Episode Transcript
[00:00:00] Speaker A: Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
Welcome to Reyna Retirement. Reyna Reyes has dedicated her career to helping people make smarter financial decisions. Reyna Retirement is all about breaking down complex financial concepts into language you can actually understand.
Now here's the co founder of American Federal Benefits Consultants, Reyna Reyes.
[00:00:40] Speaker B: Well, we all know that our needs and our money planning and our program is going to be different over time. And for example, when you get hired at the Fed, you're young and spunky and you got your whole world ahead of you and life is your oyster, the world is your oyster. And you sometimes with our TSP plan, we want to have a different establishment of the way our funds look than maybe in retirement where, hey, I'm leaving, I'm exiting. The world was my oyster and the new world can be my oyster as well. But the times, they are a change, as Dylan says.
And we know that it's nice to look at your funds and some people are in them every day and they're checking all their stuff and what's TSB doing now? And 15 apps on the recommendations. But remember, there are five TSP funds. Five funds. And there's another option for certain people with mutual funds and things like that. But that's a side note. Five funds.
GF, CSI, the G& the F. Remember we get the safety, but we don't really have a ton of growth option. It's limited growth. CS and I, we get the growth, but what do we give up? The safety. And that's kind of a very rudimentary way to approach it. But these are the facts. So a lot of people say, well, I just wish I could have like somebody who would do it for me and just automatically make me a little bit safer and safer as time goes by, huh? Eureka. They've been around. They've been waiting in the background for you. Where have you been all my life? On the TSP website, these are the L funds.
The L stands for life cycle and they follow you through your life cycle. So they were designed for you to sort of pick the year you were going to go and let a ride. That's what a lot of people do. Some people try to get percentages. In fact, I met somebody who had essentially 5% in all of the five funds and then percentages in Every L fund that exists. But remember, there's only five funds. So you're mixing up all these percentages that also include the five funds. And so ultimately you still only have five funds with an ultimate percentage in each one of them at any given time.
So what do they look like? Well, let's say I got hired and I'm going to retire in the year of 2070.
Right? Well, this, if I put all of my money in the L20 70, this is what it looks like right now as of April 26th. Now, we just entered into a new quarter, so that's why the date is now. These, this, when you look on the website, the funds are going to show what they look like as of the last quarter or the beginning of the, of the most recent quarter that you're in. And they're not going to change until the next quarter. But what's cool is they change every quarter.
So come whatever July, this'll be a little bit different and have a little bit more in that top orange fund, the G Fund. Remember, does G mean good? No. G means government bonds and securities where you have safety, but you do not get a ton of growth.
Well, why would this person want to have very little in the G Fund? Well, they're going to retire in the year 2070.
So how old are they today? Like 35 or something? I don't know. Young, right?
Not long. Not. They're brand new 35. They're. They're 23rd. They just got started.
So the trick is a lot of people in their youth and in their early ages want to be heavily aggressive. And that's totally fine. That's how this L Fund projects it. Now, let's say they keep working. La la la la la Skipping down the road. We're off to see the wizard. And here we are in the year 2030. What does that look like? If I Was in a 2030 today?
Here's what it looks like. Look at how much orange there is. It's getting me safer and safer. If I was going to retire in five years, this is what kind of the L Fund would look like. Is this a recommendation? Kind of. It's based on. Not for me. This is just based on kind of like standards and all the gurus and all the talking heads and all the charts and Excel spreadsheets that everybody puts in based on mortality and recommendations, time and conservative financial approaches in retirement. Because what happens in retirement? Can you put money in ever again? No. Are you going to get a match? No.
And how can my money grow Only based on what the market does or doesn't do. And in retirement, a lot of people get super duper conservative with their money because they're not going to be shoving it in there anymore and the government's not going to be matching them. So I even, it's funny, I had a guy, I had a guy call me like seven, eight months after retirement. He's like, man, Raina, TSP used to really like grow a lot and I didn't change anything. And the market's fine, but it's not like growing the way it was. And I was like, listen, you used to see your dollar amount increase because you were putting money in like a banshee and the, and you were getting the government match. All that stopped in retirement. So you're still earning like you were, but you're not shoveling the coal into the train. You know, we're just kind of on autopilot and whatever the funds do because like, oh, that makes so much sense because he, he was seeing the increase, but a lot of that increase was based on his own contribution.
So this is the elf fund. Hey, I'm in the 2030.
And what happens in 2030? What happens in 2070? What happens whenever the year arrives that you chose?
The next year will be this super heavy orange one. Look at all this orange. Look at all the G funds. Gee whiz. G willikers, G funk money.
So in this example, in this year I have retired or I'm retiring. The L income, this is an L income, almost 75ish percent safe GNF and then a quarter ish in the CSNI. So we're not, they're not saying, hey, you should be 100 conservative. They're saying there's a portion that makes sense to be aggressive, but you should not be aggressive with all of it. That's kind of what the elfons are saying to us. When you look at them in the spirit of, of the, of the recommendations or what they're setting you up in. Obviously you see if I'm retiring way far away, crazy aggression. I can, I have time, I can ride the wave. If the market does its up and downs, which is what it does, I can afford to, I have time to recover. I can afford to experience some micro losses, even some macro losses because then I've got so many years to work, but now I'm retiring.
You'll get a letter if you had an L fund when your year arrives and it'll say, hey, now your plan is an all income. It's Never going to change again. If you liked all the changes, then you should go somewhere else. But if you put your money here for this purpose, then you shouldn't make any changes.
Maybe you're content. We're happy. We're retiring. Now we can take time to smell the proverbial roses and enjoy the fact that the money's not going to be losing anything there.
However, this is where a lot of people contact outside carriers, people like myself that work with IRAs. Remember, the only kind of IRA I work with is 100% safe. Safe as the G Fund. But sometimes you want to see, are there other attributes I can get? Are there other bells and whistles? Are there other features? Is there a better mousetrap out there somewhere? If my money's going to be just sitting somewhere, do I want it to sit somewhere?
No, better.
That's the very high class Ivy League way to say, is there a place that I might prefer?
That's why a lot of times you want to reach out and make some comparisons. You want to see all the places money could be.
And if you anything, I'm going to show you can't lose any money. I try to have plans that have no fees and we want to grow to our best capability. Are there ways we can. That you can outgrow the G Fund? Absolutely. Are there ways to have that same level of safety? Absolutely.
Should we keep some in the market? I think so. I think it's great. I mean, using that L Fund as an example, a lot of times people like to have some in an aggressive state and then some in a place that they know that they're not worried about it. Reach out, get scheduled. Let's see what makes sense for you and where you want to be, how you want to be. Well, correction, how you want to be and when and how we can make a plan to do it the right way the first time. We'll talk to you soon.
[00:09:02] Speaker A: Thanks for listening to Reyna Retirement. With a strong commitment to ethical standards, Reyna works hard to find the right solution for each individual or family who reaches out for advice. To contact Raina directly, call 850-450-6500. That's 850-450-6500. Or to reach the team at American Federal Benefits Consultants, call 1-800-872-8857. That's 1-800-872- 8857. You can also go online to American Federal.org not affiliated with the United States Government. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. The information is intended to be educational in nature and does not provide a guarantee or specific result. All copyrights and trademarks are the property of their respective owners. American Federal Benefits can is an independent organization, not a government agency or affiliated with the Federal Government or any state government. The terms CSRs, FERs, FELI, and FEHB are all registered trademarks of the U.S. office of Personnel Management. American Federal Benefits Consultants, agents, consultants, or any independent contractors do not provide tax, legal, or investment advice and do not engage in the solicitation or sale of securities. Consult with your tax advisor or attorney regarding specific situations.
