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How to Keep What You Worked a Life Time Accumulating

Posted on Thursday, 24th March 2016 by

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Updated 8/12/2025

The bull market in 2016 was the longest in history at the time. All bull markets eventually end in a significant downturn or recession. The Federal Reserve applied its low-interest policies until they started to rise dramatically several years ago. When interest rates are low, more individuals are forced into the stock market to earn a higher rate of return, which in turn artificially increases stock prices as interest rates decrease.

 

 

Since interest rates were near zero in 2016, the only way they could go was up, unless we enter a negative interest rate environment. With negative interest rates, savers pay banks to keep their money!  If they charge a negative 1 percent rate on a $100,000 bank deposit, you’ll have only $99,000 in your account at the end of the year. Not a good thing.

If the Federal Reserve allows interest rates to rise, stocks tend to fall in value, and the interest on newly issued bonds and our national debt increases correspondingly. You have to understand how markets work to protect your assets.

In essence, the Federal Reserve essentially robbed Peter to pay Paul. They reduced interest rates in years past to almost zero for an extended period. All of the interest that everyone had been earning on our savings and other accounts was transferred to the government when interest rates were artificially low.

The government used these low interest rates to borrow vast amounts of money, estimated to be as much as 40% of the government’s annual operating expenses, at very low interest rates to overspend and fund government programs.

Informed Investment Decisions

Significant losses are hard to recover from, especially when you are retired and living on a fixed income. Unfortunately, retirees can’t simply print money like the Federal Reserve does to balance the books. Successful Investing requires understanding market basics, rational thinking, and attention to detail.

When I was in my late twenties, I joined the National Association of Investors Corporation (NAIC).  They are the nation’s largest non-profit organization dedicated to investment education, and they publish Better Investing Magazine, an unbiased, independent source of investing news and insights for all experience levels.

NAIC encourages members to start investing early, offers courses on investing fundamentals, and supports local chapters. They showed me how to buy stocks directly from major corporations through Dividend Reinvestment Direct Purchase Programs with as little as $25 a month and no brokerage commissions.

Fidelity offers several online investing tutorials that you may find helpful. Their Essentials of Investing interactive tutorial can help you learn about risks, priorities, and common strategies used by other retirees. They also offer a mutual fund evaluator and many different tools to help you select and manage your investments.

Basic investment knowledge also helps federal employees and annuitants grow their Thrift Savings Plan (TSP).  You stand to lose if you panic during market corrections and invest in the wrong funds at the wrong time. Fortunately, for those who don’t have the time or inclination to learn investing concepts, the TSP offers Life Cycle funds, often referred to as one-decision funds, that automatically change to a more conservative mix as you approach retirement.

Stocks, Bonds, Mutual Funds, and ETFs

The purchase of stocks and bonds should be made based on fundamentals, not on gut feelings or general observations. Before purchasing a stock, check the company’s price to earnings (PE) ratio, yield, debt, industry outlook, book value, and so much more.  Once you learn what to look for and understand the principles, you will be able to make sound investment decisions. With bonds, it’s about credit quality, duration, and other factors.

If you aren’t familiar with these terms, consider taking a beginning investor’s course, such as the one offered by NAIC mentioned earlier in this article. There are rating services that provide prepared reports for thousands of companies, mutual funds, and exchange-traded funds (ETFs). I use Value Line, Morning Star, and my brokerage house stock rating sheets to validate stock selections.

You can view the DOW 30 ValueLine Investment Surveys on their site at no cost.  You have to subscribe to their service to view the 5,000 or so stocks they track, or visit your local library’s reference section. Most brokerage firms provide rating sheets for stocks, mutual funds, and ETFs. Services like Value Line and Moody’s are often available at your local library.

A good publication for investors is Kiplinger Magazine; I’ve been a subscriber for many years and find each issue insightful.  They also publish a list of recommended mutual and exchange-traded funds, including building block, one-decision, and custom funds for your consideration.  They publish articles on how to select a balanced portfolio using their recommended funds or you can do the same with a funds such as Vanguard Wellington (VWELX) or Fidelity Balanced (FBALX).

Vanguard and Fidelity both offer tools to help you select a diversified portfolio of funds based on your situation after answering a few basic questions. Vanguard’s Fund Selection Tool is easy to use and provides a list of recommended mutual funds and the amount to invest in each.  It only takes a few minutes to complete.

Gold & Silver Discussion

I receive several flyers each year offering to double or even triple your investment in short order. I relegate these offers to the trash and don’t read them. They talk about doom and gloom and how the market is going to crash, and gold or certain other investments are your only protection. If you have considered purchasing gold and silver, there are many sellers ready to take advantage of the uninformed.

Several companies sell gold and silver at huge markups, well above the spot price for that metal. The spot price reflects the price paid for a precious metal based upon immediate delivery and is expressed as the ask or selling price or the bid or buyback price.

The reason your cost is above spot price for precious metal coins, bars, and rounds is to compensate the miners, refiners, mints, and retail outlets for producing and selling the product. You will rarely buy at or below spot, and newly minted coins and bars, referred to as bullion, typically sell for between 3 to 15 percent above spot, depending on the coin denomination and size.

Large gold and silver dealers often sell a single one-ounce gold American Eagle coin for approximately 4 to 5 percent above current spot/melt values. They will purchase them from customers at about two to five percent under their current selling price. If the spot price of gold is $3450 per ounce, you can expect to pay approximately $3622 per one ounce coin.

Some sellers offer the same coins for considerably more, so shop around to get the price as close to spot as possible. Smaller-denomination coins sell for a higher premium because they cost more to produce. A tenth of an ounce coin requires the U.S. Mint to strike a smaller blank ten times to make the same one ounce of metal coins. Costco now sells gold and silver coins and bars online with very low markups.

I’ve seen several 1-ounce silver bars selling from some vendors for twice their silver content spot price, so buyer beware. Silver would have to increase by more than 100% for you to break even at those prices. You can purchase silver rounds or bars for several dollars less than the silver American Eagle coins. Gold and silver bullion can be bought from sellers across the country and also directly from the U.S. Mint. If you are interested in gold and silver coins, check the spot prices online before buying precious metal coins.

Many companies offer loss leaders, selling you a limited number of gold and silver coins just above spot at a very reasonable price. When you call, they attempt to sell you graded or collector coins for 3 to 4 times the price of the loss leader coins. If you do decide to buy collector coins, you can check prices at the CPGS site to ensure you aren’t getting ripped off.  They also offer a grading service for coins you’d like to have graded for your collection.

Market Fundamentals

If you don’t understand market fundamentals, learn about them before investing. Even if you hire an advisor, it’s essential to know investing principles so you can understand and approve of his or her recommendations. Financial security is the foundation of a successful life and retirement. A little time, preparation, and pre-planning go a long way to achieving this goal, and there is a lot of help available to get you there.

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Disclaimer: The information provided may not cover all aspects of unique or special circumstances.  Federal regulations, medical procedures, investment information, and benefit details 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 may not be suitable for your situation. This service is not affiliated with OPM or any federal entity. You should consult a financial, medical, or human resource professional where appropriate. Neither the publisher nor the author shall be liable for any loss or 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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Social Security and Leave Record Updates

Posted on Wednesday, 2nd March 2016 by

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Social Security File & Suspend

I discussed in a recent column the process my wife and I went through to file and suspend my Social Security benefits.  I did this so that my wife will now be able to collect a spousal benefit while I deferred collecting until age 70 and my benefit will increase 8 percent a year until then.  This option will no longer be available after April 30th of this year.  Shortly after making this change I received a new Medicare card with a different Medicare claim number suffix. Your Medicare claim number is basically your Social Security Number followed by one of 30 plus suffix extensions. I went from a T (Enrolled in Medicare but temporarily delayed Social Security Benefits) to an A (Primary Claimant – wage earner) status.

This basically confirms that I am now officially collecting Social Security benefits and in the program even though I personally delayed collecting until age 70. My wife is now collecting a spousal benefit based on my work history.  Her total monthly check is comprised of two components, her benefit that she started collecting at age 62 plus a spousal benefit that increased her check up to half of what I would have collected at age 66.

If both you and your spouse are at your full retirement age (66) you only have a short time to take advantage of this option.  My article tilted Social Security Changes, Retiree Job Options, & Updates explains the major changes that were made to the Social Security Program recently under the “Bipartisan Budget Act of 2015.”

I’ve been concerned for some time about potential changes to the Social Security program that are proposed by both political parties.  Hopefully, if you are already in the system and collecting Social Security neither party will pass legislation to cancel those benefits. Only time will tell.

2016 Leave and Schedule Record – Entering Fractional Hours

Mary, a federal employee that uses our 2016 Leave and Schedule Record reported that she was having trouble entering fractional hours on the Excel spread sheet.  I downloaded the chart and entered 8 hours of annual leave accrued with 1.5 hours of leave taken for that period and the balance shows correctly as 6.5 hours. However if you enter 1.25 hours the fractional hours round up to 1.3 hours due to the limited space provided for that column. This happens with all four categories of leave; annual, sick, comp and credit and there is an easy correction that you can make so that the fractional hours do not round up.

The leave total fractional hours round up due to column space limitations when your total hours are 3 digits or more. You can expand the column width and the rounding will return to the actual number.

To expand the column width for annual leave totals place your cursor at the top of the form on the line between the columns T & U. Click and hold the left mouse button down and move the mouse to the right to expand the column a bit. Release the mouse button and you will see that the rounding disappears and your fractional hours will be as entered and not rounded up. You can do this with each of the four leave columns so that fractional hours will show correctly.

When we update the chart for 2017 I’ll expand the columns so this won’t be an issue.

Request a Retirement Benefits Summary & Analysis. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections.

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

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

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Will Government Pension Offset (GPO) Reduce Your Social Security Benefits?

Posted on Saturday, 13th February 2016 by

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Recently one of our newsletter subscribers asked me to explain how the Government Pension Offset (GPO) impacts a married couple, one retiring under CSRS and the other under FERS.  The husband will retire under CSRS and his wife is a FERS employee. He also wanted to know if his wife’s social security will be penalized due to his CSRS annuity.

Under the Social Security system you apply for benefits based on your work history or for a spouses, widows, or widowers benefit if it would be greater than what you would receive based on your work history.  It’s important to note that you can’t apply for a spouses benefit until they start collecting their Social Security benefits.

GPO only applies if you receive a pension from a federal, state, or local government based on work for which you didn’t pay Social Security taxes and then apply for a spouses, widows or widowers benefit.  FERS annuitants paid into the Social Security system and are not subject to GPO.

If you are a CSRS retiree and then apply for a spouses, widows, or widowers benefit GPO reduces your Social Security benefit by two-thirds of your government pension.  For example, if your monthly civil service pension is $900, two-thirds of that, or $600, must be deducted from your spouses, widows, or widowers Social Security benefit. If you’re eligible for a $800 spouses, widows or widowers Social Security benefit you will get $200 monthly from Social Security ($800 – $600 = $200). If you retired with a CSRS federal pension of $1,200 a month in this scenario two-thirds, $800, will be deducted from your benefit and you would receive no Social Security benefits ($800-$800 = $0).  If you are CSRS you can apply for Social Security Benefits under your work history if you meet the basic eligibility requirements as mentioned in this article.

The offset applies to a spouses, widows, or widowers Social Security benefit. However, they may reduce your own Social Security benefit because of the Windfall Elimination Provision (WEP). Social Security is earned by each worker and their benefits are independent of each others. For example, my wife worked in the private sector and earned a benefit that she applied for when she turned 62. When my wife reached full retirement age, 66, I filed for Social Security and immediately suspended my benefit so that my wife could collect a spousal benefit based on my higher earnings.  Since my wife worked in the private sector she paid into the Social Security system and was not subject to GPO. Had she been a federal worker in the CSRS system GPO would have been applied.

Social Security combined her original benefit with the spouses benefit so that her check increased by 50%. I won’t collect until age 70 and my benefit will increase 8% a year until then. Only my wife’s spousal benefit was reduced by WEP not her primary benefit based on her work history.  She receives a combination of the benefit that she was collecting and then an additional amount of her spouses benefit. Because I have less than 30 years of substantial earnings her spousal benefit portion of her monthly check was reduced by WEP.

Typically a CSRS retiree’s Social Security benefit is considerably smaller than a spouse’s Social Security benefit when the spouse retires under the FERS system or from the private sector.  CSRS employees do not contribute to Social Security and they must work a minimum of 40 quarters, 10 years, in a job where they paid into the Social Security system to collect a benefit on their work history. Since most CSRS employees have less than 20 substantial years of private sector earnings their benefit was reduced by $413 if they retired in 2015.

In this case, where the husband is retiring in the CSRS system and his wife is FERS, more than likely her Social Security benefit will be substantially more than her husband’s spousal benefit.  She would apply under her work history.

There is a lot to consider and it is best to review your personal situation carefully before applying for Social Security.  Social Security provides WEP and GPO calculators to help you determine the impact, if any, on your benefits.

Request a Retirement Benefits Summary & Analysis. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections.

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

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

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1099 Rs Available, Social Security Filing, & Updates

Posted on Wednesday, 27th January 2016 by

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I typically purchase Intuit TurboTax Home & Business software in mid December each year to start working on our income taxes. I was able to download my Statement of Annuity Paid (1099 R Form) direct from OPM’s retirement services web site on January 17th!  Typically retirees receive these forms in the mail by the end of January.  You can also download duplicate 1099 R copies from OPM’s website if you should lose or misplace your copy.

Social Security Filing

Last week I filed for Social Security and immediately suspended so that my wife, who will soon be at full retirement age, could take a spousal benefit. We had to file by phone since we couldn’t get an appointment at our local Social Security office for several months, they were booked solid.  My wife’s monthly check will increase by almost 50%.  This file and suspend option won’t be available after April or early May of this year due to the changes in the law that took effect when the President signed HR-1314, the “Bipartisan Budget Act of 2015.”

Because I was CSRS my wife’s benefit was reduced by the Windfall Elimination Provision (WEP).  Thankfully I have 25 substantial years of earnings to date so the reduction was about half as much as the typical CSRS retiree’s deduction. Actually, when I do sign up for benefits at age 70 I’ll have 28 or 29 substantial earnings years if I continue working and at that point my Social Security check will only be reduced by $41 to $82 a month. Also, if I continue to work and earn the substantial earnings amount or more, my wife’s benefit will increase 5% each year plus COLA increases until I turn 70 and start collecting Social Security.

Currently, most CSRS retirees have 20 or less substantial years of earnings and if you started collecting a benefit in 2015 your monthly Social Security check would have been reduced by $413. My Social Security statement shows my taxed Social Security Earnings back to 1965 and my first substantial year of earnings was in 1968 when substantial earnings were only $1,950 a year.  In 2015 substantial earnings are listed at $22,050.

Updates

Last week my iPhone 5 quit and the local Verizon store wasn’t able to fix it. They offered to sell me a new iPhone 6 or 6S for $27 a month added to my wireless phone bill.  They no longer offer two year contracts however you must either pay cash for a new phone or pay for it monthly for two years.

I decided to look around and Sams Club was offering a $350 Sam’s Club Gift Card if you purchased a new Samsung phone.  The Samsung phones were just too big to carry in my pocket. I told the sales clerk that I was happy with my iPhone 5 and the new phones didn’t have anything that I really wanted and was about to walk out. She then pulled out a new iPhone 5S and said that I could buy a new iPhone 5S for 99 cents if I signed up for a new 2 year contract.

The Sam’s clerk explained that the carriers eliminated two year contracts at their primary phone outlets. However, Sams and a few other sellers were permitted to continue offering them with specials like she offered me. I signed a new 2 year contract and paid 99 cents for my iPhone 5S that has finger print recognition and an improved camera especially for low light situations.  The sales clerk said that my phone bill would not increase except for a one-time $40 activation charge.

I called Verizon the next day to verify the transaction and discovered that my contract cost was about $20 a month more than what I was paying previously.  I thought the deal was too good to be true.  What the sales clerk didn’t tell me was that when you aren’t on a contract they reduce your line cost from $40 a month to $20 a month to keep you using their service. The agent said I was only using about .1 Megs of data monthly, much less than the 2 Megs I was paying for, and after giving me a 15% veteran’s discount my bill ended up being $5 a month more.

I discovered that once you go off contract, like I was, you have to call them to get the line reduction. Fortunately I called several days after my contract expired three months ago and reviewed my bill with them and at that time they dropped my line charge to $20. If your contract has expired call your wireless phone carrier and ask for a discount.

To get a veterans or military discount from Verizon Wireless you have to call and send them either a copy of your military ID or for veterans a copy of your DD 214 form. I scanned my DD 214 and sent it to them through their web site.

The long and short of it is that if the deal sounds too good to be true it probably isn’t the deal you thought it was.  In this case, without the military discount and reduction in Data costs, I would have paid $20 more monthly and could have purchased several phones for that price without going back on a two year contract.  Still, for $5 more each month I’m happy with my new iPhone 5S.

Request a Retirement Benefits Summary & Analysis. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections.

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

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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FEGLI Rate Changes, Annuity Adjustments & More

Posted on Friday, 15th January 2016 by

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As of January 1, 2016, FEGLI premiums for many options and age brackets changed due to actuarial adjustments. Annuitants that carried FEGLI coverage into retirement will receive a Notice of Annuity Adjustment showing the new rates.

Most of the new FEGLI rates for Option A, B and C decrease. The older age band rates for Options A, B and C increase including retirees basic insurance rates with 50% reduction and the no reduction rates.

If retirees elected the 75% reduction your premium is waived when you reach age 65. However, retirees that are 65 or older and didn’t elect a 75% reduction or ones that carried other FEGLI options into retirement for Family or multiples will still receive an adjustment notice. The new rates mostly impact the age brackets

It’s important to note that you can reduce or cancel coverage at any time but annuitants cannot increase coverage, even during the upcoming open season scheduled for September 1, 2016 through September 30, 2016. If you elect to reduce or cancel all or any part of your FEGLI coverage, that election is irrevocable.

The upcoming open season is an excellent time for active federal employees to evaluate their insurance needs and add to or modify their existing coverage. Linda Sherman wrote an article titled “A Life Insurance Check-up: Evaluating Your Insurance Needs” that can help you determine what coverage to carry.

Some retirees opt not to carry FEGLI insurance into retirement. I personally would keep the basic at the 75% reduction as a minimum because at age 65 the premium is waived. There is also advantages to carrying Family and Option A as well because they are low cost and the family Option C does provide basic coverage for your spouse and dependents in retirement as well. The Part B multiples get very expensive as you age and there are lower cost options available if needed. Look closely at your options before deciding what is best for you and yours. Here are links to three articles that I wrote, before they announced the 2016 Open Season, on the FEGLI options that you may find helpful:

Social Security Changes

I mentioned in a recent article the changes made to Social Security’s file and suspend option this year for those at their full retirement age of 66. This option permits a higher earning spouse, that’s currently not receiving benefits, to file for benefits and immediately suspend them so their spouse can take a higher spousal benefit. This option allows a lower earning spouse to collect the higher earners benefit while the higher earner lets their benefit grow 8% a year until they apply up to age 70. Other changes are also discussed in the previous article that may impact you when filing for benefits this year.

This option, under the new law, will no longer be available later this year. Our local Social Security office was so busy that we couldn’t get an appointment for several months and had to make a telephone appointment to file before the cutoff. If you are eligible for this option and considering applying call early for an appointment.

Nice to Know

I have an iPhone 5 and was having problems charging it for the past three months or so. I’m sure this problem could develop in just about any phone that you carry in your pocket or purse. Every time I plugged in the charger the connection was intermittent and I would often go back to find it hadn’t charged. Just by moving the connector to either side or by pushing it forcefully into the USB phone jack it would connect most times. I tried a new cord and charger and the problem persisted. I thought that I may have to replace the phone due to a defective phone jack.

After closely inspecting the phone USB jack I discovered debris in the connector. I turned off the phone and used a tooth pick to gently remove what seemed to be more pocket lint than you could possibly imagine. After removing the lint the problem resolved and my phone now charges quickly and seems to hold the charge longer.

If you have a cell phone charging problem look at your USB charging connector to see if there is lint buildup. Be careful not to damage the connector if you use a toothpick to dislodge the lint.

Request a Retirement Benefits Summary & Analysis. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections.

Helpful Retirement Planning Tools
Distribute these FREE tools to others that are planning their retirement

Visit our other informative sites

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

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

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TSP – Risk Versus Reward (TSP Performance Beats market in 2015)

Posted on Monday, 11th January 2016 by

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Important Note: This article is not an investment recommendation and should not to be relied upon when making investment decisions – investors should conduct their own comprehensive research. Please read the Disclaimer at the end of this article.

Each year I review our investments and rebalance funds as necessary to maintain a pre determined asset allocation. In 2015 the THRIFT Savings Plan (TSP) performed better than the market in general. The Dow closed at 17,425 in 2015 down from 17,823 in 2014 for a loss of 2.2% while the S&P was down .08% year to year. You can use the closing figures reported on YAHOO’s Historical Charts to track index performance for any period.

The TSP C Fund gained 1.46% in 2015 while the G Fund was the TSP winner with a 2.04% gain followed by the L Income Fund with a 1.85% increase year to year. The S and I funds were losers with a 2.92% and .51% loss respectively. The G and L Income funds returns far exceeded any gains that we could have earned from a bank CD last year.

I kept my TSP account in retirement because of their low fees and the fact that the G Fund is the only fund guaranteed not to decrease in value. I wrote several articles on the advantages of the THRIFT Plan last year including “The TSP Advantage – Should I Say or Go” and “Survivors Beware – The TSP Trap” that you may find informative. The G Fund purchases special issue government bonds that pay the long term treasury yield.

Retirees are often advised to keep a good percentage of their savings in cash or cash equivalent investments such as savings accounts, certificates of deposits, bank money market accounts, U.S. Treasuries, Savings Bonds, investment grade bonds, or Municipal Bonds to maintain account balances and to provide a cushion during bad economic times.  Even some of the fallback investments such as bond funds can be risky today with increasing interest rates. As interest rates increase bond fund’s Net Asset Value (NAV) tends to decrease. A good example of this is the performance of the F Fund last year. Its yield was only .91% while over the past 10 years compounded yield was 4.89%. As interest rates rise bond fund yields tend to decrease in value because newly issued bonds have higher yields than the bonds held in the fund.  The G Fund isn’t nearly as sensitive to interest rates because the G Fund yield is determined by the rate paid for long term Treasuries.

To determine what percentage of your investments to keep in safe and secure accounts you can use a factor of 110. Basically, you would subtract your age from 110 and that figure is how much to keep in equity stock and mutual fund investments. A person age 67, according to this formula, should have no more than 43 % of their assets in equities such as company stocks, Exchange Traded Funds (ETFs), and mutual funds with 57% kept in secure FDIC insured CDs, savings accounts, Treasuries, Savings and Muni bonds for emergencies and to weather a market meltdown like we experienced in 2008. Many use a more conservative factor of 100 to determine how much to retain in cash and equities. With the 100 factor your age determines what percentage of your investments should be kept safe and secure.

Retirees that receive a fixed annuity, like those in the federal workforce, often use the higher factor of 110 because of the added financial security an annuity provides. Retirees that don’t need to tap their retirement nest egg and can live comfortably off their annuity and Social Security checks often choose to keep higher percentages in dividend paying equities, ETFs, or mutual funds.

I use my TSP account to cover a good portion of cash equivalent savings and invest in the L Income fund. The L Income invests approximately 75% in the G Fund and 25% in all of the other funds to give your assets a chance to keep up with and beat inflation when it returns. With the dramatic stock market sell off last week my TSP account balance hardly changed compared to private sector investments. It is reassuring to visit the TSP site and see that your funds balance remains fairly constant even during major market volatility. In 2008, during the stock market meltdown, the L Income Fund lost 5.09% compared to a 36.99% loss in the C Fund, 38% loss in the S fund and 42.43% loss in the I Fund. The F & G Funds were the winners that year with a 5.45% and 3.75% gains respectively.

Over a 10 year period the L-Income Fund returns ranged from a low of -5.09% in 2008 to a high of 8.57% in 2009 while the C-Fund ranged from a low of -36.99% in 2008 to a high of 32.45% in 2013. The ten year average gain for the L Income fund is about half that of the C Fund. Retirees that can’t afford to wait years to recover from a major recession will find the L Income and G Funds safe havens for their critically needed cash. Younger workers and those retired that don’t need to tap their TSP funds can tolerate more risk. It all depends on your personal situation.

Insurance Policy Review

I purchased a whole life policy in 1973 from a large private insurance company shortly after being discharged from active duty. I received my annual premium notice and called them last week to discuss the possibility of converting it to a paid up policy since the annual dividend is more than my premium.   The policy’s death benefit and cash value has more than doubled over the years due to very generous dividends.

I discovered that I could stop annual payments and convert the policy to paid up status. By taking this step the death benefit will increase approximately 10%! A good deal I thought until I asked the agent what dividends the policy is paying. The policy pays a guaranteed 4% annual dividend and the agent advised me that I could continue earning the full 4% and grow the death benefit for as long as I desired. I decided to keep the policy and pay the small premium at least until I turn 70. There are few opportunities to earn 4% a year today. If you have an older policy like mine, and you are 65 or older, you may be able to stop payments and convert your policy to paid up with an increased death benefit like they offered me.

Retiree Employment Update

Employers recruiting federal retirees and those soon to retire post job vacancies on our Jobs Center. Recently Adams Consulting Group, LLC posted an IT Audit VP position and the Idaho Department of Parks and Recreation advertised for a state park maintenance position.

Private companies, contractors, and state government departments use our Jobs Board to hire skilled federal retirees for part and full time positions nationwide. Many opportunities exist for those looking to supplement their retirement income or to start a second career. We provide this free job listing service to companies that are seeking to hire experienced retired federal workers.

Request a Retirement Benefits Summary & Analysis. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections.

Helpful Retirement Planning Tools
Distribute these FREE tools to others that are planning their retirement

Visit our other informative sites

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

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, EMPLOYMENT OPTIONS, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE

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Annuity Statements, Open Season Comments, & Closing Thoughts

Posted on Tuesday, 15th December 2015 by

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I receive email messages from retirees and survivors each year that can’t find their CSA claim number and are uncertain as to what benefits they elected when they retired. At least once a year we receive a Notice of Annuity Adjustment, shortly after the new year starts, that provides abundant information for annuitants and their survivors. Any time your annuity payment is modified, for whatever reasons, OPM sends out a new notice outlining the change and the impact on your annuity. If a COLA is pending, you change an allotment, increase tax withholdings, or for example your long term insurance premium increases you will receive a Notice of Annuity Adjustment.

This form offers a wealth of information for you and your family. It includes your Claim number, the amount withheld for each item deducted from your annuity payment, and your gross and net payment. This document also includes an Annual Notice of Survivor Annuity Election Rights and provides contact information for OPM including a recommendation to register and log on to their online services.

I keep the Notice of Annuity Adjustments that I receive 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. This is an important document and needs to be readily available if you or your survivor need to contact OPM or require clarification on your benefits.

Open Season Final Comments

I changed my enrollment to the GEHA Standard Self Plus One option this open season. Within three weeks of making the change I received our cards and an extensive welcome package outlining all of their services. They included an 8 page fold out comparing the Standard to High options with separate columns listing what you pay for each service area when you also have Medicare A and B. For those 65 and older with Medicare A and B there is little difference between the two options except for prescriptions. If you don’t use many prescriptions or are able to use generic drugs the Standard option may work well for you depending on your personal situation since you pay no deductibles, copayments or coinsurance for either plan option. The monthly high option self plus one premium is $496.51 compared to $241.25 for the Standard option, a savings of $255.26 per month. For those also enrolled in Medicare evaluate your prescription needs to determine if the additional $255.26 a month is worth the cost. Both Standard and High options have a prescription 90-day supply mail service program as well.

Creature Comforts

I’m constantly on my feet, going here and there, and can’t sit still for long. Over the years I’ve had foot problems and my knees aren’t in the best of shape either. My wife and I walk daily with our dog and throughout the day in the house. By the middle of the day my feet are tired and sore. Recently I discovered Sketchers GoWalk 3 soft sole slip on shoes that are extremely comfortable. Much of our home has hardwood or ceramic flooring and I was looking for a soft sole house shoe to cushion the beating my feet were taking on these hard surfaces. My wife was experiencing feet and shin pain and bought a pair of GoWalk 3 Sketchers and the pain went away. I bought a pair for the home and when you put them on you feel like you are walking on air. My feet and joint pain disappeared and the neuropathy that I’ve had for years isn’t as pronounced with these shoes. I purchased a lace up pair this week to wear outside and I’m impressed with the comfort and results. I no longer use inserts in my shoes, there isn’t a need since the Sketcher GoWalk 3 shoe seems to conform to your foot’s contour. If you are looking for a comfortable shoe check out the Sketcher GoWalk 3.

Retiree Employment Update

Employers recruiting federal retirees and those soon to retire post job vacancies on our Jobs Center. Recently Federal Staffing Resources posted several openings for three psychologists and a health educator that are needed in North Carolina, Oklahoma, Texas and Virginia. Visit our Jobs Board for complete details.

Private companies, contractors, and state government departments use our Jobs Board to hire skilled federal retirees for part and full time positions nationwide. Many opportunities exist for those looking to supplement their retirement income or to start a second career. We provide this free job listing service to companies that are seeking to hire experienced retired federal workers.

Request a Retirement Benefits Summary & Analysis. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections.

Helpful Retirement Planning Tools
Distribute these FREE tools to others that are planning their retirement

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and financial information are subject to change. To ensure the accuracy of this information, contact relevant parties and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. 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, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Social Security Changes, Retiree Job Options, & Updates

Posted on Sunday, 29th November 2015 by

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On November 2, 2015 the President signed HR-1314, the “Bipartisan Budget Act of 2015.” This law eliminated the file and suspend option for most Social Security applicants and changed the restricted application rules. These filing strategies allowed couples to increase their lifetime total payout.

If you are now at full retirement age and planning to file and suspend you have 180 days from the date the bill was signed to apply. My wife and I are planning to file and suspend this February. We will be in one of the last groups that will be allowed to take advantage of this strategy.

Filing and suspending permits the higher earning spouse, at their full retirement age, to file for benefits and then immediately suspend them. The lower earning spouse then applies for and collects a higher spousal benefit. The lower earning spouse increases their monthly payment up to half of their spouse’s benefit and the person suspending their benefit increases their benefit 8% a year for those born after 1943 or later. The spouse that suspends their payment until age 70 would receive 132% of the monthly benefit for delaying collecting benefits for 48 months.

Another option many used to only collect a spousal benefit, while their benefit continued to grow, was for one person to file a “restricted” application at full retirement age. This option will no longer be available for anyone turning 62 in 2016 or later and you must now apply for and claim all eligible benefits. They did allow an exception for anyone that will be 62 or older in 2015. A restricted application for a spousal benefit only will still be permitted for this group.

If you are already enrolled in these options there is no change, you are grandfathered under the law. Neither of these two strategies can now be used if you were born on or after January 2, 1954.

Other changes include initiatives to reduce fraud through the expansion of their Cooperative Disability Investigation Units and by implementing new and stronger penalties.

Retiree Employment Update

Employers recruiting federal retirees and those soon to retire post job vacancies on our Jobs Center. Recently Adams Consulting Group LLC in New York City posted two openings, one for a HR Payroll & Benefits Manager and another for Senior Accountant. Both pay 6 figure salaries. Visit our Jobs Board for complete details.

Private companies, contractors, and state government departments use our Jobs Board to hire skilled federal retirees for part and full time positions nationwide. Many opportunities exist for those looking to supplement their retirement income or to start a second career. We provide this free job listing service to companies that are seeking to hire experienced retired federal workers.

Update

Government Executive Magazine published its final print issue this December. I’ve been a loyal subscriber and reader for over 30 years and thankfully it will continue to be available online. I sent Tom Shoop, their Executive Vice President, a note congratulating him on their transition to digital and thanked him for the services they continue to provide.

They provide a wealth of information for anything and everything federal and I often mention Tammy Flanagan’s retirement planning articles on our web site and in my retirement planning column. To avoid missing an issue visit their subscription page to sign up for publications and newsletters of interest. They list four daily government news groups; Government Executive, Nextgov, Defense One, and Route Fifty. You will also find many other newsletters focusing on technology, government careers, and other related areas.

Request a Retirement Benefits Summary & Analysis. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections.

Helpful Retirement Planning Tools
Distribute these FREE tools to others that are planning their retirement

Visit our other informative sites

The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and financial information are subject to change. To ensure the accuracy of this information, contact relevant parties and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. 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, EMPLOYMENT OPTIONS, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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