Micah Shilanski (00:00)
Welcome to the Plan Your Federal Retirement Podcast. I’m your host, Michael Shilanski, and today we’re going to be getting in, especially because this great time of year that we have, the details into things you need to be looking at before Magic 1231 date comes around. So in order to join me as we get in this conversation about these really important planning tips, we invited back another advisor who works on our team, John Raleigh. John, thanks for joining us today,

John Raleigh (00:24)
Micah thanks for having me.

Micah Shilanski (00:25)
Well, you we were kind of talking pregame about this as we were kind of thinking about the dates, you know, and saying December. And I know I liked your joke. We should add Santa Claus hats on. That would have been a little bit more appropriate. So sorry, guys, we didn’t plan for that one. ⁓ But we do have some good news. There’s we’re planners. We like forecasting. We like a looking thing out. We like numbers. I get it. And that’s not everybody’s jam, but that’s definitely our jam. And one of the things that we love about this and John, push back on me if you disagree, is I love seeing the impact that can be made

when we see problems coming in advance.

John Raleigh (00:58)
There’s no doubt. I even go back simpler, my mind thinking about it, Micah I mean, not pushing back at you, but agreeing with you. I remember as a kid, I used to always read the rules in games that we played. And the reason being was my brother, Tom, would cheat to win all the time and I could beat him if I knew the rules. I couldn’t beat him if I didn’t know the rules because he would figure out a way to work around it. We know the rules now. I mean, that’s one of the beautiful.

things and we’ll have experience for these rules coming toward year end. it’s, I mean, there’s a lot of great things that can happen.

Micah Shilanski (01:33)
Now, one of the things that happens is, I make this joke before, right? A client asked me years ago, it says, Micah I mean, your clients are pretty much the same age, they’re going through the same experiences, they’re coming at, they gotta be asking pretty much the same questions. I was like, yeah, there’s slight differences, but they’re really similar questions. He’s like, don’t you ever get bored of it? Meeting seven, eight people a day just answering the same questions again? I said, Bob, absolutely not, because my answers change. Now, that’s not like a flippant response. And the reason I say that though, is because the rules change, right?

And John, I love your perspective is now we have the updated rules. Now we know what the tax law is going to be with the one big, beautiful bill act that’s in place. Great. Now we’ve had a couple of months under a belt to read it, to understand how it’s going to work. And we can do things going forward to make sure we’re minimizing taxes. We can do things and really understand what impact we can have working with people to make sure they’re on track for retirement.

John Raleigh (02:25)
It’s so powerful to be able to know that and feel that. mean, in other words, you’re able to then sit there and say, I can make a big difference. Or when we look back, we can say, look at the differences been made

Micah Shilanski (02:34)
So let’s kind of jump into some of the things that we should do. Now, one of the things, let’s talk about this one big, beautiful bill act that’s out there. There is a lot of things inside of that. I know federal employees were really concerned on all the changes that would affect your benefits. Great news, there was no changes that really affected your benefits. That’s great. But there are some tax law changes that are out there we need to be thinking about. I know for years we’ve kind of moved off of itemized deductions to standard deductions because

with the TCJA Tax Cuts and Job Act and went back in 2018, it really raised that standard deduction. So most people weren’t itemizing anymore. That means we quit paying attention to giving money to charity. But John, now that’s changed. And even if you have a standard deduction, you can still donate to charity and get a little extra credit, a little extra tax write off for that. Is that correct?

John Raleigh (03:20)
Yeah, no, that’s definitely correct. And it’s wonderful that they left this in there because I know the charities need the money with everything that’s going on and being able to understand the difference, how you’re able to take advantage of the difference can make a significant difference, not only to the charity, but into your tax situation.

Micah Shilanski (03:37)
Yeah, 100%. So right now it’s about an extra thousand dollars a person. So a thousand bucks if you’re single, 2,000 if you’re married, finally joined. That if you have those receipts, you’ve given cash to charity, et cetera, you’re able to deduct that in addition to your standard deduction. So why do I bring this up? It’s still December. You can still make those charitable contributions as well. Now downside on charitable contributions for our high income earners, unfortunately, one of the things that they have done is they’ve also put a, if you’re

itemizing your deductions in 2026 or after they put a little bit of a floor before you can start itemizing your deductions for charities. So that’s something to be thinking about going forward. John, I know as you and I are working with our clients, some of those higher income earners, we’re encouraging them to accelerate those charitable contributions to this year because they’re worth more, because you don’t have that floor that you got to get over in order to start deducting them in 2026 and beyond.

John Raleigh (04:35)
It makes a huge difference, not only a short term for you, but for the charity because that acceleration is money available then for them to be able to do the things that they’re able to do. So it works both ways. It actually gives a really nice provision in there.

Micah Shilanski (04:48)
John, I’m make a little bit of a left turn here, but talking to Sherri’s, know you and I are really passionate about this. If there’s money left over, how do we make the world a better place? When we have our estate planning conversation with the clients, there’s three documents everyone has to have, a will, a healthcare directive, a durable power attorney. We might talk about a trust, we might talk about an LLC, some other things, but those are the three that you have to have. One of the things I’m bringing up more and more with my clients is saying, hey, every penny goes to your spouse, you got your kids taken care of, but if there’s a

dollar left over and you can make the world a better place, where would you want that money to go? And maybe we should be thinking about in our estate documents, like how do we leave some money to a charity? just for the same things that you’re saying, they need the money, they do good work, how do we help cascade that even after our death?

John Raleigh (05:35)
when there is a different level to if you have vision, the IRS is your biggest charity then. so. So, I mean, you’re giving away money to somebody. Correct. If you don’t, if you don’t handle it properly, you might as well have it go to who you want it to go to. mean, that’s that makes total sense to me. And I know a majority of people I talk to.

Micah Shilanski (05:37)
Go for it.

Yeah, and there’s some advanced, you know, we don’t have time to jump into that today. That may be a future podcast. There’s some advanced planning strategies that we could talk about and kind of implement with clients that really help mitigate taxes to your heirs. so, leave tax-free money to them, which is fabulous, and give all your taxable money, that dirty money that the IRS wants to take almost 40 % of, and you can give that to a charity and make it tax-free. And so, really, the IRS is getting defunded, right? And we’re allowing more of our money to go where we want it to versus the IRS is the charity.

I get all excited to talk about this stuff.

John Raleigh (06:25)
just

learned it from a different area, not from you.

Micah Shilanski (06:28)
Yeah, fair enough. Fund it from a different area, not from you. Correct. Only control what we can control. Fair enough. All right. So we got to be looking at those charitable contributions for this year. For our clients with those RMDs, required minimum distributions, et cetera, looking at those QCDs, qualified charitable distribution accounts, right? Those are still great things to use that was not negatively affected in the one big, beautiful bill. In fact, they’re a little bit better in my opinion, because there’s no four with those. They’re great deduction vehicles that are there. Another thing that we’re kind of looking for is just that future tax planning.

Now that we know what the tax laws are, quote, I’m to say permanent in my air quotes, right? Permanent just means until Congress decides to change it again. But now we’ve got this longer runway on taxes, we can be a little bit more precise on what do we want to make Roth conversions? Do we want to blend our distributions from IRAs and Roth IRAs to help control our taxes? There’s some neat strategies we should be thinking about and getting ready to implement in 2026. Did you know that OPM has over a 20 % error rate when processing retirement applications?

Now, I’m not trying to throw them under the bus at all. There’s a lot of moving parts that come into retirement from your records to what your HR has, what gets sent to OPM, and all of the process in between. But what I hate to see happen is when federal employees get caught up in little things that could have been avoided. And that’s why we created a free guide to help guide you through one of the biggest mistakes we see in calculating retirement pension. And that is figuring out what your RSCD is, your retirement service computation date.

Now, I think this is such a big area that that causes so much confusion because it seems so simple. It’s like a when did I start working for the government and when am I going to retire? And boom, you have how long I’ve worked for the government. If only it was that simple. There’s so many moving pieces to this. You need to know how much time you have that counts towards retirement. More importantly, you need to know how to check to make sure your HR, your agency OPM has that same information so you get the most out of your benefits.

In order to figure out how to do that, gonna download our free guide today at planyourfederalretirement.com slash verifyrscd. That again is planyourfederalretirement.com / verifyrscd. That way you can get the facts about how to calculate your RSCD for retirement and avoid one of the biggest mistakes that hamper federal employees retirement. Till next time, happy planning.

John Raleigh (08:55)
There’s no doubt. There’s so many pieces in this bill that if you fit within those guidelines of the tax brackets, that you can take advantage of. And sadly, the codes are, and Micah, you know this as well. mean, we’ve talked about it for years. The IRS codes are designed for the people that want to push things off for as long as possible and not to pay then to come. Because those are the people that are going to pay the most amount of taxes. The people that understand the codes, the people that pay attention to the codes and are proactive with the codes.

We’re not the people that the IRS like because we are using the rules to our advantage, not to the IRS’s advantage, because they know the majority of people are going to say, I’ll worry about that next year. I’ll worry about that some other time.

Micah Shilanski (09:35)
That’s the trap of defer, defer, defer, defer, right? You’re going to defer, defer, defer your income for the future and it sounds great today, but eventually you got to pay the piper. And sometimes it’s better to have the devil we know versus the devil we don’t know. Or maybe we mix that back a little bit and we do a little bit of both, right? But John, to your point, we got to be really cognizant about those things.

John Raleigh (09:55)
leaving your options open. That’s the key. Making sure you’re nimble and flexible because what happens with the next administration or the following administration or whatever and the changes that they want to make, how much flexibility do you have in your plan to be able to make the adjustments that you’re not paying more? Unless you want to pay more. And I’ve had one client say that he didn’t mind paying taxes. Other than that, the majority of them

Micah Shilanski (10:17)
And you are welcome to pay more in taxes. In fact, there’s a voluntary section that you can put. It counts as a charitable contribution. You actually get a deduction for it. You can pay more in taxes if you like to. The IRS ⁓ has never not taken money to my understanding. They will take your money in a heartbeat. Now, John, I want to talk a little bit about that diversification, right? Because we talk about diversification with investments all the time. And what you were hinting at, which I love, is tax diversification, right? We have assets spread in different tax categories so that when we need to, we can pull these different levelers in retirement and control our taxes.

So they give a great example of this. Several years ago with a couple of clients, we were doing Roth conversions. Now their income is like, hey, I’m going to a Roth conversion now. And in the future, I’m going to be in the same tax bracket. Like what’s the point of the Roth conversion? Cause if I’m in the same tax bracket in the future, there’s really no difference, right? And paying taxes now, paying tax in the future. was like, that’s a great point. Why do I want to do it now? Well, I want to have options in the future because when they change the tax law, not if, when they change the tax law, if I have a few more tools at my disposal,

we can do some better tax planning opportunity. Now, that’s what we’ve been doing for years. And they were like so, so on the Roth conversions. Because again, they’re always going to be in that because their pension incomes relatively the same tax bracket. Low and behold, the One Big Beautiful Bill Act comes in and what does it do? It gives seniors between 2025 and 2028 an extra bonus deduction. However, that bonus deduction, that extra $6,000 in change per person, that gets phased out based on your income.

So this particular client was in that phase out zone and they weren’t going to get these deductions. This is guys, great news. You remember those Roth IRAs that we were converting money into in the past and we didn’t know how we’re going to use them. Now we’re going to use them. We’re now going to blend the clients distributions a little bit from taxable, a little bit from tax free. They’re now going to come underneath that phase out limit and they’re going to get this extra $6,000 deduction per person, $12,000 for each of them for the next three, four years. Right? Well, this is fantastic, right? That’s an extra $50,000 of deductions.

reductions over the next four years they’re gonna get because we did Roth planning in the past. Now again, I didn’t know this was coming, right? Believe it or not, President Trump does not text me and ask me what I should think should be in the bill or not, right? So I don’t have any influence on these things, but what we know is the more we’re diversified, the more tools we have in our tool bag, when the opportunity comes, we get to take advantage of it.

John Raleigh (12:37)
The tax could cycle through themselves. I mean, I’m looking at when you’re just speaking, I was back in the mid-80s where the tax brackets were extremely high and there were deductions. You could deduct if you bought a boat, a plane, racehorses, all those sort of things to offset the amount of taxes you were paying back then. So this is no different. This is giving you an opportunity to be able to take advantage of pieces right now. And we know where the window is anyhow. We know it will close till three years from now and like that for a lot of these.

So taking advantage of now, putting yourself in a better position. you go like you said, and you said pulling levers, I’ve always said it’s turning faucets on and off. We have all these faucets up, right? You turn them up full blast or we could shut them back off to be able to control where all this money’s coming from so that you can live the lifestyle you want, but have the taxes as low as we can possibly make them. And that’s, to me, it makes total sense.

Micah Shilanski (13:30)
Yeah, 100%. So an action item for our listeners out there is, look at it this year. What are your taxes going to be? Great news, we did this in October, November with all of our clients. Projection as to where their taxes are going to be. What changes should we make this year? And what do we need to be on docket to change for 2026 and beyond to make sure we’re minimizing taxes? Now that we have semi-permanent tax code, awesome, we get a plan for more than three years in advance. So I really like that.

John Raleigh (13:54)
The fact that you have three years also is a great advantage too, because it’s not like you have to pull a bandaid off right this second and deal with the consequences afterwards. The fact that we have three years to be able to work adjusted to is perfect because it says maybe we can do more now or maybe we’d turn it off a little bit in that right now because of taking advantage of maybe next year or the

Micah Shilanski (14:14)
Just this morning, actually, I was talking to a client because they had a large inheritance and they were going to take more money out at once. But now because they’re over 65, we’re not going to stretch that distribution out for four years so we can get that senior bonus deduction in year five. We’re going to take a larger amount out because in the end, they just save more in taxes that way. So all of these levers, faucets, et cetera, these things are all connected at the end of the day. And you really got to look at them and say how to use them best to your advantage.

John, let’s make a little bit of a turn in the conversation, talk a little bit on health insurance, right? It is open season. Now, I know most of our listeners will not make a change in their health insurance because most federal employees don’t make a change in health insurance during open season, but I like to bring it up so you know what’s happening. And this is an important thing when it comes to Medicare as well. So I wanna speak really quickly to our dual or our tandem federal employees, both husband and wife are federal employees.

Now, most of the time when that happens, one of them has a family plan and then generally when the kids move out of the house, they just keep the family plan. They don’t move it to a self plus one or they do that or they have two self-onlies. For the ones that have the two self-onlies or the self plus one, I always like the younger spouse, whichever one is going to retire later to move the health insurance in their name. Why? Because while we’re working, that health insurance comes out pre-tax, right? When we’re retired, it comes out.

after tax. Now you got to pay taxes on this health insurance money. So might as well get a tax deduction if you can. What does that have to with open season? I really prefer to make any changes to health insurance during your open season time period because the government is set up to handle it. If you do a change of life event and you process it, it is more painful. I’ve had a couple of clients not heed my advice and do it early. They were like, nope, we’re going to wait until the change of life event just so that way we don’t have to make any changes until this time.

They wait till the change of life event two months later when they’re still dealing with this, they’re like, Micah, we should have done it in open season. Like, yep, that’s okay though. You didn’t. This is how we’re gonna deal with it. So you can choose to which camp you wanna be in and listening or not listening, but I highly recommend before retirement, the open season before you retire is when you wanna make these shifts. And you guys know this as federal employees, there’s a theory on how things work and then there’s reality and the change of life events don’t always go as smooth as we would like them to go.

John Raleigh (16:30)
just like anything else this year, Oakland, they’re not supposed to, unfortunately.

Micah Shilanski (16:34)
So that’s something to be thinking about. How much are you going to pay for health insurance? What’s going to be covered? Where does Medicare fit into this mix as well? These are things that we should be thinking about for 2025, especially during open season. John, let’s make another little turn in this, if you don’t mind. And let’s talk about our plans for 2026. What are some things our listeners should be thinking about now getting set up for next year to make 2026 really successful?

John Raleigh (16:57)
It depends on where you’re at in your career and how you’re going, but are you maxing out your retirement benefits if that’s case? And you’re using all the pieces that are there. It’s very easy to get distracted and pay attention to other things, especially when you’re getting to the point where you’re looking at transitioning or possibly transitioning. If you’re newer in your career, are you taking advantage of all the benefits? I federal employees have such great benefits. Why not take advantage of those pieces that are there for you? And lighten the way.

If you have a spouse, you’ve got children, you’ve got all that stuff going on. It’s very easy just to say, I’m not going to work out till later, or I don’t want to think about it or whatever till something happens. So looking forward, you can sit there and we can’t we don’t know everything that’s in front of us, but we sure can have an idea of how we would like things to be and and what sort of nimbleness that we need to have if something comes up and how do we prepare for it. And that’s where I think the strength is at this point between now and the beginning of the

Just making sure everything is set so that you benefit the best from what you have available to you.

Micah Shilanski (18:02)
I love it. And let’s talk about some of great benefits you have. Let’s say you’re in that retirement age, just we’re doing 60 and 63. Remember, there’s that special catch up you have for your TSP account. You can put in, if you’re between 60 and 63, $35,750 a year in 2026 into your retirement accounts. That’s a lot of money. That’s just the TSP, right? If there’s two of you, you can double that. Plus you could have IRA or Roth IRA contributions in addition to that.

It’s a lot of money we can be socking away. Now, one of the things that I love about socking money away in the TSP, especially right before retirement, like John, I’ll get this question from time to time. Micah, does it really matter if I save more in my TSP six months before I retire, a year before I retire, two years before I retire? Is it really gonna grow that much? That’s a great question, but I think it’s the wrong question. What I love about saving more money in the TSP is it doesn’t go to your checkbook.

Right? That money’s gone. It money’s in the TSP. That means it’s not in your checking account and you don’t spend it. So right before retirement, John, I really love using that TSP money to make sure you’re getting down to living on your retirement spending. And it’s a great forced way to do it.

John Raleigh (19:18)
it gives you a great opportunity because if you think about the philosophy, and I know everybody that’s been listening to us for a long period of time here know this, timeframes there and saving money now, that money going in isn’t necessarily going to be used over the next five years. If we sat down and just did a quick calculation of what $10,000 is really worth 10 years from now, it’s a lot more than $10,000. And you’re making a much better decision even in your mind, you’re not. You’re just sitting there thinking, well,

I’ll just take that money and like you said, spend it or do whatever. And getting used to that transition or getting used to spending where you’re going to be at retirement will make you lucky.

Micah Shilanski (19:55)
Now, in order to do what John’s talking about, we got to talk about TSP allocations. Now, of course, this is a generic podcast. We’re talking to a lot of people, thousands of people on this. So this is not a recommendation. It is an idea to consider and then talk with your financial professional if this is a good idea for you or not. But John, with a lot of my clients, when we’re doing just that, we’re saving that extra money into the TSP. Number one, it lowers their cashflow, which I love it. And number two, this is a 10-year decision. Okay, let’s go back to our first rule of investments.

any money that you want to spend in the next five years doesn’t belong in the stock market. We know why. 2008, 2009, 2010, 2012. took five years to recover there about. If I’m putting money in there and I want it to grow in the next 10 years, which is a good thing to do, that probably means I should not be allocating to the GRF fund. That means I should probably be thinking about the CSRI. Now, you’ve got to say your risk tolerance. Let’s put all these great disclosures right here. Everyone is going to be different, but it’s something I’d want to have a conversation about.

So just because you’re retiring this next year, John, I love that point you said, that doesn’t mean you’re gonna spend all the money in your TSP next year. Or I hope it means you’re not gonna spend all the money in your TSP this next year. So we gotta allocate it. And you’re about to make this huge change in your life going from working to retired, which is an amazing change, but you gotta have a good plan to walk down that road.

John Raleigh (21:13)
The power of making those decisions and putting them in perspective of where they are going to affect your life is so key. And people just seem to think it’s one and done. I’m done with it. I thought about it. It’s over, you know, and it’s not the case. mean, unless you died tomorrow, then it was over.

Micah Shilanski (21:29)
On that note, the other thing we’ve got to be thinking about too is getting into what that investment plan is going to be in 2026. We need a really good one. We need one that’s not emotional. We need one that doesn’t move up and down as much as the markets do. We need a dispassionate way of looking at your retirement funds and saying, how much can you safely withdraw and never outlive your money, yet have that money grow to outpace inflation, yet not have that money grow so much?

you deprived your life of experiences that you need to have. So these are three major things that we need to hold hand in hand while you’re building that retirement plan and especially that investment plan.

John Raleigh (22:10)
And emotions are so key. I know, Micah, you’ve heard this before. ⁓ I had a business coach once say that anytime there’s chaos going on out there, there’s opportunities and there’s obstacles. And you choose what you want to pay attention to. People that hate the current administration can sit there and say, there’s obstacles all over. I don’t want any part of it. People that love them, they could firework. It doesn’t matter, but there’s obstacles and opportunities. How do you take advantage of what’s going out there for you in your situation? And that’s

what this sort of strategy puts together for. It takes away the emotion. takes away it. It’s a real solid plan. And for us old people, you used to go to AAA and get this thing called a trip text that you would just turn over the page. And it was the map by map by map of where you were traveling to. That’s what the planning is. I mean, that’s what we do. And if there’s a traffic jam or whatever, you’re able to make the adjustment based on the information that you have.

Micah Shilanski (23:02)
Yeah. If we go back to earlier this year, the tariff concerns, and in that March time period, April time period, the market plummeted pretty quick in a couple of days. It was down a little bit for about a month, and then all of sudden, think, don’t quote me on this, it was the end of March, beginning of April, somewhere in there, it really dropped. Now, the people that were super concerned about this and going to cash, that means we were making an emotional decision. The ones that said, we’ve been through this before, and I got to people get frustrated with me when I say this.

Micah, it’s different, it’s self-induced. Micah, it’s different because of this. Micah, it’s different because of this. Okay, great, you’re correct. It is different, but it’s the same. And what I mean by this is we always are gonna have these opportunities or obstacles that are gonna come up. Now, the cause could be different. That’s fair, the cause is different, but we had COVID before this. We had an international issue between that, right? Every couple of years, there’s a 30 % decline in the markets. That’s just nothing new, right? There’s always a why as to there.

but it’s very common for these things to take place. So John, I love what you’re talking about. When this happens, not if, when this happens, what is your opportunity? What are things you’re gonna do to take advantage of it?

John Raleigh (24:10)
And also the emotions horrible too, because I mean, I remember when a hundred points swing in the market was devastating. And now a thousand points swing feels like it’s getting normal, but it’s still a thousand points. And you sit there and say, this is the end of the world. mean, so, so times changed. Unfortunately, we, tend to go back to what we were comfortable with and that that’s sort of what you’re talking about.

Micah Shilanski (24:32)
100%. So this podcast is all about action items and taking action in your retirement. So what does that mean for you? Look at your plan for this year. Say, hey, what changes do I need to make in 2025? Here’s our selfish plug. If you don’t know what those are and you need help, pick up the phone, give us a call. If you have someone else you’re working with and they haven’t brought this up, you need to call them. Ask them why they haven’t brought this up and what are things you need to do. If you’re making your own plan, get a dedicated time

out of the house where you can go somewhere, sit down, cause you’re in the house, you’re going to be distracted by 50 other things, dedicate time where you can step out outside of the house and walk through your plan and say, Hey, what are things that I need to be doing? Cause at the end of the day, it’s your money and we don’t want you overpaying the IRS just cause we got busy with other things and you got to make sure you’re set up for retirement. John, what other action items should our listeners be thinking about?

John Raleigh (25:20)
If

you are getting away and putting the time away, understand there’s changes that have been made in the code and understand the codes and your deductions and like that. And is there opportunities there in this planning process now or looking forward for next year and the following year to make sure you’re doing the best you can for yourself and your family? There’s a little adage, if you don’t make a decision, you’re making a decision. Make a decision. Okay. Well, that’s the biggest thing I want to add. Look at it and make a decision. It’ll work out.

for your advantage over time for sure

Micah Shilanski (25:52)
I love it. Well, this podcast all about taking action, so make sure you do those things. Our goal is to help another 1 million federal employees with retirement, and we cannot do that without your help. So please send this information out. As always, take action, implement this thing. It’ll be life-changing for you. Until next time, happy planning. Thanks for listening to another episode at Plan Your Federal Retirement. We’re on a mission here to help one million federal employees understand their benefits more. But first,

Understand that the opinions voiced in Plan Your Federal Retirement are for general information only and are not intended to provide specific advice or recommendations for any individual. Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk, including possible loss of principle. No strategy assures success or protects against loss.

To determine what may be appropriate for you, consult with your attorney, accountant, financial, or tax advisor prior to investing. Guests on Plan Your Federal Retirement are not affiliated with CWMLLC. Investment Advisory Services offered through CWMLLC and SEC Registered Investment Advisor. Until next time, happy planning.