I have had a number of questions recently from federal employees and middle-class families wondering how they will be affected by the new tax law. There are a few changes that are going to affect federal employees and the middle class, and the end result will likely be a reduction in the amount of taxes paid.
This is a question that takes a little analysis. The traditional TSP gives participants an immediate benefit by lowering their adjusted gross income (AGI), which means less taxes are paid today. The tax benefit for Roth TSP comes when a participant takes distributions and receives tax free income.
A common question for federal employees to ask me is, "so what's this annuity option in my Thrift Savings Plan (TSP)?" There is a lot of misunderstanding around what annuity options are available through TSP, as well as confusing the TSP annuity options with your FERS annuity.
A new law has been passed that makes some big changes to TSP. This law will make TSP more flexible for retirees and some feds that are close to retirement.
The customer is always right has to be one of the most dangerous catch phrases in business. Nobody wants to argue, but an advisor that always says yes to clients is doing them a disservice. An advisor that will "talk back" provides a lot more value.
Most people I talk to about retirement are primarily concerned with retirement income, and justifiably so, since many want to retire in the near future. I believe that we get too focused on the income aspect of retirement versus the expenses side of retirement. If you want flexibility in retirement, you first need to gain control of your expenses before worrying about your income.
One issue with the 4% rule is that your income remains steady throughout retirement, rising incrementally each year to adjust for inflation. While a steady income may sound good, it isn’t the solution for everyone. Another issue is that most studies on retirement income are based on math and science, and not human behavior and desires.
A retirement date does not and should not equal an automatic 80% allocation to fixed income. If you will rely on income from your TSP in retirement, then you may want to take more risk in your TSP (many retirement studies say that you should).
In over ten years of working with federal employees I have learned that there are many questions around retirement and how federal benefits work in retirement. I believe a federal employee’s financial well-being is vital to a happy and satisfying retirement. Federal employees should know exactly how their retirement will work before submitting their retirement papers.
I wrote a previous article that discussed reasons not to take a Thrift Savings Plan (or 401k) loan. Even though I am generally against taking a loan from your retirement plan, there are times when it can make sense. There are many reasons not to take a loan, but I will refer you back to my previous article for those reasons. Justification of a TSP loan calls for a dire situation, such as high credit card debt.
Fast forward many years later, and I still have a tendency to do things myself. The main reason I clean my own cars, wax my cars, clean the house, and do the yard work is because I’m tight (or frugal, to put it politely). I don’t like the idea of paying others to do something that I am able to do.
Retirement is a goal that most of us aspire to. Even though retirement is often thought of as an ending, it is more of a beginning event. Yes, you may be done working, but a new phase of life is starting. Each phase of life has its own risks and retirement is no different.
Taking out a loan against your TSP has become a pretty common practice with federal employees. Even federal employees with higher incomes have taken money out of their TSP because it is a “good deal.” As many of us have seen in life, just because it sounds like it is a good deal doesn’t mean it actually is. Despite sounding like a good deal,
One way procrastination hurts us is the timing of our Roth IRA contributions. Roth IRAs are a common retirement savings tool, especially for younger generations. The timing of Roth IRA contributions can be a big factor in retirement savings.
One of the biggest obstacles to accumulating wealth is what I call Lifestyle Creep. Lifestyle Creep can delay retirement, financial stability, and financial independence. At its worst, lifestyle creep can drive families into large amounts of debt that they will spend decades climbing out of. Others have referred to it as lifestyle drift or lifestyle inflation.
