Top 10 Mistakes Made by Federal Employees — Part 3: Not Properly Maximizing TSP Matching

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1.30.26: 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. And as always, I really appreciate 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. No matter where you're located in the world, looking for information regarding benefits and retirement. And that's what this podcast is all about. We've got over 160 episodes now, and they're geared towards information that we believe you need to hear. And also, it came from questions that you've asked or scenarios that we've encountered, things that I've, I've seen while giving presentations at a government agency or at an event or at a meeting or whatever it might be. So just understand that the whole purpose of this is for for you and to put out the information that we believe you need to know. Now we're in the middle of a series reviewing the top ten mistakes made by federal employees and hopefully how to avoid them. And this is a pamphlet that I created years ago, and I wanted to revitalize it. Um, I wanted to bring it up again and give you a fresh new perspective on some things. And these are some oldies but goodies, and you may or may not have heard these things before, but if you have not watched the first two episodes, I highly recommend you go back and view mistake number one and mistake number two.

Speaker1:
Today we are talking about mistake number three, and if you have not seen the pamphlet, you have not seen the federal employee top ten mistakes. Reach out to us. I've had several of you reaching out to say, hey, I want to get a copy of that PDF. It's a short little pamphlet, right? There's it's it's my in my opinion, the top ten mistakes. It's by no means all the mistakes that federal employees make when it comes to their benefits and retirement. But it's a great starting point. And hopefully you go through this and you're like, I'm not making all these mistakes. Great. Now it it doesn't mean mean that everything is free and clear, but these are some of the major things. And if you've been able to sidestep some of these hurdles and these aren't speed bumps, but this is like a that that that runway in the, in the airport, that walkway that speed me up then. Great. So we're going to talk about mistake number three today. So let's dive into today's content. Mistake number three is not maximizing the TSP matching not maximizing the five TSP matching. Now what is this. This is very easy to understand very easy to look at. And you just say hey the TSP is is your 401 k. The TSP is your um, ability to save additional money for your retirement.

Speaker1:
And it's your wild card. We've we've given a lot of information, a lot of time and effort on this show, talking about the TSP and the different things within the TSP. And one of the great benefits of it is not only is this your way to save more money for retirement, and perhaps you're going to use it for income to supplement your pension and Social Security payments. That's what a lot of federal employees do use it for is a third income in retirement. But how is that money going to get there? You have to put it there. It has to be something that you contribute to. You have to volunteer to put additional money to it. Now the government, they're going to they're going to put in the minimum amount. They're going to set you up on a default amount if you've gotten hired recently, but they match in your TSP up to 5%, up to 5%. So if you put in 5%, in essence, we can go over the the technicality of what goes on in this. But in essence, if you put in 5%, you get 5% from the government, okay. So you put in five, you're going to get a free five. And why am I saying this is a mistake? Because I don't know any other type of money that's better than free money. I don't I don't know about free money is my favorite kind of money.

Speaker1:
So when it comes to getting up to 5%, I'm not going to say this is a blanket statement for everybody that you should be at 5% and you must be a 5%, but it's a mistake. I see, for those that are able and capable of getting up to 5% matching in their TSP. This is a big mistake. Why? Because you get more free money put into your account. Now, I don't know about you, but I'm a simple math guy and I say the more money that's getting put in, the better chance I'm going to have more money in the end. And if I get matched up to five and I'm only putting in 2 or 3, well, I'm only getting matched 2 or 3. So understand that the more you put in at least up to 5%, the more the government's going to give you in free money. They're matching money and the government doesn't give you much for free, but they want to give you up to 5% in your TSP. So if you put in five, they put in you've made instantly 100% of your money, but you've doubled your money right there. Now it can go into any of the funds or any of the options that you've chosen, and your money can grow over time. And the more you put in early when it comes to the time value of money, the more you're going to have in the end.

Speaker1:
There's so many illustrations out there of people that start early, start putting money in the earliest that they possibly can, and compared to somebody who starts later, the person who starts earlier will generally always have more money in the end because of that time value of money, assuming the same rates of return and things like that. So understand what the government is trying to do for you is give you a little bit extra, and all you got to do is come to the table and put some money in. So just understand that this is a mistake that I see federal employees make because it's free money. It puts more in their account and in the end they're going to have more there. So I say this is going to be a relatively short episode because this is a mistake. That's that's easy to avoid if you're capable of getting up to that maximum matching, I, I would recommend it. It's something that I talk to federal employees about when I'm giving presentations. It's something that I talk to them him about what I'm doing one on ones. It's something that I'm mentioning here as a mistake that federal employees make is, if you're capable of it, getting up to that 5% maximum matching so that you can have the most that the government will give you in free money.

Speaker1:
So very simple. For today's episode, very easy to understand when it comes to, uh, this mistake. And if you have questions about it, go to our website, Federal Retirement Show.com. Fill out our form. One of our experts. If it's not me personally, we'll be reaching out in order to review your situation. Answer your questions, talk to you about whatever it is that you want to ask questions about, because we want to ensure that you're set up properly and heading into retirement so you can retire how you want, when you want, with the lifestyle that you want. Now do me a favor. Also, if you like our content, if you've gone back and you've viewed all of our episodes and you really, really, really like it, we've gotten a lot of compliments throughout the last four years while doing this. Um, tell a friend, tell a colleague, send somebody else a link to the federal retirement show. We want to reach as many federal employees as possible, and that's only possible through word of mouth and some of the other channels that are out there. So share this with a friend. Share this with a colleague. Let them know there's a place they can go to get accurate information when it comes to their benefits and retirement situation. Again, my name is Val Majewski. You've been watching the federal retirement show and I look forward to seeing you on a future episode.

Speaker2:
Well, it being the beginning of 2026, here it is tax season once again. And this year is going to be pretty different for a lot of Americans. Joining me to talk more about that is Mark Steber. He's chief tax officer of Jackson Hewitt Tax Service. Hey there Mark how are you.

Speaker3:
Hey Matt. Very excited. Very exciting time. Here it is. Tax season go. Time to get those tax refunds.

Speaker2:
That's right. I mean you you are always the most excited when tax season comes around. And that's why I always love talking to you around tax time because you're very passionate about it, you know, the ins and the outs. And speaking of which, share those ins and outs with us this time around. What are some of those big changes that we're seeing for tax filing season this year?

Speaker3:
Well, like taxes or don't like taxes, 300 billion with a B dollars are getting ready to move into the pockets of taxpayers. And those people that file early and file correctly will get more than their fair share of the 300 billion, and that's about 100 million Americans. So paying attention to your taxes, you know, it's a good job in 2025 is going to be one for the record books of good news for taxpayers. We had a big tax legislative legislative change back there in the summer, which put a whole bunch of new stuff which can be confusing, intimidating, and daunting, but new stuff that can put more money in your pocket. So you say excited. I say it's getting ready to be the giving cash to taxpayers time. And that's always a good thing. So I'll start off with a few of the big things that people have probably seen, but get into a little bit of the specifics. There's a new deduction if you get money through tips, if you're earning money through tips. And that's a lot of people think if you're a Starbucks worker, your bartender, your food service hospital, the list goes on and on. A new deduction up to $25,000 of deductible tips that are not taxable this year. That's a that's a big one and a new one. Over time, if you earn overtime in your job and a lot of people have overtime, you can get a new deduction of up to $12,500 of qualified overtime deduction off your tax return, not taxable.

Speaker3:
The big one though, for seniors this year there's a new $6,000 per person tax deduction if you're 65 or older. On December 31st, 2025, you get a brand new $6,000 per person deduction. And that's not to be confused with the prior senior taxpayer deduction or the larger standard deduction available for seniors. This is a new new new senior deduction 6000, intended to help offset some of the tax liability on Social Security, which is where some of the confusion is. You do not have to be drawing or even eligible for Social Security. You just have to be 65. And if you bought a car, 20 million people buy a car every year. You borrowed money. There's a brand new deduction of up to $10,000 on automobile loan interest expense. And again, you don't have to itemize. You just have to have qualified, manufactured and assembled in the in the assembled in the United States. And you get that deduction. And there's a host of others. They raise the state and local threshold of 40,000. If you if you have that in you itemize. And several states do have that higher standard deduction, higher child credit higher refundable credit. You know there's a lot of other stuff. But those big four including that new senior deduction, those will put more money in the pockets of taxpayers. There's just no question.

Speaker2:
Yeah there you go. And and of course a lot of new stuff there that you just mentioned and and more. So how can folks really, uh, be prepared and prepare those documents, get organized to file this year?

Speaker3:
Well, you start off by saying, I'm excited. I hope other people are excited about going and getting some of that $300 billion. That starts with not dreading tax day, not waiting till April 15th, but getting a plan to be organized. And that starts right now. Those tax documents are coming in even as we speak. W-2s 1099. You know, retirement distributions, Social Security statements and all the rest. You need to have a very simple plan to start being organized around those. The brown envelope and the the household works, the shoebox works, but whatever works for you. But start accumulating those documents because it's critical you be accurate. Also, know that not everything comes in the mail anymore. Some things come through electronic transmission. So if you're waiting on a document and it hasn't come, check your email, check your spam folder. Because if it hasn't come by January 31st, the deadline for those types of things. Hope is not a strategy. You need to take some action, and you don't need to wait on that because you might have questions from your tax pro on this and other things, and you don't want to wait up to the last minute. So get a plan for organization that includes the envelope or whatever it is to collect your documents. Start to locate your tax professional. That's not an easy task these days. You want somebody trusted, trained, experienced, branded. That'll be here when you have questions later. Not some of the pop up people that might not have your best interest. So find your tax docs, find your tax pro, and then get a plan on your calendar to get it done. And go get that money and start that process and start planning for next year.

Speaker2:
Yeah. And of course, you know, working with a tax pro, I think for for most people it sounds like this time around, or at least at least for more people maybe than in years past. It's pretty important to do that because you might miss something, especially with all of these sort of wholesale tax law changes that we're seeing this year. You might miss some of those new, uh, credits or deductions or things like that that could really benefit you come tax time.

Speaker3:
Yeah. And here's an important point on that. I know I sound like I'm pedaling pro tax prep, but I've seen more mistakes by people who pay false attention to some mistaken understanding or Uncle Bob's tax tip because he watched Tic TAC or whatever. But the reality is simply this. And this is what your listeners need to know. If you leave off one of these many benefits that I talked about, and a myriad of others that we didn't talk about that are time tested and in place. If you leave it off, the IRS does not say, oh, hey, Matt, here's 5000 more dollars. You leave it off. It stays off forever until you go and fix it, or somebody finds it and fixes it. But the point is, if you hurry through this and you wait till the last minute and you leave off that new senior deduction 6000 or 12,000 if you're married, the IRS is not just simply going to mail you 3000 more dollars and say, oh, you left off the senior deduction, Matt. Too bad we caught that for you. That's not how it works. Leave it off. It stays off. And if you're not prepared to put in the legwork to learn about it, to answer the questions correctly or to do it properly, you can cost yourself more than enough money to pay a tax professional to help you, if not this year and some other years. So it always makes sense. And the more complicated, the more sense. But this year, just due to the changes, it's probably a good idea to get some help.

Speaker2:
Yeah, I think so as well. Well, Mark, just about time for us to wrap up here. But anything else that you wanted to touch on that we haven't mentioned here? Or maybe you know, some resources for folks online.

Speaker3:
Yeah. I'll give you two final points in a quick moment. Uh, $300 billion in refunds are coming. 100 million people that will draw in some bad people. Bad practices, bad promises. So pay attention when somebody offers you something too good to be true, whether it's a deduction or a credit or they won't sign it. Uh, it's what your mama always said. If it sounds too good to be true, it's probably not true. Use a trusted tax helper and do a little work on that. And if you need more information, our website at Jackson Hewitt Comm with a used Jackson Hewitt or not. A lot of information on there. Calculators, tax tips, frequently asked questions, how to find an office. Just put your zip code in the box, but use a trusted professional this year and every year and go to Jackson hewitt.com just to get your questions answered or to debunk uncle Bob at the table.

Speaker2:
Uncle Bob and his tax tips. Sometimes they, uh, are just kind of out of out of thin air and just don't make sense. So, yeah, make sure that, uh, you debunk uncle Bob. Mark Steber with Jackson Hewitt. He's chief tax officer there. Mark, thanks so much. Really do appreciate it.

Speaker3:
Thank you Matt. Go get that money. It's not automatic.

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