How to Retire the Cheapskate Way: The Ultimate Cheapskates’ Guide to Retirement.
Jeff Yeager has an interesting approach to preparing for retirement- he, like few brave others, purports that reducing spending is more powerful than the generic brokerage house and financial planner/pundit advice to save a $1-$2M retirement nest egg.
Jeff should know, he managed to retire at age 47 from his moderate-salary job running the books for a non-profit in DC. He is ‘selfishly employed’ (more on this) as an author/authority on frugality and maintains a personal network of hundreds of ‘miser advisers’.
Two riders in The American Taxpayer Relief Act of 2012 (the Fiscal Cliff Deal) apply directly to Federal Employee Benefits. They are:
1) Increasing the Transportation Incentive Program (TIP), a program to incentivize federal employees to use mass transport or vanpools, to a monthly stipend of $240. The language in the bill restores parity between commuter expenses for parking (currently $240/month) vs. mass transport (was $125). They are now both set at $240, retroactive to 01 January 2013.
2) Ability to convert money in your employer-sponsored 401k account to the employer-sponsored Roth 401k account (if offered by the employer).
Just like the creation of the Roth TSP, It will probably take the TSP 12-18 months to catch up with this provision, but my prediction is that it will happen. This provision in the Fiscal Cliff Deal was put there as revenue grab to get income taxes now (immediately upon 401k conversion to Roth 401k) vs in the future (eventual withdrawals from 401k). My take on the conversion is that it is probably a bad idea to convert a Traditional IRA/401k to a Roth IRA/401k right now unless you are absolutely certain you will be in a higher marginal bracket when you retire.
As an aside, “The American Taxpayer Relief Act of 2012”? If my recollection is correct, this was created and passed by both houses of congress on January 02, 2013…
Ok, you can if you want to, but it will cost you roughly $350 per year versus waiting until 2014 to retire.
Fedweek produced a somewhat tongue-in-cheek article calling the 2010 National Defense Authorization Act the ‘No FERS Employee Retires in 2013 Act’.
For those who recall, the 2010 NDAA restored sick leave parity between the FERS and CSRS systems, phasing in full sick leave credit for FERS participants in 2014.
Would you gut it out an additional year just for a $350 per year annuity check? I don’t think so, but a FERS employees ‘on the fence’ in December of 2013 might wait until January of 2014 to retire.
We’ll have to wait and see.
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On December 26th, while we were all busy recovering from the Holiday and headed out for year-end clearance sales, the Treasury Secretary dropped a surprise on us. He announced that the federal government will once again hit its ‘debt ceiling’ on Dec 31st, and that the Treasury will take ‘extraordinary measures’ to stretch out its checkbook.
Interestingly, the most comprehensive breakdown I’ve found of the ‘extraordinary measures‘ is from the UK’s Guardian, not from a US-based news organization. The four measures, listed in order of magnitude, are:
- Stop investments in to the Civil Service Retirement and Disability Fund (CSRDF)- the CSRS annuity for retired and disabled CSRS participants (note: I am clueless on the CSRS retirement system as I am not a participant. The link is informative, but an opinion piece).
- Suspending investments in to the TSP G Fund.
- Halt issuance of State and Local government securities (SLGS)
- Cease contributing to the Exchange Stabilization Fund (used to purchase foreign currency).
What #2 means to you and me is that, among other things, the Treasury Department will take out a 401k loan against your TSP balance. Specifically, the Treasury will borrow from the G Fund and issue IOU’s to pay them back at a later date.
If this all sounds familiar, it is. This is one of many extraordinary measures the Treasury took last time the nation neared its debt ceiling in May of 2011. After the debt deal was reached in August of 2011 (which set up Sequestration, aka the ‘fiscal cliff’), the TSP G Fund balances were made whole.
What’s it mean to you and me? Probably not much, as long as:
- You don’t take personal offense at the Treasury Secretary raiding your individual retirement funds (Your TSP balance).
- All past and present government employees and military participants in the TSP do not all sell-off their G Fund holdings at once.
- Institutional Investors and sovereign nations continue to purchase US Government-issued debt.
The mechanics of how the G Fund is raided are described pretty well in this 2002 GovExec article, when the G Fund was about to be raided in order to avoid a what-seems-paltry-now debt ceiling limit of $6 Trillion.