Posted on Sunday, 24th February 2019 by

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The President signed a spending bill fully funding the federal government through September of this year. The bill authorized a 1.9% pay raise for federal employees. It will take time for all of the agencies to load the updated tables into their system and we will post the new 2019 pay tables as soon as OPM releases them.  As of February 24th, the new pay tables were not yet available on OPM’s website.  Fortunately, the raise will be retroactive back to the first full pay period of 2019. All will get a larger check with the backpay included soon.

With the longest government shutdown in history behind us it is a good time to establish an account for exigencies that may arise in the future. We just went through a painful shutdown that impacted hundreds of thousands of federal employees. Many were not prepared and didn’t have the reserves they needed to make ends meet for an extended period. It’s a good time to evaluate where you are financially to prepare for the next emergency in your life.

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

This should be a wakeup call to all federal employees to establish emergency savings if they haven’t already. Now is an excellent time to begin. With the new raise and a lump sum back payment coming, either add to your existing savings or start an emergency account now.

Many feel they can’t save, they live paycheck to paycheck. There are ways to make it painless. Since a raise is on the way, retroactive to the beginning of the year, start an emergency account with the retroactive increase. Then, grow your account by setting up an allotment to your local credit union or bank for half of the 1.9% increase each pay. Those who already have a savings account, increase your allotment by at least half of your scheduled increase. You will still see more in your paycheck and at the same time your savings will grow each and every pay.

If you are within 10 years of retirement, I suggest increasing your savings allotment to as much as the full amount of you increase each year. When I retired my take home pay was the same as it was 10 years prior and conversely my credit union account grew substantially. You can use this technique to pay off your mortgage before retirement or to simply feather your retirement nest egg.

Another option is to open a Treasury Direct account and send an allotment each pay to purchase Savings bonds.  I Bonds are inflation adjusted and currently paying 2.83%. EE Bonds are paying .10%, however, if you hold EE Bonds for 20 years, the Treasury guarantees the bonds will double earning and effective rate of 3%. 

I believe I Bonds are a better option for those approaching retirement and for anyone else that may need to cash in their bonds in less than 20 years. Also, inflation has been low for the past 10 years and interest rates are still rising. The interest earned on your bonds are tax deferred. You don’t have to pay income tax on the interest earned until you cash them in. You will have to set up a Treasury Direct account before your first purchase.

There is a downside to EE and I Bonds, you can’t cash them in for one year after the purchase. Any bonds puchased in the previous 12 months can’t immediately be turned into cash.

Thankfully, the raise has come and now it’s up to you to prepare for the inevitable down the road. There will always be times in our lives when we well need to fall back on our savings.

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.

Last 5 posts by Dennis Damp

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, FINANCE / TIP, RETIREMENT CONCERNS, SURVIVOR INFORMATION | Comments (0)


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