Posted on Friday, 13th May 2022 by Dennis Damp

The TSP is updating their website and adding new investment choices. A short summary follows along with steps to take now that will familiarize you with the pending changes. If you were planning to initiate a new withdrawal or any changes to your investments from May 26^th through the first week of June, you won’t have access to your account.

TSP TRANSISTION DATES

Mark the following dates on your calendar. Full access under the new system will be available the first week of June.

• May 16 to the first week of June: Certain My Account transactions, online tools, and forms will be temporarily unavailable. You can sign in to your account through May 25^th using your original username and password.
• May 26 to the first week of June: All transactions will be unavailable, including changes to investments. My Account and the ThriftLine will also be unavailable during this time.
• First week of June: Full TSP service returns with new features, expanded support options, efficient online transactions, a new My Account with convenient navigation, and much more.

When the new website is launched in early June you will be required to initiate a new login for your account.

During the transition period, your savings will remain invested in the TSP funds you’ve chosen. Your payroll contributions and loan payments will continue. Installment payments scheduled to be paid May 24 – May 31 will be disbursed early on May 23.

These changes were designed to provide account access flexibility, additional investment choices, more options to contact TSP representatives for help, and additional secure online transactions.

NEW FEATURES

These features will be on par to those offered by most private sector retirement plans and adds more investment options. When you run into problems a virtual assistant will be available online and the new TSP Mobile App can connect you to a live-chat with a TSP Representative during normal business hours. The TSP phone line (877-968-3778) remains an option as before.  Here is a brief summary of what to expect:

• New My Account interface including additional security steps to verify login credentials.
• A TSP Mobile App for use on your cell phones and tablets.
• Complete forms and more transactions online, sign your name electronically, and make loan payments.
• Invest a portion of your account in mutual funds through their new Mutual Fund Window. Certain restrictions apply.

TAKE THESE STEPS NOW

Once the new system goes live you won’t have online access to your historical records. Documents and messages currently available in My Account will not transfer to the new system. You can download your historical statements and save any messages for your records. After the move you can request copies from the TSP and they will send them in the mail.

I went online to search for any historical records of interest that I may want to download. The TSP posted this notice on my beneficiary election page:

” You will not be able to access this wizard as of 11:59 p.m. eastern time on 05/16/2022 while we make enhancements to the TSP. If you are in a situation where you need to complete a TSP-3 form to designate a beneficiary, call the ThriftLine to request a paper form. Once the TSP enhancements are in place the first week of June, you’ll be able to complete most transactions entirely online, and most paper forms will no longer be necessary.” 

I printed out my beneficiary elections for my estate planning binder and downloaded my annual statements from 2018 through 2021, previous years 1099-Rs, and the most recent quarterly statement. You can also download a copy of your official Account Balance Letter. This letter is often required by banks and other lending institutions. If you are closing on a new property while the system is offline, download this letter to take to your lender. Note the following:

• Any transactions that you were planning to make from May 26 through the first week of June would have to made before or after these dates.
• Review your investments and make any changes to ensure you have them allocated in the funds desired before May 26^th.

The TSP will be sending out more information as they progress through the update. They also provide a detailed summary of these changes on their website.

Helpful Retirement Planning Tools

• Retirement Planning for Federal Employees & Annuitants
• The Ultimate Retirement Planning Guide – Start Now
• TSP Guide
• TSP Considerations
• Medicare Guide
• Medicare and FEHB Options – What Will You Do When You Turn 65? (Part 1)
• Budget Work Sheet
• Social Security Guide

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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Posted on Friday, 6th May 2022 by Dennis Damp

Wild stock market swings and volatility in all sectors is causing investors to pause. Our retirement accounts are on the block and as inflation continues on its rampage, investors seek safe harbors to wait out the storm. Unfortunately, we are in for quite a ride.

Our recent trip down south was an eyeopener every time we stopped to fill up along the way. Locally I paid $4.28 a gallon for gas this week!

There are a few bright spots that will at least help to alleviate some of the pain. Our COLA next year is expected to be one of the highest in decades and I-Bond yields are increasing dramatically as well. Treasury bills and notes are also rising as the Federal Reserve increased interest rates another .5% last week.

Banks are flush with cash due to their savings account owner’s inability to find better rates of return. They issue loans based on these dormant funds; banks and credit unions get away with paying us almost nothing for that privilege.

Investing in I-Bonds and Treasuries provide ways for all of us to earn a substantially higher rate of return on a portion of our savings and fixed income investments. The current I-bond rate is 240 times greater than my local banks .04% rate and the recent 8-week Treasury Bill’s rate of 0.721% rate is 18 times higher.

I-BOND COMPOSITE RATE

As of May 1^st, I-Bond owners are now receiving the new Composite Rate of 9.62%. You will receive this rate for a full six months from the date of purchase resulting in an 8.37% rate over a twelve-month period. The previous six-month rate was 7.12%. There are few places today where you can earn high yields guaranteed by the US Government.

A $100,000 investment in I-Bonds will earn $8,370 for this 12-month period compared to just $40 at my local bank that is paying a meager .04% yield! Banks aren’t inclined to pay fair and reasonable rates. This is why I moved much of our savings to Treasury Bill ladders this year.

I started buying I bonds in 1999 and purchased my first $1,000 I-Bond in May of 2000. It is now worth $3,408 and earning 10.64%!  A comparable EE bond that I purchased in January of that year, at half face value, is worth $1,078 and earning .77%. I stopped buying EE bonds that year.

My article on I-Bonds discussed the limits and options that you have to purchase these investment gems.

PAPER I-BONDS

I was able to purchase additional paper I-Bonds this year! Yes, you can still buy up to $5,000 a year in paper I-bonds but only with your income tax refund. Last year I purposely overpaid my estimated quarterly federal income taxes with the intention of taking advantage of this loophole. It worked; the Treasury sent me 12 paper bonds in the mail! They sent a mix of bonds ranging from as low as $50 to as high as $1,000.

I was expecting one to five bonds, not 12 all sent in a separate envelope through regular mail. They may be using the paper bonds they had on hand and sent whatever was available.

TREASURY BILL LADDERS

There are ways to Ditch Your Bank’s Low Rates and earn considerably higher yields. I use Treasury Bill ladders to ensure I have sufficient cash available when needed and am earning a reasonable yield. Treasury Bill ladders are an excellent option when interest rates are increasing.

A Treasury Bill ladder is a savings strategy where you invest in several Bills with staggered maturities to take advantage of higher yields. They also provide cash, if needed, at recurring intervals. With the Federal Reserve set to raise rates several more times in 2022 this strategy is a viable and attractive option.

Four or eight-week bills can be used for funds that need to be available at recurrent intervals. A 4-week bill ladder consists of dividing the amount available by four and investing that amount weekly for four weeks. Short term bills are auctioned every Thursday with a settlement date the following Tuesday.

One fourth of your invested amount will be available weekly. Four-week bills can be reinvested through Treasury Direct for up to two years (24 times). You can stop reinvestments at any time and at maturity the full amount will be electronically deposited back into your designated bank account.

An 8-week bill ladder consists of investing half of your available funds in an 8-week bill and on the fifth week purchase another of equal value. Half of the funds would be available every four weeks at the new rate. Another option is to use 8 instalments, divide the available amount by eight and buy an 8-week bill each week for eight weeks. If you have $40,000 to invest, purchase a $5,000 bill for eight consecutive weeks. After the initial 8-week investment you will have $5,000 available each week. The 8-week notes pay a higher yield.

• NOTE: Check with your bank to see if there is a maximum number of monthly withdrawals and deposits from your savings and money market accounts. Regulation D, a Federal Reserve Board rule limits withdrawals and transfers to six each statement cycle. This rule was waived by the Federal Reserve during the pandemic. Many banks maintained the limit, while others increased the number of withdrawals and transfers permitted. Withdrawals through tellers at branch offices don’t count toward the six transfers or withdrawal limits each statement cycle.

TRESURY NOTES

Treasury Bills are a good way to earn a higher yield for a portion of your immediate savings that must be available for emergencies. Treasury Notes are longer term investments with 2, 5, 7, and 10-year durations. The 2-year note issued on 5/2/2022 yielded 2.5%! Just try getting that rate for a CD at any bank, an impossible task today. As the Federal Reserve raises rates Treasury yields typically follow suit.

Notes are purchased direct from the Treasury or through your stock brokerage account and interest is paid semiannually. If purchased through a broker, you can sell it on the secondary bond exchange before maturity, there is market risk and commissions to deal with when doing so. If interest rates are higher on new Treasury Notes when you sell, you could take a loss. If held to maturity, there is no market risk. Notes purchased through Treasury Direct must be transferred to a broker if you wish to sell them before maturity.

There are other considerations when buying notes. Read the detailed Treasury Note information available on their website.

I-BONDS VERSES TIPS

I-bonds can only be purchased direct from the Treasury and have a fixed and variable inflation rate. They protect us from inflation by adjusting their variable inflation rate semiannually based on changes in CPI. Interest is earned on the bond every month and is compounded semiannually, twice a year. The interest the bond earned in the previous six months is added to the bond’s principal value; then, interest for the next six months is calculated using this adjusted principal.

Purchases of I-bonds are limited to $10,000 per person yearly through Treasury Direct and an additional $5,000 in paper bonds if you have an income tax return due at the end of the years.

The interest rate on TIPS stays constant for the life of the bond. The face value of TIPS is adjusted based on CPI and the fixed interest rate of the bond at issuance is then applied to the adjusted face value.

The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When TIPS mature, you are paid the adjusted principal or original principal, whichever is greater.

TIPS can be bought and sold through your stock broker without any purchase limits. They are also available via mutual funds and ETFs.

TREASURYDIRECT.GOV

Many are hesitant to purchase Treasury Bills and Notes online through TreasuryDirect.gov. I understand the hesitation, unlike brokerage accounts they don’t send out monthly statements; you have to print the website screens to have documents for your files and estate plans. Tax forms are also downloaded from the site and not sent via regular mail. However, you are buying direct from the government and eliminating the middleman; there aren’t any fees charged for purchases. Here is more information on the Treasury’s programs:

• Treasury Bills In-depth
• Treasury Notes In-depth
• Treasury rates (Yields)
• Auction schedule

Helpful Retirement Planning Tools

• Retirement Planning for Federal Employees & Annuitants
• The Ultimate Retirement Planning Guide – Start Now
• TSP Guide
• TSP Considerations
• Medicare Guide
• Medicare and FEHB Options – What Will You Do When You Turn 65? (Part 1)
• Budget Work Sheet
• Social Security Guide

Disclaimer: The information provided may not cover all aspect of unique or special circumstances. Over time, various dynamic economic factors relied upon as a basis for this article may change. The information contained herein should not be considered investment advice and may not be suitable for your situation. This service is not affiliated with OPM or any federal entity. Consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in ESTATE PLANNING, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Friday, 29th April 2022 by Dennis Damp

We can expect another significant COLA increase in 2023 if inflation continues on its current path or if we move to what economists call stagflation. According to the Senior Citizens League, the 2023 COLA could be as high as 8.9%; the largest increase since 1981 when it was 11.2%; in 1980 it was 14.3%!

There are many variables in the annual COLA calculation and the final number can change dramatically before the announcement this October.

Stagflation takes hold when the inflation rate is high, economic growth rate slows, and unemployment is high. Most actions that government takes to lower inflation raises unemployment, and policies designed to decrease unemployment often spur inflation. We aren’t there yet, but many economists fear this scenario that is initiated by a supply shock and poor economic policies.

A supply shock occurs when there is a sudden increase or decrease in the supply of a commodity or service, such as the significant increases at the gas pump. The higher prices raise production costs, profits fall, and the economy slows. Many products and materials are suffering the same plight. Have you tried to buy a new car lately?>

The situation we find ourselves in today was compounded by pandemic deficit spending that dramatically increased the money supply driving inflation even higher.

Last year, my article on the projected 2022 COLA quoted Kiplinger Magazine’s projection of 3%. I anticipated a much higher rate then and believe inflation could exceed our expectations again this year. Prices continue increasing across all sectors unabated. A measure of just how things are going will be the Treasury’s I-Bond interest rate announcement due next month. It should be north of 9%!

Once inflation takes hold the economy spins out of control; things don’t revert back to the mean afterwards, when it settles down.

The median cost of a home in 1980 unadjusted for inflation, according to the US Census Bureau, was $47,200 dollars. My wife and I purchased a new 3 bedroom, two bath Ryan ranch home in 1979 for $47,750! The median household income was approximately $17,000 dollars and a gallon of gas was $1.25! Today, the median cost of a home now exceeds $350,500 dollars.

Hold on to your hats again this year, we have quite a ride ahead.

Helpful Retirement Planning Tools

• Retirement Planning for Federal Employees & Annuitants
• The Ultimate Retirement Planning Guide – Start Now
• TSP Guide
• TSP Considerations
• Medicare Guide
• Medicare and FEHB Options – What Will You Do When You Turn 65? (Part 1)
• Budget Work Sheet
• Social Security Guide

Disclaimer: The information provided may not cover all aspect of unique or special circumstances. Over time, various dynamic economic factors relied upon as a basis for this article may change. The information contained herein should not be considered investment advice and may not be suitable for your situation. This service is not affiliated with OPM or any federal entity. Consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in ANNUITIES / ELIGIBILITY, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Friday, 8th April 2022 by Dennis Damp

It’s impossible to time the market. One of the financial advisers I talked with years ago asked me this question: “Who are you investing for?” He suggested being more aggressive if you don’t require your investments to live on in retirement or investing primarily for your heirs. The market ultimately increases over time.

The S&P 500 index has returned a historic annualized average return of approximately 10.67% from 1957 through 2021. THRIFT Plan participants that held the C fund (S&P 500 index fund) from its inception did very well to say the least. Yet, retirees must weigh the risk associated with continuing an aggressive investment strategy in retirement.

Over the past 120 years there were many recessions and the great depression that started in 1929. From the early 1900s on there were four major recessions with the longest recovery period from 1929 to 1955, 25 years. The average recovery period was 16.5 years! The shortest recovery period until the Corona Virus recession of 2020 was six years from 2009 to 2015.

What most have experienced since 1985 is a bull market interrupted with two recessions, one running six years from 2009 to 2015, and the Corona Virus recession that lasted only two months in early 2020. The following charts show how long it took to recover to former levels.

S&P 500 1957 – 2021

DOW 1900-2021

Many would see their retirement nest egg decrease dramatically during an extended recession, panic, and sell. It doesn’t matter whether or not they need their savings to live on, it’s human nature. We’re elated when markets rise and despondent during downturns. It takes a steadfast disposition to stay the course and ignore severe market gyrations no matter what the age.

Retirees can’t dollar cost average on the way down like those still employed and contributing to their retirement account. Plus, they don’t have time on their side.

Regardless of who we are investing for, it makes sense for many retirees to protect what they’ve worked a lifetime accumulating. I’d rather have one in the hand than two in the bush, my former boss related this sage advice when I was contemplating his job offer.

It’s impossible to predict when the next major market correction or recession is coming. Yet, they are inevitable after extended periods of excesses. Our national debt now exceeds this country’s GDP for the first time since WW II, considering seven proposed Federal Reserve interest rate hikes this year, skyrocketing inflation, world unrest, excessive government spending, chaos at our southern border, pandemic related supply chain issues, fuel and potential pending food shortages, how much will it take to tip the scales one way or the other?

I’m not a clairvoyant, alarmist, or a financial planner, just a casual observer and seasoned conservative investor.

It may be a good time for retirees and those approaching retirement to assess their risk tolerance and portfolios. Federal annuitants often have more latitude with their investment choices. Even though many live comfortably off their monthly annuity, Social Security, and TSP withdrawals: inflation, health issues, and other factors could require additional retirement savings withdrawals down the road. Will the funds be there when needed?

According to Charles Schwab, “The conservative allocation is composed of 15% large-cap stocks, 5% international stocks, 50% bonds and 30% cash investments. The moderately conservative allocation is 25% large-cap stocks, 5% small-cap stocks, 10% international stocks, 50% bonds and 10% cash investments. The moderate allocation is 35% large-cap stocks, 10% small-cap stocks, 15% international stocks, 35% bonds and 5% cash investments.”

THRIFT plan participants can mirror these allocations with existing funds. A mutual fund window will soon be offered by the TSP that allows us to purchase thousands of mutual funds including one-decision and balanced funds. The L Income Fund allocations are between the moderately conservative to conservative portfolios listed above with an annual return of 2.99% as of February 2022, the 10-year average return is 4.71%.

The Vanguard Wellesley Income Fund (VWINX) allocation is moderately conservative and it achieved an 8.5% total return in 2021 with a 10-year average total return of 7 percent. The target allocation is two-thirds bonds and one-third stocks. It has a 5-Star Morningstar rating and their management fee is only .22%. They focus on value dividend paying stocks and investment grade bonds. VWINX seeks to provide long-term growth of income and a high and sustainable level of current income, along with moderate long-term capital appreciation. This fund fully recovered in less than one year during the 2008 to 2015 recession.

Another conservative balanced fund is Vanguard’s Wellington Fund (VWELX). It invests approximately two-thirds in stocks and one-third bonds. It has a moderate allocation and a 10.49% total return in 2021 with a 10-year average total return of 9.55% percent. This 5-Star (GOLD) Morningstar rating fund’s management fee is only .24%. VWELX has been around since 1929 and seeks to provide long-term capital appreciation and reasonable current income. It dropped 22% in 2008 and recovered eighteen months later to its previous high.

These funds may be available when the TSP’s mutual fund window becomes available this June.

With conservative portfolios, the challenge is to find a decent rate of return on your fixed income. Treasury Bills and notes are now offering decent returns as interest rates scontinue to rise. The balanced funds mentioned above manage their equities and bond investments to maximize yield and capital gains. They are professional money managers; their past performance is a measure of just how effective they have been over the years. There are many one decision conservative funds; it takes research and time to find the one right for you.

Professionally managed bond funds are also available such as the Dodge and Cox Income Fund (DODIX) and Fidelity’s (FTBFX), both have a Morningstar GOLD 4-star ratings. However, as interest rates increase bond funds generally go in the opposite direction; the shorter duration the bond fund has the less downside risk. Individual bonds held to maturity don’t have the market risk bond funds have.

If you purchase a Treasury, corporate or municipal bond of any duration, and don’t sell it on the secondary market before maturity, you will receive the principal and all interest due. You can buy individual bonds through your broker and Treasuries at TreasuryDirect.gov. There is minimal market risk with investment grade bonds. The TSP G Fund is one of the only bond funds that I’m aware of that is guaranteed not to decrease in value, it yielded 1.52% last year with a 10-year average yield of 1.94%.

I-Bonds are now paying 9.62% interest and the ones issued back in 1999 pay over 13%. Even EE Savings bonds offer a 3% yield if you hold them for at least 20 years. Currently short-term treasuries are paying considerably more than most bank savings accounts and CDs.

Conservative portfolios usually seek to provide both capital appreciation and income for the investor. Could I miss out if the market continues to power ahead? Certainly, but that is a tenable outcome that I can easily live with and preferable to experiencing a dramatic decrease during an extended recession. Here are several articles that may help you perform your assessment:

• Is the Stock Market Keeping You Up at Night?
• I Bonds Yield 9.62% While the Sky is Falling!
• How to Keep What You Worked a Lifetime Accumulating
• Have You Considered Hiring A Financial Advisor

All portfolios that include stocks, mutual funds, ETFs, and bonds are impacted by market volatility. The more conservative the mix the less downside risk.

The information contained herein should not be considered investment advice and may not be suitable for your situation.

Helpful Retirement Planning Tools

• Retirement Planning for Federal Employees & Annuitants
• The Ultimate Retirement Planning Guide – Start Now
• TSP Guide
• TSP Considerations
• Medicare Guide
• Medicare and FEHB Options – What Will You Do When You Turn 65? (Part 1)
• Budget Work Sheet
• Social Security Guide

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, investment, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The information contained herein should not be considered investment advice and may not be suitable for your situation. This service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in ANNUITIES / ELIGIBILITY, EMPLOYMENT OPTIONS, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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Posted on Friday, 25th March 2022 by Dennis Damp

Investment Rates Updated 5/22/2022

Currently, even after the recent Federal Reserve’s interest rate hike, my bank reduced their savings rate from .05% to .04%!  Makes no sense except for the banks, they loan our money out at much higher rates and we fund their huge profits. Bank CEOs brag about their astronomical client deposits and pay us a negative rate of return after factoring inflation into the equation.

In all fairness, most fixed income investments short of I Savings Bonds and junk bonds pay an effective negative return with skyrocketing inflation as noted in the following chart.

*The composite rate is derived by adding the previous 7.12% six month rate and the new six month rate of 9.62% and dividing that figure by two.

Cash accounts are required for emergencies and enough to keep us afloat for three months or more; a portion of it could be put to better use.

Treasury Bills, Notes and Bonds

The Treasury holds weekly Bills, Notes, Bonds and TIPs auctions that are guaranteed by the full faith of the US Government. One of the safest investments you can make. The above chart shows how much you can earn by investing in short term Treasury Bills opposed to the exceeding low bank rates offered today.

Treasury yields vary with interest rate movement. When rates go up, as they are scheduled to do over the next year, the returns for Treasury securities generally follow suit. Rates do vary auction to auction and are driven by multiple factors.

The yearly earnings reflected in the above chart assume the reinvested amounts, for bills with terms of less than one-year, will equal or exceed the previous auction yields on average for the remainder of this year. With additional rate hikes scheduled, there is a good chance that total yearly earnings will exceed the amounts listed.

The Federal Reserve

The Federal Open Market Committee (FOMC), a branch of the Federal Reserve that decides on the monetary policy of the United States, holds 8 regularly scheduled meetings per year. They raised rates a quarter point on March 16^th 2022 and anticipate raising rates 6 more times this year to rein in the highest inflation in 40 years.

When the Fed Rate increases, short term bills can yield more than traditional savings accounts and CDs. Banks aren’t as quick to increase savings account and CD yields after the Federal Reserve moves rates higher.

Short Term T Bills

The 4-week bill’s investment rate increased from .051% on the March 3^rd auction to .193% at their March 24^th auction. You can elect to have them reinvested for up to two years or in this case 24 times. As rates rise, you earn more with each reinvestment. You can cancel reinvestments at any time; the cash is returned to your bank account at the end of the investment period. Many investors ladder different terms to increase their earnings so that a set amount of cash is available at whatever interval you choose.

Treasury Bills are sold at discount (below face value); when the bill matures the investor receives face value. Review their tentative auction dates and recent auction rates for more information.

Sign up for Treasury Direct online and use their “Buy Direct” feature to purchase any of their offerings including I Savings Bonds. It’s easy to set up and they transfer funds from your bank account for the purchases and deposit your interest and principal back to your account.

Advantages

I purchase short term Treasury Bills when private sector savings and CD rates are unrealistically low. When interest rates start to fall you may find the opposite, your bank could be paying more. Review the upcoming rates with each reinvestment and compare them to your local savings and CD rates.

Helpful Retirement Planning Tools

• Retirement Planning for Federal Employees & Annuitants
• The Ultimate Retirement Planning Guide – Start Now
• TSP Guide
• TSP Considerations
• Medicare Guide
• Medicare and FEHB Options – What Will You Do When You Turn 65? (Part 1)
• Budget Work Sheet
• Social Security Guide

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, investment, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change.

The information contained herein should not be considered investment advice and may not be suitable for your situation. This service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in ANNUITIES / ELIGIBILITY, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Friday, 11th March 2022 by Dennis Damp

My previous article titled “Skyrocketing Inflation” had a broken link, the most clicked on link in the article. Here is the corrected link:

• How to Keep What You Worked a Lifetime Accumulating (Updated)

Typically, I focus on issues that impact those planning retirement and annuitants alike. The common thread reflects my personal experiences and commentary on various subjects that affects everyone, not just retirees. I include my personal experience knowing that others may be able to avoid some of the pitfalls that I traversed along the way. All newsletter articles are also published on our blog and we publish an alphabetized article index. When reading archived articles, consider the date they were written or revised, things change over time.

INFLATION CONCERNS (Continued)

The average cost for gas in the Pittsburgh area is now $4.45 a gallon! Typically, Sam’s Club and Costco offer gas at lower prices plus a Sam’s Club Master Card user receives a 5% rebate for all gas purchases on top of their lower everyday prices.

As I write this article, President Biden announced a ban on Russian oil imports. Stopping Russian oil imports, without increasing domestic production, could cause additional pain at the pump. Time will tell.

Newsletter Subscriber Comments

John suggested shopping at an Aldi grocery in your area. They are considerably less expensive than major grocery chains.

Joel’s wood working machinery orders were delayed months last year and prices are up 20% this year. Wood prices for the Baltic birch plywood he purchases went from $36 a sheet to $105.00 and domestic plywood is up 30%!

Robert, along with many others, find it difficult to believe that supply chains are still broken when corporate quarterly reports show record profits.

Utility Competitive Pricing

Many states allow gas and electric utility users to switch to lower cost suppliers. Your local utility will remain your distributor when you change to another service. I’m checking local offers this week.  If you make this change, be careful when the contract period ends. They offer new customers a fair savings, however once the contract ends, they often increase the price per unit dramatically. Mark the end date on your calendar and contact other providers before the contract ends to obtain competitive prices for the next term.

Food Costs

According to Agri Pulse, “…Farmers are faced with a fertilizer crisis. Prices for phosphorus-based and potassium-based (potash) fertilizers have more than doubled in Kansas while Nitrogen-based fertilizers have more than quadrupled… without it, American agricultural yields will quickly suffer as well as food prices in local grocery stores.”

Natural gas is one of the key ingredients in fertilizer production and its costs increased 35% this year. China, the largest exporter of fertilizer and phosphate, suspended exports in July to secure their supplies. Russia and China are two of the largest exporters of fertilizer worldwide.

This is compounded by the fact that Russia and Ukraine supply nearly a third of the world’s wheat and barley. ABC reported, “Ukraine’s government has banned the export of wheat, oats and other staples that are crucial for global food supplies as authorities try to ensure they can feed people during Russia’s intensifying war.” The supply crunch is driving prices higher.

Emergency Preparations – Stock up for the year ahead

It may be time to stock up on stapples. Whenever coffee, canned goods, or other stapples go on sale, pick up extras for emergencies.

With conflicts escalating and costs rising, freeze dried food that lasts 25 to 30 years may be an option before prices explode. My Patriot Supply and Mountain House offer a broad selection of meal options. Mountain house is available direct from the manufacturer or from Amazon. Their offerings taste surprisingly good.

With the current state of affairs and the resurrected cold war with Russia, it is wise to have a sufficient supply of stapples, medications, and a well-stocked first aid kit available. A natural disaster, world conflict, or a terrorist attack on our infrastructure could wreak havoc for extended periods.

I’m not a survivalist, more of a realist. The attack on 9/11 was perpetrated by foreigners legally here on student visas. We knew who they were and their whereabouts; yet ignored many signs that they were here to do us harm. Those who wish to harm us today can send saboteurs through our porous southern border to set up terrorist cells nationwide!

Pandemonium at our Borders

It is estimated that hundreds of thousands of “got-aways” crossed our southern border last year. The Border Patrol defines a “got-away” as an individual who is not turned back to Mexico or apprehended, and is no longer being actively pursued. Who are the got-aways and what are they up to? More importantly, who in government is paying attention to this today?

America is helping Ukraine protect their Sovereignty and borders and I support our humanitarian efforts. Shouldn’t America’s borders also be protected and secured? The drug cartels have greater control over our southern border than ICE does! Illegal border crossings should be a concern for everyone.

There is much to ponder and worry about today. Inflation is just one of many problems that we must find ways to mitigate the impact on our day to day lives. We must persevere, prepare as best we can, inform our representatives about our concerns, and hope and pray for the best.

Helpful Retirement Planning Tools

• Retirement Planning for Federal Employees & Annuitants
• The Ultimate Retirement Planning Guide – Start Now
• TSP Guide
• TSP Considerations
• Medicare Guide
• Medicare and FEHB Options – What Will You Do When You Turn 65? (Part 1)
• Budget Work Sheet
• Social Security Guide

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Tags: Border problem, emergency food supplies, Inflation
Posted in FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SURVIVOR INFORMATION, WELLNESS / HEALTH

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Posted on Friday, 4th March 2022 by Dennis Damp

Everyone must prepare to maintain their standard of living in retirement.  Retirees from all sectors and those still working feel the wrath of this unrelenting force that constantly impacts our day to day lives. The progression of this financial endemic (inflation) is always upon us. At times, and when the economy is on a sound footing, it’s hardly noticeable; unlike today when prices are skyrocketing.

According to Kiplinger, “If you needed $60,000 for your first year of retirement, in 20 years you would require $108,366.67 to match today’s purchasing power of $60,000. Another way to look at it: At 3% annual inflation, that initial $60,000 would be worth only $33,220.55 in 20 years.”

The annual inflation rate increased to 7.5% in January of this year as reported by the US Bureau of Labor Statistics. This is the highest rate since 1982 and above market forecasts. Much of it is due to escalating energy costs, supply chain disruptions, labor market shortages, excessive stimulus spending, and pent-up demand as the pandemic wanes.

My natural gas bills have increased dramatically this year. The gas company’s cost per thm increased 35 percent this year! Costs are increasing across the board with few if any areas unaffected.

COST INCREASES PAST 12 MONTHS (From various sources)

• New Cars – 12% (Have Your Tried Buying a New Car Lately) – 82% of all new cars sold above MSRP in January!
• Used Cars – 40%
• Gas – 58%
• Housing
  • New Homes – The median home sales price was up 19% in 2021 and is projected to increase another 14% this year according to Zillow.
  • Rents – 11%
• Heating Costs
  • Natural Gas – 30%
  • Propane – 54%
  • Heating Oil – 34%
• Meat poultry and fish – 13%
• Electricity – 7%
• Medical Care
  • General – 8.4%
  • Medicare Premiums (The standard Part B monthly premium amount in 2022 is $170.10, a 14.5% increase from last year.)
  • FEHB Average Increase for 2022 – 2.4%

COST OF LIVING ADJUSTMENTS (COLAs)

Do COLAs compensate for these increased costs? Emphatically, NO.

Federal employee’s annuities increase most years with a Cost-of-Living-Adjustment (COLA), the same adjustment Social Security recipients receive. However, the Senior Citizen’s League reported that Social Security benefits have lost 30 percent of their buying power since 2000!

Even though CSRS annuitants received a 5.9% COLA increase for 2022 (FERS annuitants 4.9%) our costs are increasing at an alarming rate; each month our purchasing power diminishes.

RETIREE’S DILEMA

Retirees suffer disproportionately; in order to finance the national-debt the federal reserve keeps interest rates artificially low so that savings accounts and CDs receive a net negative return due to the inflation effect. Retirees can’t risk losing their savings and often keep their cash in local bank accounts and CDs that earn almost nothing. Our bank savings account has a .05 percent yield! Yet, we all have savings accounts at these alarming low rates out of necessity.

Many retirees can’t risk investing in the stock market. A major market correction or recession could shrink their investments by up to 50 percent or more and take years to recover in some cases.

Initially the administration and the Federal Reserve announced that inflation was transitory. They changed their position as the economy overheated and costs continue to rise. The excessive stimulus spending which amplified the supply chain problems, along with many other factors has spurred demand for everything.

I’ve lived long enough to experience wild inflation and Interest rate cycles. The gas shortages of the 1970s and when interest rates reached 16.63% in 1981, the highest point in modern history. My wife and I relocated and purchased a home in 1985; we paid 11.5% interest on a 30-year loan! The couple that sold us the home laughed at the closing because the $75,000 4-bedroom three bath home would cost us over $250,000 if we didn’t refinance down the road, which we did several times before paying it off.

I helped my wife’s elderly aunt move her bank savings account in 1983, earning 5%, to CDs at the same institution yielding 13%! She couldn’t believe her good fortune.

With this country’s huge debt crisis and the Fed’s ever expanding balance sheet to astronomical levels, inflation is inevitable; we are feeling the aftereffects of their over indulgence. Yet, I have faith in the America we grew up in and the system of government our founding fathers created all those many years ago. The checks and balances that take affect when the pendulum swings too far in one direction, and when the people redirect our path at the ballot box. No system of government is better than ours and we proved this many times when circumstances were dire and the outlook bleak.

KEEPING AHEAD OF INFLATION

It’s difficult keeping up with inflation with the increases noted on the above chart. To survive unscathed, we must locate lower cost alternatives and stable recession resistant investments with lower management fees, hold off on large purchases until hopefully things calm down, possibly work part-time in retirement, and so much more.

There are ways to mitigate inflation’s impact. For those invested in the Thrift Savings Plan (TSP), they have some of the lowest management fees available and will soon offer a Mutual Fund Window allowing you to invest in 5000 private sector mutual funds. The TSP funds charge very low management fees from .043% to .059% depending on the fund.

The L Income Fund is designed to minimize the impact of inflation for retirees that can’t afford to lose their savings and invests in the following funds:

• G Fund – 70.76% (Guaranteed to never decrease in value)
• F Fund – 5.74% (Corporate bond fund)
• C Fund – 12.33% (S&P 500 index fund)
• S Fund – 2.95% (Small cap index fund)
• I Fund – 8.23% (International stock index fund)

The advantage of the L Income Fund is that 76.5% is invested in bonds, the majority of which are special issue federal bonds that will never decease in value. The remaining 23.5% is invested in a cross section of the market that will grow over time. Last year the L Income fund yielded 4.18% and the ten-year-average return is 4.33%.

The G Fund is another option for those who want a bulletproof investment that won’t decrease in value and will earn considerably more than most bank savings accounts. However, it won’t keep up with inflation.  The 2021 yield was 1.45% with a 10-year average yield of 1.93%. Still, far greater than my local bank’s .05% yield!

Find alternative higher yielding safe investments such as I Savings Bonds, now yielding 7.12%. Unfortunately, the Treasury Inflation Protected Securities (TIPS), that you can purchase direct from the government or through a broker, have negative rates of return. The yield on a TIPS bond is equal to the Treasury bond yield minus the expected inflation rate. Most TIPS selling today are issues with a .25% yield. As a result, when standard Treasury bonds are trading at yields below the expected inflation rate, TIPS yields fall into negative territory. This has been the case since late 2010. Why would investors purchase TIPS with a negative yield?  According to Fidelity Investments, “If actual inflation exceeds the breakeven rate in the future, the adjustment to the TIPS will eventually provide a higher real return than the conventional bond. ”

There are balanced mutual funds that hold up well in downturns and recessions. Market corrections can last years and individual funds and stocks recover at different intervals. Recoveries are typically referenced to a market index like the S&P that is comprised of the top 500 American companies.

If you invested 100% of your non-TSP investments in the Vanguard Wellesley Income Fund (VWINX) before the last bear market started in 2008, your investment would have only decreased 9%. Investors recovered all of their losses in less than a year! This mutual fund has averaged 7.2% annually since its inception in 2001. The DOW & S&P indexes fell more than 50% during this period and took several years to fully recover.

I’ve written a number of articles on the subject over the years that you may find helpful:

• How to Keep What You Worked a Life Time Accumulating (Updated)
• Is the Stock Market Keeping You Up at Night?

Take precautions now to protect your assets and prepare for the rocky road ahead.

Helpful Retirement Planning Tools

• Retirement Planning for Federal Employees & Annuitants
• The Ultimate Retirement Planning Guide – Start Now
• TSP Guide
• TSP Considerations
• Medicare Guide
• Medicare and FEHB Options – What Will You Do When You Turn 65? (Part 1)
• Budget Work Sheet
• Social Security Guide

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Friday, 18th February 2022 by Dennis Damp

If you are in the market for a new car, it may be challenging to find the one you want at an affordable price. Most dealers have few new cars available; it has been that way for more than a year now. Honestly, I don’t know how the dealerships are staying in business. Some have closed their doors for good and most new car show rooms are empty. Edmunds reports that 82% of all new cars bought in January sold for over the MSRP.

My 2020 Traverse – Featured on www.stolenplates.com

GM’s 2021 sales fell 13% from 2020 levels to just over 2.2 million and 24% from 2019 pre Covid sales of 2.887 million vehicles. Demand is high however inventory is extremely low stateside due to chip shortages, the majority are manufactured overseas.

The North American Free Trade Agreement (NAFTA), signed by Bill Clinton in 1993, sent the vast majority of our manufacturing overseas to China and elsewhere. Millions of manufacturing jobs were lost stateside. Subsequent democratic and republican administrations supported this agreement until Donald Trump withdrew from NAFTA and encouraged manufactures to return to America.

Intel recently announced that a new $20 billion dollar chip facility will be built in Ohio. Two chip plants will be constructed on their 1,000-acre site; they plan to expand to eight facilities employing 3,000 when it is completed. Construction begins this year with production scheduled to start late 2025. This won’t help with current chip shortages, and we may have supply chain problems for some time to come. The Biden Administration is working with Congress to pass legislation that will provide incentives for other chip manufacturers to set up shop in America.

I purchased a new 2020 Chevy Traverse in January of 2020, around the time COVID arrived on our shores. The ride is exceptional for an SUV with its 20-inch wheels; a powerful six-cylinder engine and tons of cargo space. I was impressed with its safety features, navigation, rear view mirror camera, and 360-degree backup camera. The touch screen and voice controls are easy to use.

Costco offered a $700 Costco gift card when buying a GM car through their auto purchasing program. Including manufacturer and dealer incentives, plus an additional $1500 off by using my GM credit card points, I paid 17 percent below MSRP. The $700 Costco card covered my gas purchases for almost a full year. A great deal.

In October of last year several companies offered me more than I paid for my 2020 Traverse! The KIA dealer offered my wife a similar deal for her 2018 KIA Soul.

My son was looking for a new SUV, his 2014 Traverse had 75,000 miles on the odometer. None were available at local dealerships and we offered to sell him ours for a reasonable price. We liked our Traverse but it didn’t have adaptive cruise control, the leather seats are too short and uncomfortable for long trips, and a midsize SUV was a better fit for us. WeBuyAnyCar offered him $12,200 for his 2014 Traverse. They gave him a check on-the-spot after a short 30-minute inspection less a $300 processing fee.

I started searching for a replacement; it was like looking for trees in Greenland, there weren’t any to speak of on the lots. I contacted several Buick dealers to test drive an Envision SUV. We were in Myrtle Beach at the time and they found one in Atlanta Georgia, too far to travel for a test drive! They offered to order one but I refused without a test drive; they only offered the same 4-cyclinder engine on all trim levels. Plus, they wouldn’t provide a delivery date. They also advised me that many of the features we wanted, such as adaptive cruise control and heated steering wheel, weren’t available due to the chip shortage.

Fortunately, I’m taking my time and in no hurry. Plus, I generally don’t pay sticker price for any car. During our search in Myrtle Beach, the few new cars on the lot had an upcharge of from $3,000 to $5,000 above MSRP sticker price due to “low inventory levels!”

Normally a new car’s value declines precipitously after purchase. Not today; you may discover, like I did, that two of our cars that we bought new in 2018 and 2020 are now worth more than what we initially paid! According to Edmunds.com “Used car prices are up almost 40%, and new car prices are up about 12% compared to last year.” Check out how much your car is worth on Edmunds.com. You will be surprised at today’s used car values.

If you are on the fence and need a car now, Consumer Reports’ article titled “How to Buy a Car in Today’s Challenging Market” can help.

We did find a limited number of models to test drive at several car dealerships in Pittsburgh, not the trim levels we wanted. Just haven’t found the right one yet. Hopefully, things will improve this summer but I’m not keeping my fingers crossed.

Helpful Retirement Planning Tools

• Retirement Planning for Federal Employees & Annuitants
• The Ultimate Retirement Planning Guide – Start Now
• TSP Guide
• TSP Considerations
• Medicare Guide
• Medicare and FEHB Options – What Will You Do When You Turn 65? (Part 1)
• Budget Work Sheet
• Social Security Guide

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, Travel

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