Latest / Federal Retirement Advisors | FedLegacy / Fill Out This One Page Before You Retire From Federal Service
Transcript
- William Smith: What's going on everybody. Hope everybody's doing well. hope everybody's having a great week. I'm so sad because summertime is over. And I really, I don't know, these last couple of years, I have really, really enjoyed my summertime for some reason. Like, I just enjoy it. So head into this fall, winter time, doesn't it's not just not feeling great for me. So anyway, that's not what we're here for. But I wanted to just welcome everybody. We are going to, we're we just we're entering to the fourth quarter of the year. Coming up tomorrow starts the fourth quarter. But my team is already prepared, is preparing you all for what's happening in the fourth quarter because a lot of people are retiring in this fourth quarter. So a lot of these webinars that you'll be seeing will be fourth quarter based, meaning if you're getting ready to retire, we want to make sure you retire on time and with confidence. And so we want to make sure we walk you through the full steps of retirement so that when you do retire, you are gonna say, Fed legacy. Help me with these Wednesday calls retire the way I was supposed to be. I was talking to a lady today, and she's 70 years old. She worked in the government for 45 years. And we were going through her retirement stuff today. And I was just like, man, like this is it's such an honor to be able to talk to people at the end of their retirement journey who honestly, some lot of people just don't have a clue on what's next. And to be able to have those conversations with someone who's worked 45 years in the government and getting ready to retire and walk in those. Walking them through that. I just, I I absolutely love it. Right. And this is why we started Fed Legacy. This is why a lot of our advisors work with us. You know, we and we hire federal employees. We have two federal employees who are now working in our Fed Trust and Wills team. And it just feels good. It's just all a part of our mission, helping people just like you retire on time and with confidence and having those conversations about what's next. And so today, we're going to talk about what, what, what, what you need to, the numbers you need to think about as you're getting ready to retire. Right. And we we have what we call a we a one page, a one pager. And in that one pager, if you know these numbers on this one page, you can pretty much calculate where your retirement's gonna be. And if it's a good idea to retire or not, what are some of the things you need to think about in retirement? You know, if we fill out this one pager, if you fill out this one pager that we have, and you can what you can do when I before I share my screen, you can actually just take out one piece of paper and Write down the name, the the the the feels that I'm gonna give you, and then just fill it out for yourself. It's simple stuff, but a lot of times the the the most effective things are simple and and and most people just don't do it because it's so easy to do. And what'd they say? What's easy to do is also easy not to do. Everybody knows this to save money, but it's easy not to save money, right? And so what you wanna do is make sure you do the easy stuff over and over and over and over again. Because e the easy things are sometimes the hardest things to do, but they make the biggest difference when you do them consistently. What I want to do is I'm gonna share this screen here, right? So this is a real one pager, you know, we made the graphics look fancy and everything like that, but this is the real number from someone we talked to earlier in the month. And so, you know, this person had one point one point two seven, one point two seven million in their TSP. Good amount of money. All of it was in traditional TSP. And so we oftentimes talk about this, right? Is it's it's not about how much money you have, it's about do you have a plan with that? This person didn't really have a plan and he didn't understand the tax bill. So we we what we do is we we wrote down with their TSP. So we want to know the first thing you want to put on your sheet is what is my TSP balance? Okay. Write that down. What's your TSP balance is? Then you want to say, in parentheses, how much of that TSP balance is tax versus non-tax percentage-wise, right? You do 100%. And so you look at, okay, is 70% of my money in traditional TSP? Or 100% of my money in traditional CSP or 20%. I mean, well, it's not gonna be 20% traditional, but then and then how much is in Raw of TSP? Very simple. If you look at the first page of your TSP statement, you will be able to see how much of your money is in traditional TSP versus Raw TSP. And and sometimes people get caught up on this because it's it's sometimes hard to distinguish. You'll see a bunch of numbers. You'll see like what the 1% matches. Not 1%. You the 1% contribution the TSP makes. You'll see your TSP match amount. You'll see your qualified amount, which is the amount that you contribute. and then you'll see the full amount of like how much is in your traditional TSP when you're reading your TSP statement. But also what will be on there is an amount that says Roth TSP amount. The Raw TSP amount is the only amount on that sheet that the taxes are already paid for. Okay. Where you're reading that. And the only place you can see how much you're putting in your TSP, how much money you have in your Raw TSP is on the first page of your TSP statement that you get from TSP.gov or the one that they send you in the mail. You won't be able to see it in your balance, in your investment balance. You won't be able to see it there. You won't be able to see it on the pay stub, obviously. The only place you'll be able to see it is there, right? So if you want to see it. Go see it. You know, maybe TSP should up they should update it so you can see it in the investment portal. But on right now, as of right now, only place you can see that is in is on your statement on the first page. Okay. The next thing you want to put down is how much your first pension will be. I've walked us through that first pension calcul calculation many times, but I'm assuming if you're getting ready to retire this year, you would have already ran that number. And so you want to know what your What your first pension amount is. So you want to write that number down. Your TSP balance, what your first pension will be. Okay. And actually, let me go to that. Here it is right here. You want to know what your first pension estimate will be. And if you don't know how to calculate your first pension estimate, the way you do it is this. You take your estimated high three. Okay. So, and if you don't know your estimated high three and you're not retiring this year, that's fine. Just use your current salary. Just so you know how to run the formula. You take your you take your current salary or your estimated hot three if you have it, you times that times the amount of years you worked. You worked. So if you're retiring and you have 30 years, you take, let's say your salary is 100,000, you take 100,000 times 30. And then if you're over 62 or 62 and over, you times that times 1.1%. You're gonna get a number. That number is gonna be your annual salary for the year. As far as your pension goes, your annual pension. If you wanna know what it is by the month, you just divide that by twelve. That's gonna be your monthly pension. If you're s if you're sixty one and below, and you have tw or you or you have twenty year don't have twenty years of service, you're gonna do your salary times amount of years you work. So again, that hundred thousand times thirty, but you're only gonna times it times one percent, not one point one. That will give you your first pension estimate. Okay. So you want to have your TSP balance, how you have it allocated as far as ROV TSP and traditional TSP. Then you want to write down your social security estimate. Okay. You and if you don't have your social security estimate, what you do is you go to SSA.gov. As soon as you go to the right in the center, it's going to be something that says, you know, download your TSP. I mean your social security statement. And it's won't say it takes 10 minutes or less or something like that. You do it, you use ID me, you know, the ID me, I think is what it's called. You use that, it'll help you get in there. Usually it's pretty simple. You'll then be able to see your TSP, your C your Social Security statement, then you plug that number in. Okay, because you got your first pension, you your Social Security estimate. And then if you have Fegly, you want to know, okay, am I gonna keep my Fegley or not? The reason why that's super important is because the Fegley is one of those cause is the is a is a cost that depending on the choice that you make, it will cause a spike in what you're paying. What do I mean? A spike or a deduction. So if you have Fegley Basic, most people right now, if you have if you have Fegley Basic, you're probably paying, you know, less than 40 bucks at 40 bucks a pay period easily, probably 20-something bucks a pay period. And but when you retire, Like this that lady I was just talking to you about the seventy work forty five years, she told me, I'ma keep my effect. Like she was getting ready to fill out her paperwork. And I she was like, I'm just gonna keep my salary. When we looked at it, if she was to keep her salary, it was gonna cost her four hundred and ten dollars to do the no reduction a month. And I said, Do you you really need to do this? Cause you have a lot of money in your TSP. And she's like, no, I just thought I had to. I thought that was the only option. But what she's paying thirty dollars a pay period for now is you know. Is it's going to jump to that 410 because she's doing the no reduction. And so, and so what she decided was, okay, well, no, I'm not going to do the no reduction. I'm going to do the 75% reduction, which then now makes that fairly free because she's older than 65. And it will be for you too once you reach 65. But it will reduce down the 25% of your salary. But it saved her $400 a month. She has a bunch of money in her TSP. She doesn't really need the life insurance. She's 70 years old. Her kids are grown, obviously. And so that changed the way, you know, where her pen how her pension showed up. Right. Now, your health insurance costs and things like that, those are more fixed. You need that stuff. Unless you're military, you have TriCare, and all those different dynamics. But for the most part, your health insurance costs remains the same. That's pretty consistent. There's nothing you can really do about that. But Fegly is something you could do about it. And so if you want to keep your coverage, you want to write that number, you want to write how much it's going to cost you down so that you can make a choice either I'm going to keep this or not. Because that's something that can change the way your pension looks when you're retired. And the last thing you want to do on this line is you just want to write down what your monthly expenses is. Right. And we just call it debt passion paycheck. Okay. What you you're going to spend each month. And when you do that, you take all those numbers, your TS well, not your TSP balance, but you take your first pension, your social security, you add those up. That becomes your monthly income, obviously, right? Then you have your expenses. And then you look to see all right, is there a gap or a surplus here? Now you can deduct 20% from the income for taxes just to make it safe. But then you want to see, okay. If my pension is if my pension is $4,000, my Social Security is $2,500, that's $6,500, minus the taxes, you know, let's just say that's $6,000 a month. Okay, my bills are $3,000. Okay. I got a surplus here, which is a good thing. And it's something that we always talk about. Because some of you might not have a surplus. And that's okay. But it's great to have a surplus because it makes it easier on you. Now, if you don't have a surplus, let's say your pension is $4,000 and your Social Security is $2,500 and your bills are $6,500. But your bills are $7,000. So now there's like a $500 gap there, right? Or even with taxes, let's say it's a $1,000 a month gap. Okay. That lets us know. Okay, we need to take a thousand a month from TSP. This is one of the this and now when that happens, that's okay. You saved your whole life. Your TSP is there for income. But you want to make sure you structure it the right way because depending on how much income you take, it can cause your Medicare cost to go up. taxes as well. Right. And so you wanna that's this is why I always say like knowing your numbers is an important thing. Very, very important thing. But It's not just okay to know your numbers. You want to make sure you have a plan once you know your numbers. I was talking to a lady today. We're helping her with some Roth Convergence stuff. And she just couldn't wrap her mind around how Roth Conversions work. And so I said, okay, let me explain this to you. let me explain this to you very simply. And so I explained it to her very simply as far as best I could, right? About around, and well she well, here's her her question was. Why does Roth conversions and how much money I take from my TSP, why does it, why does it matter so much? And so I broke down the tax brackets. I broke, I broke down her Medicare payment. And I said, you have to be mindful of all of that when you're drawing down income. And so when I explained that to her, she was like, I I get it. She just thought it's okay to just take money as you need to, which is fine, it's your money. But if you want to be if you want to be prudent and not overspending to the IRS, you can you can take the money, you just got to do it in a in a systematized way that keeps more money in your pocket and less going to their pocket. It's simple as that. Because the IRS banks on you not having a plan, just pulling money when you need to and just paying extra to the IRS because you just never had a plan. Right. And so our you know you're the type person that took time out to be on this call. So I would assume You wanna make sure you have a plan, right? And so these are some of the things that we wanna make sure you do. You want we want to make sure you understand, okay, what is your pension's gonna be, what's your social security is gonna be, what your faculty costs are gonna be. Because when we go back to that surplus, let's say your faculty was costing you $300 a month and you said, Well, I'll just keep the life insurance because I could afford that. Well, now it pushes you over. Do I really need it? Can I do the 50% deduction to 75%? I mean, it would be sort the full. It costs me less. It allows me to, it allows me to to to to have a surplus, but I still have life insurance. I might not have as much, but I have I have some, or I might get an outside policy. Or I might do survivor benefit. I might not. It allows you when you know your numbers and they're s they're they're there right there in front of you, laid out, it allows you to make decisions that can make that can make a difference. Another another scenario when you see that you might not need the income anymore or any extra income from your TSP, you might invest your TSP a little differently. You might say, you know what? I could be really aggressive because I don't really need this TSP anytime soon. So I can keep more money in my C fund because I'm not needing income anytime soon. Whereas there might be somebody on the call who says, Well, I'm gonna need $1,500 a month for my TSP as soon as I retire based on these numbers I'm looking at. Okay. Well, how do I guarantee this $1,500 is gonna come to me every month and not be and cause I need this. Okay, well, in your situation, you need to move some money to maybe a income IRA that's gonna guarantee you that $1,500 or something a bit more conservative that if the market tanks like it did in 2022 were where people were losing 20, 25%. That that's not affecting you, and you're not in a situation where you're taking income every month but selling shares at the bottom of the market. Nobody wants to do that because it, you know, that that really that really screws with you when it comes to you selling shares while the market is down, and that could cause your your accounts to collapse faster. And so you just want to make sure when you know your numbers, whether you have a surplus or deficit, how you navigate it. And it looks very simple like this, but it's like a It's like, and I'm sure it's not like this for you, but it could be if you just look at it, right? It's like Tetris. It's like, okay, and this is how me and my team look at it. It's like, okay, well, how do we move this over here to make it all work and fit together? And so when you have your numbers in front of you, it makes it a whole lot easier to make decisions. I've seen people for sh for that work years and years and years because they've heard that they make they will make less in retirement. But once they do something like this, they're like, whoa, well, right now my take home is is six thousand a month. Once I pay my put my ten percent of my TSP, I'm paying for social security. You you know, I'm paying for my fag lee, all this stuff. But then I run my numbers, I'm no longer gonna be paying for TSP, which is, you know, whatever it is, th let's say a thousand a month. I'm no longer paying for social security, which is, you know, four or five hundred dollars a pay period. I'm about the same, even though it looks like my income's reduced. When I get my when I have my social security getting paid to me, have my pension being paid, I'm right at about $150, $200 less than what I'm making right now. okay. I can make different decisions. And so I now don't have to commute and things like that. And so having your numbers simply written out can make a huge difference. These retirement, retirement can be simple when you know these things. And then the next thing I will ask you to do, and not everybody does this, but but this is for people that are getting closer to retirement. I number one. I hate like spreadsheets with my balances and all that type of stuff. I don't like that type of stuff. It just irks me to look at what I spend on food and stuff like that. But if you're, if you're, because I just love Uber Eats. It just makes my life so much easier. But but but it's expensive. But as you're getting ready to go down into retirement, you want to know how much you're spending on things. You want to know because what I don't want you all to do, I do not want you all to do this. And I and I and I honestly I hate it when I see it. When people are like, Yeah, I'm getting ready to retire. I gotta start cutting back. No, you work 30 plus years. Now's the time to celebrate. And so you wanna know what your expenses are. And you wanna know and you wanna like write everything out because you wanna be able to say, All right, when I retire, I'm I'm gonna be all right. I'm gonna be okay when I retire because I'm still gonna be able to spend what I wanted to spend. We wrote that down here. And here's my income. I budgeted it out. Okay. I don't quite cover my all my, but let me how much can I put into my TSP? And that's where we come in. We can help you run a report to show you, okay, if you took $2,000 a month from your TSP, this is how long that will last you. You know, and oftentimes it lasts you for the rest of your life. Or, or you're just living off the interest. Like, okay, I'm taking $50,000 a year off my TSP. My TSP is at $800,000. Long as I make seven percent a year on average, I'll be okay. Right. And so just things like that, conversations like that matter. And so, but the way those conversations start is by you having these numbers, your TSP balance and allocations, your first pension estimate, your social security estimate, understanding your effect costs, understanding what your bills are. And in that way, you have those things laid out. You have those things laid out, it makes a big difference. So We got some people in here that are on that. And so here's how you do it, right? Here's how you do it. You pull, you pull every statement you have. You pull your TSP statement, you pull your service social security statement, you pull your pay stuff just because you want to know what your net is, right? You wanna you wanna you wanna understand all that stuff. That allows you to make an income slide. That way you know exactly if you if you're if you're military, you pull your VA statement, you you know what your military. disability is, I mean your VA disability, you know what your retirement is. Then you build that ex you build that expense plan. And then at that point, we help you fill that gap.