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Federal Pay

TSP Participants Move Out of Stock Funds Right Before Record Highs

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The participation rate in the Thrift Savings Plan (TSP) for federal employees has leveled off in the last several months. That is a normal change for this time of year.

The TSP notes that participation in the TSP for federal employees under the Federal Employees Retirement System (FERS) is still up two percentage points above last year.

Implementing the CARES Act

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed on March 27, 2020. The Federal Retirement Thrift Investment Board (FRTIB) created the CARES Act project to implement key provisions of the law. The project included four key provisions to enable TSP participants and beneficiaries to respond to their financial management needs during the COVID-19 pandemic.

These four provisions were:

  • Changes in 2020 Required Minimum Distributions
  • Loan Payment Suspensions
  • An increase in the maximum loan amount to $100,000
  • CARES Act withdrawal provisions.

CARES Act Loans, Suspensions and Withdrawals

CARES Loans

DateCountAmount
June, 20202,462$61,429,570.22
July, 20204,990$115,588,460.67
MTD – Aug 12, 20201,704$37,803,631.74

CARES Loans Over $50,000

CountAmount
499$37,018,575.68
825$61,766,534.20
267$19,935,382.67

CARES Loan Suspensions

DateCountAmount
June, 2020245$ 12,514,932.41
July, 2020354$ 16,419,035.09
MTD – Aug 12, 202041$ 1,958,857.50

CARES Withdrawals

DateCountAmount
July, 202021,296$ 554,831,990.61
MTD – Aug 12, 202011,621$ 277,567,169.17

TSP Participants Move into Bonds

In July, many TSP participants decided to transfer money from stock funds and into the TSP’s G and F Funds.

The G Fund took in more than $1.1 billion dollars in transfers in July and the F Fund took in more than $1.6 billion. The Lifecycle Funds received more than $933 million in transfers in July.

Also during July, more than $2 billion was transferred out of the C Fund and almost $1.7 billion from the S Fund.

After the transfers into the G and F Funds, the asset allocation in funds for TSP participants breaks out in this way:

FundAllocation Percentage
G Fund33.3%
F Fund4.6%
C Fund28.5%
S Fund9.3%
I Fund3.5%
L Funds20.9%

The latest month shows a change in direction for TSP investors. As of December 30, 2019, 30.7% of asset allocation was in the G Fund, 29.7% was in the C Fund, 3.8% was in the F Fund and 21.6% was in the L Funds. In effect, participants are moving away from stocks and putting more of their assets into the bond funds.

If you would like some help navigating your TSP, or some safe options with your TSP, you can use our Contact Us form and someone will be in touch with you.

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USPS Restructured and VERA

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In an effort to operate in a more efficient and effective manner and better serve customers, Postmaster General Louis DeJoy today announced a modified organizational structure for the U.S. Postal Service.

The new organizational structure is focused on three operating units and their core missions:

• Retail and Delivery Operations — Accept and deliver mail and packages efficiently with a high level of customer satisfaction. This organization will be led by Kristin Seaver.
• Logistics and Processing Operations — Process and move mail and packages efficiently to the delivery units, meeting determined standards. This organization will be led by David Williams.
• Commerce and Business Solutions — Leverage infrastructure to enable growth. This organization will be led by Jakki Krage Strako.

“This organizational change will capture operating efficiencies by providing clarity and economies of scale that will allow us to reduce our cost base and capture new revenue,” said DeJoy. “It is crucial that we do what is within our control to help us successfully complete our mission to serve the American people and, through the universal service obligation, bind our nation together by maintaining and operating our unique, vital and resilient infrastructure.”

As part of the modified structure, logistics and mail processing operations will report into the new Logistics and Processing Operations organization separate from existing area and district reporting structures. This includes all mail processing facilities and local transportation networks offices. Splitting operations into the two organizations of Retail and Delivery Operations, and Logistics and Processing Operations, is designed to allow for improved focus and clear communication channels. The transition to this new organizational structure will take place over the next several weeks. Transition coordinators have been identified to assist in the process.

These organizational changes do not initiate a reduction in force, and there are no immediate impacts to USPS employees. However, to prepare for future changes, the Postal Service has implemented a management hiring freeze and will be requesting future Voluntary Early Retirement Authority from the Office of Personnel Management for non-bargaining employees.

We want to hear your feedback of these new changes, or if you need help deciding if this VERA is right for you, Contact us to schedule your retirement review.

Should I Have a Traditional or Roth Thrift Savings Plan?

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Should I Have a Traditional or Roth Thrift Savings Plan?

If you are a federal employee and planning for retirement, you must carefully consider whether to contribute to a Thrift Savings Plan (TSP) and what type of TSP you should get. This article will set forth the pros and cons and explain how an effective TSP strategy can best supplement your other retirement income sources.

What is a Thrift Savings Plan?

A Thrift Savings Plan (TSP) is a retirement and savings plan available to both civilian federal employees and members of the military. It is similar to the 401(k) plans offered by employers in the private sector.

Federal Agency Contributions

One aspect of TSPs that cannot be overlooked is that a federal employee may be eligible for matching contributions from their agency. If you are a federal employee you must look into whether matching contributions are available and whether there is a limit.

Once you have that information, plan on contributing at least the amount that will be matched. If you don’t, you are leaving free money on the table.

For many federal employees, their agency will contribute 1% of income to a TSP even if the employee contributes nothing. If the employee contributes 5% of income, the agency will contribute another 4%.

Traditional TSP

In a traditional TSP, your contribution is deducted from your pre-tax wages, and taxes are deferred until you make withdrawals. This reduces your present taxable income, and your contributions are taxed at the rate that applies to your income in retirement, which should be lower.

Roth TSP

You make contributions to a Roth TSP with after-tax income. While this does not reduce your present taxable income, it does render your withdrawals in retirement tax-free.

What if I Worked in the Private Sector and have a 401(k) or Roth IRA?

You can roll an IRA from a private employer into your federal TSP. However, reach out to a Federal Retirement Consultant to ask about some other ways to manage these as well.  Keep in mind also that if you are 50 or older you can make additional catch-up contributions, however, they will not be eligible for matching contributions from your agency.

Can I Convert a Roth TSP to a Traditional TSP?

No, and you can’t convert a Traditional TSP to a Roth or vice versa.

Which Type of TSP Should I Get?

Consider having one of each and varying the contributions according to how much money you are making. This allows you to strategically allocate retirement savings throughout your career to save the most in income tax.

For example, if you are just starting your career, you might open both a Roth TSP and a Traditional TSP, and contribute most to the Roth and just a bit to the Traditional. As the years pass and you presumably make more money, you can gradually increase contributions to the Traditional and decrease contributions to the Roth.

This way you are taking advantage of both the tax-free withdrawals of a Roth TSP, and the tax-deferred withdrawals of a Traditional TSP, and reducing your taxable income when you are making more, later in your career. Don’t forget to always contribute at least the amount that your agency will match.

What About Other Retirement Income?

You will have Social Security benefits when eligible, and if you are a civilian federal employee you will have an annuity from the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). If you are a member of the uniformed services, you will have Social Security benefits and your military retired pay.

The amount of income you have in retirement will vary according to the amount you contribute to your TSP, the amount that is taxable to you in retirement, and how you allocate your TSP contributions to the various funds and the return that your choices get. Even considering market variables, strategically contributing to your TSP is sure to maximize your income in retirement. 

About the Author

Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy Philadelphia bankruptcy lawyer.

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Three Great Reasons to Take Social Security Benefits at 62

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There’s no such things as the perfect age to sign up for Social Security. You get an eight-year window to claim benefits that begins at 62 and ends at 70, financially speaking, and each age within that window has its pros and cons.

Now it just so happens that 62 is the most popular age to sign up for Social Security, but it also comes with consequences. You’re entitled to your full monthly benefit based on your wage history once you reach full retirement age, or FRA. That age is either 66, 67, or somewhere in between those two ages, depending on your year of birth.

If you claim Social Security at 62 with an FRA of 66, you’ll shrink your monthly benefit by 25%. And with an FRA of 67, you’re looking at a 30% reduction by filing at 62. But despite that tremendous hit to your retirement income, here’s why it could pay to land on 62 as your Social Security filing age.

1. You’ll get to retire sooner

Many people dream of early retirement. If you’ve spent the bulk of your career at a grueling job, you may want nothing more than to leave the workforce on the early side. And while you’ll generally need a healthy level of retirement savings to make that possible, claiming Social Security could provide the financial push you need to feel comfortable ending your career a bit sooner than most.

2. You have to retire sooner

An estimated 48% of workers are forced to retire earlier than planned, according to the Employee Benefit Research Institute, and the COVID-19 outbreak — and unemployment crisis it’s produced — could drive that percentage up even higher. These days, a lot of older Americans are out of work, and those struggling to return to a job may have no choice but to retire ahead of schedule instead. Furthermore, some older workers may be voluntarily leaving their jobs due to health concerns, and it’s these same people who are apt to need an income source like Social Security once their paychecks go away.

But even outside of the pandemic, it’s clear that early retirement often isn’t a choice, but rather, a side effect of unwanted circumstances. Older workers get pushed out of jobs all the time to make room for younger, less expensive employees, and health issues can make continuing to work impossible. If that’s the scenario you’re in, whether it’s related to COVID-19 or not, you may have to claim Social Security at 62 so you can pay your bills. And to be clear, that’s a much better option than racking up debt just to exist.

3. You’re not willing to take chances

Technically, Social Security is designed to pay you the same total lifetime benefit regardless of when you file. The logic is that while filing early lowers your monthly benefit, you collect benefits for a greater number of months. When you file on time or even after FRA, you grow your benefit, but collect fewer individual monthly payments. You should therefore, in theory, break even if you live an average lifespan.

But what if you don’t? Even if your health is great at age 62, you never know when a medical issue might pop up out of nowhere that suddenly shortens your lifespan. And if you’re unlikely to live an average life expectancy, you’re better off claiming Social Security early, as that will result in a greater amount of money in your lifetime.

Though claiming Social Security at 62 isn’t the right choice for everyone, it may be the best bet for you. Weigh the pros and cons, and with any luck, you’ll land on a solid choice.

The $16,728 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

We also conduct Free Federal Retirement and Benefits review, if you would like to take advantage of one via phone call, please reach out and call (877) 733-3877 x 1 or on our Contact Us Page fill out the simple form.

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OPM Implements New Locality Pay Area and More

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The Office of Personnel Management last week proposed regulations that would implement one new locality pay area and expand the boundaries of an existing pay area as authorized by the president’s pay agent last year.

In a proposed rule filed to the Federal Register last week, OPM officials formally began the final implementation process for establishing Des Moines, Iowa, as a locality pay area and adding Imperial County, Calif., to the existing Los Angeles-Long Beach locality pay area, effective with the first full pay period of 2021.

The Federal Salary Council, an advisory group made up of federal employee groups and White House appointees, recommended adding Des Moines and Imperial County to the General Schedule locality pay area system in 2018, and the president’s pay agent advanced the measure last December.

According to data from the Bureau of Labor Statistics, private sector employees in Des Moines on average made 10 percentage points more per year than their federal worker counterparts.

And although Imperial County, Calif., does not meet the admittance standards for any one locality pay area, those in its federal worker population, primarily U.S. Customs and Border Protection employees, commute to both Los Angeles and San Diego. Taken together, the number of commuters to both cities exceeds the threshold needed to be pulled into an existing pay area.

Although the two regions will officially be part of the locality pay tables beginning next year, employees there currently are not slated to see the benefits of locality pay. President Trump’s proposed pay raise for federal civilian employees in 2021 is 1% across the board, with locality pay remaining at 2020 levels.

On Wednesday, the House Appropriations Committee declined to override Trump’s pay plan when it advanced the fiscal 2021 Financial Services and General Government appropriations bill. Although the bill blocks a series of benefits cuts and includes other federal worker protections, the lack of a provision on federal compensation in 2021 effectively endorses the president’s proposal.

In addition to provisions blocking the controversial proposal to merge most of OPM’s functions with the General Services Administration and blocking nearly all collective bargaining agreements in the federal government that have been implemented since April 2019, appropriators have included a number of policy directives toward OPM.

The bill “encourages” OPM to reexamine rules governing how federal agencies hire and fire people to account for the fact that in some states, marijuana is no longer illegal.

“The committee encourages OPM to review its policies and guidelines regarding hiring and firing of individuals who use marijuana in states where that individual’s private use of marijuana is not prohibited under the law of the state,” the committee wrote in a report summarizing the bill. “These policies should reflect changes to the law on marijuana usage and clearly state the impact of marijuana usage on federal employment.”

The legislation also instructs OPM to include a section in its next annual report to Congress on telework devoted to federal agencies’ readiness to adopt wide-scale telework during the coronavirus pandemic and make recommendations to better prepare agencies for similar emergencies in the future.

Appropriators also encouraged federal agencies to examine “the fairness and equity” of their closure policies, and consider offering back pay to contractors who were laid off or went without pay due to federal building closures during the pandemic.

Although the committee did not act to override the president’s 1% across-the-board pay increase plan, some lawmakers have indicated they will continue to press for action on the House floor. A bipartisan group of 10 lawmakers last week urged leadership to endorse pay parity between the civilian and military federal workforce, which would amount to a 3% raise, based on language in the House version of the 2021 National Defense Authorization Act.

DHS Staffing Shakeups Continue Amid Early Retirement and Reassignment Offers

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The Trump administration is continuing to shake up the Homeland Security Department, requiring furloughs and deployments of some employees, while offering others incentives to retire early or exclusive opportunities to apply for positions elsewhere in the department.

The early retirement offers were sent out this week to employees at the Transportation Security Administration, according to an internal email obtained by Government Executive. Patricia Bradshaw, TSA’s assistant administrator for human capital, told employees management is taking the steps to “fine-tune the organization.” Transportation security officers at 35 airports currently offered retention incentives, and certain other positions, will not be eligible for the Voluntary Early Retirement Authority offers.

Elsewhere in TSA, the agency is offering Federal Air Marshals Service workers an opportunity to apply for jobs at Immigration and Customs Enforcement. The openings are exclusively available to the Air Marshals and are for both ICE’s Enforcement and Removal Operations and Homeland Security Investigations offices. Employees would serve as deportation officers or criminal investigators.

The agency told employees the opportunity was for Air Marshals Service employees “wishing to provide their skills within other areas of DHS,” but would not lead to attrition within the component.

“Let me be perfectly clear, the Federal Air Marshals Service will remain as the key law enforcement component within TSA,” the agency told employees. “This effort is not a plan to reduce or eliminate the FAMS,” adding it is “fully committed to hiring for all positions vacated by this effort.”

Days after receiving that email, however, TSA employees, including some at the Air Marshals Service, received the early retirement offers.

Customs and Border Protection, meanwhile, has told 800 officers from ports around the country they will face two consecutive 60-day deployments to the southwest border. DHS has asked for reprogramming authority to temporarily move the employees, according to the National Treasury Employees Union, which represents the CBP officers. CBP last year deployed 750 officers from their normal ports of entry posts to the southwest border.

The officers would serve in Texas at Rio Grande Valley and Laredo posts. Cases of the novel coronavirus are currently spiking in the state, which NTEU said makes the deployments unsafe.

“We have grave concerns about sending additional federal law enforcement personnel into a region where COVID-19 cases are spiking and hospitals are nearly full,” said NTEU National President Tony Reardon. The agency is struggling to keep safe CBP personnel already in the area, Reardon said, and has not demonstrated it will have the requisite personal protective equipment, lodging and transportation and access to health care for additional staff.

Reardon added CBP has not committed to testing employees at the end of their deployments or requiring them to quarantine for 14 days, as public health officials have recommended for those who may have had exposure to the virus. Reardon said the agency does not have adequate testing or contact tracing for CBP employees already at the border. More than 1,000 agency employees have tested positive for COVID-19.

“CBP should be focusing its resources on the health and safety of CBP personnel already assigned to the border, including policies that allow for appropriate social distancing at the port and giving employees more time to remain safe at home,” Reardon said.

The DHS workforce shakeups follow U.S. Citizenship and Immigration Services using reduction in force procedures to send furlough notices to more than 13,000 employees last month. The agency has cited a downturn in application receipts stemming from the coronavirus pandemic as the root of the budget crisis necessitating the forced, unpaid time off. USCIS has notified Congress it is seeking $1.2 billion to avoid the furloughing of more than 70% of its staff, but Republican and Democratic aides have said they are still awaiting a formal request for the funding.

How the Secure Act Could Benefit You

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Late last year, new legislation was signed into law that will usher in some of the most sweeping changes to retirement plans in decades. The Setting Every Community Up for Retirement (or SECURE) Act was originally passed by the House of Representatives last spring. It failed to pass the Senate then, but the legislation was included in the year-end spending bill that was passed on December 20, 2019.

The SECURE Act became effective on January 1, 2020, and it will inevitably affect many retirement savers, for better or worse. Here are a few of the most significant provisions that you should be aware of:

No more age restriction on traditional IRA contributions

Before the Secure Act, you could not make contributions to a traditional IRA for the year during which you reached age 70 1/2 or any later year. (There’s no age restriction on Roth IRA contributions, and the Secure Act does not change that.)

New law: For tax years beginning after 2019, the Secure Act repeals the age restriction on contributions to traditional IRAs. So, for tax years beginning in 2020 and beyond, you can make contributions after reaching age 70½. That’s the good news.

Key point: The deadline for making a contribution for your 2019 tax year is April 15, 2020, but you cannot make a contribution for 2019 if you were age 70 1/2 or older as of Dec. 31, 2019. Thanks to the new law, you can make contributions for tax year 2020 and beyond.

Side effect for IRA qualified charitable distributions

After reaching age 70 1/2, you can make qualified charitable contributions of up to $100,000 per year directly from your IRA(s). These contributions are called qualified charitable distributions, or QCDs. Effective for QCDs made in a tax year beginning after 2019, the $100,000 QCD limit for that year is reduced (but not below zero) by the aggregate amount of deductions allowed for prior tax years due to the aforementioned Secure Act change. In other words, deductible IRA contributions made for the year you reach age 70 1/2 and later years can reduce your annual QCD allowance.

You generally must begin taking annual required minimum distributions (RMDs) from tax-favored retirement accounts (traditional IRAs, SEP accounts, 401(k) accounts, and the like) and pay the resulting income tax hit. However, you need not take RMDs from any Roth IRA(s) set up in your name.

Before the Secure Act, the initial RMD was for the year you turned age 70 1/2. You could postpone taking that initial payout until as late as April 1 of the year after you reached the magic age. If you chose that option, however, you must take two RMDs in that year: one by the April 1 deadline (the RMD for the previous year) plus another by Dec. 31 (the RMD for the current year). For each subsequent year, you must take another RMD by Dec. 31. Under an exception, if you’re still working as an employee after reaching the magic age and you don’t own over 5% of the outfit that employs you, you can postpone taking RMDs from your employer’s plan(s) until after you’ve retired.

New law: The Secure Act increases the age after which you must begin taking RMDs from 70 1/2 to 72. But this favorable development only applies to folks who reach 70 1/2 after 2019. So, if you turned 70 1/2 in 2019 or earlier, you’re unaffected. But if you will turn 70 1/2 in 2020 or later, you won’t need to start taking RMDs until after attaining age 72. As under prior law, if you’re still working after reaching the magic age and you don’t own over 5% of the employer, you can postpone taking RMDs from your employer’s plan(s) until after you’ve retired.

Key point: If you turned 70 1/2 in 2019 and have not yet taken your initial RMD for that year, you must take that RMD, which is for the 2019 tax year, by no later than 4/1/20 or face a 50% penalty on the shortfall. You must then take your second RMD, which is for the 2020 tax year, by Dec. 31, 2020.

Now for the bad news

Stricter rules for post-death required minimum distributions curtail ‘Stretch IRAs’: The Secure Act requires most non-spouse IRA and retirement plan beneficiaries to drain inherited accounts within 10 years after the account owner’s death. This is a big anti-taxpayer change for financially comfortable folks who don’t need their IRA balances for their own retirement years but want to use those balances to set up a long-term tax-advantaged deal for their heirs.

Before the Secure Act, the required minimum distribution (RMD) rules allowed you as a non-spouse beneficiary to gradually drain the substantial IRA that you inherited from, say, your grandfather over your IRS-defined life expectancy.

For example, say you inherited Grandpa Dave’s $750,000 Roth IRA when you were 40 years old. The current IRS life expectancy table says you have 43.6 years to live. You must start taking annual RMDs from the inherited account by dividing the account balance as of the end of the previous year by your remaining life expectancy as of the end of the current year.

So, your first RMD would equal the account balance as of the previous year-end divided by 43.6, which would amount to only 2.3% of the balance. Your second RMD would equal the account balance as of the end of the following year divided by 42.6, which translates to only 2.35% of the balance. And so, on until you drain the inherited Roth account.

As you can see, the pre-Secure Act RMD regime allowed you to keep the inherited account open for many years and reap the tax advantages for those many years. With an IRA, this is called the “Stretch IRA” strategy. The Stretch IRA strategy is particularly advantageous for inherited Roth IRAs, because the income those accounts produce can grow and be withdrawn federal-income-tax-free. So, under the pre-Secure Act rules, a Stretch Roth IRA could give you some protection from future federal income tax rate increases for many years. That’s the upside.

Unfortunately, the Secure Act’s 10-year rule puts a damper on the Stretch IRA strategy. It can still work, but only in the limited circumstances when the 10-year rule does not apply (explained below). This development will have some well-off folks and their estate planning advisers scrambling for months (at least) to react. That’s especially true if you’ve set up a “conduit” or “pass-through” trust as the beneficiary of what you intended to be a Stretch IRA for your heirs.

Key point: According to the Congressional Research Service, the lid put on the Stretch IRA strategy by the new law has the potential to generate about $15.7 billion in tax revenue over the next decade.

Effective date: The Secure Act’s anti-taxpayer RMD change is generally effective for RMDs taken from accounts whose owners die after 2019. The RMD rules for accounts inherited from owners who died before 2020 are unchanged.

Who is affected?

The Secure Act’s anti-taxpayer RMD change will not affect account owners who drain their accounts during their retirement years. And account beneficiaries who want to quickly drain inherited accounts will be unaffected. The change will only affect certain non-spouse beneficiaries who want to keep inherited accounts open for as long as possible to reap the tax advantages. In other words, “rich” folks with lots of financial self-discipline.

The Secure Act’s anti-taxpayer RMD change also will not affect accounts inherited by a so-called eligible designated beneficiary. An eligible designated beneficiary is: (1) the surviving spouse of the deceased account owner, (2) a minor child of the deceased account owner, (3) a beneficiary who is no more than 10 years younger than the deceased account owner, or (4) a chronically-ill individual (as defined).

If your grandfather dies in 2020 or later, you can only keep the big Roth IRA that you inherit from him open for 10 years after his departure.

Under the exception for eligible designated beneficiaries, RMDs from the inherited account can generally be taken over the life or life expectancy of the eligible designated beneficiary, beginning with the year following the year of the account owner’s death. Same as before the Secure Act.

So, the Stretch IRA strategy can still work for an eligible designated beneficiary, such as an account owner’s much-younger spouse or recently born tot. Other non-spouse beneficiaries (such as an adult child, grandchild, niece or nephew) will get slammed by the new 10-year account liquidation requirement. So, if your grandfather dies in 2020 or later, you can only keep the big Roth IRA that you inherit from him open for 10 years after his departure. Bummer!

10-year rule specifics: When it applies, the new 10-year rule generally applies regardless of whether the account owner dies before or after his or her RMD required beginning date (RBD). Thanks to another Secure Act change explained earlier, the RMD rules do not kick in until age 72 for account owners who attain age 70 1/2 after 2019. So, the RBD for those folks will be April 1 of the year following the year they attain age 72.

Following the death of an eligible designated beneficiary, the account balance must be distributed within 10 years.

When an account owner’s child reaches the age of majority under applicable state law, the account balance must be distributed within 10 years after that date.

The bottom line: As you can see, the Secure Act includes both good and bad news for folks who don’t enjoy paying taxes. The new law includes more important tax changes that I’ve not covered here.

3 examples of new RMD rules for non-spousal retirement account beneficiaries

Example 1: David dies in 2020 and leaves his IRA to designated beneficiary Diane, his sister, who was born eight years after David. Diane is an eligible designated beneficiary. Therefore, the balance in the inherited IRA can be paid out over her life expectancy. If David dies before the account is exhausted, the remaining balance must be paid out within 10 years after her death.

Example 2: Diane dies in 2020 and leaves her IRA to designated beneficiary David, her brother, who was born 12 years after Diane. David is not an eligible designated beneficiary because he is more than 10 years younger than Diane. The balance in the inherited IRA must be paid out within 10 years after Diane’s death.

Example 3: Michael dies in 2020 at age 85. He lives his $2 million Roth IRA to his 24-year-old spouse Melissa. Since Melissa is an eligible designated beneficiary, the new 10-year rule does not apply to her. As a surviving spouse, she can retitle the inherited Roth account in her own name. Then she will not have to take any RMDs for as long as she lives. So, this is a situation where the Stretch IRA strategy still works well (although not quite as well as before the Secure Act for reasons that are too complicated to explain here).

Example 4: Michael dies on Dec. 15, 2019. He left his IRA to designated beneficiary Melissa, his beloved niece, who is 30 years younger than Michael. Because Michael died before 2020, the balance in the inherited IRA can be paid out over Melissa’s life expectancy under the pre-Secure Act RMD rules. If Melissa dies on or after 1/1/20, the balance in the IRA must be paid out to her designated beneficiary or beneficiaries or the heir(s) who inherit the account within 10 years after Melissa’s death.

If you think this is something you should consider, reach out to us to get your Free Retirement review to see how we can help you maximize your TSP in regards to using the New Secure Act.  Contact us or give us a call at (877) 733-3877 x 1 to schedule your review today!

Retirement Claims Backlog Falls By Only 1.5 Percent Last Month

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After the annual spike in retirement claims submitted by federal employees at the beginning of the year, the Office of Personnel Management was only able to reduce its backlog by a few hundred claims last month.

The agency received 17,134 retirement claims in January, a huge increase compared to this time last year, when it received 13,264 claims, and the 9,273 it received in February.

Meanwhile, OPM processed 10,059 claims in January and 9,627 in February, bringing its backlog inventory to 23,629 by the end of February—only down from 23,983 in January, a reduction of 1.5%.

It took an average of 58 days to process a single claim in January and 54 days in February.

The figures come from OPM’s monthly claims processing progress report available on the OPM website.

If you think your ready for retirement, and would like a Free Retirement Review, visit our Contact Us page to Request and Schedule your review today or call (877) 733-3877

Budget Proposes Cutting and Simplifying Federal Employee Leave and More

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The Trump administration this week revived a proposal to consolidate most of the categories of paid leave available to federal employees into one pool, and reduce the overall number of leave days available to them.

Currently, in addition to 10 paid federal holidays, federal workers receive up to 13 sick days annually, as well as anywhere from 13 to 26 vacation days, depending on their length of service. In the White House’s fiscal 2021 budget request, unveiled Monday, President Trump proposed creating a single consolidated category of leave from which employees can pull as needed.

Although the administration said the new system would be easier for employees to use and agencies to manage, it noted that the total number of days available to federal workers would decrease, although it did not say by how much. The plan would require the passage of legislation by Congress.

“The 2021 budget proposes to transition the existing civilian leave system to a model used in the private sector to grant employees maximum flexibility by combining all leave into one paid time off category,” budget documents stated. “While the total leave days would be reduced, the proposal adds a short term disability insurance policy to protect employees.”

The administration did not expand on what this new “insurance policy” would look like.

The consolidated leave system would remain separate from the newly enacted paid parental leave program, which provides new parents up to 12 weeks of paid leave after the birth, adoption or foster placement of a new child. Signed into law as part of the 2020 National Defense Authorization Act, this new benefit will be implemented by Oct. 1.

The proposal appeared verbatim in the Trump administration’s fiscal 2020 budget proposal, but lawmakers elected not to include it either in their spending bills or in separate legislation.

Meanwhile, the Office of Personnel Management on Monday issued its annual call to federal health insurers to send their benefit and rate proposals for next year’s Federal Employees Health Benefits Program enrollment period. The agency asked insurance companies to focus both on plan quality and affordability, as well as to address a number of trending issues in medical care.

Additionally, OPM asked insurers to identify so-called “low-value care” that will no longer be covered, specifically procedures like unnecessary diagnostic testing. The agency also asked companies to highlight how to improve both the quality and utilization of tobacco cessation benefits.

This is just another area where the Government wants to take more benefits from you the employee.  If you would like to know more, or would like to have a Retirement consultation, please let us know.  You can Contact Us and schedule your review here.

Make Sure Retirement Protection Is In Your Future

By | Benefits, Federal Pay, Retirement, TSP | No Comments

WHEN YOU REACH RETIREMENT OR CLOSE TO RETIREMENT, you expect to reap the rewards for decades of hard work and diligent saving so you can live happily ever after.

Well, as many Americans are finding out, it’s not always a fairy-tale ending. Even a big pile of money does not guarantee a secure retirement. In fact, one of the biggest concerns people have about retirement is that they won’t have the income to sustain their current lifestyle or, even worse, that they could run out of money altogether.

These concerns can often lead to a less enjoyable retirement because people are afraid they might spend too much of their savings in the early years and not have enough later when their health is declining and inflation has driven up healthcare costs.

The good news is that there is a way to improve your chances of achieving a more secure and satisfying retirement through retirement income planning. Studies show that people who have a protected lifetime income stream are generally more secure financially than those who don’t. Additionally, people with protected lifetime income have a higher level of satisfaction in retirement, which is a key factor in enjoying your retirement years.

A 2018 GUARANTEED LIFETIME INCOME STUDY conducted by Greenwald & Associates and CANNEX gathered information from 1,003 individuals between the ages of 55 and 75 and whose household assets were at least $100,000. Respondents said the greatest benefits of having a protected lifetime income are protection against longevity risk, peace of mind, and being better able to budget – all of which can make for a less stressful and happier overall retirement.

The study also found that the perceived value of protected lifetime income continues to grow. More respondents now considered protected income “a highly-valuable addition to Social Security” compared to one year earlier. Of these individuals, nearly three-quarters said protected lifetime income is “extremely important” to their financial security.

While both Social Security and pensions can provide this kind of income stream, they don’t always cover your retirement income needs. You may also be one of the many Americans who doesn’t receive a pension. In that case, putting money into an annuity can supplement your protected lifetime income, helping you maintain your lifestyle for life

The study found that concerns about long-term health care, losing money in a market downturn, and fear of outliving retirement savings were among the factors that respondents said increased their interest in protected lifetime income.

Higher satisfaction scores for those with protected lifetime income
Between 1998 and 2010, the University of Michigan conducted the Health and Retirement Study, which gathered data from approximately 26,000 Americans over the age of 50 on an array of retirement issues, such as wealth, income, job security, health, and cognition.

The results revealed that satisfaction scores for all of these retirement issues were significantly higher for people who had more than 30% of their assets invested in protected lifetime income products. For example, when it comes to nursing home expenses, individuals with at least 30% of their retirement portfolio made up of protected lifetime income products were more confident that they’d be able to afford it.

While the study did not indicate a “magic number,” it did find that when people have more protected lifetime income, their overall satisfaction levels rose accordingly. And even though retirement satisfaction has been declining over time, satisfaction rates remain higher for people with a guaranteed monthly income stream, according to the study.

There’s no question that financial uncertainty can impact your happiness in retirement. That is why protected lifetime income products as a portion of your retirement portfolio can help ease a lot of that worry. So you should schedule a retirement review with a our Federal Retirement Consultants, and see how an annuity could help protect your retirement income and pave the road to a less stressful and happier lifestyle. Visit our contact us page today or call us at (877) 733-3877 to schedule your review.