todd carmack

Investment Window Policies Finalized by TSP

February 26, 2024 /by todd carmack

TSP account holders have awaited the opportunity to move their investments away from mutual funds throughout the program’s history. Having gone into effect on June 1st, the Federal Retirement Thrift Investment Board (FRTIB) has adopted a new rule without any changes. TSP participants were poised to begin utilizing the new mutual fund window the same month to expand their horizons and save money.

A new record-keeping system enables investments to be made through the mutual fund window, thanks to the ease of an app, new online features, and additional security features. More significantly, certain transactions had to experience suspended access between May 26th and the early-June launch date. In addition, a new annual administrative fee, annual maintenance fee, and individual trade fee were enacted, specifically for those who opt for the window. Minimal initial transfer amounts and a limit on investments through the window were also put into effect. These changes mean that the option will be extended to investors with $40k or more invested within a TSP.

Because the FRTIB has expressed the value of overall transparency toward TSP participants, the fees have been posted in dollar amounts. Through account maintenance fees and transaction fees, TSP participants choose to pay indirectly through revenue shares. There is also a limit regarding the amount of retirement savings that can be used for mutual funds. While many have criticized the 25% cap, the FRTIB assures investors that the cap is not intended to replace core TSP funds. The mutual fund window was created to enhance TSP rather than provide it as an alternative to core options.

Contact Information:
Email: [email protected]
Phone: 7735026467

Bio:
Todd Carmack grew up in Dubuque, Iowa, where he learned the concepts of hard work and the value of a dollar. Todd spent years in Boy Scouts and achieved the honor of Eagle Scout. Todd graduated from Iowa State University, moved to Chicago, spent a few years managing restaurants, and started working in financial services and insurance, helping families prepare for the high cost of college for their children. After spending years in the insurance industry, Todd moved to Arizona and started working with Federal Employees, offing education and options on their benefits. Becoming a Financial Advisor / Fiduciary can help people properly plan for the future. Todd also enjoys cooking and traveling in his free time.

Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.

How Much Retirement Income Will Your TSP Provide?

February 14, 2024 /by todd carmack

Most people will need to take regular withdrawals from their TSP in retirement, but how exactly federal retirees can accomplish this is unclear.

It’s fantastic to have a sizable TSP by retirement. However, there is an issue. Federal employees are not used to making a living from a lot of money. A paycheck every two weeks is the norm for most. So how do you do that without running out of money to turn your TSP into a paycheck? This post will dive further into this specific query.

The biggest TSP Paycheck Mistake

A simple way to determine how much of a paycheck your TSP can provide without you having to worry about running out is to use the 4% rule. Most individuals are unaware of how the 4% rule works and don’t use it correctly.

Actual 4% Rule

Many think the 4% rule states that you can only withdraw 4% of your yearly TSP balance. However, this is untrue.

In reality, the 4% rule recommends that you withdraw 4% of your TSP balance at the start of retirement and then increase that initial withdrawal annually following inflation.

Here’s an example.

Let’s imagine you have $500,000 to retire on. You can withdraw $20,000 in the first year of retirement since 4% of that is $20,000.

Most people assume that in year 2, you must multiply 4% by your new TSP amount once more, but that is not what the 4% specifies.

According to the 4% rule, you should increase your withdrawal amount in year two by the amount of inflation that occurred that year.

Therefore, assuming inflation was 5%, your withdrawal in year two would be $21,000 ($20,000 x 1.05).

The graph below shows how a withdrawal, assuming a $20,000 initial withdrawal, would alter with various inflation rates over time.

Year	Inflation	Withdrawal
1	5%	$20,000.00
2	5%	$21,000.00
3	2%	$22,050.00
4	1%	$22,491.00
5	0%	$22,715.91
6	0%	$22,715.91
7	5%	$22,715.91
8	5%	$23,851.71
9	8%	$25,044.29
10	1%	$27,047.83

But you haven’t finished yet.

Do you get to keep the entire $20,000 if you have $500,000 in your TSP and plan to withdraw $20,000 in your first year?

Most likely not.

Uncle Sam comes in. We must not overlook taxes!

With a 20% effective tax rate, you may spend $16,000 of a $20,000 first-year withdrawal after paying $4,000 in taxes.

In addition, the type of retirement plan you are withdrawing funds from and your other income sources will determine your retirement tax rate.

For instance, you would pay no taxes if you withdrew the $20,000 from the Roth TSP.

Yes, that’s right-$0!

That is one of the many benefits of the Roth TSP.

Making TSP Paychecks

Once you know how much you can take out of your TSP each year, you should pick how often (monthly, quarterly, etc.) you wish to receive the payments and divide the annual amount accordingly.

You have many flexible options with the TSP (and other banks if you have IRAs) regarding how you wish to receive your money.

Because most payments (such as utilities, credit cards, etc.) must be paid each month, most individuals prefer a monthly payment.

As a result, a $20,000 annual withdrawal would be roughly $1,666 each month, or $1,333 after taxes.

However, you can certainly modify your payment schedule based on your requirements.

Take a TSP Annuity

Another option you have when it comes to withdrawing your TSP is to take a TSP annuity. With this option, you would give your TSP balance, or at least a portion of it, to an annuity provider. They would promise you a set salary for a predetermined period. Your life expectancy will determine your monthly payment amount if you want to have the annuity generate payments for the remainder of your life.

The option’s limited flexibility and reversibility are its main drawbacks. Once you’ve made this choice, accessing any of your funds other than the monthly salary you receive from them will be incredibly challenging. Although this approach provides protection, it has very little flexibility.

Not to mention the fact that most fed employees already receive a sizable fixed income through their pension and Social Security. Although having a fixed income is fantastic, you still need to have enough savings and assets to deal with life’s uncertainties when they arise.

Contact Information:
Email: [email protected]
Phone: 7735026467

Benefits and limitations of thrift savings plan annuity

February 8, 2024 /by todd carmack

Annuity, like other retirement plans, is a plan in which you pay a certain amount now, enabling you to receive a monthly allowance until your last breath.

The Thrift Savings Plan (TSP) annuity provider provides different services like:

Joint life annuity: This TSP is for you and your spouse or someone closer and dearer to you. Your joint annuitant is advisable to be part of the people with an insurable interest in you. The joint life TSP annuity allows you and your partner to receive monthly earnings as long as you are both alive or one dies, leaving the other partner alive. The pension still covers the monthly allowance of the survivor for the end of their life.

Single life annuity: The TSP single life annuity only offers you the monthly payment benefits as long as you are alive and stops after you die. This annuity plan can not be transferable to your partner.

100% survivor annuity: This is one of the benefits of the joint life annuity package. Choosing this pension plan allows the survivor to receive the same monthly amount you receive when both of you are alive. For instance, the monthly payment for you and your annuitant is $1000; when both of you are alive, the survivor will also get that amount if any one of you dies.

50% survivor annuity: The 50% survivor annuity plan is also not a bad idea. The monthly fees to the survivor will be 50% of the initial amount paid while both of you are alive. It is advisable to choose this plan option, especially if you are ten years older than your joint annuitant. It will serve as a windfall, not something you will rely on as a means of surviving.

Annuity payment options

You should choose the joint or single life annuity and consider the two payment options and the factors that affect the monthly annuity payments.

Level payment: If you choose this payment option for either the single or joint life annuity. You will receive the same amount of money monthly throughout your entire life for the single-life grant. While for a joint life grant, you and your joint annuitant will receive the same amount monthly every year without any increment. The survivor’s amount will later depend on whether you chose the 100% or 50% survivor annuity.

Increasing payments: This payment option might not be impressive to you because the amount paid per month is small compared to the level payment option. However, This increasing payment is preferable to the level payment due to the rapid economic growth. Things are changing every day, and your income should also be increasing. The annuity payment will be increased yearly by 2% on the first day of payment. Before March 2, 2020, the income from the TSP annuities rose between 0% and 3% annually based on the consumer price index.

The other side of this plan is that you can not choose this payment option if your joint annuitant is not your spouse.

Factors that can affect your monthly annuity payment include the following:

§ The amount you used to acquire the TSP annuity.

§ TSP annuity option you opt for (the single or joint life annuity).

§ Your age or the age of your joint annuitant when you bought the annuity.

§ The “interest rate index” when you purchase the annuity.

Additional features of TSP annuities

Providing payment for beneficiaries

You can provide payment options to your beneficiary(ies) in the annuity section of your TSP withdrawal form. Note that your monthly receivable amount will be lesser than when you did not choose any additional features.

Cash refund

Assuming you and your partner (if the joint annuitant is applicable) die before they pay you, the remaining amount of the TSP balance you used to obtain your annuity will be paid to your beneficiary(ies) in a heaping sum. This feature applies to any of the annuity plans.

Ten-year certain

If you buy the single life annuity, you can add the ten-year specific feature to your plan. The features give you 100% assurance that you or your beneficiary can receive your money until ten years if you are alive or dead. Also, if you live beyond ten years, you can still collect your monthly payment. Still, your beneficiary(ies) are not eligible for the annuity payment when you die.

Special considerations (spouse’s rights)

The additional pension feature gives your spouse rights over your annuity purchases whether you are together or separated. Presuming you are a uniformed officer or FERS, your spouse is legally eligible for a joint life annuity with level payments, no cash refund, and 50% survivor benefit. Suppose you have more than $3,500 and want to make a total withdrawal from your account; your spouse must sign the statement on your withdrawal form, which waives their right to it. In this case, you do not use the aggregate money to purchase the annuity.

Contact Information:
Email: [email protected]
Phone: 7735026467

The 9 Life Transformations That Have An Impact On Social Security Benefit

January 26, 2024 /by todd carmack

Everything in life is not permanent since change is constant in life. However, the social security benefit is about to change. Therefore, regardless of the factors that influence the social security benefits, you will enjoy the positive side of having more income during retirement.

Some factors that influence social security benefits are:

1. Change of name: For instance, if you decide to change your name legally from Claire Martins to Claire John, you should notify and contact the SSA about the changes in your name. It will help avoid errors in remitting your salary or wages into the social security earning file.

You need to present some documents to the SSA to accept your new name and issue your new security card, such as:

• Certificate of naturalization bearing your new name.

• Marriage certificate.

• Divorce decree.

• Court order showing approval of your new name.

2. Change of address: The SSA needs to be informed of your new location to prevent them from sending your monthly check or other valuable documents to a different address. Your relocation from one state to another will not affect your security benefits payouts. However, it can influence your check due to the taxes assigned by the state.

Social security is treated differently in some states.

3. Adoption or extension of the family: If there is a new member in your family, either you adopt or expand your family, the social security administration needs to be informed, as the latest member could be part of the beneficiary of the social security retirement packages.

Your children under 18, unmarried or full-time students in or below grade 12, and children with disability are eligible for the benefits without reducing your retirement benefits.

4. Change of citizenship status: If you satisfy specific required conditions by the SSA as a legal immigrant in the state, you can be eligible for social security benefits. Such conditions include work credits or earned equivalent credits from your work history in your previous country.

As an American citizen, you have the right to receive your benefits if you relocate to one of the eligible countries. However, suppose you decide to leave for some country like Moldova, Kazakhstan, Tajikistan, Belarus, Azerbaijan, Kyrgyzstan, and Uzbekistan, where the SSA cannot make social security payments. In that case, you might not get the benefits.

5. If you receive a pension from your new work not covered under social security: During your years in service, suppose you didn’t pay taxes for social security, the SSA may reduce the widow, spouse or widower benefits by more than 60 percent of the payments you receive as pension from the government. This act is termed government pension offset (GPO).

6. If you are convicted of a crime: if you are found guilty of an offense and sentenced for 30 or more days, the SSA can deprive you of your entire social security benefits. However, the SSA will return your benefits a month after your release once you are acquitted.

7. You are no longer in charge of your social security recipient child: The American government provides social security benefits for children aged 18 and above who are disabled before they are 22 years or continuously disabled. The benefits can last for the time they are incapable of doing any work or until they die from the disability.

8. If you don’t have practical fund management skills: After retirement, you might be the one who can’t control your financial affairs. When you identify this challenge, inform the Social Security Administration. They can help you conduct a discreet investigation and appoint someone who might be your family member, organization, friend, or an individual to assist you in monitoring your benefit affairs. Failure to do so may cause a monthly benefit check delay or errors in your earning record.

9. Suppose the beneficiary dies: For example, if the social security inheritor died in July, you must refund the benefit they paid in August to the social security administration. They are not entitled to social security payouts again.

You can contact the social security administration (SSA) at 1-800-772-1213 if you have any challenges concerning the social security benefits.

Contact Information:
Email: [email protected]
Phone: 6232511574

Sin #3 and Your 401(k)

January 20, 2024 /by todd carmack

What dangers should you accept to reach your financial objective, if any? What’s the cut-off point? That’s a simple question, but the answer can be complex.

How much is “enough” depends on a myriad of factors. What’s more important to you: your nest egg, your kids, or something else? Additionally, “enough” is a moving target. When you can retire depends on your age and your financial situation, both of which are subject to change as you get older. Yes, it most likely will.

At 25, aiming for a million-dollar nest egg could be a realistic target. But things may have shifted by the time you get to middle age. Possibly there have been one or more severe economic downturns. Or dramatic rises in prices. Like now, for example. There are constant shifts in the world and economy, from gas and baby formula prices to the possibility of a broader war in Europe. So far, changes haven’t been for the better in many situations. So we went to a recently retired fed, Abraham Grungold, to get his take on things. After a lengthy government job and TSP investment, he recently retired with over a million dollars in his bank account. In his own words:

TSP â€” How much is enough?

Over 100,000 federal workers have become millionaires through the Thrift Savings Plan (TSP). How much money in a TSP would be enough to live comfortably in retirement? Is there a magic number for a secure retirement? Various elements, some of which are unique to each person’s personal and financial circumstances, determine the answer. Note that federal and state tax rates are subject to change. Thus, the numbers in the following two scenarios should be treated as approximations.

An Individual

If you retire at age 62 after 30 years in the federal government and receive an annuity of $30,000, a Social Security payment of $20,000, and a total of $500,000 in your Thrift Savings Plan, you can expect to receive $20,000 year for the next 25 years. Your yearly gross salary is $70,000; once taxes are taken out, you’ll be left with about $55,000. Will your current standard of living be supported by this income?

A Couple

Consider a relationship in which one partner is a federal employee, and both are 62 years old. Furthermore, they have $1,000,000 in their TSP and other retirement accounts.

An annuity of $30,000 is paid to Spouse 1, while Spouse 2 receives $20,000 from Social Security. They plan to spend $40,000 a year, or 4% of their $1,000,000 nest egg, for the next 25 years. They make a combined $110,000 annually before taxes, which amounts to about $85,000. Could they maintain their current standard of living on this salary?

Before retiring, government employees should put as much money as they can into savings and invest aggressively to ensure that they will have sufficient funds to have a comfortable retirement and some funds left aside for unexpected expenses. When I asked several former government employees, they all assured me that they were able to retire comfortably on $2 million. But do you think that’s enough?

Some unexpected events will arise in your life. The following are examples of unforeseen challenges that retirees may face:

Everything’s getting more expensive due to inflation.

Financing for a vacation or secondary residence
Meeting medical and pharmaceutical costs
Spending on grandkids’ higher education
Nursing homes or other facilities providing long-term care

After you have retired, you need to be watchful and keep a close eye on how much money you are spending. Even if they take money out of their tax-deferred savings plans (TSPs), investors still need to make significant investments to ensure they have money set aside for unexpected expenses and that their accounts continue to grow.

Many federal workers have reached out to me as a financial coach with questions about their retirement, TSP, and assets outside the TSP. I think it’s essential for them to have a backup plan in place for when they retire. The best way to prepare for these challenges as a senior is to save as much as possible in a TSP.

Contact Information:
Email: [email protected]
Phone: 7735026467

Managing Retirement-Related Healthcare Costs

January 14, 2024 /by todd carmack

When people begin planning for retirement, the typical expenses taken into account include housing, utilities, gas, and even food. Unfortunately, retirees fail to consider the increasing cost associated with healthcare costs during retirement. By failing to manage healthcare costs before retiring, aging individuals risk facing an expensive oversight later in life. With healthcare being one of the most costly aspects of retirement, it’s imperative to plan before being slapped with sticker shock at the beginning of your golden years.

In 2021 alone, your average retired couple needed to plan for over $300k in savings to cover the entirety of their healthcare expenses alone. According to a survey conducted by RBC Wealth Management, up to 80% of the individuals surveyed felt they would fail to afford healthcare in retirement. Concern has arisen due to the simple fact that retirement funds are fixed figures. Although it’s essential to understand how health insurance premiums change over the years, it isn’t worth stressing over.

As you age, the expenditures associated with healthcare increase. For example, a couple between 65 and 74 should plan to spend $12k per year. As the couple ages between 75 and 84, it increases to $21k. During your golden years, you may notice that your set retirement income remains the same as healthcare costs rise. For this reason, individuals choose to invest in plans such as a health savings account (HSA) or 401(k).

Planning for future medical costs can mean the difference between enjoying retirement and scrambling to stay on top of your finances. You will be far ahead of the curve by estimating costs ahead of time and putting a healthcare plan into your plan from the beginning. Start by considering your family and medical history, especially if you suffer from a chronic condition or have spent any time smoking.

The location of your retirement is another commonly overlooked factor, but why does it matter? Regarding retirement healthcare, the state where you purchase your policy may offer different benefits to solo and spousal plans. Some families purchase gap insurance to bridge the gap in existing coverage, with options such as COBRA. Gap insurance helps pay for areas traditional insurance providers do not cover, which means it won’t cover 100% of your bill. For example, eye exams, long-term care, and dental or hearing care aren’t covered by Medicare plans and are billed as out-of-pocket expenses without gap insurance.

Contact Information:
Email: [email protected]
Phone: 6232511574

Important Considerations When Buying Long-Term Care Insurance

December 30, 2023 /by todd carmack

Long-term care insurance can be costly, whether purchased through the federal FLTCIP program or elsewhere. The options available in such insurance can be tailored to keep premium costs low, but keep the following considerations in mind:

The benefit is received on a daily or monthly basis. At least 60-80% of the cost of a private room in your area should be covered by your policy. If you can’t afford to pay the balance out of your other assets, you should consider buying 100% coverage.
The scope of care. Unless you would feel vulnerable or uncomfortable having strangers come into your home and hence do not want in-home care, a policy should pay as much for home care as it does for nursing home care.
The duration of the benefit. Purchase a policy that will cover you for at least three years. After a three-year waiting period, you should have a plan to transfer assets and eventually qualify for Medicaid.
The period of waiting. The longer you wait before receiving benefits, the lower your premiums will be. A 100-day waiting period will cost you more than $15,000 out of pocket if you earn $5,000 per month. Choose a 30-day waiting period if you’re not willing or able to bear that cost.
Anti-inflationary measures. The majority of people will want to be protected in this way. Simple protection will be less expensive than compound protection, and it may be sufficient in today’s low-inflation economy.
What happens if you miss a payment? Policyholders who miss a single payment risk losing access to their accounts. However, many organizations provide measures to protect their consumers. Some companies have nonforfeiture options, allowing you to keep a lesser benefit based on what you’ve already paid. Others provide a continuity option that allows third parties to pay for policyholders who cannot do so. For example, if a policyholder misses a premium payment due to an extended vacation or hospital stay, a chosen sibling or adult child can cover the premium payments temporarily.
Other advantages. Other long-term care benefits to which you’ll be entitled should not be overlooked. You will most likely qualify for Medicaid, which can cover a nursing home if you have no large assets or income. Thus you will not need any LTC insurance. If you are a veteran or a veteran’s spouse, you may be eligible for up to $1,500 in veteran monthly benefits, so you will likely only need enough coverage to fill the gap.

The more preparation you undertake now, the better off you will be in retirement and aging. The cost is often the largest deterrent to purchasing long-term care insurance. Combining estate-planning strategies like Asset Protection Trusts in addition to your long-term care insurance needs, on the other hand, can often result in a reduction in the amount of insurance required and, as a consequence, a reduced overall cost.

Contact Information:
Email: [email protected]
Phone: 6232511574

A New Bill Could Give Seniors an Additional $2,400 Each Year in Social Security Benefits

December 20, 2023 /by todd carmack

If a new bill recently introduced to Congress gains approval, beneficiaries of Social Security could receive an annual benefit increase of up to $2,400. This is something that senior citizens no doubt would undoubtedly welcome as rising inflation nullifies their annual cost-of-living increases.

According to CBS News, on June 9, United States Representative Peter DeFazio (D) of Oregon and Senator Bernie Sanders (I) of Vermont proposed the Social Security Expansion Act. Everyone already receiving Social Security benefits or reaching 62 in 2023 would be eligible to earn an additional $200 in their checks every month if the measure becomes law.

There are several reasons the measure should be passed at this time. First, it comes after a declaration by the Social Security Administration earlier this month that citizens of the United States will no longer get their total Social Security payments in around 13 years if efforts are not taken to strengthen the program.

In addition, it takes place amid a period of historically high inflation, which has a disproportionately large influence on older people living on fixed incomes, many of whom depend entirely on payments from Social Security.

The Social Security Administration (SSA) determined this year’s cost-of-living adjustment (COLA) to be 5.9 percent based on the inflation rates from 2021. Since that time, however, inflation has reached much beyond 8 percent, meaning that people who receive Social Security now see their benefits reduced.

By increasing the amount of money sent to each beneficiary every month, the new legislation hopes to relieve some of the monetary pressure. Because the typical amount received from Social Security each month is around $1,658, an increase of $200 would result in a 12 percent pay raise.

According to Martha Shedden, president of the National Association of Registered Social Security Analysts, many seniors rely on Social Security for the bulk of their income. An additional $200 per month may make a difference for many individuals.

The proposed legislation would, among other things, increase the monthly payout amount and make various other modifications to the program itself. The Consumer Price Index for the Elderly (CPI-E) might be used instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers as the basis for calculating the yearly cost-of-living adjustment (COLA) (CPI-W).

A further modification would involve adding additional money by imposing the Social Security payroll tax on any income over $250,000. At this time, earnings greater than $147,000 are exempt from the Social Security tax.

Even if Congress does not approve the plan in its current iteration, commentators anticipate that Social Security will undergo some modifications to meet the requirements of beneficiaries long into the foreseeable future. So, it was all about the new bill passed for an additional $2,400 as a social security benefit for older citizens.

Contact Information:
Email: [email protected]
Phone: 6232511574

Ohio Lawmakers Get Advice From a Policy Group on Federal Expenditure

December 14, 2023 /by todd carmack

On Monday, a group of experts in Ohio explained how the state’s money would be spent. It was an earnest discussion that would benefit many young students. However, a Columbus-based institute, The Buckeye Institute, firmly believes that the unexpended money from American Rescue Plan Act Dollars should be spent correctly. It can be done to help overcome unemployment by rebuilding Ohio’s unemployment trust fund. They are sure that it will be valuable to people so they can find something for themselves and work. Therefore, this plan can be implemented and prove to be helpful.

Moreover, they should make the internet more accessible. They can advertise the Ohio Afterschool Enrichment education savings account program for students. Students will learn many tips that they could use if they ever face these issues.

Logan Kolas, an economic policy analyst, stated to The Buckeye Institute that Ohio lawmakers would have to ensure that the money is spent correctly. If the money is being expended in the best way, it will ensure the unemployment decline. Therefore, Kolas’s recommendation to the lawmakers was to limit investment spending, especially the ones that are one-time and are confined to a specific end date. Due to the pandemic, everyone has suffered a significant loss in education, jobs, and people.

Furthermore, the memo explains that they can tackle the learning loss during the pandemic by expanding the education savings account program. Thus, Kolas told the memo that Ohio lawmakers could spend Washington’s remaining funds collected during the pandemic. Therefore, Ohio can make most of the situation if they stick to a spending plan. Not only will they be able to help everyone but overcome the current unemployment situation in the state.

Other than this, many action plans have been generated for a good cause. This year, it is the second time that The Buckeye Institute has insisted on restoring the pre-pandemic fund levels by using one-time federal money. It was issued in February, five months after Gov. Mike DeWine announced covering the unemployment benefits. It would be done by providing a repayment of the federal loans. Center Square reported previously that in September 2021, DeWine announced that Ohio should use funds from the American Rescue Plan. They should begin the process to repay the US Treasury Department, which is to be done by Thursday. If the loan is not paid by Monday, the Federal government will charge 2.777% interest. Thus, it means employers will have to pay high taxes for unemployment. The quick payment was dissimilar to actions that took place in the recession of 2008. Thus, the state had to borrow money to cover unemployment benefits. According to the Ohio Department of Jobs and Family, Matt Damschroder, they had to pay $258 million as a form of interest.

Contact Information:
Email: [email protected]
Phone: 6232511574

Why Jeffrey Levine Believes Retirees Should Delay Social Security

December 8, 2023 /by todd carmack

According to Jeffrey Levine, the RIA Buckingham Wealth Partners firm’s chief planning officer, now is the ideal time for advisers to demonstrate their value to their clients, particularly those on a fixed income. He says one way to go about doing this is by implementing designs, building, and protecting strategies for all of its clients, regardless of their age or whether they are pre-retirees or retirees.

Levine noted that the idea “combines components of what’s commonly known as life planning with a data-driven approach to the technical elements of a financial plan and some novel approaches to conduct the monitoring/updating portion of an ongoing planning partnership.”

In a recent email interview, Levine answered some questions about what he and his firm are doing to assist clients in overcoming the numerous hurdles that investors will face in 2022.

How does Buckingham Wealth Partners plan on helping clients in dealing with market volatility this year?

We’ve explored a variety of approaches to assist consumers in dealing with the current market volatility. Communication and education are first and foremost, and we’ve accomplished this through various methods, including webinars, emails, and, when needed, direct one-on-one conversations.

When we build client portfolios, we think about the long term. And, throughout time, we “know” that there will be excellent markets and terrible markets, times of high volatility and periods of low volatility, etc.

We don’t usually look to make significant asset allocation modifications in response to the “news of the day” because we use an evidence-based strategy. Rather, we try to educate clients on the benefits of staying invested in a well-balanced portfolio.

Of course, this isn’t to suggest that there aren’t some efficient steps they can take to benefit from market volatility somehow. For example, we’ve executed trades in several of our clients’ taxable accounts to collect losses that will (hopefully) be used to offset potential capital gains. Other clients have also benefited from Roth conversions at cheaper valuations.

How is Buckingham Wealth assisting retired clients with inflation? What should other advisors do to help retiree clients?

Inflation is a huge concern for all clients, but those on fixed incomes are especially vulnerable. When working with retirees, making the correct “big picture” decisions is the first step in dealing with (possible) inflation. When to file for Social Security is one of those major decisions.

Everyone’s circumstances are unique, but we’re firm believers in the long-term advantages of deferring Social Security benefits wherever possible. Because Social Security benefits are subject to annual cost-of-living adjustments, postponing benefits is one of the finest tools for fighting inflation available to a (pre-) retiree.

The client’s asset allocation is another large picture factor. A fully-diversified portfolio can help offset the effects of a range of risks, including inflation. Of course, getting the more minor decisions “right” also helps.

How is Buckingham Wealth assisting clients with annuities?

We don’t use annuities very often in our planning at the moment. However, if appropriate, we will collaborate with third parties to develop a solution that will assist us in meeting the demands of individual clients.

We’re keeping an eye on several annuity-related issues. Finally, there appears to be a drive (finally) to produce more RIA-friendly [multi-year guaranteed annuities] and even income annuities.

What would you advise other advisors to undertake this year to assist pre-retiree clients? How will you assist retirees?

While there are some distinctions between retirees and pre-retirees, I’m not sure I’d divide our customer experience so sharply between the two groups.

Regardless of age, we seek to implement the Design | Build | Protect concept for our clients at a high level. That philosophy combines aspects of life planning with an evidence-based approach to financial planning.

Based on my position, I can devote most of my time to the technical aspects of financial planning. The major dilemma for most organizations is “how do you design a system that can give a consistent planning experience while taking into account each client’s unique planning demands?”

Our Wealth Planning Conversations are the answer to that question. Each Wealth Planning Conversation includes several key elements, such as our evidence-based default perspective on a particular strategy, issue, or topic, what we believe is the acceptable role for an advisor, a list of best practices, valuable resources, and even a conversation guide to assist advisors in determining how to best communicate these issues with clients.

It’s through all of these wealth planning conversations that advisors are empowered to provide clients with a consistent yet customizable experience.

Contact Information:
Email: [email protected]
Phone: 6232511574

The Federal Government wants to Improve Retirement Ways: Add Gold to Spend Golden Years with Ease

November 26, 2023 /by todd carmack

People are now looking for better retirement plans to make their future secure. In the U.S., Washington D.C. wants to improve how people live their retirement days; therefore, they want to improve the retirement system. According to a report, the Senate and House of Representatives could sign a $1.7 trillion spending bill for 2023, which is 4,100 pages long. That bill has been planned with the name “Secure 2.0,” which would allow workers to be prepared for their future life after retirement.

Things are getting more strict. Employees should enroll themselves in the plan of retirement to avoid inconveniences later. According to the CNBC report, organizations hiring employees should automatically enroll their employees in the 401(k) plan at a rate of 3% at least but should be at most 10%. It should only be done if they have fewer than ten workers or if they have had their own business for under three years. Moreover, workers should withdraw their RMDs when they reach the age of 73 as soon as 2023 starts. The period would go to 75 in 2033. Right now, the age limit is 72. The fine for not taking RMDs would decrease from 50% to 25%, and in some scenarios, it can reduce further to 10%.

People want to make better plans to ensure the safety of their future. Therefore, to improve their retirement plan, workers can now add an extra $6,500 every year to their account under the 401(k) plan when they reach the age limit of 50. The limit would be increased to $10,000 or 50% more than the regular amount for people aged 60 to 63 in 2023. It has been proven to be very helpful for many employees. They could make a better savings plan once they retire. Also, these catch-up amounts may be increased due to the current inflation going around the globe.

Furthermore, all these catch-up amounts are added to the Roth treatment. This rule does not apply to workers earning $145,000 or less. The plans have also tried to accommodate employees who are paying their student loans. Employers can contribute to the 401(k) plan for their employees who are paying their student loans instead of saving for their post-career days.

Sometimes, employees face emergencies. They would require money to deal with their problems. An innovation has been made to the plan. In emergencies, they have set a new plan for the employees. Therefore, employees can withdraw amounts up to $1,000 from their retirement account in case they have emergency payments to make. Also, they would not have to pay a 10% tax fine for making an early withdrawal if they are under the age of 59. Companies can help their employees by allowing them to create an emergency account. In this way, they will automatically add a certain amount they could withdraw anytime during critical situations. The amount added to the emergency savings account can be $2,500, which would be deducted automatically from their pay.

Employees who work as part-time workers who have been working for two consecutive years for around 500 to 999 hours instead of fulfilling the requirement of three years could be eligible for the company’s 401(k). Workers should have as much as $200,000 for their qualified longevity allowance contract. The current limits of 25% of the value of the retirement accounts and $135,000 are eliminated. A new addition has been made. The bill has eliminated the pre-death distribution requirement for the 401(k) plan and now allows tax-and penalty-free rollovers to Roth IRAs. Many of them are from college saving accounts which have been said to be 529 accounts done under certain conditions. Also, the bill has now included an incentive for small business owners so they can set up a retirement.

A few years ago, the U.S. Department of Labor ruled that employers can consider making climate change investments for their retirement savings plan. It is a change that was made from Trump-era regulations. A report was released in March. It stated that there had been an increase of 76% in the companies in California which have adopted a low-cost, accessible retirement plan. They have done so due to a law requiring the small business to choose the private market option, like 401(k), or they should go through the state-run Cal Savers program.

Contact Information:
Email: [email protected]
Phone: 6232511574

The Limited Eligibility of a Lump-Sum Annuity

November 20, 2023 /by todd carmack

Lump-sum annuities (or lump-sum option or alternative form of an annuity) remain a primarily misunderstood portion of the federal retirement policy. However, trending data shows that, as they approach retirement, most employees ask for lump-sum annuities even when it isn’t readily available. So, what exactly is a lump-sum option, and will it be phased out in the future?

The lump-sum annuity was created as a replacement option for the three-year recovery rule, in which retirees were exempt from paying taxes on annuity payments for up to 3 years. Said retirees would receive an amount equal to past contributions into the retirement fund, which had previously been taxed. These individuals were also permitted to receive an amount equal to previous contributions during retirement, while they also received a reduction in their annuity based on life expectancy.

Although the lump-sum option was widely available and quite popular since its creation, it drew much attention from the federal government. Ultimately, the opportunity was eliminated in 1994 for most Americans, aside from those dealing with a medical condition deemed fatal within a two-year period. Individuals facing such life-threatening conditions can choose the lump-sum option with a few contingencies.

While quite a bit of time has passed since changes were enacted, many employees on the heels of retirement are banking on lump-sum annuity availability. This confusion may be due, in part, to the time in which they entered government employment, around the original design of lump-sum options. A Thrift Savings Plan (TSP) may serve as a decent alternative for those looking to pay off loans, a mortgage, or make a significant purchase.

Contact Information:
Email: [email protected]
Phone: 6232511574

The Social Security Benefits Calculation Guide for 2022

November 14, 2023 /by todd carmack

Social Security benefits may be a significant component of your retirement strategy. The amount of Social Security payments you will receive is determined using a three-step method.

Step 1: Determine your average earning history

Step 2: Determine your primary insurance amount (PIA)

Step 3: Determine your actual Social Security benefit

Calculate your average earning history

The first stage is to evaluate your average lifetime income. It’s not as easy as just averaging your profits after summing up all your earnings. The calculation must take into account several constraining factors.

Only earnings that you paid Social Security taxes on will be counted against your lifetime earnings. The computation will not consider incomes that, for instance, were not subject to Social Security taxation throughout your lifetime.

The yearly cap for Social Security taxes is $147,000 in 2022 ($142,800 in 2021). Only $147,000 of your 2022 employment income, for instance, counts in the computation of your lifetime Social Security earnings. The sum over $147,000 is not subject to taxation or factored into the computation of lifetime earnings.

Calculate your primary insurance amount

You’ll include your average indexed monthly earnings (AIME) into a formula to get your main insurance amount, or PIA, after calculating your AIME. The foundation of this formula is a concept known as “bend points.”

The PIA is the value that your Social Security payment would be if you applied for benefits to start at precisely the time when you would be eligible for retirement (FRA). Your PIA is multiplied by a growing or decreasing factor at any other age, even a month before or a month beyond your full retirement age, to calculate your benefit amount.

We must first determine which bend points, based on your age, apply to you in order to compute your PIA. Bend points are chunks of your AIME, and your PIA is calculated by multiplying the sum of each bend point by a particular percentage.

Based on numbers that were first calculated in 1977, bend points are calculated for each year. The bend points in 1977 were $180 and $1,085. Over the years, these bend points have been adjusted annually; as a result, the bend points for 2022 are $1,024 and $6,172. The bend points for 2021 were $996 and $6,002. The year you turn 62 represents the beginning of your situation’s curve.

Calculate your actual Social Security benefit

We can determine your actual Social Security benefit using the PIA. The age you are when you start receiving Social Security payments in relation to your full retirement age, or FRA, is the additional element besides the PIA.

Your benefit will be the same as your PIA if you petition for Social Security payments to begin at your FRA. Your Social Security income will be deducted from your PIA for each month before your FRA. In contrast, your Social Security pension will be enhanced from your PIA for each month following your FRA, up to the age of 70.

The reductions for filing early are in relation to your FRA. The PIA is decreased by five-ninths of 1%, or 0.556%, for each of the 36 months leading up to your FRA. The decrease is 20% if benefits are started a full 36 months before FRA.

A further five-twelfths of 1%, or 0.417%, is subtracted from the PIA for each month that is more than 36 months before the FRA. Therefore, the extra reduction is 5% for every full year (12 months) that you submit less than 36 months before the FRA.

For each month that Social Security benefits are delayed beyond FRA, the delayed-filing increases (two-thirds of 1%) are computed. Your Social Security payment is determined by adding 8% to the PIA for each full year of delay.

Your FRA is defined by your birth year. Your FRA is 66 if you were born between 1946 and 1954. The FRA is extended by two months for each year following 1954. The FRA is 67 for those born in 1960 or after.

Contact Information:
Email: [email protected]
Phone: 6232511574

Flexibility Offered by FEDVIP Compared to FEHB

November 8, 2023 /by todd carmack

The Federal and Dental Vision Insurance Program (FEDVIP) offers late-career employees and retirees special provisions of interest to fill gaps within their respective FEHB health insurance coverage. Qualified individuals are enabled to ensure coverage in all aspects of their enrollment. Although annuitants may not be eligible for FEHB, they are eligible for FEDVIP, which significantly benefits retirees unable to obtain FEHB.

For example, let’s say a retiree was facing the discontinuation in their retirement benefits, did not have FEHB for five years before retiring, or had dropped their FEHB. In any case, there are, in fact, several avenues that make a federal employee ineligible for FEHB coverage. FEDVIP is different in that, although FEHB and FEGLI have a service requirement, retirees aren’t required to have been enrolled for the five years leading up to their retirement. Compared to annuitants, active employees must pay premiums using pre-tax money. In short, this distinct difference means FEDVIP is a more expensive option in retirement than it is during active service. FEHB, by comparison, will become more costly in a similar way.

The relationship between FEDVIP and FEHB involves full or partial affiliation through health insurance carriers. Currently, FEHB-enrolled employees are not required to participate in an FEHB-sponsored vision or dental plan. Therefore, the responsibility for coordinating FEHB plan benefits lies with the program carriers as secondary payors.

Contact Information:
Email: [email protected]
Phone: 6232511574

How Social Security Reform Can Help Those Disproportionally Affected by Retirement Tax Breaks

October 26, 2023 /by todd carmack

With a Social Security crisis still coming, Congress must approve legislation to prevent the Social Security trust fund from running out of resources by 2034, according to GoBankingRates.com forecasts.

Some reform components urge people to save for retirement on their own. However, according to a new report from the National Institute on Retirement Security, more than half of the tax breaks meant to encourage retirement savings through other vehicles, like defined contribution (DC) plans and Individual Retirement Accounts (IRAs), currently benefit the top 10% of wage earners in the United States â€” not the middle class or lower-income wage earners.

Furthermore, the wealthiest 30% of employees earn 89% of the “present value of tax advantages for DC plans and IRAs,” according to the report.

The report, “The Missing Middle: How Tax Incentives for Retirement Savings Leave Middle-Class Families Behind,” discusses how Social Security fails to help the middle class. It has been found to aid in the reduction of poverty among older Americans, but it doesn’t offer adequate retirement income for the middle class.

Furthermore, because of marginal tax rates, the tax benefits obtained by saving for retirement through alternative methods benefit high earners more. According to the report, when these factors are combined, they result in retirement disparities tied not just to income but also to geography and race.

The report proposes potential remedies such as expanding Social Security through benefit modifications or including lifelong income choices for people who save outside the program. Reforming the tax features of retirement savings might also help motivate retirement savings outside the Social Security system by providing middle-class tax breaks.

Finally, the report proposed that decreasing abuses in the present Social Security system may contribute to the fund’s growth through federal tax revenue.

Contact Information:
Email: [email protected]
Phone: 6232511574

13 things you can sell when planning to retire

October 20, 2023 /by todd carmack

Many retirees downsize as a means of reducing costs and simplifying their lives. Some people move to a smaller house or a retirement community. Others simply get rid of items they no longer need.

You may sell many items to reduce clutter and boost your retirement savings if your retirement plans include downsizing. Here are some of them.

1. Your Car

Your car might still be a significant expense even after you have finished paying it off because you have to pay for gas, insurance, upkeep, and repairs. Consider selling one of the cars you and your partner have if you each have one.

Even if you only have one automobile, selling it and commuting by public transportation or ridesharing can be less expensive.

2. Your House

Where you wish to reside is a crucial decision when preparing for retirement. Your current home, which is likely your most valuable asset, may need to be sold to do this.

You can use the money to rent a smaller space, buy a smaller home, or save any extra cash. You can generate funds by downsizing your home. You’ll also save time and money because you’ll have fewer properties to maintain.

3. Your Furniture

Selling larger furniture pieces that you won’t have a place for if you move to a smaller home is a wonderful option. Furniture can be sold on Craigslist, Facebook Marketplace, or directly to a consignment company or secondhand furniture retailer.

4. Exercise Equipment

Your home may no longer have room for exercise equipment if you downsize. However, even if you intend to remain in your existing home, you might consider selling your treadmill or stationary bike since you’ll have access to alternative fitness options through programs like Medicare Advantage.

5. Old Mobile Phones

Moving old cell phones with you if you are downsizing or moving and having them lying around is pointless. The time has come to sell. Depending on the age and quality of your used phone, you can receive hundreds of dollars. You can sell your phone online through websites like Best Buy Trade-In, Flipsy, Amazon Trade-In, Gazelle, and others.

6. Children’s Toys

It’s time to let go of any toys you’ve kept for sentimental reasons. Even collectibles might be used to describe some of these toys. If so, you can make a lot of money by selling them on eBay.

7. Your Work Clothing

When you leave the workforce, you are no longer required to dress professionally for daily activities. One suit should be kept for weddings and other special events, while the rest should be sold. You can consign your clothing at a nearby consignment store or sell it online at places like Poshmark and thredUP.

8. Dated Computers

If you replaced your computer but kept the old one, it’s likely gathering dust when it could be earning money. You have two options for selling your computer: either use Best Buy’s Trade-In program and receive a gift card in exchange for its value or sell it online using a site like Flipsy.

9. Antiques and Collectibles

Antiques and collectibles can take up a lot of space, which you might not have if you reduce your home, much as books do. Holding onto a few items with sentimental significance is acceptable, but consider whether your value would increase if you sold them and used the proceeds to fund your retirement.

10. Bags You’ll Never Use

Similar to suitcases and other bags, you may have amassed a sizable collection of handbags over time, but you probably only used one or two of them. Some handbags can sell for a lot when resold, particularly if they are designer names.

11. Decoration Items

If you downsize to a smaller house, holiday decorations and other dÃ©cor items may be taking up room you don’t have. Think about organizing a yard sale if you have any random dÃ©cor items you no longer want or need.

12. Books

Books take up so much space and frequently remain unread on shelves. There’s no reason to save a book unless it has sentimental value or you genuinely believe you’ll read it again. You can sell books to nearby used bookstores or through Amazon’s trade-in program.

13. Sporting Goods

While it’s crucial to be active in retirement, you might not regularly use all of your sporting equipment. It might be time to sell your skis if they have spent more time in your garage than in the snow. Renting is always an option if you ever find yourself needing sporting goods later on.

Contact Information:
Email: [email protected]
Phone: 6232511574

Converting Money from a TSP Into an Annuity

October 8, 2023 /by todd carmack

Even though it’s one of several ways to withdraw money from a Thrift Savings Plan (TSP), the least common choice is to purchase an annuity. The payments can be made in one large sum, every month, or any mix of the two. A little more than 10% of withdrawals from the TSP are used to purchase annuities. You need to be familiar with its characteristics before committing it to paper. The distributions for annuities under the TSP are more adaptable than those under the FERS and CSRS.

TSP provides customers with the following options for annuities:

1. A permanent annuity that pays just you during your whole life is called single life.

2. A combined life with spouse annuity provides you two with payments for as long as either of you is still living. When one spouse passes away, the other will get an income for the rest of their lives.

3. Joint life with a non-spouse, also known as a joint annuity, is an annuity paid to both you and your non-spouse while you are both still alive. This individual must have an interest in you that can be insured. When one of them passes away, the other will get an income for the rest of their lives. Anyone considered to have an insurable interest in you includes your exes, biological or adoptive relatives who are closer to you than your first cousins, and people with whom you have had a common-law marriage in nations that allow such unions. Blood relations are biological and adopted relatives more closely related than first cousins.

Survivors of a joint-life annuity can choose either a full or partial survivor payment. This indicates that either you or your joint annuitant will continue to receive full monthly payments (100%), or those payments will be decreased to half their previous amount (50%). Basic annuities can have additional annuity features added to them. These features include accruing awards, cash returns, and a guarantee that lasts for ten years. If payments are made more consistently, the monthly payment will rise by 2% annually. Your beneficiary will be entitled to a cash return if both you and your partner annuitant pass away before receiving payments equivalent to the account amount used to purchase the annuity. This occurs if you pass away before receiving annuity payments comparable to the sum in your account. If you choose a 10-year definite payout annuity but pass away before the end of the first decade, the remaining payments will be given to the beneficiary of your choice.

Specific types of basic annuities are not allowed to have certain features. After purchasing an annuity, the money is transferred to a private company, and the 401(k) does not deliver the benefit. Rather, the private organization carries it out. You can calculate how a certain amount would convert into income under each of the available options by using the calculator that can be found on the website www.tsp.gov.

If you are married and have a balance of more than $3,500, spouses’ rights will apply to the withdrawal option you choose. Your spouse has the right to a joint and survivor annuity with level payments and no cash return until they waive it if you are a FERS member and you are married. This entitlement is only waived if the member dies. If your spouse does not renounce this right, they will be entitled to it. If you are married and a member of the CSRS and remove money from the TSP, the TSP is required to tell your spouse.

Contact Information:
Email: [email protected]
Phone: 6232511574

Three Steps to Help You Retire in A Slowing Economy

September 26, 2023 /by todd carmack

People who think about retiring soon and early retirees will have to navigate rough waters during these periods. With the stock market in decline, the economy weakening, and the Federal Reserve signaling future interest rate rises to battle inflation, retirees must make prudent decisions to ensure a successful retirement.

Which of the Three Financial Stages Do You Occupy?

That’s where a well-thought-out financial strategy may assist in ensuring a pleasant retirement, even in a tough market. Here are three steps that might help retirees with this significant life transition.

1. Look through your spending history.

Many people do not keep a home budget during their earning years. They also don’t want to live on a fixed budget in retirement. Therefore they should take a different approach: to examine macro trends in spending habits.

We total up all yearly spending over the previous three years. Anyone may gather all credit card and bank statements and calculate average spending.

This exercise aims to see if this spending pattern is sustainable for the following 30 years of retirement. An individual or couple must survive on portfolio savings and guaranteed income sources such as Social Security payments.

Furthermore, most new retirees quickly realize they must fill their days with at least one big activity, which generally comes at a cost. For most retirees, there were two large sums spent: one on house upgrades and another on vacation in a recreational vehicle. Certain hobbies, such as repairing a classic automobile, may quickly cost tens of thousands of dollars and strain the budget.

If spending needs to be cut, there are some simple solutions. These can include reducing monthly automated subscription payments, raising house and vehicle deductibles in return for reduced insurance rates, traveling during off-seasons, and doing some home maintenance jobs rather than hiring specialists.

Some are significant changes. These include deciding to reduce their house or selling extra automobiles to save even more money.

2. Create a plan to survive a stock market drop

It’s natural to be concerned amid uncertain times. On the other hand, those with a detailed financial plan should be able to ride it out without making costly mistakes.

Selling investments at a loss is frequently motivated by fear. Most financial planners know someone who sold their assets in March 2020 when the market fell. However, markets swiftly reversed course and achieved new highs for over two years. A person with millions of dollars in investments who sells their stocks and loses 20% of their value frequently locks in their losses, missing out on the potential benefits of market gains later in the recovery.

Strategies for Investing in a Bear Market

As a prospective recession approaches, one method that might help in planning for retirement income is to construct a bond ladder.

A bond ladder allows someone to buy various individual bonds with different maturity dates, the date an investor receives their bond’s interest payment. A person could, for example, invest $100,000 and purchase ten different bonds, each with a face value of $10,000. Because each bond has a different maturity date, an investor will receive a consistent stream of guaranteed income if held to maturity. High-quality bonds that are held to maturity can offer a regular source of income for a household for the following several years.

3. Acknowledge that you’ll require enough money to last 20-30 years.

Many individuals in their 60s who plan to retire with $1.5 million to $5 million in financial assets may feel at ease. However, people frequently don’t know whether their money will endure at least two decades, if not longer. A retiree can determine their sustainable withdrawal rate, including longevity risks, by developing a strategy based on several statistical models.

Between 1980 and 2010, America’s population of adults aged 90 and up almost tripled to 1.9 million, and this figure is likely to rise dramatically over the following four decades. That implies that new retirees will require enough money to live well for an extended period and may be unable to leave money to their heirs.

Each plan is tailored to the needs of an individual or couple. However, all of them should contribute to determining a sustainable withdrawal rate from a person’s or couple’s portfolio that’ll last a lifetime and meet their financial objectives. Some couples, for example, might want to spend every penny, while others may wish to leave something for their heirs. Each plan is designed to withstand the stress of uncertain events, like a recession or a major geopolitical event.

Remember that a retirement income strategy is essential to reducing emotional fears because the spend-down life phase differs greatly from the accumulation mindset.

Contact Information:
Email: [email protected]
Phone: 6232511574

Federal Employees and Open Enrollment Period

September 14, 2023 /by todd carmack

It is critical first to understand what Medicare Part C (Medicare Advantage) is and what it provides to individuals who are qualified to enroll. Medicare Advantage plans are managed by commercial insurance companies and provide a broader range of healthcare benefits. For example, prescription drug coverage is included in most plans, and several plans also offer vision, hearing, and dental insurance. In addition, members must use healthcare professionals who are part of their Medicare Advantage plan’s network to reduce out-of-pocket expenses. This is because Medicare Advantage plans are administered in an HMO or PPO model. These professionals include physicians, dentists, pharmacists, and optometrists.

An individual must be enrolled in Medicare Part A and Medicare Part B to enroll in a Medicare Advantage plan. Those who don’t want to buy three different insurance policies for their medical, dental, and vision care needs may find Medicare Advantage plans useful. However, the restriction is that Medicare Advantage subscribers typically cannot use their preferred doctors, dentists, pharmacies, or other health providers. Instead, they must use medical experts in the network of the Medicare Advantage plan.

What is the OEP, and Why Does it Happen Every Year?

The OEP, also known as the Annual Election Period or AEP, occurs every year between October 15 and December 7, with changes made during the OEP taking effect on January 1 of the following year. Medicare beneficiaries can join a Medicare Advantage Plan and alter or disenroll from their Medicare Advantage plans. Also, they can change or disenroll from a separate Medicare Part D prescription drug plan in which they are currently enrolled during the OEP.

The OEP occurs once a year because commercial insurance companies that manage Medicare Part D and Medicare Advantage plans are required to re-file with Medicare every year. As a result, the benefits and premiums connected with an enrollee’s plan (Medicare Advantage, a Medicare Part D prescription drug plan, or both) can and will vary in most years. That is why the Center for Medicare Services (CMS) provides individuals eligible for Medicare with an election period each year. If they are unsatisfied with their existing coverage, this gives them the option to switch plans.

Individuals participating in a Medicare Advantage plan or a Medicare Part D prescription drug insurance plan for 2022 must have received a notice from their program by September 2022. This is known as the Annual Notice of Change. The Annual Notice of Change includes information on whether the plan premium and benefits will change. In addition, the Annual Notice of Change compares the benefits adjustments in the plan from 2022 to 2023, making it easier to compare changes to coverages.

During the 2022 OEP, an individual enrolled in Original Medicare (Medicare Part A and Medicare Part B) can make the following modifications to their health coverage:

- Change from Original Medicare (Medicare Parts A and B) to a Medicare Advantage plan. However, they must still be enrolled in Medicare Parts A and B.
- Dropping a Medicare Advantage Plan and continuing in Original Medicare, with or without a Medicare Part D prescription plan
- Switch from one Medicare Advantage Plan to another
- If nothing is done, your current Medicare coverage will automatically renew in 2023.
- Join a new Medicare Advantage plan or a Medicare Part D prescription medication plan.

Whatever modifications are made to Medicare Advantage and Medicare Part D prescription medication programs will take effect on January 1, 2023.

How the OEP Affects Federal Retirees on Original Medicare

The FEHB program has its own Medicare Advantage plans. Therefore, a federal retiree enrolled in Original Medicare considering enrolling in a Medicare Advantage program for 2023 could do so during the 2023 “open season.”

Federal retirees who are enrolled in an FEHB health plan and Original Medicare and choose to enroll in a commercial Medicare Advantage Plan during the OEP may do so. They must, however, halt their FEHB program coverage during the 2023 “open season.”
A federal retiree enrolled in an FEHB cannot use their preferred doctors, dentists, or other healthcare providers not in the Medicare Advantage plan’s network.
A federal retiree spouse will also be enrolled in the Medicare Advantage plan. However, the federal employee must enroll in a Medicare Advantage plan, and their spouse is covered through the FEHB program.

Finally, while selecting a Medicare Advantage Plan outside the FEHB program, a federal retiree should ensure that the plan covers prescription drugs for themself. In addition, if married, their spouse, to ensure that the project meets their prescription medication needs.

Contact Information:
Email: [email protected]
Phone: 6232511574

An Open Season Checklist for Federal Employees

September 8, 2023 /by todd carmack

Federal employees can review and make changes to their health insurance plans annually during the Open Season. It can be daunting, with many plans and premium increases to consider. This year’s Open Season will take place from Friday, November 14 to December 12, 2022. The changes will take effect on January 1, 2023. And it’s the best time for federal employees to switch health plans and alter their existing plans. So, ensure your health plan is the most excellent fit for your family’s needs. Let’s look at the open Season checklist to guide you through the process.

High Premium Increases

Employee premium share will rise by 8.7% next year. It’s the highest increase in a decade, making this year preferable for many employees to contemplate switching FEHB plans. Premiums will go down in 56 programs, remain the same in nine goals, rise below the usual in 119 plans, and rise slightly above the standard in 78 projects throughout the upcoming year.

For instance, Self-only registrants will have to pay an additional $6,510 due to a decrease in premiums of 36.5% in Nevada, a rise in premiums of 49.5% in New Mexico, and a 34.2% rise in Illinois plans. It’s crucial to check how the premium for your FEHB plan has changed. So, here is how you can select the best health plan for 2023.

Selecting New Health Plans

Shopping for a new health plan can be daunting, but selecting the option that offers the best value is worth the effort. Total cost should be the primary factor in your selection process. It includes your premiums and the likely out-of-pocket expenses based on your family’s age, size, and expected healthcare usage.

For federal employees, Checkbook’s Guide to Health Plans ranks plan options based on total cost estimates. The differences in 2023 can be striking. For instance, a family of four living in Washington, D.C., could save more than $4,000 in estimated costs by switching from BCBS Standard to Kaiser Standard. Alternatively, this same family could keep their PPO coverage and save $3,500 by switching from BCBS Standard to GEHA Elevate.

Hence, the goal is to ensure that you select the plan that offers the best value for you and your family. Let’s see how you can do it effectively because savings can be huge.

Flexible Spending Accounts

Flexible Spending Accounts (FSAs) are a great way to save money on out-of-pocket healthcare expenses. With FSAs, you can set aside pre-tax dollars to cover eligible healthcare costs. Unfortunately, only 20% of federal employees are taking advantage of this program.

Considering setting up an FSA, it’s essential to know critical details. You can contribute anywhere from $100 to $3,050 in 2023. This money is taken out of your paycheck in equal installments, avoiding payroll taxes, which means you get an adequate 30% savings on qualified healthcare expenses!

Plan Benefit Changes

As health insurance plans prepare for significant changes across the board in 2023, it’s essential to be aware of the changes to your current FEHB plan and any plan you may be considering. These changes can significantly affect the benefits you’re entitled to and how much you’ll pay for them. It’s crucial to look at the official FEHB plan brochure and closely at Section II â€“ How Your Plan Will Change in 2023.

You’ll find detailed information on any additions or changes in your plan benefits and an overview of the cost increases you could be facing in the year ahead. Please ensure you’re prepared for a very different FEHB experience in 2023 before it’s too late.

The same goes for your provider directory, formulary updates, and dental benefits for 2023. Make sure you check your doctor’s coverage and dental needs to ensure that you are making the best decisions for yourself and your family. Updating these lists and aligning them with your needs and goals is essential in managing your health insurance.

Final words

Less than 2.5% of federal employees switched health insurance during Open Season, despite the highest premium rise in the past decade. However, professionals should check to see if their current FEHB plan is still the best option. They should look for changes in 2023 to the significant benefits, provider networks, and prescription drug coverage.

Contact Information:
Email: [email protected]
Phone: 6232511574

Tag: todd carmack

todd carmack

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