Let’s Debunk Some Retirement Myths. By: Joe Carreno
/by joe carrenoIf it sounds too good to be true—well, it probably is.
Myth #1: If I quit federal service before the year in which I turn 55, I can start withdrawals once I reach that age. If I retire with 25 years of law enforcement service before the year I turn 50, I can start taking TSP withdrawals without penalty when I turn 50.
Reality: The TSP does waive the 10% early withdrawal penalty for payments paid after you depart from service during or after the year you turn 55 (or the year you turn 50 if you’re a public safety employee). Employees who separate before the year they turn 55 (doesn’t matter if they retire or resign) (and law enforcement officers who apply for an immediate retirement benefit before the year they reach 50 and have 25 years of service with the completion of 25 years of covered law enforcement service) have to be careful and avoid the early withdrawal penalty. In these cases, you won’t be exempt from the early withdrawal tax penalty till you reach 59 and a half. (There are several exceptions to this rule.)
Myth #2: Those who retire in 2021 will get the 2021 COLA in their January 2022 retirement benefit payout.
Reality: The amount of an annuitant’s first Cost-of-Living Adjustment (COLA) is prorated depending on the number of months between the start date of the annuity and the effective date of the first COLA following that date. Those covered by the Federal Employees Retirement System (FERS) and have been retired for at least a year and reached the age of 62 by December 1, 2021, will be eligible for the full COLA. The 2021 COLA is projected to be greater than 5%, with FERS retirees receiving 1% less than the full adjustment.
FERS COLAs do not typically apply to annuitants under the age of 62 as of December 1, 2020. As for survivor annuitants, the COLA applies to both the basic survivor annuity and the supplementary annuity. COLAs under the Civil Service Retirement System (CSRS) apply to all annuities, regardless of the annuitant’s age.
Retirees get one-twelfth of the applicable COLA for each month they receive an annuity prior to December 1, 2021, up to a maximum of 12 months. An annuitant’s retirement date must be no later than December 31 of the previous year in order to get the full 2022 COLA increase.
COLAs begin on December 1 of the year in which a retiree becomes eligible.
Myth #3: For people who retire after the January 2022 annual General Schedule pay adjustment takes effect will have this new rate reflected as one of the three years in their high-three average salary used to determine their CSRS or FERS retirement payout.
Reality: The high-three average pay is the highest yearly rate obtained by averaging an employee’s basic pay rates in force throughout any three consecutive years of creditable civilian service, with each rate weighted by the length of time it was in effect.
The high-three average wage rate is calculated on a daily average and might include more than three pay rates. For example, if you choose January 31, 2022, as your retirement date and your highest average is your last three years of basic pay, then your high-three average will be calculated with the 2022 pay rise accounting for just 29 days of the overall three-year period.
What Should You Do if Your Company is Cutting Your 401(k) Match? By: Joe Carreno
/by joe carrenoFor 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.
Congressional Watchdog Finds That Almost 40% of Participants Don’t Understand 401(k) Fees. By: Joe Carreno
/by joe carrenoOn Thursday, August 26, 2021, the Government Accountability Office (GAO), a congressional watchdog, released a report stating that almost 40% of 401(k) participants do not fully understand the scheme’s fees. For the past ten years, the US Department of Labor has requested sponsors to educate participants about the fees associated with their accounts. Yet, a significant number of participants do not completely understand the fees.
Democrat lawmakers, Sen. Patty Murray of Washington and Rep. Bobby Scott of Virginia had requested the report. Sen. Murray chairs the US Senate Health, Education, Labor, and Pensions Committee, while Rep. Scott chairs the House Committee on Education and Labor.
Scott said the findings of GAO should serve as a wake-up call for the Labor Department and 401(k) participants. He added that the report indicates that the Labor Department must make it compulsory for plan sponsors to give participants full fee disclosures. He added that the disclosures should be easy to understand and that participants should know how the fees affect their contributions.
The report stated that about 87 million employees have 401(k) plans, making the accounts one of the most popular ways people save for retirement. Around 71% of workers in the private sector, and local and state governments received their retirement benefits in March 2020. Of this percentage, 55% had 401(k) accounts.
401(k) participants must understand the effects of administrative and investing fees on their contributions as participants who do not understand them may be adversely affected.
Murray described retirement savings as long-term investments. As such, the Democrat said participants need “clear, complete information.” He added that the report shows that 401(k) participants do not have the needed information to make informed choices about their long-term retirement investments.
What Participants Do Not Understand about 401(k) Fees
For its findings, GAO surveyed 1,000 401(k) participants. The survey included questions that were meant to test participants’ knowledge of the fees. The government watchdog found that many respondents know about the existence of the fees, but they do not completely understand how the fees affect them. Other respondents do not know about the existence of the fees at all. The members of the latter category made up about 64% of respondents. These respondents didn’t know if they were paying any fees or even if the fees even existed.
65% of the participants didn’t know how much additional fees they paid on the 401(k) accounts. The government watchdog found that females and savers with less than $1,000 made up a majority of this group. It also discovered that education was a factor. More people with high school diplomas or less also said they do not understand the fees.
“Americans are already struggling to stretch their paychecks and save for retirement,” Chairman Scott stated. “Making fee disclosures more accessible is a common-sense change that will help more people retire with dignity.”
Long-Term Effects on Participants
Employer-sponsored 401(k) plans and any other investment account come with costs. Participants and their employers pay the fees. Some they pay independently and some together. However, participants have to be aware of these fees, or their savings could be adversely affected. In 2006, GAO submitted a report that shows how an increase of 1% could reduce retirement savings by tens of thousands of dollars.
For example, a worker who contributes $20,000 to a 401(k) plan with a 7% return rate and 0.5% fee will have $70,500 after 20 years. If the fee is increased to 1.5%, the worker will have $58,000 at retirement. The 1% fee increase caused a 17% reduction in the worker’s earnings.
GAO Recommendations
GAO made five recommendations to the Labor Department. These recommendations will enhance contributors’ knowledge of the long-term effects of the fees. The recommendations are:
- – The department should enforce the use of a consistent term for asset-based investment fees.
- – It should stipulate the fees in quarterly disclosures.
- – It should educate participants on the long-term effects of the fees.
- – It should add fee benchmarks for in-plan investment options.
- – It should add ticker information for investment options in disclosures.
The department has responded to the committee’s recommendations. It stated that it is unable to enforce the recommendations at the moment but would consider adopting them in the future. The committee, in turn, urged the department to do whatever it can to help the Americans who are saving money.
Will Your Social Security Benefits be Enough During Retirement? By: Joe Carreno
/by joe carrenoSocial 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%.
$50,000
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.
Would You Want To Retire Under MRA+10? by Joe Carreno
/by joe carrenoWould You Want To Retire Under MRA+10? by Joe Carreno
For federal workers under the Federal Employees’ Retirement System (FERS) that wish to go into retirement but are not able to receive an immediate annuity that is not reduced may have another way with the MRA+10 provision by Joe Carreno.
FERS workers that are at least the minimum retirement age (MRA) can hang up their hats if they have a minimum of 10 years worked, but less than 30 under the MRA+10.
As per Joe Carreno those that have a birth year before 1948 will have a minimum retirement age of 55. Each year from 1948 will have two months added for each year until 1952. Individuals born from 1953 to 1964 will have an MRA of 56. Anyone with the birth year of 1965 or later will see an increase of 2 months for each additional year until the minimum reaches 57 for people born in 1970 and on.
In regard to the ten years of work, this can be a mix of any creditable service as long a deposit was put into such as FERS or CSRS (Civil Service Retirement System), active duty military service, and more.
Though it may be good news to hear that you can retire with less than 30 years of creditable service, there is a snag. Those that retire under the MRA+10 will have their annuity payments lessened by 5% for each year that you are under 62 years of age.
This reduction can be lessened or avoided by delaying receiving your annuity until much later. For individuals that have a minimum of 20 years worked will be able to receive their annuity payments at 60 without the penalty.
So how is the annuity for someone under the MRA+10 provision calculated? By using the following calculation:
.01 x your high-3 x years and full months of creditable service. Joe Carreno said but remember that you will be facing a reduction based on when you start receiving your annuity payments.
If you retire under MRA+10, you will not be qualified to receive a special retirement supplement. Also, you will not receive a COLA (cost-of-living adjustment) until the age of 62.
For workers that have had FEGLI (Federal Employees’ Group Life Insurance) and/or FEHB (Federal Employees’ Health Benefits) for at least five years straight when you claim retirement, you will be able to carry those benefits over into retirement without a gap in your coverage if you start receiving your annuity as soon as possible as per described by Joe Carreno.
If you do not start your annuity immediately, the benefits will stop after 31 days of coverage that is premium-free. Once you start getting your annuity payments, you will be eligible to enroll once again into these benefit programs.
Why a Will Is Necessary in Your Planning – By Joe Carreno
/by joe carrenoWhy a Will Is Necessary in Your Planning by Joe Carreno
If you are planning for retirement, you should also be planning the affairs of your estate, and a very important thing you should take care of is having a will as per described by Joe Carreno.
If you do not have a will and end up passing, your estate will be allocated according to your state’s law.
If you do not have a will set, there may be some unfavorable consequences that may happen.
For instance, as per Joe Carreno if you and your partner unexpectedly die while your children are still underage, you will not have a choice in who the guardians of your children will be if you do not have it in a will. Generally, the court will make the decision as to who will take care of your children and the assets they will receive from your deaths.
If you do not have a will that lays out your wishes on how your assets will be distributed, the state that you live in will likely have all or a majority of your wealth go to your spouse. This can still happen even if you are separated or in the process of divorce. If you want some of your assets to go to specific people, you will need it planned out in a will. If not, the person or people you want the least to have your assets may end up getting your wealth.
Joe Carreno said this is also the same case for charitable causes. If you wish to donate some of your wealth to a cause you believe in when you die, you will need it stated in a will.
Another thing a will can do is help reduce any estate taxes if planned as per described by Joe Carreno.
It is in your best interest, as well as your family’s, to get things planned out and written into a will. That way, you will be at peace knowing that your children will be taken care of and assets will go where you want them to.
More Money For Fed Workers After Changes in TSP – Joe Flavio Carreno
/by joe carrenoMore Money For Fed Workers After Changes in TSP – Joe Flavio Carreno
The Thrift Savings Plan (TSP) appeared as the most extensive defined contribution plan in the world by Joe Flavio Carreno. Statistics released by the TSP show that as of December 31, 2018, the retirement savings plan has approximately 5.5 million participants. This number undoubtedly increased during the past year and will continue to do so considering the recent changes in the TSP policy.
TSP participants are contributing and saving more due to several changes in the policy over the past few decades. These changes greatly affected not only the number of federal employees participating but also the amount of money contributed to the plan.
Matching Contributions Increased Retirement Savings
The Congressional Budget Office stated that Thrift Savings Plan members increased to about 22 percent after the government introduced matching contributions to the plan. Moreover, the average employee contribution rates rose to 3.5 percent as per Joe Flavio Carreno.
Federal employees under FERS are now entitled to receive matching contributions from TSP. There is a one percent automatic supplement from the agency regardless of whether the federal employee participates in the plan or not. If the employee participates, matching contributions from the agency can increase up to 5%, which makes sense as to why it is recommended that they provide enough shares to reach the maximum matching contribution.
The agency matches the first 3 percent of the employee’s pay in the same amount and then matches the next 2 percent of the payment at $0.50 per $1 contributed. In total, Joe Flavio Carreno said this means that the agency adds as much as five percent on the federal employee’s behalf as long as he saves the same five percent from his salary.
Automatic Enrolment Allowed More Feds to Enjoy Tax-free Retirement Savings
The automatic enrolment became active for federal workers hired after July 2010. This adjustment includes newly-hired and rehired FERS and CSRS employees. Its goal is to increase participation, particularly for employees who otherwise would not participate.
According to the Congressional Budget Office, automatic enrolment increased employee participation by 13 percent. Moreover, employee contribution rates increased to almost 1 percent due to this implementation. About 3.3 million are actively participating out of the 5.5 million participants mentioned above as of December 2018.
It was announced in June this past year that The Federal Retirement Thrift Investment Board, the agency that administers the Thrift Savings Plan, will increase the automatic enrolment percentage pay from 3 to 5 percent. The pay change will take effect on or after October 1, 2020. However, this will not impact the contribution rates of participants who are already a member of TSP.
The five percent change is significantly beneficial since it denotes the amount that federal employees need to contribute to take full advantage of government matching. Taking advantage of the five percent government matching and investing it well in the TSP is equivalent to considerable retirement savings throughout the course of a federal employee’s career.
The SECURE Act Added More Benefits For TSP Participants – Joe Flavio Carreno
President Trump signed the Setting Every Community Up for Retirement Enhancement Act this past December 20. The new law was part of an end-year appropriations act and accompanying tax measures in which the Congress enacted a $1.4 trillion spending bill. Thought to be a far-reaching bill that brings significant changes in retirement plans, including the Thrift Savings Plan, many consider this to be the best financial amendment that has happened in more than a decade.
TSP participants who turn 70½ after December 31, 2019, will begin their first Required Minimum Distribution at age 72. While some participants may require the money sooner than others, the additional 1½ won’t be too long of a wait. And for those who don’t see the need to withdraw early, they are now allowed an extension of enjoying the government’s tax-free savings growth. Moreover, many federal employees are staying with the workforce longer, which means that a lot of participants can afford to delay their withdrawals.
Additionally, the SECURE Act now allows penalty-free withdrawals from defined contributory retirement accounts upon the birth or adoption of a child. After December 31, TSP participants can withdraw $5000 per spouse within a year of childbirth or child adoption. While the 10 percent early withdrawal penalty is waived, a federal income tax will apply to the amount of the withdrawal.
TSP after the SECURE Act is beneficial for parents, considering that childbirth is the most expensive health event that households are likely to experience during their childbearing years. Even child adoption is not exempt from expensive costs. While the state funds most adoptions from foster care, other types of adoption do cost money. Aspiring parents would usually need to avail assistance from private adoption agencies to adopt a healthy baby who could cost about $5,000 to $40,000.
Can Changes in TSP Attract Younger Fed Applicants?
According to Joe Flavio Carreno, Participants are expecting more policy changes on the Thrift Savings Plan as competitive retirement plans serve as an attractive perk used to get more federal workers. With the threat of a looming retirement wave, the government expects to entice applicants aged below 25, which is the least percentage of total federal employees.
The TSP is more beneficial when federal employees start early and save consistently. A chart from the Federal Retirement Thrift Investment Board shows how an average federal employee earning about $42,399 every year may grow his savings up to a million dollars.
