Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Why Your Retirement Spending Estimates Are Probably Wrong

This week, I thought it would be interesting to conduct a roundtable interview with five financial planners who work with federal employees. I spoke with Diana Davis from Money Concepts; Karen P. Schaeffer with KarenSchaeffer Financial, LLC; Micah Shilanski at Shilanski & Associates Inc.; Kristina E. M. Sturgis, with Valenstein & Patterson; and Joe Sullender with the Financial Strategies Group of Wells Fargo Advisors.  

How do you plan for retirement in a volatile market? 

Sturgis: As we are several years into a bull market, we frequently recommend that clients approaching retirement with significant wealth in their TSP consider two allocations: a more conservative one for the wealth they have already built, and another allocation for future contributions, which takes advantage of the market roller coaster. This allows them to not only reduce loss during market declines, but to have a place to draw from to buy into a correction at attractive prices.

Shilanski: A basic rule of thumb is not having any money you are going to spend in the next 5 years in the market, and this would go for the TSP as well. 

Sullender: You have to first evaluate your need for the funds. Today is no different than yesterday...

Who Can You Trust?

The Thrift Savings Plan recently sent a brochure to agencies offering guidance for choosing vendors for financial planning events.

But federal employees face a similar challenge—finding qualified financial advisors who act in a worker’s best interest as they consider what to do with the TSP after retirement and how to manage the TSP in a volatile market. Federal employees have done a great job of saving a portion of their salary in the TSP, but now that many are approaching retirement, they aren’t always certain about how to handle their savings.  There are many resources available. It might be tempting to hire someone to take over the management of your retirement savings, but you need to be able to distinguish fact from fiction and reliable information from scams. 

Lesson No. 1: If you are going to hire someone to assist you with your financial planning for retirement, it is important to hire someone who is both qualified and who will look out for what is in your best interest, not their best interest. This is called a “fiduciary” responsibility. 

There is a clearinghouse of information at that can help you learn more about investing...

Be Ready for the Long Term

A few weeks ago, I shared a “Dear Kids” letter from a father to his adult children about the importance of planning for retirement. As I was thinking about that letter, I realized it’s also a good idea to let your family know how you’re preparing for long term care if you reach the point where you can no longer live independently. In my family we have dealt with long term care issues for my dad, who passed away in 1998, and my husband’s mom, who we lost more recently. My mom and my husband’s dad both passed away more suddenly and did not need long term care, so the way I see it, our odds are 50-50 that my husband and I may someday need such care. To help readers weigh the issues, I decided to share a letter I wrote to my own adult children to let them know the steps we've taken to prepare for whatever may come. 

Dear Kids,

As you know, I spend a lot of my time helping other people prepare for retirement. As I was thinking about this, it seemed a good time to let you know about...

Beware of Hucksters

I’ve conducted a lot of retirement planning seminars over the course of my career. I’ve taught at least 3,000 federal employees the basics about their benefits in the past year -- over 100,000 during my career. There aren’t very many of us who conduct such classes for federal employees, so it’s not surprising that thousands miss out on agency-sponsored pre-retirement planning classes. 

There are many good reasons to attend an agency-sponsored seminar. First, there’s access to seasoned professionals and the materials they bring, with no sales pitch. There also are opportunities to ask questions—and to learn from answers to colleagues’ questions. Perhaps most important, such sessions give employees some needed time and space to focus on retirement planning.

Consider these retirement statistics:

  • From 2005 to 2014, 275,059 employees retired from the Federal Employees Retirement System (average age: 60.6 years; average length of service: 28.2 years).
  • During the same period, 331,973 employees retired under the Civil Service Retirement System (average age: 59.8 years; average length of service: 33.8 years).

Although the vast majority of retirees were covered under CSRS or FERS, there are a few other retirement plans...

Risk and Retirement: Managing Your TSP Investment

A new law requires the Thrift Savings Plan to invest the automatic contributions of recently hired federal employees into an age-appropriate lifecycle fund.  Eric Katz outlined  this change to the TSP under the Smart Savings Act, which President Obama signed into law in December 2014. The G Fund previously was the default option for the TSP.  Besides new employees, the switch also will affect new survivor annuitants and re-hired federal employees who have a zero balance in their TSP account. 

How is a participant’s default L Fund determined?

According to TSP Bulletin 15-2, the L Fund selection for each participant will be based on a projected retirement age of 62. For example, the age-appropriate default investment fund for someone born between 1973 and 1982 would be L2040, since they would be expected to begin drawing on their TSP funds between 2035 and 2044.

In last week’s column on 12 practical tips for a successful retirement, I urged readers to consider their tolerance for risk. Participants subject to the new default investment rules will receive a letter from the TSP that includes such risk information as required by the Smart Savings Act. 

The TSP spells out the investment risks...