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Am I the only one who used to think "I know how to prepare for retirement...", yet every year I get less and less confident that I can handle the planning on my own without professional assistance? Wow. So much to think about. Thanks @TheFedCorner for sharing these videos.
You're not alone. Many retirement planning concepts are simple to understand but complex to implement. Laws and the economy frequently change, and it requires a substantial amount of time to properly stay on top of it all. Glad you found the videos helpful!
Super helpful! Thank the couple for sharing this information. Also, maybe paying off the house quickly would help minimize expenses/spending early. I'm 33, im just shoving in as much as I can into retirement vehicles.
Yes, this was very helpful. We are retiring at 62 after next year and plan to do roth conversions until age 70 when we start taking social security. We are hoping that those conversions grow enough to get us through retirement
Happy to hear this helped. Roth conversions can be incredible tools sometimes. We have a few videos on when they do and don't make sense, check those out if you'd like!
At what tax rate are you going to do the conversions? My issue is the government could decide to tax the gains in the future just like they started, and increased taxes on Social Security.
Thiago and his team helped me with my plan. I am 62, retired from the government. 1M in TSP, and doing consulting work, so not fully retired yet. However, I am more confident that the plan will keep me in a financial position where I can enjoy the rest of my life.
62 and struggling with should I retire or keep working. Retire means retire. If I retire from federal employment and then go back to work doing something else, why not just keep working?
Excellent suggestion, we'll add this to Thiago's video list. He does have a retirement checklist video that's being developed so stay tuned for that. Alternatively, for personal questions or anything related to working with him, you may send an email to welcome@rmgadvisors(dot)com
I came across this video by doing a search. Am I glad I found it. This was very insightful information. I am a recent FED retiree, and I am trying to figure this retirement planning out. I will sign up for the newsletter to learn some more. Thank you.
I'm late to the game but I've been watching a lot of Thiago's videos (a lot in general but Fed Corner are superior) and this was one of the most helpful I've seen. Please, please do more of these. Real scenarios are exactly the type of thing I deeply need in my learning.
Yes please, more info about optimizing to save on taxes. Specifically, Roth conversion for those in 12/15% bracket, and capital gains window vs. Roth conversions.
Glad it was helpful. For this specific case, I was using 6.13% linearly annualized returns. Understand that linear returns is a mean line driven through a scatter plot of returns. It represents trajectories and should be used with caution, as volatility and tax-bite are very real variables that must also be accounted for. I just couldn't fit every possible outlook inside a video or risk it being too long and technical. -TG
Sure, I'll consider this, someone else mentioned it too. The challenge is that there are many different strategies that can be good in some circumstances and bad in others. But perhaps I can show examples and talk through how some of them work.
If this same couple were to decide to defer 2 years and retire at 62, how would that change their projection? Would they still need to supplement with consulting?
Great question. That’s one that we’d ordinarily ask when planning with clients. Once we calculate how much they need annually for lifestyle we can factor in spend rates + inflation, some growth, and an additional two years of work. That bumps FERS by 10%, more savings in portfolio, and could be enough to allow someone to not have to work PT in retirement. The graphs show an illustration of the calculations on whether or not the math works out in any given circumstance.
Can anyone help me understand why at age 62 the FERS retirement jumped from approx 27K to 29K (7.5% increase), while the next year it only jumped to $30K (a 2.5% increase) ? it would appear as he is saying that since you don't get the COLA until age 62 - that the COLA is cumulatively held until age 62. Which I do think was the case. I just thought everyone else gets their COLA's who are 62 or greater and you just lose your purchasing power until age 62 and at age 62 you just got the COLA for that year of age 62 to whatever the "FER's diet COLA" was and then it continued with DIET COLA's of each year. I don't understand why he increased the FER with a COLA of 7.5% unless it was cumulatively held ? Can someone explain this ? Thanks.
By waiting until age 62 to retire, the FERS annuity pension is calculated at 1.1% instead of 1.0%. Example, 40 years at age 62 x 1.1% = 44% x high 3. If retiring at age 60, that would be 38 years at age 60 x 1.0% = 38% x high 3. You are correct that you don't get the COLA until 62, but you do get a supplement until age 62. That's just a simple example. I think that 1.0% to 1.1% difference at age 62 is just one decision point on when to retire.
Excellent attention to detail, Nicholas. You are correct, COLA does not accrue until 62 and it is not cumulative along the way, so you are indeed losing purchasing power for a few years. This particular sample was an exact duplicate of the real family's plan, and they wanted to see a first COLA similar to the one for 2023, thus the bigger jump.
Thiago: Hi ! Thank you for the response back. (I thought I was losing my mind for a minute there !!!) It would have been interesting and more of a worst case to use the 2.5% COLA for the first year at 62 years old I think that you will never see that high of a COLA increase again as in 2023. In fact, by using the 2.5% COLA for age 62 and then re-running this with the same scenarios, it could show us all how much that effects the overall outcome. (Not saying for them to work longer, but just re-run everything you did with the presumed 2.5% COLA for age 62) @@TheFedCorner
Thiago: Hi. Another thing -- if the COLA for 2026 was 7.5% and that is diet cola on FERS - that means it was 8.5% inflation with calculations from the CPI . So therefore consumer goods and services also went up in that year of 2025 (to get the COLA for 2026). Yet for this couples living expenses you kept it steady at an increase of 2.5% per year and also the insurance premiums you kept it steady at 1.25% per year. Does this sound right to you for the year 2026 ? If there is a COLA that this couple wanted , then everything else should have also increased for 2026 - otherwise it is "free money - given to them" , but not take in goods and services. You are giving them more purchasing power than they deserve, in other words. And if this couple is keeping FEHB, I have been studying that ever since OPM created "self plus one" around 2013 - and FEHB is increasing at a rate of 4.5% per year. I am also curious how you handled medicare part B for this couple at age 65 for him and the next year for her , given they are taking SS at 67, that is a big jump in living expenses. Medicare for them (assuming no IRMAA) could be $200 a month each by year 2029 - and then when both of them take Medicare Part B that next year ($400 a month) - that is nearly $5000 more for that year and every year after that adjusting each year for the "new wonder drug" that comes out to make us live longer. Medicare Part B is what really scares me and its projection of what it will be in the future (as it doubled in premium in 10 years).
His "Portfolio A" showed a 22% return in year 1, and a 15% return in year 2, and how this was a portfolio that would leave to financial retirement success. However, the chance of anyone getting such returns out of a relatively balanced, not overly risky portfolio, is, well, just about zero.
Portfolio growth comes from more than just the return on stocks. What you see is total increase, not percentage growth of the investment holdings. This is a model based on historical figures.
Great video and example. My wife and I are looking at this as well and may be in a similar situation (hoping I’ll have more like $1.5M by the time we retire at age 57 in 7 years though). Trying to figure out if we can pull a lot those first 5 years to pay off mortgage and do Roth conversions and how that could affect our overall plan). Research continues but this video is a great for my thinking in that!
@@glasshalffull2930we are looking at building/buying new in a new location but as I run scenarios it’s scary when you pull so much those first few years. Plus any Roth conversions and not wanting to affect Medicare so need to do all this before 63.
@@scotta5838 IMHO, maybe instead trying to pay off the mortgage, stockpile the extra funds in laddered CDs so you can use it to survive without pulling from your 401K those first five years. Though counterintuitive, you could also ‘stop’ contributing to your 401K for a few years just before retirement (always contribute enough to get the match) and stockpile that money. It seems like you’re fixated on not having a mortgage. Not saying it wouldn’t be great to have a paid off mortgage, but in reality it’s just another monthly expense. Same as property tax, food, fuel, income tax, health insurance, etc.
The system I use is much too expensive for individuals, and it’s quite challenging to learn and use if not a professional. But there are some other tools out there that are intended for individual use. I’m testing a few out to see how well they work and may eventually do a video on it.
What is implementing a proper retirement system mean? I didn't see where you told us exactly what you did. This couple is very similar to us so would have liked to see that. How do you figure out what to do?
This will vary among families. Certain investments have characteristics that can help a retirement plan's objectives. Creating the right mix for any given retirement plan is multifaceted. I'll consider a video on this but it can be an overwhelming concept and quite technical for a quick video format. -TG
@@TheFedCorner Thank you for the reply. Appreciate it. I do understand the complexity which is why I have a consistent headache trying to figure it all out LOL
I like this. I still wonder how this would look for my wife and me, as she retires in a little under 3 years and I in a little under 6. We both work for the FED. I also wonder how much it costs to have our situation analyzed.
Don’t be discouraged! Retirement plans are vastly dependent on lifestyle, which is heavily influenced by where you live. If someone hasn’t saved as much, it might mean they have to be okay with some trade-offs, but there are always things they can do to improve their position. The best thing is to start working toward it now.
Thanks for your feedback. In some videos we try to remain high level to give people an idea of how to be thinking, while others go a bit more in depth.
couple problems I see are, you need to withdraw from deferred accounts in the beginning also. You have them living till 100. at age 80 50% will be dead more if we keep listening to the science. I don't expect your couple to make it to 80 boy did they miss out on life.
Great points! They did spend tax-deferred accounts in early retirement since they didn't have much in after-tax. Regarding the age, that's how long the projection is run for, not necessarily how long they live. However, running to 90 or less would be imprudent, as we see many federal retirees who live beyond that. Thanks for tuning in!
Great point, it’s too easy to just fall into the routine. Some folks needs the leave for payout once retiring though since the pension doesn’t start for a few months.
@@TheFedCorner , if they need the payout they probably aren’t ready to retire financially. The payout is a nice to have to fund that retirement vacation.
If you enjoyed this video, consider subscribing by using this link: ua-cam.com/users/thefedcorner
AND if you're interested in our FREE newsletter, you can find it here: thefedcorner.com/current-resources#764c6ea5-6ec2-4c7d-b04a-99745e48d53f
Am I the only one who used to think "I know how to prepare for retirement...", yet every year I get less and less confident that I can handle the planning on my own without professional assistance? Wow. So much to think about. Thanks @TheFedCorner for sharing these videos.
You're not alone. Many retirement planning concepts are simple to understand but complex to implement. Laws and the economy frequently change, and it requires a substantial amount of time to properly stay on top of it all. Glad you found the videos helpful!
Yes, the tax stuff is the biggest wild card for me....
Super helpful! Thank the couple for sharing this information. Also, maybe paying off the house quickly would help minimize expenses/spending early. I'm 33, im just shoving in as much as I can into retirement vehicles.
Keep at it! You've got plenty of time to save aggressively to create your own financial independence in the future. Thanks for tuning in!
@@TheFedCorner thanks. I never feel like I'm doing/saving "enough"
Yes, this was very helpful. We are retiring at 62 after next year and plan to do roth conversions until age 70 when we start taking social security. We are hoping that those conversions grow enough to get us through retirement
Happy to hear this helped. Roth conversions can be incredible tools sometimes. We have a few videos on when they do and don't make sense, check those out if you'd like!
At what tax rate are you going to do the conversions? My issue is the government could decide to tax the gains in the future just like they started, and increased taxes on Social Security.
Thiago and his team helped me with my plan. I am 62, retired from the government. 1M in TSP, and doing consulting work, so not fully retired yet. However, I am more confident that the plan will keep me in a financial position where I can enjoy the rest of my life.
We're glad to be helpful. Thanks for sharing your experience and for your support; we all appreciate you!
@crcol may I ask a ball park on what it cost you and are they a Fiduciary?
62 and struggling with should I retire or keep working. Retire means retire. If I retire from federal employment and then go back to work doing something else, why not just keep working?
Do you guys have some sort of mid-career check-in/review of retirement strategy service? These videos are awesome!
Excellent suggestion, we'll add this to Thiago's video list. He does have a retirement checklist video that's being developed so stay tuned for that. Alternatively, for personal questions or anything related to working with him, you may send an email to welcome@rmgadvisors(dot)com
Thank you!!
I appreciate you taking us through the story. Love it!
Glad to hear it was helpful!
This case study was helpful. I would also like to see examples of single people.
Sure, we'll add a case study with one person to our list for the future.
Yesss, second this!
@@CumminsTurbo4 I'll third this!
I came across this video by doing a search. Am I glad I found it. This was very insightful information. I am a recent FED retiree, and I am trying to figure this retirement planning out. I will sign up for the newsletter to learn some more. Thank you.
Thanks for tuning in!
I'm late to the game but I've been watching a lot of Thiago's videos (a lot in general but Fed Corner are superior) and this was one of the most helpful I've seen. Please, please do more of these. Real scenarios are exactly the type of thing I deeply need in my learning.
We appreciate it! Glad they've been helpful. Thiago has more of these planned so stay tuned!
This is very helpful. This sounds like my situation.
Yes please, more info about optimizing to save on taxes. Specifically, Roth conversion for those in 12/15% bracket, and capital gains window vs. Roth conversions.
Yes, it was very helpful. Pl continue to give such examples.
We will!
This case study was helpful. Would like to see more examples in future. For the success rates what market assumptions were factored in.
Glad it was helpful. For this specific case, I was using 6.13% linearly annualized returns. Understand that linear returns is a mean line driven through a scatter plot of returns. It represents trajectories and should be used with caution, as volatility and tax-bite are very real variables that must also be accounted for. I just couldn't fit every possible outlook inside a video or risk it being too long and technical. -TG
Yes, real world examples are very informative!
More coming from Thiago in the near future, stay tuned!
Maybe do a video on retirement income strategy and methods to reduce taxes since that made a huge difference?
Sure, I'll consider this, someone else mentioned it too. The challenge is that there are many different strategies that can be good in some circumstances and bad in others. But perhaps I can show examples and talk through how some of them work.
This was very helpful. I need to really start thinking about my retirement. Lots to think about!
Glad it was helpful!
Yes, this is helpful… please show more
Glad it helped! I’ll do different scenarios going forward.
Yes, this is very helpful!
Glad you think so!
Yes helpful video, very interesting what small changes can do.
Happy to hear you found it helpful!
Very helpful.
Glad to hear!
This was really Helpful!
Glad you think so!
Helpful,and I would like to see more real world examples, please.
You got it!
Yes - this video was very helpful.
Glad you think so!
I've heard the 4% rule thrown around, but is that still relevant for TSP?
That's a true, With a significant sum like $1M in your TSP, it's crucial to have a well-thought-out strategy.
@TheFedCorner Do you work my the hour? I am within a year of retirement. 1.2 million + 62k fers + 28k SSA +20k wife SSA. zero debt
No, we do not work by the hour.
This was helpful.
Glad to hear it!
Excellent!
Many thanks!
We like these examples Thiago
Glad you found it helpful.
Absolutely helpful
Glad you think so.
Thiago had me at Monte Carlo 👍
If this same couple were to decide to defer 2 years and retire at 62, how would that change their projection? Would they still need to supplement with consulting?
Great question. That’s one that we’d ordinarily ask when planning with clients. Once we calculate how much they need annually for lifestyle we can factor in spend rates + inflation, some growth, and an additional two years of work. That bumps FERS by 10%, more savings in portfolio, and could be enough to allow someone to not have to work PT in retirement. The graphs show an illustration of the calculations on whether or not the math works out in any given circumstance.
Can anyone help me understand why at age 62 the FERS retirement jumped from approx 27K to 29K (7.5% increase), while the next year it only jumped to $30K (a 2.5% increase) ? it would appear as he is saying that since you don't get the COLA until age 62 - that the COLA is cumulatively held until age 62. Which I do think was the case. I just thought everyone else gets their COLA's who are 62 or greater and you just lose your purchasing power until age 62 and at age 62 you just got the COLA for that year of age 62 to whatever the "FER's diet COLA" was and then it continued with DIET COLA's of each year. I don't understand why he increased the FER with a COLA of 7.5% unless it was cumulatively held ? Can someone explain this ? Thanks.
By waiting until age 62 to retire, the FERS annuity pension is calculated at 1.1% instead of 1.0%. Example, 40 years at age 62 x 1.1% = 44% x high 3. If retiring at age 60, that would be 38 years at age 60 x 1.0% = 38% x high 3. You are correct that you don't get the COLA until 62, but you do get a supplement until age 62. That's just a simple example. I think that 1.0% to 1.1% difference at age 62 is just one decision point on when to retire.
Excellent attention to detail, Nicholas. You are correct, COLA does not accrue until 62 and it is not cumulative along the way, so you are indeed losing purchasing power for a few years. This particular sample was an exact duplicate of the real family's plan, and they wanted to see a first COLA similar to the one for 2023, thus the bigger jump.
Thiago: Hi ! Thank you for the response back. (I thought I was losing my mind for a minute there !!!) It would have been interesting and more of a worst case to use the 2.5% COLA for the first year at 62 years old I think that you will never see that high of a COLA increase again as in 2023. In fact, by using the 2.5% COLA for age 62 and then re-running this with the same scenarios, it could show us all how much that effects the overall outcome. (Not saying for them to work longer, but just re-run everything you did with the presumed 2.5% COLA for age 62) @@TheFedCorner
Thiago: Hi. Another thing -- if the COLA for 2026 was 7.5% and that is diet cola on FERS - that means it was 8.5% inflation with calculations from the CPI . So therefore consumer goods and services also went up in that year of 2025 (to get the COLA for 2026). Yet for this couples living expenses you kept it steady at an increase of 2.5% per year and also the insurance premiums you kept it steady at 1.25% per year. Does this sound right to you for the year 2026 ? If there is a COLA that this couple wanted , then everything else should have also increased for 2026 - otherwise it is "free money - given to them" , but not take in goods and services. You are giving them more purchasing power than they deserve, in other words. And if this couple is keeping FEHB, I have been studying that ever since OPM created "self plus one" around 2013 - and FEHB is increasing at a rate of 4.5% per year. I am also curious how you handled medicare part B for this couple at age 65 for him and the next year for her , given they are taking SS at 67, that is a big jump in living expenses. Medicare for them (assuming no IRMAA) could be $200 a month each by year 2029 - and then when both of them take Medicare Part B that next year ($400 a month) - that is nearly $5000 more for that year and every year after that adjusting each year for the "new wonder drug" that comes out to make us live longer. Medicare Part B is what really scares me and its projection of what it will be in the future (as it doubled in premium in 10 years).
His "Portfolio A" showed a 22% return in year 1, and a 15% return in year 2, and how this was a portfolio that would leave to financial retirement success. However, the chance of anyone getting such returns out of a relatively balanced, not overly risky portfolio, is, well, just about zero.
Portfolio growth comes from more than just the return on stocks. What you see is total increase, not percentage growth of the investment holdings. This is a model based on historical figures.
Great video and example. My wife and I are looking at this as well and may be in a similar situation (hoping I’ll have more like $1.5M by the time we retire at age 57 in 7 years though). Trying to figure out if we can pull a lot those first 5 years to pay off mortgage and do Roth conversions and how that could affect our overall plan). Research continues but this video is a great for my thinking in that!
Great goal to shoot for, glad you enjoyed the video.
What interest rate is your mortgage? If it’s 3%, why would you pull out of your portfolio, that hopefully is making 7%, to pay off a 3% mortgage?
@@glasshalffull2930we are looking at building/buying new in a new location but as I run scenarios it’s scary when you pull so much those first few years. Plus any Roth conversions and not wanting to affect Medicare so need to do all this before 63.
@@scotta5838 IMHO, maybe instead trying to pay off the mortgage, stockpile the extra funds in laddered CDs so you can use it to survive without pulling from your 401K those first five years. Though counterintuitive, you could also ‘stop’ contributing to your 401K for a few years just before retirement (always contribute enough to get the match) and stockpile that money. It seems like you’re fixated on not having a mortgage. Not saying it wouldn’t be great to have a paid off mortgage, but in reality it’s just another monthly expense. Same as property tax, food, fuel, income tax, health insurance, etc.
Very helpful! Is there a tool like this I can use to plug in my own numbers?
The system I use is much too expensive for individuals, and it’s quite challenging to learn and use if not a professional. But there are some other tools out there that are intended for individual use. I’m testing a few out to see how well they work and may eventually do a video on it.
What is implementing a proper retirement system mean? I didn't see where you told us exactly what you did. This couple is very similar to us so would have liked to see that. How do you figure out what to do?
This will vary among families. Certain investments have characteristics that can help a retirement plan's objectives. Creating the right mix for any given retirement plan is multifaceted. I'll consider a video on this but it can be an overwhelming concept and quite technical for a quick video format. -TG
@@TheFedCorner Thank you for the reply. Appreciate it. I do understand the complexity which is why I have a consistent headache trying to figure it all out LOL
I like this. I still wonder how this would look for my wife and me, as she retires in a little under 3 years and I in a little under 6. We both work for the FED. I also wonder how much it costs to have our situation analyzed.
Thanks, very helpful!
Glad you liked it!
Well if they weren't ready with 1M, I'm screwed for sure.
Don’t be discouraged! Retirement plans are vastly dependent on lifestyle, which is heavily influenced by where you live. If someone hasn’t saved as much, it might mean they have to be okay with some trade-offs, but there are always things they can do to improve their position. The best thing is to start working toward it now.
do you charge people in the federal service for this type of help? if i recall correctly we can see free financial advisors.
This was minimally helpful since it didn't provide a lot of information just vague examples.
Thanks for your feedback. In some videos we try to remain high level to give people an idea of how to be thinking, while others go a bit more in depth.
couple problems I see are, you need to withdraw from deferred accounts in the beginning also. You have them living till 100. at age 80 50% will be dead more if we keep listening to the science. I don't expect your couple to make it to 80 boy did they miss out on life.
Great points! They did spend tax-deferred accounts in early retirement since they didn't have much in after-tax. Regarding the age, that's how long the projection is run for, not necessarily how long they live. However, running to 90 or less would be imprudent, as we see many federal retirees who live beyond that. Thanks for tuning in!
You earn leave. Take leave. Don't let work consume your life.
Great point, it’s too easy to just fall into the routine. Some folks needs the leave for payout once retiring though since the pension doesn’t start for a few months.
@@TheFedCorner , if they need the payout they probably aren’t ready to retire financially. The payout is a nice to have to fund that retirement vacation.
This is why you sell all your liabilities and move to Mexico or Spain.