The virus-driven stock market crash has hammered the TSP accounts of hundreds of thousands of feds, many of whom had planned to retire this year. Until, that is, coronavirus became a household word almost overnight! Now all bets are off.
Some potential retirees won’t have to tap their federal 401k plan for many years. They can live comfortably off their monthly civil service annuity. And as health premiums, and needs, increase over the years, the government will continue to pay the lion’s share. About 71% of their total premium now and in the future. But that isn’t most would-be retirees.
Many who planned to put in their papers this year will need draw on their accounts as soon as they retire. For good reason: because they will need the money to keep eating and covering their bills and expenses. But now, thanks to the end of the record 11-year bull market, many simply won’t have as much income in retirement as they planned because of their stock-market linked TSP accounts.
Workers under the older Civil Service Retirement System (CSRS), with its more generous annuity funded in part by higher employee contributions and annual inflation-indexed cost of living adjustments, are more likely to leave on schedule. With a good, steady stream of income.
Many can live comfortably on their federal annuity while giving their stock-indexed TSP funds time to recover. But for the majority of retirement eligible federal and postal workers, that’s not an option. At least not if they want to maintain a decent standard of living in retirement.
The reason? Many, if not most, of the feds eligible to retire are not under the CSRS program. They are under the very different Federal Employees Retirement System (FERS). Under the 3-legged retirement system, income from the TSP was projected to provide anywhere from one-third to as much as one-half of the income FERS retirees have. The other two sources were the civil service itself, which is much smaller than the CSRS annuity, and Social Security.
Hundreds of thousands of feds faced the same situation in 2008 when the market collapsed. Many moved into the safety of the treasury securities G-fund. Many also stopped investing in the stock-indexed C, S and I funds. While they missed out on the big returns of the record bull market many feel vindicated now that the “correction” of more than 30 percent so far has happened.
So should you stay or should you go? That’s what we’re going to talk about today with benefits expert Tammy Flanagan, my guest on our Your Turn radio show. Tammy has been there, done that, and has the answers to some questions you probably didn’t know you had.
For instance if you are going to retire this year, there are questions such as:
- When will I get my first cost of living adjustment?
- Do I get a retirement statement every month?
- What if I move? Change banks?
- What if I have made Voluntary Contributions (CSRS)?
- What if I have excess retirement contributions (CSRS)?
- How do I use OPM Services Online?
- How do I apply for Social Security?
- How do I apply for my TSP withdrawals?
- Can I change my insurance after I retire?
- What if I have questions?
- How do I enroll and pay for Medicare?
If you are under the FERS program and have questions, Tammy has the answers. The show begins at 10 am, EDT today. It will be archived on our home page so you can listen later, or again. Or refer it to a friend. If you have questions send them to me at firstname.lastname@example.org before showtime.
And stay safe!
Nearly Useless Factoid
By Alazar Moges
The weather is shifting warmer for most of us, even though we are all stuck inside. And with spring flowers of course comes spring showers, and of course the occasional thunderstorm. That becomes are reality for a little while, but all around the world at any given moment, there are roughly 2,000 thunderstorms in progress and an estimated 16 million thunderstorms each year.
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