Concerns and Misinformation – Retirement and TSP

10.24.25: Audio automatically transcribed by Sonix

10.24.25: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Well, welcome back to the federal retirement show. I'm your host, Val Majewski with American Benefits Exchange. I really appreciate, as always, you taking the time out of your busy schedule to join us to view our content. We get a lot of great feedback from those federal employees across the world that view us either on YouTube, SoundCloud, Spotify, Apple Podcasts, wherever it is. Uh, appreciate you tuning in to listen to or view our content. And what is this here for? It's for you, the federal employee that's looking for accurate information when it comes to your benefits and retirement situation. And we have a lot of episodes. We just eclipsed the 150th episode last time. This is number 151. Um, and it's driven by conversations that I have with federal employees just like you, concerns, questions, situations that I've seen and I've been working specifically with federal employees for the last 15 years, almost. And it's it's really a testament to you all and your curiosity to make sure that you learn all of this information or you have a resource or a place to find all this information. That's why we do what we do. We started this because I wanted to get this information out there, didn't know that it would grow to be 150 episodes, and we'd have viewers all across the world that is, that are hungering for this information. So really, thank you. Now, I'm going to ask you for a favor.

Speaker1:
If you like our content, be sure to subscribe. Get notified when a new episode comes out and tell a friend that's a a thing I've been harping on recently with recent episodes is there are a lot of federal employees out there that need to know this information, that do not know that this channel or this show or this podcast exists. So tell them about the federal retirement show and have them reach out to me personally. They could do that by going to our website, Federal Retirement Show.com filling out the form. And again, if it's, uh, one of our experts across the country, if not me personally, we'll be reaching out to discuss their benefits and retirement situation and answer any of their questions, because we just want to ensure again, that you all have all the information you need so you can make the best decisions. We talk about these two words. We want to make sure that you maximize what the government gives you. Optimize your situation when it comes to your future retirement. You're going to love yourself for it. Your future self, when you do retire, is going to love the fact that you prepared early enough or as soon as you found out. So that way again, you could be set up properly. Now, today's episode, we're going to be talking about some concerns that I've seen federal employees have and some more misinformation that I keep hearing now, why concerns I just performed over the weekend, um, a benefits and retirement seminar or workshop for a group of postal employees.

Speaker1:
And it was it was awesome. The questions were great that we were getting, but there was a common theme that was going on and people were concerned about what Retirement's going to look like and what is that process going to look like, and what is the timing look like. And that was. So those were, I should say, some of the best questions that we got and the overall theme of the questions and the conversation, once we got all the information out there, revolved around what retirement process and timing is going to look like. And I can share with you just some information that I heard from a federal employee that recently retired and what this person went through during that process. So you may have seen in our content, we've talked about, uh, the new retirement process, the online application. Right. They call it the aura, the online retirement application that OPM came out with. So you can fill that out rather than having to fill out the paper form. Um, there's also the fact that there's a big backlog with OPM, and the retirement process is taking longer than it has. And as we get towards the end of the year, right now, we're in the middle of October 2025.

Speaker1:
As you get closer to the end of the year, that's a very popular time for people to retire. So there's an influx of retirement applications, which is going to delay that process a little bit longer. Now, hopefully once they get the online application figured out, that will decrease drastically the time it takes to process a retirement application. But right now, they're still going through the early stages of that. So the jury's still out whether or not that's going to really work. Now, in theory it should, but they've got to get some things figured out. So this federal employee shared their experience with the group when we were going through this this training, this workshop. And I want to share some of that with you. Right. Because I've talked about when you first go into retirement. Now let's back up just a little bit here and just go over that process again. When you do retire, no matter what day of the month you retire in, we typically recommend the last day of the month, but let's say you retire any day of the month, right? We're in October. Let's say you retire any day in October. When is your effective retirement date? If you thought or said November 1st, you'd be correct. So no matter what day you retire during any month, your effective retirement date is the first of the following month.

Speaker1:
Then your first paycheck should come to you the first of the month after that. So in this case, if I retire on any day in October, my effective retirement date is November 1st. My first paycheck retirement paycheck should come December 1st. Now, what happens when you get that paycheck? Currently, federal employees are being thrown into what's known as interim pay or interim pay status. And that's where you're going to get about 60, 70% of what you should be getting initially. And that will last for a period of time. And then they will make you into or put you into full pay status and back pay you everything that they should have been paying you along the way. Now, the problem with that is that's a perfect scenario, right? This veteran employee shared their experience, saying it took 120 days, or about four months to get his first interim paycheck. Think about that. So this person retired December 31st recently, right. So let's just say December 31st of last year. And it took them four months to get their first interim paycheck. Okay. So that was May 1st. So December 31st should have been effective date January 1st. First paycheck February 1st. It took until May 1st four months of not getting paid. January, February, March, April and May 1st was the first interim paycheck. An interim pay was not the full amount that this person should have gotten paid.

Speaker1:
So not only was the delay in getting paid longer than normal, but the first check wasn't even full pay status. So typically I've seen federal employees get an interim pay for 3 to 6 months. The worst case that I saw was 12 months. That was a specific, unique situation with an FAA employee, and they were an interim pay status for 12 months before getting their full pay in this case. This is the first time I was hearing something like this. So I just want to share this experience with you so you can be aware, especially if you're going to be retiring at the end of the year this year, or just at any point in time within the next several months. And you're planning on this. Be prepared. Be prepared for this kind of situation. Right. What if you don't get paid for four months? Are you prepared for that financially? Do you have extra money saved up? Do you have that annual leave that you should be getting a lump sum check with? Or are you using it all? Um, do you have reserves? If not, then you might have to be pulling from your TSP to make up for lost time. So just want to make you aware of that. This is a real life situation where a federal employee, retired December 31st first. We're supposed to get paid their first check February 1st.

Speaker1:
And that did not come. That first interim paycheck did not come until May 1st. So this was a big concern with the folks that were in the training is saying, whew, I don't want to be caught, you know, with my, uh, my situation and not getting paid and not knowing that this is what can come down. So now they had at least some time to prepare, sometime to, uh, be ready for this so that when the time does come, they may be able to mitigate it a little better then this person was, because nobody warned this particular person that this might happen. So I'm just I'm not warning you to say, hey, this is what's going to happen, but just understand it could. So I talked about your future self, your future self a few months down the road, if you're going to retire at the end of the year, is going to be thanking you for preparing today or over preparing today, if in fact, you actually do get paid your first check when you should on February 1st, right? If you retired at the end of the year. So just understand this. This caused a big concern in the room and a number of other questions that came up like what is the interim pay thing? And I didn't know about this or I didn't know about that. Then we shifted over to ensuring that your paperwork is paid or sorry paid is filled out correctly.

Speaker1:
Now, when you fill out the online application, if you're going that route, it should make sure that everything is checkmarked or everything is selected or everything is filled out before you submit it. But if you're still doing paper, if they allow you to do it, like postal employees are filling out the. And I say in quotes the Blue book because I know they've changed it from, you know, printing it in blue to now it's just in black and white. But the old school blue book, if you're filling that out, you want to ensure that that's filled out correctly. So talking to an expert, something that can help you or walk you through that to ensure you don't make any mistakes, because if it's still being handled by an individual person and they're going through that paperwork and something's incorrect and they've got a big pile of papers on their desk, I'm not saying they do this from personal knowledge, but I know if it were me, you'd put that in a pile. You say, I'm going to work on that one later. I'm going to go to the next one, see if it's filled out properly. It could delay your process. You want to ensure that it's filled out correctly. You also want to ensure that you get it in in plenty of time. I normally recommend two months if you're going to retire at the end of the year.

Speaker1:
Maybe you're getting it in three months. We're already past that, but get it in as soon as you possibly can, especially if you're going to retire in the near future, because there's going to be an influx of retirement applications generally at the end of the year. So this was a big concern that the people in the room, the people that were planning on retiring in the near future, and some even said, well, you know what? My retirement date is kind of fluid. I might push it off a few months so I can properly prepare so I can save up some more dollars, especially if I'm going to go maybe three four months without getting paid at all from the day that I separated service. So understand that that's what has gone on. I'm not saying it's going to happen to you, but it could because it happened to another federal employee. They were not anticipating this. So if you can prepare properly, if you can hear what I'm saying and talk to other colleagues or former colleagues that have recently retired and see what their situation was like and learn from what they've done, because it can help you prepare for the future and not be blindsided. So that was the first thing that I wanted to talk to you about. The other thing was, was misinformation.

Speaker1:
And I've done some episodes on misinformation and and just understand where do you get your information from? This was something that was also talked about during this training that we said, where do you get your information from? If you're getting it from the water cooler or, or from the office setting or from, you know, the floor, if you're working at a postal facility or from, you know, your colleagues, whatever it might be, if you're getting it from there, make sure that it's correct, because there is a lot of misinformation that goes around that I'm going to share with you something that we recently heard, and you got to verify and double check, even with me, verify and double check things that I'm saying because I've had to go back and rerecord episodes because I was incorrect. Now, it doesn't happen often because I've been an expert in this area for a long period of time. But it does happen occasionally. There are things that I've never seen before. So if I make a mistake, yes, I want to come out and correct it so you can see the updated or corrected information. And now you're making a decision based on what's true instead of what I previously said. So if you hear something, talk to an expert and verify this is what a federal employee came to us and said that they heard when it came to TSB and matching funds.

Speaker1:
So let's reiterate the TSB matches or the government matches up to 5% of what your TSB contribution is. So you pick a percentage of your salary that you want to defer and put towards TSB. The government will match up to 5%. Right. And there are two buckets of money or two buckets where you can put your money, your contributions. And those are the traditional bucket. The pre-tax bucket or the Roth bucket, the post tax and then the future tax free bucket. The misconception or the misinformation that this federal employee heard was that if they put into the Roth bucket, no matter what their contribution was, it was not matched because the government only matched what you put into the traditional bucket. Let me say that again, this federal employee had heard, and this is what they thought was true, that if they deferred, let's say they put 5% in and they put all their money into the Roth bucket, that the government would not give them any matching funds because they only match what you put towards the traditional side. And that is incorrect. Incorrect. Now you can defer as much as you want, up to the maximum per year of your salary and put it into TSP. Do you have a choice to put into one bucket or the other, or a combination of both? No matter what you defer, no matter where you put your money, the government will match up to 5% and they will put their contributions into the traditional bucket.

Speaker1:
You do not have to put money in the traditional to get matching. You can put 100% of your deductions or your contributions into TSP, into the Roth side if you wanted to, and the government will match whatever you're putting in. However, their contributions go towards the traditional. So again, this was misinformation. This was a misunderstanding of what actually happens. And it can prevent somebody from taking advantage. They this person did not want to miss out on matching funds, but they really wanted to contribute to the Roth. So what they knew they misunderstood or what they thought they knew sorry was a misunderstanding because they thought they had to put only into the traditional to get the matching. That is not true. Again, they can put their contributions or you as a federal employee, put your contributions in either bucket or a combination of both. Up to the maximum total for the year based on whatever your age is. Right. Because there can be catch up and other things. But then the government will only match up to 5% of your salary up to and, but their contributions will go into the traditional bucket. So I just want to make that clear and go back and view some of our other misconceptions and things that that we talked about.

Speaker1:
But this came up recently, uh, with a conversation with a federal employee. And also the very the concerns that we were talking about came up over the weekend giving a, uh, benefits and retirement workshop or training session for a local group of federal employees. So if you have concerns or questions, you want to verify some information that you've heard. Maybe you have a misunderstanding or, um, some misconceptions out there. Reach out to us. Our website is Federal Retirement Show.com. As I've stated earlier, there's a form on the page. Fill that out. One of our experts across the country will reach out to you if it's not me personally, to go over your benefits and retirement situation and answer any questions that you might have. That is what we are here for. So hope you found this information helpful. I hope you found this episode helpful. As I said earlier, we have over 150 now episodes. You can go back and you can view all of our content. There's something in there for everybody. Um, so there's a lot of information for you to dive through and a lot of things that hopefully you can get your questions answered just by viewing our previous episodes. Again, my name is Val Majewski with American Benefits Exchange. It's been a joy and a pleasure to bring this episode to you today. You've been watching the Federal Retirement Show and look forward to seeing you on a future episode.

Speaker2:
Is retirement just around the corner? It might be time to start imagining the foundation of your retirement budget. I'm Jim Tabaka here for the Retirement Radio Network powered by Emeril Live. Most people spend decades saving for retirement. The far fewer spend time planning how they'll spend in retirement, according to a recent study by CNBC. 64% of Americans are more worried about running out of money in retirement than they are of actually dying, Andrew Biggs, senior fellow at the American Enterprise Institute, tells CNBC that growing fears about retirement finances are pushing more Americans to keep working later in life.

Speaker3:
We have more options for extended work lives today than we've ever had before, and Americans are taking advantage of them.

Speaker2:
Without a clear retirement budget, it's easy to go off track either by spending too much too soon, or holding back out of fear and missing out on the freedom you've earned. At a recent Ted talk, award winning financial planner Amir Rocha-lima revealed how true freedom and retirement budgeting go hand in hand.

Speaker4:
Yes, you need to know your numbers, but knowing how much you need to ensure your dream retirement becomes a reality is completely intertwined with knowing what your dream retirement looks like in the first place.

Speaker2:
To help keep your retirement years both secure and fulfilling. Here are four tips for navigating your budget. First, get clear on your monthly must haves. We're talking about essentials. Housing. Healthcare. Groceries. Transportation. Next, think about what makes retirement meaningful for you. Travel. Picking up a new hobby. Helping the grandkids with college. This is your time. But even purpose has a price tag. Then take a close look at your income sources. Social security. Pensions. Investment. Withdrawals. Each comes with its own set of rules and tax impacts. And finally, check in with your budget every year. Life changes. The markets they shift. Your priorities might too. A little regular review can go a long way in keeping you confident and in control. Retirement budgeting isn't a set it and forget it moment. No, it's a new chapter, and like any good story, it needs a solid outline for the Retirement Radio network powered by a mirror life. I'm Jim.

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