Ep #18: Phase of Retirement – 10 Years Out From Retirement

Full Episode Transcript
With Your Hosts
Micah Shilanski and Tammy Flanagan

You can spend. You can save. What is the right thing to do? Federal benefits, thrifts, savings plans, too. You can save your own way, with help from Micah and Tammy. You can save your own way, save your own way…

Micah Shilanski:  Welcome back to the Plan Your Federal Retirement Podcast. I’m your co-host Micah Shilanski, and with me, as usual, is the wonderful Tammy Flanagan. Hey Tammy, how’s it going?

Tammy Flanagan:        Hey, Micah. I’m doing just fine today. Nice and sunny day here in Florida, and you’re just getting started for your day I’ll bet.

Micah Shilanski:  That’s right. A little bit early up here, but the sun is coming out longer and longer, so we take these beautiful days. And the sunshine up in Alaska, when you start getting, especially into that March time period, is such a pure, beautiful sunlight, especially coming from the dark. So, we really enjoy it and look forward to spring, which comes in June. All right, maybe not that far.

Tammy Flanagan:        Glistening out over all of that snow that you look out over, right?

Micah Shilanski:  That’s right. That’s right. Kind of like glistening out in the future about a possible retirement, right? Is that a smooth-

Tammy Flanagan:        Yes.

Micah Shilanski:  … transition?

Tammy Flanagan:        That’s a good transition to what we’re going to talk about today. I think we’ve got a really good topic as it covers so many bases. It covers a lot of area and I think it’s going to be applicable no matter where you are in your career, even though we’re kind of targeting the person who’s a little farther from retirement today. But I think everyone can get something out of this, because we’re covering all the bases.

Micah Shilanski:  Totally right. And this is one of the things we talk about so often is making sure you’re getting great information and not coming with an assumption that you already know things. Taking a pause, and I really have to make sure I’m doing this whenever I’m learning something, is kind of checking my ego almost. It’d be like, “Now, what do I need to learn? What assumptions do I have that was incorrect?” To make sure I have all the correct information. So Tammy, just, as you said, as we go through this podcast series, and we’re going to use the next several episodes, the first one, today, we’re going to be tackling about people that are with a little bit more than 10 years from retirement. What do they need to focus on?

                           And then for the next episodes, we’re going to be dialing that in as we get closer, closer, not only to retirement, but after retirement, what are the things you need to be focused on to make sure you stay on track for that retirement?

Tammy Flanagan:        Yep. You don’t want to go off track.

Micah Shilanski:  That’s right. That’s right. It gets a little bumpy and a little scary, so all right. So, we’re focusing on 10 years out. Now, the key foundation in federal employees and in retirement, is a pension. And I talk about this all the time. It’s my second favorite thing I like about the federal retirement system. The first thing is, absolutely, the health insurance. I’m just biased, but it’s a great benefit. But your pension is such a foundation for retirement. Tammy, tell us a little bit more about how important that is for retirement planning.

Tammy Flanagan:        Well, I think everyone that’s probably listening to us today is going to be under the FERS retirement system, which is the acronym for the federal employees retirement system. And that is a system that’s based on a government pension. Now I know a lot of people think, well, it’s not as generous as that old civil service system that everybody knows and loves, but to have a pension today in 2021 is just unheard of in many cases. There’s so many jobs, most jobs you take in the private sector, a pension, really? No, no pension. So if you stay in federal service, a minimum of five years, you are what we call vested, that you have ownership of a pension. Even if you don’t stay the rest of your life, you can still have something to show for those years. And the more time you spend in the government and the higher your salary gets, the more generous that pension becomes.

                           And it becomes a very valuable benefit that it’s really kind of hard to replace if you go out into the private sector, mid career. So, I think one of the things I’d love to touch on a little bit today is talking about someone who’s at that point where they’re ready to jump off the bridge of federal service and jump into the world of private industry. What are we leaving behind? What is this value of this pension, if we’re not going to get one in that next career? So I think that’s a really important thing for people who are going to stay in federal service to know the value, but also for people who might leave early to understand what they’re leaving behind. If they kind of freeze that pension at age 32, and now have to save more in the future in that next career.

Micah Shilanski:  That’s a great thing. And we’re not saying don’t jump, we’re just saying, look before you leap. Know what these benefits are going to cost, so you’re making an educated and informed decision because it’s your money. This is what we’re talking about is your money and your benefits. Now, in your comparing things, if you’re going out in the private sector, there are companies out there, I’m using air quotes, that have what are called “pensions,” but that doesn’t mean what you think it means.

                           Pension now in the private sector just means when you retire, you’re going to get a lump sum of money. It’s like another TSP. It’s like another 401k that’s set up versus the federal pension, Tammy, and correct me if I’m wrong. The beautiful part that I love about this, this is a lifetime income guaranteed by the federal government that you can not outlive. And last I checked the good news about that, the government can keep printing money. When I do it, I get in trouble, but they got plenty. They can keep those presses going and make sure you get your retirement check.

Tammy Flanagan:        That’s a good point, Micah, because in the private sector, when they give you that lump sum pension benefits, so to speak, that’s something that the company funded for you. So they put some money aside probably every two weeks as you worked, and that’s your pension of whatever it is when you separate. But with the federal pension, you do have the option to take a lump sum refund if you leave early. But if you leave that little bit of money you’ve contributed on deposit, the agencies put in more than you did. And the government, as you said, has the requirement under the law to pay that benefit to you for the rest of your life. So generally speaking, most federal employees will take it as the lifetime benefit. Most people don’t leave early and take the money out, because you have some value to that.

                           Like I said, even if you only have five years of service, you’ll still have something to show for it based on, not how much is in there, but based on your salary and how much service you had when you left. So, it’s going to have a little different value than just getting that lump sum of cash as you walk out the door.

Micah Shilanski:  That’s exactly right. And let’s put some general numbers inside of here, right?

Tammy Flanagan:        Mm-hmm (affirmative).

Micah Shilanski:  So if you had… So every year you work for the federal government, there’s a few exceptions out there, but under FERS every year adds one percent to your pension. So Tammy, if you were, after 10 years of federal services, you said after five years, you’re vested, so at 10 years of service, let’s just make it a clean 10 years, they would have 10% of their high three, right?

Tammy Flanagan:        Right.

Micah Shilanski:  So, if their high three was 50 grand, that would be $5,000 a year. It was a 100 grand. It’d be $10,000 a year. Sound right?

Tammy Flanagan:        That’s right. And how much would you have to save, Micah, to create $5,000 a year income with a COLA?

Micah Shilanski:  Exactly. And the COLA, that’s the fun part that you just threw in there, plus the guaranteed piece of the pie is another really important part. So, if you need $5,000 a month in income, you’re going to have to do a couple of different things in order to get that far. One, you have to be willing to save the money that’s there. So how are you going to save that money? Now, if I just need you to replace five grand in income, roughly, I’d be looking for a $100,000.

Tammy Flanagan:        That’s right.

Micah Shilanski:  You need around a $100,000 of money set aside to replace 5,000 of income. But Tammy, these aren’t apples and apples, right?

Tammy Flanagan:        No.

Micah Shilanski:  Because that a 100,000 that I would have to have to invest, I’m going to put in the stock market, it’s going to grow. It’s going to take risks, like 2020 took this little hiccup. This little COVID thing, 2018 was a 20% downturn. All these different times and periods, we could show the market dropping these big times, that’s what’s going to happen. With the federal government five grand a month. It’s guaranteed. It’s not going to go down. So, there’s a little bit of that mental sanity that’s inside of there. So, you may be able to replace the income. It will be at a different risk, and you have to save that income. So, if you leave federal service, you just have to save so much more of your money.

Tammy Flanagan:        Right. Yeah. Not only do you have to save for your 401(k) or your 403(b), just like we have our TSP, but we’re talking here about another savings account just to replace the pension or just to have more in your 401k, so that you can replace your income when you retire. Because if you don’t have a pension, it’s kind of on you to save.

Micah Shilanski:  Yep. So, what are some general kind of rules of thumb that are out there? So, if I have a younger client that I’m meeting with and chatting, and they’re saying, “You know what, Micah…” And let’s say, they’re not a federal employee. If they’re not a federal employee, he says, “Micah, I want to retire early.” So, what’s early? Early is between 55 and 58. If 55 and 60, in private sector’s considered early federal employee, that’s considered normal retirement, which is great. So, if they want to retire between 55 and 60, I’m going to tell them they probably need to save 20 to 25% of their income out of their pocket in order to achieve that goal, to make sure they’re saving money that’s going to be there, because they don’t have a pension. Versus a federal employee that same time probably needs to save 15%-

Tammy Flanagan:        10.

Micah Shilanski:  Yeah, 10 to 15% of their income. They could save plus the match, plus all those other things. But that’s the minimum they would need to save. So, again, you can absolutely transition to that private sector, just know how much more you need to say.

Tammy Flanagan:        Yeah. Make sure you do it. Because without that, there’s always a solution. If you didn’t save enough by 58, then you just work a little longer. Maybe another 10 years you’ll be in good shape.

Micah Shilanski:  That’s right. That’s right. And it’s not the end of the world, right?

Tammy Flanagan:        No. No. Heck no. I thought I’d be retired by now. And I really don’t want to retire, I enjoy what I’m doing. I finally got good at it after 35 years.

Micah Shilanski:  I think that happened a few years ago, by the way.

Tammy Flanagan:        So, yeah, you don’t know what the future holds, but you want to plan for it. You want to play in ahead. And it’s not only that you want to retire, what if your health takes a turn for the worse?

Micah Shilanski:  Sure.

Tammy Flanagan:        What if you have to become a caregiver? So, I always think it’s good to be prepared to plan to retire earlier than later. And if you enjoy what you’re doing, heck, nobody’s complained because they had too much money saved.

Micah Shilanski:  Or it just gives you that financial independence. Now, you could work less. You could move to part time. You could do leave without pay. It opens the door to so many possibilities when you don’t have to worry about just that almighty dollar question.

Tammy Flanagan:        Yeah.

Micah Shilanski:  Because you have enough.

Tammy Flanagan:        It’s a little bit of sacrifice, but it pays off.

Micah Shilanski:  So. Tammy, let’s transition this a little bit. So, the pension is going to be a huge thing. So more than 10 years out from retirement, understand the value of your pension. Does this mean commit to a 30 year career? No, but so many people that are retiring are… Tammy, let me know if you know it different. When I’m talking to my clients that are retiring, they always say, “Micah, I had no plans of being here for 30 years. I was going to be here a couple years and then I turned around and it’s retirement time.”

Tammy Flanagan:        That’s right. Yeah. I think the two milestones or the two goalposts you want to hit. If you’re going to leave early, stay at least five years.

Micah Shilanski:  Sure.

Tammy Flanagan:        Five years will vest you under the FERS pension. And then if you’ve passed the five-year mark, you’re working on 10. Then if you’re close to 10, stay 10, because that’s going to allow you to collect a deferred retirement younger than if you had left with less than 10 years. So, I think if you’re someone who isn’t going to make the federal service your career strive for either five years, or better yet, 10 years before making that leap, if you can.

Micah Shilanski:  So, let’s talk about some other things. Whether you’re going to stay or not, these are some things you’re really need to focus on. Tammy, I’m going to kick it off and say cashflow. I’m going to jump back on the planning side. But cashflow is king as you’re going through, because no one knows what the next 10, 15, 20, 30 years of life is going to be. But if you can do a good job, understanding your cashflow and prepaying for things, this is a key for financial success. So, what do I mean by prepaying? It doesn’t mean, “Hey, I want to go to Hawaii. I’m going to run everything up on my credit, and I’ll spend the next two years paying it off.”

                           Nope, Nope. Not the plan. We need to get ahead of those things. So, how do you create savings accounts? How do you create buckets of money that you could save in advance for these expenses you know you’re going to have?

Tammy Flanagan:        Put them in a bank account where your spouse, who spends all the money, can’t see them. That’s what my husband does, and it’s worked. It’s worked every time. He wanted to have a Corvette when he retired from government service.

Micah Shilanski:  Sure.

Tammy Flanagan:        So every paycheck he put a little bit of money in a bank account that I never saw, and I didn’t even know it existed, but by the time he retired, he went with cash money, and bought that dream car that he always had wanted since he was 16, so that works. And now he’s doing the same thing, he has a small pension that he receives from eight years of work he did, and that goes in the bank every month in a separate account. And that’s my car fund for my next new car. So once there’s enough in there, I’ll be getting a new car. But yeah, I think you have to have some intentional goals.

Micah Shilanski:  And we talked about this a lot, I think, on one of our other podcasts, but really just talking about cashflow planning and how things come in. I think it was podcasts seven, so if you go to planyourfederalretirement.com/seven, you’ll learn about that. But we talk about these buckets of money concepts and Tammy, what you just said was gold right there. Using a separate bank account to save money, because we have this thing called a financial thermostat, and when we see it, we want to keep money between a-

Tammy Flanagan:        Spend it.

Micah Shilanski:  … certain level. Exactly, it gets spent.

Tammy Flanagan:        I know exactly how that works. Luckily I know myself well enough that I have to keep it out of sight out of mind, because I’m on the see cash diet, see cash and I spend it.

Micah Shilanski:  And that’s great, you know it, so we plan accordingly, and to make sure you’re taken care of. Yeah, so we all have different vices. We all have different habits. Yeah, just to know what they are, and plan for them.

Tammy Flanagan:        Yep. It’s called being impulsive. I have $20 in my wallet and I see something that costs 14.99, “Oh, I can afford that I’ve got the 20 bucks in my wallet.

Micah Shilanski:  Keep less than your wallet, and you’re good to go.

Tammy Flanagan:        That’s right. That’s exactly how it works for me. But I think that’s key too, that you have to learn yourself. You have to realize where your weaknesses are. Like you might be afraid of the stock market, so you need to learn more about what the stock market is and how it works and how volatility can affect you. And I think once you’ve gotten through that education process, I think the rest of it becomes less scary or you have less chance of making a major mistake. So, just like you and I keep learning, I think everyone planning for retirement has some education that needs to happen. As much as we love or hate working with numbers, we have to at least have some basic concepts understood.

Micah Shilanski:  Absolutely. And on that note, let’s transition a little bit to the TSP. On the TSP side of the things, this is a really important thing to understand how it works. No, you don’t need to know the details of all the S&P 500 or the C fund exactly, but the basic concept is long-term investing. Especially if you have more than 10 years for retirement, I’m a big fan. No, this isn’t advice, everyone’s and individual. This is just talking points, but I’m a big fan of saying,” Hey, let that money work for you for the long-term.” Because, Tammy, working with clients over time that have just put money away that have kind of forgotten about it and invested every single month in the TSP. It’s been amazing to see that money grow over time.

Tammy Flanagan:        Yes, absolutely. And you have to have a plan. I’ve talked to a lot of people lately, now, apparently there’s quite a few of these websites out there. There are a lot of federal employees, I have to say, they trust them and they use them, but they’re sites that are… Who knows who’s running them? But they’re giving tips on how to invest your thrift. And I was looking at one today and in the frequently asked questions, it said, “Will you let me know when the market’s going to fall?” And the answer was, “We’ll try to do that.” And I’m like, “How are they going to try to do that? I want to know.”

Micah Shilanski:  Well, tomorrow, it might fall, just so you know.

Tammy Flanagan:        Well, yeah, and it might go up 20%, who knows?

Micah Shilanski:  Exactly.

Tammy Flanagan:        So I was like, just be careful of trying to time the market, and even if you’re hiring a so-called professional to help you time the market, that’s not what making a goal or planning for retirement really boils down to it, in my opinion. I know you’d probably agree with that as well.

Micah Shilanski:  Sure. Especially, the cocktail party or the water cooler thing. Everyone always wants to talk about, “Oh, I was in Tesla when it was at zero.” “I was in Apple from the beginning.” “Oh, I bought Bitcoin.” Or, “Oh, I was in Reddit and I got GameStop.” They know all of those things that are happening, everybody likes to talk about it. I can tell you as the person that actually looks at their accounts when they come in, it’s not exactly the picture that they’re painting and they never talk about their losses. So, one of the things, Tammy, I always tell people, is this, “Look, the stock market, it can be a lottery game. It can be. You can play that.” Right?

Tammy Flanagan:        Mm-hmm (affirmative). You can play—

Micah Shilanski:  “You could pick one stock you can hit the lottery and you could potentially win. And that’s the same risk/reward ratio is going and buying a lottery ticket.” So, okay, it does work from time to time, but the odds are not in your favor. What is in your favor? Dollar/cost averaging. Yes, it sounds boring. And you want your investments to be boring. You want them to grow over time and be there for you in retirement and not be the sexiest, newest thing out there that, quite frankly, you’re probably going to get burned on.

Tammy Flanagan:        Yep. And I know some people are like, “Well, I don’t have time to look at my TSP every day.” Don’t look at your TSP every day.

Micah Shilanski:  Yes.

Tammy Flanagan:        Look at once a year. Look at it once every six months. The more you look at it, the more you might start to take advantage of those water cooler suggestions to buy this-

Micah Shilanski:  Sure.

Tammy Flanagan:        … or to buy that, or sell this or to sell that. And it’s more of, like you said, dollar/cost averaging, come up with a plan. It’s kind of like how the L Funds try to accomplish a goal of becoming more conservative as life goes on, but you can afford to be a little more aggressive when you’ve got 30 years ahead of you.

Micah Shilanski:  You got it. And Tammy, this is same thing that happened like in the height of COVID, when all the markets were falling in. And we talked about it on the webinar that we were doing. Literally at that time, we’re doing a webinar on the TSP, and I said, “Well, my recommendation to my clients is going to be, don’t look their accounts.” And some people were like, “What?” And I was like, “Nope, that was my recommendation across the board, because can you do anything about it? No, we can’t control the stock market. And if we’ve done proper planning,” and, again, we use using a five-year rule. If you need any money in the next five years, it’s doesn’t belong in the stock market.

Tammy Flanagan:        Shouldn’t be there.

Micah Shilanski:  Well, then who cares? We got plenty of money that’s going to be there. So, play those little bit of head games if you need them, be that long-term, especially for more than 10 years out, the TSP is a beautiful place to be able to put money to grow for your retirement.

Tammy Flanagan:        Absolutely. Yep. Got to have a plan. You can’t live in the fear. I always say the solution to fear is education.

Micah Shilanski:  It’s surely not as scary as we think once we get into it. So that’s the same kind of concept, transitioning a little bit. IRA funding, Roth IRA funding, HSA, health savings accounts, maybe college planning as well. All of those things kind of fit a little bit into this more than 10 year out realm, and these are all just different tools. Just like in your toolbox, you have more than just a hammer. You probably got a screwdriver, probably got a drill, probably got some other things in there. The same thing we need to have in your investment toolbox is some diversification. You need to be looking at other things as well, because that is what’s really going to help you grow over time.

Tammy Flanagan:        I wish somebody would have told me that 30 years ago, because we don’t have a lot of tax-free money at this stage in our life, and I wish we did. But if you think about it 30 years ago, we didn’t have a Roth IRA. We didn’t have an HSA. We didn’t have all these wonderful tools that you can take advantage of today to set aside some money that’s going to grow, not tax deferred, but tax-free. And I know that’s the best kind of money. I’ve learned that from you, Micah. I want some tax-free money. I have done the HSA, which has been really nice, but-

Micah Shilanski:  Oh, that’s beautiful.

Tammy Flanagan:        … it would have been nice to have it even longer.

Micah Shilanski:  And Tammy, I still hear from people sometimes that maybe they’re just 10 years out or they’re eight years out from retirement, and says, “Well, I’ve missed the boat on that Roth IRA.” “Why are you dying tomorrow? Because if you’re not, then you still haven’t missed the boat.” Because it’s not just a retirement date, is it? It’s how long are we going to live? You could have eight years till your retirement day, but then maybe you’re going to live in retirement for 30 years. That’s 38 years of tax-free money and savings that you can have. So it’s generally not too late to be looking at these things.

Tammy Flanagan:        Right. And that’s… I think one time in the past podcast, we talked about IRA conversions-

Micah Shilanski:  Oh, we did that’s right.

Tammy Flanagan:        … to Roths. And that’s something else that even people, my ripe old age, my ripe young age can still do to get ready for the future. Because even in your 60s, you still might have 30 or 40 years left. So it’s not that short of a horizon whenever you think about it.

Micah Shilanski:  Well, Tammy, let’s transition a little bit, if you want. Let’s talk a little bit on the insurance side, because still as a federal employee, more than 10 years out, what are some insurances that they have? What are some things they should be thinking about?

Tammy Flanagan:        Yeah. Well, I was noticing with my two sons, and when they get jobs, what health insurance? Or it’s 90 days or six months to get insurance or to get benefit. Federal employees, the day you’re hired, if you’re put under the retirement plan, you’re also given your whole cafeteria of health plans and dental plans and vision plans and long-term care and life insurance to choose from. That’s, again, to me, an incredible benefit now that I’ve seen a little bit of what happens when college grads or high school grads go out to their first career, they don’t necessarily get that. And federal employees have all of that. And all of it can go into retirement with you, if you stay long enough to collect a retirement benefit.

                           So another trade off, if you leave federal service early, before you are eligible to retire, if you’re too young, then you’re going to leave a lot of those insurance benefits on the table. The only really portable benefit, when it comes to insurance, is long-term care. So once you’re in it, you can keep it, even if you don’t stay a full career. But with life insurance and health insurance, you have to be eligible for what’s called an immediate retirement. That means I’m leaving today and I’m going to start collecting benefits within a month. So when I’m old enough to retire, I have enough service to retire, that’s generally when we can talk about continuing your federal health benefits, continuation of life insurance, sometimes at no charge, depending on your age. So life insurance will hold some value. Once you’re over 65 and retired and you stop paying for it. So that’s… Who’s heard of free life insurance. That’s kind of unheard of, but you can have that as a federal retiree. So I do think these are really, really important benefits.

Micah Shilanski:  Yeah. Really important. And we talked about it before on the health insurance side, you have so many options as a federal employee. It’s just not Blue Cross Blue Shield. There’s nothing against them, but there’s some great high deductible healthcare plans out there that, when we have time horizon in front of us, may depending on your kids’ ages and what they need as well. But these are some things you should look into of how do you max out these benefits, because there’s no one key success to retirement. There’s not just one thing you can do and everything’s going to be fine. Just like anything else, it’s all the little things that add up to a really big thing and insurance is part of that.

Tammy Flanagan:        Absolutely. I had people say that to me one time, like, “Why don’t you talk so much about insurance when you’re talking about retirement planning?” I’ll say, “Because insurance is one of those benefits that can make or break your retirement.”

Micah Shilanski:  Oh, absolutely.

Tammy Flanagan:        Whether it’s not doing long-term care planning, not necessarily having insurance, but at least thinking about, what if I need long-term care? That can be cost-prohibitive, if you had to pay for it, so what’s your plan? Or what if I have to go out into the affordable care market to buy health insurance when I’m 58? That’s not affordable. I hate to tell you at age 58 to go out and buy health insurance, it’s going to cost you a huge premium and a very high deductible, without much of an HSA incentive to go with that. We’re in the federal government, if you have a high deductible plan, they pay you to have it. They give you, sometimes, $900 a year-

Micah Shilanski:  Wow.

Tammy Flanagan:        … per person. So, it’s like nobody gets that in the private sector. And then you can add more money to it. So we… I think the federal employees really do have a well-thought out, wide variety range of different benefits to choose from. And the only complaint I hear, and I think it’s, again, lack of education, is that some people will say, “Well, my spouse, my husband/my wife, works in the private sector and they don’t have to pay for their health insurance. The company pays the whole premium.” Yeah. But ask them what happens when your spouse retires from that company, will they get to keep that same health plan at age 55 or 58, if they leave answers? The answers, most likely, no. Where with federal employees, you’re paying a premium, it’s a small portion of the total premium and that’s something you’re going to have the rest of your life. Once you qualify for it, nobody can take it away from you unless you choose to cancel it.

Micah Shilanski:  Yeah. It’s a great deal. Again, huge, huge benefits that are going to be there. So, kind of the essence that’s inside of there, it’s not just enough to know about these benefits that are out there, you have to do something about them. You can take advantage of the things that are out there. So, just like anything else, it’s a start small concept. Don’t listen to this whole thing, and says, “Oh my gosh, there’s so many things I didn’t even think about.” And now you’re going to get overwhelmed and do nothing.

                           What’s one thing that you could do this week to improve your retirement planning, if you’re more than 10 weeks out? So, Tammy I’ll go first. Is it okay if we transition to some action items?

Tammy Flanagan:        Sure.

Micah Shilanski:  All right. Perfect. First thing I would say, increase your retirement savings by one percent. That’s it. Doesn’t have to be 10. It doesn’t have to be 20. One percent more in your pay than what you’re paying, put that in your retirement account. It’s amazing when you increase things ever so slightly, how you realize, more than likely you’re just below that money somewhere else. And if you put a little bit more into that savings, you don’t see the TSP, in this example, Roth, IRA, something of that nature, it’ll grow and grow and be a huge benefit for you.

Tammy Flanagan:        Okay. I got one for you. So, we’re early in the year, so get yourself one of those, I call them buckets, like a little three ring binder or a folder or something you can put things in, and start saving any time you go to the eye doctor, to the dentist, to the pharmacy, just put the receipts in that bucket. So, open season comes around the end of the year, November, December timeframe, see how much you spent out of pocket on healthcare this year. That’s going to help you decide which health plan might be best for you. Going to help you decide whether or not you need dental and vision supplemental coverage. And it’s even going to help you decide whether or not you want to contribute to the flexible spending account next year.

                           So keep track of your health care expenses, anything related to healthcare, even if you’re buying band-aids, just throw that in your little receipt bucket. And at the end of the year, you can kind of sort it out and you’ll see a lot clearer picture of what your family is spending money on when it comes to healthcare.

Micah Shilanski:  Yeah. I think that-

Tammy Flanagan:        Or not, maybe you’re not spending it, which is even better, then you can get a lower option plan.

Micah Shilanski:  But now it’s an informed decision versus we get to November, we haven’t done this, now we think we spent all this money, we’re not sure, it’s overwhelming. I’ll do it next year. That means 30 years later, you still have a made a change. I mean, that’s really what that translates to.

Tammy Flanagan:        It happens all the time.

Micah Shilanski:  Mm-hmm (affirmative). Yep.

Tammy Flanagan:        I see it.

Micah Shilanski:  All right. Another action item for you. And again, I want you to pick one of these, not all of these, so whichever one resonates best with you. The next one, know what your benefits are worth. So we did a quick example at the beginning, if you stay for 30 years, what is that dollar amount worth? And how much would you have to save if you left federal service? And I’m not telling you to go to federal service, to stay in it, to leave, et cetera. But know what those benefits are worth, because so often we can kind of look at it, and say, “Oh, I don’t really have that much saved for retirement.” Or, “I read this money magazine, and someone needs five million dollars in order for them to be in retirement.” That’s not a federal employee. You have some phenomenal things as in a pension that really provide a great benefit for you.

Tammy Flanagan:        Yep. And I would say, do a couple of calculations. There’s calculators out there for TSP income and savings. There’s… Social security, has wonderful calculators on ssa.gov, including the one that they do for you.

Micah Shilanski:  That’s right.

Tammy Flanagan:        You can go there and get it online, or some of you will get it in the mail, and your agency can provide you an estimate of your first benefit. Sometimes they won’t do it if you’re still 10 or 20 years away from retirement, but there’s information to help you run the numbers, and it’s second grade math. Come on one percent times my salary times my service, that’s a pretty simple calculation, and the more service, the better, the higher the salary, the better, pretty simple thing to project.

Micah Shilanski:  Awesome.  Let people know about the podcast, share this with other federal employees. We are growing with past over 20,000 downloads, which is amazing, because we just, relatively new, started this podcast and it grows because of you. So thank you our listeners. Please share the out. If you have any topics or suggestions for us, things you want us to change, improve or chat about, then shoot us an email [email protected], and until next time happy planning.

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