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September 26, 2021

Federal Employee Retirement and Benefits News

Category: Articles


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5 Pre-Retirement Blunders Even Retirement-Savvy Investors Make

As you get closer to retirement, you want to make sure that you keep your principal safe, and that you have a good solid income plan in place so that you can comfortably pay your living expenses.

But unfortunately, there are some common blunders that people make that could end up throwing your retirement off track. So, it is important to understand what these mistakes are, and how you can avoid making them. 


5 Biggest Mistakes Made Before Retirement

Even if you have been a good saver all of your life, you still could be making some mistakes as you get closer to retirement. The most common pre-retirement blunders that even retirement savvy investors make include:

  1. Withdrawing money too early from retirement plan(s).
  2. Not discussing – and coordinating – retirement goals with a spouse or partner.
  3. Not maximizing Social Security benefits.
  4. Using the same financial advisor who helped you to grow your assets.
  5. Not planning for the unexpected.


Withdrawing Money Too Early from Retirement Plans

For many people, the money that is in their retirement plan(s) is their most valuable asset. So, it can make sense to consider using these funds for various needs – even if those needs are not related to your retirement income.

But accessing money too early from retirement plans can be costly. One reason for this is because you will likely owe taxes on some – or even all – of your withdrawals. Plus, the amount of tax could be substantial. 

Even though income tax rates are currently considered low, no one knows what these rates will be in the future. We do know, however, that the top federal income tax rate has been more than 70% forty-nine times in the past 107 years. 


Top Federal Income Tax Rates 1913 – 2020





















































































Source: Inside Gov (


In addition to being taxed on your withdrawals, you could also incur an additional 10% “early withdrawal” penalty from the IRS if you do so before you turn age 59 ½. Plus, depending on the type of investments you have, there may also be an early withdrawal penalty.

For instance, if you take money out of most bonds and CDs (certificates of deposit) before the maturity date, you will likely have to face an early withdrawal penalty. Likewise, most annuities will also impose a surrender charge if you withdraw all of the money and “surrender” the contract, or even if you take out more than a certain amount each year. (In many cases, you are allowed to access up to 10% per year penalty-free, even during the surrender period). 

On top of all that, there are other financially harmful effects that could be faced. For instance, if money is withdrawn from an IRA or qualified employer-sponsored retirement account, you will lose any future tax-deferred gains on the money you take out. Over time, this lost return could be substantial.  

So, unless it is a last resort, it is not advisable that you access money from your retirement account(s) until you can at least avoid any of the early withdrawal or surrender penalties that you could face. 


Not Discussing – and Coordinating – Retirement Goals with a Spouse or Partner

If you have a spouse or partner, it is essential that you include him or her in your retirement planning. That way, you can both work towards a similar goal. In some cases, two people may have very different spending and saving habits – which can make planning for short- and long-term financial objectives difficult. 

Working with a retirement income planning professional can help you to develop viable strategies for coordinating your plan. He or she can also assist you in other areas, too, such as the timing of when you retire, along with estimated future expenses, and tax reduction or elimination. 


Not Maximizing Social Security Benefits

While most people are aware that they will have Social Security retirement income in the future, what many do not realize is that there are multiple ways you can access this income – and not maximizing these benefits could end up costing 5- or even 6-figures in lost income over time. 

Qualified Social Security recipients can file for this income as early as age 62. But accessing Social Security any time before your full retirement age will permanently reduce the dollar amount of your benefit.


Social Security Full Retirement Age

Year of Birth

Minimum Retirement Age for Full Benefits

1937 or Before



65 + 2 months


65 + 4 months


65 + 6 months


65 + 8 months


65 + 10 months

1943 to 1954



66 + 2 months


66 + 4 months


66 + 6 months


66 + 8 months


66 + 10 months

1960 or Later


Source: Social Security Administration


The amount of the reduction in Social Security benefits will depend on your age when you file and your full retirement age. So, based on just how early you start receiving Social Security, your benefit could be reduced as much as 30%. 


Cost of Taking Social Security Income Before Your Full Retirement Age


Full Retirement Age 66

Full Retirement Age 67


25% reduction

30% reduction


20% reduction

25% reduction


13.3% reduction

20% reduction


6.7% reduction

13.3% reduction


Full Benefits

6.7% reduction



Full Benefits


On the other hand, if you wait until after your full retirement age to claim Social Security, you could increase your benefits going forward. For instance, each year that you delay can result in an 8% rise in the dollar amount of your income from Social Security. 

So, based on your full retirement age and the time that you file, you could see as much as a 32% increase in the dollar amount. As an example, if your full retirement age for Social Security is 66, and your benefit amount at that time is $2,000 per month, you could increase your benefit to $2,640 by waiting until age 70 to collect. 


If you take benefits at age:

Monthly benefit amount:











(This example uses simple increases of 8% per year, based on an original dollar amount of benefit of $2,000. It does not factor in any cost-of-living-adjustment, or COLA, that the benefit recipient may be eligible for). 


Some other items to consider when you file for Social Security include whether or not your spouse is also eligible, as well as any of the other retirement income streams that you may have. 


Not Planning Ahead for the Unexpected

Although nobody likes to think about it, the reality is that accidents and illnesses can – and do – occur…and when they do, it is best to already have a plan in place. For instance, if you are unable to work for a while due to a disability, you may have to dip into your savings to pay the bills. 

Likewise, the need for long-term care can be extremely costly. On average, the monthly price tag for a semi-private room in a skilled nursing facility can be over $7,500. But, long-term care coverage and a disability insurance plan can help you to keep your savings and assets in place for their intended purpose.

The same holds true with life insurance protection. The funds from a policy can help your survivors move forward, but without having to struggle financially if your income is replaced with these funds. 


Using the Same Financial Advisor Who Helped You to Grow Your Assets

While it may sound strange, using a financial advisor who helped you to grow your savings and investments may not necessarily be the same person you should work with on your retirement income planning.

This is because converting assets into a reliable, ongoing income stream takes a different strategy. So, if you need advice regarding how you can turn your savings into a lifetime retirement income, talking with a specialist in this area of planning is a must.

If you would like more information on how to set up a retirement income stream, as well as on how you can reduce the chances of making a mistake in your overall planning strategy, please feel free to contact us. 


Do You Actually Understand Thrift Saving Plan (TSP) Investments? – Aaron Steele

How well do you understand the TSP fund options? Here’s a quick rundown.

As the world’s largest employer-sponsored savings plan, the Thrift Savings Plan (TSP) plays a role in the retirement plans of every FERS federal employee.

Every year, many people become millionaires simply by making good use of their TSP account.

However, without at least a basic understanding of the TSP funds, it’s extremely difficult to be successful in the TSP over the long term.

This article will quickly bring you up to speed on the essentials of the TSP fund options.


The Fundamentals

The TSP offers only five core fund options. Here they are, along with a brief description of what they invest in:

    • G Fund: Investments in U.S. Treasury Bonds.
    • F Fund: Investments in several types of U.S.-based bonds.
    • C Fund: Investments in 500 of some of the biggest U.S. companies (Follows the S&P 500).
    • S Fund: Investments in most other major U.S. companies (aside from the S&P 500).
    • I Fund: Investments in the major companies in Europe, Australasia, and the Far East.

Note: There’re also L Funds in the TSP, but these are simply a mix of the core five funds. 


The Conservative TSP Funds

The G and F Funds are the most conservative of the five funds because they are less volatile than the others. However, as a trade-off for being more stable, they lack the potential to grow as much as the other funds.

Although the G Fund guarantees that any money invested in it won’t lose value, it has only averaged about a 2% annual return over the last ten years.

The F Fund’s value can fall, but it remains very stable compared to the other funds. Over the last ten years, it has averaged a 3.6% annual return.


The Issue with the G and F Funds

As they near retirement, many people will invest the majority of their TSP assets in a combination of the G and F Funds. While investing a part of your money in conservative funds might be a wise decision, many individuals overdo it.

The G and F Funds are unlikely to lose value, but they’re also unlikely to grow much. This lack of significant growth, as well as inflation, can have a substantial impact on your money over time.

For example, if the prices of goods and services rise every year (inflation) and your investments don’t increase quickly enough to compensate, you may deplete your TSP far faster than you had planned.

This does not suggest that the G and F Funds are bad investments. They are excellent funds that do exactly what they’re supposed to do. However, you’ll want to ensure that you also have investments to help you maintain your usual lifestyle during retirement.


The Aggressive TSP Funds

The C, S, and I Funds are the aggressive TSP funds. 

They are dubbed “aggressive” because they have a far higher probability of sustaining significant growth over time. However, as a result, they can be significantly more volatile than the G and F Funds.

For instance, the C Fund lost more than 35% in 2008 but recovered it all and more in the next several years.

It is advised you not put any money into these funds that you’ll require in the coming years. These funds will perform better in the long run but are less predictable in the short term.


The L Funds

The most crucial thing to remember about the L Funds is that they’re not independent funds. They’re essentially various combinations of the main five funds that we have discussed.

What distinguishes them is that each L Fund is designed to gradually grow more conservative over time. In principle, one might invest in a single L Fund and never have to modify their investment allocation for the remainder of their career.


Final Thoughts

We hope you have a better knowledge of the various TSP funds and what they’re meant to accomplish. Now, you’ll be much more prepared to understand when you read about investing strategies.

What Should You Do if Your Company is Cutting Your 401(k) Match? – Joe Carreno

For the first time, unemployment has reached its peak after the incident of the Wall Street crash in 1929. Up till now, millions of people have lost their jobs, as employers claim that they do not have enough money to pay their employees. Meanwhile, only the positions of the people are not getting affected by the COVID-19. Due to the termination of businesses and the lockdown, employers are also unable to pay for their due part in the 401(k) plan of their employees.

As millions of people have become unemployed, their 401(k) plan has automatically gone down. But, those who are at their jobs also do not know how long they will keep on serving at that position—even being the employee under a specific employer. Still, thousands of people have had their 401(k) plan hit.

In reality, the termination of the 401(k) plan is a big issue, as this is one of the most significant sources of income that avoids employees’ threats of outliving money in their retired life. But now, those who have got their 401(k) plan hit by this pandemic are truly vulnerable to the stressed circumstances of the economy.

Moreover, those employees whose retirement is near or who are thinking of taking early retirement will be the weakest people who will be adversely affected by the interruptions in their 401(k) plan.

So, if any one of you is worried due to these prevailing crises, they must not make themselves suffer, as we here have a plan that can reduce the intensity of this damage. Abiding by the following steps, you will have ample relief regarding your 401(k) plan.

But, before we go into the details of those, we would like to add some words about 401(k) plan.


401(k) Plan:

Most of the employees rely on their savings after retirement, and to avoid any financial uncertainty, employees need to tap into some savings plan that could provide them with the accumulated money at the end of their service. So, there are different saving plans to serve employees in this regard.

Thrift Saving Plans and 401(k) plans are the leading plans that provide most employees with the money to spend their retired life respectably. The only difference between these plans is that the Thrift Savings Plan (TSP) is adaptable for federal employees only, and the employees can adopt the 401(k) plan in the private sector.

In reality, a 401(k) plan is a sponsored plan offered by the employer of the employee. According to the set terms and conditions of the policy, a considerable part of the deposited money comes from the employer. Moreover, this installment is either deposited monthly or yearly, according to the conditions of the plan.

Apart from this, a little part of that deposited money goes from the employee, and this part is cut from the salary of every month. So, this is how a small amount is reduced from the wages of employees every month, and the employer pays the more significant part, and in the end, this money is given back to the employees as their retirement income.

But, according to the prevailing situation, employers are unable to pay that more prominent part of the amount that is to be deposited, and in this way, the 401(k) plans of employees have been affected severely.

However, according to the situation, it is tough for employers to maintain the payments for 401(k) plans of their employees. Don’t worry, we have a plan that will help you out in this harsh environment. Following the given instructions, you will match your 401(k) plan payments, and you can conveniently avoid derailing your retirement savings.


Increase contributions from your end

As employers are less willing to contribute to the 401(k) plans of their employees, the only way out is to get your savings plan terminated. But, if you do so, you will have nothing in your hand to spend your retired life.

So, the best option to cope with this problem is to contribute maximum in your 401(k) plan saving plan. 

For this purpose, you need to reach out to the HR department of your organization that maintains the record of your saving plan. From there, determine how much part was being contributed by your employer in your saving plan and try to provide that amount on your own.

On the other hand, you may also know about the contributions paid by your employer online from your 401(k) plan portal. There remains a summary of your plan, and you may check that amount from there.

Now, you have to bear the burden of full payment of your savings account, and for this purpose, you have to adjust money from the income you have in your hand. At this point, you will have a question about how you will manage to pay that amount on your own. Here are some practices that could facilitate you in paying the full amount of your savings plan.


#1. Use Coupons While Buying Essential Items

 While roaming in the market, you might have seen products along with coupons, and these things are highly recommended in these circumstances because you get something free with the original product. So, by doing this, you can have something extra along with the main thing, and that extra thing will surely reduce your shopping budget, as you will not buy that thing.


#2. Cut Your Discretionary Expenses

If you are habitual of visiting the Appalachians every season, and you watch movies every week, you must reconsider your priorities.

These are discretionary expenses, and even without these expenses, you may comfortably live your life. So, abandoning these expenses, you will save considerable money that you can use for paying the installment of your 401(k) plan’s savings account.

So, these are the steps that you can follow to meet the amount paid by your employer. But, still, if you cannot meet that amount, put the money forward that you accumulated and let your plan go with that amount. But, leaving the plan will never be a good option. 


Consider Changing the Savings Plan

Of course, the employer puts a great amount in your 401(k) plan, and if the employer takes a step back, there is real trouble for the employee. So, in the first step, we concluded that you could meet that amount by sacrificing your non-necessary expenses. But, if you still cannot match your 401(k) plan, you might think about moving your savings plan.

You can move your savings plan from a 401(k) plan to an Individual Retirement Account (IRA). Being a 401(k) plan holder, you can conveniently shift your savings plan.

Therefore, if you cannot meet the match of the 401(k) plan, you can invest that money in the IRA savings plan. Typically, you move your accumulated cash from your 401(k) plan’s account to your newly opened IRA account. Now, it is up to you how much of an investment you want to make in the IRA account based on your earnings.

This savings plan through an IRA will allow you to invest your money in different kinds of stocks, and the interest that you will earn through that investment will keep on accumulating in your IRA savings account. At the end of the term of your service, you will get this collected money as money for your retirement.

So, changing the savings plan from a 401(K) plan to an IRA savings plan seems to be the best solution; otherwise, you might lose your retirement money. And of course, it will not be possible for any of the people to live their retired life without having their retirement payments.


Redraft Your Retirement Plan

So, if you do not match your 401(k) plan, you may change your savings plan. Moving to the IRA will be a good option, as we discussed above. But, the need of the hour is that everyone, either having a 401(k) plan or IRA savings plan, must check the status of their savings plans, as this status will provide them with the bright idea that how much money they will be having at the end of their retirement to spend in their retired life.

Therefore, for this purpose, make a list of expenses that you make at your home every month and estimate the money that you will receive at the end of your service. The estimated retirement money can be seen from the portal whose savings plan you have opted for. So, now you have both estimated expenses and the estimated amount of retirement. And do not forget adding 3% of inflation, which is most likely to rise every year.

Now, compare both of these numbers, and see whether your retirement amount is enough for your estimated expenses or not. If it is sitting right with the expenses, that is good, but if this is not the case, you must take the pain of this thing, and consider how you can eliminate this gap between your expenses and income.

In this situation, you need to explore other options that could provide you with a solution to this problem. For example, if you do not have enough money out of your IRA saving plan, you can go back to your 401(k) plan once your organization restarts that policy. On the other hand, you may also move to the annuities.

However, in short, you have to keep yourself to the safe end by calculating the estimated income and expenses.


Final Words:

In the meantime, when the pandemic of COVID-19 is creating chaos all over the world, a vast number of small businesses have shut down forever, and unemployment is also at its peak. Moreover, those who are at their jobs are also uncertain about the security of their career. Meanwhile, the saving plans of the employers got a tight blow due to the abandonment of businesses due to the lockdowns in the USA.

So, the problem becomes even worse when employees face the situation of termination of their 401(k) savings plan. This is because employers are claiming they do not have enough money to put in the savings plans of their employees. Therefore, this service has been temporarily cut from employers. Now, the only option appears to contribute to your plan on your own; otherwise, you might ruin your investment savings. 

TSP Participants Want Changes in the Program, but Majority Are Satisfied with the Savings Scheme – Ricardo Viader

The Federal Retirement Thrift Investment Board, in conjunction with Gallup, recently conducted a survey with 36,000 participants. The board aims to evaluate consumer satisfaction with the surveys, which help the agency make suitable changes to its plans and tools. 89% of participants said they liked the savings plan. This figure is slightly higher than the 87% of participants who said they liked the TSP in last year’s survey. 

The increase in the satisfaction rate can be attributed to the service members participating in the Blended Retirement System (BRS). Last year, the satisfaction rate amongst service members had been 77%. That figure rose to 88% in this year’s survey. In addition, 33% of service members who liked the BRS said they were “extremely satisfied” with the system. In last year’s survey, only 22% of service members had chosen this option. 

The FRTIB said its biennial and triennial surveys will now be conducted annually.

In January 2021, the Employee Benefit Research Institute (EBRI) had also conducted a survey that revealed that 84% of workers said they liked the TSP. That survey and the more recent one shows that the retirement saving scheme continues to outshine similar plans of the private sector. 

Another notable thing about the survey is that TSP participants who save less money show lower satisfaction with the program, unlike those who save more. 50% of the participants said they contribute over 5% to the TSP. 94% of these participants said they were satisfied with the system. On the other hand, 29% of the participants said their contribution to the plan was 5%. 90% of these participants said they were satisfied with the system. Of the last group, participants who contribute less than 5%, only 86% said they were satisfied. 

For members of the last group, 43% said they didn’t have enough money to contribute above 5%, 31% said they didn’t increase their savings amounts, and 26% said they didn’t see the need to change their savings amounts. The TSP noted that fewer people cited affordability as a reason for low contribution in 2021 the percentage had been 53% in 2017 and 47% in 2020. 

Participants Requested More Changes to the Plan 

In a 2017 survey, the FRTIB found that 62% of participants wanted more flexible withdrawal options. The agency had made a few changes in 2019. Many participants said they liked the changes, but others had clamored for even more flexible options. 

In this year’s survey, 67% of the participants said they were satisfied with the withdrawal options. The percentage is an improvement on the rate of previous years, but withdrawal options remain the weakest point of the TSP. According to the survey, participants preferred recurring payments, partial payments, and life expectancy installments over other TSP withdrawal options. 

The FRTIB also conducted another survey to discover factors that participants consider when buying an annuity or making a withdrawal. The board has not released the survey results but promised to do so in a few months. 

About 40% of the respondents also plan to take money out of the TSP after retirement. These workers said they would get more and better investment choices outside the TSP. They also hope to get higher returns on their investments and strengthen other investments with the funds from the TSP. About 58% of BRS participants, more compared to other participants, said they would transfer funds from their TSP accounts. 

90% of the respondents want to be able to choose the investment funds they use for withdrawals. The board stated that it would consider adding this option when it completes its modernization projects. The projects will allow the agency to enhance its customer services and internal IT mechanisms and offer participants new tools, such as a mobile app. 

Respondents’ Reactions to TSP Fees 

The vast majority of participants, some 60%, said they knew about the TSP’s fees or had an opinion of them. 

Not many respondents were satisfied with TSP fees. 46% of the respondents want to take money out of the TSP in search of better fees. About 60% of the respondents said they didn’t have much knowledge about the TSP fees. The other 40% who claimed they knew actually believed that the scheme has some of the lowest fees compared to similar plans. Three quarters said the TSP fees are low, 22% said the fees are similar to other defined savings plans, and 4% said the TSP fees are high. 

The board said the agency’s expense ratio is between 0.49% to 0.6%. Steve Huber, the board’s enterprise portfolio management chief, said a majority of similarly defined contribution plans have an expense ratio of less than 2.5%. Huber explained that the board was surprised that most of the respondents didn’t know about the TSP fees and that those that knew felt the fees were higher or at the same level with similar plans. The board said it would seek ways to educate participants about the TSP’s lower fees.

TSP Finds that New Workers Are Investing More in Age-Appropriate Lifecycle Funds – Kathy Hollingsworth

The agency that oversees the Thrift Savings Plan (TSP) has noticed a difference in the investment patterns of new workers. The agency found that these workers are moving their default investment fund from the government securities (G Funds) to age-appropriate lifecycle funds (L Funds). The TSP recently analyzed investor behavior and found that younger workers are investing more in L Funds. 

The agency found that workers below the age of 30 invest 63% of their assets in L Funds. Those between 30 and 39 invest around 39% of their assets in the funds. In addition, workers between ages 50 and 59 invest 20% of their assets in the funds. Those between age 60 and 69 invest 17%, and those who are 70 and above invest 13%. 

In its report, the agency stated that the 2015 shift of default investment from the G Fund to age-appropriate L Funds had changed the fund-utilization ratio. It also stipulated that the beliefs about the advantages of utilizing the L Funds also constitute a factor. 

The report also stipulated that workers who have been using the TSP for longer have more investments in the G Fund than newer participants. Those between the age of 60 and 69 have 38% investments in the fund. Workers who are 70 and above have more assets in the G Fund, with an investment of 43%. On the contrary, only 9% of those under 30 and 18% of those between 30 and 39 invest in the fund. 

The report stated that participants focus more of their investments on income-producing assets as they approach retirement. This factor, it stated, could be responsible for the new investment patterns. The agency also stated in its reports that fewer young workers are investing in the G Fund. In 2014, the youngest participants invested 42% of their assets in the G Fund. 

The high percentage had prompted the agency to change the default investment fund from the G Fund. The agency explained that the fund is guaranteed against investment losses but has a lower growth potential than other funds. The change has the intended effects, as shown by the recent survey. Fewer younger workers are investing in G Funds, just as the agency wanted. 

Though participants can change their default investment fund and amount, the agency said many participants never bother to do that.

Only FERS employees were considered for this survey.

Inflation and the Timeframe of Your Retirement – Brad Furges

With the growing inflation, an increasing number of federal employees are doing the figures to determine the financial benefits of working for another year or two. For many, the answer is startling: much more money in retirement for working a few years longer.


According to benefits expert, a Federal Employees Retirement System (FERS) employee earning $80,000 per year may increase their starting annuity by over $30,000 by staying on for another two years. That is a lot of money by any standard. Both now and later.

The FERS plan covers the great majority of still-working public workers. While it doesn’t have as generous civil service benefit as the Civil Service Retirement System (CSRS) scheme it replaced, FERS employees are eligible for Social Security benefits as well as a 5% government match to their Thrift Savings Plan (TSP) accounts. Retiring under the FERS program might be more complicated since it has more moving pieces and various requirements. But it’s well worth it if done right. Working longer for a greater pension allows many FERS retirees to put off accessing their TSP savings for years.

FERS employees must maximize their retirement benefits since FERS retirees are subject to the Cost-of-Living Adjustment (COLA) scheme opposite of their CSRS colleagues. In short, when inflation goes beyond 2% (as it’ll this year), retirees receive inflation catchup that is 1% less than the actual increase in inflation. The January 2022 COLA for CSRS, Social Security, and military retirees, for example, is 6%. Those on the FERS program will receive only 5%. Compounding-in-reverse indicates substantially reduced purchasing power over time.

So, aside from the obvious, what are the disadvantages of working longer than planned? 

According to a benefits expert, the $80,000 per year employee may increase their starting annuity by about $30,000 by working two more years, from age 60 to age 62. At the same time, they can also draw a full salary, qualify for pay increases and within-grade increments, and increase their high-3 year average salary.


A benefits expert came up with this example of how postponing retirement may benefit you a great deal. Of course, there are several more factors to consider. However, money, as in having enough in your golden years, is a major one. You may use this example of an $80K employee working longer to receive more in retirement. Here’s the example:

Length of Service at 60: 19 years

    • 19 x $80,000 x 1% = $15,200 x .90 = $13,680 (10% reduction under the MRA + 10 retirement as employee didn’t have 20 years of service at age 60 to be eligible for an unreduced retirement)

Length of Service at 61: 20 years

    • 20 x $80,000 x 1% = $16,000 + $12,000 = $28,000 (The additional $12,000 is a FERS supplement of $1,000 a month payable to age 62 when retiree can file for SSA and receive an even greater SSA benefit depending on their lifetime of FICA taxed wages)

Length of Service at 62: 21 years

    • 21 x $80,000 x 1.1% = $18,400 + $24,000 = $42,480 (The $24,000 is the SSA benefit payable at age 62 of $2,000 a month from their lifetime of FICA taxed wages)


Of course, the individual who left at 60 may claim their SSA benefit, but the shortfall in their FERS basic retirement income would still be close to $5,000 per year or $600 per month – for life! They would have benefited from adding two more years at their presumably best earning years to their SSA record, as well as two additional years of contributions and growth to their TSP account.

They may withdraw $24,000 per year from their TSP account to get $43,000 per year by deferring SSA claims until age 70 and then taking considerably lower payments from the TSP to fulfill the required minimum distributions at 72.

Definitely one to have in your retirement planning toolbox. Also, don’t forget to forward it to a FERS friend.

TSP Accounts: After the coronavirus has hit the world economy hard, how long is the road to recovery? – Kathy Hollingsworth

The coronavirus has clobbered the world economy and the people depending on it. Some of the geniuses are working hard to find the vaccine and possible solutions for fighting this deadly virus, but until a controllable solution is available, the stock markets around the globe can fall at historical speeds. TSP account holders are amongst those hit worst by this virus and are now looking forward to recovering their losses due to the current market decline. 

Many investors already know that this type of stock market decline is inevitable. The two main questions that bother our minds when such decline begins are: (1) How harsh will this decline be? (2) How long will it stay?

We can never predict when the stock market decline will happen, or why it happens. Sometimes, the U.S. or world equities never see a declining market, and sometimes they experience multiple declines. For example, in the year 1990, the decade started with a minor drop of over 10% that ended in January 1991, after a small period of recession and just after the collaboration of military operations in Iraq as part of Operation Desert Storm. The subsequent downturns were not seen until 1997 and 1998, and they were too short-lived and not very noticeable. Before that era, in 1987, the U.S. market saw the sharpest one-day drop of 22%. This was just three months before the C Fund came into operations. Soon a $250,000 portfolio was invested in the S&P 500 stock index fund (tracked by C Fund) after that; the day dropped to about $193,000 overnight. During that time, the stock markets declined by almost 1/3rd in totality.

Many investors experienced multiple downturns in 2020. Initially, it was seen in 2000 and continued for three years. Historically, this was the longest downturn followed by a historic bubble in stock market values – the S&P 500 and the C Fund returned at least 20% in each of the five prior years in the late 1990s in addition to the 9/11 terrorist attacks and a recession during that period. The next downturn was observed in 2008-9, and it was one of the worst drops in the U.S. and global stock markets since the Great Depression that started in 1929 and continued until the late 1930s.

From the stock market data of those years, we can analyze how an average investor would have dealt with stocks during those major declines and after the drop. Smart investors not only dealt with that traumatic period but also emerged as successful investors after surviving those downturns.

A recently released book titled, “TSP Investing Strategies: Building Wealth While Working for Uncle Sam, Second Edition” is a good one to analyze every 20-, 30-, 35-, and the 40-year period between 1900 and 2019, to find how average investors survived despite a variety of market declines during those timeframes. Each period has its own characteristics, but it is very important to check that investments in broad U.S. stock indexes (just like C and S Funds) dropped considerably at a certain point during every period that was analyzed, and they were also able to recover and raise enough after that decline. It was examined that in every 30-year period examined since 1900, an all-U.S. stock index portfolio (especially C Fund) outperformed the all-government bond portfolio (especially G Fund), by a noticeable margin. One exception was seen in the period from 1903 to 1932 when the market dropped evenly during the depths of the Depression (the stock fund was able to recover in the next couple of years).

If we know this in advance and analyze how an average investor deals with the market decline, and how they emerge as winners, then a person needs to be mentally prepared, if not emotionally, for the stock market drops as they happen.

Let’s understand this process. Start examining the 35-year period from January 1983 to December 2017. This period includes the sharp drop in 1987, the bubble years of the late 1990s, the longest drop in the U.S. stock market over three consecutive years in the early 2000s, and finally, the biggest decline in the U.S. equities of over 50% in 2008 and early 2009.

Let’s analyze this timeframe as a period for a new employee who contributes 5% of an entry-level salary of $30,000. According to government rules, this would make $250 in monthly contributions in the first year. Let’s assume that the annual salary and the regular contributions of this employee increase by 5% a year. Over 35 years, this employee would have a total contribution of about $271,000, and if we assume that half of this contribution matches the government’s, then that means a federal employee with a TSP account would have invested less than $136,000 of his or her money over the 35-year period.

To understand this clearly, four portfolios were tested. The first one is investing all contributions monthly in the S&P 500, representing the C Fund. The second one is investing all contributions monthly in an account that returns the 10-year U.S. Government Bond interest rate (closely equivalent to G Fund). A third one is investing about 65% in the S&P 500 and 35% in the 10-year bond, without any rebalancing. The fourth one is investing in the same percentage but rebalancing at the end of each year back to the same percentage (65-35) to account for portfolio drift over time.

Here, are the results of the four portfolios of investors who invested monthly from January 1983 to December 2017:

The highest value after investing for the 35-period is seen in the case of the C Fund; during each market drop, the fund also suffered a sharp drop in account value as compared to other funds. As compared to the balanced funds, it took a long time to recover after each decline, depending on our definition of “recover.”

If we define “recover” as the time starting from the month of peak value before the drop took place to the month when the value surpassed that same value, then we can say that all-C Fund account portfolios took five years to recover their losses after the 3-year decline of the early 2000s, and the 65-35 C-G Fund took just four years while the 65-35 annually rebalanced account took 3½ years to recover losses.

During 2008-9, the market decline was for a short duration, but it was sharper where all-C Fund account portfolio took three years to recover, the 65-35 account took three years, and the annually rebalanced 65-35 account took only 29 months to recover.

This thing may not be visible in the chart, but we can clearly see that the fastest recovery during this period came after the major market declines in the late-1987 period. All-C Fund account portfolios recovered to their original value in a year, and the other funds recovered faster than C Funds. The main reason was U.S. equities that recovered relatively quickly despite the market drop of about one-third.

Well, we must say that the 10-Year Government Bond account never declined despite the coronavirus market decline. The G Fund is the only fund in the TSP funds that have never dropped. In terms of total returns, the G Fund was the last one to end the 35-year period.

These were just a few examples from the previous 100+ years of the history of U.S. stock and government bond index. Overall speaking, the total value of a portfolio consisting entirely of U.S. stock indexes (such as the C Fund), can recover losses within a year or even three after experiencing a significant decline. The most severe and lengthiest drops may take another year or a maximum of two years to recover. Accounts recover comparatively quicker after short-term drops. This means that an active TSP participant does not need to sell his or her stock funds and continue investing despite the market decline. There are many planned strategies that investors can suggest during downturns. But we must mention here that the buy-and-hold strategy is the best one to stay in the market over long periods of time.

Over a period of time, we will find a solution to recover from the coronavirus, and the U.S. and world markets will recover after ongoing downturns too. By continuous investment in funds during these difficult times, TSP account holders will be able to recover from the losses as well. No doubt, we are going through challenging times, but there is a way to reduce anxiety — at least when it comes to investing — to focus on the long-term goals. We hope and pray for all to stay safe and healthy as the world fights on the coronavirus and struggles to recover globally. 

Will Your Social Security Benefits be Enough During Retirement? – Joe Carreno

Social Security benefits have been designed to help you cater for a portion of your daily expenses after retirement. As soon as you attain the eligible age of 62, you can expect to receive monthly checks from the SSA to replace a portion of the monthly paychecks you have just lost. However, your Social Security checks will not be solely responsible for a comfortable life after retirement. On average, experts say Social Security checks only make up for 40% of pre-retirement incomes.

This figure becomes even more insufficient for people whose pre-retirement incomes were above average and thus used to a different lifestyle. If you are in this category, you are likely used to a more comfortable lifestyle, and your Social Security benefits won’t be worth much to you. To avoid any unpleasant surprises upon retirement, you have to calculate how much your Social Security benefits will be worth and what you can do to cover the difference. 

What Will the Social Security Monthly Checks Be Worth?

On average, Social Security benefits are able to replace only 40% of a retiree’s previous paychecks when they used to work. However, this estimate does not apply to all retirees. It only applies to workers whose earnings fall in the category classified as average. Some workers earn above average and spend more money than the average American household. People also have different standards as to what they describe as a “comfortable lifestyle” after retirement. 

For example, the Bureau of Labor Statistics Consumer Expenditure recently estimated that average households headed by someone who is at least 65 years old spend around $50,220 annually. As a result, the $26,355 that these households receive yearly from the SSA amounts to around 52% of their expenses. 

However, the calculation only considers the common household expenses of senior citizens. It doesn’t consider other factors, such as travel expenses, new hobbies, and other activities that some retirees look to embark on after retirement. The number of Social Security recipients in one household also affects the amount of money they can receive from SSA. Experts say families with multiple recipients have problems covering their expenses compared to homes with single recipients. 

In addition, workers earning below the average use their Social Security paychecks to cover more expenses than others. With all these variables, it is impossible to generalize the worth of Social Security benefits for all categories of workers and retirees. 

How to Estimate the Worth of Social Security Benefits for Your Situation?

Since we have ascertained that generalizing the worth of Social Security benefits for all situations is a fruitless venture, it is time to discuss how you can make a personalized estimate. You can start by creating a personal Social Security account. With this SSA resource, you can calculate an estimate of what you will receive from the SSA. You only need to input your current earnings, possible age of retirement, and other personal details. You can also adjust your income and age of retirement if anything comes up in the future. 

Once you’ve got your estimated monthly benefit, you can multiply it by 12 to get your estimated annual benefit. Then, you can divide that by your estimated annual retirement expenses and multiply that by 100 to figure out what percentage of your income Social Security will cover. 

After putting in the necessary details, the resource will give you a close estimate of your expected monthly Social Security benefits. You can use this sum to come up with the percentage of your annual income that you will get from Social Security. To do this, multiply the monthly estimate by 12 and divide the result by your estimated annual retirement expenses, and then multiply by 100. The result of this simple calculation will help you determine the percentage of your post-retirement expenses that Social Security will cover. 

For example, if our fictional employee’s monthly estimate from the online resource is $2,000, and he/she wishes to spend $50,000 every year after retirement, then the calculation will look like this:

$2000 × 12 = $24,000. 

$24,000 × 100 = 48%. 



Our employee’s Social Security will cater to 48% of their monthly expenses after retirement. It would help if you did your calculation to ascertain what to expect from the SSA after retirement. It is also advisable that you run the calculations at least once in two years because of changes in governmental policies and other factors that can change the figures. 

How Do You Make up the Differences if the Estimate is Lower Than You Expect

There are very slim chances that your Social Security will exceed $25,000 annually. So, it is always important to have a Plan B that will make up the difference. Luckily, we have several options you can call Plab B that will help you live comfortably even after you retire. Your first option is saving money in a 401(k) account if you work with an organization that matches or adds to their workers’ 401(k) contributions. Your 401(k) contribution will be made in pre-tax dollars, so you make the most of every dollar. 

Another option is opening and contributing to an Individual Retirement Account (IRA). IRAs will help you have a little bit more control over your savings and investments. They also come with some tax advantages.

A retirement calculator will help you figure out how much you need to invest in these accounts to cover the difference between your Social Security estimate and your post-retirement expenses. The calculator will request the estimated yearly growth rate of your investments. You should use a 5-6% growth rate. Your investments may do better than that, but it is safer to aim low and have a surplus than aim high and be disappointed later on. 

If you will not be able to meet up with the calculator’s estimates, you may have to make a few changes. You may decide to either work for more years to make up the difference or reduce your post-retirement expenses. You can also look for other sources of income, such as a side job, or seek a better job that would pay you more.

How to Approach Retirement as a Small Business Owner

Running your own business has numerous advantages, including the ability to determine your work schedule and the possibility of raising your income. However, without the benefits usually provided by large employers, saving for retirement is often left up to you.

When you operate a small business, nearly every aspect of it becomes entangled with your personal life. You are your company, and your company is you, says David Burton, a Harness Wealth’s tax consultant.

Having a retirement plan in place and putting money aside early helps guarantees you will have a stable financial cushion when retirement comes.

Let’s look at four tips that’ll help you prepare for your retirement as a small business owner.

  1. Determine your retirement needs

It’s critical to calculate how much money you’ll need to live a comfortable retirement.

Consider your desired retirement age, estimated living costs, and other relevant considerations such as taxes, inflation, and Social Security benefits.

Make sure to account for various possible scenarios, such as selling the firm or ceasing to generate business-related income.

Financial tools, like a retirement calculator, can help you assess your needs. You might also seek the advice of a financial professional who specializes in retirement planning.

In any case, knowing how much money you’ll need early on will help you decide on the best retirement approach to fulfill your financial goals.

  1. Develop an exit plan

You’ll have to decide what to do with your business once you retire. That means having an exit strategy.

The exit plan might be transferring ownership control to someone else, selling the business, or conducting an initial public offering. When deciding about an exit strategy, consider how long you want to remain a part of the business. Also, consider the best way to protect your business assets, and your financial situation and ambitions.

Many business owners don’t always consider their exit strategy or retirement plan regarding their business. According to Kristen Carlisle, Betterment 401(k)’s general manager, it’s never too early to start thinking about it.

In many situations, your business company plan and pitch should include an exit strategy.

  1. Figure out the best retirement savings plan for you

Once you’ve determined your retirement needs and an exit strategy for your business, it’s time to figure out which retirement savings plan is best for you.

Consider the contribution restrictions of the plans, the number of employees you have, and the tax benefits associated with the kind of account you choose.

No matter at what point in your business planning path you’re currently, it’s essential to consider building a retirement plan for yourself. If you have employees, it’s also a good idea to provide them with a retirement benefit to feel financially secure and prepared, Carlisle stated.

The following are the five types of the most popular self-employed retirement plans:

Traditional or Roth IRA

  • An IRA, either traditional or Roth, is a tax-advantaged retirement savings account. With a traditional IRA, you only pay taxes on your money when you withdraw it in retirement. Because taxes are deferred, your investment profits may rise faster. Traditional IRAs can be either deductible or not. A non-deductible IRA doesn’t allow you to deduct your contributions on your tax return, whereas a deductible IRA allows that. A Roth IRA requires you to pay taxes on the money you contribute upfront, enabling your money to grow tax-free, and you pay no taxes when you retire. You or your employees can create and fund their own IRAs. 401(k)s from a former job could also be rolled over into an IRA. 

SEP (Simplified Employee Pension)

  • A SEP IRA is a tax-deductible account for self-employed persons or small business owners, including freelancers. SEPs work similarly to traditional IRAs in that contributions aren’t taxed until withdrawn. This sort of account, which an employer or a self-employed individual may set up, allows the employer to contribute to their employees’ accounts. They provide a more significant contribution maximum, on top of traditional or Roth IRA contributions.

SIMPLE IRA (Savings Investment Match Plan for Employees)

  • Another form of tax-deductible account for self-employed persons or small business owners is a SIMPLE IRA. As opposed to SEP IRAs, employees and not only employers, can contribute to it. SIMPLE IRAs additionally require the employer to make a dollar-for-dollar match of up to 3% of an employee’s salary or a flat 2% of pay, regardless of whether the employee contributes or not.

Solo or Individual 401(k)

  • A solo 401(k) is an individual 401(k) for a self-employed individual or small business owner who doesn’t have any employees. Solo 401(k)s operate similarly to traditional 401(k) plans offered by larger corporations and organizations. They, like IRAs, are available in both traditional and Roth forms. Contributions can be divided equally between the two.

Defined benefit

  • A defined benefit plan, like a pension, is a form of retirement account that the employer sponsors. When you retire, your employer determines a fixed compensation depending on criteria such as your income and time spent at the firm. When retiring, you can choose between a lump-sum payout or a monthly “annuity” payment.
  1. Prioritize retirement planning

It’s all so easy to get caught up in the day-to-day activities of running a small business. But no matter what, Carlisle said, don’t make the mistake of ignoring retirement benefits for yourself or your employees.

Make sure that you’re thinking for your future and the future of your staff, regardless of the size of your business, she said. It doesn’t have to be a big start; you may start small and grow from there, as long as you don’t overlook the benefit.

Learn How to Live a Retirement That’s Worth Saving for

The majority of retirement planning advice focuses on how to save enough money to replace your salary.

However, employment delivers us much more than just money. What we do gives many of us a sense of meaning, achievement, and even identity. Work also provides social ties and a structure in our days.

Losing all of that may be unsettling, which is why experts — including those who have already retired — advise planning ahead of time for how you’ll replace those aspects of employment.

In her book “Flipping a Switch: Your Guide to Happiness and Financial Security in Later Life,” Barbara O’Neill, CFP, claims most adults don’t want a life with total leisure. According to her, they desire a sense of purpose,  filled with meaningful days and healthy relationships, and the freedom to do whatever they want, even if that means to keep working.


A bustle of activity frequently marks retirement as retirees travel, visit relatives, and engage in their favorite activities. However, retirement experts advise picturing a more regular day once you’ve completed some of your bucket list items. From the moment you wake up, how will you spend every hour? With whom would you spend your time? What will you say if someone asks you, “What do you do?”

O’Neill, for instance, doesn’t describe herself as “retired.” Instead, she says that she retired from Rutgers University after 41 years as a professor and is now the owner of Money Talk Financial Planning Seminars and Publications, where she writes and lectures on personal financing.

Indeed, studies suggest that working in retirement is linked with greater happiness. Part-time work may also help with your gradual transition into retirement, according to CFP Shelly-Ann Eweka, senior director of financial planning strategy at a financial company TIAA.

Some individuals get extremely worried about retiring since it seems final, Eweka says. Think about working part-time to have less work and more leisure time so you can ease into it.


Before quitting your job, Eweka suggests taking your retirement vision for a spin. Consider taking a two-week vacation to do something you want to do in retirement, like golfing, traveling, volunteering, or caring for the grandchildren. If you intend to relocate to another area, you should consider renting a property there for a few weeks, if possible. This way, you can find if reality meets or exceeds your expectations. If not, you may change your plans before committing, according to Eweka.

Think about how you’ll replace the social interactions you make at work. People who have strong social connections are usually happier, healthier, and have longer lives. Spending more time with family and friends might help you invest in existing relationships before and after retirement. O’Neill suggests setting aside specific days and times to meet regularly, either in person or by phone or video chat.

However, as you age, you’ll lose connections since people die or move away. According to O’Neill, volunteering, joining community groups, or simply getting to know your neighbors better may help you meet new people. Companionship from a dog, cat, or other pet can also help improve one’s well-being.


Without the framework of employment, some individuals begin to drift, with one day blending into the next. Setting objectives and working toward them can help restore a feeling of purpose and accomplishment, says O’Neill.

O’Neill began her post-Rutgers life with five goals: finishing the book she was working on, remaining active in financial education, cultivating friendships, doing a lot of fun and new things, and staying healthy by walking 10,000 steps daily, consuming nutritious foods, and getting at least seven hours of sleep every night. Taking care of your physical wellbeing is critical, as indicated in 2014 Merrill Lynch research, showing that 81% of retirees named good health as a vital element for a happy retirement.

According to O’Neill, achieving precise, quantifiable objectives can help people reframe their idea of productivity, which is essential to many people’s feeling of self-worth. Goals might also help counter a tendency to procrastinate.

People accustomed to saving and deferred gratification may have difficulty “flipping the switch” to spending and enjoying their life, says O’Neill. However, time, good health, and energy aren’t limitless. Many individuals in her 55+ community in Ocala, Florida, struggled during the pandemic, she says, not just because their plans got canceled but also because they were acutely aware that the clock was ticking.

It wasn’t simply two years gone; it was two good years, adds O’Neill. You can’t know how many of those you have left.

Social Security Benefits Might See the Largest Increase Since 1983

Seniors and disabled workers may see the largest increase in Social Security payments in decades next year due to high current inflation rate.

According to a Bank of America analyst’s report, beneficiaries’ payouts may climb by 5.8% in January 2022, the largest increase since 1983. That’s also a significant rise above the 1.3% boost to the cost-of-living adjustment (COLA) in January 2021, which was insufficient to keep up with this year’s inflation rate.

In June, the Bureau of Labor Statistics’ Consumer Price Index (CPI) – a significant indicator of inflation — increased by 5.4% from the year before, the highest increase since August 2008. Some of the most important price rises were associated with travel, automobiles, and everyday products such as washing machines, bacon, fruit, and milk.

The note stated that this has significant consequences for retirees and disabled workers receiving Social Security and SSI benefits. It implies their finances are being pinched right now but will increase significantly next year.

According to Bank of America, that rise would equate to more than an extra $80 per month in benefits, a fourfold increase over the extra $20 beneficiaries received in monthly benefits this year.

With more Social Security money to be distributed next year — and inflation rate in 2022 anticipated to fall to 2.3% — there will be an “$80 billion or more swing” in net tax benefits, which will help maintain the recovery into next year, as reported by Bank of America’s analysts.

Seniors and the disabled will contribute to keeping the economy hot, said the note.

The Social Security Administration has an ultimate say on benefit increases since it still needs three more months of data before determining the official COLA percentage.

COLA is calculated using CPI data fluctuations, especially those classed as urban wage earners and clerical employees. In October 2020, a comparison was made between the previous year’s third-quarter CPI snapshot and the current year’s third-quarter data; if any, the change in growth determines the adjustment.

Six Situations When Short-Term Life Insurance Is Worth Considering

As COVID-19 shutdowns are easing around the country, many Americans are in a period of transition. If you’re in between jobs, strengthening your health, or seeking to pay off debt, a short-term life insurance policy might protect you until your circumstances improve.

How does short-term life insurance work?

The two types of short-term life insurance are annual renewable term (ART) and temporary life insurance.

An annual renewable term (ART) is a one-year policy that renews annually for a certain number of years. That means you may continue your coverage without having to reapply or take a medical exam. Consider it a one-year contract: When the year is finished, you have the option of keeping or canceling your policy.

What’s the catch? ART can become significantly more expensive over time than the typical life insurance premiums for standard term life policies.

The price rises every year because your risk of death increases, says Elaine Tumicki, corporate VP of insurance product research at LIMRA, a trade group for life insurance.

LIMRA’s 2020 U.S. Retail Life Insurance Sales Survey showed that just 6% of term life insurance plans sold in 2020 were ART.

Some insurers offer temporary life insurance, too, to applicants who are awaiting approval for a traditional policy. Regular term or permanent life insurance can take 4 to 8 weeks to get, and the temporary policy allows you to avoid being without coverage.

When should you buy short-term life insurance?

  1. You are awaiting approval for a long-term life insurance policy.

In case your insurer offers temporary life insurance while applying for a traditional policy, you should accept it. When you pay your first premium, your insurance enters into force and generally offers the same level of coverage as the primary policy you’re applying for.

  1. You need to cover the short-term debt.

That might be a credit card debt, a personal loan, or a mortgage if you’re near to paying it off. A short-term insurance policy can provide coverage while you’re still in debt, preventing your family from having to shoulder that burden if you die early.

Annual renewable term (ART) life insurance works for new business owners as well. According to John Graves, licensed life insurance agent and founder of G&H Financial Group, if you borrowed money to establish that handicraft business, food truck, or new software company to repay the loan with earnings in the first few years, then ART might be an excellent way to shield your family from that debt if something were to happen to you.

  1. You’re switching jobs.

LIMRA’s 2021 Insurance Barometer Study found that over half of working Americans obtain life insurance through their jobs. If you need to bridge a coverage gap before returning to work or starting new employment, ART insurance may help. You can terminate your short-term coverage once you can enroll in group life insurance through your new job.

  1. You have a dangerous temporary job.

If you work in a dangerous environment every day, insurers may charge you a higher rate. If you’re going to be working a risky job (like mining or logging) for a limited time only, then you could be better off with a short-term policy. After you’ve completed that task, you may search around for lower premiums.

  1. You’re working on your health or changing your lifestyle.

According to Graves, a short-term policy can protect your family while you’re trying to lose some weight, recover from an illness, stop smoking, or otherwise improve your health.

Once you’ve gotten over the hump, you can apply for traditional insurance and possibly get a cheaper premium.

  1. You have another situation where temporary life insurance is appropriate.

Perhaps you require life insurance as part of a divorce settlement, or your rates for standard insurance are expensive because you’re on probation or have been diagnosed with gestational diabetes during pregnancy. In these situations, short-term coverage may be sufficient to meet your needs without tying you to longer-term insurance.

Alternatives to short-term life insurance

Life insurance is designed to be flexible, which is why there’re so many alternatives available. Consider traditional insurance where short-term coverage is insufficient. Term life insurance, which lasts for a defined number of years, is typically affordable and enough for most families. However, consider a permanent policy, like whole life or universal life insurance, for lifelong coverage.

Tumicki says it’s really up to the individual. Whatever their life insurance need is, they must match it to the policy that meets it.

How You Can Avoid Taxes on Your Social Security Benefits

Millions of seniors now receive Social Security benefits, and for some of them, it is their sole source of income. However, many seniors are surprised when they find that Social Security benefits (like other forms of income) are taxed. And that alone may be a significant financial blow.

The good news is that a single critical choice on your side might help you avoid having your benefits taxed.

Be strategic when choosing your retirement home.

Whether or not you pay Social Security taxes at the federal level is determined by your overall income. If those benefits represent your only source of income, you’ll usually be exempt from taxes; however, taxes may be involved if you have several income sources.

You must compute your provisional income to check if you’ll be taxed on your Social Security benefits. That includes your non-Social Security earnings plus half of your yearly benefit payment. Benefits are taxed whenever the sum reaches $25,000 for single taxpayers and $32,000 for married filers.

However, it’s not the only element that’ll decide whether or not your benefits are taxed. Some states levy their own Social Security taxes, and if you relocate to one of them, you may lose even more of your money. On the other hand, if you opt to retire in a state that doesn’t tax benefits, you’ll be able to retain more of your benefits for yourself.

Which states tax Social Security benefits?

The number of states that tax Social Security is less than the number of states that don’t. That tax is now levied in only 13 states:

  1. Colorado
  2. Connecticut
  3. Kansas
  4. Minnesota
  5. Missouri
  6. Montana
  7. Nebraska
  8. New Mexico
  9. North Dakota
  10. Rhode Island
  11. Utah
  12. Vermont
  13. West Virginia

However, West Virginia is poised to stop taxing benefits for low and moderate earnings next year, giving you even more alternatives if you’re determined to move to a state that doesn’t levy that tax.

Of course, several of the states mentioned above provide additional benefits to retirees, such as moderately-priced housing, outdoor attractions, and healthcare access. As a result, how some states approach Social Security isn’t the only thing to consider when deciding where to live in retirement. However, knowing which states tax benefits might help you narrow down your options.

Additionally, if your income isn’t very high, several of the states listed above will exclude you from paying Social Security taxes. If you don’t anticipate having a lot of retirement income other than Social Security, you might avoid paying taxes on those benefits anyway.

Social Security is a significant income source for seniors. It’s also a source of income you’ve earned throughout many years of hard labor and paying taxes on your earnings. If you wish to avoid losing a portion of your benefits, you should consider moving to a state that does not tax them, especially if there’re other compelling reasons to do so.

What to do When the Stock Market Plunges?

For a long time, investors in the TSP stock index funds (C, S, and I) have done exceptionally well.

Since the Great Recession ended in mid-2009, the market has had its ups and downs (but largely ups). Most people didn’t see it coming, and even fewer realized how or when it would end. Till after the fact, when investing your retirement nest fund isn’t really helpful.

In June 2021, the market reached an all-time high. Since then, there have been ups and downs as investors await what the FED will do (if anything) and what the newest COVID mutation will do to the mainly unvaccinated in regions like Africa, India, or more locally, in Missouri and Los Angeles County.

Most of the TSPs’ 98,000 millionaires reached a seven-figure level by investing for the long term (an average of 29 years), mainly in the C, S, and I Funds. Also, by remaining in stocks and purchasing through difficult times, such as the Great Recession. Here’s a complete breakdown of the TSPs’ composition as of June 30.

However, there’s always something, right? So, let’s look at a text by financial planner Arthur Stein:

TSP Stock Funds Rose To All-Time Highs In 2021’s First Half

The TSP stock funds’ (C, S, and I) share prices reached new highs in the second quarter, owing to a significant drop in COVID-19 cases in the United States, increased vaccinations, economic re-openings, low-interest rates (as a result of the Federal Reserve’s Quantitative Easing (QE)), and fiscal stimulus sparking an economic surge. On June 30, C Fund share prices reached an all-time high. The S and I Funds had reached their high a few days earlier.

Total Return for the period is calculated using the YTD and 1-year returns. Compound Annual Returns are computed for one, three, five, ten, and fifteen years. This is solely for illustration purposes. An investment in an index cannot be made directly. Past performance isn’t a guarantee of future results. All investments have several risks, including capital loss and volatility. Returns are rounded to the nearest tenth, and they include all income reinvestment but don’t include taxes. Bond funds didn’t fare as well. The F Fund fell 1.5% in the first six months of 2021, while the G Fund rose only 0.6%. Bond fund returns were lower than the inflation rate.

Market Outlook

There are several risks associated with current TSP Fund values, including:

  • A COVID reemergence,
  • Modifications to Federal Reserve monetary policy (QE),
  • Reductions in government stimulus (fiscal policy),
  • Wars, revolutions, terrorist attacks, natural catastrophes, and so on.

These and other dangers have prompted some analysts to forecast severe market losses in the future.

That’s hardly much of a prediction, is it? Market losses are unavoidable at some point. Falling markets (Bear Markets) eventually follow rising markets (Bull Markets). Unfortunately, we don’t know (and analysts, economists, and market experts cannot predict) the timing, length, or amplitude of future Bear and Bull Markets.

As a result, stock and bond market forecasts are neither trustworthy nor valuable. We all know that the stock market has gone through Bull and Bear Market cycles in the past. We’re now experiencing a Bull Market. It will eventually turn into a Bear Market. But when will it happen?

Since significant market drops are forecasted to happen at some point, TSP investors should plan what they’ll do if the declines occur.

Bills to keep an eye on: TSP alterations, retirement help for former seasonal federal employees, and others

The Thrift Savings Plan (TSP) is once again in the sights of Congress.

Sen. Marco Rubio (R-FL) proposed a new bill to give the TSP’s board new fiduciary duties.

The Federal Retirement Thrift Investment Board (FRTIB) is mandated by law to operate only in the fiduciary interests of its participants. This bill is known as the TSP Fiduciary Security Act. It would effectively require the TSP to consider potential national security implications when making decisions concerning its funds and participants’ alternatives.

The board has a few concerns about the legislation.

It contradicts the current responsibility to operate purely in the interests of TSP participants and changes the core idea of fiduciary duty, Kim Weaver, FRTIB’s executive director of external relations, said at the TSP’s monthly board meeting last week. It’s worth noting that it doesn’t alter the otherwise identical fiduciary duty that applies to any other 401(k) which millions of Americans use to save for retirement.

Simply put, the bill doesn’t require any other 401(k) plan to modify the way it manages its holdings.

Investments in Chinese firms or others on the Commerce Department’s Entity List are deemed a “breach of fiduciary duty” under Rubio’s proposal. Together with the secretaries of Defense, Homeland Security, Labor, and the Treasury, the attorney general would draft new regulations outlining how the TSP should comply with the new national security matters.

Rubio is one of the several senators who has shown serious concerns about the TSP and its intentions to convert the international fund to a new, China-inclusive benchmark announced last year. As a result of the move, TSP participants would have gained access to big, mid, and small-cap stocks from over 6,000 firms in 22 developed and 26 emerging economies. According to an independent consultant, it would have increased the expected returns for TSP participants.

The previous year’s plans to implement the China-inclusive index have been put on hold indefinitely due to opposition from the Trump administration and a bipartisan senators group, including Rubio.

He has introduced numerous bills aimed at preventing the TSP from adopting a China-inclusive index.

Aside from the TSP legislation, here are three other bills to watch in the coming months.

An attempt to update the ‘Plum Book’

For a second time, House Democrats are attempting to cast more light on the political appointees who hold critical positions in the executive branch.

The Periodically Listing Updates to Management (PLUM) Act was advanced last week by the House Oversight and Reform Committee. The legislation combines two bills, one from panel chairperson Carolyn Maloney (D-N.Y.) and another from Rep. Alexandria Ocasio-Cortez (D-N.Y.).

The legislation as a whole would require the Office of Personnel Management to publish and keep an active register of political appointees online.

It would also require OPM to collaborate with the White House Office of Presidential Personnel to summarize demographic data for those appointees.

Ocasio-Cortez said in a statement that our political appointees must reflect America to address the needs of the American people. The Political Appointments Inclusion and Diversity Act will shed light on who is and is not at the table in our government. By publicly reporting on the appointees’ demographics, we’ll identify where efforts need to be enhanced to ensure that our policymakers are not just talented but diverse and representative of everyone in our country.

The Office of Personnel Management currently collaborates with the House and Senate oversight committees to publish a list of political appointees, called the “Plum Book,” every four years. The data is only current when OPM and the committees prepare and publish the list; it isn’t a real-time record of when appointees come and depart or move into new posts.

Last year, Maloney and Reps. Gerry Connolly (D-VA) and John Sarbanes (D-Md.) proposed the PLUM Act. Senator Tom Carper (D-Del.) proposed identical legislation in the 116th Congress, and the bill passed both chambers’ oversight committees last year.

Former temporary federal employees are eligible for a retirement ‘buyback’

Former temporary and seasonal employees might get another opportunity to make retirement “catch-up” contributions under a bill presented last week by Reps. Derek Kilmer (D-Wash.) and Tom Cole (R-Okla.).

Currently, seasonal and temporary federal employees don’t have the option of making retirement contributions, even though many temporary workers eventually transition to permanent employment.

If they do become permanent employees, they’ll be unable to make “catch-up” contributions that would let them retire after at least 30 years of service, and their time as temporary employees would not count toward their federal pensions.

As a result, Kilmer and Cole have found that former seasonal and temporary employees work longer hours than their colleagues to receive the same retirement benefits. Their bill, the Federal Retirement Fairness Act, would allow former seasonal and temporary workers to make interest-bearing contributions for their service to their annuities.

Kilmer and Cole presented this legislation for the first time in 2019.

The National Active and Retired Federal Employees (NARFE) Association, the Federal Managers Association, and many others have endorsed the bill.

Seasonal and temporary federal employees who respond to the call of duty deserve the same degree of consideration as permanent employees, said Randy Erwin, national president of the National Federation of Federal Personnel. He represents some seasonal park rangers and U.S. Forest Service employees. It is unacceptable to overlook temporary or seasonal labor after individuals become permanent employees, considering that many of these people risk their lives and health for these jobs, as thousands of wildland firefighters do every year. To not count that time on the job is like creating a second class of employees. They deserve to have the time they’ve put in to be counted toward retirement.

Another effort at organizational reform at DHS

Democrats on the House Homeland Security Committee have consolidated a broad list of DHS priorities into a single bill.

The DHS Reform Act, formally presented last week by committee Chairman Bennie Thompson (D-Miss.), is 263 pages long and addresses a wide range of challenges that the department has encountered in recent years. It would:

  • Set restrictions and more criteria about who can serve in “acting” roles at the department.
  • Establish a new assistant secretary post in charge of all DHS law enforcement subcomponents.
  • Appoint the undersecretary for management for a five-year tenure.
  • Arrange the Joint Requirements Council to examine the department’s acquisition and technical needs.
  • Create an annual employee award program and codify a DHS steering committee on employee engagement.

Additionally, the bill would designate the DHS undersecretary for management as the department’s chief acquisition officer. The bill doesn’t consolidate congressional jurisdiction over DHS, as Thompson has sought in recent years.

The department is now required to report to more than 90 congressional committees and subcommittees, which strains the DHS and frustrates politicians and lawmakers who wish to reauthorize the agency.

These three strategies will help you buy annuities for your retirement income at low rates

When rates are low, retirees need to think deeply before purchasing income annuities for their retirement. This is because nobody will like to see a rise in payouts within the next one or two years, while their payouts have been at a lower level. 

When you purchase a lifetime annuity, you will receive a constant check for life after paying a sum of money to your insurer. Buying an income annuity is like purchasing a pension for yourself. The problem with lifetime annuity is that the rates have decreased sharply over time. For example, in 2008, a 70-year-old retiree buying a $100,000 annuity will receive approximately $800 every month. Still, in 2021, an annuity of $100,000 will give the 70-year-old man $565 every month. This shows a 28% monthly payout reduction.

There is no do-over in life annuities. Suppose you purchase a basic annuity this year and payout increases in the next two years; your monthly payments will be lowered for the rest of your life.

Suppose you want to enjoy the guaranteed payment of a lifetime annuity. You are worried about the change in payout, which can lower your monthly payment. In that case, you need to know some strategies before buying a lifetime annuity. Suppose you are a starter; you can avoid these lower payouts when payment is low by spreading your purchases over a longer period. When you do this, you are said to ladder your annuities. This strategy will help you buy in over a period, and you won’t regret purchasing a lifetime income annuity.

If you want to be saved from low rates and don’t want to use this strategy, you can purchase a  deferred annuity. Although, this will not give you any income in the long run. However, you can wait for your payout to rise, especially if you don’t plan to take your income until you are 70 years old. Some insurers may give a dividend in addition to the guaranteed payout when you go for their income annuities. You must note that this dividend will rise as the rate increases.

Make sure to maximize your social security benefits before you buy a private annuity. You can maximize your benefits by delaying your check for as long as possible. This is because social security check increases by 8% for every year you delay it after the full retirement age. 

It would help if you had an annuity since your social security benefits will not cover all your essential needs. Based on the impact of low rates on annuity payouts, it is best to buy an annuity if you are in a low-rate environment. Many people don’t want to buy an annuity when the rate is low, but experts say buying an annuity when rates are low is the best option.

Before buying a lifetime income annuity, here are three strategies you should consider:

Suppose you want to use $500,000 to buy annuities from your portfolio; you can buy $100,000 worth of annuities yearly for five years. So that if rates increase in a year or two, your income stream will still be at a higher payout level. 

The major thing to consider is where you keep the money you plan or set aside to purchase annuities in the future. Let’s assume that you keep it in long-term bonds and the rate increases; you will have fewer funds because your bond value will now be lower. You may not be financially buoyant even when there is a rise in annuity payouts. You should save your money in shorter-term funds, such as money market funds. But with this shorter-term instrument, your money may not increase significantly over time.


Suppose you want to use $500,000 to buy annuities from your portfolio; you can buy $100,000 worth of annuities yearly for five years. So that if rates increase in a year or two, your income stream will still be at a higher payout level. 

The major thing to consider is where you keep the money you plan or set aside to purchase annuities in the future. Let’s assume that you keep it in long-term bonds and the rate increases; you will have fewer funds because your bond value will now be lower. You may not be financially buoyant even when there is a rise in annuity payouts. You should save your money in shorter-term funds, such as money market funds. But with this shorter-term instrument, your money may not increase significantly over time.


Suppose you don’t need the money now; waiting may be the best option for you. The longer you delay your monthly annuity check, the higher your monthly payment. According to Cannex, a Toronto firm tracking United States annuities, a 65-year-old woman purchasing a $100,000 immediate annuity will likely get a $450 monthly payment. Suppose she purchases the annuity now and delays the payouts for five consecutive years; she will receive $590 as a monthly payout, giving her a 31 percent rise in the payout. If she delays the payments for ten years, she will receive about $860 every month. 

Just like deferring your social security benefits, delaying your annuity is good if you think that you will live long. Suppose you are purchasing an annuity for your spouse with survivor benefits; you need to consider your spouse’s life expectancy.

With deferred annuities, retirees have more flexibility with their income. Let’s say you have a much-deferred income and you need money. In that case, you can start receiving another monthly check by turning on another deferred annuity.

Dividend annuities

Some companies pay dividends in addition to their guaranteed payouts. Although, these dividends may not be guaranteed. You can use this dividend to increase your future monthly payments or take it as cash together with your guaranteed payment. The majority of buyers are delaying their dividend payments in order to boost their payouts.

If you purchase a dividend-paying annuity, your annual payout will increase every year you delay the check, but this increase may occur slowly. Suppose you buy a traditional annuity; your payouts will never increase no matter how long you delay the payment. 

When you purchase a dividend-paying annuity, a portion of the dividend will be used to increase the volume of your annuity. After eight years, you will get an annuity that is more than the standard annuity by about $441, and this amount continues to rise.

Unlike standard income annuity, a dividend-paying annuity offers some protection against inflation. When there is inflation, the annual payouts will increase faster because the insurers will produce more enormous dividends due to the inflation.

Follow These 5 Steps to Reach $2 Million in Retirement Savings With an $80,000 Annual Salary

Follow These 5 Steps to Reach $2 Million in Retirement Savings With an $80,000 Annual Salary

A nest egg of that amount may be within your grasp with enough time and a good strategy.

The 4 percent Rule is one of the most tried-and-true retirement planning recommendations. Simply put, the notion is that you withdraw 4% of your portfolio’s starting value in the first year of retirement. In succeeding years, you repeat the process, increasing the number to account for inflation. Following that method with a well-diversified portfolio increases the likelihood that your portfolio will last at least as long as your retirement.

With that as a guideline, 4% of a $2 million savings equals $80,000. That implies a $2 million portfolio should be able to entirely replace an $80,000 wage in a very sustainable manner over the course of a typical retirement. As a result, it’s a natural objective for someone earning $80,000 per year to aspire towards.

Indeed, with that amount of savings, once you count in your Social Security income, you’ll probably be taking home more in retirement than when you were working. Like many seniors, you too might be concerned that growing healthcare expenses will ruin your retirement plans. So, that extra cushion might be the deciding factor that’ll allow you to enjoy the golden years you’ve worked so hard for.

First, cut your costs

It’s feasible for someone earning $80,000 per year to accumulate a $2 million nest egg. Still, you must regularly invest over a lengthy period of time. And the better you manage your day-to-day expenses, the easier it’ll be to save money for investing.

A straightforward method to help on this front is to start by monitoring every dollar you spend for a few months. After that, go back through and designate each cost as red, yellow, or green.

Red category expenses are ones you don’t need or want to retain. These are oblivious purchases, automatically repeating charges for services you don’t use anymore, and similar. Green expenses are those that are both necessary and unavoidable, such as your mortgage payment or a recently signed lease. Yellow expenses are in the center. They are valuable enough so that you prefer not to remove them entirely. Still, you may have room and desire there to reduce your spending.

When it comes to red expenses, the decision should be simple: stop squandering money on these products. They aren’t essential nor necessary to you, and getting rid of them will allow you to put that money to better use. You may retain the green category as it is unless those costs alone put your budget overstretch. If you can’t make ends meet on the essentials while also putting money down for the future, you might want to consider more fundamental changes.

You’ll have some work to do with your yellow expenses. Sift through these to determine if there’re any methods to cut your spending while retaining the advantages you most want from them. Could you use a programmable thermostat to help you save money on utility bills? Could you make your own coffee or use the free workplace coffee instead of stopping at the coffee shop every day? Could you brown-bag your lunch a couple of days a week instead of eating out every day? Every penny you save is money you can put toward your long-term goals.

Second, pay back most of your debt

Once you’ve freed up some cash flow, your next move should be to tackle your debts. The debt avalanche approach is the most effective way to accomplish this. To use it, arrange your debts from the greatest to the lowest interest rate. Make the minimum payment on all debts except the one with the highest interest rate each month. Pay as much as you can each month on the loan with the highest interest rate until it is entirely paid off.

After you’ve completed the quick payback process with one loan, repeat the same with your next highest interest debt. Continue doing so until you have paid off the majority of your debts. You don’t have to be entirely debt-free to invest, and you certainly don’t want to put money into retirement accounts before you’ve paid off your home. However, any debts you maintain should have low-interest rates, reasonable monthly payments, and provide a clear purpose for your future. The mortgage is a kind of debt that fulfills all of these.

Why limit yourself to debt with low-interest rates? Because otherwise, you are effectively borrowing at a high interest rate to invest in assets that are expected to produce lower returns on average. You should make reasonable payments since you must meet your recurring expenses and debt service with money left over before you can properly invest. And you should only take on debt if you have a clear goal in mind for the future because you’ll be in it for the long haul, and your other priorities will shift over time. Using debt exclusively to benefit your future can help you manage your priorities along the road.

Third, make the most of any “free money” that comes your way

Once you’ve got your costs and debts under control, you’ll be ready to put some real money into investing. And, for many workers, the first investment to make if you have the chance is in a 401(k) or other employer-sponsored plans.

Specifically, if your company matches a portion of your contributions, strive to save enough to take advantage of every cent of those matching funds. That will give the highest “guaranteed” rate of return accessible to the vast majority of us ordinary mortals, and it’ll significantly help you to reach your goals.

Furthermore, if you choose between a Traditional and a Roth 401(k), consider carefully which one you want to invest in. If you want to retire with a $2 million balance, the immediate tax benefits available for contributions to a Traditional retirement plan can help you save more each paycheck. On the other hand, if you do hit your $2-million goal, the fees and taxes involved with early retirement withdrawals might make you wish you had done part of your investment through a Roth account when you had the opportunity.

Because of these trade-offs, there is no apparent winner between the two types. Still, if the only way to accomplish your objective is to take advantage of the immediate tax benefits provided by contributing to a Traditional plan, that’s the route you should pursue.

Fourth, set yourself on a path to accomplish your goal

The table below illustrates how much you’ll need to invest per month to reach your $2 million retirement goal, based on how many years you have until retirement and your portfolio’s rate of return. As this table plainly shows, if you start saving early on in your career and receive annualized returns that are close to the market’s historical norms, you may achieve your objective pretty easily. Indeed, you may be able to do that by investing in index funds that are passively managed, market-tracking index funds.

The challenge, though, is twofold. First off, the later you begin, the more difficult it will be to save enough to accomplish your objective. For example, suppose you start investing for retirement with just 15 years until you want to retire. In that case, you’ll need to save more than half your salary even to have a chance of reaching the $2 million threshold. Making the lifestyle changes necessary to begin investing half your pay would be a significant challenge.

Then, even if you choose low-cost index funds that are meant to produce average outcomes, there’s still no assurance that you’ll obtain those historical market average returns with your portfolio. As a result, you should check your progress regularly to see whether you need to adjust your savings level to stay on target. It’s far easier to make slight adjustments earlier in your journey than it is to try to bridge a large gap later in your career.

Fifth, keep it up but don’t forget to live your life

Recognize that once you’ve started saving for a $2 million nest egg, you’ll need to keep going for decades to get there. You’ll inevitably have difficulties along the road. Life happens, and you should have money set aside outside of your retirement accounts to handle unplanned situations and other priorities.

When you start accumulating a retirement nest egg, it might be tempting to dip into it to pay unexpected expenses, even if you incur taxes and penalties for early withdrawals. So, make sure you’re combining retirement savings with other life goals, and maintain a large enough emergency savings buffer just in case. That will also help you stay on pace with your retirement objectives.

Aim for the moon – if you miss, you’ll still end up among the stars


Even if your pay remains around the $80,000 range, adjusted for inflation, these five actions could bring you from $0 to $2 million over the course of your career. The beauty of it is that even if you come up a little short, you’ll be considerably better off than if you didn’t invest at all.

If you think about how much money you’ll need to retire, you’ll see that the remainder is a question of preference rather than need once your fundamental necessities are met. If you end yourself in the neighborhood of a multimillionaire, you’ll probably be able to cover your basic costs.

So get started today to increase your chances of a comfortable retirement. With enough time and a good strategy, you might be able to get there, even with an $80,000 annual salary.


What Will the Condition of Your FEHB be After Retirement? 

One area federal employees ask a lot of questions about is the FEHB program. Here a few ways in which the plan changes for Feds after retirement.

Does FEHB Coverage End With Retirement? 

No, it does not. Feds can continue enjoying the Federal Employees Health Benefits (FEHB) coverage after retirement as long as they fulfill the following criteria: 

Five years of enrollment in the program before retirement (five consecutive years that precede retirement). 

Not up to five years of coverage, but the employee enrolled as soon as they could. 

Prior CHAMPVA or Tricare coverage that will make up five years when added to FEHB enrollment years (such workers have to be enrolled in FEHB before they retire). 

Employees who have elective or discontinued service retirement and do not have up to five years of enrollment. 

In exceptional cases, workers who have less than five-year coverage could be allowed to carry on with the program in good faith. 

Payment of FEHB Premiums After Retirement  

Postal service employees will pay higher FEHB premiums after they retire, but workers in all other agencies continue paying the same rate. The premium is higher for Postal Service employees because union agitations reduced the premiums for that agency’s active duty employees. After retirement, the rate returns to normal. 

However, all federal employees, postal or not, will no longer pay the premiums with pre-tax dollars, meaning the premium will be more costly than it was during active duty. This rule might not change in the coming years, as many people have agitated for a change with no success. 

FEHB and Medicare Part A (Hospital); Any Relation?

All federal workers have access to Medicare Part A, but it does not affect their FEHB coverage. As soon as a retiree can start accessing Medicare, the two coverages will be complementary and not adversarial. 

For retirees with the two coverages, Medicare serves as the central source of healthcare insurance. In contrast, FEHB coverage plays a supporting role. But in situations where either plan does not cover a particular condition or illness, the one that covers it takes prominence without the other one supporting it. 

FEHB and Medicare Parts B, C, and D

The Medicare plans for “Medical,” “Advantaged Managed Care,” and “Prescription Drugs,” tagged Parts B, C, and D, respectively, do not significantly affect FEHB enrollment. These three plans are not covered through deductions during active duty, unlike Medicare Part A. Retirees who want any of these plans have to purchase them themselves. 

However, Part C, which is available only for those with Parts A and B, is similar to FEHB in coverage. So if you have the two, you might consider suspending the FEHB coverage until a later time.

Picking Smarter Investments in Your TSP: Todd Carmack

Picking Smarter Investments in Your TSP:  Todd Carmack

If done carefully, it’s possible to use the government’s plan for retirement to your benefit. Almost five million people keep some or all of their savings for retirement in the United States government’s Thrift Savings Plan (TSP). However, many people may not be managing their TSP to its full potential.

The U.S. Government Thrift Saving Plan is similar to a 401 (k) plan. Every pay period, money is automatically contributed and invested into one or more of the three basic options for investment.

The TSP is easy, unlike many 401 (k) and similar plans, and has a very wide range of choices for investment. This avoids several chances of errors. Nevertheless, it also eliminates some significant asset classes which can increase value in the long term for those who save for their retirement.

If you are part of the TSP and desire to get the most out of your return, in the long run, feel free to continue reading.

Target-retirement date funds are offered for those who wish to have choices made easy for them and also evolve automatically towards a conservative stance as investors grow older.

Those who would rather make their own choices are provided with five options by the TSP. They include:

  • “S” Fund: This is an index of all stocks in the U.S. that are not found in the S&P 500 index. This implies a small-cap and midcap stock.
  • “C” Fund: This is a duplicate of the S&P 500 index SPX, -0.11%.
  • “F” Fund: This is a record of bonds worldwide, both corporate and government.
  • “I” Fund: This is a duplicate of an MSCI EAFE Index EFA, 0.07% of the stocks internationally in twenty-one different markets not including those in Canada and the U.S.
  • The “G” Fund: This is a short-term investment in the U.S Treasury securities which aren’t exposed to the risk of the stock market or bond.

The above five choices provide exposure to international stocks, small-cap and large-cap U.S stocks, a large bond market, and a cash-like option (which is risk-free).

The lack of any value option is one of the most visible weaknesses of these choices. Over the years, the value stocks provided superior returns in the long run to the growth stocks which have proven to dominate the “S” and “C” funds under the TSP.

TSP Solutions to Consider

These concepts are divided into the 3 categories:

  • Aggressive – Calls for 100% equities
  • Moderate – Calls for 60% equities
  • Conservative – Calls for 40% equities

For every investor category, it is recommended to divide the portfolio’s equity the same way (i.e. 25% in “I” and 25% in “C” as well as 50% in “S”).

The differences between these 3 groups have to do with how much (if any) of the portfolio should be in the “F” and “G” funds. In other words, not exposed to the stock market risks.


Emphasizing the “S” fund may result in higher returns in the long run, so keep this in mind when making a decision between the 5 options of the TSP. Doing this can tilt the portfolio in the direction of midcap and small-cap stocks, which have been known to outperform large-cap stocks (such as those of the “I” and “C” funds) in the long term.

For instance, aggressive investors (which may include many people in their 20’s and 30’s) might place 70%/80% (or maybe up to 100%) of their “S” fund portfolios.

An easy way to increase the returns expected for both moderate and conservative investors is to own more equity funds. For instance, the combined equity stake could be increased by the moderate investor ranging from 60% to 70% or higher.

Your expected return in the long-term increases by 0.5% per year for every additional 10% held up in equities. That seems a little small but can make an enormous difference after a few years, increasing the money you will have when you are retired.

Consider keeping 10% to 40% of your usual contribution in the “S” fund if you are included in a TSP target-date fund.



Having read this article, you have learned that a moderate value stock allocation, specifically the value stocks of the small-cap, can potentially boost your return in the long run significantly.

Even though these value options are not offered by the TSP, it’s possible to increase your government retirement plan with a different account. A good option is the Roth IRA, through which you can give up to an amount of $5,500 annually ($6,500 for those over 50).

One of the best ways to use an account such as this to supplement your TSP account is by investing the whole of your IRA into emerging market small-cap value and large-cap value stocks.

If only a small amount is available for this, then the way to get the most out of it is to just add small-cap value in either an ETD or a low-cost index fund.

For any questions you may have regarding your TSP or other retirement options, please contact a financial advisor for a consultation.


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