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Posted on Friday, 25th March 2022 by

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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.

 

INVESTMENT RATES (5/22/2022)
Investment Type Percentage Rate Yearly Earnings/$100,000
My Bank .04% $40
I-Bonds 9.62% (Composite 8.37%)* $8,370*
Treasury Bills (4 weeks) .649% $649
Treasury Bills (8 weeks) .914% $914
Treasury Bills (13 week) 1.067% $1,067
Treasury Bills (26 weeks) 1.52% $1,520
Treasury Bills (52 weeks) 2.164% $2,164

*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.

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 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 16th 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.

The 4-week bill’s investment rate increased from .051% on the March 3rd auction to .193% at their March 24th 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.

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

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

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

Inflation on fire
 

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.

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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

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 FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SURVIVOR INFORMATION, WELLNESS / HEALTH

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Posted on Friday, 4th March 2022 by

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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.

INFLATION IMPACT

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:

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

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, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Friday, 18th February 2022 by

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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.

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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

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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Posted on Thursday, 3rd February 2022 by

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Good news for those wanting more investment options. The TSP plans to add a mutual fund window as early as this summer. A welcomed addition from my perspective. The proposed rule was posted on the Federal Register January 26, 2022. Comments must be received on or before March 28, 2022.

TSP Piggy Bank
 

Congress passed legislation in 2009 authorizing the Federal Retirement Thrift Investment Board (FRTIB) to offer a mutual fund window instead of adding more funds to the TSP’s mandated menu of core funds.

A mutual fund window is a self-directed brokerage account that gives individuals the ability to buy shares of mutual funds through a broker-dealer that has been selected by their retirement plan or by one of their retirement plan’s service providers. Unlike a plan’s core funds, the investments available through a brokerage account are not ordinarily vetted by a plan fiduciary to determine whether they are prudent investments. You must do your own research to determine the worthiness of your investment choices.

Those who choose to take advantage of the mutual fund window must transfer a minimum of $10,000 to fund purchases. However, the initial amount transferred cannot exceed 25 percent of the participant’s TSP balance. These two restrictions, taken together, would require a participant to have a minimum TSP balance of $40,000 before becoming eligible to invest through the mutual fund window.

Subsequent transfers to the mutual fund window can’t exceed 25 percent of a participant’s total TSP balance. If your TSP balance is $250,000, you can transfer a maximum of $62,500 to the mutual fund window.

Two interfund transfers are allowed in a calendar month. After that, money can only be transferred into the G Fund. Any transfer from the TSP core funds to a participant’s mutual fund window account, or vice versa, including a forced transfer, will count toward the existing monthly limit on interfund transfers. A member may always elect a fund transfer from his or her mutual fund window account to the G Fund.

A portion of the TSP’s administrative expenses will be allocated to those who choose to use the mutual fund window by charging an annual $55.00 fee. This fee will be redetermined once every three years and is in addition to any mutual fund window account maintenance fees, trading fees, and fees and expenses associated with the specific mutual fund(s) in which the participant chooses to invest.

There will be thousands of funds to choose from including Vanguard, Fidelity and others. Mutual fund performance can be reviewed at the fund’s family website. I use www.morningstar.com which allows registered users to track investments and review detailed fund analysis; they also have an exceptional account X-ray feature. A 15-day free trail is available to check it out.

There may be changes to the program after comments are received. The TSP will send out an announcement prior to implementation.

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Federal Retirement Reports™ develops personalized 27-page customized reports to help clients determine the best time to retire, their current and future benefit costs, TSP options, and includes a comprehensive cash flow analysis. A federal retirement specialist reviews your report with you and answers any questions you may have during a one-hour session. An additional one-hour consultation with a Certified Financial Planner (CFP) is included at no additional cost. Your money back if not completely satisfied.

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RMD Update

TSP participants that are required to take an RMD this year received a notice specifying the amount they must withdraw to satisfy this requirement. I receive this letter every January.

Joe, a newsletter subscriber, noticed that the TSP used the old IRS Uniform Lifetime Tables to calculate the Required Minimum Distributions for 2022! He contacted the TSP and their response follows:

“This responds to your inquiry of January 15, 2022, concerning your Thrift Savings Plan (TSP) account. You stated your January 2022 installment payment was miscalculated.

We regret any inconvenience. Your January 2022 installment payment was calculated using the old Internal Revenue Service (IRS) Uniform Lifetime Table. The new IRS Uniform Lifetime Table has not yet been applied to the TSP’s payment system. We are in the process of updating this information in our systems. Payments calculated using the new table will begin as soon as possible. A notice containing the new calculation for your 2022 required minimum distribution (RMD) should be mailed to your address of record in February 2022.”

The revised notice should arrive shortly, or you can download a copy from the TSP 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, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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Posted on Sunday, 23rd January 2022 by

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I’ve received a number of questions ranging from COLAs and I Savings Bond interest, to the impact on a federal employee’s annuity if they retire early or take a deferred retirement.  You may find this information helpful.

COLA, I Bond and Employment Questions

COLAs and the FERS Supplement

FERS employees retiring with a Special Supplement should be aware of their limitations. Many assume that it is equivalent to Social Security benefits.

You may be eligible for a Special Retirement Supplement if you retire:

  • After the Minimum Retirement Age(MRA) with 30 years of service;
  • At age 60 with 20 years of service; or
  • Upon involuntary or early voluntary retirement (age 50 with 20 years of service, or at any age with 25 years of service) after the U.S. Office of Personnel Management determines that your agency is undergoing a major reorganization, reduction-in-force (RIF) or transfer of function. You will not receive the Special Retirement Supplement until you reach your MRA.

The supplement is calculated by assuming a working life of 40 years, each year of FERS service is worth one-fortieth of the estimated Social Security benefit. Therefore, the FERS Supplement is often significantly less than your Social Security benefits. Plus, FERS supplements don’t qualify for a COLA per the CSRS/FERS Handbook Chapter 51, Subchapter FERS, Part 51A4.

At age 62 the supplement stops regardless of whether or not you sign up for Social Security then. If you have earnings from wages or self-employment that exceed the Social Security annual exempt amount ($19,560 in 2022), your Special Retirement Supplement will be reduced or stopped.

After reaching the MRA, retirees who are receiving the annuity supplement are required to report earnings annually to OPM.

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I Bond Interest Accrual

I’ve purchases I Bonds since their inception in 1999 and my article titled, I-Bonds Earning 7.12%! A Great Way to Save discusses just how advantageous they are. An I bond that I purchased November of 1999, a $200 bond, is now worth $687 today and yielding 10.6%! The early I Bonds had a 3% fixed rate plus the inflation rate.

I received several questions about how they accrue interest. There is a general misconception that the interest rate changes on all of the I bonds you own in May and November of each year. If you purchase an I Bond from November 1, 2021 to the end of April 2022, you’ll be guaranteed a total rate of 7.12% for the next six months. I Bonds bought in January of 2022 maintain the 7.12% rate through June. In July it will adjust to the new rate set by the Treasury on May 1st for the next 6 months.

Here is the reference on the Treasury Direct page:

“The composite rate for I bonds issued from November 2021 through April 2022 is 7.12 percent. This rate applies for the first six months you own the bond.”

Leaving Federal Service for the Private Sector

Employers have to vigorously compete for the limited pool of qualified candidates. There are hiring signs everywhere and it isn’t limited to the service industry. Companies are finding it difficult to recruit skilled workers across the board.

Job opportunities abound for federal annuitants and active federal employees. Private companies are offering skilled feds attractive incentives, flexible work hours, and higher pay to entice them to leave federal service or come out of retirement. This has escalated due to the large number of workers that have permanently left the work force through early retirements or simply decide to stay home.

The dilemma for most federal workers is to overcome their reluctance to leave federal service for fear of losing their generous retirement benefits. The following article presents the many early and deferred retirement options available:

I retired from federal service at age 55 to work full time in my business.  As soon as I was eligible, I left for what I thought and proved to be greener pastures. Those who jump ship may have the opportunity to return later with enhanced credentials at a higher pay grade. If you are contemplating a move, weigh your options carefully; protect your annuity by opting for an early or deferred retirement.

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 ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, EMPLOYMENT OPTIONS, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Friday, 14th January 2022 by

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Federal annuitants receive their updated Annuity Statement, with the COLA increase added, early January. Our 1099R Tax Forms typically aren’t available until the end of January by regular mail. Registered users of OPM’s Retirement Services Website can download their Annuity Statement and 1099R forms NOW!

IRS 1040 Form

CIVIL SERVICE ANNUITY STATEMENTS
OPM sends out updated annuity statements anytime there is a change that affects our annuity. Next month we will receive another statement showing FEHB healthcare and FEDVIP premium changes. New statements are sent out throughout the year whenever there are changes to checking/savings allotments, income tax withholding, and long-term care insurance, etc.

This document provides annuity and benefit information for you and your family. It includes the annuitant’s Claim number, the amount withheld for each item deducted from your annuity payment, and your gross and net payment. It specifies the monthly survivor annuity currently payable in the event of the annuitant’s death and includes an annual Notice of Survivor Annuity Election Rights. You will also find OPM contact information.

Instructions are included for making benefit elections such as how to apply for a survivor election for a spouse you marry after retirement, survivor annuity elections for a former spouse, and others.

I keep the most current Notice of Annuity Adjustment in my retirement folder and include a copy in our estate binder along with OPM’s annuity and FEGLI insurance verification forms that OPM sends out upon request. You can also download these forms from OPM’s site. This is an important document and should be readily available if you or your survivor need to contact OPM or require benefit clarifications.

Retirement Planning Report

 

1099R TAX STATEMENT OF ANNUITY PAID
Last year the 1099Rs weren’t available until January 19th. I downloaded my form this morning! A portion of our federal annuity isn’t taxable, this document includes your gross and taxable amounts in block 1 and 2a. The amount withheld for federal income tax is listed in block 4 and block 5 lists employee contributions including our FEHB health care premiums. One of the more interesting blocks is 9b (Total Employee Contributions). I’ve been retired 17 years and what I paid into the system was paid out to me within the first two years! We have exceptional retirement benefits.
OPM’s RETIREMENT SERVICES WEBSITE

You must be registered to use OPM’s Retirement Services Website. If you aren’t registered read the article titled “Connect to OPM’s Online Services” to understand the registration process and sign up. It doesn’t take long, however, you may have to wait for your password to be sent via regular US mail and that can take several weeks.

SUMMARY

Many banks and brokerage house’s 1099 and DIV reports are also available online for download early. Treasury Direct doesn’t send out print copies. You must download your Treasury’s OID and 1099 INT statements from your online account. They are typically available early January. If you have complex investments, your brokerage 1099 statements could be delayed until mid-March or later.

I’ve used TurboTax software for decades. It’s intuitive and walks you through the entire process, double checks your work, and they allow you to file online. This software can also download and integrate your brokerage account’s 1099 forms for your tax return, saving considerable data entry time.

There are a number of free online filing services available through the IRS and several of the tax preparation services. The IRS allows you to file online at no cost if your annual income is less than $72,000. You will have to file your State taxes separately.

Take advantage of OPM’s Online Services to download your 1099R early, obtain a lost 1099R, or find other important retirement forms and reports.

Helpful Retirement Planning Tools

Federal employees considering leaving for greener pastures should explore all options. Should you stay or should you go? Leaving federal service for the private sector.

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, SURVIVOR INFORMATION

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Posted on Friday, 7th January 2022 by

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It’s been quite a year, COVID, life disrupted across the board, and so much more to distract us day to day. Thankfully, we are surviving and life is getting back to the new normal; whatever that might be. I’m still trying to figure that out.

All Americans are impacted by the Covid epidemic, lawlessness and gun violence, open borders, inflation, out of control government spending, and so much more. Hopefully, common sense will prevail and things will return to some semblance of normal soon.

The Inflation we are experiencing isn’t transitory. Yes, prices of goods change frequently due to supply and demand. However, certain fixed costs, once increased, rarely allow the end products to retreat to their former lows. Medicare Part B Premiums increased 14.7% this year; the average FEHB health care plan premium rose another 2.4% and wages have increased dramatically for many including entry level jobs.

If inflation was transitory, we wouldn’t be paying considerably more for the same goods we purchased years ago. A commonsense analysis, nothing more. We don’t need an economist to reveal the obvious, we see the impact firsthand every time we go out the door.

Enough of life’s challenges, all are aware of the chaos around us. No need to repeat it here

On a personal note, I sold my career and jobs websites, one that I launched in 1994! The new owners, Federal Media Network, LLC will be a good steward; I’ll remain involved as a consultant and editor for several years. I retained our federal employee’s retirement planning web properties and will continue writing this newsletter and blog, hopefully for years to come. It’s time to start turning the reins over to the younger generation.

I completed several major items on my bucket list, my memoir early last year, and garage remodeling project this past summer. The only other major item on my list is to visit England, Austria, and Ireland, Mary’s and my ancestral stomping grounds.

My father’s side came from England; mother’s family from Austria and Mary’s from County Cork Ireland, all migrating to America through Ellis Island in the very early 1900s! Our DNA tests confirmed all of the above with a little Scandinavian and western European mixed in.

The Early Years, A Road Less Traveled, my 28th book and more than likely my last, was something I had on the back burner for years. During these past 7 decades I kept most everything related to family history: check book registers and tax records back to the 1960s, family correspondence, tickets from many of the events my wife and I attended, military and work records, thousands of pictures, and much more.

The Early Years, A Road Less Traveled

This was a reflective and enjoyable two-year journey. The most satisfying aspect of writing a memoir is that our children, grandchildren and future generations will have a glimpse into their family’s past. Hopefully, a journey worth remembering. The Preface, Table of Contents, and Chapter One are available online for anyone to read.

I mention my memoir here not to promote this title but to encourage others to capture their story while you still have the time and energy to do so. This is a limited production; by publishing and copyrighting the work it now resides in the Library of Congress. I consider this the culmination of my 36-year publishing career and I’ve given away far more than were sold.

You don’t have to write a formal book to preserve your story. Start a handwritten journal or use a word processor to capture your earliest recollections and proceed on from there. Interview your relatives while you still have the opportunity. Knowing what transpired in the past helps us understand the why and wherefore of a singular life interrupted by time and circumstance. A life story reveals the rhyme and reason for our existence and how we ended up where we are today.

My daughter wrote the following on her Facebook page after reading my book:

“My Dad wrote this beautiful memoir of his life and I absolutely loved it! I felt like I lived those times with him. I’ve gotten to know family members I never met such as his beautiful mother. I am in awe how my Dad is such a beautiful writer!  This book shows you how you can do anything if you work for it! He lived with perseverance rather than focusing on misfortunes… Dad, you are amazing! I love you! “

This is payment in full, I need nothing more.

Garage Remodeling Project

My wife cringed when I started the garage remodeling project several years ago and completed it this past July. I always wanted a pristine garage to work in and simply enjoy.

I painted the three-car garage walls light gray from the floor to the one-foot-wide blue racing stripe; the area above is a bright white. The wall cabinets and a work bench were added several years before. The blue racing stripe is the same color as our first car, a light blue 4 door 1963 Chevy Impala that has a story of and in itself. I upgraded the lighting to daylight LEDs; when turned on it’s as bright as a sunny midsummer day. I keep everything off the floor either in cabinets, on shelves or wall organizers. I have mostly reproductions of auto memorabilia on the walls while I search for originals on forays to local flea markets and garage sales next spring and summer.

The floor and baseboards were the last tasks. A local contractor applied a flaked multi colored polyaspartic floor coating. The flooring application was completed in 7 hours and I was able to walk on it 2 hours after they left. Regular epoxy applications take up to three days to apply and cure and the fumes are more pervasive.

Any garage floor application gases out fumes; it took 3 months of airing out with fans going 24/7 to eliminate the odor. If you have respiratory health issues, proceed with caution before applying any floor coating. Thoroughly seal your garage to keep the fumes from entering your home. I spent a week sealing every crack and crevice and installed the baseboards myself after the floor cured. Several contractors quoted over $700 to install just 80 linear feet of baseboard! The materials only cost $120 at Lowes. Also, floor coatings are slippery when wet, even with a slip retardant applied (fine sand to the final coat).

The project took its toll on my back and arthritic joints. Before it was completed, for several weeks I could barely straighten up when standing. In hindsight, I should have contracted the work out, I’m not a spring chicken anymore. However, I still enjoy working in and around the house. In my youth I worked sunup to sunset tackling every remodeling job possible plus car repairs and maintenance, not anymore!

The Past Lives On

I often listened to “60s on 6” during trips, the XM radio station that played the popular songs of the 1960s, my generation. The other day I discovered that it was gone!  Did XM radio cancel my generation?  After mentioning this on the Wilkinsburg High School Alumni (1940-1977) Facebook page, I discovered it was moved to channel 73 and retitled 60s Gold. What a relief, I enjoy this interlude that resurrects fond memoirs of my youth.

When I tuned in the new channel, they were playing “The Rain, the Park and Other Things” by the Cowsills. My girlfriend and I listened to this on my car radio on many of our dates. Love songs back then, when times were not as complicated, were simple and sweet compared to today’s venues. This song keeps playing in my head as I write this.

I saw her sitting in the rain
Raindrops falling on her
She didn’t seem to care
She sat there and smiled at me

Then I knew (I knew, I knew, I knew, I knew)
She could make me happy (happy, happy, she could make me very happy)
Flowers in her hair
Flowers everywhere (everywhere)

(I love the flower girl)
Oh I don’t know just why, she simply caught my eye
(I love the flower girl)
She seemed so sweet and kind, she crept into my mind
(To my mind, to my mind)

Here is an excerpt from my memoir describing when I first met Mary, my girlfriend back then. We’ve been married 52 years!

“Once I met Mary, little else mattered. I was head over heels for her and devoted most of my time and energy getting to know her. This was the fall of 1966; I was seventeen and Mary sixteen. She was a tomboy growing up and flowered into this radiant Irish lass with a fair complexion, long red hair, bright-blue eyes, and a smile that could melt any man’s heart. She was athletic and shy, and I loved being around her.”

Conclusion

Reflections are just that, a fleeting glimpse into the past. Reality unavoidably rose to the surface just for a short while towards the beginning of this piece.

I sincerely want to thank my site visitors, newsletter subscribers, and blog followers again this year. I appreciate your patronage and thank you for following me all of these years, some for several decades.

My best to you and yours always and may you have a healthy, safe and prosperous New Year.

Helpful Retirement Planning Tools

Request a 27 page Federal Retirement Report™ today. A one-hour session with a Certified Financial Planner is included.

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

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