Currently Browsing All Posts In Federal Employees

Friday September 8, 2017

Annuities, Bonds, and Bad Advice

Recently I was working with a client on analyzing and reallocating his IRA investment portfolio. The portfolio was substantial (over $3M) and was 40% Equities, 40% Bond, and 20% Cash. I really liked this allocation for someone his age (70) and told him that the only real improvements would be using a responsive, tactical investment management platform and to improve his Bond Allocation. The fees on the products and funds he held were already low at an average cost of 1.14%.

In assessing the Bond Allocation, using Morningstar’s X-ray Analysis, we found that over half the total was held in High-Yield or junk bonds. While there is nothing inherently wrong with holding a portion of one’s Fixed Income allocation in High Yield Bonds as a means of diversification and improving the overall yield, a 60% allocation seemed a bit high. Moreover, the total yield on his Fixed Income/Bond allocation was only 3.4%.

I came back to this client with the suggestion of replacing his Fixed Income/Bond Allocation with a combination of Fixed Index Annuities. The criteria I used for my recommendations were that any fees associated with these FIA’s should be comparable to his current annual cost of the Bond Allocation, which was .96%., that any annuity carriers we considered should have a credit rating of A+ or better, and that we could reasonably expect to exceed the current yield of his Bond Portfolio.

Many leading advisors (myself included) view a fixed indexed annuity (FIA) as another fixed income asset and allocate them accordingly:
• An alternative to low yielding bond allocations.
• Allows the investment professional to be as “active” as necessary in other areas of
the wealth management process.
• Provides a range of interest crediting methods with both capped and uncapped
strategies managed by leading investment banks.
• Provides for an ongoing guaranteed income stream for the client and spouse if desired.

The two FIA’s I recommended for this client had internal fees of .95% and .4% respectively, for an average cost of ownership of .675% annually, lower than the current cost of his Bond Funds. The performance of these annuities were tied to underlying diversified stock indices that were managed with volatility controls and had the ability to shift allocations monthly. Disclaimer: Index Annuities are never meant to be a competitor for true equity investments and are not direct investments in the underlying market indices. A reasonable return expectation for this type of product would be between 3½% – 5% over time, with negative index periods earning a 0% return. That’s why they are a viable substitute for bond positions.

This would remove the Market Risk, Credit Risk and Interest Rate Risk associated with his current Bond Allocation, lower the overall annual cost and potentially improve the annual returns. In addition, there is the option of a guaranteed lifetime income that would protect the client (and his spouse) from the risk of extreme longevity. While there are substantial surrender charges in the early years to withdraw more than the annual free amount, Required Distributions from IRA’s are never penalized and that’s all the client anticipated ever withdrawing. Seemed like a no-brainer. Except that it wasn’t.

When we finished with the analysis of the FIA’s, their performance data, reasonable projections, and the financial data on the carriers that offer the products, we scheduled our next meeting for the following week to begin the transfers and implementation of this strategy.

This next meeting is where the process fell apart. Why? Because his (adult) kid heard somewhere that annuities weren’t a good thing to do. While I’m sure that this child is smart, expertise as an elementary school teacher doesn’t qualify one to render complex investment advice. But that’s sometimes how it goes; blood is thicker than 25 years of experience and numerous advanced planning designations. In these situations I just have to let it go or run the risk of insulting the client by impugning the intelligence of their oh- so-smart progeny.

In my opinion, Index Annuities are actually over-hyped and oversold by agents (often posing as fiduciary advisors) as the silver bullet for everything investment related. Cable stations and weekend radio shows are filled with agents dispensing advice about how Index Annuities are the answer to whatever ails you. Market-like returns? Index Annuities! High Growth, No Risk? Index Annuities! Erectile dysfunction? Index Annuities! The only thing more annoying is former TV stars telling people to stockpile gold for the coming financial apocalypse.

Why are annuities so over-hyped? Because they pay commissions. Earning commissions on these products is not inherently wrong or against the best interest of the client, unless the product is not properly positioned and/or sold for the wrong reason – strictly for earning a commission.

But there’s no doubt that annuities can and do solve many of the challenges faced by retirees. The puzzle has been that consumers, and advisors to a large extent, don’t understand where annuities fit or how to use them effectively.

For me there are three primary uses for annuities in my practice – replacing Bonds or Bond Funds with a more efficient alternative in a client’s comprehensive financial plan, filling a defined need for current or future income, or for that client that just can’t stomach any real market risk.

A Wall Street Journal article once referred to income annuities as “super bonds,” which is not the most accurate term. A more appropriate term would be “actuarial bonds.” Extensive research in the field of Retirement Income Planning concludes that income annuities significantly improve retirement outcomes over what is possible with bonds or bond funds.

Unless of course your clients’ kids heard something from somewhere and doesn’t like them.

But for actual research, I suggest the following blogs:

Saturday October 10, 2015

Why Long Term Care Policies Lapse

The following is an article from a blog that I subscribe to called “The Retirement Café” written by Dirk Cotton. This blog is full of great information on all aspects of the Retirement Planning process. You can read past articles and subscribe to it here:

Why Retirees Let LTC Insurance Lapse

Originally Posted: 09 Oct 2015 01:24 PM PDT
From “The Retirement Café” blog written by Dirk Cotton

A reader recently asked my opinion on long-term care (LTC) insurance policies. My position is that many retired households, perhaps most, will not be able to afford LTC premiums and will have no decision to make. Wealthy households will be able to self-insure. That leaves the households in between with a decision to make. For those households, purchasing a long-term care insurance policy can be the lesser of two evils.

The problems with LTC insurance are well known (see An Economist Explains the Dangers of Long-Term Care Insurance). Many carriers have found the policies unprofitable and have simply gotten out of the business. According to a recent Wall Street Journal article, five of the 10 largest LTC policy sellers, including MetLife and Prudential Financial, have sharply reduced or discontinued sales entirely since 2010. Buying insurance when many insurers are abandoning the market for that insurance is risky.

Some Boomers have been encouraged to buy LTC policies because they worked well for their parents, but this is not your father’s LTC policy. Rates increased substantially after insurers realized they had initially underpriced policies and would need to raise rates substantially if they were to make a profit. You’re unlikely to get the deal your parents got.

Perhaps the greatest problem with LTC insurance is the possibility that an insured retiree will let his or her policy lapse and, after making large premium payments for years or even decades, not be covered when LTC insurance is actually needed.

While insurers can’t increase premiums for a specific policy, they can increase premiums for classes of policyholders. Jane Gross, a retired correspondent for the New York Times and author of the excellent blog on aging, Next Avenue, recently wrote in a post entitled, “Reasons to Worry – and Agitate – About Your Financial Security”, “Next up is my long-term care insurance policy, which now costs $1,357.85 a year but, this letter tells me, is raising its premiums by 48 percent — unsurprising but still breath-taking.

It would be way more than that, the MetLife representative told me by phone, but for the fact that New York State has one of the nation’s most stringent insurance commissions. . .
In 2019, MetLife told me, the state commission will again allow the insurer to raise its prices. When that happens I’ll reduce my benefit duration from three years to two. Is there a point when I’d flush down the toilet 13 years of premiums already paid? I haven’t a clue.”

Although the probability that a retiree will need some amount of long-term care is significant, the probability of a financially catastrophic stay in a long-term care facility is relatively small, as I described in an earlier post. Many stays will be quite brief and some can be paid out-of-pocket.
Long-term care expenses can range from informal care in the home to expensive nursing facilities, from short stays that can be paid out-of-pocket to lengthy stays with catastrophic costs.
The following table is from a study entitled, “Long-term care over an uncertain future: what can current retirees expect?” Notice that while 69% of people over age 65 required some form of long-term care, 31% required none at all. Another 29% required stays of two years or less. The scary number is the 14% that required more than 5 years of in-facility care. The odds of that happening are somewhat low, but the magnitude of the risk can be financially catastrophic and that’s what we need to prepare for in some way.

Medicare does not cover most long-term care costs. Medicaid may, but only after most of the retiree’s financial resources have been spent. It is intended to cover indigents. To use it for long-term care, you must become one.

A recent brief published by the Center for Retirement Research at Boston College entitled, “Why Do People Lapse Their Long-Term Care Insurance?” researches this important issue. According to the report, “At current lapse rates, men and women age 65 have, respectively, a 32- and 38-percent chance of lapsing prior to death, assuming that lapse rates remain at the same levels observed for recent cohorts.”

This brief is here:

Let me repeat that. 30% to 40% of 65-year old’s will eventually allow their LTC policy to lapse, forfeiting all benefits after having paid years of premiums.

The brief’s other key findings are:

1. Lapses could be due to the burden of insurance premiums, a strategic calculation that care use is less likely, or poor decisions due to declining cognitive ability.
Why do retirees allow their LTC coverage to lapse? Insurance premiums could increase and render the policy unaffordable, or they could remain the same while the retiree’s ability to pay declines. That doesn’t mean the premiums would have been spent totally in vain, because risk was protected prior to the lapse and that has value. But it does mean that the retiree has a potentially huge uninsured risk going forward. It would be a poor outcome, indeed, to pay premiums for decades and then suffer devastating long-term care costs after the policy lapsed.

2. The analysis finds support for both the “financial burden” and “cognitive decline” explanations. The research finds that many LTC policy lapses are the result of either premiums that the retiree can no longer afford, or the retiree losing the mental acuity needed to maintain the policy. They might forget to make premium payments or simply decide, incorrectly, that they no longer need the policy.

3. The consequences of lapsing are significant, as lapsers are actually more likely than non-lapsers to use care in the future, partly due to cognitive decline. Interestingly, the study found that retirees who let their policies lapse are more likely to need long-term care in the future than those who don’t lapse. This is partly explained by the fact than impaired retirees are more likely to let policies lapse and impaired retirees are also more likely to need long-term care.

4. Thus, for some lapsers, having insurance could be counterproductive as they buy it to protect against risk but drop it just when the risk becomes more likely. In other words, if you’re going to allow the policy to lapse, you’re probably better off not buying it in the first place. Of course, when you buy the policy, it is probably your intention to keep it in force.

Joe Tomlinson, whose opinion I respect most on retirement insurance issues, suggests that purchasing the policies, despite their known faults, is the lesser of two evils. Retirement advisor, Dana Anspach, wrote a nice piece, “What Happens When You Don’t Have Long Term Care Insurance?” explaining the downside of not purchasing LTC insurance. I agree with all of it, perhaps with the exception of identifying “the worst case scenario [as] where one spouse remains healthy and retains most of the ongoing costs of living independently and the other spouse needs care in assisted living or nursing home.” I think paying premiums for decades and then letting a policy lapse just prior to incurring huge end-of-life costs has a strong claim on that title.

I believe that you should forego these policies if you can’t afford the premiums, and potentially large future premium increases, or if you are wealthy enough to self-insure.

If you fall in between, I don’t believe there is a clear winner. There are several strong arguments in favor, and several against. I hope that explaining the issues involved will help with your very difficult decision.

Tuesday August 4, 2015

How 401(k) Plans Have Failed Us

The following is excerpted from an article in Think Advisor Magazine by Alicia Munnell of Simply Money:

The 401(k) is America’s most common retirement plan and is also its most misused plan.  The 401(k) is a ‘failed experiment’ in retirement planning and there’s plenty of blame to go around. Let’s declare 2015 the year we officially recognize 401(k) plans as a failed experiment in retirement planning. And let’s give some credit for that to plaintiffs’ attorneys, the Supreme Court and the Department of Labor.

To be fair, lots of credit also goes to the CFOs and HR professionals who cut costs on 401(k) plans to bare bones and failed to educate employees about how to use their investment options. Let’s not forget the fund companies that enjoyed years of large fees without scrutiny, or third-party administrators who used higher internal expenses to rebate the company’s costs back to the employer. Financial advisors who pocketed 12b-1 fees and other forms of trailing commissions can’t be completely overlooked, either.

Imagine how recent lawsuits would have gone if the 401(k)s had done a good job. What if the plaintiffs had sued about plan expenses and the companies’ response had been “We use those fees to cover advice services to all plan participants, with advisors who come on-site once a week”? I did this in the early 2000s for a $100 million plan. We gave the company relief from fiduciary responsibility. We were on-site, did financial plans, asset allocation, explained rebalancing—at no additional cost to the plan participants. We were paid with 12b-1 fees, which we split with Putnam, the plan provider—we took 12.5 basis points and didn’t feel underpaid.

So what’s the problem? Maybe it isn’t the fees workers pay but that they don’t get the service they deserve.
The 401(k) has become a feeding trough for financial institutions and service providers that routinely rip off participants. Why? Not because of the fees, but because participants don’t know how to use them—and no one is willing to take responsibility for guidance.

Just this year we have the following facts to ponder:

  •  • Participants left $24 billion in company matching funds unused because they didn’t save enough to claim the full match.
    • In 2014, only 10.5% of plan participants changed the asset allocation of their account balances, and just 6.6% changed the asset allocation of their contributions.
    • Approximately 21% of savers who can borrow from their 401(k) plan have outstanding loans—so they’re using their retirement funds as a piggy bank.
    • Roughly two-thirds of investors think they pay no fees for their investments, or have no idea how or how much they pay.
    • At the same time, 53% of households are at risk of being unable to maintain their standard of living in retirement.

What if participants in large plans are paying too little to have their assets managed and, therefore, are not getting the help they need? If you doubt this, just grab a copy of the yearly report from AON Hewitt—or any retirement plan consultant—about participant behavior in the plans they administer. This is not a survey; it’s a report on the millions of accounts AON Hewitt administers and what their owners do or don’t do with their funds when they get no real input or advice.

It’s not a pretty picture. Inertia rules. Did none of these employees have any reason to change their investment choices? Did none of them get a few years closer to retirement? Get divorced? Have children? Did the allocation they picked five years ago not need rebalancing after the supersonic run-up in large U.S. stocks?

More troubling, AON’s clients—the plan participants surveyed for the report—make up approximately half of the Fortune 250. Assume for a minute these companies have their pick of the smartest people around, and pay better compensation and benefits than many other firms. If these workers can’t get investing right, what does that say for the rest of us?
Where did companies go wrong? Ironically, it started with fiduciary concerns about their liability for investment returns if they, the employers, invested on the employees’ behalf.

To solve the problem of liability, companies chose to give their employees self-direction, rather than take responsibility for performance. They had a choice and took the easy one. It seemed like a simple enough strategy for getting the employer off the fiduciary hook, but it was a mistake as far as the workers’ financial well-being was concerned. For every worker who succeeded with a 401(k), there were scores who never signed up, never invested beyond the default or, worse still, bought high and sold low in a panic. If the employees had gotten help, guidance, direction—would they have brought these lawsuits?

That brings fees back into focus. If you pay a fund company very little, that’s what you’ll get from them in service. These are organizations set up to manage money, not educate Americans about financial planning. But if the fees were well-spent, employees would benefit.

No one has been putting the plan participant—the worker, the consumer—first; not the plan sponsors, the plan providers, the asset managers nor the government. The Department of Labor has been trying for a few years to figure out how to have a fiduciary standard that could be functional at the worksite.

It’s time to call it like it is and redo the 401(k). That’s going to require more time and expense on everybody’s part, but this is a case where you get what you pay for—or at least you should.

401(k) participants deserve a real plan. I personally would recommend charging everyone a fee that came out of plan assets and covered a basic level of advice for every participant. Participants should then be able to choose from a fee-for-service menu that could include more frequent financial planning, advice on assets held outside the plan, asset allocation, rebalancing, etc. The extra fees would be deducted from their 401(k) balance. The cost of these services, given the scale of most investment firms, would be modest compared to what they might cost an individual investor, owing simply to scale.

A plan that used a robo-advisor could set fees at a very low level, probably around 20 basis points. A hybrid version would couple a robo-advisor with human beings at the local level and cost more.

These options all have one goal: get participants’ investment behavior to match their investment goals. That will translate into growing account balances and shrinking lawsuits. And yes, whoever provides the service would be held accountable for the job they do. Isn’t that how it should be?

Tuesday October 21, 2014

Federal Employee Benefits: Roth TSP vs Roth IRA

Roth TSP’s are not Roth IRA’s. They are similar in many regards, but under certain circumstances investors can be caught seriously off guard if they don’t realize that while the Roth TSP may look like a Roth IRA, there are some subtle rule differences. For those in the private sector, substitute Roth 401(k) for Roth TSP – the same rules apply.

The main difference with the pre-tax TSP and Roth TSP plans is the taxation of contributions and withdrawals. Dollars deposited into the pre-tax TSP are just that – before-tax contributions. After-tax dollars are contributed to the Roth TSP. However with the Roth TSP, assuming it’s a qualified distribution (i.e. the five year and post-age 59½ rules are met), all future withdrawals are income-tax free. Having a source of income in retirement that is tax free can be very appealing, particularly for those in a high tax bracket as they look to diversify their retirement income sources.

Another nuance with a Roth TSP is that lifetime Required Minimum Distributions (RMDs) do apply to Roth TSP plans, but they do not apply to Roth IRAs (unless they are inherited). When the owner reaches age 70½, they must take an RMD from the Roth TSP plan each year. Roth TSP plans behave like pre-tax TSP when it comes to taking RMDs; you must satisfy the RMD from each qualified plan.

Having to begin spending down a Roth TSP at age 70 ½, or at a time when the money is not needed, can curtail one’s future cash flow, tax and estate planning. RMDs can be avoided from Roth TSP plans by simply rolling the Roth TSP plan to a Roth IRA before the investor reaches their required beginning date.

But – if you roll over your Roth TSP plan to a Roth IRA, the five-year rule starts all over again. The clock starts ticking from Day 1 that the rollover funds hit the Roth IRA for purposes of meeting the five-year rule. Your time in the Roth TSP plan does not count here. However, if you had contributed to any Roth IRA in a prior year, the five -year period for determining qualified distributions from a Roth IRA takes into account the date you first contributed to any Roth IRA.

So if you are contributing to the Roth TSP (or a Roth 401(k)) the take-away planning item here is to open a Roth IRA at least 5 years prior to your anticipated retirement date. You can usually do this at a Bank or your Credit Union with $500 or less. This lets you avoid the 5-year rule on qualified distributions because the Roth TSP balance that is transferred to the Roth IRA is grandfathered in to the date the Roth IRA was opened.

*What is the Five Year Rule for Roth IRA’s? An investor can withdraw his or her contributions to a Roth IRA at any time without tax or penalty. But, that is not the same case for any earnings or interest that you have earned on your Roth IRA investment. In order to withdraw your earnings from a Roth IRA tax and penalty free, not only must you be over 59 ½ years-old but your initial contributions must also have been made to your Roth IRA five years before the date when you start withdrawing funds. If you did not start contributing in your Roth IRA five years before your withdrawal, your earnings would not be considered a qualified distribution from your Roth IRA because of its violation of the five year rule.

*What Happens If You Violate The Five Year Rule? There are many exceptions that allow you to withdraw earnings from your Roth IRA tax free before you reach the age of 59 ½ such as a first time home purchase, transferred to your estate after death, in the event of a severe disability, and other reasons. But, none of those exemptions save you from having to abide by the five year rule for Roth IRA withdrawals. A withdrawal that is made before the five year time frame is complete will trigger a 10% penalty for an early withdrawal much like it would had you withdrawn the money prior to turning 59½ years-old as well as the requirement to pay taxes on the earnings. This can seriously erode 40% or more of your investment depending on which tax bracket you are in at the time of withdrawal. In some cases, a large enough withdrawal can even put you into a higher tax bracket further penalizing you. The five year rule for Roth IRA withdrawals is not something to be taken lightly as it can have serious repercussions on your earnings if you are penalized.


My Company Website:

Are you Ready to Retire?

Find out with this interactive quiz:

Will you Get the Most From Social Security?

Get Free Social Security Reports here:

Saturday February 8, 2014

Federal Retirees Face Unique Challenges

If you are going to retire from a career with the Federal Government or one of its agencies, there are a great many benefits to be had, as well as some unique challenges.

First off there is the Federal Employee Retirement System (FERS) Pension / Annuity.  Throughout this post I will use Pension and Annuity interchangeably when discussing this FERS lifetime benefit. There is also another category of Federal retiree – those retiring under the the Civil Service Retirement System (CSRS) – that I won’t get into in this entry. With fewer than 15% of employers in the private sector still offering traditional pensions plans, a career with the government shines in this respect.

Health Insurance – the Federal Employee Health Benefits (FEHB) are superior and retirees can continue these throughout retirement if retiring with a minimum number of years’ service.  Once a Federal retiree attains age 65 and Medicare eligible, FEHB becomes their supplemental coverage.

FERS Annuity Supplement – a Federal retiree that leaves prior to the minimum Social Security age of 62 will receive a supplement to their FERS Pension. This is paid until the retiree reaches age 62. The calculation for how the amount paid is derived is more than I will undertake in this short article, but it is an amount approximating the retiree’s age 62 Social Security Benefit amount. If this makes it seem like a federal retiree is being lulled into taking Social Security early at age 62, it’s true. More on this later in the post.

Federal Thrift Savings Plan (TSP) – the government’s version of a 401(k) plan.  The TSP investment choices are all ultra-low cost to own (think index fund or ETF type expenses, but lower). There are just enough funds to provide adequate diversification without overwhelming one with choices. There are also Target Date Funds (their L Funds Series) to make asset allocation even easier. The TSP also offers a Roth TSP option to save on an after-tax basis.  And then there’s the magic G Fund, which is a special government bond fund that does not fluctuate in value, only in the amount of interest it pays. It is the equivalent of a Stable Value Fund, but with a much more attractive interest rate.

Here are some of the unique challenges facing a Federal retiree:

  1. The FERS Pension / Annuity amount payable to a government retiree currently takes the Office of Personnel Management (OPM) between 5-8 months to calculate and begin paying in full.  During the first months of retirement the retiree will be paid somewhere around 50% of the full amount due. This creates an income shortfall in the meantime.
  2.  The FERS Annuity Supplement, for those retiring prior to age 62, takes even longer to calculate and begin receiving, creating more income shortfall.
  3. Dental, Vision, and Long Term Care insurance coverages – These coverages are optional add-ons to a Federal retiree’s FEHB package.  While the retiree waits for their monthly FERS Annuity payment amount to be finalized, they must pay the cost of these coverages out-of-pocket. After the full FERS pension has begun, these costs will be withheld from the monthly annuity payment, just like their FEHB premiums. And you are expected to pay this while getting only about half your projected monthly FERS Annuity payment.
  4. Social Security – for a Federal employee that retires before age 62 and has gotten into the habit of receiving this monthly income via the FERS Annuity Supplement, it’s almost impossible to resist filing for Social Security benefits at 62.  But doing so reduces a recipient’s benefits by 25% for life, versus claiming benefits at Full Retirement Age (FRA) between ages 65 and 67.  This will mean a permanent reduction in Social Security benefits. The difference in total benefits paid over a normal lifespan could be well in excess of $100,000. Who benefits most if Social Security is claimed early? Not the retiree because they’ve just locked into a 25% lifetime pay cut. Choosing the optimal Social Security claiming strategy is a topic in itself, just don’t be lulled into claiming early if it can be avoided. This has even more impact for a married couple as it locks in what the surviving spouse will receive for the remainder of her/his life.
  5. Thrift Savings Plan – A retiring Federal employee may leave the TSP in place, transfer to an IRA, or have    the TSP turned into a lifetime or lifetime with survivor annuity (like the FERS pension). The most compelling reasons to leave at least some of the TSP balance in the Plan are the benefits of non-penalized withdrawals prior to age 59 ½, and the magic G Fund.

The TSP (and private sector 401(k) plans) give participants the ability to withdraw funds before Normal Distribution Age (59 ½) if the participant is at least age 55 at retirement. You can’t do this from an IRA. If retiring before 59 ½ and knowing how long it could be before receiving full FERS Annuity payments and the FERS Supplement, it’s important to have reserve funds to make up the income shortfall and the TSP can provide this.

Even if one chooses to Transfer/Rollover the TSP balance to an IRA Plan (regardless of the investment plan chosen) the G Fund is a compelling place to leave the overall Bond / Fixed Income Allocation for your retirement portfolio. A U.S. Government Bond Fund that can never lose money is a great thing and can’t be found any place else.

So what’s a Fed to do? You’re 50, have 25 years of service, and want to retire in five years at age 55.  Where is the money coming from to make up your monthly income deficit until you start getting paid properly?  A Federal Employee needs to start thinking about this at least 5 years before the Big Day.

A viable option would be to increase your TSP and / or Roth TSP contributions a few years before retirement. Check with the OPM to see what your projected monthly FERS Penion and FERS Supplemental payments should be. Then plan for having to live on about half of the FERS Pension for up to 8 months.  Whatever the amount is of your monthly living expenses that cannot be covered by one half of the FERS Annuity payment is your monthly shortfall.

Do these rough calculations:

  1. (Projected Monthly Living Expenses) – (one-half Projected Monthly FERS Annuity payment) = Monthly Income Shortfall
  2. (Monthly income shortfall) x (8 months) = Additional amount to save between now and retirement.

Whether you are saving this through the TSP or Roth TSP, do it in the G Fund.  This is the money you will have to live on until your FERS Pension and Supplement get straightened out and you don’t want another Great Correction wiping out half of it right before you need it.

Are YOU Ready to Retire? Find out with this interactive quiz:

Will YOU Get the Most From Social Security? Get your Social Security Report here:

My Company Website: