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Retirement Challenges & Planning Assistance

Posted on Friday, 17th May 2013 by

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Many obsess about what they will do in retirement and fear finding out too late – after they retire – that retirement isn’t for them. Most retirees discover early on that their time remains a cherished commodity and you will wonder how you ever worked and got anything done.

I’ve been retired going on 9 years now and this past year has been a blur.  We moved, sold our previous home ourselves savings thousands in real estate commissions, and we spent a year getting things organized and updated in our new home.  Plus we were blessed with our first grandchild in January and our daughter just announced her engagement. All in all my retirement has worked out well for my wife and I however there were many speed bumps along the way.

Retirees have the time to explore, manage projects like selling your home by owner, remodeling  projects, researching the best place to move to or vacation in retirement, rediscovering a hobby or interest, or simply learning how to best manage your TSP and finances now that you are retired and most likely living on a fixed income. I still find that I don’t have the time to do all that I desired mostly because I’m still managing my business and always researching one thing or the other. Life gets in the way and there are always things to do places to go, and people to meet and the nice thing about retirement is that YOU can tailor it to whatever you choose within reason.

What I like about retirement is that I can devote the time to interests unencumbered by the limitations you had while employed by others who managed your time to their advantage. Now, in retirement you determine what’s important, when to do it, how much of your time and resources YOU will devote to it. Retirement gives you freedom to pursue whatever you choose as long as you are in good health and had the foresight to save and plan for this life changing event.   Here are a few helpful articles and reports that you can use to effectively plan for your retirement:

One of my most interesting projects recently was selling our home through a For Sale By Owner (FSBO) program saving us thousands of dollars in real estate commissions. I will discuss this in depth in an upcoming article. Over the past 40 years I’ve sold 5 homes successfully through this route. Actually, it isn’t a difficult process as many realtors would have you believe especially with the new services offered by FSBO companies. One rather aggressive realtor called several times to tell me about the advantages of listing our home with them. Each time she called I reminded her that her company was listing a similar home just 8 houses down the street from mine.  I asked her why that home hasn’t sold yet with all of the advantages she proclaimed for her services!  We sold our home a month or so before the similar property down the street sold.  I held numerous open houses, used a local MLS lock box so I wouldn’t have to be there for showings, and our home was listed on the local MLS and on Realtor.com.

Federal employees are fortunate to have generous CSRS and FERS retirement and the THRIFT Savings Plan (TSP) plan to fall back on.  Both combined with Social Security can make your retirement financially secure. Unfortunately, I talked with several younger workers recently that aren’t contributing to their TSP.  I don’t think they realize just how important it is to fund their TSP accounts and increase their contributions yearly so they too will have a solid foundation to fall back on when they retire.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator 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 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, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE

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Reassessing Retirement Assumptions

Posted on Monday, 13th May 2013 by

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What makes financial sense for some baby boomers may not make sense for you.

Provided by Paul H. Risser

There is no “typical” retirement. Many baby boomers want one and believe that they will have one, and their futures may indeed unfold as planned. For others, the story will be different. Just as there is no routine retirement, there are no routine financial moves that should be made before or during this phase of life, and no universal truths about the retirement experience. 

Here are some commonly held assumptions – suppositions that may or may not prove true for you, depending on your financial and lifestyle circumstances.  

#1. You should take Social Security as late as possible. Generally speaking, this is a smart move. If you were born in the years from 1943-1954, your monthly benefit will be 25% smaller if you claim Social Security at 62 instead of your “full” retirement age of 66. If you wait until 70 to take Social Security, your monthly benefit will be 32% larger than if you had taken it at 66.1

So why would anyone apply for Social Security benefits in their early 60s? The fact is, some seniors really need the income now. Some have health issues or the prospect of hereditary diseases influencing their choice. Single retirees don’t have a second, spousal income to count on, and that is another factor in the decision. For most people, waiting longer implies a larger lifetime payout from America’s retirement trust. Not everyone can bank on longevity or relative affluence, however. 

#2. You’ll probably live 15-20 years after you retire. You may live much longer, especially if you are a woman. According to the Census Bureau, the population of Americans 100 or older grew 65.8% between 1980 and 2010, and 82.8% of centenarians were women in 2010. The real eye-opener: in 2010, slightly more than a third of America’s centenarians lived alone in their own homes. Had their retirement expenses lessened with time? Doubtful to say the least.2

#3. You should step back from growth investing as you get older. As many investors age, they shift portfolio assets into investment vehicles that offer less risk than stocks and stock funds. This is a well-regarded, long-established tenet of asset allocation. Does it apply for everyone? No. Some retirees may need to invest for growth well into their 60s or 70s because their retirement savings are meager. There are retirement planners who actually favor aggressive growth investing for life, arguing that the rewards outweigh the risks at any age.

#4. The way most people invest is the way you should invest. Again, just as there is no typical retirement, there is no typical asset allocation strategy or investment that works for everyone. Your time horizon, your risk tolerance, and your current retirement nest egg represent just three of the variables to consider when you evaluate whether you should or should not enter into a particular investment.

#5. Going Roth is a no-brainer. Not necessarily. If you are mulling a Roth IRA,  Roth 401(k), or Roth TSP conversion, the big question is whether the tax savings in the end will be worth the tax you will pay on the conversion today. The younger you are – roughly speaking – the greater the possibility the answer will be “yes”, as your highest-earning years are likely in the future. If you are older and at or near your peak earning potential, the conversion may not be worth it at all.

#6. A lump sum payout represents a good deal. Some corporations are offering current and/or former workers a choice of receiving pension plan assets in a lump sum payout instead of periodic payments. They aren’t doing this out of generosity; they are doing it because actuaries have advised them to lessen their retirement obligations to loyal employees. For many pension plan participants, electing not to take the lump sum and sticking with the lifelong periodic payments may make more sense in the long run. The question is, can the retiree invest the lump sum in such a way that might produce more money over the long run, or not? The lump sum payout does offer liquidity and flexibility that the periodic payments don’t, but there are few things as economically reassuring as predictable, recurring retirement income. Longevity is another factor in this decision.

#7. Living it up in your 60s won’t hurt you in your 80s. Some couples withdraw much more than they should from their savings in the early years of retirement. After a few years, they notice a drawdown happening – their portfolio isn’t returning enough to replenish their retirement nest egg, and so the fear of outliving their money grows. This is a good argument for living beneath your means while still carefully planning and budgeting some “epic adventures” along the way.

Your retirement plan should be created and periodically revised with an understanding of the unique circumstances of your life and your unique financial objectives. There is no such thing as generic retirement planning, and that is because none of us will have generic retirements.

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

Paul H. Risser may be reached at prisser@tfamail.com, www.risserfinancial.com, or

1-866-274-7737. Paul may also be found on Facebook and Linkedin.

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Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. LD42774-2/12.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Neither Transamerica Financial Advisors, Inc. (TFA) nor its representatives provide legal, tax nor accounting advice. Persons who provide such advice do so in a capacity other than as a registered representative of TFA.

Citations.

1 – www.forbes.com/sites/janetnovack/2011/02/15/the-big-decision-when-to-take-social-security/ [2/15/11]

2 – money.usnews.com/money/retirement/articles/2013/01/07/what-people-who-live-to-100-have-in-common [1/7/13]

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Posted in BENEFITS / INSURANCE, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Social Security Update, Medicare Concerns, & Retiree Jobs

Posted on Friday, 3rd May 2013 by

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Norma, a federal employee that elected to collect Social Security while still working, commented on my last article on this subject.

She stated that while it is true you don’t decrease social security benefits if you are still working at age 66 or older you may be subject to taxes on some of the social security money you receive.

She states, “People will have to pay Federal taxes on their Social Security benefits if you file a Federal tax return as an individual and your total income is more than $25,000.  If you file a joint return, you will have to pay taxes if you and your spouse have a total income of more than $32,000. So I, for instance, have to pay taxes on anything I make over $32,000. The good news for getting around this is to max out your TSP with whatever you are getting for social security. If you are already maxed out you will end up paying additional taxes.”

It’s been costing Norma $5,000 to $7,000 in taxes a year because she initially didn’t put extra into her TSP account. However, this year she will owe nothing for social security when she does her federal taxes because she increased her TSP contributions for 2013.

The other good news is that each year you work while collecting you get an increase in your social security (Norma is getting about $45) as they drop her earliest years she worked and add the latest year.  This is in addition to the cola.  So by the time she reaches 70 Norma basically gained the 8 percent or so she would have received had she not started collecting.

Medicare Discussion (Part A and B)

Norma also provided insight into Medicare B (Medical Insurance). Norma had health expenses three years ago and signed up for Medicare B while still working. Now she has to pay the Medicare B plus her Blue Cross FEHB premiums.  She wasn’t sure how Medicare B affected her FEHB plan.  Since she is still working Blue Cross is her primary insurance and she is paying for Medicare (which also has a deductable) however only Blue Cross pays for her insurance.  She stated that, “Medicare to date has paid about $30.00 dollars over three years and until I retire and it becomes my primary I am wasting money paying the monthly premium.”

Many federal employees and retirees approaching age 65 are confused about Medicare; especially Medicare B and if it is worth paying the additional cost for Medicare B coverage when you have FEHB coverage.  If you are still working at age 65 and beyond your FEHB coverage is primary. When you retire at age 65 or older Medicare becomes your primary provider if you signed up for it and your FEHB plan becomes your supplemental coverage.

Note:  You don’t have to take Part B coverage if you don’t want it, and your FEHB plan can’t require you to take it. But, there are some advantages to enrolling in Part B. For example, you have the advantage of coordination of benefits between Medicare and your FEHB plan, reducing your out-of-pocket costs; your FEHB plan may waive its copayments, coinsurance, and deductibles for services and covered by Part B and some services covered by Part B might not be covered or are only partially covered by your plan, such as orthopedic and prosthetic devices, durable medical equipment, home health care, and medical supplies (check your plan brochure for details).

The FEHB health plan brochures explain how they coordinate benefits with Medicare, depending on the type of Medicare managed care plan you have. If you are eligible for Medicare coverage read this information carefully, as it will have a real bearing on your benefits.

The decision to enroll in Medicare is yours. OPM encourages you to apply for Medicare benefits 3 months before you turn age 65. It’s easy.  Just call the Social Security Administration number 1-800-772-1213 to set up an appointment to apply. If you do not apply for one or more Parts of Medicare, you can still be covered under the FEHB Program. Visit their website for forms and additional information.

If you can get premium-free Part A coverage, OPM advises you to enroll in it. Most Federal employees and annuitants are entitled to Medicare Part A at age 65 without cost. When you don’t have to pay premiums for Medicare Part A (Hospital Insurance), it makes sense to obtain coverage. It can reduce your out-of-pocket expenses as well as costs to FEHB, which can help keep FEHB premiums down.

Generally, plans under the FEHB Program help pay for the same kind of expenses as Medicare. FEHB plans also provide coverage for emergency care outside of the United States which Medicare doesn’t provide. Some FEHB plans also provide coverage for dental and vision care.

For more information about your Medicare options review the resources and articles on our Medicare pages. You will find them very informative and helpful, especially links to OPM’s FEGLI and Medicare Booklet and Tammy Flanagan’s 3 part series on this subject.

Retiree Job Opportunities

Many companies and state government departments recently posted jobs on our site to attract federal retirees. You will find jobs ranging from ADT Security Services, Bank teller and client services, FLSA Classifier, research, sales and everything in between. Most are part time and you can tailor you hours to your routine.  Many other 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.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator 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 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, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Collecting Social Security While Still Working and CSRS Offset Concerns

Posted on Friday, 12th April 2013 by

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A site visitor to one of our forums stated that she was 66 and still working and was CSRS offset. A colleague suggested that she think about drawing social security now versus waiting until she retires. Once you reach age 66 you can earn unlimited amounts without reducing your Social Security benefit. She had been giving the matter some thought in terms of the pros and cons.

She stated, “It seems to be the obvious pros would be to have the money now since none of us know how many years we will be able to collect and having the extra money now would enable me to increase my contributions considerably to the TSP.  The obvious con seems to be that if left untouched, the social security will increase 8% each year until I reach age 70.  It’s difficult to find any savings vehicle that would match 8%; while some of the funds in TSP have had years of growth larger than 8%, it’s still the stock market (except for the G fund which has growth of under 5%) and therefore there is no guarantee that the extra money invested would gain 8% or more and could just as easily lose money, depending on the economy & world events.

Any thoughts or pros and cons I’ve overlooked?  I realize it comes down to a personal decision but I’m trying to study all facets of the issue before deciding one way or the other.  I know, of course, that I don’t have to make a decision right now.  I am not sure how much longer I will work before retiring – at the earliest, January 2014 but I may delay it until 2015 or later.  I’m just not sure.”

Reply: Since you are at the full retirement age, the decision is basically whether to receive funds now or a greater amount later.  If we knew how long the retirement funds needed to last this would be an easy answer.  I would estimate each annuity amount (payable at 66 and at 70) and how long you would have to live to make up the difference if you wait until you are 70 to collect the higher benefit.

Sometimes the decision is not about us alone, but also about a spouse’s income as well.  For example, a married couple may elect for the lower wage earner to receive Social Security early and the higher wage earner who is still working and adding significant income to the calculation to wait.  This way if the person earning more money retires at age 66 or older the spouse can then elect the higher spousal benefit or if they die, the spouse can opt to receive the larger annuity of the higher earner.

One other thing to consider is if this would allow you to put more away in your TSP account.  After you retire, you cannot contribute money to a 401k or an IRA because deposits must come from wages.  Your beneficiaries can inherit an IRA or 401k, but usually only the spouse can receive Social Security benefits.  If you are already contributing the maximum to your TSP, this may not be a consideration.

You may want to hire a certified financial planner to review your situation in detail to provide more specialized advice in your situation.  They can look at the cost of your debt, your contribution amount to TSP, your Social Security income and your life expectancy.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator 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 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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Retirement Seen Through Your Eyes

Posted on Saturday, 6th April 2013 by

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After you leave work, what will your life look like?

How do you picture your future? If you are like many baby boomers, your view of retirement is likely pragmatic compared to that of your parents. That doesn’t mean you have to have a “plain vanilla” tomorrow. Even if your retirement savings are not as great as you would prefer, you still have great potential to design the life you want.

With that in mind, here are some things to think about.

What do you absolutely need to accomplish? If you could only get four or five things done in retirement, what would they be? Answering this question might lead you to compile a “short list” of life goals, and while they may have nothing to do with money, the financial decisions you make may be integral to achieving them. (This may be the most exciting aspect of retirement planning.)

What would revitalize you? Some people retire with no particular goals at all, and others retire burnt out. After weeks or months of respite, ambition inevitably returns. They start to think about what pursuits or adventures they could embark on to make these years special. Others have known for decades what dreams they will follow … and yet, when the time to follow them arrives, those dreams may unfold differently than anticipated and may even be supplanted by new ones.

In retirement, time is really your most valuable asset. With more free time and opportunity for reflection, you might find your old dreams giving way to new ones. You may find yourself called to volunteer as never before, or motivated to work again but in a new context.

Who should you share your time with? Here is another profound choice you get to make in retirement. The quick answer to this question for many retirees would be “family”. Today, we have nuclear families, blended families, extended families; some people think of their friends or their employees as family. You may define it as you wish and allocate more or less of your time to your family as you wish (some people do want less family time when they retire).

Regardless of how you define “family” or whether or not you want more “family time” in retirement, you probably don’t want to spend your time around “dream stealers”. They do exist. If you have a grand dream in mind for retirement, you may meet people who try to thwart it and urge you not to pursue it. (Hopefully, they are not in close proximity to you.) Reducing their psychological impact on your retirement may increase your happiness.

How much will you spend? We can’t control all retirement expenses, but we can control some of them. The thought of downsizing may have crossed your mind. While only about 10% of people older than 60 sell homes and move following retirement, it can potentially bring you a substantial lump sum or lead to smaller mortgage payments. You could also lose one or more cars (and the insurance that goes with them) and live in a neighborhood with extensive, efficient public transit. Ditching land lines and premium cable TV (or maybe all cable TV) can bring more savings. Garage sales and donations can have financial benefits as well as helping you get rid of clutter, with either cash or a federal tax deduction that may be as great as 30-50% of your adjusted gross income provided you carefully itemize and donate the goods to a 501(c)(3) non-profit.1

Could you leave a legacy? Many of us would like to give our kids or grandkids a good start in life, or help charities or schools – but given the economic realities of retiring today, there is no shame in putting your priorities first.

Consider a baby boomer couple with, for example, $285,000 in retirement savings. If that couple follows the 4% rule, the old maxim that you should withdraw about 4% of your retirement savings per year, subsequently adjusted for inflation – then you are talking about $11,400 withdrawn to start. When you combine that $11,400 with Social Security and assorted investment income, that couple isn’t exactly rich. Sustaining and enhancing income becomes the priority, and legacy planning may have to take a backseat. In Merrill Lynch’s 2012 Affluent Insights Survey, just 26% of households polled (all with investable assets of $250,000 or more) felt assured that they could leave their children an inheritance; not too surprising given what the economy and the stock market have been through these past several years.2

How are you planning for retirement? This is the most important question of all. If you feel you need to prepare more for the future or reexamine your existing plan in light of changes in your life, then confer with a financial professional experienced in retirement planning.

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. LD42774-2/12

Paul H. Risser may be reached at 1-866-274-7737, prisser@tfamail.com, or www.risserfinancial.com

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Citations.

1 – www.bankrate.com/finance/financial-literacy/ways-to-downsize-during-retirement.aspx [2/28/13]
2 – wealthmanagement.ml.com/Publish/Content/application/pdf/GWMOL/Report_ML-Affluent-Insights-Survey_0912.pdf [9/12]

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Neither Transamerica Financial Advisors, Inc. (TFA) nor its representatives provide legal, tax nor accounting advice. Persons who provide such advice do so in a capacity other than as a registered representative of TFA.

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

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TSP Investment Timing and The Retiree’s Dilemma

Posted on Monday, 1st April 2013 by

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The stock market is up and the DOW stock market index has recovered from its low of 6629 in March of 2009 to over 14,000 recently. Interest rates and yields on CDs, treasuries, and savings have remained historically low. The government has artificially maintaining interest rates well below norm to stimulate the economy and to encourage savers to spend and dive into high yielding and higher risk investments like stocks and housing. Most of this nation’s Gross Domestic Product (GDP) is based on consumer spending since we lost much of manufacturing years ago.  I discussed in Size Matters, Especially in Retirement  how the government is taxing all of us, especially retirees on fixed incomes, by maintaining artificially low yields on safe and secure CDs, savings accounts, and treasuries.  

The dilemma that we face now is do we continue to suffer with miniscule yields on our savings or dive back into higher risk investments such as stocks to take advantage of the upswing.  Unfortunately the ship has already sailed; the market is up over 100% and a correction may be in sight. Nothing goes straight up forever and many experts anticipate a market correction while other suggest the market will continue on this trajectory at least until the end of the year.  

Many jump back on the band wagon long after the gains have been made. Some panicked in 2007 and jumped totally out of the THRIFT stock funds into the G Fund and stayed there after losing a good portion of their savings.  Too often we ride the wave of sentiment and that means we sell low and buy high and lose both ways.  Federal employees in their early to mid careers have time to recover and are still contributing to their TSP accounts.  Many financial planners suggest those in early to mid career stay invested in a diverse mix of stock and bond funds until you are close to retirement.  The closer you are to retirement the more you have to play defense and PROTECT what you saved for a lifetime.

If you’re close to retirement or now retired ask yourself if you can afford to lose a significant portion of your TSP, IRA or other 401K funds if the market takes an unexpected and undesirable turn? Retirees have time against them to recover their losses. If you will need these funds to live on you may have to accept the lower returns and you will sleep well at night. If you can take some risk look for a market correction and jump back in with a conservative lower risk level you can live with. The Life Cycle L TSP funds do moderate the risk and as you approach the target date of the fund the mix becomes more conservative until the majority of your TSP is in the bond fund. In retirement many consider the L Income fund that still keeps a small portion of your account invested in stocks to help you keep up with inflation.

For other savings and investments retirees may wish to pursue a conservative approach such as I discuss in When CDs Come Due Earn Higher Yields.  If you are unfamiliar with investing in general you may need to consult a professional for help. Managing retirement funds isn’t easy and it does take time and even with understanding there is always risk no matter what you are invested in.

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Learn more about your benefits, employment, and financial planning issues on our site and visit our Blog frequently at  https://fedretire.net to read all forum articles.

Visit our other informative sites

Helpful Retirement Planning Tools
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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator 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. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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

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The Sequester’s Many Faces – Furloughs, Pay Freeze, & Fewer Resources

Posted on Wednesday, 13th March 2013 by

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The Sequester has many feds concerned about furloughs, possibly an extended pay freeze, and fewer resources to get the job done.  Retirement applications may also take longer to process if HR specialists are furloughed. The good news is that it isn’t happening overnight and Congress is working to reduce the impact when this kicks in. I recall being furloughed several times for a day or two throughout my career and each time my pay wasn’t docked. That could be different this time around.  Another point is that many agencies hold back filling positions throughout the year and use the money saved to purchase end-of-year equipment, supplies, and to pay other expenses. I wasn’t in headquarters or accounting however from my perspective and understanding as a manager this is how the agency paid for many things on their wish list. Especially considering that in most agencies, the lions share — often as high as 85% or more of their budget — is PC and B, payroll, compensation, and benefits.

Since most agencies hold back on staffing at the beginning of the fiscal year they may be able to weather the storm and hopefully there will be minimal impact within your agency.  Only time will tell. According to FactCheck.org, “The federal government will spend about $3.55 trillion this year, so $85 billion (in cuts) amounts to about 2.4 percent of all federal spending. But that’s misleading, because large parts of the federal budget are exempt from the sequester cuts — including such “mandatory” programs as Medicaid, Social Security, welfare and food stamps. The sequester cuts are split between defense and nondefense spending. They include cuts to discretionary defense spending (such as weapons purchases and base operations, but not military personnel) and to both discretionary and nondiscretionary domestic programs (everything from airport security to education aid to research grants). Cuts to those programs will be much deeper than 2.3 percent.”

Congress knows that they must address the entitlement and healthcare issues to fend off a budget crisis in the next few years and the sooner they get realistic about their options and alternatives the less impact we will all feel. The longer they hold off making meaningful tax and entitlement reforms the worse off we will all be.

Unlike many state governments the federal government has done its part to reduce employee retirement costs, one of the largest budget items on most lists, and the States should follow suit. They enacted FERS reforms in the 1980s substantially decreasing defined benefit plan payouts and converting to a mix of defined benefit and defined contribution plans utilizing the THRIFT Savings program.  They also recently increased FERS contributions for new employees.

Change is always disconcerting especially when you really don’t know what to expect.  The best defense is to be prepared as much as possible for the inevitable budget cutting coming to agencies and departments everywhere.  This applies to employees and retirees alike. Have a sufficient emergency fund set aside and contingency plans to handle a more austere life for awhile. Some agencies are considering furloughs of one day a week for 20 weeks, some longer.  Start economizing now, making sure your emergency fund is sufficient and that you have what you need to get through what may surly be coming your way. 

Employees planning on retiring soon should be prepared to live on less than their total estimated annuity since they may have to live with interium checks for extended periods.  Stock up on non perishable food supplies that are on sale and look for sales and ways to save wherever you can. It may not be easy but if you start now it will help to lesson your burden if the proposed cuts are eventually implemented. 

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator 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. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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

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Maui is Calling Me – Taking a Winter Break

Posted on Saturday, 9th March 2013 by

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Those days when I loved going out and playing in the snow are long gone.  I think they disappeared when I got rid of my skis in the 80’s. I do like watching the cardinals eating at the feeders in the trees after winter snow storm, but after about a month of that and temperatures hovering around the freezing mark or lower, well I’m ready for warm weather.  But knowing that spring and warmer temperatures are still more than a couple of months away draws me to flight or cruise deals that will take me someplace warm. Maui in February is the perfect trip given that I love whale watching, snorkeling, watching the surf and sitting under the palms on the beach.

Resorts are great if you’re the type of person who wants to have activities available all day.  Resorts are also a great place if you don’t plan to cook at all during your vacation.  For my break, I am spending a week at a resort on Oahu with family and friends before we all head to Maui for a week. After being at the pool with 30 or more kids during the day, spending a ton on eating out and nights at the clubs enjoying music and Mai Tai’s we’ll be looking for some quieter time when we land on Maui.

This visit to Maui, I opted to look for a vacation home to rent for my winter break.  Finding a vacation home rental is easy; selecting one is the hard part.  You can use one of several vacation home web sites or any local real estate office that manages vacation rentals with a web search.  It can be frustrating though since the smaller homes that are reasonably priced are the first to go.  Of course planning far in advance can help you get a great deal.  This time, with some help, I was guided to local owners who manage their own properties.  I found a gem, perfect for 4 people with 2 private bedrooms and baths near Lahaina. The West Maui Lodging offers nine distinct options for travelers all managed by owner Jan Hendrix.  She also happily shares a wealth of information for your trip including planning your island activities.

I am so excited about staying in a house on the hill near Lahaina to call home for a week.  We’ll be close to the action of Lahaina but enjoy the privacy of a home and what it offers.  We can probably whale watch from the Lanai first thing in the morning while enjoying a coffee and in the evening watching the sunset with a Mai Tai. We will be able to enjoy breakfast every morning in the Palm House and evening meals rather than eating out.  We can also relax as long as we like without needing to clear the table for waiting customers. Having a full kitchen and a grill allows us to plan ahead, stop at the store and pick up items to enjoy a meal outside or inside depending on the weather of the day.  Jan provides a list of restaurants in the area, including her favorites and also an idea of costs for her guests.  I plan to try some for lunch while we’re in Lahaina shopping or following a whale watch trip.

I’ve planned some of my favorite things to do and have also picked a couple of new adventures for this winter break. I accomplished this with the help of the owner of my vacation rental who recommended Tom’s Barefoot Tours and a specific customer representative who’s very responsive. With Andreas help at Barefoot we found some great activities that fit what we want to do on Maui.  We’ll be spending a day boating around the island of Lana’i with snorkel and beach stops throughout the trip.  We also will spend our last night on a sunset dinner cruise.  The advantage of having Andreas make our reservations is we will pay for the activities the week prior to our arrival on Maui.  Of course we can still cancel 24 hours prior to any activity for a full refund.  But if you do your own bookings and exploring numerous sites yourself, you may miss an activity that is unique and you’ll also have to pay when you book on line.  I was glad to have been given this tip from Jan when we reserved the Palm House.

Well, that’s my winter break plan.  I need to start packing.  Don’t wait for summer.  Start planning your winter break.  There are lots of deals out there.

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The information provided may not cover all aspect of unique or special circumstances. Travel policies and packages are subject to change without notice. To ensure the accuracy of this information, contact travel providers and hotels at the time of your bookings to confirm pricing, itinerary, and all costs. The comments and observations are limited to the author’s personal experience and your results may vary significantly. This article and replies to comments are not intended to substitute for professional travel services. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

Posted in LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, Travel

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