Ep #29: The Questions You Should Have Asked

 You can spend. You can save. What is the right thing to do? Federal benefits, great 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 another amazing episode of the Plan Your Federal Retirement Podcast. I’m your co-host, Micah Shilanski and with me, as usual, is the amazing Tammy Flanagan. Hey, Tammy.

Tammy Flanagan:        Hey, Micah. How are you doing today?

Micah Shilanski:  It’s just summertime in Alaska, how can I complain? Absolutely beautiful weather outside. We get to talk about federal benefits, so it’s just nothing but good stuff.

Tammy Flanagan:        Another day in paradise.

Micah Shilanski:  That’s right. What about yourself?

Tammy Flanagan:        Pretty much, same here. We’re in the sunshine state of Florida and we’re in our rainy season, but that doesn’t mean it rains all day. It usually means we get a nice drenching in the afternoon, but the rest of the day is just beautiful, hot and muggy.

Micah Shilanski:  Beautiful, hot and muggy, perfect. Now, is the rain showers, are they where you can set your clock by them, so at 4:30 every day, it generally rains or how does that work?

Tammy Flanagan:        Yeah, we’re getting there. This time of the year, they’re not that predictable, but we’re starting to see the daily build up in the clouds and it usually let’s loose around 4:30, 5:00, just when everybody’s trying to make their way home from work.

Micah Shilanski:  Yeah, exactly. Exactly. Well, Tammy, we have today something to chat about, which I absolutely love and it’s really the questions that people should have asked. Now, one of the things that I think you and I chatted about before, reasons we love doing live events, whether that’s live in person, which we thoroughly enjoy, or live webinar events is actually the questions that we get from our participants, because it gets us to show a couple of different things is number one, as presenters, did we communicate things clearly with our audience, or where our audience interests at and where do we need to spend a little more time focusing on? Today, we have just that. Our listeners, you guys listening, have taken the time to email us in questions, and we really appreciate that, so we have a list of them. I don’t think we’re going to get through them all, but we’re going to plug through as many as we can in this episode.

Tammy Flanagan:        Yeah. I love the feedback, too, because since we don’t have a live audience on the podcast, it makes us wonder, “Are people really listening?” We know that you are, and this feedback just makes that for certain. It’s really, really good for us to hear that, so we do love getting your questions and hearing what else you need to know. So we’ve got a lot of things today in different areas to explore, so I’m excited to, to answer some of these questions and at them from both the benefits point of view, tax planning, financial planning, and really come up with some solutions for some of these problems.

Micah Shilanski:  It was one of those things, too, recently we were thinking about, do we really keep the Plan Your Federal Retirement YouTube channel going? It’s relatively new. Is it really going to get traction? But some of you in your comments have said that you really appreciate it. Well, great. That was actually the deciding factor. Because you mentioned it and said you wanted to keep it going, it’s going to keep going. So again, thank you so much for taking the time and sending it to us. Tammy, with that, are you ready to get started?

Tammy Flanagan:        Let’s hear the first one.

Micah Shilanski:  All right. Robin sends a question to us and thank you, Robin. It’s a nice little warm-up, a nice little softball question for us. We love it and Tammy, her question is, “Will a form for retirement be sent to me or do I request that form?”

Tammy Flanagan:        That reminds me of another question I got years and years ago when I was working at the FBI and somebody said, “Do I just leave on the day I want to retire or do I have to do something?” So Robin, that’s a great question and no, typically a form is not sent to you unless you ask for it, so I would make contact with your HR office. Sometimes, they have a set plan for you to go through, the timeline of prepping for retirement: when to get your estimate, when to turn in the form, what forms they require and what forms the office of personnel management’s going to require. So I would start with your HR office. Hopefully, they have someone there who specializes in retirement planning or retirement, I should say, not necessarily planning. They should be able to help you. You can also go to opm.gov and find the FERS Retirement Application there. It’s standard form 3107, right, Micah?

Micah Shilanski:  Yes, ma’am.

Tammy Flanagan:        3107?

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

Tammy Flanagan:        That also will give you the application, which is fillable, so definitely fill it out online so that it’s all typed nice and neat. Then, once you’re finished, print it, sign it, make sure you attach any documents to it that it asks for, such as a marriage certificate or a divorce decree or military records. It will tell you if you need those things, depending on how you answer the various questions. So go ahead and ask for that from HR. Also, go to opm.gov, if you want the fillable version and that will get you started.

Micah Shilanski:  What we’re going to do, Robin, is we’re actually going to email you. We did a special podcast or a webinar just on filling out retirement forms, and because you asked this question, we have the information. We’re going to have our team email that out to you to give you more details, so, thank you. Let’s go to the next question we have from Rick and it talks about investments. He says, “If I transfer my TSP to an IRA after separation,” so after retiring, “and I’m only 56 years young, am I able to convert my money on a yearly basis, or do I need to wait to 59-and-a-half?” Rick, that is a great question and I’m going to make some assumptions, so let’s define some things here. One, you said you were retiring, which is wonderful, after the age of 55.

                           You said you’re going to transfer some of your TSP to an IRA, so you used the right words. I love that. When you said convert money, I’m assuming you mean convert from a traditional IRA into a Roth IRA. Now, you can absolutely do a Roth conversion at any age and there is no tax penalty because we’re going from retirement account to retirement account. Now, you do have to pay taxes and the IRS wants to be an active part of your retirement. So anytime we take a distribution, and a conversion does count as that, we’re taking money out of an IRA, we have to pay taxes on that money, but there’s no penalty.

                           Rick, I might want to throw in there, my clients that retire before 59-and-a-half, almost hands down, across the board, I recommend they leave the TSP open with at least some balance in it because once you’re gone, you’re gone from the TSP. One of the beautiful parts about the TSP, Tammy, as you know, is once we separate from service at 55 or older, we can access the TSP without a 10% penalty. So even my clients that aren’t planning on using the money, I always leave some money in there because we don’t know what the next four years is going to be like. I’d hate for you to close out your TSP, transfer everything to an IRA to do conversion. All of a sudden something comes up, you need a hundred grand, now you have to be a 10% penalty to the IRS because you’re under age 59-and- a-half. Just something to think about.

Tammy Flanagan:        Yeah. I definitely concur with that advice you’re giving there, Mike, because I do see a lot of people wanting to transfer money from the traditional TSP to the Roth TSP, but you can’t do that. So Rick here is on the right track saying, “I’d like to get some money that’s not taxable in retirement, and especially for my later years, once Medicare becomes something I have to consider.” So moving money from the TSP to a Roth IRA, I think is a great idea to reduce your tax burden later in life because 56 might just be the halfway point.

Micah Shilanski:  Yeah, very much so and I love that proactive thinking of that tax planning, so congratulations, Rick. Love it. All right. We have another question, team. I think this one’s a good one for you from Patricia and her question is, “I retired in 2013 with an early off from the postal service. I was 47 and I had 27 years of service. I was not penalized for my age and have a full retirement. I turned 56 in March,” like I said, her birth date in March, “when I receive my first supplement.” I have not received, as of yet the supplement in my retirement check. Is there something I need to do to start receiving the supplement?” So I guess Tammy has a couple of questions. One, is she eligible to receive the supplement? When would she receive the sublet, assuming she’s eligible and then, what happens if you don’t get the supplement, what should you do?

Tammy Flanagan:        Yeah. So the supplement, when you take early retirement, whether it’s a voluntary early out or a discontinued service. In her case, I think it was a voluntary early out, and the reason why there was no penalty is because she had 25 years. She actually had 27 years of federal service, which means if you’re offered early retirement, you can take that at any age as long as you have minimum of 25 years of service; however, the supplement’s not payable immediately. It’s payable when you reach your MRA. So for her, she said she’s turning 56 this year. In fact, she just did on March, oh, you said not to say her birthday, but that’s okay.

Micah Shilanski:  March is fine. March of this year, 56, there’s still a guessing game there.

Tammy Flanagan:        Okay. Yeah. Hopefully, she doesn’t mind because she sent us that information. Your MRA is probably either 56 and two months or 56 and four months, so if you don’t receive the supplement at your MRA, which remember, let’s say you turn 56 and four months this month in June, your June payment’s not going to come until July 1st. So give it a couple of months. So If you don’t start receiving that supplement automatically, then I would get on the phone right away, contact the Office of Personnel Management and let them know that, “Hey, I just turned my minimum retirement age. That was, last month or the month before and I have not yet started to receive my first supplement,” because it should start automatically. There’s nothing you should have to do to make that start. They should have set themselves a reminder at OPM to begin that for you once you reach the MRA. So that should be coming up real soon. Hopefully, you won’t need to follow up on that. And you’ll just start seeing that money show up in your bank account.

Micah Shilanski:  Yeah, and just remember whenever you’re contacting someone with OPM, you get more flies with honey than you do with vinegar, right? It’s not the person’s fault that you’re talking to on the phone that this got messed up, but they can make it worse. So you really need to spend some time just going through it. This is, again, a good cash flow question, Tammy. One of the reasons we always recommend our retirees have about 12 months of cash reserves in cash for things like this. If we expect that supplement to come in and the worst had on the supplement has been about eight months. I had a client retire, then actually the next month, he was eligible for the supplement just the way his early out worked out. It took about eight months for us to get with OPM, to get them to start that supplement. Then, they ended up back paying it and all was good. But again, it was a cashflow shortfall, so really important to make sure you’re thinking about that.

Tammy Flanagan:        Yeah. Just like with everything else, it does take time. Sometimes there are delays, but stay on top of it. Don’t let months go by, let alone years. I’ve seen some people who who’ve delayed making that follow-up call for years beyond the time and sometimes, it gets to be too late. So don’t delay.

Micah Shilanski:  Absolutely Tammy, you were kind enough to put the opium services number out there, too. So Patricia, if you can’t remember this number because you’re listening, not a problem. You can email us at [email protected] and you’ll get this information as well. But the OPM Retirement Services number is 888-767-6738; that’s 888-767-6738. I’d recommend a good headset, a good activity, vacuuming, cleaning, something else you got to do in the background. It may take a little bit to get a hold of somebody.

Tammy Flanagan:        Call early in the morning. Don’t wait till 4:00 PM. They start answering the phones at 7:40 AM, not 7:30, not 8:00, but 7:40 AM.

Micah Shilanski:  Eastern time.

Tammy Flanagan:        Eastern time. That’s right, which would be the middle of the night for you, Micah.

Micah Shilanski:  We’ve made those calls before. Sometimes you just got to get it done. All right. We got another question from Dan that comes in, and he’s asking about the TSP and retirement income, which is really great. “Since retirees can’t choose which TSP fund to take distributions, which makes the bucket strategy not possible, is the 4% strategy a better option for TSP retirement money?” Dan, great question and I really love the fact that you were thinking through this and how everything works. Now, I am completely biased about the bucket strategy. To be a 100% clear, I really like it. It’s been very successful with our clients for years and years and years and years and years of doing this. I you’re not familiar with the bucket strategy, go ahead and shoot us an email [email protected], just put bucket strategy in the subject. We have some webinars and some podcasts and we talked a lot about this, so happy to get you that.

                           Dan, I would make the comment on TSP, and Tammy, I’d love your comments on this TSP as well, but I would make the comment that the bucket strategy is still applicable; we just got to be thinking about two different sets of tools because when you retire, we have the TSP, you always have the option of making a partial transfer to an IRA and so many people miss this partial transfer concept, the TSP is a little bit limited in what we can do. That’s just the rules of the TSP. I’m not picking on it; everything has limitations. Okay, great. How are we going to use the TSP and choose? It’s either like cash bucket because it does really good as the cash bucket or it’s the growth bucket, right? Pick one of the two, then make your other buckets the other IRA account.

                           So if you’re under 59-and-a-half, as an example, and I don’t know if you are or not, but if you are, my recommendation would be to think about leaving the TSP as your cash bucket, maybe your income bucket, and then move your growth bucket over to an IRA. Why? Because we’re under 59-and-a-half, like we talked about before, I think it was with Rick’s question. If you’re under 59-and-a-half, if you take distributions from an IRA, they may be subject to a 10% penalty. But if you take money out of a TSP, if you avoid that penalty, if you separated at 55 or older. So again, think about a combination of things. What’s your best retirement strategy? It’s not about a 4% distribution or a 5%, one bucket can hopefully get us a little bit more money, which was really nice and a good way to do it. But it’s also about the emotional tolerance we’re building in and knowing where we’re going to take money from when the markets go down; not if, when they correct 30 to 50%, what’s going to happen? And that’s the reason I lean to the bucket strategy.

Tammy Flanagan:        Yeah, and I think it does take a little bit of knowledge and experience to know how to do this properly, so I’d encourage Dan and anybody else who’s thinking about doing this or making a that’s a little bit complicated, but it could result in some really wonderful tax planning to get some help because you don’t want to make a mistake when you’re selling high or buying low or whatever you’re trying to do. You want to do it in the right order. So I think it’s great and I wish the TSP would become more and more flexible and they have made strides towards that during the last changes to the thrift. But like you said, Micah, you can’t choose which fund to take your money from. You have to take it pro-rata. So with that in mind, I think having both IRA money and TSP money makes perfect sense.

Micah Shilanski:  I’ve often said the TSP board should just make Tammy and I the Czar of the TSP for a couple of days. We’ll fix everything. Done. All right?

Tammy Flanagan:        They do have some challenges because first of all, they’re governed by a board, but they’re overseen by Congress. So Congress really has to make major changes in the law and we know how that goes when there’s two sides of the House and two sides of the Senate. So they don’t always compromise the way we would like them to.

Micah Shilanski:  All right. We got another question that came in from Frank and it’s a bit of a long question, but bear with us, listeners because I think it’s a really good one. It has some different things we should be thinking about. “I’ve learned so much from your guys’ podcast and YouTube channel. I heard you talking about taxes and retirement. I plan on retiring from USPS next year at 60. My primary goal is to defer social security to at least age 67. To do this. I plan on drawing down more, and I quote, ‘normal’ rate for my TSP. So that from 60, 62 I’ll have the supplement and I won’t need, but three or 4% distributions, but from 62 to 67,” so that’s the point in time that he is no longer getting a supplement and choosing to defer his social security, he’s going to need maybe an eight to 9% of distribution.

                           “Once I reach 67 and I draw from social security, I plan on leaving my thrift alone until my RMD at 72, hoping a 70/30 allocation will replenish my TSP. Would such a scenario benefit me with taxes since from 67 to 72, I would be receiving my first pension, which is around 30 grand and my full social security? Thanks. Sorry for the long question.” No, I appreciate the details Frank. It’s such a good one. Tammy, there’s there’s a lot of stuff to pack in there. Start taking us through that.

Tammy Flanagan:        Yeah, so there’s a lot here, but there’s still a few questions, like is he married? Is there a spouse who also has a social security record? So that would be part of it. I wonder also, why not wait till 70 to take social security? Why just stop at the full retirement age? That’s another thing to consider because as you know, Micah, that difference in social security from 67 to 70 can be another 24% automatic increase. I always look at things more from a practical or maybe common sense point of view, so I always worry, not so much if I die early, but what if I live a really long time? There’s scientists now who says human life can last a 150.

                           Oh, my goodness. I wouldn’t want to live that long. But in this case, really maximizing that social security benefit will give him more flexibility down the road as he gets older to do other things with that money he’s saving. So I think it might not be a bad idea to follow his plan, similar to what we’ve talked about in the past is to kind of fill in that gap period from the time his supplement stops until he turns on social security with larger distributions, keeping in mind that you’re going to dial back those distributions once you turn on the social security. Just don’t keep the fire hose turned on full strength or you might be in for a big disappointment.

Micah Shilanski:  Right. I’m going to round up on this one, Frank. Let’s say your distribution was 10% a year, because it makes my math easy. Well, if you’re deferring for five years, that’s 50%, five-years. That’s half, half of your investible assets, right? The reason I’m saying it like this, this doesn’t mean you have a bad plan, understand how this works. So if it were me and my clients and we’re going to do this, I would carve out that dollar amount and I’d have it in a separate account and, “Great. Our other money needs to be invested longterm. This money needs to be in a separate account that’s just to get us through to ride this tide between 62 and 67. Maybe that’s the reason that we’re only doing five years of deferral is because if we push to 70, now we’d be draining 80% of our assets.”

                           All right, that’s not a good plan, so maybe that’s a good reason you’re waiting until your FRA in order to turn social security on, which is 67. So you’ve got some moving parts in there. I would definitely think about taxes, as Tammy brought up inside of this as well, saying, “Great what are things that we can really do to minimize taxes over time, whether it’s Roth conversions or distributions, or maybe starting distributions now, but moving them to a savings account?” So where’s your tax bracket at? So there’s some things in here you definitely need to solve. There’s no giant red flag saying it’s all going to blow up, though.

Tammy Flanagan:        Right, and maybe even consider instead of taking that big of a distribution from your TSP account, maybe there’s something you like doing that you can do on a part-time basis, maybe generate part of that income from earned income. You’re only 60. I used to think 60 was old now, now I’m 63. 60 is very young.

Micah Shilanski:  That’s right. It’s still spry. All right, Tammy, we have another question that came in from a gentleman, Jeff, and says, “SSG retired,” so assuming he’s a Staff Sergeant retired from ’84 to 2004, he’s now a GS-14 from 2009 to present. So his question is, “When I retire, do I get a combined retirement or do I lose one? Should I buy back my military time of 20 years?” Great question. So Tammy, first question, if you have a retiree from the military, are they stuck or can they buy back their military time? If they can buy back, what does that look like?

Tammy Flanagan:        Yeah. So Jeff’s got a quite a few options here. A number one option is he can just work his first career, keep it totally separate from his military career and never the two shall meet; that’s option one. Option two is, at the time he’s ready to retire under FERS, he can choose to combine those 20 years of military service with maybe. Another 20 years of civilian service and have a 40-year first retirement. Now that’s the one that’s going to require a little bit of work because if he does that, number one, he does have to pay that military service credit deposit in order to combine that military time with the civilian service. Number two, he’s going to have to tell the Department of Defense to keep their military retired pay once he combines it because he can’t collect both benefits.

                           So it all depends on, right now it sounds like a GS-14 is probably a much higher salary than what a Staff Sergeant makes in the Army, so it sounds like it’s in the right ballpark of somebody who might benefit from the second option. What I would do at this point, assuming that he’s still a few years away from really pulling the plug on his retirement, would be do the homework. Find out how much you would have to pay in that military deposit. You can find out the amount of your estimated pay for those 20 years, get your HR office to calculate what you would owe at this point because now that you’ve been on board for a few years, you’re going to owe some interest. So maybe put that money, invest that money somewhere outside of the thrift, outside of your bank account, just set it someplace where it’s growing so when the day comes and you decide to retire, if you at that time, think it’s a great idea to combine, now you’ve got the money.

                           You’ve done the homework to know how much you owe you will owe additional interest on that deposit, so invest it so it grows so that you’re not shocked by it by owing additional interest on it. But definitely, it looks feasible. One other thing you brought up, Micah, is maybe he’s getting part of his retire pay in the form of VA benefits, if he had some type of a disability when he was discharged, so that could be another benefit of combining the two together. So I do think it’s one that would require, a little bit more detailed. Look at this, run some numbers. The math on this is pretty easy once we know the variables. So definitely, he’s on the right track, don’t you think?

Micah Shilanski:  I do, and Jeff, this is one of the reasons I love these types of questions you’re submitting to us is because it’s just math. Now we got to know the pieces and that’s what gets complicated, but once we figure out what your buyback’s is going to be, and Tammy, in order to buy that back, they’re just taking a percent, what is it? 3% of their base pay, plus they have to pay interest in that time so we can quickly figure out what that’s going to be. At least get close and then say, “Great. How much is your pension now?” Well, let’s say quick math. Let’s say you retired and there’s a range of what your military pension is. We’ll say it’s 20 grand a year, but if your high threes are 145,000 now, and you buy then, that same 20 year military career, you could buy it back at $29,000 a year.

                           So, okay. That’s a $9,000 pay raise, potentially, under my fictitious scenario here. Okay. “Well, great. How much does it cost to buy back?” Let’s say it costs 30 grand to buy back. Perfect. You’re going to make that back in three years. So are you going to live longer than three years in retirement? Yes. It makes sense to buy it back. So that’s the math that Tammy and I are talking about is if you did nothing, what is it going to be? If you bought it back, what is it going to be and how do we blend those two? What’s that break even side, but it’s definitely something I’d look at sooner than later.

Tammy Flanagan:        Sounds like a plan.

Micah Shilanski:  Awesome. All right. We got another great question in from Carol. It says, “I’ve been employed for eight years and I am 60-years-old. Question one, “Could I retire early, and if so, what would I lose? Would I still be able to keep my medical insurance and, question number two, when I’m retired, it appears that I will have a negative balance to carry my health insurance. I would still probably need 150 or so per month. How does that work? Do they just take money out of my bank account each month?”

Tammy Flanagan:        Well, Carol, you’re getting close, but you’re not quite there. What do they say about horseshoes? So Carol at age 60, to be able to collect an immediate retirement, which is what you would need to be able to keep your health insurance, you need 10 years of service. So you’re a little bit short, but in two little years, once you’re 62, you’ll have 10 years of service. You’ll be old enough to claim an immediate retirement and the good thing about being 62, with more than five years of service, there will be no age reduction. So you would qualify for about 10% of your high three average salary. Like you said, it may not be enough depending on what your salary is, to pay the full premium for the health insurance.

                           So if there is a delta, if there’s a difference in what you owe, you can pay that directly to the National Finance Center and they’ll be happy to collect that money for you. So there used to be a time, years and years ago, when if your retirement wasn’t enough to cover the cost of the health insurance, you would get dropped, but today, that’s not true. So if you didn’t want to switch to a lower cost health plan, you can pay the difference and maintain your health insurance coverage. So the good news is work another two years and you can do this. The bad news is you can’t do it today.

Micah Shilanski:  Yeah. That’s what they call golden handcuffs, right? You have a wonderful set of benefits, but you’re super close to being able to get those. Other options, Tammy? I don’t know her work schedule, but if you wanted a work reduction, she could still work part-time because part-time work is still going to count towards that eligibility ,assuming you keep your benefits under part-time until 62. So there’s some options you have, but just you can’t quite go out just yet.

Tammy Flanagan:        Yeah. Just keep in mind if you do switch, I think it’s a great suggestion, but on a part-time schedule, you’ll pay some of the government share of the premium, so your costs will go up for health insurance. Yep.

Micah Shilanski:  Thank you. That’s a great reminder.

Tammy Flanagan:        But good option.

Micah Shilanski:  Yeah. What are you solving for? Yes, ma’am. All right. We have one

                           Other question that Tammy and I don’t have the answer to. So I always love learning new things, so we’re going to have to figure this one out. But we got a question that’s comes insurance. It says, “I erroneously selected annuity from the TSP instead of a withdraw from it. Can I reverse this option?”

Tammy Flanagan:        Yeah. So it is a one-way ticket out of the thrift when you purchase a life annuity. I have heard from people in the past who are receiving TSP annuities and all of a sudden, realized they made a mistake. For instance, I had one person, she purchased a life annuity. She added the survivor benefit so that if she died first, her husband would get the survivor benefit. But what she didn’t realize, that the survivor benefit on the TSP annuity doesn’t say, “My survivor will get this amount of money.” It says, whoever survives or the survivor.” So what her regret was that she had elected the 50% survivor option. Her husband pre-deceased her two years after she elected the annuity and her annuity payment was cut in half because it’s 50% to the survivor. While there’s two of you, it looks pretty good when there’s one of you, it goes 50%.

                           So at that point, she wanted to cash out and go back to the TSP, obviously way too late. So what we’re wondering, what you and I were talking about before we started the podcast was we don’t know because we’ve never seen the contract that you get from MetLife to see if you have a period of time when you can change your mind. I know that once you purchase the life annuity, the TSP kind of steps away; MetLife takes over as the vendor for the annuity contract and once you start receiving payments, it’s a one-way ticket in that direction. But we don’t know if there’s any kind of safety net, any safety valve to let you make a second choice, if you had just made that election.

Micah Shilanski:  I would absolutely appeal it because what is the worst they’re going to say? No? Okay, then you’re stuck with it, but I would absolutely appeal it. Sooner is better than later. The longer you wait, the lower your chances are. Under normal annuities and insurance, you have what’s called a free look period. Depending on what state you’re in, you’re given a certain period of time that you can reverse that decision, no questions asked, no penalties whatsoever. You get all your money back and those are important things to understand. I’m not ragging on the TSP too much. The TSP, what they do is a good thing, but they cannot give advice. This is one of those areas that when you’re filling out a TSP distribution form, you may want to go to someone who this is all they do is give advice on this stuff and they can tell you, “Hey, you’re selecting an annuity. Do you really know what that option is?”

                           Or, “You’re selecting a distribution and you’re 54, do you really know what that means?” Because the TSP is just going to process the forms that you send. So really, really important we understand what these definitions of these terms are, and Tammy, I don’t blame federal employees on not understanding. This is a different language, right? It’s like speaking Greek all the sudden, and what we assume like a survivor benefit, perfect. We’re programmed in our brain to know a survivor benefit means when I die, my survivor will get half or whatever that amount is. But no, now survivor means something else. So these things that we think are true are not true universally, and this is the importance about truly understanding and getting that outside opinion to questions the decisions that you have made to make sure you’re on the right path.

Tammy Flanagan:        Yeah. I think with the annuity with the TSP, right now, the interest rates are so low and I’m afraid that when interest rates start rising and annuity purchases can be based on a 5% or a 7% interest rate index, as opposed to the 2%, I think we’re going to get more people who have those regrets about the annuity and one out. It’s going to be a sad day when we have to tell them they can’t, so be really careful when you’re making this type of permanent election with your money, that you’ve saved, that you really love having this flexibility and all of a sudden, you’re going to give up that flexibility by, by making this purchase. So really know what you’re doing. Ask questions before you make that transfer rather than afterwards when there’s little that can be done.

Micah Shilanski:  All right, a couple of action items. This podcast is all about action items on your retirement, not just Tammy and I getting together to pontificate, even though we thoroughly enjoy that, we actually want you guys to do something. So number one, I’m going to say is make a plan to get educated about your benefits. Don’t have your benefits happen haphazardly, but make a plan to be educated. What podcasts do you want to listen to? Congratulations. You’re already listening to a great one, right? But what other information do you want? How many classes a year do you want to take? What is your HR putting on? Push them to get more information, but make a plan, especially as you’re getting closer and closer to retirement, you’re ramping up your benefits and education about retirement, your knowledge to make sure you’re making the best decisions for you.

Tammy Flanagan:        I think as people realize, I think another thing to really consider is that planning for retirement is a lot of areas of expertise. The nice thing about you and I, Micah, at doing this is that I’m an expert in benefits. You’re an expert in finance and tax. We like to know enough about each other’s area that we can be well-versed in it, but we’re not necessarily experts. So you’re going to be dealing with people who are experts in benefits, finance, tax and maybe estate planning is another area that you need to explore, longterm care planning. So really define what it is you need more information about and don’t be afraid to ask questions. We hear all kinds of questions from the very basic to the very complex and we love them all. I love when people ask questions because it tells me I can help you. If you don’t ask questions, I don’t know what it is you need to know.

Micah Shilanski:  Yeah. That was actually my second action item, Tammy, right there. It was, write your questions down. When you have a question, stop and write it down. You can send it in to us. You can save it for your next class, but write those down because you will not remember. We always have this great question we’re going to ask, 30 seconds later, we absolutely forget about it. So make sure you’re writing those down so you can get them answered.

Tammy Flanagan:        When you go to training, if your agency offers some type of pre-retirement class, if you go to a webinar, it’s always a good idea to have some documents with you when you attend that training, such as a leave and earnings statement, maybe an SF-50, so you know like, “Oh yeah, I do have FEGLI, or there’s how much I’m putting into my TSP account,” because sometimes we make these decisions. Years ago, we didn’t even know today that we still have five multiples of option B or that all of our money in this thrift is still going to the G-fund 100%. So download that TSP statement, that social security statement, a leave an earnings statement. That way, you have your information in front of you. When you’re listening to this information that’s being presented, it becomes a lot more personal when you do that.

Micah Shilanski:  Tammy, that is such a great idea. I’m sure it’s the same with you. You’ll be thinking about it and either they don’t have their information so they’re like, “Well, I don’t know if I have that or not.” Well, are they really going to remember this later versus the people that brought them? It’s like, “Well, perfect,” if they want to. Of course, we’d never do it publicly, but they’ll come up on break and show me their LAS. They’ll be like, “Nope, you have X,Y,Z,” or, “”No, you don’t have it. No, you’re not paying into the federal retirement system. You have a problem that we need to fix this right away.” You’re not going to get benefits you think you’re going to get, so these are things that need to be addressed and it’s with that information, so great advice.

Tammy Flanagan:        I think we’ve solved the world’s problems, Micah.

Micah Shilanski:  Amen, one podcast at a time. Well, thank you all so much for listening. Tammy, as always, thank you for your wonderful time. It’s been great chatting about this and listeners, until next time. Happy planning.