What Annoys Jeff this Week?

1. Timing. The 76 billion cicadas camping in my back yard are fine – aside from the dogs wanting to eat all of them. I generally don’t get freaked out by bugs. Their early morning screeching is what I’d charitably describe as “troublesome.” It’s made my favorite pastime of sitting on the patio for an hour each morning with coffee and a good book decidedly unpleasant. I know they’re temporary, but the little bastards are stepping all over the last days of full-time working from home. That’s just exquisitely bad timing… and I hate them for that.

2. Eligibility requirements. Marylanders who received the COVID-19 vaccination are eligible for daily drawings for $40,000… unless you’re one of the Marylanders who got the “federal” vaccine instead of the state jab. That puts me out of the running. Would I have waited a few more weeks to get the vaccine if I knew I could win a sweepstakes? Maybe. I suppose the world will never know… but I want my damned money.

3. Good intentions. The people who control the Thrift Savings Plan, the federal government’s version of a 401(k) retirement plan are being pressured to make two significant changes to how the fund is managed. The first would see the TSP divest from fossil fuel securities, with an eye towards, supposedly, making the investment funds “environmentally conscious.” The second major change would be driven by proposed congressional legislation to prohibit TSP from investing an any company based in China. Maybe both of those are admirable objectives and people should feel free to target their own money in whatever fashion they want… but for the TSP in general, which bears the lion’s share of responsibility to secure federal employees’ retirement. Personally, I want fund managers laser focused on driving down costs and maximizing return on investment… while keeping the “good intentions” of socially crusading politicians as far away as humanly possible

A tempting target…

Back in April, Senators Jeff Merkley of Oregon and Maggie Hassan of New asked the GAO to launch a study on “risks that fossil fuel stocks currently present” to those invested in the federal government’s Thrift Savings Plan (TSP). The distinguished senators then go on to imply that the TSP should create funds that “incorporate climate change risk” as part of the 401-k style program’s offerings.

Part of the allure of the TSP is its remarkably small fee structure – it’s very cheap in comparison to many other funds. Fees are low, in part, because TSP is simple. It’s got five basic index funds and five “lifecycle funds” that automatically reallocate participant’s money based on target dates. It’s got an elegant simplicity that’s historically effective at creating wealth for its participants over their long careers.

Look, I accept that climate change is a real thing. I also don’t have any particular love of the energy sector – many leaders in the area are losing value. That’s my real issue with them, though. If we’re going to drop energy companies from a portfolio, do it because they’re not making us money – not because some holier-than-thou senator wants to score a few political points.

Congress never saw a big pot of money sitting around that it didn’t want to stick its whole hand into. With $500 billion in assets under management I can understand why the TSP is an awfully tempting target. That said, the very last thing I want to see is a good thing turned on its ear by driving TSP to respond to whatever political views happen to hold sway at any given moment. Treating retirement funds as just another political football is almost a guaranteed way to manage to take another slug of cash out of my pocket.

There are already fund options out there for just about any special interest that wants to play in the market – whether your “thing” is gender diversity, sustainable energy, human rights, or a laundry list of other causes. TSP should remain a broad-based set of fund options targeted at replicating the market overall and building wealth over time for the wide swath of federal employees. Catering to the few individuals who can’t seem to be satisfied with that just doesn’t make senses… unless of course you’re more interested in enforcing ideological purity than in making good financial decisions. Surely no member in the United States Senate could ever be accused of that.

Planning for the end…

I’ve been thinking alot about retirement this weekend. Not the actual act of filing my paperwork and getting my gold watch, but of all the preparation and planning that needs to go into making that moment happen. It’s the big picture questions that have been bothering me lately and that’s probably the internet’s fault for running adds screaming “will you have enough money to retire” on three sites I visited yesterday. I’m not a financial genius by any stretch of the imagination and I’m not even all that good at the day-to-day stuff. I’m not going to sell the truck for a bag full of magic beans or anything, but checking out my Target cart on any given visit will show there tends to be more wants than needs loaded in it.

I’m throwing a respectable percentage of my pre-tax salary into the Thrift Savings Plan, the government’s version of a 401(k) and have an IRA that isn’t as well funded as it probably should be. I’ve got the real estate portion of an investment strategy covered (even if the part of it that’s in Memphis will never be more than a tax deduction). Gold and precious metals were out of sight before I ever thought about stashing any money there. Still, I feel reasonably good about my allocations… but that doesn’t overcome the voice in the back of my head that keeps whispering “you should be doing more.”

The element that’s still working in my favor is the sorcerer’s elixer of investing: time. I’ll be 33 this summer. Under the current rules, it will be another 29 years until I can retire “early” and collect social security at age 62. If I wait for full retirement, now set at age 67, it’s another 34 years. Of course as social security implodes in the next two decades, I don’t have much expectation of those milestone ages meaning much. Even if the system is “saved,” I expect the age to collect will be much higher. Under any set of rules, it’s safe to assume that I’ll be working for at least as many years into the future as I’ve been alive and probably more. Assuming an uninterrupted federal career, I’ll meet my age and years of service requirement at age 57 in 2035. That’s a full five years before the current Social Security early option and 10 years before full retirement under the system. I don’t necessarily “have to” walk away at that point, but by that far off moment in 2035, I’d like to be well enough financed to do it if I wanted to. I’m pretty sure that is the working definition of having “F%#& you” money.

I suppose the good news is that I’ve got the better part of 30 years to throw money at this particular problem. The bad news is that it looks like baring a PowerBall win, I’ve got almost 30 years of bitching and complaining still ahead of me.