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TSP

TSP Preps for Its Transition to a New Service Provider

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Officials at the federal government’s 401(k)-style retirement savings program on Tuesday outlined the disruptions—and new features—participants will see as the Thrift Savings Plan transitions to a new recordkeeping service provider this weekend.

At the monthly meeting of the Federal Retirement Thrift Investment Board, which administers the TSP, project manager Tanner Nohe said the agency is on track to bring the public facing portions of the project, which was internally called Converge, online by June 1. Currently, most transactions are unavailable to participants, and there will be a full blackout period from the close of business on Thursday until the new system comes online.

Nohe said that while some aspects of TSP services will remain unchanged, like the tsp.gov web address and the phone number for the Thriftline customer service center, that’s where the similarities end. Beginning in June, TSP participants will have access to long awaited and requested features like a mobile app, a virtual agent to help users and answer questions.

Additionally, changes to the TSP website will enable participants to make loan repayments after they leave federal service, sign documents electronically, while participants who invested in the TSP both as members of the military and as civilian federal workers will be able to see their all of their account information from the same login, where before now they had to log into two separate tsp.gov accounts.

The TSP’s mobile app, which will be available on both Apple and Android operating systems, will feature most of the same functions as the desktop website, including the new virtual assistant, the ability to make distributions and withdrawals and change how funds are invested and make interfund transfers. And participants will be able to sign and submit forms electronically, as well as upload an image of a check to roll over funds from a traditional 401(k) into the TSP.

Additionally, the TSP is adjusting a number of its terms to track with the terminology used more commonly throughout the 401(k) industry.

Once the new services are live, participants will be required to create a new account on tsp.gov, which then will work on both the website and the mobile app. The new login process will be streamlined and feature greater security, Nohe said.

But Tee Ramos, the TSP’s director of participant services, warned there could be hiccups during the transition. The agency is expecting higher than normal call volume on the Thriftline, and has staffed up at its call center to accommodate those who need assistance.

“There will be some delays in the first week, and we’re doing everything we can to support participants,” he said. “But expect much higher call volume in the days before we go live, and know that we appreciate your patience.”

If anyone is needing assistance with making some changes within there TSP Accounts, or have considered other investment ideas with their Thrift Savings Plan, we do assist all Federal Employees in this area.  You can contact us for assistance or read some testimonials from other Federal employees we have helped as well.

USPS Converted 63,000 Non-Career Employees to Permanent Jobs Over the Last Year

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he U.S. Postal Service has converted 63,000 part-time or non-permanent workers into career positions, with leadership saying it has helped stabilize the workforce after years of escalating turnover.

USPS has struggled for years with high turnover rates—particularly within its non-career workforce—leading postal management to identify new strategies to keep them on as it aims to grow its rolls. The conversions have also helped the Postal Service address employee availability issues during the COVID-19 pandemic, the agency said in a report marking the one-year anniversary of the unveiling of Postmaster General Louis DeJoy’s 10-year business plan.

The Postal Service has since 2010 increasingly relied on non-career workers, such as postal support employees and mailhandler assistants, as a cheaper alternative to reduce labor costs as part of efforts to keep pace with shrinking mail revenue. Non-career employees generally receive a less generous benefits package and lower pay than their permanent, full-time counterparts. The agency’s non-career staff grew by more than 60% between 2010 and 2017. At least some of the conversions were promised as part of collective bargaining negotiations.

The USPS inspector general has for years highlighted the problems with the Postal Service’s growing reliance on non-career workers. It found in a 2016 report, for example, that turnover the agency’s unionized, career workforce turns over every year was 1.2%, while in 2014 the non-career workforce had a 29% quit rate. By 2016, the turnover rate for non-career employees had climbed to 43%.

DeJoy previously laid out plans to reduce turnover by focusing on better options for non-career employees, highlighting the issue in testimony to Congress and in his 10-year plan. The trend marks a departure from the first months of DeJoy’s tenure, when the postmaster general led an effort to slash tens of thousands of non-union jobs by offering early retirement incentives and layoffs. USPS has since gone on a hiring spree and DeJoy has speculated he may add up to 100,000 positions compared to when he took over to meet growing package demand.

The Postal Service ended 2021 with nearly 517,000 career employees, its highest total since 2012. The non-career workforce has remained fairly steady in recent years at 136,000.

USPS boasted that it has committed more than $6 billion in core infrastructure over the last year, part of DeJoy’s promise to invest at least $40 billion by 2031. About half of the obligated total has gone toward the Postal Service’s controversial contract for new delivery vehicles, only about 20% of which are so far electric. Other investments have included new processing equipment, improvements to post offices and technology upgrades.

Postal management also highlighted its improvements in delivering mail on time, though it is still falling well short of its goals. It has also slowed down delivery for about 40% of First-Class mail, making it easier to hit its targets. USPS promised more changes to “optimize” its network, saying those plans are still in the works.

“These efforts—impacting all aspects of our operations and infrastructure—are being refined now and will be deployed in stages this year and in the coming years,” the Postal Service said.

USPS also again noted its “judicious” use of its new authority to raise prices above inflation, though it just this week proposed hiking its rates for the second time by nearly the fully allowable amount. Through a complicated formula derived from factors including inflation, declining mail volume and retiree costs, USPS could have raised its First-Class mail rates in July by 6.507%. It chose to raise them by 6.506%. The Postal Service has generated nearly $2 billion in annualized revenue from previous increases, the agency said.

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Most TSP Funds Stumble to Start 2021

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All but two of the portfolios in the federal government’s 401(k)-style retirement savings program lost ground for January.

The federal government’s 401(k)-style retirement savings program got off to a rocky start in 2021, as most of its portfolios ended January slightly in the red.

The small- and mid-size businesses of the Thrift Savings Plan’s S Fund were the top performers, gaining 2.85% last month. The G Fund, made up of government securities, also increased 0.07%.

But the common stocks of the C Fund fell 1.01% in January, while the international (I) fund lost 1.09%. The fixed income (F) fund fell 0.71%.

All of the TSP’s lifecycle (L) funds, which shift to more stable investments as participants get closer to retirement, also lost ground last month. The L Income Fund, for people who already have begun making withdrawals, fell 0.10%; L 2025, 0.24%; L 2030, 0.32%; L 2035, 0.35%; L 2040, 0.37%; L 2045, 0.39%; L 2050, 0.41%; L 2055, 0.44%; L 2060, 0.44%; and L 2065, 0.44%.

 

Billions Flow Out of TSP Due to COVID and More

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Officials at the federal government’s 401(k)-style retirement savings program said this week that nearly $3 billion exited the Thrift Savings Plan this year as a result of the COVID-19 pandemic.

The CARES Act authorized TSP participants to take loans from their accounts of up to double the normal amount, and it waived requirements that participants be 59 1/2 years old, cite a specific financial hardship or take a 10% tax penalty.

At the January meeting of the Federal Retirement Thrift Investment Board, which administers the TSP, Participant Services Director Tee Ramos outlined how federal employees and retirees made use of these flexibilities.

Over the course of the programs, which both expired last year, TSP participants took out 3,043 CARES Act loans over the normal $50,000 cap, for a total of $229 million. And 119,720 participants withdrew money using the CARES Act flexibilities, totaling $2.9 billion. Despite these figures, assets in the TSP grew in 2021.

“Plan assets were up to $710 billion in December, and the total number of participants reached 6.2 million,” Ramos said. “Hardship withdrawals and loan volumes were 18% lower than the prior year, likely driven by the availability of CARES Act withdrawals and loans.”

In other retirement news, a bipartisan group of lawmakers last week reintroduced legislation that would eliminate two provisions of the Social Security program reviled by many federal retirees. The Social Security Fairness Act (H.R. 82), introduced by Reps. Rodney Davis, R-Ill., and Abigail Spanberger, D-Va., would eliminate the windfall elimination provision and the government pension offset from the Social Security Act.

The windfall elimination provision reduces the Social Security benefits of retired federal, state and local government employees who worked in private sector jobs in addition to a government job where Social Security is not intended as an element of their retirement income, like employees in the Civil Service Retirement System. And the government pension offset prevents government retirees from collecting both their own pension like the CSRS annuity and Social Security benefits derived from their spouse’s work in the private sector.

“Virginians shouldn’t be penalized for careers in public service—and that’s why eliminating the government pension offset and windfall elimination provision is so important,” Spanberger said in a statement. “Many central Virginians—including teachers, first responders and public employees—are negatively impacted by these outdated provisions that unfairly reduce the Social Security benefits they’ve earned.”

In a statement, National Active and Retired Federal Employees Association National President Ken Thomas endorsed the legislation.

“For decades, NARFE has supported full repeal of the windfall elimination provision and the government pension offset, and applauds introduction of a bill . . . to do just that,” Thomas said. “These policies have unfairly punished retired public servants through reduced Social Security benefits for far too long. This bill would provide much-needed relief for the millions of retirees and survivors currently affected by this inequitable practice and will improve fairness for future retirees.”

 

 

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

Date Count Amount
June, 2020 2,462 $61,429,570.22
July, 2020 4,990 $115,588,460.67
MTD – Aug 12, 2020 1,704 $37,803,631.74

CARES Loans Over $50,000

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

CARES Loan Suspensions

Date Count Amount
June, 2020 245 $ 12,514,932.41
July, 2020 354 $ 16,419,035.09
MTD – Aug 12, 2020 41 $ 1,958,857.50

CARES Withdrawals

Date Count Amount
July, 2020 21,296 $ 554,831,990.61
MTD – Aug 12, 2020 11,621 $ 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:

Fund Allocation Percentage
G Fund 33.3%
F Fund 4.6%
C Fund 28.5%
S Fund 9.3%
I Fund 3.5%
L Funds 20.9%

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.

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.

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!

Make Sure Retirement Protection Is In Your Future

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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.

Pay Raise for 2021

Lawmakers Introduce Bill to Grant Civilian Feds a 3.5% Pay Raise in 2021

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Democrats in both chambers of Congress on Tuesday reintroduced a bill that would provide federal civilian employees with a 3.5% across-the-board pay increase next year.

The Federal Adjustment of Income Rates Act (H.R. 5690) was introduced by Rep. Gerry Connolly, D-Va., in the House and Sen. Brian Schatz, D-Hawaii, in the Senate. The bill mirrors similar legislation the lawmakers introduced last year that would have provided federal workers with a 3.6% raise in 2020.

Congress did not act on either version of last year’s bill. But lawmakers and President Trump ultimately agreed to provide an average 3.1% raise—including a 2.6% basic pay increase to all federal workers, and an average 0.5% increase to locality pay—as part of the bipartisan spending deal for fiscal 2020 reached last month.

“We fought hard for several consequential victories last year, but our work on behalf of our dedicated federal workers is never finished,” Connolly said in a statement. “After years of pay freezes, furloughs and Trump shutdowns, federal employees understand better than most that we simply cannot let our guard down while this president is in the White House. The FAIR Act is much-needed and well-deserved recognition of our government’s greatest asset—its public servants.”

If approved, the raise called for in the bill would mark a nearly 1-percentage point increase over the raise enacted for this year. Lawmakers still would have to negotiate how much to increase locality pay.

In a statement Tuesday, National Treasury Employees Union National President Tony Reardon endorsed the bill.

“Sen. Schatz and Rep. Connolly have been advocates, year in and year out, of helping our nation’s civil servants be able to pay their bills, invest in their children’s education, and save for retirement,” he said. “Our members will be fully engaged in the effort to pass this bill into law and give federal employees the ability to keep doing what they love: serving the public.”

Meanwhile, at the monthly meeting of the board that administers the federal government’s 401(k)-style retirement savings program, officials with the Thrift Savings Plan highlighted recent successes.

According to Tee Ramos, the TSP’s director of participant services, the agency completed more than 3,100 roll-in transactions last month, which capped off a 2019 in which the TSP saw 35,000 totaling $1.34 billion.

“I think it’s a cumulative effect,” he said. “We didn’t have any special education campaigns, but our crew has just been constantly extolling the virtues [of the TSP] and the fact that we have the best plan in America. That message is getting out there and resonating with people.”

Additionally, Ramos said early numbers suggest that the recent change making two-factor authentication a requirement for participants to access their account online was implemented smoothly.

“Authenticated logins have climbed from 350,000 in early October to 1.8 million about a week ago,” Ramos said. “That represents around 550,000 unique participants.”

So far, Ramos said there have been around 7,000 instances where people failed to log in at least twice after activating two-factor authentication, and officials are helping people learn the new system when needed, and exploring ways to make logging in easier.

“We’re extending the time we allow people to use the unique code they receive, and to save the log-in in their browser,” he said. “We’re also exploring things like allowing participants to use the unique code to authenticate their login through the call center, which is not only safer but more expedient for our participants.”

A Paycheck Mistake, and Changes to TSP Catch-Up Contributions

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The agency responsible for processing payroll for around 650,000 federal workers last week announced that it had issued incorrect paychecks for some employees across the federal government earlier this month.

The problem stemmed from the final paycheck of the 2019 calendar, which ended Jan. 4 and was issued Jan. 10. A number of federal workers reported receiving both smaller and larger amounts than they were owed.

The National Finance Center, which is a subcomponent of the Agriculture Department but provides payroll services for a variety of federal agencies, first acknowledged the discrepancies on Jan. 10, and said the problem likely resulted from federal payroll tax withholding.

By Jan. 14, the National Finance Center announced that it had identified the root cause: employees who had not submitted a new W-4 form or were not exempt defaulted to a new, often incorrect number of exemptions. Single federal workers had taxes withheld as single, with two exemptions, while married feds had taxes withheld as married, with three exemptions.

NFC said it implemented changes to fix the problem “prior to the second pass” on the relevant pay period’s payroll processing. Although the agency said it expected to have compiled a list of all employees who received the wrong amount in their pay check by the end of last week, it did not announce a timeframe for when employees who are owed money would be made whole, or when employees who were overpaid will see a lighter paycheck.

“Updates will be forthcoming as additional information becomes available and the corrective action is finalized,” NFC wrote.

Meanwhile, the federal agency responsible for administering the federal government’s 401(k)-style retirement savings program proposed new regulations this week to make it easier for older federal employees to make catch-up contributions to their Thrift Savings Plan accounts.

Currently, TSP participants age 50 and older may exceed the normal 401(k) annual contribution limits in order to make up for time spent in the private sector or when they were otherwise unable to invest in the TSP. But in order to do so, those federal workers must submit a form authorizing catch-up contributions, in addition to the standard contribution election form that all participants provide to their agency.

In draft regulations set for publication to the Federal Register Thursday, the Federal Retirement Thrift Investment Board, which governs the TSP, proposed that beginning Jan. 1, 2021, federal workers will no longer be required to submit that second form to enroll in catch-up contributions.

“Instead, the TSP will simply continue to accept contributions based on the participant’s contribution election that is already on file, until his/her contributions reach the combined limits on catch-up contributions and other types of contributions,” the agency said.

TSP officials first announced that this change would be coming last year. It is part of an effort to make the process simpler and easier for federal workers to participate, as well as to streamline the process for both the TSP and federal agencies.

According to the proposed regulations, beginning next year, when federal workers hit the standard annual contribution limit, the TSP will automatically cross reference their ages to see if they are eligible to make catch-up contributions. If the employees are at least 50 years old, they will be able to continue to make contributions up to the higher catch-up contributions limit.

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