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Posted on Saturday, 16th July 2022 by

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The 2022 FEHB Open Season will run from November 14, 2022 through December 12, 2022. Open Season starts every year on the Monday of the second full work week in November and ends on the Monday of the second full work week in December.

OPM sent a FEHB Program Carrier Letter to all FEHB providers on February 17, 2022. This letter outlines the policy goals and initiatives for the 2023 FEHB Program. A follow-up letter provided technical guidance and instructions.




OPM GOALS

As excerpted from their guidance letter, “OPM’s focus for the upcoming plan year is advancing health equity and ensuring the federal government, as the largest employer in the country, offers competitive, comprehensive health insurance benefits to its employees, annuitants, their families, and other eligible persons and groups.”

They further state, “Our health equity initiatives for the 2023 plan year relate to maternal health, gender affirming care and services, and obesity.” They also address assisted reproductive technology, preventive health services, coverage for necessary medical food, with emphasis on the Coronavirus Disease 2019 (COVID-19) pandemic.” Mental health and substance abuse disorders were also mentioned.

PREMIUM IMPACT

The average increase for our FEHB plans in 2022 was a reasonable 2.4% while Medicare premiums skyrocketed 14%! The carriers will be challenged this year by inflation and to provide expanded coverage requested by the administration.

COST NEUTRALITY

According to OPM’s cost neutrality clause, “When proposing an increase in benefits, Carriers must propose corresponding benefit reductions to offset any potential increase in premium, with limited exceptions directed by OPM.”

They provide an example in the clause, “If a Carrier were to propose decreasing a cost sharing in one benefit and this increase in benefits would have an additional cost impact, the Carrier would have to have also proposed benefit decreases in other areas with an equal or greater reduction in cost than the benefit increase in the same plan option”

We could end up paying substantially more next year when you factor in inflation and expanded coverage requirements for 2023 that must be offset by reducing benefits elsewhere. Time will tell.

EVALUATE YOUR CURRENT FEHB PLAN

It’s a good time to review your current plan’s coverage and ask yourself if they met your needs and expectations this year. Ask these questions:

• Did I have coverage issues?
• What additional coverage will I need next year?
• Was I able to get the medications / prescriptions needed?
• Did I have to pay high prescription copayments?
• Where my deductibles, copayments and coinsurance excessive this year?
• Are the labs, doctor’s offices, hospitals, and outpatient facilities available in my immediate area and covered by my current FEHB plan?
• Did I have to travel out of my area to see a provider or have procedures performed?
• Was customer service helpful and easily accessible?
• Did I encounter unanticipated expenses that I thought were covered in my current plan.
• Are you signing up for Medicare this or next year? if so, you may want to consider moving to a lower cost FEHB plan.
• Explore Medicare signup options

Answering these and others will help you prepare for the upcoming open season. If you had problems this year, look for plans that will better suit your needs in 2023.

Helpful Retirement Planning Tools

 

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Posted in BENEFITS / INSURANCE, ESTATE PLANNING, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION, WELLNESS / HEALTH

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Posted on Friday, 1st July 2022 by

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Retirement account access is critical for those who need to change fund allocations, withdraw funds, add or change beneficiaries, or process other actions such as requesting an RMD. Many Thrift Savings Plan (TSP) account holders encountered major problems when trying to login to the new site. Some spent days working to regain access and were placed on hold with the TSP customer service staff for hours.

TSP Access Problems and Mutual Fund Window
 

TSP SITE LAUNCH

Considering there are 6.6 million TSP participants with approximately $743 billion in assets, problems were inevitable with such a large undertaking.

Congresswoman Eleanor Holmes Norton requested a meeting with the TSP Executive Director to discuss the many problems account holders had and are still having with the new system. I was one of the lucky ones and gained access early and without incident. Many were able to get in with only minor issues, others weren’t so lucky, and questions still linger.

TSP FEATURES AND PROGRESS




The good news is that the TSP completely modernized this country’s largest retirement plan, we can now e-sign and upload documents, receive mobile push notifications, use their TSP mobile app and virtual assistant, and they added a mutual fund window allowing many participants to purchase mutual funds. They also added new security enhancements and wait times for customer service calls are decreasing.

After the bugs get worked out, hopefully sooner than later, we all will have more flexibility and options to manage our TSP accounts.

MUTUAL FUND WINDOW (MFW)

For those who want to diversify their investments, participants can transfer a portion of their Thrift Savings Plan account balance to a MFW account. Certain restrictions apply, Thousands of low-cost mutual funds are available for purchase.

  • Investment Representatives are available from 7 a.m. to 9 p.m. ET, Monday through Friday by calling the ThriftLine at 877-968-3778 and choosing Mutual Fund Window Account from the menu.

RESEARCH REPORTS

Morningstar research reports are available for the MFW that include mutual fund quotes, detailed fund analysis, performance, portfolio composition and much more.  I use Morningstar to monitor my stock and mutual fund portfolios. They are very useful and they provide a portfolio x-ray feature for their subscribers that identifies whether your investments are conservative or high risk.

MINIMUM BALANCE & TRANSFER REQUIREMENT

You can invest up to 25% of your savings plan in your MFW account. Your initial transfer into a MFW account must be $10,000 or more. This means that you are required to have a balance of $40,000 or more in your savings plan to open a MFW account. After your initial investment, there is no minimum for each individual transfer.

If you request a money transfer between your Thrift Savings Plan core investments and MFW Account by 12 p.m. ET, your funds will be available for trading in your MFW the next business day. Transfers requested after 12 p.m. ET are processed the following business day.

You can transfer money from your Thrift Savings Plan core funds into your Mutual Fund Window Account at any time, however, transfers in will count towards the two per month savings plan rules.

Although the amounts that you transfer into your MFW Account are included in the amount available for a loan or withdrawal under normal plan rules, you can’t borrow or withdraw directly from your MFW Account. In order to request a loan or withdrawal, you will need to transfer MFW funds back into the savings plan core investments first.

MFW FEES – Effective June 01, 2022

Mutual Funds Transaction Fees

  • $28.75 Mutual Fund Purchases/Sales
  • $28.75 Exchanges within the same fund family (charged on purchase only)
  • $57.50 Exchanges between fund families ($28.75 charged on purchase and sale)

Account Fees

  • $150 Annual Maintenance Fee
  • $5 Duplicate Statement

Note: The $150 annual fee includes a $55 administrative fee designed to guarantee that the availability of the MFW will not indirectly increase the share of TSP administrative expenses borne by the participants who choose not to use the MFW.

The fees are higher when you factor in a mutual fund’s expense ratio that can range from less than .10% to 1% and higher. For example, if you transfer $10,000 to your mutual fund window, and elect to purchase $5,000 in XYZ mutual fund with an expense ratio of 1%, your cost to own this first mutual fund would be:

  • $150 annual fee
  • $28.75 purchase transaction fee
  • $50 (1% XYZ expense ratio each year you own the mutual fund)

To set up your account and purchase your first mutual fund, the cost would be $228.75! Additional mutual fund purchases would cost $28.75 each plus their annual expense ratio. The expense ratio is deducted from each of your mutual funds the same way the TSP Funds handle their expense ratios. You would also pay a fee when you sell or exchange a mutual fund with another.

The $150 fee is paid annually plus any trading fees and the expense ratios that the mutual fund companies deduct from your investment each year.

COMPARING THE MFW TO A STANDARD BROKERAGE ACCOUNT

If you intend to transfer a good portion of your account into the MFW it may be cost advantageous to transfer those finds to an IRA at Fidelity, Vanguard or elsewhere. Costs would be lower in most cases. For example, my Fidelity brokerage retirement account doesn’t charge a setup fee and there are zero costs to purchase any of Fidelity’s mutual funds, individual stocks, and ETFs.

However, if I want to purchase a mutual fund from Vanguard there is a $75 fee which I paid because I use the Vanguard Wellesley Income Fund (VWINX) and other mutual funds as anchors in several portfolios. VWINX has an expense ratio of .24%, yields 2.55%, and has only decreased 16.4% as of 6/30/22, while the S&P is down 25% from its 52-week high.  It is a managed fund and invests approximately 40% in equities and 60% in bonds, many of which are short term Treasury Bills. They currently hold 2.5% in cash.

SUMMARY

Overall, I’m satisfied with the new TSP website.  I downloaded the historical reports I wanted to archive before they migrated to the new system as I suggested in my article titled, “CAUTION – PREPARE FOR THE TSP TRANSISTION.” The TSP warned users that our historical documents would not transfer to the new system. If you neglected to do this, request needed documents from the TSP; they will send them to you. The new design, menu structure, downloadable forms, e-document signing options and updated security features are what was needed to modernize the system.

The MFW is advantageous for those who wish to purchase a select group of funds and don’t want to open another retirement account. It is ideal for those who wish to purchase low cost highly rated mutual funds as the centerpiece of their account and intend to keep them for an extended period. Once you set up a group of funds targeted to your investment goals, you only have to rebalance annually or as needed.

Helpful Retirement Planning Tools

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.

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

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Posted on Friday, 17th June 2022 by

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I described the advantages of Treasury bills in “Ditch your Bank’s Low Savings Rates” last March. They provide higher yields for savers; if you ladder your investments a portion of your savings will be available at set intervals throughout the year. I’ve gone through several reinvestment cycles since starting treasury bill ladders earlier this year. The yield is increasing dramatically as funds are reinvested at higher rates.

When I started purchasing 4 and 8-Week bills last February they were yielding slightly more than my local bank and credit union savings rate of .04%. The 4-week bill rate has increased to 1.055% as of June 14, 2022, just 3 months later, while my local bank and credit union rates remain unchanged.

TREASURY BILL INVESTEMENT RATES

The chart below shows the interest rate increases for 4, 8, 13, 26 and 52-week bills during this period. The 52-week bill issued on June 16,2022 yields 3.134% and on June 14th the 2-year note yield was 3.324%! These rates far exceed my local bank and credit union’s .04% rate.

It’s easy to move savings that include funds previously invested in certificates of Deposit (CDs) to the Treasury for better yields. When rates level off, it will be a good time to lock in higher rates with Treasury notes of 2,3,5,7, and 10-year maturities. You may also find attractive CD rates at that time.

If rates go through the roof, like they did in the early 80s, it could be possible to pick up Notes and Bonds with very high yields. In 1981 the 30-year Treasury bond paid as high as 15.21%!

On the flip side, I relocated in the early 1980s under Permanent Change of Station (PCS) orders; our mortgage interest rate was 11%! The sellers laughed at the closing when they saw the 30-year total cost with financing.

If you are planning your retirement, learn an easy technique to retire mortgage free and other ways to economize before submitting your retirement application.




COMMON SENSE FIXED INCOME ALTERNATIVE

Treasury bills are sold at discount (below face value); when the bill matures the investor receives face value. These rates may seem insignificant to some. I can assure you the results are worth the effort.

Put another way, if you are fortunate enough to have $50,000 in combined savings earning .04%, your bank would pay you a grand total of $20 a year to keep these funds in their institution! A 1% yield would pay out $500 or $480 more than your bank is willing to pay you. Short term Treasury yields increase each reinvestment cycle and interest compounds as the Federal Reserve continues to raise rates.

If you invested the same amount in a 52-week bill, currently yielding 3.134%, you would earn $1,567. Essentially you would pay $48,433 for the 52-week note and at the end of the 12-month term the Treasury will deposit $50,000 back into your account.

CDs, Bank, and credit union interest rates will eventually rise to entice customers back to the fold. Right now, they are flush with cash and have no incentive to payout more. They are also aware of the fact that most depositors are unwilling to change and stay regardless.

TREASURYDIRECT.GOV

Visit TreasuryDirect.gov to register, explore the options, and start purchasing Treasury bills, notes, and bonds, TIPS, and savings bonds. You are buying direct from the government and eliminating the middle man; there aren’t any fees charged for purchases. Most brokerage accounts offer clients access to Treasury auctions and will purchase them for your account; the longer-term notes and bonds can be sold on the secondary market if needed. Here is more information on the Treasury’s programs:

COLA UPDATES

According to Wilbert J Morell III, a retired Navy Engineering Project manager, if inflation remains constant at 8.6% and the CPI-W at 288.012 the Social Security and CSRS COLAs will be 7.3% and the FERS COLA will be 6.3%.

If Inflation continues growing at the same monthly trend of 1% per month and the CPI-W monthly trend of 1.2% per month as reported in the 10 June CPI Report, the Social Security and CSRS COLAs will be 11.2% and the FERS COLA will be 10.2%.

US inflation by the end of the year could be as high as 12.6%.

Wilbert tracks these statistics monthly, volunteers to help seniors in his community, and is highly knowledgeable about our federal retirement benefits.

I-Bonds yields should also rise again this November in this invironment, they already pay 9.62%!

SUMMARY

Is the stock market keeping you up at night?  With inflation on the rise and costs increasing across the board, a recession is surely on the horizon. As the Fed raises rates, Treasury yields will follow suit and provide viable options for our cash.

Financial analysts on the major networks suggest a recession is coming our way in 2023 or beyond. It may be much sooner than they think.

A recession is defined as a significant decline in activity across the economy, lasting longer than a few months. Two consecutive quarters of negative economic growth, measured by a country’s gross domestic product (GDP), is the technical indicator of a recession. The country isn’t fighting on one front in this battle, we are surrounded with conflicts, all with significant negatives for our economy and well being.

The DOW and S&P are down more than 20% signaling a bear market. Many issues are driving this trend: skyrocketing inflation along with the highest gas prices in history, supply chain problems, food shortages including baby formula, COVID lockdowns in China, rising interest rates, out of control spending, the war in Ukraine, lawlessness, and the open borders and fentanyl drug crisis that killed 108,000 Americans last year, to name a few. We’ve lost more people to fentanyl overdoes than guns, suicides and traffic accidents combined last year!

Adding to our problems, electric utilities are warning of rolling blackouts this summer across the country. The early retirement of fossil fuel plants has accelerated the destabilization of the grid. Ten coal fired power plants closed in Pennsylvania in the past ten years; two more are scheduled to close this year. Maybe, just maybe we should restart a few of those plants until we have sufficient alternate power sources available!

Hopefully our leaders will wake up, rise to the occasion, and not end up like Nero, Rome’s emperor who fiddled while Rome burned.

Helpful Retirement Planning Tools

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 ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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Posted on Friday, 3rd June 2022 by

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The Thrift Savings Plan (TSP) has updated their site and requires all account holders to establish a new login to regain access to their account. I was able to sign into my new TSP account on Thursday June 2nd without incident. Their updated site is now up and running. However, you may have problems accessing the site at peak times due to the large number of TSP participants attempting to regain access to their accounts.

SIGN ON SCREENS

The following screens will familiarize you with the new sign in process.

FIND YOUR ACCOUNT

To gain access to your new account click on “Set up new login for my account” and then enter the personal information the TSP needs to find your account and connect it to the new system.




UPDATE YOUR ACCOUNT

You will be asked to select a preferred multi-factor authorization (MFA) and then set up a new user ID and password. I selected text message (SMS) which I use for most other accounts. The TSP also requires account holders to create a PIN that can be used to quickly identify yourself when calling the ThriftLine. 

SUMMARY

The new signup process takes about 10 minutes tops; the site is easy to navigate and use. I viewed current holdings and visited each area including the beneficiary election page. There is new Mutual Fund Window that you can explore and determine if you are interested in moving a part of your account to over 5,000 publicly traded mutual funds.

To access this new feature, select “Change Investments” on the main page and then select “Set Up a Mutual Fund Window Account.”  You can invest up to 25% of your savings plan in your MFW account. Your initial transfer into a MFW account must be $10,000 or more. This means that you are required to have a balance of $40,000 or more in your savings plan to open a MFW account. After your initial investment, there is no minimum for each individual transfer.

There are additional fees to consider. I intend to review this new feature in an upcoming article. There are pros and cons to this new investment option.

Visit www.tsp.gov to regain access to your account. I was pleasantly surprised just how easy the new sign in process was. Especially after spending hours on the phone this past Thursday working with customer support to update my business accounting program!

Helpful Retirement Planning Tools

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, 27th May 2022 by

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Retirees use OPM Services Online to start, change or stop federal or state income tax withholdings; download 1099-R forms, change your mailing address, start or change direct deposits and view annuity payments. This system is available to those under the Civil Service Retirement System (CSRS), Federal Employees Retirement System (FERS), FERS Special, or the Organization Retirement and Disability System (ORDS).

OPM is switching to multilevel authentication procedures for their online services to prevent others from gaining unauthorized access to our accounts.

The new procedures may create confusion for some, especially for older retirees that are unfamiliar with computers and internet protocols. Once you create a new or use your existing login.gov account, and pair it to your original OPM Services Online account, it won’t be so daunting.

LOGIN.GOV ACCOUNT

OPM is deploying enhanced security protections for accessing your servicesonline.opm.gov account on May 26th. Login.gov provides an extra layer of security by using multi-factor authentication and stronger passwords to protect your account. Other government agencies, such as the Small Business Administration and the Social Security Administration, already use this process to provide secure access to their services.

I logged into my Social Security account to check this out. They now allow access using Login.gov or you can still use your original access user name and password. If you use your original access credentials, Social Security now requires a second level of verification, either a text message code sent to your cell phone or email address that you have on file with them.

When I read OPM’s email announcing this change, I set up my www.login.gov account. This saves time and confusion when first visiting OPM’s online services starting on May 26th. If you already have a login.gov account there is no need to set up a new one.




LINK SERVICES ONLINE ACCOUNTS TO LOGIN.GOV

The following screen is what I encountered at Servicesonline.opm.gov on the morning of May 26th. Since I already created my LOGIN.GOV account, I simply clicked on “Sign in with LOGIN.GOV” and entered my LOGIN.GOV user name and ID. If you haven’t set up your new login.gov access, you will be prompted to do so.

After signing up for this service, and using it to enter your servicesonline.opm.gov account, you will be prompted to enter a code, prior to gaining access to your account. The code is sent to either your cell phone or email address that verifies you are the one accessing your account.

The next screen advises account holders to click on “Connect to servicesonline.opm.gov” and the following screen popped up asking me to enter the code that was sent to my cell phone.

After entering the code and clicking on “Submit” I was redirected to my account and home page.  I logged in and out of my site several times to ensure it was working properly. The only change that I encountered was the login process, all other features of my original account were the same as before. If you encounter problems, use OPM’s step-by-step guide and you will be back online in no time.

I use OPM’s online services frequently. It is difficult getting through to OPM by phone and with their online services you often are able to download what is needed or make changes to your account online instantly in many cases. If you already have access to this service, follow the guidance when you first enter after May 26th to keep your account active. For those who don’t currently use this site, this is a good time to sign up.

Helpful Retirement Planning Tools

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, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Friday, 13th May 2022 by

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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 26th 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 25th 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 26th.

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

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

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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 1st, 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.
Currently, a 13-week treasury bill yields 0.904% and the 26-week yields 1.399%. The most recently issued 52-week bill is earning 1.923%.
As interest rates rise over the next year or two, short term bills are a good option. When rates begin to peak or reach a point where longer-term Treasury Bills, Notes or CDs become attractive, you will have the funds to invest.
Treasury Bill rates still won’t keep up with inflation these days. However, they provide a much better return than banks and credit unions are offering.

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:

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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

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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

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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