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most federal employees have spent their
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entire career contributing to the Thrift
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Savings Plan and so it's no wonder that
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they ask themselves what happens to this
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account when I leave government service
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whether it's in a regular environment or
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in a reduction in force environment
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where early outs discontinued servants
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separate packages cash buyouts all of
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that is happening how does it change the
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access that you have to the
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tsp hi I'm Chris kallik of profeds and
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welcome to the FED impact podcast where
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we offer candid insights on your federal
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retirement so I know tsp is a huge piece
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for so many of you and frankly it's the
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part of your retirement that you have a
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whole lot of control over with respect
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to how much you're contributing how it's
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going to be taxed on the way in and on
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the way out and how it's performing
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based on where you have it invested so
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tsp is a huge part of your retirement
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plan and so we want to make sure that
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you have access to that now after you
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have separ ated from government service
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regardless how you separate the tsp
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doesn't care they don't delineate
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between you retiring you quitting you
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being fired resigned whatever whatever
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you want to call it tsp doesn't care
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you're either employed or you're not so
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once you're not you have a 30-day
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waiting period and this period is
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designed for your agency to be able to
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notify the office of personnel
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management that you are in in fact in a
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retirement status or in a separated
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status okay and that way tsp knows to
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unlock some of the access opportunity
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that you have for your account there are
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some things that you're allowed to do
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while you're still employed and other
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things that you have to wait for until
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you've actually separated from service
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and so that 30-day window is designed
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for your agency to be able to have the
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time to let tsp know now why it takes 30
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days these days I'm not really sure and
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frankly I've seen withdrawals be able to
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happen within that 30 days it's all a
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matter of you going through all the
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effort to initiate a withdrawal and it
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getting kicked back from TSP because you
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put it in a little too soon and they
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hadn't quite receive the notice from
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your agency okay so lots of different
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ways that you can access the tsp I'm not
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going to bore you with those details you
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can take monthly payments quarterly you
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can take all of it at one time you can
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take a little bit here and there all
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sorts of ways that you can access your
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tsp um but here's the thing I want to
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talk about today and that is penalties
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let's start with the normal rule that
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the IRS has for accounts like this the
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IRS wants you to leave accounts like
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this alone until you've reached the age
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of 59 and a
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half okay so once you are separated from
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service which is the nature of this
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episode you have separated from service
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and now the question is can you access
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the tsp the answer is
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yes but there very well may be a penalty
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based on this IRS Rule now there are
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some special rules assigned to 401K
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plans like the Thrift Savings Plan in
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this case the government says is or
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really the IRS says as long as you
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separate or retire from government
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service in the calendar year and which
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you turn 55 or older you are allowed to
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access your tsp and not have any penalty
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if you do have a penalty it will be a
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10% early withdrawal penalty which means
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all the money that you take out of the
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tsp you will pay an extra 10% on top of
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that that you don't ever get
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back okay and so the way to avoid it
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with respect to being a federal employee
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is you reaching the calendar year in
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which you turn 55 or older for you
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separating from service not taking the
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money separating from service that is
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what unlocks That Special Rule with the
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IRS okay otherwise if you if you leave
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at you know
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52 you are going to have a penalty on
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everything you take from your tsp all
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the way to 59 and a half that's the way
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that penalty works so very important
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that we understand how that works and
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how it doesn't work now there are many
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of you listening who are part of a
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special category of employees these are
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our Law Enforcement Officers
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firefighters and air traffic controllers
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you know you have some special rules to
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access the tsp essentially as long as
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you are eligible to retire under one of
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those special categories you are
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eligible to draw money from the tsp
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without penalty okay so for instance a
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law enforcement officer who is 50 with
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20 years of service they are eligible to
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retire under a law enforcement pension
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that automatically makes them eligible
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to draw from the tsp without penalty so
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great opportunity of course we want to
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make sure we're not dwindling that
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account away too quickly but great
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opportunity for those special categories
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of people now there are other ways to
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avoid the penalties and someone's going
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to comment on This I Promise so we're
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going to link in the show notes to the
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other ways to avoid the penalty it kind
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of gets more into the details of the
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rules of all of this uh that aren't
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necessarily appropriate for this
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particular video but I definitely want
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to make sure that the the access to that
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list is available for anybody who's
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curious and make sure that you know the
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ways to be able to avoid those penalties
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so then the question is can I move the
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tsp the answer is yes you're allowed to
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move that account if that's what you
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wish to do now there might be some
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advantages and disadvantages to doing so
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so it's super important that you're
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talking with a financial professional
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Prof who actually understands how these
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things work so you don't make a silly
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mistake and cost yourself a lot in taxes
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so please seek some help if you're if
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you're curious how to get that type of
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help let us help you uh I would I would
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be delighted to make an introduction to
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a financial professional who uh handles
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this type of work and uh make sure that
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you're you're making these decisions
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with your eyes wide open okay next can I
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leave it in the tsp a lot of people
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think I'm not sure where they got this
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but they have this idea that once they
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leave Federal service they have to take
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their tsp out and that's not true again
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there might be some good reasons to get
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it out of the tsp but you are not
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required to remove it now in the event
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that you have an outstanding loan you
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have the chance to be able to continue
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payments on that loan even as a retiree
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now this was a new rule just a couple
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years back that changed it used to be if
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you had an outstanding loan the moment
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that you retired that became a taxable
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distribution of any of the outstanding
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balance that is no longer the case and
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so you have a chance to Simply continue
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those payments and as long as you do
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that you will not have a taxal event in
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the form of that loan okay all right boy
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there's so much to think about and I'm
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just touching the wave tops of tsp here
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there's so much to think about with
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respect to tsp in retirement or after
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you've separated from federal service to
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get the full scoop on tsp and how all
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the little details where I hope you'll
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get to one of our workshops of course
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tsp is a big topic that we discuss in
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that Workshop uh we cover all of the
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pieces of the pension and all the
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insurance programs Social Security all
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the the facets of your government
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benefits and of course tsp being one of
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them so if you need to get to one of
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those workshops you can can either visit
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our site at fed impact.com or you can
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pull out your phone and text the word
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podcast to
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224444
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6144 and we will get connected you'll
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have an instant access to all of our
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training materials including our
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in-person workshops and be able to get
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the training that you need to feel
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really prepared to retire I hope this
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episode and this Series has been helpful
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to you to be able to get a lot of
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questions answered
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of course with a wide variety of federal
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employees there are bound to be
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additional questions so I hope that this
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put you in the right direction to get
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you exactly what you needed today so be
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sure to subscribe to this podcast
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wherever you might listen to podcast and
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that way more of the content that we're
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producing on a regular basis for federal
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employees shows up on your feed
