Retirement Planning Strategies Dec. 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. | 1

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