Category: Dennis Snoozy

Did you know that the hottest time of year for federal retirement is between the beginning of December and the first couple of days of the new year? During this short window, workers get the majority of their pay rise, a massive chunk of unused annual leave, and they can also spend less on tax. 

As per Dennis Snoozy For many workers, they get so caught up in the idea of retiring that they forget about what comes after. Can you continue to afford the same lifestyle? Will you need to move to a state that’s more advantageous in terms of taxes? Let’s take somebody who lives in Washington, for example; it’s hard not to get attracted to the tax-friendly policies found in South Carolina, North Carolina, or Delaware. 

Dennis Snoozy said If you’re like many federal workers, you won’t have thought about life after retirement. We’re not trying to make you feel bad, or even get you panicking, just simply aware of the sort of decisions you face after retirement. While some will want to stay where they are, others will look into the states where Social Security benefits aren’t taxed or where retirement benefits are tax-free. 

No matter what you have in mind, the one question that needs an answer is how significantly your income will fall after retiring. Will you need to lean on the TSP to fill the gap between an annuity and a previous salary? For some, they’re able to leave a good amount to loved ones. 

If you’re in the CSRS (Civil Service Retirement System) program, the extra TSP money is perhaps secondary to the larger annuity. On the other hand, we know that TSP money is more important for those under the FERS (Federal Employees Retirement System) – nowadays, this is most federal workers. 

Can You Afford to Retire? According to Dennis Snoozy

This is the all-important question, and it’s one that not many federal workers can actually answer. If you were to stop reading now and think about retirement, it probably brings up thoughts of confusion and anxiety rather than comfortably knowing whether or not you’re ready for the big day. 

Sometimes, we see federal workers making decisions based on FERS and their retirement benefits alone. However, a single decision can also affect TSP withdrawal options and Social Security. Elsewhere, it’s challenging to get our heads around how each benefit is taxed. For instance, you might know about the tax-free component with FERS. Apart from this small component, it’s actually taxed like any other form of income. For all retirees, they need to file a W-4P; after the Office of Personnel Management adjudicates claims, it’s possible to arrange state tax withholding. 

According to Dennis Snoozy,  With the TSP, it’s always taxed as ordinary income apart from one exception; qualified Roth contributions (where tax is not applicable). While state tax cannot be elected, federal tax withholding can. Finally, most Americans get Social Security without having to worry about tax, but this isn’t the case for the majority of ex-federal workers. 

For ordinary income tax, the tax rate for benefits is 85% for those earning over $44,000 on a joint return and $34,000 on an individual return. For those who want to withhold after already taking some benefits, you’ll need IRS Form W-4V – through this form; you’re essentially submitting a request for voluntary withholding. Depending on your need, send a specific percentage of your monthly benefits straight towards the tax bill. Options include: 

• 7% 

• 10% 

• 12% 

• 22% 

With this form, it’s also possible to stop withholding and change the withholding rate. To determine your overall income, take your adjusted gross income and add half of Social Security benefits and all nontaxable interest. 

With regards to state tax, this is a little more confusing, and it’s dependent on whether the state itself taxes benefits. While some tax everything, others will not tax retirement benefits, income tax, or SSA. Therefore, we recommend talking to a professional or learning the tax laws in your state. 

Conclusion 

What will you do after retirement? Whether or not you choose to stay in your current home depends on a wealth of factors. As well as everything we’ve discussed today with taxes and other financial aspects, you also need to consider your family, schooling, house prices, weather, lifestyle, and more. 

If you need help, don’t forget to reach out to a financial professional. With an impartial view of the situation, they can consider your financial needs and how to best meet your goals for retirement and beyond! 

As per Dennis Snoozy,This time isn’t much fun for anyone. Many employees are working from home, and kids are learning at home, stress-busting coronavirus pandemic headlines coming across all-day. Most federal government employees are worried about their TSP account and bound to think of options that they can go with while dealing with their accounts. If you are one of those employees, we have devised some options that would help you get some relief.

Surprisingly, in this temporarily normal situation, even going to a grocery store looks as if we are going out in the world of war. Coronavirus pandemic has caused a shortage of household goods like toilet paper and sanitizers, and investors are raising cash by liquidating their investments right to the safest treasury notes. Hopefully, the Government’s stimulus-response will reduce some of the pressure on some conservative investments.

Dennis Snoozy said Well, at this moment, everybody wants to know what are the best things to consider for the TSP account. Most federal employees are worried about their TSP account and bound to think of options that they can go with while dealing with their accounts. 

We all know that watching your TSP retirement funds drop significantly over a short period of time is a harrowing sight. So, if you are riding on a boat that is selling out your savings at some point or holding back your savings in this crisis as well, you are here at the right place. We have figured out some of the best options that would give you a sigh of relief. 

Rebalancing is the best option for investors at this point

The first thing that an investor must understand is that if he or she hasn’t sold anything, it is not the right time to sell. Considering rebalancing is the best option for investors. 

There is no need to look at a series of charts here, but history itself is proof that market inclination and declination are just a matter of time. There is no sure shot answer to when this market will recover, but within a matter of time, it will come back to an adequate level. 

Thankfully, the Federal Government has planned an unbelievable amount of stimulus ($2 trillion) to extend its support to the failing economy of the country. No information on the duration of this stimulus has been revealed by the officers so far. 

Do not sell According to Dennis Snoozy

If you are in urgent need of money from your investments, it’s advised not to sell your TSP and instead look for other possible options to withdraw money. You can cut down on your expenses and pull money from other assets like cash accounts.

If you are helpless and you do have to sell your investments, then try to make it as minimal as you can. Rebalancing is the best solution to this problem. 

Consider this as a buying opportunity.

If you have an investment time horizon of more than five to ten years, then consider this time as your buying opportunity. Try to contribute more and get to the max if you can. You may look for front-loading contributions in a couple of few months to take advantage of this falling market. Again, we mention here, consider rebalancing your TSP account.

If you have already sold your investments, try to get them back as soon as possible. You can never time the market. The time is running so hard that it is impossible for even the experts to tell what will happen next!

Don’t waste your time for some so-called perfect moment. If you have a long-term time horizon, then stay within the markets. Create a sensible plan and allocation strategy. 

We must mention here that it is not an overall structural change; it’s just a kind of shock given by the black swan event.

Some helpful tips on allocation strategy—time is the biggest factor that helps you to your investments depending on the amalgamation of the right mix and allocation strategy. If you are an older person and have a shorter time horizon, it’s understandable that you move forward and look for some balanced approach that can provide the flexibility of income. 

As per Dennis Snoozy, Myth-conception: Most retirees are under the misconception that they must wait until a Federal Employees Group Life Insurance (FEGLI) ‘s open season to get more life insurance under the FEGLI program.

Reality: To acquire more FEGLI coverage, you either experience a Qualifying Life Event (QLE) or provide medical evidence of insurability. The medical team will examine you, complete your form, and send it to the office of the FEGLI.

Many employees did not sign up for more life insurance through the FEGLI program when the opportunity was available to them, according to the writer. Probably, if you are among those people, you will be happy to know that it may not be too late if you wish to avail of this opportunity. However, new employees face some restrictions to sign up for the FEGLI program to get more coverage because there are certain inherited limitations on those opportunities. FEGLI seasons have only opened a few times since 1954, which was very rare. So due to the rarity of the FEGLI Seasons, only a few new employees want to join the FEGLI program to get more coverage.

However, there are two easy ways to get more FEGLI coverage:

1. To provide physical evidence to ensure your eligibility for basic insurance, or
2. With a qualifying life event, you can get more coverage.  

In the next sections, we will describe these two points in more detail. 

1. Providing medical evidence to ensure your eligibility for a life insurance

Under the existing policy by FEGLI, if one year has gone by from the last date of your efficacious waiver of life insurance coverage, you are allowed to give a piece of adequate medical information at your own risk using the request for life insurance (SF 2822). If you had elected less than the maximum FEGLI’s coverage when it was available to you, it means that you have acted in a way the system was not designed for by waiving the coverage effectively that you didn’t elect. So, as long as one year has passed since you last signed for an SF 2817 election form, you can give a new request to apply for life insurance.

Dennis Snoozy said However, approaching your HR office would be the best choice so that it can provide you a complete and error-free form with reliable information to proceed further. It is also essential to send this form to your physician for achieving medical evidence, which is necessary to join the Federal employees’ group life insurance program. After examining this form, your physician will send it directly to the office of the FEGLI. This process is necessary for ensuring the determination of insurability.

If you want to get basic insurance, you must complete the SF 2817 life Insurance Election by submitting a form to the OFEGLI office. Your Human Resource office will tell you about the decision of the OFEGLI, whether it approves or denies your request. So, your HR office must receive your form within 31 days from the date of OFEGLI’s approval.

However, if your request has been approved, the new coverage you have requested will be discussed in detail, as mentioned below.

• You’re enrolled in basic life insurance by your HR office on your first day in a pay and duty status on or after the date of OFEGLI’s approval (as long as you are in a pay and duty status within 31 days of OFEGLI’s approval.)
• Sign for basic Option A and/or Option B (ADDITIONAL) coverage (or increased multiples of Option B coverage), be sure to mark Option B, which will be effective on your first day of pay and duty status after the approval of your physical form.
• You cannot be enlisted for Option C by providing the medical evidence because it is insurance for your family. Therefore, it is also known as family optional insurance and can only be elected by having a life event like divorce, marriage, and death, etc.

On the other hand, if your application of basic life insurance has been refused, then you may have to wait another year to find out the physical reason that might have caused this denial.

2. Electing life insurance for a Qualifying Life Event (QLE)

According to Dennis Snoozy Family optional insurance can only be elected if you have a life event like marriage, divorce, death of a spouse, or adding an eligible child to your family. With a FEGLI “qualifying life events,” you can enroll for life insurance equal to $10,000 (Option A) or life insurance equal to 1,2,3,4 or 5 times of your annual salary (Option B) or enroll for or increase in the multiples of Option C. The Human Resource office must receive your new SF 2817 form within 60 days after the qualifying life event.

Legally married couples had a special opportunity to make changes to the FEGLI coverage. According to the recent view of the supreme court, the office of the personnel management succeeded in recognizing all marriages irrespective of their gender, applicable since June 26, 2013. The supreme court took this initiative mainly to allow same-sex couples to take advantage of the new benefits which were available to them till August 26. Same-sex couples can make changes in the FEGLI program only if they are legally married and involved in the acquisition of stepchildren.

As per Dennis Snoozy, today, millions of seniors depend on their Social Security as a critical source of their income. But according to the latest data, federal retirees are growing more worried about their social security. 

According to this year’s data collected from the Employee Benefit Research Institute, only 45% of the retirees believe that Social security will give them the same benefits as it used to provide earlier. This percentage dropped from last year’s 51% of retirees who thought the same. The main question of concern remains: Are seniors becoming overly pessimistic today? Or are they really up to something?

The future of Social Security may be Shaky but is comparatively certain.

As per Dennis Snoozy, many federal workers and near-retirees believe that the Social Security program may go bankrupt. The reality of this program is that it can never run out of money because it is driven by payroll taxes. That means, as long as we have federal workers who pay taxes, senior retirees can never suffer losses and will thus, receive benefits in some form or the other.

According to the latest reports from the trustee, the trust fund of Social Security may run out in 2034. If that situation comes, the program might cut down benefits by 23%, which might give a significant blow to current and future benefit recipients.

Congress has more than a decade and a half to work on this problem and fix it. Lawmakers will lose and may have to sit back and do nothing.

But even if Social security benefits aren’t cut or reduced, the recipients will still face a severe problem: Social Security is making no records of senior spending. The meager increase in cost-of-living of this program has really not done a great job of helping beneficiaries balance their buying power in the hours of inflation, because those type of turns have been minor or we can say never existed in recent years, and also because they get consumed by rising Medicare premiums before seniors get them according to Dennis Snoozy.

All of these circumstances mean today’s workers who are depending on the benefits of Social Security in retirement will have to move carefully and stop depending on those benefits, and start saving for your future instead. Otherwise, you would end up nothing but face a major financial crisis.

Building your nest egg

As per Dennis Snoozy, we need to clear out one thing here that the Social Security program was never meant to sustain seniors on its own. If everything goes well, that means no future cuts, then also those security benefits can replace about 40% of the pre-retirement income of an average worker. Most seniors are urged to double that amount to live after retirement peacefully. It’s, therefore, your responsibility to maintain your savings to get maximum out of your Social Security.

Now the good news for seniors is that today’s annual contribution limits allow serious about saving in a 401(k) or IRA. Workers who are of age under 50 can save up to $18,500 a year in the former and $5,500 in the latter, and these pre-set limits can be increased to $24,500 and $6,500, respectively, for workers 50 and older.

Well, we understand that every senior can’t save max out a 401(k) or even an IRA year after year, but he or she can commit to keeping a decent sum of cash each month and use that money wisely to save a considerable amount of wealth. If you are 37 with no savings and start keeping $400 a month aside until age 67, let’s suppose you invest heavily in stocks and are able to generate an average annual 7% return on your savings. At the end of the day, you’ll save $453,000, which, when combined with your Social Security benefits, could give you a handsome retirement amount. Now, if you increase your monthly savings rate to $600, you’ll have $680,000 to retire with.

According to Dennis Snoozy, this way, you can take maximum advantage of your Social Security benefits. Make sure you wait until your full retirement age to get maximum benefits. Your age should be 66, 67, or somewhere in between. Do you know, if you can hold off your benefits after your full retirement age, then your benefits will automatically increase by 8% each year you delay up until age 70, and this increase will stay in the rule for the rest of your life?

You don’t have to stop fighting for your raises during your career. The more money you can earn from the job you have, the more benefit you get after your retirement.

As per Dennis Snoozy, at this moment in time, we’re in a bull market, but one in which we’re all nervously awaiting a change. For over a decade, it has been plodding along without a single 20%+ correction. Considering the hostile nature of the world, TSP investors are closely watching the situation with Brexit in Europe, the conflict between Syria and Turkey, and other events.

With investing, the goal is to buy low and then sell high, but the art of investing is gauging when the turn is about to come. During what’s now considered the Great Recession just over a decade ago, thousands of participants in the TSP sought safety and security. Therefore, they abandoned the S and C funds (both are stock indexed) for the G fund. Since this date, many have remained. 

According to Dennis Snoozy, suddenly, there’s a greater concern than ever before that a huge correction is on the way. Last years third quarter, the performance was a mixed bag for the TSP. In terms of positive returns, it was good news for the F, G, and C funds. On the other hand, the I and S funds had negative returns; the latter manages huge foreign companies while the former concerns small and medium-sized enterprises. As trade between China and the US halts, there are concerns over the US and global economies.

Broadening the view slightly, results were more favorable for the last couple of years as a whole. From the beginning of 2018 to the end of the third quarter of 2019, the I fund is the only one not offering positive returns.

Positive and Negative Trends

When making any investment decisions, it’s essential to look at the facts. They are as follows:

• Bond prices continue to rise and are reaching record levels (one reason why the F fund has performed so heroically). At the other end of the spectrum, rates continue to decrease.

• The bull market – one of the longest in US history – goes on.

• Over the 12 months to the end of 2019, there was an increase of 1.7% in consumer prices – inflation has remained low.

• There were mixed results in unemployment for September. While unemployment was indeed low, the number of jobs available was similarly small (while wage gains were slow).

• Across many industries, growth rates started to slow towards the end of 2019. Thought to be a result of the trade tariffs – affecting manufacturing, farming, and many other industries – many fields are struggling.

• Consumer debt seems to be increasing while there was very little change in consumer spending.

At the moment, it seems to be anybody’s guess as to what will happen. For the longest time, the economic growth in the United States has been the envy of the world. This being said, the growth isn’t necessarily sustainable when brought through Fed rate cuts alone.

According to Dennis Snoozy, with the stock markets, the day a bear market arrives (a decline of at least 20%) will be no surprise. With this, both S and C funds will decline, and all TSP investors need a plan of action to protect their portfolios.

As per Dennis Snoozy, in September, there was a sense of excitement surrounding TSP participants as they discovered new withdrawal options. In the first weekend alone, nearly 10,000 people took advantage of the new opportunities, and the contact centers were incredibly busy with further requests. After announcing the changes, the agency worked hard to provide the infrastructure that this sort of demand required, and it seemed to be a success.

Dennis Snoozy said, according to one financial planner, the traditional withdrawal options and rules were not only restrictive but also confusing and complicated. In many cases, they had negative consequences for participants. As a result, the agency responsible for the TSP responded, and we now have the following changes: 

• Unlimited partial withdrawals (post-separation). 

• Annual, quarterly, and monthly installment options. 

• Ability to select a withdrawal payment source (Roth, traditional, or both). 

• Simultaneous installment and partial withdrawals. 

• Removal of contribution suspensions after a hardship withdrawal. 

• As many as four in-service withdrawals (older than 59-and-a-half). 

As well as helping those who are retired or who have left federal service, these new rules will also help the older workers still going. Rather than moving funds across to an IRA (individual retirement account) in the hunt for flexibility, these changes will convince some to keep their funds in the TSP. 

According to Dennis Snoozy, how have the changes been received? Unfortunately, the negative reputation that the previously complicated system garnered has led to many participants ignoring or not understanding their new options. They know about the changes and know that it helps them but have no idea how it affects them when it comes to distribution.

Don’t worry, we’ll have all the answers you’re likely to need today. In this guide, we’re going to talk about the new options in more detail, what happens to outstanding loan balances, and more. Without further ado, let’s get into it!

New TSP Withdrawal Options – The Basics by Dennis Snoozy

We know that it’s challenging to get your head around all the rules, so allow us to break it down. Firstly, there’s an option to make a withdrawal every 30 days for ALL participants. For those who have now departed from federal service, the 30-day requirement for partial withdrawals is the only limitation to which you need to pay attention.

Additionally, participants over the age of 59-and-a-half who are still in service have further good news. In any calendar year, you may take four partial withdrawals. However, please bear in mind that the agency doesn’t want participants to take all four of their withdrawals within three months. There’s still a 30-day limit.

Elsewhere, there’s an option for annual, quarterly, and monthly withdrawals. What’s more, it’s possible to stop the withdrawals, restart them, and change the payment amount too.

According to Dennis Snoozy, what happens when you reach 70-and-a-half? Well, the dreaded choice about balance seems to be over. If you haven’t made up your mind about what to do with the funds, the TSP will use RMDs (Required Minimum Distributions) to pay the difference of your account. As you may know, this was one of the biggest problems for TSP holders, and one reason employees decided to leave it. It seemed absurd that people would be forced into a serious portfolio and financial decision just because they reached a certain age.

With these changes, those who haven’t made the full withdrawal election will get a reminder from the TSP. Of course, the Internal Revenue Code already determines and governs the required minimum distribution reminders.

Outstanding Loan Balance – Retire or Leaving Government

If there’s an outstanding loan balance, but you want a TSP withdrawal after leaving service in some capacity, the new rules provide two options.

Firstly, the unpaid balance can remain, and this will go down as a taxable distribution. Secondly, you can pay for the loan. In some cases, the situation may lend itself to another solution, and some have tried to take the taxable amount and roll it over into an eligible employer plan or IRA. If this is achieved within 60 days, you should avoid penalties and taxes.

Either way, you MUST pay the loan or declare the unpaid balance before any withdrawal.

Partial Withdrawals – Are They Necessary? by Dennis Snoozy

After seeing the adjustments, you might be wondering whether partial withdrawals are entirely necessary when taking money quarterly or monthly. It’s not necessary, but it does provide flexibility to those who want and need it. Sometimes, a sudden car breakdown or damage to the home can lead to unexpected bills, and this flexibility will come in handy.

For those heading into retirement, especially, there’s a sense of the unknown in that we don’t know what we’ll spend on a monthly or yearly basis.

Hardship Withdrawals and Contributing

Thankfully, the new rules have also put an end to the six-month contribution suspension that once came with hardship withdrawals. With the implementation of these changes, it’s thought that over 60,000 participants were told they could contribute again despite their recent hardship withdrawal.

Making Withdrawal Changes

The days of lengthy forms and paperwork are over, and the FRTIB has introduced a “smart” tool to help all participants online. Although some cases will have complications, most withdrawal changes will have an online form, which is then printed and mailed (some will need notarization or a signature).

In the future, the FRTIB is expected to make the whole process a digital one. With the acquisition of a record-keeping service, it’s believed the need for a signature will be negated, and an online portal will deal with all requests.

TSP and Roth Equal Distributions

Finally, the new rules suggest that participants can withdraw from their Roth and traditional balances; they also choose the precise amount they wish to withdraw from each TSP account. When no specific account is chosen, TSP will take from the two accounts equally. Unfortunately, it’s not possible to choose to withdraw from specific funds according to Dennis Snoozy.

Summary

There we have it, everything you need to know about TSP withdrawal changes. To learn more, visit the TSP resources and check out their informational YouTube channel!