Posted on Saturday, 30th March 2019 by

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Federal employees have been waiting for months to receive their 1.9% pay raise. Agencies are now processing back pay retroactive to the beginning of the year and the updated 2019 pay charts are available online for your review. We are currently in pay period 7 that ends April 13. When your agency’s payroll office processes the backpay, all should see a welcomed increase in their bank account balance

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

The new locality pay charts are also available for review. The 1.9% increase is a function of the base rate increase of 1.4% plus a locality adjustment. Therefore, your raise, depending on your locality adjustment, will range from a low of 1.66% for the (Rest of the US) chart covering areas not included in a specific locality chart to a high of 2.27% for those working in the Washington DC, Baltimore Arlington area.

To estimate your backpay use the TOTAL INCREASE Percentage listing on the locality table for your area.  For example, Joe works in the LOCALITY PAY AREA OF VIRGINIA BEACH-NORFOLK, VA-NC. He is a GS-11, step 7 earning $74,842 a year. Multiplying Joe’s gross wages of $74,842 by .0187 (1.87% as listed on the locality pay table) equals $1,400, his 2019 pay increase. Divide this figure by 26, the number of pay periods, and Joe will be receiving an extra $53.85 a pay. If Joe received his backpay in pay period 9 he would receive an extra $485 in his pay less taxes.

This may not seem like much, however if you increase your TSP contribution by just 1 percent after receiving your backpay, your retirement fund will grow considerably over time.  In Joe’s case, the 1 percent increase in his TSP will take $28 of his $53.85 increase each pay, he will still have a little extra to spend. Yet, he will be saving an additional $748 a year towards retirement.

Again, this doesn’t sound like much until you look at compounded interest over say the next 20 to 30 years. Saving just $28 biweekly at 4% interest will grow to $22,368 in 20 years and will reach $42,301 in 30 years! That same savings at a 6% growth rate would be worth $28,222 in 20 years and $61,331 after 30 years. A little goes along way and it pays to start early.

Another option for many would be to use part of their backpay with additional contributions biweekly to establish an emergency fund. Possibly set up an allotment to your local Credit Union to get started. A recent report indicated that over half of those working didn’t have any savings, none at all.  In that same report more than 60% couldn’t come up with $1,000 for an emergency!  With the recent government shutdown in the rear view mirror now is a good time to evaluate your spending habits and prepare for the unexpected.

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

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Disclaimer:Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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