thrift savings plan

The Thrift Savings Plan is one of the most important parts of a Federal Employee’s retirement plan. The Thrift Savings Plan is similar to a 401(k) plan offered to Private Market employees and has very similar rules and regulations. An Advantage of the Thrift Savings Plan is the automatic contributions that FERS eligible employees receive along with the relatively inexpensive average internal expense ratio that is charged to Federal Employees on TSP Fund investments.

Which Family Members Qualify for FEHB?

February 24, 2022 /by todd carmack

Which Family Members Are Eligible for FEHB? (or Out)

The Federal Employees Health Benefits (FEHB) program, which covers 8 million federal employees, former employees, annuitants, family members, and former spouses, is the world’s largest employer-sponsored group health insurance program. Federal employees can participate in the FEHB program and cover eligible family members such as spouses and kids under the age of 26 in their coverage.

The FEHB program has three levels of enrollment:

Self Only
Self Plus One
Self And Family

The employee or annuitant and just one eligible family member are covered by a “self plus one” registration. The employee or annuitant, as well as various family members, such as a spouse and children under the age of 26, are covered under a “self and family” enrolment.

Each health insurance plan offered under the FEHB program has a different premium. The federal government covers 72% to 75% of an employee’s or annuitant’s FEHB premium, with the remaining 25% to 28% paid by the employee or annuitant.

It doesn’t matter which FEHB health insurance plan you have or what type of coverage you have (self only, self and family, or self plus one). The percentages of who pays what portion of the FEHB premiums (the annuitant, employee, or the federal government) are always the same and are regulated by law.

The FEHB Program offers over 200 health insurance plan options. Several fee-for-service plans are open to all participants, while others are only available to certain types of employees. Preferred provider organization (PPO) plans are available. Health maintenance organizations (HMOs) are also available in most locations of the United States. To be eligible to enroll in a specific HMO, an employee or annuitant must reside or work within a specific geographic area.

So Which Family Member is Eligible for The FEHB Program?

The FEHB covers you and your “eligible” family members. “Eligible” is the essential word here. Some people you consider family members â€” and in some situations, even those who live with you â€” may not be eligible for under the program.

An eligible family member is defined as:

Your partner;
A former spouse in some circumstances;
Children under the age of 26, including legitimately adopted children, acknowledged out-of-wedlock children, stepchildren, and foster children under certain circumstances (see below);
Children of any age who are unable to support themselves due to a mental or physical handicap that started before the age of 26.

Domestic partnerships, civil unions, and other arrangements that aren’t legally recognized as marriages don’t qualify as eligible family members. Even though they are financially reliant on you and/or live with you, your parents, siblings, and sisters, and other close relatives do not.

In addition, there are several restrictions on stepchildren and foster children’s eligibility. Your stepchildren, for example, remain eligible as enrollees even if you divorce or die, as long as the children live with you in a parent-child relationship.

To be considered for foster care, the child must live with you, and you must be the child’s principal financial supporter and expect to look after the child to adulthood. You must also sign a document stating that your foster child satisfies the standards.

Contact Information:
Email: [email protected]
Phone: 6232511574

Bio:
I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.

Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision. Confidential Notice and Disclosure: Electronic mail sent over the internet is not secure and could be intercepted by a third party. For your protection, avoid sending confidential identifying information, such as account and social security numbers. Further, do not send time-sensitive, action-oriented messages, such as transaction orders, fund transfer instructions, or check stop payments, as it is our policy not to accept such items electronically. All e-mail sent to or from this address will be received or otherwise recorded by the sender’s corporate e-mail system and is subject to archival, monitoring or review by, and/or disclosure to, someone other than the recipient as permitted and required by the Securities and Exchange Commission. Please contact your advisor if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Additionally, if you change your address or fail to receive account statements from your account custodian, please contact our office at [email protected] or 800-779-4183.

How Does Income Planning Differ from Investment Planning?

February 8, 2022 /by todd carmack

While saving and investing are key components of planning your financial future, a successful retirement has more to do with income â€“ how much you can generate, as well as for how long. Without a steady and reliable incoming cash flow that lasts for the rest of your life, you could spend your golden years worrying about when the financial well will run dry.

Some in the financial industry refer to investment planning â€“ or the â€œaccumulationâ€ period – like climbing a mountain, with the ultimate goal of reaching the top. But the peak of the mountain is just the beginning of the â€œdistribution,â€ or income, period.

In many cases, going back down a mountain can be more difficult than climbing up. It can also require a completely different set of skills and tools. That is why it is important to work with an income planner as you approach the time in your life when you’ll be depending on your savings and other income sources for your incoming cash flow.

Investment Planning versus Income Planning

If you are still in your working years, you may have been setting aside money for the future in hopes that it will grow over time. It could also be that you work with a broker or financial advisor who has set up a retirement investment strategy for you.

Investment planning is the process of matching your financial goals and objectives with your financial resources. This is a core component of financial planning that starts with determining your short- and long-term monetary goals and objectives.

There are many different investments that you can choose from. These include:

Stocks
Bonds
Certificates of Deposit (CDs)
Mutual Funds
Exchange Traded Funds (ETFs)
Unit Investment Trusts (UITs)
Annuities
Options
Real Estate
Gold, Silver, and Other Precious Metals
Collectibles

While all of these may provide you with the opportunity to generate a nice return, they may or may not be right, based on what it is that you are trying to achieve. For example, even though the value of small-cap stocks could increase exponentially within a short period of time, they can also expose you to the risk of loss.

Therefore, there are many factors to consider before you choose the best investment(s) for your particular needs, such as:

Risk tolerance
Time frame until retirement (or other financial goals that you are investing for)
Other assets / income generators

There are many potential risks that you can face during your investing years, too. These can include:

Stock market volatility
Low interest rates
Sequence, or order, of returns
Lost opportunity risk (i.e., the inability to invest in something else if your money is tied up in another investment)
Financial emergencies (such as uncovered medical expenses and/or job loss)

Investment planning will generally change over time, based on how close you are to retirement. As an example, as you approach retirement, you may want to allocate a larger portion of your portfolio to fixed or safe assets so that your portfolio does not suffer a loss in the event of a market downturn.

While investment planning aims to grow and protect assets, income planning focuses more on generating a reliable, ongoing cash flow so that you can pay your essential living expenses, as well as have some extra funds for non-essentials like travel, entertainment, and fun in your retirement years.

It is important to plan carefully for your income in retirement because there are many unknowns â€“ starting with how long you will need the income to flow in. Given longer life expectancy today, it is not uncommon for someone to live for 20 or more years after they’ve left the working world.

Similar to the accumulation period, there are a number of risks that you can face when you are in the income, or distribution, period. Some of the most common risks to your retirement income are:

Inflation
Healthcare and long-term care costs
Financial emergencies
Early withdrawal fees (depending on when you start accessing your money)
Loss of one or more income streams (such as the loss of pension income when the worker/retiree spouse passes away)
Taxes (particularly when accessing funds from a fully taxable account, such as a traditional IRA or 401k)

One of the biggest risks to your income planning is longevity. That is because if you live a long life, your income must stretch out for a longer period of time. It is also subject to all of the other financial risks longer, too.

That is why income planning needs to factor in a long payout period. This can be difficult to do using only investments, though. However, there is one financial vehicle that can continue to pay you a set amount of income for the rest of your life â€“ no matter how long that may be. This can be done using an annuity.

Annuities are designed for paying out a specific dollar amount of income for a pre-selected time period (such as 10 or 20 years), or for the remainder of your lifetime. Many annuities will also allow you the option of a joint income recipient where the income continues until the death of the second individual.

How to Create the Right Investment and Income Plan for Your Objectives

No two individuals or couples have the exact same investment or income goals. Therefore, there isn’t just one single financial vehicle or strategy that is right for everyone across the board.

Regardless of whether you’re in the accumulation phase or the distribution phase of your life, it is essential that you get the right advice â€“ which includes using the proper tools for the specific jobs.

Contact Information:
Email: [email protected]
Phone: 6232511574

Disclosure:
Investment advisory services offered through BWM Advisory, LLC BWM Advisory, LLC d/b/a Bedrock Investment Advisors collectively ‘BWM’ does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision. Confidential Notice and Disclosure: Electronic mail sent over the internet is not secure and could be intercepted by a third party. For your protection, avoid sending confidential identifying information, such as account and social security numbers. Further, do not send time-sensitive, action-oriented messages, such as transaction orders, fund transfer instructions, or check stop payments, as it is our policy not to accept such items electronically. All e-mail sent to or from this address will be received or otherwise recorded by the sender’s corporate e-mail system and is subject to archival, monitoring or review by, and/or disclosure to, someone other than the recipient as permitted and required by the Securities and Exchange Commission. Please contact your advisor if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Additionally, if you change your address or fail to receive account statements from your account custodian, please contact our office at [email protected] or 800-779-4183.

FERS Three-Legged Stool, by Todd Carmack

January 31, 2022 /by todd carmack

FERS Three-Legged Stool

Have you ever heard of the FERS Three-Legged Stool? Maybe you have heard the term flying around in office chit-chat or from some fellow employee trying to share his wisdom with you. If you don’t know what it is, don’t worry, as we are here to explain everything there is to know about it.

The “three legs” of the “FERS stool” are the foundation of the generic FERS retirement plan. You can think of each of the three legs as one of the three streams of the FERS retirement income. To be more specific, think of the first leg as the FERS pension, the second leg as the Social Security, and the third leg representing the Thrift Saving Plan (TSP).

Let’s try to understand this stool as your seat on which you will rest after retirement. Your goal is to build this stool as high as possible so that you can have a tension-free life after you retire.

Finding the Right Seat

Some people think that they will be able to spend their lives without many problems by entirely relying on Social Security benefits after retirement. That is a gross misconception. In reality, you can say that such people are doomed to live their days in borderline poverty. In other words, they have a very thin blanket protecting them from the harsh chilly storms of poverty.

As we have stated, Social Security is one of the legs of our stool. But can you imagine sitting comfortably on a stool with just one leg? It would be quite impossible to do so.

You can have a comfortable life after retirement only if you act as an active participant in planning your retirement. As a FERS employee, it is of utmost importance that you adequately fund your TSP. Those who ignore nourishing their TSP often find themselves in a situation that’s akin to balancing on a bike with two wheels that is not moving at all.

During the post-war era, people thought of retiring as late as possible. This trend has now changed. Nowadays, people want to retire earlier. This trend is expected to compound on itself in the upcoming years. Given that there have been significant improvements in the eldercare field and the life expectancy has also increased, there is no reason why this trend won’t move forward.

Design Improvements

Now let’s focus on improving the design of our three-legged stool. What can we do to make our seats even more comfortable after retirement? This first design improvement would include adding a tax-free bucket to our design. You can also think of this tax-free bucket as the fourth leg of our retirement stool, making it even more stable. We can agree that economic scenarios can change drastically within a short time frame. No one can predict the tax regime 15 years from now. For this reason, you should make sure that all your investments are well protected from such unpleasant changes in tax policies.

The fourth leg of our stool represents collaborative strategies adopted for benefiting from tax-free returns on our investments. In building this fourth leg, we can also say that we used a composite wood that includes Roth TSP, Roth IRA, and cash value Life Insurance.

Because our national debt crisis is compounding and the politics might take a complete U-turn on tax policies, it is highly recommended that you add this fourth leg to the stool.

Adding the Chair Back

Till now, we have understood the concept of the three-legged stool, and we have also added a fourth leg to provide more stability. What if we can further improve the design by adding a chair back? In this section, we will do precisely that.

The chair back represents a comprehensive insurance cover for you and your family to safeguard against any mishaps or unfortunate incidents. The primary purpose of buying insurance products is to create a flow of high-level emergency funds in case of an emergency. It is a known fact that the lack of proper health insurance causes most bankruptcies in the United States. For this reason, it is in your best interest to stay covered.

There are different types of policies available in the market, and mainly, they are designed to safeguard you against a particular kind of situation. For example, Federal Long Term Care Insurance Program (FLTCIP) provides you the benefits of providing coverage for long-term nursing care, Federal Employees’ Group Life Insurance (FEGLI) safeguards your family in case of your death, and Short Term Disability Programs provide coverage against work-related injuries. In most cases, these policies can be utilized only for the specific purpose for which they were designed.

There are also life insurance policies that utilize living benefits. Such policies are also called flexible policies as they can be used for other purposes.

Adding Comfort

So now we have added stability and a chair back to our stool. Next, we will add some comfort to it. Let’s say we add a nice cushion to make it a more comfortable seat.

The best way to add comfort to our retirement stool is with investments. You must always make sure that your TSP contributions match that of the government. Failing to do so will mean that you let go of easy money.

With TSP Catch Up contributions, an employee becomes eligible after 50 years of age, and you can add even more cushioning. You can even add IRA and make your FERS retirement stool the best and most comfortable retirement stool.

It might sound like it’s pretty simple, and this is something that you can easily do. But the fact is that it’s easier said than done. To actually stick to this design, we need to be emotionally invested in it. We need to empower ourselves with actual financial knowledge to make our investments work in our favor and towards the fulfillment of our dreams. It would help if you understood that delayed gratification is better than instant fun. For example, if you think that it’s in your best interest to have an extended vacation, then you are wrong. You must understand that a comfortable retirement will be the best vacation you can ever have.

Many people think that retirement means sitting duck for the rest of their lives — that is wrong. Even if you have the most comfortable stool with the best possible stability, you won’t be happy if you keep sitting in it till you cannot move. Retirement is not like a nursing home. It is more like a vacation to pursue your passions and work towards your dreams. There is no point in clocking out after retirement. Instead, you should keep yourself up by getting indulged in all the pleasures of life that you missed out on while working so hard.

Understand that retirement fulfillment will not come from a bank account — it will come from your own heart. The point of financial independence is not to become inactive but to have the freedom to do as you desire.

Contact Information:
Email: [email protected]
Phone: 6232511574

How Much Will FEHB Premiums for Federal Employees Rise in 2022?

January 25, 2022 /by joe carreno

FEHB Premiums for 2022

The Office of Personnel Management has revealed the prices for the Federal Employees Health Benefits (FEHB) insurance plans for 2022. In 2022, the average percentage of FEHB premiums paid by federal workers and retirees will rise by 3.8%.

According to the Office of Personnel Management, the overall price increase for non-Postal federal workers and retirees under FEHB will be 2.4% in 2022. According to the Office of Personnel Management, this is the second-lowest premium rise in the recent 24 years, which may be pleasant news after premiums increased by 3.6% in 2021 and 4% in 2020. Premiums increased by 1.3% on average in 2019, which was a lesser rise than previous years.

With the cost-of-living adjustment (COLA) predicted to be about 6% in 2022 due to increasing inflation, this news may come as a comfort to federal retirees in particular. When the main CPI numbers are revealed in October, the COLA for 2022 will be announced. At that time, FedSmith will publish a post informing our readers of the final COLA for 2022.

As of the most recent action on the yearly pay rise process, existing federal workers are on schedule to get a 2.7% average pay boost. For 2022, FEHB offers 275 health plan options. In response to the opioid crisis, the Office of Personnel Management (OPM) encouraged FEHB carriers to concentrate on COVID-19, mental health, and drug use disorder services. On OPM’s website, you may get complete sets of rate charts for all health insurance plans describing the FEHB rates for 2022.

FEDVIP Premiums for 2022

Premiums for dental and vision plans in the Federal Employees Dental and Vision Insurance Program (FEDVIP) will rise by 0.81% on average in 2022 and 0.95% for vision plans. In 2022, FEDVIP will provide 23 dental plan choices and ten vision plan options.

“Quality health insurance has never been more essential, and the Office of Personnel Management is ensuring that all eligible enrollees have the information they need to make educated choices about their coverage,” said Kiran Ahuja, Director of the United States Office of Personnel Management. “The worldwide pandemic highlights an employer’s obligation to offer excellent, cheap, and trustworthy healthcare alternatives to its employees.” The federal government, as the country’s biggest employer, is happy to set an example by offering a diverse range of health insurance plans via the FEHB and FEDVIP that provide the high-quality coverage that every employee deserves.”

The 2022 FEDVIP premiums are based on the weighted average of all plan costs across all carriers, with assigned weights assigned to each carrier, so there may be some variation among plans. Plans with an initial or final projected loss have higher weight given to their costs. Premiums are adjusted according to the national medical trend rate for health care services and the annual trend rate for dental services. The average increase in FEDVIP premiums for dental plans is 0.81%, while vision premiums will rise by an average of 0.95%. For federal employees, the share of FEDVIP premiums paid by enrollees falls between 14-18%, depending on which plan they select. The government pays the remaining portion 85-86% of premiums. According to OPM, federal employees pay an average of 16% of premiums for their FEHB plans, while the government pays 84%.

The 6-month open season begins on November 12, 2019, and ends on January 10, 2020. The open season period allows enrollees to review their coverage options before changing to current benefit elections during the Open Season or an opportunity period. OPM said that high turnover among enrollees and the new information available on healthcare plans presented challenges for designing a benefit-selection survey. “While we attempted to stay as close as possible to our previous open season design, we made some changes to reflect current enrollment practices and the availability of data about FEHB plan benefits,” said the notice.

In addition to federal employees and retirees, a person covered by FEHB must be a current spouse of a federal employee, retiree or annuitant, former spouse who hasn’t remarried, a child under age 26 for whom an eligible adult is entitled to enroll as a family member under the plan rules, or an individual who was previously eligible for FEHB, but whose eligibility terminated due to a break in service. The number of people covered by FEDVIP is not broken out.

The one-year increase in Maximum Allowable Insurance (MAI) and the 10% threshold for employer-sponsored insurance (ESI) remain unchanged from the 2019 FEHB premiums. MAI limits the total employee and agency premium contributions to a formula based on plan offerings and geographic location. Still, it only applies if employees seek coverage above the statutory FEHB program benefit entitlement.

Contact Information:
Email: [email protected]
Phone: 8139269909

Bio:
For over 30-years Flavio “Joe” Carreno of The Retirement Advantage has been a Federal Employee Retirement System specialist (FERS) as well as a Florida Retirement System specialist (FRS) independent advocate. An affiliate of PSRE (Public Sector Retirement Educators), a Federal Contractor & Registered Vendor to the Federal Government, also an affiliate of TSP Withdrawal Consultants. We will help you understand your FERS & FRS Benefits, TSP & Florida D.R.O.P. withdrawal options in detail while recognizing & maximizing all concurrent alternatives available.Our primary goal is to guide you into retirement with no regrets; safe, predictable, stable, for life. We look forward to visiting with you.

Disclosure:
Not affiliated with the U.S. Federal Government, the State of Florida, or any government agency. The firm is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Although we make great efforts to ensure the accuracy of the information contained herein we cannot guarantee all information is correct. Any comments regarding guarantees, safe and secure investments & guaranteed income streams or similar refer only to fixed insurance and annuity products. Fixed insurance and annuity product guarantees are subject to the claimsâ€paying ability of the issuing company. Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. Annuities are not FDIC insured.

Inflation: How Dangerous Is It for Your Retirement?

January 25, 2022 /by joe carreno

If you aren’t careful, inflation can eat into your retirement savings. As the American economy reopens, we’re witnessing increased inflation rates, which should cause retirees to think about the threat this poses to their financial stability.

The consumer price index increased by 5.4 percent last year, the highest level in over 13 years. You may be concerned now if you recall the 1970s’ skyrocketing double-digit inflation rates. Even if inflation never returns to those levels, you must consider the long-term effects on your savings.

In ten or twenty years, what will your money be worth?

Even minor increases in inflation can have a significant impact on a retiree’s savings. The Federal Reserve’s target inflation rate is 2%, but it has stated that it will allow inflation to grow above this level for some time. Consider how a 3% annual inflation rate would affect your money over the next 20 years.

To replicate today’s purchasing power of $60,000, you’d need $108,366.67 in 20 years. Another way to look at it is that $60,000 today would be worth only $33,220.55 after 20 years if inflation is 3% per year.

Because you may expect the cost of everyday things, travel, and other expenses to continue to climb, you should consider inflation in your retirement planning. Inflation eats away at the value of your investments and will do so even after you retire. Since savings accounts pay near-zero returns, retirees who rely solely on their assets are exposed to excessive inflation. As a result, it’s critical to evaluate your long-term investing strategy and retirement saving plan to see if you’re shielded from inflation.

The Social Security System Isn’t Up to Date

Because Social Security benefit increases have not kept up with the rising cost of prescription drugs, food, and housing, the Senior Citizens League estimates that the typical Social Security payment has lost approximately a third of its purchasing power since 2000.

This happened despite annual cost-of-living adjustments (COLAs) for Social Security benefits, which should keep benefit levels up to date with inflation.

In 2018, the cost-of-living adjustment (COLA) for Social Security recipients was 2.8%, which was quite high (for the 2019 benefit year). A 1.3% gain was the COLA rate in 2020 (for the 2021 benefit year). COLA has been absent or nearly absent for several years. In 2016, it was 0.3%, whereas in 2015, it was 0%. Changes to the way COLAs are computed have been proposed by lawmakers to better represent price increases experienced by older Americans.

Consider what would happen if you lost a third of your retirement income in 20 years. Is it more likely that you’ll run out of money?

What Options Are Available To You?

So, how can you figure out how much money you’ll need in retirement when inflation keeps adding to the mix? Here are a few pointers to remember:

To begin, think about any retirement income sources that are unlikely to keep up with inflation.

Consider how much money you have in a savings account or a CD is making in interest during this time. In the coming years, it’s unlikely that we’ll see a significant increase in interest rates, so plan on earning very little. It’s critical to evaluate your long-term investing strategy and retirement income plan to see if you’re shielded from inflation.

Next, figure out how much money you have in your savings account at the moment.

Consider inflation over the next 10, 20, and 30 years as you do so. Consider that, while overall inflation rates may reduce from their current levels, this may not be the case for some of the individual commodities and services that could consume a significant portion of your income, such as energy, food, or healthcare and long-term care expenditures.

Consider whether you’ll need to change your existing investment strategy once you’ve retired.

You might want to consider a retirement strategy that allows you to continue to grow your money so that you’re protected from unforeseen events like inflation. A good plan ensures that your purchasing power requirements are met consistently. As you approach and attain retirement, you may need to take on less investing risk. Having the correct risk asset allocations for your scenario could help you counteract the eroding impacts of inflation on your retirement savings.

Contact Information:
Email: [email protected]
Phone: 8139269909

Bio:
For over 30-years Flavio “Joe” Carreno of The Retirement Advantage has been a Federal Employee Retirement System specialist (FERS) as well as a Florida Retirement System specialist (FRS) independent advocate. An affiliate of PSRE (Public Sector Retirement Educators), a Federal Contractor & Registered Vendor to the Federal Government, also an affiliate of TSP Withdrawal Consultants. We will help you understand your FERS & FRS Benefits, TSP & Florida D.R.O.P. withdrawal options in detail while recognizing & maximizing all concurrent alternatives available.Our primary goal is to guide you into retirement with no regrets; safe, predictable, stable, for life. We look forward to visiting with you.

Disclosure:
Not affiliated with the U.S. Federal Government, the State of Florida, or any government agency. The firm is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Although we make great efforts to ensure the accuracy of the information contained herein we cannot guarantee all information is correct. Any comments regarding guarantees, safe and secure investments & guaranteed income streams or similar refer only to fixed insurance and annuity products. Fixed insurance and annuity product guarantees are subject to the claimsâ€paying ability of the issuing company. Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. Annuities are not FDIC insured.

Coming in 2022! A Mobile App for Federal Employees

December 16, 2021 /by todd carmack

Mobile App to Track Federal Employees’ Retirement Transactions To Be Launched In 2022

On Tuesday, officials from the federal government’s 401(k)-style retirement savings program highlighted several new features that the Thrift Savings Plan (TSP) would offer when it completes its transfer to a new recordkeeper next year.

Officials announced during a meeting on October 26 that a mobile app for the TSP would be available in mid-2022. The app is part of the Converge Program of the Federal Retirement Thrift Investment Board, which aims to improve the TSP’s retirement services under the agency’s unified recordkeeping contract.

Program manager Tanner Nohe stated at the Federal Retirement Thrift Investment Board’s monthly meeting, which manages the TSP that by the middle of 2022, the TSP will provide participants new options that would make it easier to manage and secure their funds.

According to Nohe, the program will launch with an app that will allow consumers fast access to account features. “It will enable us to offer retirement services on the go, as well as provide a new avenue for two-way communication with our participants,” he added.

Members will be able to effectively manage their accounts via their smartphones. In addition to the existing customer service alternatives, there will be a range of different ways for participants to receive help.

“For all participants, we’re also adding a virtual assistant and a virtual chat,” Nohe stated. “The AI-powered assistant will be available 24 hours a day, seven days a week…” A virtual chat with a live representative will also be available.”

The TSP will enhance the number of services and transactions available “on the move” with the launch of the mobile app, according to Nohe. Electronic signatures, additional online forms, and a new “concierge” service to help consumers move money from any other retirement accounts into the TSP are all part of the plan.

“Once people are enrolled in the Thrift Savings Plan, it will be easier for them to manage their money, and when it comes to rollovers, we’ll provide a concierge service to assist those who wish to roll funds into the plan throughout the process,” Nohe added. “Along with that, they’ll be able to scan their checks instead of mailing them in.” We’ll also offer an address locator tool for withdrawals to make the procedure go more smoothly.”

According to Nohe, the new structure will also provide more flexibility in terms of TSP loans. Participants can currently have two loans open with the agency: one general purpose and one principal residence loan. Beginning next year, both outstanding loans will be able to be used for general purposes, and there will be more alternatives for repaying loans if a participant has already left government service.

Tee Ramos, Federal Retirement Thrift Investment Board’s (FRTIB) director of participant services, said the program is on pace to launch in mid-2022.

Contact Information:
Email: [email protected]
Phone: 6232511574

Can Bad Debt Affect Your Social Security?- Flavio Joe Carreno

October 27, 2021 /by joe carreno

Many circumstances can leave workers unable to pay their debts until they retire. For some people, it may be an illness. For others, it may be a sudden job loss. These circumstances can send retirees into dire financial situations. If this applies to you and you want to know how the debts will affect your Social Security benefits, please read the article till the end.

Debt Garnishment and Social Security

The first question we must ask is if Social Security can be garnished for debt? The answer is yes, but not in all situations can this occur. Recipients that owe money to the government and those ordered by the courts to pay money to family members or fines to the courts can expect their Social Security to be garnished by the Social Security Administration (SSA).

Here are some other situations where the SSA can garnish your benefits to fulfill a debt obligation:

â€¢ You have defaulted in the repayment of your federal student loans: Social Security can reduce up to 15% of your benefits if you have defaulted on federal student loans. However, the 15% can only come from everything you receive above $750. This means that if your total monthly benefit is $750 or less, there would be no garnishment. Therefore you don’t need to worry.

â€¢ You owe the Internal Revenue Service (IRS): It is allowed to come for your benefits if you owe the IRS. Likewise, for student loans, the agency can deduct up to 15% of your benefits. This time, nothing is protected. All of your benefits are fair game.

â€¢ You flouted a court order for alimony or child support: Pending payments on court-ordered alimony and child support can also lead to the garnishment of your benefits. This time, the deduction can go as high as 50% if you are catering for another child or spouse or 60% if you are not catering for another child or spouse. In addition, if the payment deadline has been over twelve weeks, an extra 5% of your benefits can be garnished.

â€¢ You owe court-ordered restitution in a criminal case: In this situation, you stand to lose up to 25% of your benefits.

Note: garnishment of debt only comes when you miss payments and not just for owing the debts. If you owe debts and you pay at the appropriate time, there will be no garnishments. Also, garnishments do not affect whatever you have received from Social Security, but only your present and future benefits will be affected.

Debts that are Free from Garnishment

Debts owed to private establishments cannot be deducted from your Social Security. Credit card debts, mortgages, private student loans, auto loans, and other similar loans do not affect Social Security benefits. However, there are other serious effects of owing these debts. Not only will the debts affect your credit score and stop your future loans, but you could also lose your car or home, which will ultimately affect you after your retirement.

Suppose you are still employed and cannot fulfill your debt obligations to private establishments. Then such establishments or private debt collectors can sue you to court and get an order to garnish part of your salary. However, your federal retirement benefits are completely protected by law.

Retired and Unable to Pay Debts?

Some lucky people are able to pay off their debts completely before retirement. However, this is not the story for all. Some retirees take debts into their retirement years, and the loss of their paychecks makes it difficult to pay them off. This makes debt repayment challenging and remains for a long time.

Whether you are still working or retired, there are a few options open to those having difficulties paying off their debts, especially when the debts are federal debts. If your debts are taxes, the IRS has an online payment plan form. You can apply and get approved within a few minutes. If your debts are federal student loans, even Parent PLUS loans, you can opt for an income-driven payment plan. The plan uses your income to ascertain what you pay. You can also turn to the courts to adjust the amount of money you have to pay.

The most crucial step to protecting your Social Security from garnishment is prompt action. As soon as you know you will miss a payment, contact the right authorities for help.

Contact Information:
Email: [email protected]
Phone: 8139269909

Terrified of Running Out of Money When You Retire? Here’s What You Can Do…, by Flavio J. “Joe” Carreno

October 2, 2021 /by joe carreno

When it comes to retirement, most people think it’s just about saving up a considerable chunk of money during their working days. But spending that money safely and appropriately in retirement is just as much of a concern.

To put this in perspective, reports from the Transamerica Center for Retirement Studies and Aegon Center for Longevity found that Americans worry more about running out of retirement funds than declining health. In a survey of CPA financial planners, 30% of financial planners say their clients’ top fear in retirement is running out of money.

The general advice for retirement is to save, save, save, and invest, invest, and invest. But times have changed. People need to understand that saving successfully for retirement isn’t the end of the job. Experts now recommend spending time on withdrawal strategies. You need to learn how to spend safely and know your actions if the financial market eats into your assets. Here are some ways to preserve your retirement savings.

Draw-Down ‘Rule’?

The popular 4% rule suggests that you should withdraw 4% of your retirement holdings annually while keeping pace with inflation. To get your retirement holdings, you’ll have to add up all your assets in various accounts, including your 401(k), brokerage, and individual retirement accounts. This 4% includes all the dividends from your stocks.

By withdrawing 4% every year, you’ll have a balance large enough to last you for 25 years in retirement. This 4% also includes all the dividends from your stocks. The rule is, however, not entirely rigid. The 4% withdrawal is just the starting point. When the financial market experiences a downturn, you may have to reduce your retirement to 3% or even 2%.

Spikes and Valleys

Research over the years has shown that people’s budgets aren’t identical all through retirement. Retirees tend to spend more on leisure and travel during the early years. This, however, seems to trend down as they approach mid-retirement. At that point, the spending goes up for healthcare costs.

This is why rigid withdrawal strategies can be ineffective. Instead of following a rigid formula, see your retirement withdrawals as distinct financial decisions and work out the best strategy for you. Take less when the market is down, and if the financial market goes up, you can take more. For instance, 4% of $2 million would be $80,000. You can take all of that in a good year, and take less in a market downturn to safeguard yourself.

Consider using a minimum distribution approach. The RMD tables tell you how much you can withdraw, depending on your age. As you grow older, the withdrawal amount goes up because your life expectancy is dropping.

Mix it Up

Diversification is key to safeguard your investment. Your asset allocation should include bonds and cash. This way, if the equity market hits a brick, these assets can hold your portfolio pretty well, and there’ll be no need to invade your stocks.

Also, your withdrawal strategy should be sensitive to happenings in the financial market. There’s the risk that the market can dip in your first few years in retirement. If you make withdrawals at that time, you’re selling at a loss, which may affect the value of your portfolio.

For instance, let say you have $1,000,000, then the market stumbles, and you’re left with $800,000. Selling at this point will affect your portfolio. Hence, it’s essential to withdraw less in a market downturn.

A Safety Net

Life expenses aren’t the same every month, so you need guardrails in your spending. One year you might spend so much on travel and the next, health or a vacation.

So if you earn $3,000 every month, there’s no guarantee that you’ll only need $3,000 in future months. That amount should be the upper limit. Consider saving any difference between your monthly spending plan and upper limit for months of higher spending.

Social Security

Another critical decision you’ll make in retirement is when to claim Social Security. There’s a need to give it a lot of thought because it can be very impactful. It’s advisable to delay Social Security so that you can claim maximum benefits. But you also need to consider how much you have and whether you’re at risk of running out of money.

Contact Information:
Email: [email protected]
Phone: 8139269909

Is TSP 2020 the Scariest Roller-Coaster Ride or a Merry-go-Round? By: Marvin Dutton

September 24, 2021 /by marvin dutton

The ongoing world economic crisis due to the coronavirus outbreak reminds everyone of the recession that clobbered the economy in 2008-2009. During that period, hundreds of thousands of federal employees and near-retirees extracted money from their dropping stock-market funds, such as C, S, and I funds. They transferred them to their Treasury securities G fund. Many of them never thought of returning to stocks even if they became expensive during the historic 11 years of the bull market. Many who left the stock fund for the Treasury securities believe that they did the best thing. Many who were still investing in the stock-indexed funds while the stock market was plunging thought they did the right job when they refused to sell their shares when they were dropping and continued to invest when they were available on sale.

According to you, who did the right thing then? Let us ask this question of Abraham Grungold. Abraham Grungold is a long-term federal employee and a successful investor who now is a financial coach. We asked him why he’s sticking with the stock market. He replied and said it is like riding on a very steep roller-coaster. Here’s how he analyzes the situation as a deferral employee and a financial coach:

TSP 2020 is like a very steep roller-coaster ride that is the scariest ride of all

During his 34 years of service, he tried and tested Thrift Savings Plan roller-coasters. The TSP roller coaster is a ride for TSP participants who are investing their money in the C, S and I funds. The TSP participants who are investing in Treasury securities, or the G fund, are riding a merry-go-round. They are at no risk and merely enjoying their investments.

During his service, he took many federal furloughs but had never seen any long-term effect on the financial markets. Though new, it lasted for a short-duration and was overrated. After that ride, the TSP funds returned with a more substantial investment. The financial crisis of 2008 lasted longer, and he had to ride on that TSP roller coaster ride for a long time. While on that ride, it seemed like it would never end. The journey continued for years, with many ups and downs along the way. After that ride ended, the TSP returned and became more reliable than ever.

Now, this TSP 2020 roller-coaster ride is the scariest ride of all uncertainties, and the biggest fear is in the first drop of this ride. The first drop resulted in the TSP’s depreciation by 35% within a short few weeks. By depreciation, we mean a decrease in value, not any loss. The financial crisis of 2008 dropped the TSP account to 40%, but that was a progressive one that stayed for the 2008 to 2009 period. This year’s TSP roller coaster brought an immediate significant drop that is not acceptable. It is a steep and very volatile ride. Each hill and valley of this ride comes with a 5% inclination and 10% drops in my TSP, says Abraham Grungold.

He gave us some survival tips for this ride. Let’s have a look:

He applies a simple approach to each ride he takes. He takes a deep, calming breath and stays there with both hands in the first drop. Sometimes, he prefers closing his eyes. That means closing his eyes to the financial news because watching the financial news during a financial crisis can only increase stress and anxiety and worsen the situation. During all of his rides, he continues his contributions into the C fund and avoids watching the financial markets. He always focused on his federal career and enjoyed time with his family. His TSP account has increased by 20% already and he expects that this ride will last longer than other rides, but yes, the market will return stronger than before again.

So, what does he advise participants to do who only invest in the G fund during their fed career and in retirement? His reply is simple: Some people like to go on merry-go-rounds, and some love steep roller-coasters. People who love taking risks like Abraham Grungold will always ride on a TSP roller-coaster during their career and into retirement. No matter which type of ride you take, the most important thing is that you should feel comfortable with whatever you are doing, and it should be enjoyable. The money is yours, so the decision to invest it should rest in your hands only.

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

September 23, 2021 /by 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.

Will COVID-19 Impact Options for TSP Investors? By: Brad Furges

September 23, 2021 /by brad furges

In recent months, the federal government has introduced many changes in its Thrift Savings Plan (TSP). Most of the newly introduced modifications have nothing to do with the novel COVID-19 coronavirus pandemic, but some unexpected events can inevitably impact the investors. In this case, it is advised to expand the I fund and include more companies, and lay emphasis on emerging markets like China.

The CARES Act that came into effect to fight the pandemic may also impact the TSP investors who want to withdraw money from their TSP account but do not want to pay any penalty.

What changes can change the impact and inclusions of the I fund?

One change is increasing the investment in international stocks, or we call them I funds in the TSP’s lifecycle funds. The amount in the lifecycle funds for foreign funds was increased from 30% to 35%. (This percentage increase is in terms of the I fund ratio to the C+ S + me ratio.) This new change came into effect on January 4, 2019.

With this, a higher allocation of equity funds in the lifecycle income fund was also increased from the previous 20% to 30%. The change came into effect in January 2019 and will stay until July 2028. According to January 2020 reports, the L income fund has a target of equity allocation of 21.50%.

Changing contents of the I fund

The government is planning to change the I fund (International Stock Fund). The I fund’s current plan is to measure the stock market performance of developed markets working outside the U.S. and Canada.

As of now, the I fund has stocks from 21 developed markets representing more than 600 companies from large and mid-sized markets.

Things creating controversy over the I Fund Index

A group of senators is requesting the chairman of the Federal Retirement Thrift Investment Board (FRTIB), an agency responsible for the smooth working of the Thrift Savings Plan, to take back its decision to transfer the index tracked by the TSP’s I fund.

According to the new law, the new index will be completely different and represent more than 6,000 companies in the index containing 22 developed markets and 26 emerging markets. It will include large, medium, and small companies.

Many people who read the new changes commented that the I fund should include emerging markets or separate funds for the emerging market. The new changes will consider these things.

$50 billion in federal employee retirement assets are easily accessible to Chinese companies

This provision to change the I fund index has seen many controversies. Senators Marco Rubio (R-FL) and Jeanne Shaheen (D-NH) commented and said that changing the I fund to set a new benchmark index would expose more than $50 billion in federal retirement assets, including federal employees. Members of the U.S. Armed Forces would give birth to undisclosed material risks associated with many of the Chinese companies already listed on this MSCI index.

This controversy was the result of the ongoing market crisis due to the coronavirus pandemic and China’s pivotal role in the spread of this virus. Nobody knows the impact of this new change and the controversy on the world and the TSP investors.

When can we expect to see the changed new I fund index?

Several people reading the news have asked multiple times when they can see the new I fund index coming into effect. To answer this question of the new index’s date, Kim Weaver, the director of the Office of External Affairs for the Federal Retirement Thrift Investment Board (FRTIB), said that the board is working on this and will announce the date soon.

It seems that the board is still working on the new index and has not come up with any specific date for implementation.

The new provision allows withdrawing from retirement accounts without paying any penalty.

The latest provision in the CARES Act will enable participants of any age to withdraw up to $100,000 from a retirement account early without paying the 10% early withdrawal penalty in case he or she is impacted by the coronavirus or was exposed to it.

That means TSP investors can withdraw up to $100,000 from their account without paying any penalty.

Is this is allowed? What is the process of taking this step? No specific information on this question has been received so far. FedSmith asked the TSP what this rule means for the TSP investors. Ms. Weaver replied and said under the CARES Act, participants have this authority, and they have a project team to determine whether and how to implement the process.

Though this provision looks attractive, withdrawing up to $100,000 from the TSP without paying a 10% penalty may be difficult for TSP investors to pay the amount. It seems that this option will be open for TSP investors, but we don’t know if this will be available to TSP investors, and when it will happen.

The coronavirus is expected to impact our society in ways that we never expected a short time ago. Many TSP investors seeing the rapid drop in the stock market are riding on an emotional ride while they are watching their investment dropping. The number of millionaires in the TSP club has dropped by more than 45% in a short while.

While the percentage of the lifecycle’s I funds has increased, we have no idea of the date when the new I fund will come into effect. The CARES Act to fight the COVID-19 crisis is expected to open up new withdrawal options for some TSP investors. It might be too early to guess how this situation will help TSP investors. More surprises are expected to come before the pandemic ends.

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

September 21, 2021 /by rick 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.

Effect of COVID-19 on the TSP. Sponsored By: Todd Carmack

September 21, 2021 /by todd carmack

You will hardly find any sector that has not been adversely impacted by COVID-19. So, the same is the case with the TSP (Thrift Savings Plan). There is no single plan which didn’t go down in the meantime. So, considering the situation, in this post, we are going to present a critical analysis of the common effect of COVID-19 on the TSP.

Introduction

COVID-19 has a global economic effect, which is getting more and more aggravated with every passing day. Of course, the package of $2 trillion would help people in coping with this problem, but the effect can be minimized only and not eliminated. Moreover, according to the Washington Post, a huge number of Americans will be expelled from their jobs in the wake of COVID-19.

Similarly, whether it is about the annuities, life insurance, or the TSP, all of these are facing adversities because of COVID-19, as COVID-19 has its outsized bad impacts on every aspect of life. Most of the participants and circumstances can endorse the veracity of the statement that the Thrift Savings Plan is also not different from other things.

According to the Federal Investment Thrift Savings Board

Different departments are carrying out research to determine the bad impact of coronavirus on the TSP, and the same kind of study has been presented by the Federal Retirement Thrift Investment Board (FRTIB) that is extending its research on three fronts.

Ravi Deo, the executive director of the FRTIB, expressed his view with the TSP board on Monday in these words: “We are monitoring the impact on the TSP funds and our participant accounts. Along with this, we are also monitoring the impact on our ability to service the participants and ensure the running of the TSP. And of course, we are monitoring the impact on the health and well-being of our employees and contractors. We have created teams that are looking at all three aspects above. The teams meet regularly and make recommendations to Suzanne [Tosini], our chief operating officer, and me.”

According to the board, there have been many differences in the activities of participants of the TSP, and they’re not very positive. The adverse impacts of COVID-19 have started becoming visible, and they will get even worse with every passing day unless this recession is over.

The same situation had been faced by TSP plan holders earlier in the times of 2008-2009, but, unfortunately, people truly learned very little from that event and are still committing the same mistakes. If we compare the withdrawals of 2019 and 2020 from the savings plans, we will come to know that since the first of March of 2020 up till now, more than 25 million people have withdrawn money from their TSP. On the other hand, this number was much less in the year 2019.

Meanwhile, the inter-fund transfer (IFT) is also at its peak. In this time, when the market is highly volatile, most of the TSP holders have shifted their plans from other funds to the G fund, which has excellent stability if compared with the additional funds. The shifting of the plans from one fund to the G fund can be estimated by the fact that from the 24th of February to the 17th of March, $21 billion in funds were transferred to the G fund by the participants.

Sean McCaffrey, the chief investment officer of the TSP, expressed his view in the following words: “This movement into the G fund corresponded to net flows out of the C, S, I, and L funds. Moreover, this represents the highest volume of IFT activity both on an absolute basis and as a percentage of assets for any three weeks since the TSP implemented a limit on IFTs in May 2008.”

TSP service centers are open for service, for now

Despite having severe health and economic emergencies, TSP service centers are still open for the service of TSP plan holders. Ravi Deo propagated his statement in the following words over this issue: “The contact centers are dealing with a higher than normal volume of calls,” Deo said. “Those calls tend to spike at certain points during the day. We are still answering the vast majority of calls in less than 20 seconds. Still, the situation may get worse, and we have to reduce staffing and allow service levels to slip in order to ensure safety for all employees at the contact centers.”

Meanwhile, the Federal Retirement Thrift Investment Board (FRTIB) is planning to expand the telework capabilities for contact center staffers. Albeit, the employees associated with the agencies may face difficulty in taking and making the calls from the participants of the TSP. In this regard, Ravi Deo shared the success of their department in the following words: “We’re working through the issues with telework,” Deo said. “The goal is to have all the contractors have the ability to telework in the not-too-distant future.”

In short, the department is extending its full ventures to make sure that TSP service centers are working with their total efficiency, where they could resolve the public problems either related to the systematic withdrawals or inter-funds transfer through the online channel.

Yes, still, there are issues related to the TSP operations that require mailed confirmations, as most of the staff members are unable to join their duties, as they are either in the areas that are affected by the pandemic or absent due to being unfit from illness.

Moreover, Ravi Deo said that the department was working to make the previously planned project active for adding in the convenience of the people of having their TSP forms downloaded electronically. This act will reduce the anguish of the people visiting and making calls to the TSP service centers repeatedly.

All FRTIB employees are teleworking

As it has been made sure that TSP service centers will remain open to entertain the queries of the TSP plan holders, employees will work according to the routine. In the same way, employees of the FRTIB department are also present in their headquarters in Washington, D.C.

An endeavor was made one month before in which more than 750 FRTIB employees have successfully connected with the TSP’s virtual private network. So, according to Deo, the FRTIB is not going to leave any page unturned in the service of the people who are concerned about their TSP.

Final words

You should be well-convinced over the statement that the TSP has been equally targeted by COVID-19, as any other sector was targeted. People are moving towards G funds by adopting the policy of inter-funds transfers, as G funds are less volatile and more stable than additional funds. Meanwhile, TSP service centers and FRTIB departments are doing their best to facilitate people in their queries.

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

September 20, 2021 /by leslie "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.

TSP Approves Budget for 2022 Fiscal Year. By: Aaron Steele

September 18, 2021 /by aaron steele

On Tuesday, August 24, 2021, the Federal Thrift Investment Board approved its 2022 budget. The new budget is $496.8 million, a slight decrease from the $498.4 million that the board approved for the 2021 fiscal year. The board oversees the Thrift Savings Plan (TSP), a retirement savings plan scheme for federal employees.

The board made the decision during its monthly meeting on August 24. Ravindra Deo, the board’s executive director, explained that the 2022 budget is the second-highest spending plan since 2020. The board has been spending more on projects since 2020, but the 2021 budget has been the highest spending period so far.

Deo explained that the board aims to focus more on the TSP and its participants over the next five years. The executive director added that the board had been more focused on technology and cybersecurity over the past five years. However, it has more confidence in the progress it has made in those areas over the years. The board members will now prefer to focus more on the agency and the participants of the scheme. Deo added that TSP participants should expect better services from the board.

The TSP has had a three-year spending uptick period. A part of the focus is the agency’s project — Converge. The project is geared towards helping the agency change its recordkeeping method. Converge is expected to take effect in 2022 and will allow for better services, including services that participants have been clamoring for, such as a mobile application and access to mutual funds.

Apart from Converge, the board is also looking at initiating other upgrades with the increased budget. Such initiatives will include an upgrade to the agency’s information technology (IT) and financial services management. In about two years, the executives of the board predict that the agency’s funding will fall to about $445 million.

More people are expected to join the savings scheme, and this, Deo said, will reduce the budget’s cost to each participant from $79 to $57. Deo said this change is expected to take place in 2026. According to the executive director, next year’s budget is 6.8 points, but that of 2026 will be around 4.5 basis points. The basis points, measured in ratio or percentage, compare the agency’s budgets to its assets.

Deo also explained that the board would determine the success of each project by examining how fast employees learn the new systems. The executive director added that the new model would pose a new challenge for employees, who need to evolve and adapt to it. Deo also maintained that the participants remain the priority even as the agency adjusts to the new changes.

Things Not to do While Managing Your TSP During a Pandemic. By: Ricardo Viader

September 16, 2021 /by rick viader

We aren’t surprised by the changing activities in the Thrift Savings Plan. After all, the TSP after the coronavirus pandemic clobbered the performance of the stock market.

Kim Weaver, the director of external affairs of the TSP, while giving an interview on the TV show Government Matters this week, said the government saw a hit in the inter-fund transfers. But that spike has been reported only from the 5% of our participants, said Kim. Ninety-five percent of the TSP participants are sitting idle and doing nothing. But she advised people to stick to their old plans.

It is natural to worry about the volatility of the stock market amid the coronavirus pandemic and worry about retirement in general. Kim received an email from a client this week, and we will discuss the email and solutions suggested by Kim.

One client working under the Federal Employees Retirement System (FERS) had already submitted her retirement paperwork in December 2019. She worked for the federal government for 22 years and will retire on March 31, 2020. This decision was made long ago, so she applied for her Social Security benefits and will be receiving her benefits starting in May 2020.

But all of us know about the third leg of our FERS retirement, the TSP. The client took her TSP last September and gave it to a very reliable financial adviser to manage for her. She also has some of the remaining TSP funds which have matured since September 2019. She had been actively saving in her TSP since she started her job with the government and actively contributed to the catch-up contribution. Now she can see her retirement savings declining day by day, and she doesn’t have any time to make it up for her, like the time she had when the market plunged the last time.

According to her understanding of the documents, her paperwork has been reviewed and approved by the government. Still, she has not received the estimate of her annuity due to the agency’s software problems that the agency uses to calculate the annuity. So, she has no idea about the money she will receive monthly. She is in the middle of the checkout process that is expected to complete electronically only if things go as per plans. It’s too late for her to stop or delay her retirement at this point, so what should she do? It looks like she needs to look for a part-time job after retirement—she never planned anything like that!

Kim replied to her email and said, “If you think you are not ready to retire at this time, you still have time to hold your retirement application. Taking retirement is a voluntary action, and you haven’t left your job yet. This guidance comes from the Office of Personnel Management that says an agency must allow a federal employee to hold or withdraw his or her retirement application before the effective date of retirement, giving a valid reason and explaining the reason in writing to the employer.

Though the retirement process will go slowly during this ongoing period of world crisis, if this situation worries you or if you think that you don’t have a three- to six-month month emergency fund, you can delay your retirement until you feel financially strong enough to bring your life to normal.

In the mail, the client mentioned that she withdrew most of her money out of her TSP and put it in the safe hands of a very reliable financial adviser. Kim said that when any financial professional asks you to do so, he or she should give an apparent reason for his or her activity.

Kim said that the client’s financial adviser must have recommended some options to rebalance investments corresponding to retirement plans of this year. That doesn’t mean you would stay safe from the declining markets, but you should have some savings in your account to keep you stable while you withdraw savings from your retirement account without being impacted by the ups and downs of the changing market.

“It’s common for professional financial advisers to contact their clients in situations like this and give them some certainty. I hope your financial advisor contacted you,” said Kim. Those who plan to retire or have recently retired from government services must check these tips from the below-mentioned resources:

Janet Novack has written an article on ways that the coronavirus will impact Boomer retirements. She has written in her report that in times like this, a “bucket strategy,” or allocating retirement savings, always works well. Taking an example, an individual nearing or already retired should save money for at least three to five years of essential expenses in cash or equivalent to cash like laddered CDs or Treasury bonds.
Josh Sacndlen of Heritage Wealth Planning said this bucket strategy helps you to segregate your current income needs into their emergency account. In this way, you don’t need to worry about times like this when the market is getting crushed and making ends meet is difficult.
Mark Keen has talked about many TSP issues that federal employees and retirees face in a webinar at the NARFE Federal Benefits Institute on February 27. Its saved copy is available for free to members of NARFE.
Micah Shilanski said that TSP account holders who reserve a long-term plan for their savings and investments are not scared of the current market volatility. He further added that such employees in this condition consider this time as a buying opportunity because the stock market is low. He and Kim will be coming up with videos on March 27 and March 31, addressing issues of retirement planning during the current situation.

Last but not least, the reminder from the TSP looks relaxing during this time of market uncertainty. By the time you understand the situation and plan to react to it, the entire market situation might have changed. If you skip one or two small ups in a decade, your TSP investments may give the average market return for the entire term. It is advised to stick to your plan and don’t attend these bouncers.

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

September 15, 2021 /by leslie "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.

What Next to Manage Your TSP: Buy, Sell, or Sit Tight? By: Brad Furges

September 14, 2021 /by brad furges

Some time back, hundreds of Thrift Savings Plan account participants were dreaming of their entry into the Millionaires Club. Some believed that by mid-year, their accounts would have more than $2 million. Now, this seems like only a dream. So the question for all federal employees who are managing their finances during their retirement is what to do next to manage their TSP? During the last time, the Great Recession of 2008-2009, tens of hundreds of active and retired feds moved out of their stock indexed C, S, and I funds. Most switched to the Treasury securities G fund. Many never invested in stocks despite the 11-year bull market. So who can be done next? And what could have been done correctly at that time, and now? In this article, we will try to put some light on this question:

To get an answer to this question, we contacted Abraham Grungold. He is a successful TSP investor and a financial coach who is known for his thoughts and a fantastic sense of words of wisdom. He answered this question and said that, for employees under the Federal Employees Retirement System (FERS), it is the best time to buy.

The ongoing COVID-19 pandemic is scary. People are losing their lives, and they should not be treated lightly. Everyone needs to stay cautious with his or her personal and financial health. This may end in the coming weeks or in months. The economic health has certainly taken everyone on the chin. Everyone feels knocked down, but we will return and become sharper after the outbreak is over. As far as employees under the FERS system are concerned, employees who have a Thrift Savings Plan will buy in a downward market. Doesn’t matter, if you are one year away from retirement or more from retirement, this time is a perfect buying opportunity.

He said he has transferred his cash balances to the C fund and changed his future contributions to buying C funds. For his personal IRA, he is purchasing every time the DOW dropped another 10%, buying when the market is low 10%, 20%, and then at 30%.

At his financial coaching site, he has both clients who are federal employees and non-federal employees. His advice is not to sell anything to all clients because you don’t lose anything when you don’t do anything. If you are watching the game, you will not be at a loss. But there are clients he is told that when the Dow dropped to 30% is the time to buy something. The financial expert’s advice is to buy when the market is low. One of his federal employee clients transferred 50% of his account into the C fund. That person retired, so 50% was good enough for him. There is one more fed client who has both C and F funds. Grungold advised him to increase his contributions to the maximum since he was good enough and could afford to do so.

Grungold said, “I also have two non-FERS clients—one purchased a considerable amount in an S&P 500 Fund with Vanguard, and the other is waiting to see a drop in the S&P fund. It is advised to invest in small quantities, and when the market is low, that is 20-30% of any purchase is a good option. For many non-fed clients who had small cash, I suggested high-quality value stocks going down 25-30% but which will come up quickly after the virus has left us.”

“No matter what type of decision you take on, the most important thing is that you feel good and comfortable with whatever you are doing. The money is yours, so the decision to invest it should rest in your hands only. Please do not hesitate to contact me on LinkedIn or my Facebook page for more queries.”

The Top 5 TSP Mistakes That Federal Employees Commit. Sponsored By: Todd Carmack

September 12, 2021 /by todd carmack

Some of you might develop your perception of buying annuities, joining the TSP, and signing up for other retirement plans by mere reading of too many generalized articles, which are not for the federal employees but for the general people. Therefore, it is repeated that they often miss the golden chance and fall in the category of losers, as they could not take the proper benefit of their retirement plans.

So, considering the problem, we are here with the five top mistakes that federal employees commit with the Thrift Savings Plan (TSP). Moreover, after reading this post, you will be able to decide what will be better for you to choose from.

Let us have a look over these mistakes.

#1. Some employees do not have the TSP

This is one of the biggest problems that people come across in their financial career. Being part of the Thrift Savings Plan is inevitable for a federal employee if he/she wants to lead a prosperous life after his/her retirement. But, some federal employees don’t adopt the Thrift Savings Plan, and this is one of the biggest mistakes that they commit.

So, they might go with the TSP by keeping the following things in their minds:

How much money do you want to have in your TSP at the time of your retirement?
What should be the amount of risk that will keep you comfortable?
What will be the value of your annual premium if you want to reach your early decided goal?

So, you need to be very careful while drafting your TSP solutions because, in most situations, you might find it hard to make the right decision, and the single solution would not be applied to your problem.

#2. Contributing less than 5% in the TSP

This is the stereotype that is found in the minds of most of the federal employees, that contributing more to their TSP brings harm to their interest. This might be the thinking developed from reading a generalized article that was written for something else. This isn’t the case with federal employees.

Even if they do not contribute 5% to the TSP, they are unable to enjoy a considerable benefit based on their contribution. Because of the contribution they make, the company matches that in your TSP on your behalf. Therefore, if you contribute 5% in your TSP, you will have a 5% rise in your annual income, as this contribution is based on the total income you earn in one year.

So, being a federal employee, you must not keep this fear in your mind, and you must play out of the box, to enjoy the full potential benefits that have been kept in the TSP.

#3. Carelessness for their adopted lifecycle funds

The lifecycle funds comprise the full five plans that are under the TSP. Once you adopt these funds, they start moving towards a more complex and tough decision as you move closer to your retirement. But, these complicated and hard decisions might inflict enormous benefits for your cause.

But, the need is to make the right decision at the right time, which most people do not pay heed to and lose the critical occasions that could be enjoyed with a good return. Most of the time, people are confined to drafting a specific solution that does fit their requirements, and they start thinking about their lifecycle funds.

Therefore, in such a situation where you find it hard to draft a suitable solution for your lifecycle funds, you must consult with a financial adviser who could read your case and give you a good piece of advice keeping your position in view.

#4. Investing 100% of their money into the G fund

The G fund is one of five index funds, and most people give priority to this fund because it possesses the lowest volatility. This fund is invested only in the USA government securities that are issued on the TSP only. This fund allows you to have an interest in your investment without losing the principle.

G funds depend upon the federal fund rates and federal reserves, so it stays the best option to have low interest for years without any concern of losing the principal amount you have invested in the fund. But, this is not that beneficial for the federal employees, as they cannot earn big through this fund.

With the growth rate of only 2.3%, you might feel safe, but to get a big gain out of your TSP, you have to pay for the more significant risk for the bigger gain. So, this is again one of the biggest mistakes that federal employees commit and stay away from exploring the real worth of the advantages offered by the other funds.

It would be an excellent approach to invest in different funds, like the C fund or S fund, but investing all the money in a single fund might halt the way of your financial career’s betterment.

#5. Investing based on past performance

Most of the federal employees consider that checking the trend of the past performance of the funds will be the best prerequisite of choosing the right fund. But, this is not the right way of selecting the right fund.

The most important thing that you come across in choosing the funds comes up in the form of your own circumstances that you are facing. So, always select a fund keeping in view your requirements and needs without paying heed to the past trends of the funds, as they may alter their course any time.

Having gone through this post, you might have understood the mistakes that most of the federal employees commit in their financial career and could not enjoy the real benefits offered by these funds. Here is some advice: if you want to earn big from these plans, you must get yourself out of the box of safe play.

So, mark your requirements and consult with a good financial adviser to make the decision to invest in funds.

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

September 4, 2021 /by Admin

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.

Tag: thrift savings plan

thrift savings plan

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What Next to Manage Your TSP: Buy, Sell, or Sit Tight? By: Brad Furges

The Top 5 TSP Mistakes That Federal Employees Commit. Sponsored By: Todd Carmack

#1. Some employees do not have the TSP

#2. Contributing less than 5% in the TSP

#3. Carelessness for their adopted lifecycle funds

#4. Investing 100% of their money into the G fund

#5. Investing based on past performance

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

TSP & Retirement