Eric White We’re coming close to the end of the year. It’s been a shaky end as usual, and you’ve got open season tackling in and everything like that. You know, tell me why this is the perfect time to be thinking about taxes next April.

Thiago Glieger I know, this is the topic nobody likes to think about, especially not early and before we have to, right? But smart federal employees are looking at their income year to date, and they’re looking at things like tax withholding. If there were any major changes this year, like a promotion or a bonus, or maybe your spouse retired, something like that, your withholding might be off. And then there’s a variety of other things too, that you’ll want to incorporate, like making sure that you don’t wanna incorporate some kind of charitable giving. A lot of people do that at the end of the year. There’s RMDs that come in. So there’s a lot of little things that, if we start paying attention to now, all of it affects taxes. So we wanna get ahead of those things.

Eric White Yeah, so let’s get into it rather than actually saying let’s get ahead of it. How do you actually go about doing that?

Thiago Glieger Yeah, so one of the biggest things we tell federal employees to be aware of, Eric, is to make sure that they are actually maximizing their TSP contributions, if they can afford to do so. Obviously, this is an interesting time to be doing that, given that, you know, people aren’t being paid, but the idea of maxing out the TSP helps you to save on taxes if you’re using pre-tax contributions. So before the end of the year, you want to try and get as much as you can in there. So the contribution for 2025, the limit is $23,000. If you are over 50, it’s $7,500 additionally. So if you’re behind on contributions and you actually want to get all of those paychecks in there, you can actually adjust some pay periods so that you do a little bit more and get yourself caught up. Okay, now for 2026, this is where some of the big changes are going to come to the TSP contributions. First, we’re going to start getting the normal inflation adjustment for the contribution limits. The amount that you can contribute under 50 goes up by a thousand and then catch-up goes up by another 500. But the biggest change is how that catch-up contribution is going to happen. So for people who are over 50 and they’re going to be earning $145,000 or more as a federal salary, they can no longer do that pre-tax deduction. What does that mean? That means you’re going have to pay taxes on all of that catch-up contribution. So. This is a pretty big thing as people start thinking about taxes for next year. Your taxable income could actually be going up and you might actually owe a little bit more in tax.

Eric White Yeah. Are there any changes coming down the pipeline that you’re hearing regarding TSP contributions? Are those amounts going to go up again in the backdrop of that? This is a very strange time to be talking about this.

Thiago Glieger Yeah, Eric, each year we see a little bit of an inflation adjustment where the … IRS actually will come out and say, hey, everyone participating in a 401k type of plan like the T.S.P. Now you can put a little more each year. It Just helps you stay on top of saving a little but more. And so we’re definitely going to see that. Of course, for anyone over 50, you have that additional catch up contribution. And then for people who are a little older than that, there’s the special catch up contribution as well. So, lots of ways to get more money in the Thrift Savings Plan, and again, if you’re already thinking about taxes for next year, you want to consider whether or not you’re going to be forced to do Roth contributions for the catch-up, because that means you have to pay the tax up front, and so that’s a big change both in the amounts and in how you’re contributing that’s coming to the TSP next year.

Eric White I’m talking with Thiago Glieger, private wealth advisor for RMG advisors. On those TSP contributions, we’ll get a little bit more into the investment side of things, but during this time that we had mentioned, a lot of folks aren’t getting their paychecks regularly. The idea of borrowing against your TSP plan is now a plan that most folks are going to have to result to. What can you tell us about what they should be on the lookout for if it comes down to that.

Thiago Glieger Yeah, Eric, this is just such a hard time for federal employees and it’s really unfortunate that we are down to these last little solutions of trying to borrow against ourselves. But the idea of borrowing from ourselves instead of borrowing another type of creditor like a bank or a financial institution means that you’re going to be paying yourself the interest if you borrow from the TSP and it forces you as soon as you start getting paid again. It forces you to start repaying yourself back each paycheck. So it really allows you to be very disciplined and not overspending, taking the money and then not ever paying it back. The reason that that’s very nice is because it gives you access to liquidity immediately. And if you have to put food on the table, you have make a bill payment, you have pay your mortgage, that’s a really good way to get cash very quickly — which the TSP is still functioning. A lot of people think that the government is shut down, people can’t access the TSP. That’s not true. You can actually go in there and get that. There’s different types of TSP loans. You can get up to $50,000 for a GenPurpose one. And you can see the information. The TSP has a really nice page that talks about the loans and how they work and how much you can get. If you’ve tapped it before, then obviously there’s going to be some limitations there. But if you’re in a dire situation and you’re looking at, you know, not being able to make a mortgage payment or having to put some huge bill on a credit card and possibly start down this rabbit hole of credit card debt, the TSP loan can be a really good option for you.

Eric White Let’s look at farther down the future here. As far as capital gains and avoiding the tax bill that can sometimes come when you’re looking for liquidity fast and easy from selling some of your holdings, what is it that people should keep in mind if they go that route?

Thiago Glieger The big thing, Eric, with capital gains is that people who own non-retirement accounts, so brokerage accounts, right — they are going to be subject to any sort of capital gains taxes. And there’s a lot of things that you can do to help reduce those taxes, one of which is called tax-loss harvesting. So this is something that as the markets go up and down, you can take use of that volatility and create tax savings for yourself throughout the year. So it is something you want to do year round, but you can always look at this time of the year and go back and see is there anything in my portfolio that I could sell that could help me to create some tax savings. If you have additional tax loss beyond any of the gain that you’re realizing you can actually offset up to $3,000 of your salary in these capital losses as well. So if you think about salary income, that’s the highest form of tax that we have. And if you can reduce $3,000 worth of that salary for tax purposes, then you’re actually saving several hundreds of dollars in taxes simply by doing a very simple strategy in your portfolio.

Eric White And the length of holding those positions also has an effect on that. Do I have that correct?

Thiago Glieger That’s right. If you’re going to be realizing gains or losses, depending on how long you held it, the IRS treats that differently. So the key number we want to be aware of is 12 months or more. Anything that’s 12 months is considered long-term, right? And anything that’s less than 12 months, is considered short-term. The only other time horizon thing that you want to be aware of too, Eric — that I think you were alluding to — is this idea of a wash sale. So if you’re creating tax savings from a loss in your investments, you gotta be really careful about not to rebuy the same stock within a period of time, not have sold it prior to the sale. There’s some rules around there that you gotta be real careful [about].

Eric White All right, and this time of year, and a lot of people going through some hardship right now. Another way is through some charitable giving. How can you — well, you know, it sounds bad to look out for yourself when you’re trying to be helpful — but what can you do to maximize really the way that it can benefit you as well when making a charitable donation.

Thiago Glieger The best way that you can give philanthropically or to any charity is if it benefits both them and you. That’s a situation where everybody wins and who doesn’t like that? There’s a couple of really smart ways that people will do these kind of charity and donating. The first is if someone is looking at their RMDs. So this time of the year, we have required minimum distributions that are gonna be applicable to anybody over a certain age. So typically that’s 73 for most people these days. And the good news is the TSP is gonna take that money out of your thrift savings account automatically. But the bad news is you pay taxes on that whole distribution. Wouldn’t it be nice if you could instead, if you are a regular contributor to a charity of sorts, maybe give some of that RMD to the charity directly. So that’s a strategy that people could do. Unfortunately, you can’t do that within the TSP, but you can do that with an IRA. But you don’t pay the taxes on it, the charity doesn’t pay taxes on, and you satisfy your RMD all at the same time. So that’s a really helpful tip that a lot of federal employees have been able to do. Key age for that is 70 and a half, okay? So this is not something that’s available to everybody. But frankly, if you’re coming up on RMDs and worried about that, you’re gonna be probably a little older anyway, so that’s big one.

Eric White Anything else that people should keep in mind as the year ends out here and looking towards next year and what is probably going to be another up and down one?

Thiago Glieger Yeah, we’ve got open season coming up here in about a month or so, Eric, right? And so I think that it would be smart for federal employees to look at some of the tools within your benefits package, because those can help save taxes as well. So, for example, if you’re not using the FSA, which is a flexible spending account, you need to go to FSA feds and really consider using that tool. You can put a few thousand dollars in it. I want to say something like $2,000 or $3,000 as a family every single year. And listen, everybody has some kind of medical expense. Even if you’re going to the doctor just once a year, you can use that money. It’s fully tax deductible. And then if you use that money for a qualified medical expense, you don’t pay any taxes on that money either. So it’s like getting tax-free healthcare services. And the important detail with the FSA is that you are going to lose the bulk of it if you don’t use it. So you always wanna make sure maybe you don’t contribute too much of it into it. Or you can use the money for all kinds of interesting qualified expenses. I’ll give you an example. Some of our clients have purchased — they had a couple of thousand bucks still left in an FSA, they were gonna lose it — they purchased a defibrillator, an AED for their household using those funds and they got it completely tax-free. You can buy Band-Aids, you can buy aspirin, all kinds other stuff, and you can see what’s qualified and what’s not online. So that’s a really nice benefit to look at for taxes at yearr end.

Eric White I think I’d buy one of those CPR dummies they look like they’re fun to play with a little

Thiago Glieger I bet you it’s probably qualified.

The post When paychecks stop and tax season looms, what moves should federal employees make? first appeared on Federal News Network.

Eric White We’re talking about the new [Online Retirement Application (ORA)] system, or I guess, is it “Or-uh” system? I’ll let you … Correct my pronunciation for federal retirees. Obviously, that system is going to get used a lot over the next coming months, if what has been happening recently is any sign of what’s to come. Tell me about what’s going on with this system and what feds are saying — of the ones that have been using it — about it.

Thiago Glieger Yeah, Eric, this new system — so we call it O-R-A; I think that’s how most people are calling it, as you said — this is a brand new system. And honestly, it’s been confusing a lot of people … it’s replacing the old paperwork that a lot federal employees had to fill out — really the SF-3107 — as they were going to retire from their agencies. But I think the big problem here, Eric, is they’re finding that a lot of the HR departments are just simply overwhelmed … We had a lot of people [who] were leaving, we have bottlenecking of a lot people that are leaving on [the] [deferred resignation program (DRP)] as well, and so they just can’t provide the kind of support that they used to before. So a lot of these questions start to pile up. It’s a brand new system and there’s not enough people in place to help answer those questions. Retirement is already a pretty stressful process for people, right? So then on top of that, not having a clear process or information about a new system only adds to the anxiety … When it was first launched everyone hoped that OPM was going to say, this is going to be faster, it’s going to be smoother, it’s going to require less people. And OPM actually said the opposite. They said, at first, it might actually take longer … They are very hopeful that over time this is gonna be a good system but right now there [are] a lot of moving parts that have to come together for all of that efficiency to really start showing up. And as you guys have seen, Eric, there’s tens of thousands of federal employees retiring. We just had the first wave here on 9/30. We’re gonna have another wave here 12/31. And so it’s really, really tough for people to get answers to the system.

Eric White Yeah, sort of a “ready, fire, aim” approach that we love here in the USA. Walk us through what a federal employee should expect when they decide to retire under this new system. What are some of the major changes from the old system? Not that anybody retires more than once, hopefully, but you know, what exactly are they looking at from a landscape perspective?

Thiago Glieger Yeah, so what it used to be is that a lot of agencies would run the [Government Retirement and Benefits (GRB)] platform retirement estimator for federal employees retiring. And the GRB platform was effectively a repository of your federal service, and it would give you information on what retirement could look like, estimates of your pension, things like that. So then we run into problem number one: a lot agencies cut GRB. So now federal employees are saying, well, what does my retirement estimate look like? How many credible years do I have? That system is no longer there. So then agencies are not even able to provide that information. But presuming you’re still gonna move forward with the actual retirement process, [the] first step is you have to notify your HR office that you’re ready to retire. You can send them an email, generally, and say, I believe I’m eligible; I’d like to start the retirement process. And this is because the HR group has to initiate the ORA system in most cases. Every agency has a little bit of a different process, but this is what the majority of the groups are doing … You have to remember what’s different here is now HR is swamped. There’s tons of people retiring. There’s less of them around to be able to do this, which is causing some of the bottleneck. Once HR begins the ORA process, you’re given access to it. And again, this is gonna replace the SF-3107, which is the retirement form. And so now it’s actually easier because instead of filling out a government form, you’re just going through a system online and it’s asking you questions one by one. Everyone has filled out those kinds of forms before. So it’s actually pretty easy, as we’ve seen with some of our clients. And what it does is it takes your answers and pre-fills the form for you, which is a nice service. Once you submit that part, it’s really important that a federal employee stay alert because a lot of times, HR — they may kick it back if they need additional information — there’s something that’s missing, so you have to check to make sure you don’t need to do additional work on the ORA system for that. That’s when it moves to payroll. Once it moves to payroll, they finalize all of your hours, which can take a month to a month and a half just at payroll itself, before it goes to OPM. So if you think about it, we’re talking a month at payroll, [that] could be a month before HR actually gets around to being able to initiate the system for you. We’re At 2 months so far. Once it hits OPM, that’s when the official clock starts, as OPM likes to describe it. And there’s some uncharted waters here because OPM has not really handled, A, this new system before, and B, this many federal employees retiring all at the same time. So they release information — there is some congressional report that gets put out there that talks about how many applications are coming into the system and what is the average processing time month over month. We’ve been seeing that go up and up and up over the last three months. I expect it’s going to continue to get worse, right? So we’re talking three months at the agency level plus … whatever time OPM is going to need for themselves.

Eric White We’re talking with financial planner Thiago Glieger. So, other than those long timelines — well, we can call them unknown timelines, as you say — what are some of the other issues that federal employees are seeing so far with the system? It sounds like it is going through some growing pains, but are there any fundamental flaws with it that people are just not liking?

Thiago Glieger I think some of the challenging questions that the system asks them are things like, how much withholding do you want to do on your taxes? Or, what do you wanna do about life insurance? And before there was some guidance in the forms [about] how to be thinking about some of these things. The system is a little bit more streamlined and it just asks you the question. Well, if you haven’t gone through the process of creating a financial plan, how do you know how much insurance do you need? What kind of tax liability are you expected to have? So federal retirees are called upon to make these decisions in real time as they’re filling out the form and they don’t really have the information to be able to answer those questions. Okay, the other issue that we are running into, and this one hasn’t been too much, is that sometimes people don’t get the notification of additional action that they need. Sometimes it gets stuck in their spam email. So this is something that, again, it’s those bumps that they’re trying to pull together. There are a lot of systems in the background that have to coordinate with each other and, as any brand new system that gets launched, there’s always stuff that’s going to break. So I’m sure some of that’s gonna be a problem too.

Eric White Gotcha. All right. And so what can folks do if they are looking to retire? You’re a financial planner. I guess we’re talking to the right person. How can they financially prepare for any delays that might occur because … some of those dates don’t line up and you don’t want to be caught in-between paychecks, as they say, and without anything coming in? What sort of precautions can those looking to retire take?

Thiago Glieger Yeah, that’s a really good point, Eric. I think the first thing that federal retirees should remember is that you will get your annual leave lump sum. Okay, so that comes pretty quickly in our experience with clients, right after you leave. So you get your final paycheck and then shortly thereafter you get your lump sum, so depending on how many hours you have, you’re gonna get a big check that’s gonna help you to meet your expenses between when you leave and no longer have an income and when the pension actually fully starts. There [is] also, in most cases, an interim payment, where it’s a portion of your final pension; not the exact amount. But again, we don’t wanna count on that because there’s cases where people don’t get it. So the biggest thing is that, let’s say you’re planning to retire December 31st, now is the time to start boosting your cash reserves. So what do I mean by that? Cash in the bank is gonna be really important here. So … This might mean, and it sounds a little counterintuitive, but might mean maybe don’t put as much in the Thrift Savings Plan for the rest of the year, if you know you’re gonna retire, okay? Yes, you have access to the TSP if you are retiring within a certain age, the age is 55 for most people, but cash in the bank is that much easier to access … it’s already been taxed in most cases. So if you reduce your TSP contribution, that means your take-home pay goes up and you get to start accumulating that cash. I would also think about what kind of expenses maybe you have coming up, right? The general guide for people is we like around six months-worth of your monthly expenses in cash in the bank at all times. And because we might be looking at delays on your pension starting, you might wanna increase that a little bit more. So if you’ve got big renovations you were planning to do on the home, maybe postpone that for a little but until you get greater clarity around OPM’s timeline for the stuff. And the last one — and this one’s a little bit controversial as well, but it depends on how old you are — if you leave prior to the age of 55, which a lot of people have done this year, you technically don’t have access to the TSP funds un-penalized, unless you are law enforcement or special provisions, 1811s, things like that. So what you can look at is a potential TSP loan. You can get up to $50,000 and that comes without that 10% early withdrawal penalty, which is kind of nice because you can put that in your bank account, use it or don’t use it, but at least it creates extra cashflow for you. Of course, check with your financial professionals, make sure that this is something that is feasible within your plan, but that’s been a really solid one to help bridge people over.

Eric White Uncertainty is the word of the day for a lot of federal employees, particularly those that are retiring, even so. Any advice on handling that aspect of things? You’re already going through the anguish of entering into a new stage of your life, having all of this in the background of shutdowns and potential furloughs and things of that nature. What can you tell people that are going through this right now?

Thiago Glieger I would say for folks to rely on your planning. This is something that creates great peace of mind, just knowing what you’re gonna do in which scenario. So if this happens, if it takes longer, if the markets crash in the middle of your waiting for your pension, all of these things, if you can think ahead of what those potential problems may be and what you are gonna do if those things happen or what you gonna do in preparation to hedge some of those risks, that gives you great peace mind. We have to be careful about watching the economy and the news around the markets. The markets are very volatile and you always have different opinions and people talking about what the markets are gonna do next. We have to careful cause that creates a lot of anxiety for retirement. And I think too, the more information you have, the better. OPM has a really, really helpful retirement quick guide, which we can give you guys the link [to] … You can put it in the show notes. The OPM retirement quick guide is super helpful, [it] walks you through the process so you know what to expect. And in fact, there is one additional resource that is actually your benefits officer directory. This is something that OPM maintains pretty regularly and it’s the HR person in charge at your office. In case the process is just stuck and if you can’t get answers, you can get anywhere, this is a place you can look for to find out who’s in charge of your agency to get the answers you need.

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