Retirement Planning Strategies Dec. 2017

Retirement Planning Strategies Dec. 2017

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DECEMBER 2017

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An Early Christmas Gift for Federal Employees ALL THE BUDGET GOSSIP COMES TO NOTHING ... FOR NOW

W   hen I was growing up, we always had Christmas at my grandparent’s house in southwestern Wisconsin. What I most remember from those days is that it always seemed to be snowing while we were there. At the very least, there never failed to be snow on the ground. That was great news for my cousins and me, because it meant we could spend the days sledding. Those afternoons flying down hills are some of my most cherished memories. We definitely had no shortage of holiday cheer. This year, federal employees got one early Christmas present in the form of the passing of the federal budget. The cuts that were initially proposed for federal retirement didn’t end up making their way into the approved bill, putting off all the stress and worry of 2017 until next year. For many people, reading that elicits a big, “Phew.” You’re probably thinking, “Now I don’t have to retire.” There’s no doubt that this should be cause for celebration, but you can bet those cuts are still on the minds of policymakers. Enjoy the Christmas present, but don’t count on an entirely happy new year. When it comes time to hash out the budget for 2019, the proposed cuts will likely be revisited. As I’ve dug into the documents, it seems two changes are most likely. First, federal employees will be required to make bigger contributions to the Federal Employees Retirement System (FERS).

Second, there will be a rate change for the Thrift Savings Plan (TSP) G Fund. While these are the most likely outcomes, I don’t need to tell you that nothing is guaranteed. Tax reform is hard to pass, and with that on the agenda, negotiations will be fierce. At any moment, any consideration is subject to a complete overhaul.

If you want to be forward thinking, that’s great, but there’s no use in guessing what the 2019 budget will look like. You’re much better served by focusing on the things you can control, like savings and investment options. If you’ll allow me a winter analogy, I’d say that you can’t shovel snow that hasn’t fallen yet. What you can do is make sure your house is as ready for a blizzard as possible. That way, if the snow falls, you’ll be ready and able to deal with it. I cannot stress enough that worrying about things that may or may not happen will only lead to rash decisions. Remember, change is a long, protracted process, especially when it comes to the federal government. This year is a perfect example: Budget revisions happened over and over. Ignore the gossip. Stick to the facts. Finally, I want to wish everyone reading this a happy holiday season. We may talk often about financial issues in this newsletter, but this is the time to focus on spending time with loved ones. I might be getting a little too old for sledding, but I certainly cherish the holidays as much now as I did growing up. I hope you can say the same.

–Ann Vanderslice

As always, then, the best way to plan for a great 2018 is to make decisions based on what you know rather than on speculation.

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The Rightsizing Retirement Revolution ARE YOU FINANCIALLY PREPARED TO LEAVE THE WORKFORCE?

A recent Google consumer survey reported that almost 50 percent of the baby boomer generation has less than $1,000 in savings accounts. What’s more, according to a report by the Economic Policy Institute, the average boomer has saved a nest egg of about $8,178 per year for a 20-year retirement, and 41 percent of this generation has no retirement savings whatsoever. But, despite these troubling statistics, retirement is feasible for nearly all of us. It just requires a bit of “rightsizing.” As opposed to downsizing, rightsizing implies that you’re moving into a monetary space that’s right for you. With rightsizing, nothing matters more to the financial success of your retirement, regardless of the breadth of your budget, than carefully managing your spending. Seems obvious, right? But according to an

Employee Benefit Research Institute report, 46 percent of retirees actually increase their spending after leaving the workforce. To prepare for retirement, you need to start living below your means as soon as possible and develop habits that will last until long after you’ve left the workforce. And no, this certainly doesn’t have to be as grim a process as it sounds. You don’t need to give up the things you love to do or purchase. It simply means taking a hard look at your surroundings, your possessions, and your spending habits and do something about it. Are you sticking around in a house much larger than you need, simply because it’s full of old stuff? It might be time to jettison the junk lying around and give your mind — and your budget — some wiggle room. Concentrate on what you actually need in your life and identify how much of your

spending is simply to impress others. These are tough decisions to deal with, but if you want to have a fulfilling, long retirement, they’re absolutely essential things to consider. If you really want to zero in on your expenses, use an app like Mint or iFinance that imports your banking >Page 1 Page 2 Page 3 Page 4

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