Federal Working Feeling the Heat

Summary

Podcast Summary: Federal Working Feeling the Heat

Podcast Information:

• Title: Jill on Money with Jill Schlesinger
• Host/Author: Audacy
• Episode: Federal Working Feeling the Heat
• Release Date: April 9, 2025
• Description: Host Jill Schlesinger, CFP®, addresses challenging and controversial financial and investing topics in an accessible manner. The show features listener call-ins and interviews with guests to provide actionable financial insights.

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Introduction

In the episode titled "Federal Working Feeling the Heat," Jill Schlesinger (referred to as Mark due to a change in the transcript) addresses the financial concerns of federal employees facing potential job terminations. The episode primarily focuses on a listener named Anna, a federal employee, and her husband, who is a researcher at a university dependent on NIH funding, both of whom are unexpectedly at risk of losing their jobs.

Caller’s Situation

Anna's Predicament: Anna, a 54-year-old federal employee, joins the show to discuss her and her husband's financial stability in light of impending job losses. Her husband, aged 57, is a researcher facing termination from his NIH-funded position. Both are uncertain about their future employment and its impact on their financial health.

Key Concerns:

• Potential loss of income due to job termination.
• Eligibility and reliability of pensions.
• Financial obligations, including college funds for their two teenagers.

Notable Quote:

Anna: "I am a current federal employee who is facing potential termination along with many of my colleagues, which was not something we had really seen coming as of a couple months ago."
[02:36]

Financial Overview

Pensions and Retirement:

• Anna's Husband: At 69, eligible for a pension of approximately $2,000/month, taxable in his home country with an estimated net of $1,000/month after taxes.
• Anna: Returned to federal service five years ago after 16 years in the private sector. Eligible for a reduced pension of $1,500/month at age 57 (end of 2027) and $2,800/month at age 62 (end of 2032).

Savings and Investments:

• Brokerage and Cash: $767,000
• Retirement Accounts (IRAs, 401ks, TSPs): $2.4 million (including $210,000 in Roth IRAs)
• 529 College Savings Plans: $360,000 for two teenagers (ages 13 and 16)

Real Estate Assets:

• Primary Residence: Valued at approximately $1.6 million with a mortgage remaining of $740,000 at a 3.5% interest rate.
• Rental Condo: Valued at $200,000 with a remaining mortgage of $36,000, generating break-even cash flow.

Notable Quotes:

Anna: "We have a mix of IRAs, 401ks and TSPs that total right now about 2.4 million."
[05:32]

Mark: "You have a lot of money. You have a lot of money. When we say, like, the rainy day fund. This is your rainy day Fund, you've done it."
[18:49]

Mark’s Financial Advice

Strategic Financial Adjustments:

1. Pause 529 Contributions:

   • Advice: "Stop doing your 529 contributions. Just put in up to the match for both of you."
   • [11:25]

2. Utilize Retirement Accounts if Necessary:

   • Rule of 55: Anna's husband can tap into his 401k or TSP without penalty if he loses his job after age 55.
   • Tax Implications: Withdrawals will be taxed but won't significantly impact their tax bracket.
   • Advice: "Use the money from your retirement account while your income is low, pay the tax that's due on that and live on that money."
   • [15:03]

3. Maintain a Healthy Cash Reserve:

   • Current Savings: Approximately $767,000 in brokerage and cash provides a substantial buffer.
   • Recommendation: "Do not roll over your 401k or your thrift savings plan into an IRA rollover."
   • [16:40]

4. Evaluate Real Estate Holdings:

   • Rental Condo: Considering selling to free up additional funds.
   • Advice: "Do not make a massive slash and burn kind of move, like, sell everything and go to cash. You don't need to do that."
   • [18:14]

5. Reassess Housing:

   • Primary Residence: Potential to downsize if necessary to reduce mortgage obligations.
   • Advice: "You could stay in the district in a smaller house, certainly."
   • [10:09]

Reassurances: Mark emphasizes that, despite the immediate concerns, Anna and her husband are in a secure financial position due to their substantial savings and investments. He reassures them that they do not need to make drastic changes immediately and that their financial foundation will support them through the uncertainty.

Notable Quotes:

Mark: "You are fine. We have a terrible situation in terms of you have a short term issue. But it's going to be okay."
[16:14]

Mark: "You've got a lot of money. You've got a lot of money. When we say, like, the rainy day fund. This is your rainy day Fund, you've done it."
[18:49]

Key Takeaways and Conclusions

• Financial Preparedness: Anna and her husband are well-prepared financially, with significant savings and diversified investments.
• Strategic Adjustments: Minor tweaks, such as pausing 529 contributions and potentially tapping into retirement accounts, can provide additional security without jeopardizing long-term financial goals.
• Reassurance: Mark provides strong reassurance, highlighting that their current financial status is robust enough to handle the short-term uncertainties.
• Proactive Planning: The episode underscores the importance of having a comprehensive financial plan and savings buffer to navigate unexpected job losses or economic downturns.

Final Notable Quote:

Mark: "You have plenty of umbrellas. We got our galoshes. We're good."
[19:37]

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Conclusion

In this episode of "Jill on Money," Anna's concerns about potential job losses are met with comprehensive financial analysis and strategic advice. The discussion highlights the importance of maintaining a strong financial foundation, making informed adjustments in times of uncertainty, and the value of having a "rainy day fund." Mark's reassuring guidance serves as a valuable resource for listeners facing similar financial challenges.

Transcript

[Jill Schlesinger]

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[Mark]

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[Mark]

Welcome to the Jill on Money show. It's Wednesday, April 9, and yes, I still have a little laryngitis. I'm very sorry. This is. I'm probably going to get worse before it gets better. But it's raspy. It's kind of sexy. Or I sound like Brenda Vaccaro. Either one old reference. Some of you will get it, many will not. Anyway, this is the program that takes the mystery out of your financial life. If You've got a question, Something going on in your world? Give us a Holler. Go to jillonmoney.com, click the contact us button, write us a note, and let us know if you want to join us on the air by checking the box. Mark will do everything else. Let's get straight into it because I don't want to talk too much. We have Anna joining us from the Southeast. Hello, Anna. What's going on? How can we help you out?

[Anna]

Hi. Great. Thanks for having me on here. Sure. I was interested in talking to you because I am a current federal employee who is facing potential termination along with many of my colleagues, which was not something we had really seen coming as of a couple months ago. My husband is similarly suddenly at risk as a researcher at a research university with NIH funding. So I thought this would be a nice time to just sort of do a quick checkup of where we are at Financial.

[Mark]

Well, I wouldn't say a nice time. I would say it's good time to actually check in. Nice would be actually say, you know, something good is happening. So, Anna, how old are you guys?

[Anna]

I'm 54. He's 57.

[Mark]

Are both or either of you entitled to pensions?

[Anna]

Yes. Well, potentially. So he is at the age of 69, he's from another country. And at the age of 69, it would be about $2,000 a month.

[Mark]

Would that be taxable in that country? Not here. Like, how does that work?

[Anna]

Yes, that would be taxable in that country, which is a very high tax country.

[Mark]

So, okay, is 2,000amonth the gross amount or would he be. Would it be much lower amount because of that tax?

[Anna]

No, that's before taxes, I believe.

[Mark]

How much? Like $1,000 a month would he clear, you think?

[Anna]

Yeah, I think I would say that.

[Mark]

Okay, great. Now, you are a federal employee, so you also would be entitled to a pension, presumably. Yes.

[Anna]

Well, it depends. I have returned to Federal Service just five years ago after 16 years in the private sector. If I can make it to my minimum retirement age of 57, which is at the end of 2027, at that point I would be eligible for a reduced pension of about 1500amonth. And if I can make it to age 62, which would be the very end of 2032, then it would be $2,800 a month.

[Mark]

But you're kind of not even considering that at this point, just in case, right?

[Anna]

If I make it through. Yeah, that's, I think, the big question. I'd been assuming I would make it at least 2 1/2 more years to that minimum retirement age for the reduced pension, mostly because of the ability to then carry health insurance on retire. So my goal would be that however this might be out of my control right now.

[Mark]

Absolutely. Okay, so. So let's just. The one thing we do know is that in 12 years your husband gets this old pension that kicks in. And let's not look at this with your pension at all. So Anna, what have you guys saved so far?

[Anna]

So just starting with what we've got right now in brokerage account and cash is about $767,000. And then in various, we've got a mix of IRAs, 401ks and TSPs that total right now about 2.4 million.

[Mark]

Oh, that's a lot of money. Good for you guys. That's all traditional, right?

[Anna]

Except for about 80,000 is one of the Roths TSPs. And then. No, I'm sorry, I actually misspoke. 210,000 is in Roth IRAs, but the bulk is traditional.

[Mark]

Okay, got it. So brokerage and cash. 767, retirement 2.4. Any other assets that are out there besides your home and things like that? But anything else?

[Anna]

We have 529s for our two teenagers.

[Mark]

Oh, how old are those teenagers?

[Anna]

13 and 16.

[Mark]

Oh my God. Got a lot going on, huh?

[Anna]

Yes, indeed.

[Mark]

529. So how much money is in those?

[Anna]

Total of 360,000.

[Mark]

Oh, that's a lot of money. And they're both college bound, presumably. Are you still contributing to the 529 less.

[Anna]

I slowed down contributions at the beginning of the year, knowing there might be some uncertainty with our jobs.

[Mark]

Do you have parents that you need to be thinking about in terms of their financial security?

[Anna]

The ones who are in the other country? No, they have quite a good social safety net. I have an 82 year old father, so I may need to. But at this moment, no.

[Mark]

Okay. For now, no. How about a house? You guys own your home?

[Anna]

We own our home.

[Mark]

And how much is it worth approximately?

[Anna]

As of yesterday it looks like about 1.6 million.

[Mark]

I love that you're like as of yesterday, yesterday.

[Anna]

Everything in my life is subject to change. Day to day, it seems.

[Mark]

Right, I understand. I guess that actually that is true anyway, but we don't live that way. Is there a mortgage outstanding on the house?

[Anna]

Yes, about 740,000. 40,000 outstanding.

[Mark]

What is the interest rate?

[Anna]

3.5.

[Mark]

Okay, and this is a place where, I mean you have a 16 year old and a 13 year old, so you want to stay there at least until the kids are through high school, Right.

[Anna]

Ideally.

[Mark]

Ideally, if you were to lose your position, like in the next round. Okay. Would you be employable doing something else? Because you said you did work in the private sector. So I'm trying to get a sense of like, how much money should we really have in cash? How long might it take you to get another position? What do you think?

[Anna]

So in the past I would have said this would be no problem. However, in the last two months, the whole sector in which I've had my 25 year career has effectively been dismantled. Anything in global health? So it's really not clear to me at the moment what the next path would be.

[Mark]

Okay, what about your spending right now? What does that look like?

[Anna]

So I would say I did some quick estimates this morning and I would say maybe 9,000amonth, maybe could bump up to 10,000 to cover things. I might not be thinking of something like that. And I also forgot to mention, we do have a rental condo as well.

[Mark]

Tell me about that. How much is that worth?

[Anna]

That's worth about 200,000. And the remaining mortgage is 36,000.

[Mark]

Is it rented out? Is it?

[Anna]

It is.

[Mark]

And, and how much cash flow does that provide?

[Anna]

It pretty much breaks even.

[Mark]

That's it?

[Anna]

Yeah.

[Mark]

Is there any reason why you were keeping it? Like, oh, that's where I'd move my dad if I had to, or something like that?

[Anna]

No, it's just I've had the same tenant for about 10 years and.

[Mark]

And you're the salt of the earth and you, you know. Yeah. Aren't you nice? Would you consider selling the condo?

[Anna]

Yes, I would.

[Mark]

Would that person, Would your renter be able to buy it, you think?

[Anna]

They have thought about it but haven't wanted to, so. But I, I would be able to find a buyer, I'm sure.

[Mark]

Okay. If we had to handicap what you and your husband could maybe make. If I understand your current positions, you would not be making the same amount of money, obviously. Right, right. But do you have a sense that you together could make enough money to cover your spending?

[Anna]

I think we could. I mean, the house is the big expense, obviously.

[Mark]

Of course.

[Anna]

And so I've always assumed that downsizing would very much be on the table should we need to.

[Mark]

Right. But on the other hand, you want to stay in it for now.

[Anna]

Yes.

[Mark]

Because we have to get these kids through high school. Right?

[Anna]

Yes. But you know, we could stay in the district in a smaller house, certainly.

[Mark]

Oh, you are getting to the. I can tell you're serious right now. The question at hand is what do we do if we both lose our jobs now? Is that right?

[Anna]

Yes.

[Mark]

Okay, so the people who are. You're talking about people who are just let go or facing their. You said termination. Have you been offered any sort of early retirement? Has it. Have anyone in your group been offered that?

[Anna]

Yes, it was offered, but I was not eligible for that.

[Mark]

Okay. Same thing for your husband, or is his. Is he more at risk than you are, do you think it's sort of similar?

[Anna]

It's really hard to know at the moment. I would have said he was, but now I'm not sure. Okay, but he would not have any.

[Mark]

Kind of severance or no incentive or anything to get out, right? Okay.

[Anna]

No.

[Mark]

All right. So are you putting any money right now into the 529?

[Anna]

About, I think about $500 a month now.

[Mark]

Okay. And the amount of money that you're putting into retirement right now, what is that?

[Anna]

For me, it's 5% of my income, which is the minimum required to get the full match for the tsp. And he has reduced his quite a bit this year also, as we've been looking forward and concerned about.

[Mark]

So both of you. I would. That was the first thing I was going to say, which is stop doing your 529 contributions.

[Anna]

Okay.

[Mark]

Just put in up to the match for both of you.

[Anna]

Okay.

[Mark]

You guys are in, like, this is the emergency. Let's gather up some cash mode. Okay, so that's. I agree. That's on in the brokerage. Slash, cash. How much is cash and how much is invested?

[Anna]

I believe right now about 150is in cash. He just made some changes this week.

[Mark]

He the broker or he your husband?

[Anna]

He. My husband. Sorry.

[Mark]

Okay, so he's managing it.

[Anna]

Yes.

[Mark]

And right now the benefits you receive are through you and not him.

[Anna]

Right?

[Mark]

Is it. Okay, I got it. He is a citizen or he's a green card holder.

[Anna]

Which one's a citizen?

[Mark]

Okay, so he is a. He will have Social Security, correct?

[Anna]

Yes.

[Mark]

So let's just run through some of those numbers. So Social Security for him at his. Do you know that number? At 67? Oh, great.

[Anna]

At 67 for him it's 2,400.

[Mark]

Okay, great. And what about at age 70?

[Anna]

3,200.

[Mark]

And for you?

[Anna]

For me, at 67 it's 3,800. And at 70 it is 4,900.

[Mark]

I presume what you had thought was, hey, we'll just wait till we're 70. We'll have a bunch of money coming in, plus his little pension. And, you know, we'll dip into our investments as we need and we're good, right? Basically. Okay, yeah, you're still good. Calm down. You're going to be okay. You're still good. That's what I want you to take away. The most important thing for you to hear right now, besides that my voice sounds terrible, is you're fine. We have a terrible situation in terms of you have a short term issue. But it's going to be okay. It's going to be okay. I think that the game plan would be I'm going to give you like the worst case. The break the glass scenario is you work for as long as you're going to work. But let's just say by the middle of this year, you're both out of work, God forbid. But in that case, you have your income that you've made for the first half of the year. What do you guys make together, by the way?

[Anna]

About 280.

[Mark]

Okay, so for, let's just pretend for the. For you've lost as of June, you both lose your jobs. And then what we are going to try to do is we are going to start taking some of the money because your husband is. You said he's 57, right? So he's got some money that is, is he in the 401k or thrift savings plan? What does he have?

[Anna]

He has both.

[Mark]

Okay, so as long as he has one of those two, he'll be able to invoke the Rule of 55, meaning he'll be able to tap his retirement account. Not IRA has to be a qualified plan. He'll be able to take some money out. So let's just pretend that you've made $140,000. He'll take another, I don't know, let's call it another $100,000 out of his retirement account. You'll pay the tax that's due. You're not going to change your tax bracket. You're just going to pay, right? You're going to pay it and you'll live on that. And in that interim time, you'll see like basically what kind of income you're going to have, whether you'll get a job, whether you won't get a job, what your real cash flow will be, what it won't be. But you could kind of do that if you guys get so so jobs that instead of making $280,000 a year, instead you're making half that. Together you're making 140,000 or 120,000. What you need to do is pull money out of his retirement account. In the interim, pay the tax that's due on that and live on that money. You don't have to save any more money. You really don't. Now, you can do that for a while because obviously the money that's in your 401k and your thrift savings plan, you got a lot of money in there. So it is highly unlikely in my mind that for 10 or 13 years or 15 years that you're going to need to pull out 100 grand a year and we inflate it, let's just say every year. I don't think you'll do that. Have to do that every year. I think you will have a job and I think you both will have jobs. But I think in the near term, the game plan would be use the money from your retirement account while your income is low, pay the tax that you. Because you already, in a weird way, you had this funny problem which now doesn't seem like a problem. It's like now it's, it's not a bug, but it's a feature which is you had money that wasn't taxed and it was going to be growing, growing, growing. Right. And I was going to sit here and say to you, oh, you guys have a ticking time bomb. You're going to have to get some money out of your retirement account right now. Fate may force you to take money out of that retirement account. Right?

[Anna]

Okay. Right.

[Mark]

Okay. And so you take it out. Don't worry about it. You have plenty of money. You're going to be fine. Honestly. You could, you could spend half of your retirement money. You know, you could go from 2.4 to 1.2 in the next 10 years and you still have money left over. And then you will get Social Security and you probably will have jobs. And so I don't think this is a real problem. I don't think there. You should. You are not in a break the glass scenario right now.

[Anna]

Okay, good.

[Mark]

I really don't see that. One thing to just note is because he is managing the money, if either of you loses your job, do not roll over your 401k or your thrift savings plan into an IRA rollover. You have to leave it where it is. This is one of those few times where I say, you know what, don't roll it over because you cannot invoke the rule of 55 from an IRA account.

[Anna]

Okay, that's good to know.

[Mark]

Okay, Now I know this Kid's going to college, right?

[Anna]

Yep.

[Mark]

You're going to freak out about this. Are you going to be like, oh, my God, I have to pay for every single dollar? Don't worry about it. I know where. We know which state we're talking to here. Doesn't that. Doesn't that state have, like, a really good college incentive program?

[Anna]

So we're very fortunate that we currently live in a state where with their grades right now, they would be able to stay in state and have tuition essentially covered.

[Mark]

Oh, my God. That would be great.

[Anna]

That's what I'm hoping right now. Yep.

[Mark]

Oh, my.

[Anna]

Really good school. And could not go into any debt or use all of that 529 money.

[Mark]

Yeah. Then you'd have another $300,000 maybe. Yeah. And also, of course, just to be clear, that's why you really, absolutely should not put more money in there.

[Anna]

That makes sense.

[Mark]

Okay, so here's what we're not doing immediately. You're not blowing out of your condo immediately. You're not blowing out of your house immediately. You're sitting still. If this happens this year, no big changes this year. Just wait. Just wait to see what happens. Because, listen, I know this rental condo. You probably had it for a while.

[Anna]

20 years. Over 20.

[Mark]

Okay. So if you were to sell it, it seems like, oh, I, you know, let's say you sell it and you're like, oh, I netted $170,000. Right. But then you have to recapture. You've been depreciating it. There's a tax liability. It's not that much money. It's not like an amazing amount of money. I would tell the renter, I would give them notice that, like, hey, we love you. We're not doing anything. Just want to let you know, maybe they know that. Maybe it's implicit because they know what you do. But, like, the blank's hitting the fan. And so, you know, we're going to reevaluate this.

[Anna]

Okay.

[Mark]

And we'd love it if you could buy it. If you want to buy it, Great. And if you don't want it, maybe they're also in the same industry, you know, maybe they're federal workers. But, you know, I just think it would be really. It would behoove you to not make a massive slash and burn kind of move, like, sell everything and go to cash. You don't need to do that. You got a lot of money. You've got a lot of money. You know, when we say, like, the rainy day fund. This is your rainy day Fund, you've done it. So it stinks because you weren't expecting it and certainly at this point in your lives. But you thankfully did the work of saving and investing and building up your total net worth so that when this rainy day has now arrived, you can say, all right, we got plenty of umbrellas. We got our galoshes. We're good.

[Anna]

Excellent.

[Mark]

All right.

[Anna]

Very encouraging.

[Mark]

All right. Now, if you need anything else, if the hammer comes down tomorrow and you want to call back, I want to hear from you. You have an open line to us. Really wonderful. Do you guys have those estate documents done?

[Anna]

We sure do.

[Mark]

Thank goodness. All right, Anna and the king of Siam. I'm going to start singing the King and I to you right now. I wish you all the very best. Thank you for getting in touch with us. Let us know if we can help you out. Hey, gang, do you know someone who's a federal worker who's freaking like, Anna and her husband or someone who works at a university who's like, oh, I use soft dollars and research funding. A lot of people have been reaching out to us. We are here for you. Get in touch with us. Go to jillonmoney.com, click the contact us button. Let us know if you'd like to come on the air and talk this through. It's really scary. These are un. This is really unchartered territory for these kinds of workers. So please, please let us know what we can do to help you out. You can subscribe to us on the Odyssey app or wherever you find your favorite podcast. Please leave us a rating and review wherever you listen. Put your hands, metaphorically on someone's back. I don't want to hear any nasty talk about federal workers. They are fabulous civil servants and we deserve to have then treated better and they deserve better. So put your hands on their backs. Change your work, Change your wealth. Change your life. Thank you for listening. We'll talk to you tomorrow.

[Jill Schlesinger]

Hi, this is Jill Schlesinger. I used to own a small business and now I talk to a lot of business owners like you who know that having the right partners in place can help you take your business to the next level. Partners like American Express that give you access to world class business and travel benefits so you can get more for your business wherever it takes you. With the Amex Business Platinum card, you can earn one and a half times membership rewards points on select business purchases. And you can get complimentary access to more than 1400 airport lounges worldwide, including the Centurion Lounge. So you can keep running your business while you're on the go, see how the AMEX Business Platinum Card gives business owners like you the tools and rewards that can help move your business forward. Terms and Points Cap apply [e-mail] Amex.

[Courtney Harrell]

Business Imagine if you could ask someone anything you wanted about their finances. How much do you make? Who paid for that fancy dinner? What did your house actually cost? On every episode of what We Spend, a different guest opens up their wallets, opens up their lives, really, and tells us all about their finances. For one week, they tell us everything they spend their money on.

[Anna]

My son slammed like $6 for the blueberries in five minutes.

[Courtney Harrell]

This is a podcast about all the ways money comes into our lives and then leaves again, which, of course, we all have a lot of feelings about.

[Mark]

I really want these things. I want to own a house. I want to have a child. But this morning I really wanted a coffee.

[Courtney Harrell]

Because whatever you are buying or not buying or saving or spending, at the end of the day, money is always about more than your balance. Audience I'm Courtney Harrell and this is what We Spend. Listen to and follow what We Spend An Odyssey original podcast available now. Wherever you get your podcasts.