There were a lot of great articles during the last week, so I apologize for the number below, but they are all great reads.
Also of note this week is that it’s time to decide whether you go for the new Blended Retirement System and this Thrift Savings Plan notice:
Changes coming to the Lifecycle (L) Funds — (November 29, 2018) We are planning adjustments to the L Funds in an effort to improve your investment outcomes. Effective in January 2019, we will increase exposure to international stocks (the I Fund) from 30% to 35% of the overall stock allocation in all L Funds. The L Income Fund stock allocation (C, S, and I Funds combined) will increase from 20% to 30% over a period of up to 10 years. The L 2030, L 2040, and L 2050 overall stock allocations will hold steady for a period of years before resuming their transitions from stocks to bonds. In addition to improving investment outcomes, this pause will align the L 2030, L 2040, and L 2050 Funds with the L 2060 Fund, which will be introduced in 2020 with an initial stock allocation of 99%. Visit Lifecycle Funds to learn more.
The L Funds are getting riskier, which is probably a good thing.
Here are this week’s personal finance articles:
Here’s the official announcement of the 2019 contribution limits for the Thrift Savings Plan:
For those less than 50 years old, it increased from $18,500 to $19,000. If you are 50+ you can do an extra $6,000 on top of that.
by Brendon Drew
DFAS has struggled to accurately implement the new pay plan, and most physicians notice the impact on their LES. What most don’t realize, though, is that the errors may have also impacted their Thrift Savings Plan (TSP) investments. If you contribute to the TSP with any of your medical specialty pays, you should thoroughly investigate your LES and your TSP statements. Here’s an example of what can happen.
I was transitioned off of the legacy pay in February 2017:
When DFAS completed the retroactive pay changes, $785.93 was removed from my 2017 TSP contribution total:
While that may not seem like much, consider that my TSP earned 27% in 2017, the money grows tax-free in a Roth account, and I plan on having that account for another 30-40 years.
Since the involuntary withdrawal occurred in calendar year 2018 but went back into calendar year 2017, I was unable to provide “catch up” contributions in 2018.
I recommend that you review your LES carefully. In the month(s) you are transitioned from the legacy system, look for a negative VSP and/or BCP entitlement. If you see one of these, go pull your TSP statements from the corresponding period and you may find that money was taken out of your retirement account and given back to you as cash.
If you have questions about this, feel free to email me on the global address book. Make sure you have access to your LES and prior TSP statements.
The three largest investment firms have been lowering the cost of their index mutual funds and exchanged traded funds (ETFs) in a price war. How does this price war and the resulting costs compare to the Thrift Savings Plan, which has also had historically low costs on their investments? Read more here:
There is a great post on the Thrift Savings Plan (TSP) over at WhiteCoatInvestor.com that you should check out:
I was forwarded this message regarding a new problem with the Thrift Saving Plan (TSP) contributions and those converting to the new consolidated pay plan. I don’t fully understand it and was debating whether I should even post it, but I decided to do so. In my opinion, the take home messages are:
- If you are contributing to the TSP using your special pays, you should probably just use a percentage of your base pay, if possible. This is what I do, and I converted to the new pay plan in June without any TSP issues.
- If you don’t regularly check your TSP contributions, you probably should after you convert to the new pay plan.
Here is the message:
All, I was just apprised of this issue with TSP, and the new special pays, and wanted to get it out as quickly. This is very important and needs to get out ASAP. I am sure I have listed all command coordinators, so for NMC San Diego, and NMC Portsmouth, appreciate if you could send this to the Regional Command DFA, so they can get it out to all
My office was not made aware of this issue until today. Due to workarounds DFAS has had to do, particularly for the MC and DC in order to pay what was previously MSP and DOMRB, it has effected individuals elections to TSP.
My office has nothing to do with TSP, and would not be able to answer any questions, or resolve any issues, so individuals need to contact their PSD, or email the DFAS TSP office at email@example.com.
DFAS has a draft message they will be releasing this weekend to the PSDs, but the important information individuals need to know about claiming TSP for the new pays, which is under paragraph 5 of the message is below. No one should be electing the legacy special pays anymore (A – C), so only (D -F) are the ones they should be concerning themselves with.
For MC and DC, what DFAS has done is convert all MSP and DOMRB to CRNA-ISP in their system to ensure anniversary payments are made. The reason is the DFAS system has a failsafe to prevent a non-MC or non-DC from receiving the pay, and that is the member must have a resident VSP in the system at the time the anniversary MSP or DOMRB payment is due. If the MC/DC officer has converting to the new CSP then their VSP was stopped, and the anniversary MSP/DOMRB payment would reject.
THE FOLLOWING INFORMATION WILL ASSIST WITH TSP ELECTION:
A. LEGACY BCP: SHOULD ELECT SPECIAL PAY FOR TSP CONTRIBUTION PURPOSES, ALONG WITH ITS PERCENTAGE.
B. LEGACY VSP DC: SHOULD ELECT SPECIAL PAY FOR TSP CONTRIBUTION PURPOSES, ALONG WITH ITS PERCENTAGE.
C. LEGACY VSP MC: SHOULD ELECT SPECIAL PAY FOR TSP CONTRIBUTION PURPOSES, ALONG WITH ITS PERCENTAGE.
D. HPO BCP: SHOULD ELECT INCENTIVE PAY FOR TSP CONTRIBUTION PURPOSES, ALONG WITH ITS PERCENTAGE.
E. HPO IP: SHOULD ELECT INCENTIVE PAY FOR TSP CONTRIBUTION PURPOSES, ALONG WITH ITS PERCENTAGE.
F. RETENTION BONUS: SHOULD ELECT SPECIAL PAY FOR TSP CONTRIBUTION PURPOSES, ALONG WITH ITS PERCENTAGE.
Again, if there are any questions they should be addressed to the PSD, or the DFAS TSP email Address above.
William L. “Bill” Marin
Program Manager, Navy Medical Special Pays Program
Chief, Bureau of Medicine and Surgery (M13)
7700 Arlington Blvd. (Suite 5125)
Falls Church, VA 22042-5125
[Editor’s Note – The process of contributing to the TSP above the $18K annual limit while deployed can be confusing. Thanks to Dr. Levi Kitchen for giving us a first hand summary of how it works.]
By LCDR Levi Kitchen (Levikk81 < at > gmail.com)
Deployment offers a number of financial benefits, including tax free pay which can be directly contributed to your Thrift Savings Plan (TSP). However, this can be tricky. The following numbers are based on 2017 limits, which can be seen at this link.
Normally, the elective deferral limit is $18,000 annually. A deferral is defined as the money you elect to remove from your paycheck and contribute to the TSP. This includes either Roth or traditional TSP contributions. When deployed to a combat zone and therefore receiving combat zone tax exempt (CZTE) pay, the deferral limit for the current calendar year increases to $54,000. However, even when receiving CZTE pay, you cannot exceed $18,000 in contributions to your Roth TSP. The remaining $36,000 would have to be contributed to the traditional TSP. Also, in order to take advantage of the higher limit, the money has to come from your CZTE pay, which has to come directly from your paycheck. So, you can only take advantage of the higher deferral limits while receiving CZTE pay, not after.
Although the decision between the Roth and traditional TSP can be complicated (a matrix can be seen here), it’s probably smartest to max contributions to the Roth TSP first as, due to the CZTE, this money will never be taxed by the federal government. Once you reach a total contribution of $18,000 to the Roth TSP, DFAS will automatically stop deducting money from your paycheck. At this point, you need to change your contributions to traditional TSP in MyPay, because you’ve reached the limit of allowable Roth TSP contributions. Automatic deductions to the traditional TSP would again stop once you reach the total limit of $54,000 ($18,000 in Roth TSP and $36,000 in traditional TSP) for the calendar year, or you stop receiving CZTE pay.
As far as I know, once you stop receiving CZTE pay, your annual limit returns to $18,000 regardless of either Roth or traditional contributions. If you’ve already contributed over $18,000 while deployed, then you cannot contribute anymore to your TSP for that calendar year.
For any comments or questions, please email Levi at Levikk81 < at > gmail.com.