Weekend Reading on Your Federal Benefits 29-18.jpg

(for the week of July 14th – July 20th)

You’re too busy during the week to keep up on all the news around your employee benefits and pay. My weekly summary of the most interesting and relevant news stories could help you and includes my comments and insights.

By the way, if you’ve read something about your employee benefits that you think is important or interesting, share it. And, let me know about news sources that you follow. Have a great weekend.

George Ray
Federal Benefits Online

In this week’s benefits news for Feds, we’re watching as the workforce slowly shrinks, we’re continuing our discussion on survivor benefit options at retirement, and we’re enumerating the four reasons why you shouldn’t take a loan from your TSP. Let’s get started.

The Shrinking Federal Workforce

From ChiefHRO.com

The Federal workforce is definitely smaller than it was in December of 2016 according to ChiefHRO’s Jeff Neal and some statistics from OPM’s Fedscope. The total workforce is down by about only 1%, but some agencies had bigger drops in the number of employees than others. Mr. Neal notes that ‘the Department of State is down 9.28%, Education is down 12.94%, Labor is down 8.25%, and Housing and Urban Development is down 5.97%.’ Only Homeland Security (+3.72%), Veterans Affairs (+1.73%), and OPM (+2.44%) are up. Except for an unusual blip at the Small Business Administration (+54.19%) due to temporary employees required for disaster recovery work. A table is included with data from Fedscope for all the cabinet-level and large agencies if you're interested in taking a look. It would appear that the administration’s efforts to shrink the workforce are working. Have you said goodbye to any associates recently?

More Things to Consider When Making Your Annuity Election

From Govexec.com

Tammy Flanagan continues her discussion from last week on your annuity options in her regular column for Government Executive. Before you retire, you’ll need to decide whether you want to provide your spouse with a survivor benefit and how much they should get. One of the questions that do come up frequently during my education programs is addressed by Tammy in her article. The question is “Could you please provide more information when there is a married couple where both spouses are entitled to their own retirement benefit?” Sometimes both partners work for the Federal government—sometimes even in the same agency. There are several considerations which should be discussed when making a decision at retirement, and Ms. Flanagan lays them out on the table.

There’s also discussion of a technique that is sometimes recommended by financial advisers which is referred to as ‘pension max’ or pension maximization. It involves choosing a smaller survivor benefit and using the savings to purchase life insurance. Her recommendation here is to be careful. There can be some benefit to this strategy, but it must be executed wisely. And since we’re talking about making good decisions, how about we cover . . .

Four Reasons Not to Take a TSP Loan

From Fedsmith.com

As you likely know, it is possible to borrow money from your Thrift Savings Plan (TSP), but it may not be the best idea to do so except in limited circumstances. When you borrow from your account you must establish a loan agreement with the TSP folks to pay back the money you borrowed. It can be deducted from your paycheck, and if you take a general purpose loan, can be used for any number of things.

In his article, former Fed Alexis Hongamen tells us that (1) you’ll pay an ‘opportunity cost’. Your money could have been invested and making you greater gains (depending on the investment funds you choose) than borrowing it out of the plan now. He says that (2) as you pay back your loan, it will cost you more because you’ll pay it back with after-tax dollars. And (3) you could say that at retirement these funds will be double-taxed since the after-tax payments will come out like all the other money in your TSP (ROTH contributions excepted) and be taxable, again. The last reason for avoiding a loan (4) is that if you need to pay back your loan, you could also have to reduce your current TSP contributions in order to have enough money for your current living expenses which will reduce your long-term retirement savings. That means you could be borrowing against the comfort of your retirement. And that sounds pretty uncomfortable.

See you next week. Thanks!

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