Ep #7: The Myth of 80% Retirement

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Today Micah and Tammy are setting the record straight and dispelling some myths about what you actually need to retire with. There’s a lot of water-cooler talk about the rules of retirement, but do you know how to make the best decisions for your unique situation?

Listen in as Micah and Tammy share where to start when thinking about how much you’ll need, as well as the most powerful thing to start learning today to make your retirement strategy work for you. You’ll hear tips to get your retirement strategy on the right track today, whether you’re 5 or 30 years away from leaving the workforce, and what you can do to determine what your unique retirement strategy should look like.

Listen to the Full Episode:

What You’ll Learn In Today’s Episode:

  • How spending changes in retirement and how to plan for those changes.
  • Why you’re probably better off with the FERS plan than the former CSRS system.
  • How to create a retirement income that you’re comfortable with.
  • The two things you can do if your retirement income is too low.
  • How to use allotments to your advantage.
  • Why you should start living on your retirement income two years before you retire.
  • How to factor withholdings into your overall strategy.

Ideas Worth Sharing:

Every day is a weekend in retirement. Click To Tweet

Your net income in retirement vs. your net income while you’re working can be the same, but the withholdings in retirement should be a little bit less. Click To Tweet

This is all about creating options. Click To Tweet

Resources In Today’s Episode:

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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:  Well, welcome to The Plan Your Federal Retirement Podcast. I’m your cohost, Micah Shilanski, and with me as usual is the amazing Tammy Flanagan. Tammy, how are you doing?

 

Tammy Flanagan:        Hey, Micah. It’s good to talk to you again, and I’m excited about our topic of today, because I think one of the things you and I both do so much of is dispelling myths.

 

Micah Shilanski:  Yes.

 

Tammy Flanagan:        Today, hopefully we can set some records straight on what is it that you need to retire on?

 

Micah Shilanski:  There’s a lot of water cooler talk that goes out there, right? We just have to be careful. It’s one of the quotes, and I think it’s attributed to Eleanor Roosevelt. I could be wrong in this, but it’s not what you don’t know that’s a problem. It’s what you think you know that just ain’t so that gets us into trouble. This is one of these areas about federal retirees, because your benefits are so unique. Yep, they’re complex. There’s a lot of moving parts. But you have a phenomenal benefit set, and I get to see that from the outside in, right? Seeing what a good benefit set they are, and you’ve got to know how it works, but not get caught up in a lot of that water cooler talk, because it may not be the best information.

 

Tammy Flanagan:        Yeah, and I always hear from people who kind of have a chip on their shoulder about the FERS retirement system-

 

Micah Shilanski:  Sure, yeah.

 

Tammy Flanagan:        … thinking that, “Oh, man, if I could have just been hired before 1984, I would be in the more generous civil service system.” Sometimes when we sit down and I say, “Okay, here’s what you would have had had you been CSRS. Here’s what you have now,” and now actually looks better than what they would have had under civil service, because they’ve been so trained to save for retirement. There’s so much more flexibility in their Social Security benefit that I think a lot of people don’t realize that FERS really is a complete system and you can retire quite comfortably on it.

 

Micah Shilanski:  I guess two points there. One, just what you said, right? It is a good retirement system. You can retire quite comfortably on it. Number two, you don’t have a choice.

 

Tammy Flanagan:        That’s right. Nos sense crying over spilled milk.

 

Micah Shilanski:  Amen. Now, before we jump into this, Tammy, I did want to take a quick minute. It was really neat. We launched this podcast. We’re only on episode seven, and believe it or not, in Alaska, I ran into two people that listened to our podcast. So thank you very much for our listeners. This is something that we’re growing. It’s kind of taking off, and we need your help. One of the ways you could really help, if you’ve got any type of valuable information, even if it was just good for a comedic laugh now and then, forward this to a friend. Share it with a coworker. Help us grow.

 

One of the things that Tammy and I really want to do is, as you said, dispel a lot of the myths that are out there about the federal retirement system, empower federal employees to understand your benefits, to make phenomenal decisions about the future so you can be financially independent, and we need your help to share this podcast so we can do that.

 

Tammy Flanagan:        Yeah, and I hope everybody’s having as much fun as we are, because I think this is what we do best, is sit down and just chat back and forth about what’s right and what’s wrong with the retirement system. We just live and breathe retirement. So this is a great way to help share this information with others. I don’t know. We’re both pretty energetic and pretty passionate about this topic. So hopefully that comes across in the podcast, because I really do enjoy it.

 

Micah Shilanski:  Yeah, me, too. All right. Well, let’s dive into this myth that’s out there, right? There’s a lot of different things, and I’ll share a little bit why I think this is incorrect in the federal system. But Tammy, there’s a myth that we were talking about in our kind of pregame about people come out and say, “Well, I need 80% of my income to retire if I have a mortgage,” right? “As long as I have 80% of my income, I’m going to be fine” or “If my mortgage is paid off, I only need 60% of my income to retire, and I’m going to be fine.” Before I jump into my initial thoughts on that, what are your initial thoughts when you hear that?

 

Tammy Flanagan:        Well, I wonder, are they talking about 60% of what? Of their gross income, of their net income?

 

Micah Shilanski:  Sure. Yeah.

 

Tammy Flanagan:        Do they know even where that’s coming from? Because I know we do read this a lot in magazine articles, or you might hear one of those pay-per-view shows on retirement planning where someone’s trying to sell you insurance telling you, “Here’s how much you need for the Delta.” But I really think it’s more individual than that. I know I run into people who are big-time savers, and they probably could live on less. Then there’s other folks who everything they bring in, they spend. Then if they had more money, they’d spend that, too, which describes me to some extent. Then you have the mixed marriages, like I have. My husband’s the saver. I’m the spender. So we kind of balance each other out, which is always nice, because you don’t want to have two spenders like me together, or else you’ll be working forever.

 

Micah Shilanski:  That’s right.

 

Tammy Flanagan:        Unfortunately, I will be.

 

Micah Shilanski:  Oh, but you love it. So there’s a little difference there.

 

Tammy Flanagan:        I do.

 

Micah Shilanski:  One of the things is we’re working with clients, and we’re getting them ready to retire. One of the things, Tammy, I really try to highlight is, one, work as long as you want to work, right? As long as you’re financially able, go to that financial independence stage, and cashflow is the heartbeat of retirement. If you have enough cashflow coming in, you get to do the things you want to do. If you don’t have the cashflow coming in, it can make retirement a challenge. But it’s just as much emotional as it is about financial.

 

But we’re going to tackle that financial one a little bit as we get more to cashflow. But I agree with you. I think that 80% number, that 60% rule of thumb, I think most rule of thumbs are a bunch of BS, because they’re too broad. They apply out there to the huge universe, and federal employees, you’re pretty unique in your benefit set. So we need to take a process to come up with a unique answer. It’s the same process that we talk about with all of our clients, but it’s a unique answer for each individual person.

 

So Tammy, what would you suggest? I know you’re not a financial planner, right? So fair disclosure is out there, but you work a lot doing benefits analysis. When you’re working, and I’m happy to share mine, too, what do you tell clients they’re going to need for retirement income?

 

Tammy Flanagan:        Well, as you said, Micah, I’m not a financial planner. But what I do know is more common sense. I know that when I got a paycheck and I had insurance withheld and taxes withheld and retirement withheld, whatever was left, that was what I brought home. That’s generally what we spent. I mean, at the end of every month, I wasn’t putting another $1,000 away. I was usually spending that. Then the next paycheck came, and we planned our budget for the month and spent that as well. If there’s money left over that, man, hey, we could have steak one night this month or we could go out to eat. It wasn’t that we could put $30 in the bank, because we were already saving. We already had allotments coming out for vacation planning, for retirement planning. So that’s the only way we were able to save, is to have that money come out of our paycheck ahead of time so that whatever was left was what we lived on.

 

So in retirement, I think a lot of people are the same way, where they’re used to having that set amount of income. So how do we create that same income in retirement? Well, for most federal employees, it’s going to come in three checks. It’s going to be your first basic benefit, your Social Security and thrift, but I think what the scary part of that is is not knowing when to turn on your Social Security, because you have an eight-year window. Do I take it early? Do I take it late? Then how much and how often to take out of my TSP account?

 

That’s where I usually say, “Call a financial planner,” because that’s where it’s getting into tax planning, financial planning, and you have to be careful. I think there are some things you really have to need to know about money to know what are the best choices to make, but you do have three very nice streams of income.

 

Micah Shilanski:  You do. Let’s unpack some of the things that you said that you kind of glossed over, if that’s all right, Tammy.

 

Tammy Flanagan:        Yeah.

 

Micah Shilanski:  One of them was a brilliant thing that you said, was just about cashflow and allotments. So just as you had said, what I tell my clients when I’m working, we’re preparing for retirement, we always ask how much money they would like in retirement income. Then I check that with their net paycheck. How much do they have hitting their bank account, right? This is my reality check. I do a lot of these when I’m working with clients, because sometimes we have a theory on what we think we do. Then we have the reality of what we’re actually doing. Nine times out of ten, your net paycheck is what you spend.

 

Now, why would I go into retirement when every day’s a weekend, right? So when do we spend the most money? Monday through Friday, assuming a traditional work week, or Friday night, Saturday, and Sunday, right? The weekend is when we spend the most money. So now every day’s a weekend in retirement. Do you think your spending is going to go down? Sometimes people are like, “Yes, because I’m not going to have a commute. I don’t have to buy work clothes. I’m going to pack my lunch.”

 

Here’s what I’ll tell you. We’re creatures of habit. If you were used to spending X amount of dollars, nine times out of ten, you will spend that same money, just in a different direction, right? So if all of a sudden, you don’t buy work clothes, which I promise really isn’t as big as of your budget as you think it is, you will redirect that money somewhere else, and it normally gets spent. So the best place to start planning, Tammy, is just what you said, 100% of your income. What is your net paycheck? Don’t worry about your gross, right? Because gross is something different. That’s the big amount that you’re paid. But what hits your bank account every two weeks? This is where we start.

 

Tammy Flanagan:        Yeah, and I think from at least the paychecks I get to see for a lot of the federal clients I’ve worked with, many of them are only bringing home 65% of their gross. So maybe that’s where that 60% number comes from, because it is your net income is usually 60 to 80% of your gross, depending on your tax bracket and depending on how much you’re saving in the thrift. So maybe from that standpoint, there might be a little bit of truth to that if you’re comparing the gross number, but I prefer like you, Micah, going on more concrete things based on me as an individual or us as a family and making sure that we’re preparing for what’s not going to feel like a cramped lifestyle. I want to have a nice retirement lifestyle. Otherwise, I’ll keep working a few more years if that’s going to help.

 

Micah Shilanski:  So let’s talk about some ways to think about that as we’re getting closer to retirement. Now, even if you’re years away from retirement, I still like this strategy, and I call it cashflow planning. We’ve talked about it a little bit before, and Tammy, it’s just what you and Brian were doing, is allotments. I am a big fan of allotments coming out of your paycheck, and if you don’t know what an allotment is, you can set up where your net pay goes to one bank account. But you can set up multiple allotments so you can have money going to different bank accounts.

 

I’m a huge fan of this, because, again, we’re creatures of habit in what we spend. So look at your cashflow and say, “All right. How much are we spending?” If you have a goal to save money or if you have a goal for a trip, like coming from Alaska, right? Travel is a wee bit more expensive than the lower 48 is to travel from, and so a lot of our clients, we have travel accounts set up. “How much money do you want to spend in travel?” “We’re going to spend 6,000 a year in travel.” “Awesome. That’s 500 bucks a month, 250 a pay period.” Yeah, I know it’s slightly different, right? But close. So 250 a pay period, and set up an allotment going just into a travel account. Then that’s your money you just get to use for travel, and it’s spending money. It’s not savings money. You’ve got a trip. Awesome. Use it for that.

 

This is a great gauge that I find, Tammy, working with clients in advance of retirement to find out how much do they actually spend on travel versus when it’s all in one bank account, it’s all on one credit card, we skinny down our travel amount in our mind. It’s not nearly much as we think it is, right? We really reduce that. In reality, it’s a lot more. So by creating a separate account, we’re still spending the same money, but now it creates a little bit … like shining a flashlight on it. It brings attention to how much we’re spending so you can actually plan for retirement.

 

Tammy Flanagan:        Yeah. It keeps it more organized, like keeping all your drawers neatly arranged so that you see where everything is. I think it does help you to understand what it’s going to take, because I think the other thing, too, whenever federal employees are planning to retire, they always want to get an estimate of their retirement. The agencies generally will provide you with a FERS or a CSRS estimate, but it doesn’t show state tax withholding if you live in a state where there’s a state income tax. It doesn’t show the correct amount of federal tax withholding, because it doesn’t take into account you may have other income from Social Security or a spouse or TSP withdrawals.

 

So you really have to think about what are those withholdings going to be for taxes, federal, and state and your insurance, which is your health benefits, life insurance, dental, vision, and longterm care? Because you are still going to pay those things once you retire, but you no longer have to put money into FERS. You no longer have to save in the thrift. You no longer have to pay the FICA or the Medicare tax. So that does help to some extent. So your net income in retirement versus your net income while you’re working can be the same, but the withholdings in retirement should be a little bit less. So that’s the good news. I think that’s the bright side of the coin.

 

Micah Shilanski:  Yeah, absolutely. As you’re talking about that, on our website, we actually do have some calculators to help you with this. So this is episode seven. So if you go to pyfrx21.wpengine.com, hyphens in between, pyfrx21.wpengine.com/seven, you’ll actually have the direct link to this podcast, and we’ll put a link to the calculators on there.

 

Tammy Flanagan:        Oh, that’s great.

 

Micah Shilanski:  That’s, Tammy, what you’re talking about. Yeah. But what’s that net income that’s going to come from all different sources? That’s really a powerful thing to start learning, working with today.

 

Tammy Flanagan:        Yep, yep, and out of your TSP account, you only have taxes, but federal tax for sure, state tax maybe, and then your Social Security check. You have federal tax, generally not state tax, depending on where you live, but you’ve got to remember Medicare at age 65 gets withheld from Social Security. So once I think you have a better handle or understanding of those withholdings, it’s not so scary, because then it becomes a number that you can compare to the number that you know is coming in while you’re working.

 

I always tell people if that number doesn’t look good enough to you, there’s two things you can do. You can either save more or work longer or live on less. That’s always an option, too, but we usually don’t like that option.

 

Yeah, I’d rather maybe work another year and a half and maybe make it a little more comfortable if that’s the case, rather than retire too soon and feel a little too tight.

 

Micah Shilanski:  This is all about creating options. This is the really important part, right? We don’t know what the next year is going to come out for us, right? I mean, rewind the clock February.

 

Tammy Flanagan:        We don’t even know how this year is going to come out.

 

Micah Shilanski:  Exactly, right? Totally different. We don’t know what the next 10, 15, 20, 30, 40 years is going to be. So when you’re creating a plan, when you’re creating the cashflow, we of course want it to be as accurate as possible, which is why we always talk about cashflow in all of my client meetings, how much people are spending, what’s in their savings, what’s in their checking, a little hint, right? The reason I ask what’s in their saving and checking is because I know what was in it last time, and now I can see how much they’re really spending. But that’s still, again, the little check that we make to see what are we really doing versus in our minds, in theory that we’re doing.

 

But as we start working through this, working on your cashflow is such an important thing and creating options in retirement, because we don’t know what’s going to happen.

 

Tammy Flanagan:        Right.

 

Micah Shilanski:  So the other thing that you brought up, Tammy, I want to talk about real quick before we kind of move on is really talking about living on retirement income. This is something that you need to do, I always want my clients to do at least two years before they retire. So just making up an example, let’s say somebody says they’re bringing home $8,500 a month, and they want to retire with $6,000 a month in a retirement account. So they think that’s going to be fine. Okay, great, right? If that’s what it is, well, let’s live on that now. Via an allotment, I would want the difference, right? $2,500 a month, 1,250 per pay period, going to a separate bank account. So I’m going to pick on Wells Fargo. If you’re used to banking at Wells Fargo and that’s what I’m going to call your operating account, where you pay all your bills out of, I don’t want a savings account at Wells Fargo, because we have-

 

Tammy Flanagan:        Right. It’s too easy to transfer the money back.

 

Micah Shilanski:  Yes.

 

Tammy Flanagan:        I know that trick.

 

Micah Shilanski:  Because we see it, right? I jokingly call this our financial thermostat. If we look online at our bank account and it’s between X and Y, we feel good, and everyone’s zero line, everyone’s comfort level has different zeros in it, right? But if it’s doing X and Y, we feel good. All of a sudden, your bank account goes up, and it goes above Y. Now we feel really good, right? We start spending money, and then it goes down below X. We’re like, “Who spent that money? Knock it off. We don’t have any money.” We get irritated, and it comes back up. But it floats back and forth. That’s what I call our financial thermostat.

 

So a mental game that we get to play with your financial thermostat is when you’re saving money for the future, don’t have it where you bank at. So I use Capital One a lot for these accounts. I want separate Capital One accounts, an allotment going to Capital One or any bank. This is just an example. I want an allotment going over there so that my cashflow for a retiree, right, going back to this example, is only 6,000 a month. Then let’s see what it’s really like, and if you can’t live on 6,000 a month while you’re working, how are you going to live on 6,000 a month when every day’s a weekend?

 

Tammy Flanagan:        Yeah. It’s going to be tough. The other thing I’ll do with folks is if I see someone who looks like it’s going to be a really big deficit in their retirement income, I’ll run them two or three scenarios. I’ll say, “Okay, here’s what it’s going to look when you plan to retire. Let’s just for the fun of it, I know you don’t plan to stay until you’re 62, but let’s see what it would look like if you did.” When they see the difference in the benefit for working another three or four years, sometimes people will really think that through and at least delay retirement a little bit, because I do sometimes see people who I feel like maybe just because you’re eligible to retire doesn’t mean you can afford it.

 

I think that’s two different things. I think when we hear, “You’ve got to be 57 with 30 years,” that you think, “Well, yeah, that’s full career. I should be able to retire.” But like you said, there’s different levels of spending. There’s different needs financially that we have. We might still have kids in college or we might still have just bought a new house with a big mortgage. So you’ve got to really take everything into consideration.

 

Micah Shilanski:  Tammy, I really like that point that you just brought up, is that sometimes when we think what, quote, a full career, 30 years in 57, for example, you should be able to retire, just real quick, jump back and compare that to the private sector. Route people in the private sector really aren’t thinking about retirement until early as 62. It’s really 65 is when they’re thinking about it.

 

Tammy Flanagan:        More like 66, 67.

 

Micah Shilanski:  Yep. Yep, exactly.

 

Tammy Flanagan:        Then it coordinates with either Medicare age, because a lot of folks in private industry, if they retire at 57, they wouldn’t have any health insurance. So they have to wait until they’re old enough for Medicare to be able to retire and pick up a Medicare supplement. I think also because to get Social Security, you need to have that to retire, and most private sector jobs, where with federal employees under FERS, you might get a supplement. So you think, “Okay, I’ve got the supplement. I think I can do it.” Some people can. Some people have really done a wonderful job of saving, and they live on less than they bring home.

 

So some people can afford to retire at a relatively young age, and that’s what they’ve worked for. But if you don’t plan for that, it’s not going to happen, because you have to really start planning for that early retirement way before you retire. It just doesn’t happen, right? You have to do a little bit of thought goes into it.

 

Micah Shilanski:  I’m a big fan of helping people retire, right? It’s kind of my profession. I like it when people retire and they’re able to do things. But this should be the retirement of your dreams. So what that means is set it up for the best success. What’s your cashflow? How much are you spending? This isn’t a budgeting conversation, right? I don’t want 72 different line items and where your dollars go. But where in general does your money go, how is that going to be the same or different in retirement, and how do you gear up to make sure you have that much income? If you need 8,000 a month coming in in retirement income, 10,000, 12,000, $20,000 a month in retirement income, the number is the number, right?

 

This is what makes everyone unique, where you need to follow the same process. That process is how much are you spending right now, and what’s really going to change, not theoretically, really going to change in retirement? That means you’re probably going to spend more. How do you replace that income? Now, that comes up with a unique answer, and the answer is different for everybody, but we all need to follow that process so we can get closer to it.

 

Tammy Flanagan:        Yeah. I think sometimes, and maybe you could address this a little bit, Micah, you’ll hear people will tell me at least that, “As soon as I sell my house, I’m going to retire, because we’re going to pick up and we’re going to move to a whole ‘nother state,” like we did. We went from Virginia to Florida. So you get a chance to start over with your budget. So you don’t have to buy the same level of house. You don’t have kids at home, so you can get a smaller place.

 

So how do you help someone figure out, what are you going to need in that new lifestyle? Will it be less income, really, than what you’re needing today, or is there a way to sit down and make a list of how that might change? Even though you might spend less on a house, you might have more time to spend money on travel or visiting your grandchildren, if they’re in a different state. So that could make up for the savings.

 

Micah Shilanski:  One of the things I try to do in that planning, right? Let’s take your example, Tammy. You went from Virginia to Florida. The only thing I would do really different in a budget-wise, let’s say you’re going to sell a place, and I’m making this up. I’m just using you as an example, right? So you’re going to sell out of Virginia, and you’re going to buy a place in Florida. Okay, well, if we had enough equity out of our place that we had in Virginia to buy a house in Florida or a condo, et cetera, well, then great. I wouldn’t worry about a mortgage. So I take the mortgage out, and I would take out state income taxes, because you moved the correct direction, right? Alaska to Florida. Got to love it. So no state income taxes. So that’s a beautiful thing.

 

I would keep the rest of your spending the exact same, because I’m erring on the higher side of cost of living. So often, we’re in a delusion that “I’m going to move to X, and it’s going to be a lower cost of living.” We get this with a lot of our Alaska clients, right? They’re like, “Well, Alaska, it’s a huge cost of living to be up here. So I’m going to move to Oregon. I’m going to move to Arizona. I’m going to move somewhere else that has a lower cost of living,” and they’re a little surprised that it’s not as lower as they thought it was going to be.

 

Tammy Flanagan:        That’s true. That’s true.

 

Micah Shilanski:  So err on the side of caution. If you’re going to move to an area and you think things are going to be less, take your higher spending. What does that look like? If you can continue that, well, awesome. Now you have it made, just in case the spending is going to be more.

 

Tammy Flanagan:        That’s right. Yeah. I think that’s one of the hard things for people to figure out if they are planning that retirement move, because some people do equate retirement with, “Okay, let’s pull up stakes and go someplace either warmer or less traffic or less taxes or something,” maybe move near family, whatever.

 

Micah Shilanski:  Right, right. Yeah, no, I think those are great points. So the other thing to kind of talk about real fast as we did, and I think we’ll have to dive into this in a further episode as well, but it’s just a heads-up, thinking about your TSP, your IRAs, your other investments that are out there that is going to be a great source of income, but we need to be careful in how you take that money out.

 

Again, I like systematic approach. I think one of the biggest things that gets people in trouble is they think about their TSP as a bank account. “Oh, we’re just going to pull out a lump sum of money to pay off my house.” Maybe that’s a good or not a good idea. “I’m going to pull out a lump sum of money for travel,” right? If you’ve grown your retirement assets, if you had your lifestyle maintained and managed getting a paycheck every two weeks, why would you change that in retirement for the next 40 years, right? Then, all of a sudden take out big lump sums. We’re not wired for that. So you may want to really think about that investment plan. I think on a future pod, we’ll definitely get into that a little bit more in depth.

 

Tammy Flanagan:        Yeah, I agree. I think you could take out money, just like we do from our paycheck, and put it in a separate account for that vacation or for that remodeling of the kitchen or whatever it is you want to do. So that way, you’re still living on the same income every month so it’s not going up and down, because it’s so much harder to track something, just like we try to track the stock market. It goes up one day and down the next. That’s a little scary, where if it all stayed the same every month, it’s the same amount of income, we’re just putting it in different envelopes, you might say, that’s the way to do it where it makes sense. You have a little more level of comfort, I think, in knowing that your retirement plans are working out.

 

Micah Shilanski:  You want a boring retirement plan when it comes to your investments and a boring cashflow strategy, right? You don’t want something super exciting that’s there. Now, exciting retirement, doing the things you want, that’s where the excitement should live. The money side should be boring. It should just do its thing and provide for everything else.

 

Tammy Flanagan:        I like to play Monopoly. When you pass go, collect $200, get out of jail free card. Maybe that’s why we learned that game as kids, right? Every once in a while, you do get a little something, like the electric company says, “Oh, you overpaid us. So here’s a little check for you at the end of the year.” But usually, it’s not a million dollars. Usually, it’s 25 bucks and 50 cents.

 

Micah Shilanski:  Exactly. Yeah. Well, Tammy, let’s transition to a few action items for our listeners, right? Because this podcast, hopefully it’s a little entertaining for you, Tammy, and I have fun talking, but it’s about action and about making sure you can improve your life. So number one, I would say your first action assignment this week is how much do you really spend? Now, simple way of doing that, what hits your net bank account, right? What hits your bank account? More than likely, that is what you spend, but figure out what do you spend, and broadly where does it go? A couple of categories, no more than four, household, travel, entertainment, medical. It’s generally in those four categories. Where does your money go? Just know what it is.

 

Tammy Flanagan:        I also think, too, if you can make your spending look like a monthly number rather than a biweekly one, so I’ll always take a paycheck, multiply it by 26 pay periods, and then divide it by 12. So now we’re looking at “Here’s your average monthly income. Here’s your average net income. So let’s look at your retirement now, because all of your retirement benefits come monthly. So let’s see your estimate of your civil service or FERS. Let’s look at your Social Security estimate, take some tax out of it, and then let’s look and see, what could you do realistically with your TSP account to make that produce the income you’ll need to fill in the gap?” Then it’s a little easier when you’re just looking at those three income sources compared to that one monthly income that we’ve now converted your paycheck to.

 

Micah Shilanski:  Yeah, I like that. So on that note, jump on the website, pyfrx21.wpengine.com/seven, and look at the calculator. See if that’s going to be a fit for you so you can understand what you’re saying. What is this retirement income that’s going to come in?

 

Tammy Flanagan:        Yep. You can do it. You can make the income match your net income in your paycheck.

 

Micah Shilanski:  You can. There’s so many different things. Especially the further you are ahead of this, the more options you have, and little changes make a huge difference over the long term. So we will absolutely get into that. The last action items that would be absolutely amazing: share this with a friend. Share this with a coworker. If you got one good idea, then share it with someone else so they can get one good idea and help improve their retirement planning.

 

Tammy Flanagan:        Yeah. Let us know what you think of the theme song, too. I think it’s great. I’ve never had a song named after me before.

 

Micah Shilanski:  Yeah, and any suggestions-

 

Tammy Flanagan:        Other than the one that I was born with, Tammy’s in Love. That might be before your time, Micah.

 

Micah Shilanski:  It is. We should have done that for the theme song. There we go.

 

Tammy Flanagan:        Yeah. It would sound like I’m in love with money, and that’s not the case.

 

Micah Shilanski:  Fair point, fair point. Awesome. Well, Tammy, as always, it has been just a pleasure talking about this with you.

 

Tammy Flanagan:        Yep. It has been, too, and I hope that everyone’s listening and they got something they can use for their successful retirement planning.

 

Micah Shilanski:  Sounds great. Well, until next time. Happy planning.

 

Hey, before you go, a few notes from our attorneys. Opinions expressed herein are solely those of Shilanski & Associates, Incorporated, unless otherwise specifically cited. Material presented is believed to be from reliable sources, and no representations are made by our firm as to other parties, informational accuracy, or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation.

 

Content provided herein is for informational purposes only and should not be used or construed as investment advice or recommendation regarding the purchase or sale of any security. There is no guarantee that any forward-looking statements or opinions provided will prove to be correct. Securities investing involves risk, including the potential loss of principle. There is no assurance that any investment plan or strategy will be successful.

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