Time for a reality check

My youngest son died last week. Sudden heart attack. He had three children. Total shock to all of us. His daughter is the executor of his will. Tough, emotional job. Everything from checking his lease to finding the title to his car. And paying bills. But knowing her, and knowing him, I bet she gets it done.

Losing anyone, close friend or loved one, is tough. Losing a child is maybe the toughest.

The downside of doing a career column, which this is, is that I don’t get to tell the world how I would handle President Putin and Ukraine situation. Or the pandemic.

The upside is that while I am not an expert on any subject, I have access to a variety of people who can help you during your federal career. And when you leave it. It’s mostly very rewarding. And while not as exciting as bashing a politician or entertainer, helping people in their careers or retirement is nice work if you can get it.

Today’s Your Turn show (10am EST) was planned weeks before my son’s death. But its about the kind of thing he could be very good at: Taking care of his family. Hopefully it will help you in important ways, like taxes and investments. Subject that are not fun, but are very important when someone else settles your affairs.

My guest is Tom O’Rourke. He’s a Washington-area tax and estate attorney, and a former IRS lawyer too. Been there, done that! He knows the kind of advice you need and should be getting. Today his topic will be taxes and your TSP:

How to double your money and save taxes

January is the time for implementing New Years’ resolutions. While your financial advisor may not be able to help you lose weight or get in shape, he or she can help you get your financial house in order. This typically includes taking steps to save money, reduce taxes, and make sure you have a plan to protect yourself and your loved ones.

When I consult with a federal employee seeking advice on how to improve their financial situation, I advise that I have a plan that will allow them to double their money and to save more than $1,000 in taxes at no risk. Of course, my recommendation involves investing in the TSP.

As all federal employees know, if they participate in FERS, their employer is required to match up to 5% of any amount they contribute. If an employee’s salary is $100,000 per year, and they contribute 5% or $5,000 to the TSP, the employee’s agency will contribute an additional $5,000. Thus, merely by participating, the employee has doubled their money. They do not need to be an astute investor. They merely need to participate.

In addition to being able to double their money, the employee will realize significant tax benefits. If the employee contributes to the traditional TSP, they will realize an immediate tax saving. For most employees, a $5,000 annual contribution will result in state/federal tax savings of approximately $1,500 per year.

If the contribution is invested in the Roth TSP, there is no immediate tax saving, but the amount contributed and earnings on these contributions are not taxed at the time they are withdrawn. Withdrawals from the Roth TSP are only tax free if the Roth account has been in existence for at least five years, and the account owner is at least 59 ½.

Another highly significant advantage of investing in the TSP is that any earnings on your investment are tax free as long they remain in the TSP. For example, if an individual invests $5,000 per year and is able to earn an 8% rate of return, after 20 years the account will be worth $457,620 for a FERS investor, $228,810 for a CSRS investor, or $123,348 for a person who invests in a taxable account. If, at the end of the twenty-year period, the investor withdraws all funds in one lump sum (the worst possible option from a tax perspective) and pays tax at the highest rate, they will have more money than if they had invested in a taxable account.

The TSP is a straightforward and legally permissible way to double your money and save taxes. It will help put you on the path to financial security.

Nearly Useless Factoid

By David Thornton

Researchers at Cardiff University found in a recent study that both men and women are judged to be more attractive when wearing a protective face mask. The study also found that blue surgical masks were associated with being the most attractive.

Source: The Guardian

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