds over a particular period?
What are the major specific risks associated with this fund?
How does the fund perform in comparison to its peers?
What fees are associated with this fund, mainly sales fees?
About the adviser:
How much are they paid?
What are your training, experiences and the certifications you have received?
Has SEC ever disciplined you, a state regulator or other entities such as FINRA?
Can you provide the names and contact information of your major long-term clients?
What is your knowledge about federal retirement and benefits?
How much fees and commission will I pay?
How often will I get statements?
What it the amount of money that I will receive if I sell my investments now?
It is recommended to take notes while talking to the advisor. SEC has come up with a form used to take notes in a conversation with the broker or financial profession. It can be found here.
2019 to Surpass All Records?/by Aubrey Lovegrove
The government shutdown we are currently experiencing officially has become the joint third-longest shutdown in US history (at least on record). A meeting between President Trump, Nancy Pelosi, and Chuck Schumer, to talk about funding for the wall, ended with the former walking out.
Unfortunately for the 800,000 workers expected to miss out on pay as a result, Sarah Sanders, White House press secretary, has already stated on President Trump’s commitment to the wall who even said that he would be willing to continue the government shutdown for months (and years!). For Democrats, they believe the wall to be an extreme measure and one that doesn’t use resources effectively. Instead, they support tunnel detection, drones, and other forms of technology as a boost to border security.
President Trump’s Plan
In total, the President wants to spend $5.6 billion on border security and the wall is just one component of this. Of course, the term ‘wall’ itself has been the subject of much discussion; Trump has changed his definition from a ‘concrete’ wall to a ‘steel fence.’ The Democrat stance hasn’t really changed; they’re happy to discuss the immigration issue, but once the shutdown is over. For Sen. Dick Durbin, the government being shut down is completely unnecessary while talks occur.
Ending on Sunday, we’ve seen many days filled with so-called ‘meetings’ between Vice President Mike Pence, senior congressional aides, and other White House officials. As of yet, however, no deal has been agreed. Earlier in the weekend, a budget justification was requested by the Democrats since this wasn’t included in the 2019 budget – this was not fulfilled.
On Wednesday 9th, the shutdown then became the second-longest (19 days) on record, and there’s still no end in sight. Although a nightmare situation for federal workers, at least there is some relief as Pelosi announced that some funding would be provided by House Democrats and the introduction of certain bills. This is essential to receive tax refunds; without these bills, millions expecting refunds would be let down as those in charge at the IRS may be furloughed.
Of course, this would have to pass through the White House and Republicans first. In addition to this, it’s also a short-term measure that doesn’t resolve the long-term problem. Back in 2013, now the fourth-longest shutdown, the battle was over the Affordable Care Act, but this came to an end after 16 days. For this current shutdown, it all began three days before Christmas when a quarter of all federal departments were forced to close after running out of funding. Since then, 800,000 employees have either been furloughed or have continued working but without pay.
With the longest ever shutdown at 21 days, it looks as though we’re going to exceed this and set all kinds of new records. In 2013, it was the Republicans who eventually conceded defeat and, in later polls, they also took the blame for the shutdown. In 1995/96, spending cuts were the topic of conversation between Republican House Speaker Newt Gingrich and President Clinton – this led to three weeks of inactivity at a governmental level. For this particular shutdown, no blame was apportioned, but the two parties actually came together to agree a seven-year budget plan.
With President Trump walking out of the most recent meeting, this doesn’t exactly inspire hope that an agreement is within touching distance. Unfortunately, it’s the workers who are suffering now, and the consequences of such discussions are getting more severe with each day that passes.
Government Shutdown: How Federal Workers Can Generate Cash/by Aubrey Lovegrove
Currently, the federal government is undergoing a partial shutdown which, as was envisaged at the start, has caused financial concerns for thousands of federal workers. According to recent statistics, around 800,000 federal employees are either expected to work without pay or be furloughed. Of course, bills don’t stop during this time, and the US Office of Personnel Management has already provided federal workers with a sample letter for talking with creditors.
Rather like the US Office of Personnel Management, we’re in the interest of providing much-needed solutions…which is why we have some financial advice for the months ahead!
Firstly, if you’ve never budgeted your spending before, now is the time to start. Are there areas of your life where spending can be reduced for the meantime? If you’re concerned about student loans or your mortgage, always keep the creditor up-to-date; this way, they’re aware of your financial position and can suggest potential solutions.
Look for Help
You aren’t alone, ask your agency if you’re being furloughed and the resources with which they can provide you. Elsewhere, some federal credit unions, such as the Congressional Federal Credit Union, are offering short-term relief loans. For the first 60 days, the Union’s loan comes with a rate of 0%.
Access the Emergency Fund
By all accounts, this situation would be considered an emergency so access your emergency backstop if you’re concerned about your next paycheck. However, we recognize this is something not available to all workers. In fact, 22% of Americans only have enough savings to cover three months of expenses – 23% have none at all.
If you don’t have the recommended three to six months’ worth of expenses in savings, you should be looking for a line of credit (federal credit union) or, alternatively, a 0% interest furlough loan. As mentioned previously, the 0% interest will eventually come to an end so bear this in mind. With the Congressional Federal Credit Union’s loan, the rate increases to 4% after 60 days.
Meanwhile, some will find emergency funding in a home equity line of credit. With the average rate of interest currently at 5.64%, this is significantly lower than the average for credit cards; Bankrate suggests the latter exceeds 17.50%.
If you’re interested in this option, always remember the drawbacks to such a solution. Not only is the interest rate variable, but it also won’t be tax deductible if the money isn’t used for home renovation.
If there’s one piece of advice you take from this guide, we recommend being cautious and not making rash decisions. The following three ‘solutions’ are incredibly risky;
Credit Cards – As we’ve already seen, the interest rates on credit cards can be excessive. Also, the cash advances offered normally come with a charge of up to 5%.
Margin Loans – For those with a brokerage account, you always need a minimum balance and maintaining this can be difficult considering market volatility. If you fall below the minimum, a ‘margin call’ is made by the brokerage firm and they could request a deposit within just 24 hours. Suddenly, you’re looking for additional money to deposit into the account.
Retirement Plan – Finally, you might be tempted to borrow from your retirement plan; in fact, all furloughs expected to last over 30 days enable workers to take loans from a TSP. Not only will the withdrawn money stop working in the market, but you’ve also got to find the same money after the furlough to repay the retirement savings. Without repayments, the loan could be considered permanent, and this means dreaded tax.
How Do You Maximize Your TSP in 2019?/by Aubrey Lovegrove
You have probably heard about the plans to increase the tax-deductible contribution that you can make on elective retirement plans like TSP in 2019 but did not understand what that meant. How will it affect those contributing from their military pay?
What this means is that if you are a part of TSP, the maximum contribution allowed will rise from $ 18,500 to $19,000. However, you can only manage to save that much if you take actions and plan well. If you are making deductions from your military pay, it is up to you to work on making adjustments if you wish to maximize the amount.
How is that done?
To change your contributions plan, you have to go to my myPay website. At the site, you will be asked to specify the percentage of the base pay that you want to contribute to TSP. That is the percentage that will be withheld from each paycheck.
If you play a part in the Blended Retirement System, the Defense Department matches your contributions to up to 5% of your pay. Also, you can decide to contribute 100% of your basic earning, special earning, incentive and bonuses to your TSP account. If you are in the military zone, you will be able to save more. You should note that you cannot contribute your allowances to the account.
How do you know your maximum TSP contribution?
You can only tell DFSA the percentage of your earning to withhold as your contribution. So how do you calculate the proper percentage that will maximize your TSP? Here is a simple illustration on the same.
From 2019, the maximum contribution will be $19,000. Take that amount and divide it by 12 to know your maximum monthly contribution. The result will be about $1,583.33 per month to help you reach your goal. You then divide $1,583.33 by your 2019 salary to know your percentage.
If you are an E-5 with at least six years in service, in this case, your base pay in 2019 will be $3,001.36 per month. This is equivalent to 53% of your base pay every payday. If you are an O-3 with four years service, it will be 28% which is $1,583.33 divided by your base pay of $5,671.52.
It may sound like a lot as it is over half of your base pay in case you are an E-5.
You should not forget about allowances and other special pays that have to be drawn along the base pay. If you are a military member in operation, there are limited places and ways to spend your money. The best decision is to contribute as much as you can to TSP.
Some individuals may opt to withhold nothing and instead put the entire amount. Doing that will only make you lose the DoD 5% match. It is recommended that you contribute 5% of your base pay every payday to help you get the DoD 5 percent match rather than throwing the free money away.
Keeping up with the military pay changes
The pay benefits keep changing, and you must make efforts to ensure that you are up to date with all the updates and your earnings.
Different Ways of Moving Money to Your TPS Account/by Aubrey Lovegrove
Although the separated workers cannot make savings to their TSP, which is only made through payroll deductions, they still have the allowance of rolling money into their TSP accounts and to keep managing it. These rollovers are only done on qualified accounts, and they are not treated as contributions to TSP.
You will be allowed to roll the money into your TSP account even if you have started taking distributions. You should, however, note that not all employer plans and IRAs are qualified for this allowance. If you have a Roth balance in your TPS, you will be allowed to roll the Roth plan from your previous or subsequent employer into the TSP. You are however not allowed to roll a Roth IRA into your TSP balance. That is just how the law demands.
If as a federal worker you have a traditional balance in your TSP account, which most people do, you are permitted to roll pre-tax money from your employer and IRAs plans into your TSP. The money will include everything entailed in a basic deductible IRA, (which means that you could deduct your contributions from your earnings for federal income tax) and the income portions of a non-deductible IRA (where the IRA deductibles are nondeductible).
You can also roll over your pre-tax money into any employer-sponsored plan from a previous or subsequent employer.
Some people tend to wonder if after leaving TSP, they could go back after separation. The answer to this is no. You cannot go back just anyhow. You have to get a job, be re-employed and then create a new TSP account. In such case, you will be categorized as a re-employed annuitant, and you could be allowed or denied the chance to contribute to the TSP. It is best if you look for resources and understand more on the same.
Most individuals wish that they could go back into the TSP after separation. For example, you could opt to roll your account into IRA as you search for better withdrawal choices. Later, TPS comes with more defined and better withdrawal options which promote flexibility for all. At this point, you will want to get back to TPS, and you find it better.
If you are already a retiree who does not wish to return to federal service for re-employment, you will have no chances of getting back. However, if you still have some desires for getting back to the federal services, you could get re-employed and try out your luck to see if you will be granted the chance to contribute to the TSP.
Help for Clients of Certain Banks After Shutdown/by Aubrey Lovegrove
With the government shutdown causing havoc for government workers, there is at least some relief as a number of banks have promised help through consumer assistance programs. With 800,000 workers expected to work with no pay or be furloughed, the battle between President Trump and Congress over the border wall rages on.
For these federal workers, day-to-day survival has become a difficult task with incoming bills and other expenditure requirements. Following from the help offered by the US Office of Personnel Management, Wells Fargo has suggested a reversal of overdraft fees for those affected by the shutdown. Additionally, forbearance and payment assistance programs could be available for loan, mortgage, and credit customers.
Alongside Wells Fargo, Bank of America has offered its own support. Although the extent of the support very much depends on the circumstances of the individual, help could include loan modifications and fee waivers.
For customers of Wells Fargo, Bank of America, Citi, and Chase (JPMorgan Chase & Co), the easiest way to see if you’re eligible for support would be to dial their number. Chase has encouraged all customers to dial a newly-created care line (1-888-356-0023), and Citi has promised assistance for those facing hardship. Even if it’s a simple waiving of fees, this is better than receiving no help at all.
If you’re a federal worker and have some concerns over your financial situation in the coming weeks and months, we have some simple advice for you here today!
Draw a Simple Budget – Whenever the word ‘budget’ is used, people think of spending hours drawing up spreadsheets and using advanced budgeting programs on the internet. In truth, all you have to do is write down your main expenses on a piece of paper. Instantly, it’ll be easy to differentiate between the ‘necessary’ expenses and the ‘luxury’ expenses.
While on this note, there’s nothing wrong with contacting your federal agency and asking them directly what resources they have for help and whether you’re going to be furloughed. Also, many federal credit unions are helping workers in the short-term by providing furlough relief loans.
For anybody with mortgages, student loans, and other debts, don’t bury your head in the sand. Instead, pick up the phone and update them to your financial situation. With many agencies, they offer employees help when contacting landlords and creditors for relief.
Emergency Cash – For many Certified Financial Planners (CFPs), they recommend keeping cash stored somewhere for emergencies; typically this is enough for at least three months of expenditure. Unfortunately, research suggests only 47% of Americans have emergency savings for three months so you might be looking for other sources of cash. If this is the case, 0% interest rates can be found with a line of credit or furlough loan from a federal credit union.
Even though this interest rate is likely to increase after 60 days, it’s much better than a credit card which can charge upwards of 17%. Alternatively, a home equity line of credit (HELOC) can offer interest of 5.64%, but the interest isn’t deductible for taxes because you won’t be using the money for home improvements.
Sources to Avoid – To finish, we should explain the three sources of cash to avoid; credit cards, margin loans, and your retirement plan. While the first two lead to excessive charges and difficulty in maintaining a minimum balance, the latter could be treated as a permanent loan, and therefore bringing tax into the equation, if you can’t afford to reimburse your plan within a certain time limit.
If you belong to one of the banks mentioned above, why not contact them today to see what help they offer?
Pension Envy? You’re Not Alone/by Aubrey Lovegrove
Pension envy refers to an individual wishing they could swap their retirement plan with other employees in the office for one reason or another. Would you say that you have a touch of pension envy? If so, you’re not alone.
Many, if not the majority, of federal employees who are under the old Civil Service Retirement System (CSRS) have envy towards their workmates that are in the Federal Employees Retirement System (FERS). Majority of fed retirees have coverage under CSRS that was replaced in the mid-80s by FERS.
Many FERS employees would move to the CSRS program in a heartbeat if it was possible. Currently, some federal and postal employees are under FERS (that replaced CSRS) in the mid-1980s. Employees in 1987 were offered the choice to remain in CSRS or move to FERS.
The design of FERS was meant to shift more of the retirement to employees away from the government employer. It is done this way in many private companies. Compared to CSRS, FERS workers are offered a reduced life annuity. However, individuals receive and pay for coverage of social security. This allows them to qualify for a government contribution to match up to 5 percent for their Thrift Savings Plan.
Together with saving the government the costs, FERS was designed for its portability. Most of the people signing up for government service jobs do not retire from their work, and that makes FERS portability better.
Retirement Dates: What’s Ideal/by Aubrey Lovegrove
To leave a government job after a long career can feel rewarding in most cases. For those employees that cannot stand their boss, or don’t share anything in common with coworkers, or maybe hate to commute or their jobs it’s a no-brainer; it makes sense to leave as soon as possible. For those that love their jobs, sometimes it’s hard to say goodbye. Either way, picking a retirement date is inevitable.
After deciding on the year you will be retiring, the next issue is to determine the ideal date; December 31 and January 1-3 are common dates for most federal employees.
This is because to pick a late retirement date on December or the beginning of January can mean extra money, lower your tax bill for the next year, and enable you to carry over and benefit from thousands of dollars in cash of annual leave. This is the reason that most people do not go on a vacation within the final year of employment. A particular date can be useful for employees in Federal Employees Retirement System while the other is best for those that will retire under the Civil Service Retirement System.
Availability of a January pay raise this year could be reflected in the majority, if not all, of the annual leave an employee has carried over.
To those hired in the 1980s, they may still be kicking themselves for selecting to opt-in to FERS because CSRS has a more generous annuity. Contrarily, individuals in FERS qualify for and pay into Social Security, and there will be the 5 percent government match in their Thrift Savings Plan (TSP).
Things to be Aware of Regarding Your Thrift Savings Plan/by Aubrey Lovegrove
A majority of articles about retirement planning are focusing on 401(k)s. Nonetheless, military personnel and federal employees save for their retirement in a different type of account referred to as Thrift Savings Plan or the TSP.
In a few ways, the functioning of the TSPs can be similar to that of 401(k)s. Participants make their contributions with their employer opting to match the offer. The limit for annual contribution is $18,500 and an additional $6,000 catch-up contribution to individuals aged 50 or older.
Similar to the majority of 401(k)s, TSP can provide other options that are traditional and Roth. For traditional TSP, participants can make pre-tax contributions and not pay taxes on withdrawals of your retirement money. Opting in for Roth option, contributions made are post-tax income and tax on withdrawals is not paid.
There is a possibility of having at the same time both the traditional and Roth TSP. The red flag that is interesting is prevalent since the government matching contributions can be made through traditional TSP. This means that even though you contribute to a Roth TSP, you can still own the two types of accounts and have some added tax diversification benefits.
How TSPs Performs for Different kind of Employees
There is a slight difference in individuals TSP account, and it depends on whether you are a civilian government employee or in the military:
-Federal Employees Retirement System: Federal civilian employees who started working from January 1, 1984, or after all considered FERS. Those who were hired after the end of July 31, 2010, they are enrolled in a traditional TSP automatically with 3% of their basic salary deducted and deposited in their account unless they decide to change or stop making contributions. Employees in FERS that are hired prior to August 1 2010, the TSP contribution from their agency is 1%, and they can decide to contribute more.
-Civil Service Retirement System (CSRS): This particular retirement system is for federal civilian employees that were employed prior to January 1, 1984. After making a contribution to the agency, they will assist CSRS employees’ in establishing the accounts.
Since 80% of uniformed military members do not serve for 20 years required to becoming eligible for a pension, majority walks away from the service without anything for retirement. Enactment of the Blended Retirement System (BRS) is hoping to change this situation. It enables individuals to choose either pension or TSP or have all of them by choosing the one with the best option depending on the current years they have served.
Any person joining the military now is automatically in the BRS. They will automatically receive 1% of their base pay contributed to TSP, and they can opt to add 4% and receive a total match of 5%. After completing 20 years of service, they will still receive a pension, but it will be reduced.
Individuals with over 12 years in the service, the pension will be a better bet since the 5% match on a TSP will not offset the higher pension they could get if they did not have TSP.
This is the point of having served for 8 to 12 years in the military. This is whether they stayed in the old system or switched to the BRS depending on their situation.
TSP Investment Choices
You can select from five index funds or various lifecycle funds that are composed of a combination of the five index funds. These types have far fewer investment options offered by majority of employers in their 401(k)s and are available to choose from a small number of options that is less confusing.
G Fund: As its name states, the Government Securities Fund are invested in U.S. government securities. This is because of its lower volatility and individuals can earn interest income without fearing to lose their principal investment.
F Fund: Fixed Income Fund investment is made in government, corporate, and bonds that are mortgage-backed with an aim to matching Bloomberg Barclays U.S. Aggregate Bond Index performance. The fund offers risk ranging from low to moderate level.
C Fund: Common Stock Index Fund is matched with S&P 500 that is composed of U.S. companies from medium to large. The fund has a moderate risk level.
S Fund: Small Capitalization Stock Index Fund is less risky since investments are made in small and medium-sized U.S. companies that are not found in the C Fund. The Dow Jones U.S. Completion Total Stock Market Index matches the fund.
I Fund: International Stock Index Fund is matched by the way MSCI EAFE (Europe, Australasia, Far East) index performs and is composed of over 20 developed stocks.
L Fund: L Fund is selected based on individual retirement time horizon, and it is the same as target-date or lifecycle funds with the funds shifting gradually from being aggressive to moderate and conservative as a person is nearing retirement. Having the retirement age in mind, individuals can select a fund that will target the closest year to when they turn to that age.
A huge TSP fund options benefit is that they entail lower expense ratios of around 40 cents for every $1,000 that is invested. This is better since a fraction of a percent rise to expense ratio of the fund will significantly lower person retirement savings in 20 or 30 years.
Not opting for an L Fund, can lead to the creation of the best combination of the other five funds. It is essential to highlight investment options you take care of and choose the one appropriate for you. It is important to be aware that default fund allocations cannot match your particular goals.
Contributions are deposited automatically into the L Fund if an individual enrolled in a TSP on or after September 5, 2015, that is targeted towards the time you turn 62 years. If enrollment were prior to this date, the contributions would be deposited to a G Fund that is not aggressive enough while having a long time horizon.
BRS members and FERS employees receive an automatic contribution of 1% to the base pay of their TSP whether they contribute or not. From this point, you can receive a match on your additional contributions reaching up to 5% of the salary.
After three years, the majority of FERS employees 1% contribution is vested with that of BRS, and a few FERS employees will be after two years. The match on these contributions does not need vesting.
It is important to choose your TSP beneficiaries and keep the list updated in case you bear children or get a divorce.
Beneficiaries will get the money if you have less than $200 or less in your TSP after passing away. Those with above $200, the money stays invested with the establishment of a beneficiary participant account in their name.
Where to Begin?
To individual’s eligible for participating in TSP, it is highly recommended to contribute enough amounts that will get 5% match.
If you qualify to a Roth IRA, you can contribute up to $5,500 per year. Following this, you can keep on taking advantage of the ability to lowering your taxable income through contributing an annual maximum of up to $18,500 to your TSP.
An individual with more money available can invest further by setting up a separate after-tax brokerage account.
Would You Keep CSRS or Switch FERS?/by Aubrey Lovegrove
This question is not tricky, but it becomes a trick question if the government commences an open season that is special to allow a person to change their retirement plan. The question that arises is if that person will pick the old program of Civil Service Retirement System (CSRS) or the new one that replaced it in the 1980s the Federal Employees Retirement System (FERS).
Majority of feds still working up to date are all under the new FERS plan, and most of the individuals under CSRS are the federal retirees.
Asking a FERS employee this question, they usually point out CSRS plan benefits. The plan offers you a considerable starting annuity, and its cost of living adjustments are indexed fully to inflation on an annual basis. CSRS retirees get a 2.8 percent COLA. FERS retirees receive a 2.0 percent under the formula referred to as diet-COLA. This is not a huge difference, but it lowers drastically over time spent in retirement.
Asking the question to a typical CSRS employee or retiree, they will highlight some FERS super benefits. For instance, Social Security covers the employees allowing them to qualify for a government match of 5 percent to their Thrift Savings Plan accounts. Majority of people under FERS take a stride in extra investment and those that do not get it only dream of it.
Employees under CSRS contribute much more than FERS workers to their retirement plan, but those under FERS will be required to pay Social Security.
Workers under FERS get contribution matches in their TSP accounts in amounts that can be quite significant. CSRS retirees do not receive contribution matches.
If you have questions regarding your own retirement plan, make sure to reach out to a trusted financial advisor.
COLA : Keep Prorating Policy in Mind/by Aubrey Lovegrove
COLA for retirees is most likely going to exceed the pay increases of employees that are actively working in the coming January of 2019. Some employees that are eligible for retirement are considering early retirement as they are hoping to benefit from the former rather than the latter.
The CSRS COLA percent is 2.8, and FERS COLA is 2 percent. This is for individuals that are not yet 62, with the exception of disability retirees, retired law enforcement officers, and firefighter or air traffic controllers that are eligible for COLAs. FERS survivor benefits from COLAs payments regardless of their age.
For every month that an individual was not on the retirement roll, their COLAs are lowered by 8.3 percent. Even after going through early retirement, a person that is still employed will get a small part of the upcoming COLA.
An individual is on the retirement roll under FERS the month following their retirement regardless of the day of the month of their retirement. In CSRS, a person will be on the retirement roll at the month of retirement even if they retire few days after the month started, which makes them appear on the roll in the following month. It means that to receive full payment in January, a person who is required to have retired under CSRS should have done it no later than December 3, 2017. For those retiring under FERS, they are eligible for a COLA if they retired no later than November 31, 2017.
Benefits of social security are raised in full COLA no matter how long an individual has been withdrawing their benefits.
Breaking Down the Finer Points of Discontinued Service Retirement/by Aubrey Lovegrove
The only kind of federal retirement that isn’t considered voluntary is Discontinued Service Retirement, or DSR. An employee may become eligible for DSR if they meet the age and length of service requirements and were separated against their will, without the reasoning of “misconduct or delinquency.” The age requirements are either fifty years of age with twenty years of service, or any age with twenty-five years of service.
In either age-related instance, a minimum of five years of that service must be creditable civilian service.
The final decision of if the separation is involuntary is made by The Office of Personnel Management makes. These actions are usually considered to be involuntary:
Abolishment of position;
Lack of funds;
Expiration of incumbent’s term of office
Unacceptable performance (unless due to employee’s misconduct);
Transfer of function outside the commuting area
When no mobility agreement exists, reassignment outside the commuting area
Failure to consistently meet the qualification requirements of the position. This is provided the separation is non-disciplinary and the action is initiated by the agency
Separation at the time of probation as a result of failure to qualify due to performance only, which excludes misconduct
The loss of military membership or the rank that is required to hold the National Guard position, resulting in separation of a National Guard technician
Under title 5, U.S.C., Ch. 43, Subchapter II – The removal from the Senior Executive Service for poor performance.
Notice the distinction between separation due to poor job performance and separation related to misconduct. An employee who is not able to perform their duties is more likely to be eligible for DSR, while one who refuses is not.
The employee is not eligible for DSR if they decline a reasonable offer of a different position, even if an employee’s separation meets the rest of the aforementioned criteria. The reasonability of an offer is generally based upon whether the offered position is within the same agency, commuting area, the same tenure group, and within two grades of the employee’s previous position.
Much like early retirement, Discontinued Service Retirement provides for a two percent per year (1/6 of one percent per month) decrease in a CSRS retiree’s pension for each year (month) they are under the age of fifty-five. If an employee is not a special category employee, a FERS DSR retiree will not face age based decreases to their pension. They will not, however, be eligible to produce a cost-of-living increase until they have reached age sixty-two.
The employee must have received the agency’s decision for removal before the employee is considered eligible for retirement under discontinued service provisions for either unacceptable performance or disability or illness. So, if performance action were taken under 5 CFR 432, it would involve having provided the employee an opportunity to demonstrate acceptable performance during which they were not able to show improvement, followed by a proposal to remove and then notice of decision. The removal action is the cause for the employee’s retirement, so the employing agency may choose not to settle the case and remove the notice of decision to provide a clean record.
Are You Ready for Retirement?/by Aubrey Lovegrove
2018 is first approaching its end, a time in which most employees ponder whether to retire or not. Besides, other employees might consider retirement if offered the opportunity to do just that.
You need to answer the following question to know if you are ready for retirement in case you belong to this category.
Is Retirement the Right Option for You?
In response to this question, it is necessary to conducting and evaluating honestly of your present position. Given that, you need to find answers to the following key questions. First, are you enjoying what you are currently doing? If not, are you ready to quit? If so, what reasons do you have while considering your retirement? It is essential to exercise discretion before making these decisions. Preferably, you need to retire when you are ready. Avoid quitting from employment because of frustrations or disappointments with your employer or colleagues.
How Will You Finance Your Retirement?
Most importantly, assessing how you will meet your financial needs during retirement is essential. Will your retirement annuity, TSP, and any other investments sufficiently meet these needs? If the answer is no, you ought to look for ways to offset these differences. You might have minimal or deficient skills, meaning that you cannot generate some retirement income. You need to ensure that you have enough income to cover for your present and future needs.
What Do You Plan to Accomplish During Retirement?
Increased life expectancies mean that you could spend more time in retirement than you initially expected. Nowadays, most retirees set up some part-time business, engage in volunteer work, or hobbies. Then again, you might have a post-retirement plan. In case you do not have a plan, it’s high time that you develop one especially if you are married. Be aware that having a partner is an added advantage, as compared to being single.
Use the following three tips in making your retirement decision:
1. Identify whether you are ready to retire from your occupation.
2. Evaluate whether you have the necessary finances to cater for your retirement.
3. Determine how you will spend your time during retirement.
Retiring Abroad as a Federal Worker/by Aubrey Lovegrove
In recent years, we’ve seen plenty of people asking whether their federal employee benefits will be impacted negatively after retiring and moving abroad. With this in mind, we want to discuss what actually happens!
First and foremost, we recommend taking advantage of the resources available on this topic from the likes of the State Department, the IRS, and the Social Security Administration. According to the National Active and Retired Federal Employees Association, difficulties with federal retirement benefits should only occur in a handful of countries, and this is a result of Treasury Department sanctions.
Currently, there are retired federal employees all over the world still using the Federal Employee Health Benefits Program. This being said, you should consider health care coverage because, as a general rule, Medicare doesn’t extend beyond the US. As we know in the US, different locations will suit different FEHBP plans, and this continues abroad.
Ultimately, there are various complications that can affect one’s retirement program and this includes the fact that FEHBP plans don’t necessarily cover some things that, in other countries, would be considered acceptable. Instead, the FEHBP classes them as investigational or experimental. As long as you utilize the resources provided, and ask somebody if you’re unsure, you shouldn’t have any major problems.
Federal Employees That are Waiting to Retire Until Later/by Aubrey Lovegrove
Federal employees average retirement age is continuing to rise, and in the 2017 fiscal year, it reached an average of 61.8 years. This was an increase within a half year in 2015 based on a recent report shown by OPM.
The VA and the Army are the two largest agencies with the reported increase that was nearly a full year from 63.3 and 62.3 years respectively. Other agencies that had a notably higher average age excluding some small agencies where retirement skew the numbers are Civil Rights Commission at 68.4, CFTC was 67.5, Federal Maritime Commission at 67.1 years.
Agencies that were on the lower end include the Justice at 56.2, Transportation at 59.7. The two had a large number of employees that were eligible for early retirement based on the special provision, law enforcement officers in the former scenario and air traffic controllers for the latter.
A little difference is present based on gender with an average age of 61.7 years for female and 61.9 for male. There was less difference based on race and ethnicity, but there was a substantial difference in their occupation. Clerical workers were among the latest retirees at 63.3, followed by individuals in professional occupations at 63.1. The earliest being in another category that included those under special retirement provisions at 55.4.
The reason the average age continued to increase was not delved in the report. A common voiced explanation included the desire to continuing with salary earnings for longer. Simultaneously, there was a build up for later retirement benefits and nature of most jobs demanded less physical health improvements that resulted in longer career periods.
Deciding on Retirement Survivor Annuities/by Aubrey Lovegrove
Individuals that are still married during their retirement can give a full survivor annuity for their spouse. This is unless of course a court-ordered divorce settlement has barred them or an agreement is reached with the spouse to receive a lesser amount in writing.
Under CSRS, full survivor annuity is 55 percent of your base annuity, and 50 percent under FERS. A survivor annuity that is reduced under CSRS can be in terms of a percentage of any base you elect or in a specific dollar amount. Selecting a specific dollar amount can be as low as $1 every month. Under FERS, 25 percent is the only possible reduced annuity.
Once you go for retirement, OPM can then determine the amount your annuity is reduced by to pay for the survivor benefit. The reduction is taken from the annuity amount you are entitled to during the moment you retire before deductions, such as taxes, life, and health insurance are taken.
To CSRS retirees, OPM applies a formula to determine the reduction to be made to your annuity. The reduction under CSRS should be 2.5 percent of the first $3,600 you elect, plus another 10 percent of the amount that is above $3,600. This reduction would be less complicated under FERS. For a 50 percent survivor benefit, your annuity would be reduced by 10 percent and 5 percent for a 25 percent benefit.
A majority of retirees elect a full survivor annuity for their spouses, and it is a good reason to elect a small survivor annuity rather than not have one at all. To do so will preserve entitlement of your spouse to have coverage under the Federal Employees Health Benefits program. This is unless your spouse has an entitlement to the coverage in his or her own right as federal employee or retiree. Your surviving spouse would receive an annuity that can allow them to continue with that coverage after your death.
A CSRS survivor that has an annuity that is reduced substantially would be required to pay premiums directly to OPM if they have an elected reduction that is small to cover them. Survivors from FERS are typically less likely to have problems to pay for these premiums under the reduction of 25 percent.
Survivor annuity benefits are raised by cost-of-living-adjustments on an annual basis regardless of the survivor age.
Feds Can Provide Notice of Intentions in Advance/by Aubrey Lovegrove
Illness or injury can cause a medical condition that is catastrophic at any age, potentially leading to the patient losing their ability to make the appropriate decisions. Thanks to “advance directives” you can now give directions for your medical care in advance when such instructions are to be deemed as necessary.
The availability of the documents enhances the chances of individual true wishes being respected. It will translate to avoiding medical costs that are expensive and at long last will be unnecessary. It also reduces legal costs.
Living wills that have such documents it can instruct doctors and hospitals on whether or not life-sustaining procedures will be desired.
There are health care proxies also referred to as health care power of attorney with this document. They will have the name of the agent acting on behalf of the principal if he or she is not able to make medical decisions and there exists a selection between two possible treatments.
In the proxy, language specifically authorizes that your medical information should be released to the agent you have appointed. In other instances, federal law can limit the release of such documents that will make it difficult for your agent to makeinformed decisions.
There is also affidavit for donation of organs and tissues. This is if you wish to give authorization for your organs and body parts to be removed after passing away for experimental purposes or transplant.
The provisions also apply to minors. In this case, a parent or a legal guardian acts on behalf of the children to ensure that advance directives are in place. When a child 18 years old, in most states they will be legal adults and are responsible for their own health care. Children are encouraged by their parents to execute their living wills once they come of age, but it will be up to the next generation to take action.
TSP Funds Exhibit a Major Drop in 2018/by Aubrey Lovegrove
The first week of October was already pretty unfortunate, but the second week turned out to be even worse for Thrift Savings Plan (TSP). The running stocks in 2018 ended with the lowest performances since 2008. In 2008, the C fund ended down approximately 37% while in 2018, it finished down 4.4%.
The Dow Jones Industrial Average dropped to 5.6% in 2018 while the S&P 500 fell to 6.2%. The stock market went through a hard time in the last few months of 2018. Investors were worried about the global economy’s performance and the unraveling central bank’s easy money policies which have been in existence for the last few years.
Comparison Between TSP and Overall Averages
In 2018, the C fund in TSP dropped to 4.41%. December was a low month for the stock funds with the C funds decreasing by 9.03% and the S fund declining by 10.70%. The I fund was not better either as it dropped by 4.82%.
All the TSP stock funds declined in 2018 except for the bond funds. The G funds gave the best results with an increase of 2.91%. The L income increased by up to 0.71% while the F fund which lagged most funds for the year ended up with a vast improvement by an increase of 0.15 for 2018.
The number of funds in the TSP at the end of the November 2018 was more than $561. At the end of 2017, the TSP balance was over $542.
Average TSP balances
By the end of November 2018, the latest data available showed that the average TSP balance for FERS workers was $139,560 and the average balances for Roth were $12,832. By the end of 2017, the average TSP balance for the FERS workers was $138,190, and Roth balances were $11,692.
All the TSP funds decreased in 2018, but that was not something unusual after nine years running of positive returns in the C fund. Hopefully TSP investors succeed in their endeavors to increase their TSP balances and returns this year.
Can We Escape the 2019 Federal Pay Freeze?/by Aubrey Lovegrove
For federal workers, let’s just say life under President Trump has been an interesting one. Perhaps above all else, there are concerns over the plans for a pay freeze which was announced in the 2019 budget nearly a year ago. Since the announcement, the freeze has been described in a number of different ways by various agencies and representatives, but the Federal Managers Association perhaps summed it up best as a ‘direct slap in the face.’
This being said, could we possibly escape the freeze?
In a best-case scenario, the House Democrats deal would succeed, and we would have funding for most agencies as well as an end to the government shutdown. Despite the Department of Homeland Security missing out, the package revealed by the House Speaker designate Nancy Pelosi (D-Calif) contained several bills to fund agencies.
For example, there were bills to increase wages for civilian employees and also reinstate the six appropriation bills that were so close to being finalized in Congress before the government shutdown.
Alternatively, a second package does exist, and it suggests $1.3 billion for border security and DHS funding into February. So far, the proactive approach by House Democrats has been praised, and the American Federation of Government Employees has encouraged representatives to push it through the Senate and then the President.
Call for Action
In recent weeks, the support for an alternative to the pay freeze has been requested by several parties. Not only has the AFGE requested that President Trump show his appreciation for ‘devoted federal employees,’ the National President of NARFE believes the economy will suffer after both a shutdown and a pay freeze. According to Ken Thomas, the work of the government will be undermined, and it will become extremely difficult to hire and retain high-quality employees.
In addition to this, some members have already declared their wish for a standalone legislation that would increase pay for civilian employees this year (even if it came as a provision in an omnibus spending bill). Elsewhere, as long as Congress specifies the action as retroactive, the provision could even offer a retroactive raise for employees.
Unfortunately, the government shutdown has come at a poor time for everyone; Chris Van Hollen and Ben Cardin, Maryland Democratic senators, said that retroactive pay increases were being explored before the shutdown occurred. In a letter to the President, several Democrats came together to suggest work would continue on a ‘bipartisan’ basis if President Trump doesn’t choose to change his stance on the pay freeze (to ensure a pay adjustment is received by federal workers).
Important Start to 2019
Above all else, one of the critical concerns for the government is being able to recruit and retain the best talent. Should the pay freeze come into effect, the aforementioned senators believe the public sector would be seen as the inferior choice compared to the private sector. They believe focus should now be on boosting the federal workforce considering a large portion of the existing workforce will be eligible for retirement within the next five years.
Luckily, there seems to be a bipartisan agreement for civilian employees to receive a 1.9% pay increase. Not only has it been passed by the Senate within an appropriations bill, but House Republicans have also suggested its inclusion in their final conference report for the bill; towards the end of 2018, however, the Democrats noted their skepticism.