The TSP Journey – Part 2

12.12.25: Audio automatically transcribed by Sonix

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

Speaker1:
Welcome back to the Federal retirement show. I'm your host Val Majewski with American Benefits Exchange. Really appreciate, as always, you taking the time out of your busy schedule to join me to view our content. That's what it's here for. It's for you, the federal employee that's looking for accurate information when it comes to your benefits and retirement situations. And we're on this journey, right. The TSP journey. And hopefully at this point you have seen part one of the TSP journey. If you have not, I would say pause it right here. Go back and view part one so that we can pick up where we are right now in part two. And that's where we're at TSP journey part two. And what we're doing with this is just finishing the year off, because this is a very popular time for people to retire, to make decisions, to reflect on how the year has gone And see if there's any changes that need to be made or or make decisions when it comes to benefits of retirement, but specifically when it comes to TSP. And this is a very popular time of year for those decisions. So I want to take you on this basic journey. I say basic because in the time we have allotted, um, and for this, we're not going into the deepest dive ever when it comes to TSP and all the details and all the things. And that's where I leave it up to you. If you have additional questions, please reach out to us.

Speaker1:
If you're like, man, you didn't cover all this, you didn't go into the detail I wanted you to. That's for you to then reach out to us, go to our website, Federal Retirement Show.com fill out the form. We will be in touch. We'll schedule a time so that we can go over all of your questions with with TSP or anything else, and we can get them answered to make sure that you have a satisfactory response so that you can make the best decisions going forward. So that being said, let's dive into today's content and talk about the TSP journey part two. So if you don't recall from part one, I'll just summarize real quick. We were talking about being in the accumulation phase, starting TSP early, remaining consistent, being in the accumulation phase, and what happens as we go through your career. And and now we're we're nearing retirement. Right. We're not getting into retirement yet but we're coming a little closer towards retirement. So maybe that's 20 years down the road. Maybe that's 30 years down the road. Maybe you've just started five years ago, but either way, you're nearing retirement and that's different for everybody. Some say nearing retirement is less than ten years. Less than five years, three, two, one. However many years you consider nearing retirement. That's where part two of the TSP journey comes in. Okay, so that's where we're going to pick up today. And we're going to be talking about not just the accumulation phase of building up assets like we did in part one.

Speaker1:
But today we're going to be talking about preservation. So what does that mean. Preservation phase. This is what I want to preserve. Maybe we can even call it conservation phase. But the preservation phase is I've built up this nest egg. I'm out of the accumulation phase. I might still accumulate, but I want to preserve everything that I have. I want to conserve. I want to make sure that it's not going to go anywhere. I want to make sure that it's going to be there for me when I need it in retirement. And why do I say that? Because most federal employees that I talk to you and I'm speaking general. That's why I said it may not speak specifically to your situation, but when I speak in general, most federal employees are going to need TSP for their income in retirement or a portion of their income in retirement. Why? Because as a reminder, this is one of your three retirement income sources. And in a lot of cases, TSP is going to carry the most amount of weight. And what I mean by that is it's going to carry the biggest amount of income for your retirement. And let's talk about that real quick. Let's say you work 30 years from the government. What's general rule of thumb? You're going to get in your pension 1% for every year of service of your high three. So you work 30 years. That's 30%. Okay. We want to generally get close to 90 or 100% of our pre-retirement income.

Speaker1:
So what else makes up the the difference there? That's social security. Social security generally and typically will be 20 to 25% of your pre-retirement income. So now we're looking at 30 from your pension 2025. Let's say it was 25 roughly 55%. Now, even if we're only going to get to 90% of your pre-retirement income, that leaves TSP to make up 35%. That's greater than all the other two portions. So in a lot of cases, PSP is going to carry the most weight. Now, as you get close to retirement you've built up this retirement nest egg. And we talked in part one about the different, um, fund options that you have, the different investment choices that you have within TSP, generally speaking, that are employees and people in general are going to be more risky or take more risk as they're younger and they have a longer time horizon until they retire. Why is that? Because they want to maximize the returns and the growth of their plan, and they have time to make up any losses. Should the market or their investment choices take a downturn. You have time to make it up, right? If I've got 30 years until retirement and the market goes down, I know I've got time. And generally speaking, again, I'm always talking to generalities. The market on the long term will be greater than it was when it started. Now in the short term, that's a different story.

Speaker1:
So if you're going to retire within the next ten years, five years, three years, whatever, you don't have that long time horizon, that long runway to make up any differences. If the market takes a turn, if your investments go down. So that's why we talked about federal employees specifically because you're looking to use this money in retirement, are in the preservation or conservation phase. They want to take their foot off the gas when it comes to risk within TSP, not take as much of it because they're going to need this money in retirement. You've done a good job at this point, and that's why there's different phases of accumulating money. Now it's time to preserve. Take the foot off the gas. Now you can still take some risk. That's up to you. And I've talked to federal employees that are taking maximum risk all the way up until the point where they walk out the door. That's their their prerogative, right? That's their decision. But most that I talk to want to take their foot off the gas, preserve what they've accumulated. And how do you do that? So what is this? This means that you're going to reduce or eliminate the amount of risk that you're taking as you're nearing or entering retirement. As I said, nearing retirement is different for everybody. And risk tolerance overall is different for everybody. So how much you're taking your foot off the gas? That's up to you. But this is generally the time where people do it again within ten, five, three, two, one years.

Speaker1:
Whatever you consider nearing retirement now, what can you do with NTSB if you want to reduce risk or eliminate risk. Um, if you're still going to take some risk, the most conservative investment choice is probably the L income. And this is just, you know, my opinion on this. But the most conservative, if you still want to take a little bit of risk, is going to be the income. If you want zero risk whatsoever, you've got to go into the G fund, because the G fund is the only fund that is guaranteed not to lose, only fund that's guaranteed not to have a losing month or losing year. It's never lost in its history. But we should all know the negative side of the G fund is it doesn't earn much either. So that's where people look at G fund alternatives. Where can I get the same G fund like protection, but maybe better growth than the G fund. So if you still want to have some risk, maybe L income if you're going with the L funds, um, G fund, the only one that's guaranteed not to lose. And perhaps there's G fund alternatives to look at too, depending on your situation. Now at this point in your journey, right in part two, as you're getting into this phase, it's important not only to know what you want to do in retirement and have a plan for retirement. But what function or purpose do you want your TSP to serve for you in retirement? And there's different things that you can consider.

Speaker1:
We'll talk about that in part three, but it's time to think about it. Have a plan. You don't want to think and go to the end of like, I don't know what I'm going to do. You want to plan ahead and ensure you've got all the variables and everything written down or jotted down, or in your mind about what your retirement is going to look like, where is the money going to be coming from? And then ultimately, what purpose, what function do I want my TSP to serve? We talked about the elimination of risk. Right. How do I eliminate risk. How do I do that within TSP? I mentioned the G fund. All the other funds are, you know, subject to some sort of risk. Um, but ultimately you want to ensure that you're lining up your TSP to your desires, your function, your purpose. It's suitable for you. It's optimized and set up properly for you, your family, your situation. I can't say this enough that where you get your advice from is very important. I've talked to a lot of federal employees and say, I'm going to I'm going to do this with my TSP. And they say, why? Well, I talked to so and so my colleague kind of water cooler talk. Right. And that's what they're doing. And that's great. But that's not your situation. They're different than you. Their strategies are different than you.

Speaker1:
Their family dynamic is different than you. Their way they think about money or their risk tolerance is different than you. So you need to customize it for your situation. Yes, gather information and you can see what other people are doing, but it's important to customize a plan and design it specifically for you and your family. So that's where function purpose, risk tolerance, how much you take your foot off the gas, how much you want to preserve or conserve your TSP. That's all individualized. There's no blanket statement. I just say in general, people take their foot off the gas. How much the preserve or conserve their TSP. That's an individual conversation. So as I mentioned, go to our website, Federal Retirement Show.com you can fill out the form, you can ask us a question, you'll reach out to us, and we'll schedule a time to go over your specific situation, answer your personal questions, and make sure you're set up properly. So, as I said, if you've gotten now to the end of part two and you have yet to watch part one, go back and watch the TSP journey part one and come back and rewatch part two if you want, but get ready next week for part three as we close out 2025. Thank you again for taking the time out of your schedule. My name is Val Majeski. You've been watching the federal retirement show and looking forward to seeing in the next episode where we discuss the TSP journey. Part three.

Speaker2:
Well, of course, a lot of people are thinking about their holiday spending maybe a little bit more. I don't know, thoughtfully taking a little more time when they're making purchases this year. Times tend to be a little tight right now for folks, but people are focusing on value as they as they usually do. But there are some new trends out there that may be, you know, people are taking advantage of to save a buck here or there or just kind of buy some cool things for the holidays. Um, joining me now to talk more about that whole concept and kind of what is happening as far as holiday shopping this year is Mary Haines. She is head of consumer and small business products and analytics at Bank of America. Mary, thank you so much for taking some time for me. Really appreciate it.

Speaker3:
Oh, thanks for having me, Matt.

Speaker2:
Well, so first off, what trends are you seeing for this holiday shopping season and really, how have they been impacting consumer shopping behavior so far this year?

Speaker3:
Yeah, I mean, as you mentioned, the consumers are really being thoughtful about their holiday purchase this holiday season in light of continued inflation and concerns about tariffs. So they're trying to find out ways to make their money go further. So one is they're really focused on who are they buying for. 38% are only going to purchase gifts for immediate family and close friends. And then where they're shopping. So discount stores are incredibly popular this holiday season, with 87% of the people that we surveyed, um, sharing that they're going to spend at discount stores this season. And even stores like second hand stores are really having a great resurgence and growth, especially with some younger generations.

Speaker2:
Yeah. And one thing that seems to be kind of taking off, I believe this holiday season more than ever before is this so-called dupe culture here. Um, tell our listeners what dupe culture is and, uh, you know how that is sort of taking hold of folks, I think kind of almost literally because it's, you know, you kind of can just be scrolling through social media and you run across something, right? It's kind of, uh, right there in your face.

Speaker3:
Yeah, absolutely. In our survey, 51% of people said they'd been open to giving a dupe, which is a product that is similar and design feature and quality as a higher end branded item. Uh, and social media has really propelled people engaging with dupes as they see TikTok videos of people with a dupe. So not only is it a less expensive option to get a similar, um, item as a gift, it's also for younger generations cooler to have the dupe than the real thing.

Speaker2:
Which is kind of crazy. It's like, you know, no longer do you have to go to Chinatown and, uh, you know, go into, uh, back alley or a van somewhere to get something that's very similar to the brand. Uh, you can actually do that online, but these are not not to say that they're like, you know, direct knockoffs or anything, but as you say, kind of similar in quality and, and all of that kind of thing, but for a cheaper price.

Speaker3:
Yeah. I mean, I'll give an example. I got a Brandy Melville sweater with an American flag on it for $38. People ask me if it's Ralph Lauren, which would have been $500, and I'm proud to say no, I got I only paid $38 for this.

Speaker2:
It's a, it's a like a a badge of pride, really, uh, to to be walking around with that. That's great. Well, and so what um, generations I guess, are more likely to, to, to hold on to these trends. I mean, obviously, I would say younger generations, maybe the gen, Gen Z, uh, the millennial generation, probably more, uh, in-tune with all of social media, of course. And, and, uh, getting into Duke culture. But maybe what about maybe some of the different trends that you're seeing out there who's kind of Clutching on to to the different trends that are happening.

Speaker3:
Yeah. I mean, as you shared, um, a dupe is not as appealing to a Boomer or Gen X. Um, and we're also seeing similar with the use of new tools like AI. Many people are using ChatGPT to figure out what to give somebody, as well as to get the best price on that purchase. You see that much more pronounced with younger generations. So 51% of people we surveyed plan on using AI for holiday spending. 71% of Gen Z and millennials plan on using it. And that's also what we're seeing in our data is second hand stores. So buying something used is much more popular with younger generation than older generations. But I think it's important for the older generations, especially boomers, to know those gifts are very well received. So don't hesitate from buying a dupe or getting something second hand for your grandchildren or younger friends.

Speaker2:
Yeah, definitely gotta understand that sort of dynamic that they they view it through different eyes. Definitely. And, um, you know, speaking of, you know, all of the maybe going to second hand stores and thrift thrift stores, things like that, what are maybe some ways that people can manage their spending this holiday season. People are looking for deals and, and, you know, trying to pay more attention to their budgets maybe this year, but how can they actually do that in a practical way?

Speaker3:
Well, most important is to make a list, check it twice and then stick to it. So figure out who are you buying for, how much do you want to spend, and then include all of the other things that go along with the holiday season food, wrapping paper, scotch tape, etc.. And then it's really hard, but stick to it. And that's where things like warehouse stores where you can buy in bulk for things like food and, stocking stuffers can really help you manage against that budget.

Speaker2:
Yeah, well. Very good. Well, just about time for us to wrap things up here. But anything else that you wanted to touch on, Mary that that comes to mind that we haven't mentioned?

Speaker3:
What's really important that you use a rewards card when you make your spending this holiday season? Because that can certainly help you use the rewards for additional gifts or to pay the bill when it comes in. In January, I always use my customized Cash Rewards card from Bank of America, which gives new clients 6% back in the category of their choice. I always do online shopping where I do my holiday spending, and I use that cash back to pay down the bill in January.

Speaker2:
So yeah, very, very smart, uh, options there. Well, Mary Heinz Dorsch is with Bank of America, head of consumer and small business products and analytics there at B of A. Thank you so much, Mary, for spending some time with me and talking about this. Really do appreciate it.

Speaker3:
Thank you. Happy holidays.

Speaker2:
You too.

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