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 super smarter financial decisions. Reina 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: So what you going to do when you retire? You remember cops, right? The theme song? What you going to do when they come for you? In fact, great story about that. I'll get to my point in a second. So how about we were in Best Buy, this is years ago. Years, years, years ago. Probably a decade.
And we walk in and there's some hullabaloo. There's, there's like a police officer on the side, but we didn't really notice. And then one of the Best Buy employees says, if you want to see something cool, stand right here and watch that door. And unbeknownst to us, there's this door on the side right by the thing, like a very quiet little door.
So sure enough, we didn't wait long. That door opens and, and then there's another officer kind of perp walking somebody out. And right as that door opens, the guy hit a button and the SPE started going, bad boys, bad boys. What you going to do? What you going to do when they come for you as they perp walk this guy out of Best Buy into a police car right at the front?
So best Best Buy visit ever. But that's the question. What you going to do when the time comes and you retire? We know that with tsp, a lot of times people say, but Raina, you told me to have a calmness of spirit and that when I retire, nothing automatically happens. With tsp, this is true in terms of there's no auto withdrawal, there's no automatic distribution and taxableness.
Unless you're over 73/75. When the time comes and you're subject to RMDs. If you're one of the few in the proud that have been working past RMD age here in the beautiful, lovely world of government work, you will then be subject to RMDs. It's not right now. You don't have that now while you're working. In fact, that's one of the cool ways you can further defer Your tax obligation to your Uncle Uncle Sam, that is by working past your RMD age while you're in work status as an employee, RMD is are not required of you until the day you sever employment or if you roll money out into an outside ira. Either one of those events will trigger your RMD requirements all of a sudden. Where you're required for RMDs really and ravenously. I don't know, I can't think of any other R words for that one. But you will be subject to RMDs at the time. So working could be beneficial if you wanted to further stick to Uncle Sam and make them wait longer for the taxes.
Another thing to consider is if you're retiring and separated early like some of my derpa Derp Vera people. What words does she speak? What does that even mean? Derpa derp is the DRP that is the deferred or delayed. Some people are using different words resignation program through which many retired because they were already eligible. And so they took the offer to go ahead and get paid for another eight, nine months while they didn't have to do actual work, which was a pretty good little gig. And if you were in your 73 or plus while you were doing that, you further delayed the RMD. But for those of you who are a little whippersnappers and you separated in your 50s or something like that, early 60s, then you know there's some options for your distribution from tsp. You know, I'm an IRA queen and I can help you do all kinds of rollovers to all kinds of places. Roth IRAs, traditional IRAs. Bring unto me your weekend, your weary money, and we will put it and let it have a rest in a safe, happy place. But what you need to know is that you've got a lot of choices with that. Now some of you have spouses that are non fed. So you're not a Twinkie. Maybe you're a ding dong. Now here's a new definition for you. How about Ding dongs are two married federal employees. But did I say Twinkies? Yes, Twinkies are two.
There's so many new words happening today, we're just happy with it. Two married federal employees. I call Twinkies because two of the same thing in a little package. And it means some decisions, survivor benefits, life insurance, things like that. But one of my amazing postal employees in New York, actually he and his wife coined this phrase. I said, well, you're kind of like Twinkies, but you're not really Twinkies. Because he's postal and, and she works for a city municipality. So they both have pension and they both have a 401k style plan. So they said, oh, we're Ding Dongs, which is another version of like a hostess cake that comes in a packet. I said, oh my goodness, you're Ding Dongs. Crazy enough I wrote it on my notes, but I didn't give myself any context. Ding Dongs was on the notes. And great. Me, I'm showing a screen share the next time I see him. Let's recap all my notes that I. Okay, I hand wrote these bad handwriting and Ding Dongs are just sitting there in the middle like, what is this? I would never call them Ding Dongs. These people are very nice. Like, I really enjoy talking with them. Why would I call them a Ding Dong? And then so I, I stopped the screen share and then they reminded me like, oh yeah, we're your Ding Dongs. And I'm like, oh yeah, that's what it was. And it's been a phrase, they coined the phrase ever since then. So I digress to the story. But you will never forget if you're a Ding Dong, meaning federal employee and a spouse that has some type of similar benefits, pension and a 401 is the prime way I would consider a Ding Dong family. And all that means when we look at this, if you're a Ding Dong family and you have a 401k, not just a tsp, we might need to really look at what's up.
What's up with your 401k? What's up? That is old 90s stuff. That.
What's up with your 401. Because.
Because some 401s do have the automatic distribution or the automatic. Your money is not going to stay here. You don't got to go home, but you can't stay here kind of program where you've got an X amount of time post separation to make a plan, an exit strategy to relocate your funds. And I've just been talking with people here very recently who just are doing taxes and they get a 1099 and they're like, what is this? Who is this company? What is that?
And then they're like, oh wait, I know who this was. We had a 401k with them. Why am I getting a taxable distribution? Most of my stuff was in Roth.
Thanks 401k company for helping me out so much and sending me this distribution that now taxed the money that wasn't supposed to be taxed and they can't. You know, we were talking and we're like, okay, hold on, hold on. We can do an indirect rollover for this and just take that money, put it in a Roth, because it came from a Roth. As an indirect rollover, you got a certain amount of time. I digress. But the point is, you got to know and prepare what you're going to do when the 401k comes for you. So. So we've got to make plans for that. As you know, I know. TSP backwards and forwards and in between and upside down and all the other directions. 401ks I know as well. But we have to look at the program and see who's administering it because they all have different rules, they all have different stuff, right?
So you need to know these things. And that's why it's worth having a couple of planning sessions with me or my team. Because it's very common, as you've seen, if you've ever scheduled or started to schedule a meeting with us, we say, hey, get your documents together, grab the stuff, have it ready and we'll go over it. It's very common that we have the core documents ready. But then maybe somebody has an ancillary product they didn't prepare for. Or they say, oh, by the way, I remember I have this other financial plan I forgot all about. Okay. That's why we have multiple meetings to make plans and then we can get a little bit in the weeds on the future meanings. So let this be your recommendation from Raina for the present, to give yourself a present and just take a moment.
We got to tell ourselves, we stop scrolling for a minute and we take a moment to read this stuff. Okay, Administer of my money, what are you going to make me do? What choices do I have if I'm leaving? Because we, we want to avoid the stuff or at least know it's coming so we can make the right choices. Reach out, get scheduled. Let's have a meeting. Let's go over your stuff so we can know what you're going to do when the 401k comes for you. We'll see you soon.
[00:09:15] 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 Reyna directly, call 850-450-6500.
That's 850, 456,500. 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 americanfederal.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 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 Consultants is an independent organization, not a government agency or affiliated with the Federal Government or any state government. The terms csrs, fers, fegli and FEHB are all registered trademark of the UB 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.
