Posted on Thursday, 27th January 2011 by Dennis DampPrint This Post
I have always been fairly conservative with my TSP account considering that I’m now retired and may need these funds down the road. I look at my TSP performance from several perspectives. First, I compare my contributions to market value for total gain, the amount my account has grown since retiring, and then look at year to year statistics to track performance for recovery periods such as the latest recession. My TSP account is now worth more than it was in 2008 and my total account has grown substantially above my contributions over the years. I actively manage my account moving funds from the conservative G Fund to other funds as the business environment changes.
Even though the TSP posted its second year of positive returns you may not have fully recovered suggests Linda Duncan, our Benefits and Finance Forum host. If the funds have done so well in the past two years, how come your account balance might not have fully recovered from the devastating market downturn in 2008?
In 2008, the C, F, and I funds lost between 36.99% and 42.43%. The C fund gained a total of 41.74% in 2009 and 2010 combined, yet your account balance has not fully recovered. If you had $100,000 in the C fund in 2008 and left the funds in the C fund through 2010. The year-end accounting would look like this:
- 2008: $100,000 – 36.99% = $63,010 new balance
- 2009: $63,010 + 26.68% = $79,821 new balance
- 2010: $79,821 + 15.06% = 91,842 new balance
Therefore, if you left all your money in the C fund and did not contribute additional funds, you are not quite back to what you had before 2008. For the C fund to return to the pre-2008 balance of $100,000, the C fund would have to earn at least 8.89% in 2011.
Simply put, if you have a 25% loss on your savings followed by a 25% gain, do you have the same amount of money that you started with? The answer of course is no because of the amount of money the percentage is derived from is different.
Check your historical account balances in your TSP account at www.tsp.gov to determine if your TSP account has made a full recovery yet.
Skyrocketing FEHB Costs
I reported in my October 2010 article that my FEHB premium increased 12% and since then many feds have been shocked to discover their premiums went even higher. Abby’s FEHB coverage in New York increased $188.03 per month and her carrier attributed the increase to the new health care bill. She immediately contacted her Senator’s staff because she thought that the new health care bill would be cost neutral. The staff at first was at a loss for word; however, they called back several days later to advise her that “the bill included an increase for all federal workers in 2011 and that in the future retirees may need to absorb more of the health care costs.”
I’ve known Abby for many years and she was a respected senior federal manage. When you talked with her you knew you were getting a straight answer, not a politically correct reply. You may not have liked the response but you knew you didn’t need any clarifications after the discussion. That is what we need from our politicians today, straight talk based on known facts and research not subjective conjecture. I met with my Congressman about this and other issues in late 2010 and he advised me that he voted against health care reform for this and many other reasons. When they added children up to age 26 to all existing policies and now insurers can’t exclude anyone with pre-existing conditions and then waived signup making it OK to sign up when you get sick, costs for insurance companies are projected to skyrocket! Now that the new regulations are starting to take effect, the administration has granted hundreds of waivers because companies simply can’t afford to maintain coverage under the new system. If you recall, Nancy Pelosi said when they placed the new health care legislation up for a vote and I quote, “We have to pass this bill so we can find out what is in it.”
Unfortunately… what I and many others are finding out is that they should have READ THE BILL and understood what was in it before passing it! Would you buy a house without a walk through, checking out the neighborhood, a home inspection, and understanding what you would have to pay for it!
- Roth Conversion – If you converted a part or all of a retirement account to a ROTH in 2010 to take advantage of paying the taxes on the withdrawal in 2011 and 2012 you will received a 1099-R from your brokerage account. The statement will show the full amount of the withdrawal. The 1099-R doesn’t show the transfer to a ROTH account. Don’t panic, you will receive a Form 5498 showing the transfer and will use that to substantiate paying the taxes in 2011 and 2012.
- Need a Break from the Cold? Read Nancy Holston’s January article on great travel Deals this time of year. After spending the past month getting out in the weather to participate in her favorite activities she needed a break from winter so she can survive winter.
- The TSP is launching the new L 2050 fund on January 31. Check out the new fund on www.tsp.gov. Their new web site is far more functional than the older site and I like the feature where you can go back and check your funds value on any past date. Go to the date you retired and print out the report and keep it with your retirement paperwork. It provides a basis for determining your gain since retirement.
- House Bill H.R. 408 is a five year spending reduction bill. The President mentioned this in his State of the Union Address on January 25th. Section 401 is titled “Extension of Federal Employee Pay Freeze.” The bill proposes extending the pay freeze to 2015. There are 24 cosponsors of the bill and only time will tell if it is passed.
- COLA calculations for 2012 are still pointing in the negative direction which doesn’t bode well for a cost of living increase next year. There is still plenty of time for inflation to raise its ugly head but I wouldn’t hold my breath. That seems hard to believe when you consider how fast our health care premiums; fuel and food prices have escalated over the past year!
Request a FREE Retirement Benefits Summary Analysis online at http://federalretirement.net/assistance.htm. A benefits specialist will prepare a personal retirement analysis detailing your total benefits and expenses verses total retirement income from all sources. A sample analysis is available for your review.
Visit our other informative sites
- http://federaljobs.net (Federal Career & Job Center)
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- http://fedcareer.info (Career Development Center)
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- http://searchfedjobs.com (Job Search – All Sectors)
- http://ehsjobs.org (Environmental Health & Safety Job Center)
- http://stolenplates.com (What to do if this happens to you)
- Educational Opportunities (Find educational opportunities in your area)
The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.
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