Do you need a 35-year retirement plan?

One of the more useful tools in your retirement planning kit may the obituary section of your local newspaper.

In the obits in the D.C. area. it is not unusual to see several short bios each day of former feds with fascinating jobs. Many of them did good things, quietly and for a long time. Often their neighbors didn’t know what they had accomplished and how they were involved. This includes everyone from scientists to spies and occupations in between.

Michael CapolinoLongevity, in most cases, is a good thing if you have your health and don’t outlive your financial resources. Thanks to their Civil Service Retirement System and Federal Employees Retirement System annuities, most federal-postal workers are in good shape compared to many of their private sector counterparts. The latter either don’t have guaranteed pensions, or, if they do, don’t have any inflation protection — no cost of living adjustments, ever.

Wednesday’s column was about the long-term “safety” of the G fund where most federal investors have most of their money. A lot of people commented including Bill Morell, who is two-years from retiring. Here’s his short-range plan for — he hopes — a long and healthy retirement:

“I have major health issues and I am hanging in here until I reach my full Social Security age of 66. I am a federal employee at age 64 and plan to retire on my 66th birthday. I plan to collect my FERS annuity, full Social Security, and take Thrift Savings Plan payments based on my life expectancy at the IRS required minimum withdrawals established by the IRS Life Expectancy Tables immediately.

“My retirement and financial plan will support my wife and I for 35 years, considering and estimating inflation and taxes and all existing short term debt. Our lifestyle changes have been ongoing and will continue based on our health and the economy.

“I had my TSP in both the G and C funds before and after the March 2009 crash. I immediately stopped putting money in the C Fund — a mistake at the time — and went 100 percent into the G Fund and increased my deposits to maximum to date. I did not move my C Funds to the G Fund until later after recovery. I waited until the C Fund recouped its share price of its highest point before the March 2009 S&P crash of about 43 percent to my C Fund, and then I moved 100 percent to the G Fund where I am till this day.

“In hindsight — on the worst day in March 2009 the G Fund share price was higher than the C Fund Share Price, and was the opportune time for everyone to move a good portion of their G Funds into the C Fund, but fear and distrust overrode common sense to a lot of us. Why did I take the above action? I thought it would be a decade before the market recovered and years after I planned to retire. [I heard] horror stories of those retired folks collecting payments, partially or fully in the stock funds who ended up taking minimum wage jobs to survive.

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“This taught me to not have more money in the TSP stock or bond funds than I can afford to lose. It taught me to keep enough money in the G Fund to live for at least 30 years after retirement. Anything over that security fund, can then be invested by transferring the excess money from the G Fund into the C and S funds on a buy low sell high rational and transferred back to the G Fund should I run short or another collapse occurs. Obviously, now is not the time to put or transfer funds into the stock funds since the price is high.

“My guess is that most people who are 100 percent in the G Fund are retirees who need guaranteed income from the TSP to survive for decades to come. If I was a young employee and based on the market situation now, I would have all my principle in the G Fund and only put into the G Fund right now until the next crash, and then move it to the C Fund and maybe some in the S Fund. But I would not move any into the I Fund or Lifecycle funds.

“Consider your principle as what you deposit and the U.S. matches, and the interest to invest in the stock market until five years before retirement and then analyze how much you need to survive for 30 years in retirement and leave the rest in the C Fund. Check your situation annually to make appropriate adjustments and not listen to the media noise from certified financial planners who may lead you in a direction of paying high cost fees and taking unnecessary risks in other plans such as annuities, life insurance, and high risk stocks options.

“As Warren Buffett would tell most average investors stick with the indexes based on the S&P and you will be fine in those early years. My feeling is to stay away from the F, I, and L funds completely and stay with the G, C, and S funds.”

Nearly Useless Factoid

By Amelia Brust

Each airplane in the U.S. commercial fleet is struck by lightning an estimated once a year at least, but the last known commercial plane crash attributed to lightning was in 1967. They are designed so that, initially, the lightning hits an extremity such as the nose or wing tip. The current travels through the plane’s conductive exterior and exits off another extremity, such as the tail.

Source: Scientific American