Tighten belt before you retire

When they eventually retire after a long, long career, most federal and postal workers are financially comfortable. Especially those who invested regularly and wisely in the Thrift Savings Plan. A growing number of longtime investors have seen their account values go over the $1 million mark. As of last August, there were 46,088 with accounts worth between $500,000 and $999,999. With the upward mobility of the market, the number of millionaires and near-millionaire TSP investors has increased dramatically.

But launching oneself into retirement can be problematic. At first …

In the first few months after retirement, some people get a major financial jolt that can force them to dip into their TSP account long before they had planned. Until their final annuity is figured out and approved the vast majority get an “interim” payment which can be a lot less than they deserve. Or can live on.

A huge number of federal workers are eligible to retire right now. That doesn’t mean they are going to leave. But they could. And while there is still no sign of the long-predicted Retirement Tidal Wave, the number of people applying for retirement is creeping up. And that could have a major impact on how long you will be getting an interim payment when you retire. Around 14,500 feds put in for retirement in January and other 13,000 applied last month. The backlog in processing claims at the Office of Personnel Management hit 24,000. Do the math.

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The average time for processing a claim now is between 61 and 64 days. That means some are done faster than that. And some are not. If you’ve worked for a number of federal agencies over your career, or had a break or breaks in service, it means you have a long paper trail that must be tracked and verified before you can be approve for a full annuity payment.

It is one thing to save for retirement. It is another to save for the immediate period after retirement (the first two to four months) when your income drops dramatically.

Think TSP: For people under the FERS program, investments and earnings in their TSP accounts will provide anywhere from one-third to one-half the money they have to spend in retirement. For the last nine years those in the stock-indexed C and S funds have enjoyed a bull market. But all good things must come to an end. Do you have a plan for riding out (or maybe even profiting from) the next, long overdue bear market downturn?

Whether you do or not check out Wednesday’s Your Turn radio show. My guest is financial planner Arthur Stein, who has special advice for feds nearing retirement. You can listen live 10 a.m. EDT at Federal News Radio or at 1500 AM in the Washington area.

If you have questions for Art Stein email them to me, before airtime, at mcausey@federalnewsradio.com.

Nearly Useless Factoid

By Michael O’Connell

Elisabeth Windisch of Germany created the world’s largest gummy candy on Feb. 3, 2014. The candy weighed 1,128 pounds, 12 ounces, and took six days to set in cold storage.

Source: Wikipedia