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Federal and Postal Employees – Choosing a Financial Professional

Which Retirement Account Do I Withdrawal From First?

September 23, 2014 /by Dianna Tafazoli

Federal Employees and Retirement Account Withdrawal Options

What account to withdraw from first in retirement to give us the greatest benefit.

Your tax-deferred status has allowed you to protect some of your money from taxes and allowing it to grow tax-free in your pension plan or other savings vehicles. Once you start receiving distributions, you will have to pay taxes on the money. Therefore, we need to be educated and wise in deciding which accounts to draw from first.

When you deposit money into your regular bank account it is likely that the money has already been subject to taxes. Therefore, when you withdraw the money you don’t have to pay taxes on it again. You also do not owe taxes on any of the interest earned. You declared the interest earned when you filed your yearly income tax return.

If you must make withdrawals in retirement, the money should come from your savings account first because it is not subject to taxes. Using the savings withdrawal method first also allows you to postpone paying taxes on those accounts that are tax-advantaged.

Roth IRAs with after-tax contributions and tax-free growth have the added advantage of exemption from required minimum distributions that may apply to other retirement accounts. After age 70.5 when you must begin to take distributions from other accounts, your Roth account can continue to grow tax-free. Monies in the Roth account after your death can be used by your beneficiaries tax-free. Given these circumstances, the Roth IRA is the account you should consider withdrawing from last or as far down the road as feasible.

How you plan to handle your accounts is very personal and depends on unique factors in your life such as the kind of account and assets you have and how long you have had the assets. It also depends on the level at which the account has already been taxed and the expected rate of return. Your estate plans must also be evaluated before you make decisions. If at any time you have questions or are not certain about what steps to take, always consider speaking to someone who has expertise in financial management and handling taxes in retirement. It should also be noted that under most circumstances, if you do not take the required minimum distribution after age 70.5, you will suffer a 50% penalty on withdrawal shortfall. The Internal Revenue determines the formula to calculate the penalty.

Otherwise it is estimated that most of your retirement account withdrawals will be subject to approximately 20% required federal tax withholdings. If you have tax liabilities in one year the Internal Revenue might require you to pay an estimated tax. Visit the Internal Revenue Service to find out more about estimated taxes in publications 590 and 554 or online at www.irs.gov.

Many retirees think about selling their homes to get a tax break in retirement. Things to consider:

If you are single selling your house for a profit of up $250,000 that amount may be exempt from taxes.
If you are married with joint ownership up to $500,000 may be exempt from taxes.
The caveat is that you must own the home and it has been your primary residence for two of the last five years.
You have not used the exclusion in the last two years.

Other retirees think about paying off their mortgage if it has not been paid off prior to retirement. Things to consider:

Mortgage debt has a tax advantage if most of the payment is going towards interest.
If the payments are basically going towards principal then you may not have a tax advantage.
If your balance remains high enough to generate a tax break, you may still want to consider paying off the mortgage if you meet the following criteria.

• You are already clearly and without doubt maximizing your retirement savings.
• You have already paid off other debt that has a higher interest rate and does not have a tax-deductible advantage for you.
• Your emergency fund is robust and will sustain you according to your financial plan and individual action plan.

Being debt-free is certainly appealing. However, any financial decisions you make
concerning you retirement future requires much thought in addition to being educated about your options and the consequences of your actions. Remember every decision we make carries an associated cost.

P. S. Always Remember to Share What You Know.

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Federal and Postal Employees – Choosing a Financial Professional

TSP Withdrawals and using IRAs correctly in TSP Rollovers

September 23, 2014 /by Dianna Tafazoli

TSP, IRA Rollovers and other Options

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There are three common types of IRAs – Traditional, Roth and Rollover. Finding the right IRA for you requires being educated about what each one offers. All IRAs are designed to help you for retirement but each has its unique features.

An IRA is an Individual Retirement Account (IRA) that provides either a tax-free or tax- deferred way for you to save for retirement. IRAs allow you to invest in just about any investment and these investments can grow tax deferred. Each IRA has unique eligibility requirements and benefits.

IRAs rely primarily on the power of long term, tax-deferred compounding to provide your retirement savings the opportunity to grow faster than in an account that is taxable. When you earn interest, receive dividends or sell an investment for gain, you are not obligated to pay taxes that year on the earnings. All taxes are deferred until you withdraw those earnings in retirement. Your money continues working for you while building your nest egg for year after year.

Roth IRA

Unique Benefits, Eligibility Requirements

Any earnings are tax-free if withdrawn after age 59.5 and the account has been open five years or more
Contributions (not earnings) can be withdrawn tax and penalty free at any time
Contributions are not tax-deductible
There is a single 5 year holding period when determining whether earnings can be withdrawn federally tax-free. The period begins January 1 of the first contribution to any Roth IRA account.
Regular contributions are allowed up to age 50
Catch-up contributions are allowed age 50 +
Up to age 50 – 2009 contribution limit $5,000
Over age 50 – 2009 contribution limit $6,000
Modified adjusted gross income and tax filing status determine how much you can contribute
For 2009, single tax-filers with $120,000 or less in annual income and joint-tax filers with $176,000 or less are eligible. For 2010, single tax-filers with $120,000 or less in annual income and joint tax-filers with $177,000 or less are eligible.

Traditional IRA

Unique Benefits, Eligibility Requirements

Any earnings grow tax-deferred until withdrawn after 59.5 at which time they are taxed at your current rate
Contributions and earnings can be withdrawn penalty free after age 59.5
Contributions may be tax-deductible
Allows investment earnings the opportunity to grow tax deferred until withdrawn
Your age and tax filing status (joint or single) determine how much you can contribute annually
Contributions may be tax-deferred depending on your tax filing status, modified adjusted gross income, and participation in employer-sponsored plans.
Maybe opened by anyone with taxable compensation or a spouse (if you file jointly) with earned income and who was not 70.5 years old by the end of the current year
Up to age 50 2009 contribution limit $5,000
Age 50 – 70.5 contribution limit $6,000
Over age 70.5 2009 contribution limit (not allowed)

**Rollover IRAs (TSP 70 and TSP Withdrawal)**

Rollover IRAs allow you to consolidate your TSP, possible 401(k) and 403(b) accounts along with any other employer-sponsored retirement accounts into one account maintaining the assets’ tax deferred status. Using form TSP 70, a TSP withdrawal can be a good decision because of the limited TSP investment options that exist and the much larger array of options available through Rollover IRAs.

There are a few outside companies that specialize in helping Federal employees with their TSP funds after retirement or once an employee has reached 59 1/2. Two of those companies that you may want to consider can be found at TSP-70.com and TSP-withdrawal.com.

P. S. Always Remember to Share What You Know.

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Federal and Postal Employees – Choosing a Financial Professional

Records To Check Before Retirement

For Postal Employees – LiteBlue and the TSP

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It is best to make certain all of your records are in place when anticipating retirement. Tips to get in shape for retirement.

-Review your designation of beneficiary for the lump sum payment of retirement contributions when no one is eligible for monthly payments.

– If a copy is not in your folder, file a new designation. The designation is made on

Standard Form 2808 for CSRS and Standard Form 3102 for FERS. Make sure

the form shows very clearly the person(s) you want designated.

– FERS transfers and any prior designation made for CSRS is cancelled. You may want

to file a FERS designation. Automatic transfers to FERS from CSRS,- the designation

will remain in force.

If there is no designation of beneficiary, benefits will be paid as follows:

Your widow or widower.
Your children in equal shares.
Your parents in equal shares.
Your appointed executor or administrator of your estate.
Your next of kin under the laws of the state you reside in when you die.

What records are needed for my health benefits?

Inside of your OPF should be a record of all of your health benefit registration forms (Standard Form 2809) and where appropriate Standard Form 2810, Notice of Change in Health Benefits. When you retire be absolutely certain that your official records show a complete history of your health insurance enrollment for the last five years. Your records should include your current Federal life insurance coverage on a Standard Form 2817, “Life Insurance election”, and where appropriate, a current life insurance designation of beneficiary (Standard Form 2823).

P. S. Always Remember to Share What You Know.

TSP ARTICLES

Federal and Postal Employees – Choosing a Financial Professional

Is Your Thrift Savings Plan (TSP) Working For You?

How Much Money Do You Need In Retirement

Whether you are ten years, five years or just 1 year from retirement, you need to have a way of estimating how much money you are going to need to retire. Financial experts say we will have to replace about 70 to 80 even 90 percent of our annual salary in retirement in order to maintain the lifestyle we have become accustomed to. Decisions – decisions.

Let’s examine Four Steps that will help to estimate how much money you will need to retire comfortably. This is where tracking our weekly, monthly and yearly spending comes in. We need to always know what is coming in, what is going out and how much we can afford to spend. Planning for our comfort and security in retirement requires grit, tenacity and sheer will power to make a plan and follow it.

How Much Money You Will Need In Retirement:

Estimate your retirement expenses, including taxes and even one-time major purchases. Make a list and revisit it often. These are not items you think about in your head, they need to be put on paper and then they become real.

If you need help determining how much you need seek out the help of a qualified Federal Retirement Expert.

Determine how much retirement income will come from your known resources. Compare income from TSP and other savings and your Federal Annuity with estimated retirement expenses.

You could also be eligible for Social Security of a Military Pension.

Compute the gap between how much money you need to retire and the amount you will receive from your known resources. Evaluate the gap and measure its size with financial and economic scrutiny.
When doing a retirement analysis and assessment, factor in inflation and life expectancy. Look at your assessment from both ends of the spectrum – the best scenario and the worst.

Formula for Estimating Your Federal Retirement Income:

The majority of Americans will rely basically on two sources of consistent retirement income – Social Security and Employee Pensions. The other component should be savings and investments (Thrift Savings Plan (TSP) and outside investments like IRAs). Let’s be practical, we don’t all have that category separate and apart from vehicles provided through employment. However, it is never too late if you put your plan in place and stick to it.

P. S. Always Remember to Share What You Know.

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Federal and Postal Employees – Choosing a Financial Professional

Create A Spending Log

Use the spending log example to see how you are spending your money. You just might be surprised. As you begin to prepare for Federal retirement, it is important to make certain you are eliminating as much waste as possible. Your spending log might show you where you can cut back and perhaps add a bit more to savings.

Without a lot of thinking, use the table below and quickly jot down how much money you think you spend daily in any given week. You may also itemize the things you spend your money on. Then revisit your personal spending log and examine in detail how you are spending your money.

Personal Spending Log

Weekly	Income + $ (A)	Spending – $ (B)
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday

A minus B gives you a guestimation of how you are spending your money on a weekly basis. Part of your retirement readiness checklist requires you to look at how much money you spend daily and if you can redirect some of the spending to create greater money management efficiency.

Try logging your income and purchases on a daily basis for a month. Analyze the results and decide what you can do differently with your spending.

P. S. Always Remember to Share What You Know.

What Is Effective Retirement Decision-Making

Access your TSP.gov Account HERE

For Federal Employees, when it comes to Retirement Planning, effective decision-making involves flexibility in thought and actions. One must be prepared to make sacrifices now to achieve something better later. We must also understand the value of trade-offs. Decisions you make today will inevitably impact future retirement decisions. All decisions made carry associated consequences that affect us, our families, and the society we live in.

We can all improve our skills in effective decision-making through consistent practice and application. But, there is no financial plan nor individual action plan (IAP), no matter how well designed or thought out that works if you don’t follow it. We must develop strategies that will motivate us to stay the course. No financial plan is set in concrete, rather plans are designed to be flexible, changeable and evolve over time as our lives evolve. We need to monitor plans and know when important changes need to be made. Updating your financial plan is critical to your plan’s success.

A financial plan will assist you in identifying, determining, and directing what you want to have and achieve in retirement. A financial plan helps to target the outcome desired, map out how to get there and how to stay on track.

Start our with a conversation with your spouse, a friend or someone you trust. Talk about what is important to you and your well-being in your retirement future. After the conversation, begin to put your plans to work by putting them in writing. Nobody can take what you have in your head if you are not there to tell the story. Prepare soon. Prepare wisely. Prepare to live in comfort and security.

P. S. Always Remember to Share What You Know.

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Who Is Watching the Market?

August 18, 2014 /by Dianna Tafazoli

As a federal retirement specialist and educator, I am most intimately concerned about how federal employees view retirement and how they make ready for perhaps the most difficult transition in their lives. I recently heard that Market Watch did a survey of employees to decipher whether they were most attached to large salaries or means to support their future retirement. I was very pleased with the overwhelming response.

**Six Figures or Comfortable Retirement?**

A majority of those surveyed said they would much rather forgo a six-figured salary for greater contributions to their retirement fund. If they could get a 25% match in a 401K for the private sector and the Thrift Savings Plan (TSP) for the federal force, that would be the scenario most sought. It is good to know that workers are thinking about how to fund their future given Americans are living on average, 30 years past retirement. That is a significantly long time to make certain your resources outlast you. What you save today and the plans you put in place today will determine how well you are able to live in retirement.

Getting prepared financially is a big piece of the puzzle, but we do know that financial preparation hinges upon the ability to accept the emotional and psychological paradigm that comes with making such a transition. If we are emotionally and psychologically prepared, then it stands to reason that we will be much more inclined to manage our money. It is sometimes a denial of realty that steers us away from putting very critical and necessary plans in place.

The best education any of us can receive is to fully embrace the inevitability of seasons. In most parts of the country, Winter appears after the joy of Fall. Spring alerts us to the notion that Summer is coming. Just as the seasons of the year come and go, so do seasons in our lives. Work and hopefully a stable job is a part of the season of our adulthood into the age of maturity. For the senior sect, I think the age of maturity is more fitting than saying old age. That term ill fits the new generation of seniors because they are living active, meaningful, productive lives and doing things their parents and grandparents never dreamed of.

While I don’t believe in traditional retirement as long as you are physically and mentally able to chase your passion, choices and options should certainly be on your vision board. If you choose to work or travel or play then you should have the financial means to do so. If you decide that working full-time or part-time or going back to school fit you best, then the plans you put in place during your earlier years should allow you to do that.

Another caveat and a teachable moment here is the definition of true compensation. Salary and benefits make up true compensation. If you are making a salary of $80,000 annually and your benefits package is worth $25,000 – your true compensation is $105,000. You might say, I can’t spend my benefits. Wrong – because if you didn’t have them you would have to take care of your medical concerns out of your $80,000. Can you feel the number sinking quickly to $50,000 and you haven’t even paid taxes. What about the contributions made to your retirement fund from your employer? Let’s ratchet the remaining $50,000 down to about $45,000. What if you have no sick leave provisions or vacation? You might be able to take a weekendcation or a homecation, but when you are sick, you are sick. Now since illness cannot be avoided, let move the $45,000 down to about $40,000 and we are being generous. Get the picture?

Total compensation is something that should never be dismissed in planning for your future. Having a plan that is flexible and SMART (Specific, Measurable, Attainable, Realistic and Time Sensitive) should be at the center of your vision board.

P.S. Always Remember to Share What You Know.

Dianna Tafazoli

Can I Name Any Beneficiary To My TSP

August 12, 2014 /by Dianna Tafazoli

Beneficiary Differences for TSP

There are a number of rules that exist when naming a beneficiary for your Federal Employees’ Group Life Insurance (FEGLI) and your Civil Service Retirement System (CSRS) and your Federal Employees Retirement System (FERS) survivor annuity. In most cases, the spouse a spouse is named as the beneficiary. However, the same rules do not apply for the Thrift Savings Plan (TSP). You may name anyone you choose, it does not have to be a spouse. The TSP also allows for the naming of contingent beneficiaries.

TSP Contingent Beneficiaries

Contingent beneficiaries is always a good posture to take under any circumstances because there is always that possibility that something might happen to the person you have named. The TSP also allows for the TSP account holder to name beneficiaries and designate the percentage intended for each beneficiary.

The TSP, like the Federal Government, does not honor Wills. The TSP uses the Order of Precedence in the case where no beneficiary is named. It is important to always update your beneficiary designation forms. Visit your eOPF (electronic Official Personnel Folder) and your TSP folder to review the contents and to make sure you are updating your files and keeping things in place. Updating your files means getting to determine how your assets and resources will be distributed.

The TSP-3 (Designation of Beneficiary) is the form used to select your beneficiary or beneficiaries.

P. S. Always Remember to Share What You Know.

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Federal and Postal Employees – Choosing a Financial Professional

An Affordable Luxury – The TSP

August 8, 2014 /by Dianna Tafazoli

Affording the TSP

People who don’t consider themselves wealthy often live vicariously by watching the rich and famous on television and reading about them in magazines. They never imagine themselves having the same advantages as ‘the beautiful’ people. How wealth is measured is relative. There are people who are billionaires and millionaires. Then there are people who are thousandaires. The term doesn’t sound too bad to me. If I had $400,000 or $600,000 I wouldn’t consider it a negative thing to have in my possession. While those figures might not qualify you to be in the million dollar or billion dollar club, they qualify you to be in a club that is doing just fine – a club that will allow you to retire on your own terms.

**Maximize the TSP Opportunity**

The idea is not to think as a minimalist when it comes to possibilities for your life and that of your family. Think of yourself as a maximumlist – willing to maximize every opportunity that comes your way and the TSP is no exception. After all, you are a big investor with a whole team of financial experts keeping watch over your massive portfolio. If you participate in the TSP, then you are an investor with a portfolio housing some of the most sought after stocks, bonds and government securities in the world. Although, your TSP does not necessarily fall into the category of active management – it is taking care of the business of your retirement by managing your federal wealth as directed.

**Automatic TSP Enrollment**

For a few years now, the TSP has begun to participate in automatic enrollment for new employees coming into the federal service. Each new employee is automatically enrolled in the TSP with the 1% agency contribution going into the G Fund or the Government Securities Investment Fund. The Fund is safe guaranteeing minimal or no loss. The G Fund by statutory law via the authority of the Secretary of Treasury granted by the Congress can determine when the G Fund is unable to be fully invested without exceeding the debit limit. However, this Fund action has no impact on active workers or retirees.

Although the automatic 1% is invested in the G Fund, the new employee can select not to participate in the TSP or they can decide they want their money put into one of the other TSP Funds. Not participating in the Thrift Savings Plan (TSP) is tantamount to putting your money in a bucket and setting fire to it – throwing money away. Putting your money in the TSP is an affordable luxury you don’t have to dream about.

P.S. Always Remember to Share What You Know.

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If You Could Have One Close Friend – Choose the TSP

August 8, 2014 /by Dianna Tafazoli

The TSP offers an advantage both to the employees in the Civil Service Retirement System (CSRS) and those in the Federal Employees Retirement System (FERS). Many CSRS eligible employees tend to ignore the TSP because of no matching contributions. However, the advantage to CSRS employees is the tax-deferment piece. Anytime earnings can be protected from taxes, it is a bonus. The contributions made by CSRS employees have an opportunity to grow without being taxed until they are withdrawn, although there is no agency match. CSRS employees must not miss out on the opportunity to invest in the TSP. Investing in the TSP, acts as a supplement for CSRS employees – just another way of increasing their resources available in retirement.

As for FERS (Federal Employees Retirement System) employees, it would be well-advised to get very well acquainted with the TSP (Thrift Savings Plan) because it represents the largest part of the retirement profile. The FERS system consists of a basic benefit (.8%) of basic pay, Social Security and the Thrift Savings Plan (TSP). Fully investing in the TSP is a smart step to take towards protecting your retirement future. Saving early and consistently just makes good sense. However, it is never too late to start saving and planning for your future. Taking advantage of the perks of the TSP is probably one of the wisest investments you will ever make.

Currently every member of the federal workforce participating in the TSP have the opportunity to contribute $17,500 annually into the TSP. The Thrift Savings Board has expanded offering both a Traditional TSP and a Roth TSP to the federal workforce. Although the Traditional TSP and Roth TSP are treated separately for tax purposes, it is still one TSP account. In other words, you don’t get to put $17,500 in the Roth and another $17,500 in the Traditional TSP. It is one account governed by the same contribution limits. It would be a sweet treat if such a thing existed, but it does not.

Back to the real world. Once you decide to participate in the TSP, the best decision of your life, then there is an automatic 1% agency contribution whether you make contributions or not. The 1% contribution is yours if you stay in the service for 3 years. However, if you leave prior to the 3 year vesting period, you forfeit everything in the account. If you pass away prior to meeting the vesting requirements, everything in the account is yours. Now that we are clear about the 1% automatic contribution, let’s talk about the rest of the good stuff the TSP has to offer.

The government matches up to 5% of what you contribute to the TSP. Anything over the 5% is not matched. The allocation is the government matches dollar-for-dollar on the first 3 percent of your contribution and 50 cents on the dollar for the next 2% of contributions. It is an unparalleled opportunity to invest in your federal wealth management. Not investing in the TSP is akin to giving away free money. An analogy – we contribute to Social Security and the Disability Trust Fund during our work careers, by having 1.45% withheld from our check for Medicare and 6.25% for Social Security so we earn enough credits (quarters) or Medicare equivalents to qualify for the future benefits offered from either one or both programs. Suppose we had a choice of not making those contributions, then upon reaching retirement age (65) we could not benefit from Medicare Part A or what we call Free Medicare.

We wouldn’t feel very happy about paying for something that should be free because of the investment we made prior. Therefore, investing in the TSP now reaps similar rewards when planning your retirement future. Where else are you going to find such a sweet deal that even 1% would be invested in your future where you virtually had nothing to do except breathe. The Federal Government offers a number of benefits to the federal workforce, but if you don’t take advantage of those benefits, you stand to lose much more than you will ever gain. Educate yourself. Invest in your future and give yourself and your family a real opportunity at retiring well. I will let you in on a secret – the TSP is one of the best friends you will ever meet on your road to retiring with comfort and security.

P. S. Always Remember to Share What You Know.

What is the Difference Between a Broker and an RIA?

July 29, 2014 /by Dianna Tafazoli

This question came into my mailbox. The writer said he asked his HR Director what was the difference between the two and she said she didn’t know. She gave him the right answer. HR Directors are usually not Financial Advisors and typically are not licensed (and therefore shouldn’t) offer investment or financial advice. They know retirement and may have a fairly sound knowledge about certain financial terms and instruments because of their knowledge of benefits. However, I find absolutely nothing unusual about the HR Director’s answer. She probably looked at the writer very strangely and wondered why he was asking her such a questions. We are going to take a shot at answering this question because of our financial literacy educational platform.

The difference between a broker and a registered investment advisor (RIA) has a lot to do with how that professional’s business is structured. This might sound a little unkind, but it is what I believe constitutes the most significant difference between the two. The broker is generally a representative who works for a brokerage firm selling securities. Brokers are not really financial advisors (regardless of the name they might call themselves), but are selling a product. The selling of products generally carries a commission, sort of like in the movie – The Wolf of Wall Street. The brokers, not to say they are not good people, but they truly have a motive to sell a product. The question becomes – Does their interest come before yours? Just a question to think about.

A Registered Investment Advisor (RIA) is required by law to not only give you suitable advice or recommendations, but must act with a tremendous amount of fiduciary responsibility. Both are regulated by the Securities Exchange Act of 1934 but to different degrees or operating parameters. RIAs are required to put the client’s interest first and not their own. In short – if you have a choice, a RIA may be your better option.

The most important requirement is making sure you are educated about what direction you want to take when it comes to financial planning and managing and transferring your wealth.

P. S. Always Remember to Share What You Know.

Understanding The Thrift Savings Plan, By Todd Carmack

July 27, 2014 /by Todd Carmack

Understanding The Thrift Savings Plan, by Todd Carmack

The TSP is the Federal Government’s retirement account

If I asked 20 federal employees, “How much does the government match for TSP contributions?” I would get several different answers. The correct answer is 5% if you’re a FERS employee. Providing education is the most important part of my job and I enjoy the benefits that truly educating my clients can bring them.

One of the most important pieces of advice I can provide to employees is to make sure you are contributing a minimum of 5% to your Thrift Savings Plan (TSP). Free money is hard to come by and if you’re contributint to your TSP its about the same as giving yourself a raise just by doing the smart thing! Example: If your salary is $51,450 a year, your 5% contribution is $2572.50 a year and the government will match that figure, which means you will have a total $5145 in contributions to your account – not to mention any TSP fund performance.

Knowing your TSP investment options (TSP Funds) is also vital. Here are the six options:

TSP G Fund – government securities

TSP F Fund – government, corporate and mortgage backed bonds

TSP C Fund – Large/mid cap U.S stocks

TSP S Fund – small cap U.S stocks

TSP I Fund – international

TSP L Fund – lifestyle funds (which is a combination of G,F,C,S, & I)

As for contribution limits, for those age 49 and under, you can contribute a maximum of $17,500 a year. For those who are 50 and above, you can contribute an additional $5500 a year.

About the Author:

Todd Carmack,

***Glendale,* *Arizona***

**Other Todd Carmack Articles**

Social Security for FERS Employees, by Todd Carmack

Is The Pension Survivor Benefit Best For You? by Todd Carmack

Understanding Your FEGLI Coverage. by Todd Carmack

Disclosure: BWM Advisory, LLC reserves the right to edit blog entries and delete those that contain offensive or inappropriate language. Content will also be deleted that potentially violates securities laws and regulations. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. All investment strategies have the potential for profit or loss. Hyperlinks on this website are provided as a convenience. We cannot be held responsible for information, services or products found on websites linked to ours. BWM Advisory, LLC is registered as an investment adviser with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.

The SEC Gives Financial Advisors A Pass

July 21, 2014 /by Dianna Tafazoli

The Securities and Exchange Commission (SEC) regulates financial advisors

The Securities and Exchange Commission (SEC) regulates financial advisors via The Investment Advisers Act of 1940. They have now opened the way for financial advisors and money managers to start promoting investor reviews that are present on social networks. Prior to the SEC opening the door for these professionals, social media was already there – Twitter, Linkedin and Yelp. I suppose the SEC did not notice the presence of those vehicles before. Long before the SEC made its ruling, investors had the ability to post and review comments from advisors on websites that had been around for a very long time.

As long as the posting was put up by the investor and not coerced by the Advisor, then there was no problem with the SEC. The SEC gave the green light for advisors to integrate positive posts and testimonials into their marketing strategies. There is one little catch, the advisors and money managers cannot edit out the negative comments. More and more people are beginning to use the internet to search for all of their needs.

A recent Corporate Insight survey revealed that 67 percent of millenniums would use online search engines to learn more about the financial advisors they select. Only 28 percent of baby boomers would be inclined to use online tools. Investors and individuals looking to financial advisors and money managers to help with their financial challenges need to have as much access to information about these professionals as possible. When individuals have adequate and relevant information, they can then make an informed decision. Transparency is best for all concerned.

P. S. Always Remember to Share What You Know.

Recommended Articles

Understanding The Thrift Savings Plan, By Todd Carmack

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The Senate Salutes Federal Employees

July 21, 2014 /by Dianna Tafazoli

Well, not the entire Senate, yet. Ben Cardin (D-MD) and Brian Schatz (D-HI) recently introduced a bill called the Federal Adjustment of Income Rates (FAIR) which would give federal employees a 3.3 percent pay raise in 2015. The proposed pay raise is welcomed news for Federal employees. Federal employees have endured a lot over the past years. They have gone without pay increases, endured pay freezes and furloughs and even lived through the sequester.

A report from Commerce’s Bureau of Economic Analysis stated that the federal civilian workforce was the only entity that experienced a decrease rather than an increase in earnings in 2013. Many unions are standing strong behind the FAIR Act clearly a move that leverages their membership. Federal workers have not been exempt from the economic down-slide faced by the entire nation. Federal workers have had to reevaluate spending and planning for their family’s future. Federal employees were very shaken over the sequester. Although, many knew they would be made whole, expenses and bills that are due now have no relationship with what will happen in the future.

The gap that has always separated public employees from private employees certainly widened as a result of the slow-down and the eventual shut-down of the Federal Government. Salaries and benefits must be competitive in order to bring the highest caliber of talent to the Federal service. It is good to know that Federal employees, often under-appreciated, have found two champions in Senators Cardin and Schatz. The senators appreciate the hard work and dedication of public servants and want them to be rewarded for their hard work and long years of service.

The people of Maryland and Hawaii know that their Senators are not only fighting for Federal employees in their individual states, but Federal employees all over the United States. Because the FAIR Act will benefit all Federal employees, I am certain the Senators will have no problem convincing their 48 colleagues that implementing the FAIR Act is the right thing to do.

P. S. Always Remember to Share What You Know.

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Can You Participate In The TSP After Retirement?

July 19, 2014 /by Dianna Tafazoli

Your Thrift Savings Plan (TSP) is funded via payroll deductions. Therefore, once you are no longer an employee your participation in the TSP stops as far as being able to make contributions. However, you don’t have to take your money out of the TSP, you just cannot put money into it.

TSP After Leaving Federal Employment – TSP Withdrawals

If you leave service and decide to make a TSP withdrawal, you may do so in two ways. You may make a partial TSP withdrawal or a full-withdrawal. You can make a partial withdrawal of $1,000 or more. You can make a request for a partial withdrawal online or use Form TSP-77. If you make a full withdrawal you can request a single payment withdrawal of your entire TSP balance. You may also request a series of monthly payments. In this way you can choose a specific dollar amount to receive each month or you can receive a monthly amount based on your age and your account balance. If you are requesting a specific dollar amounts, the monthly payment must be a minimum of $25.00.

TSP-77 Form

TSP Annuity

You may also elect a TSP life annuity. The TSP life annuity pays you a monthly benefit for life. The TSP will purchase an annuity for you from their provider (Currently Metropolitan Life Insurance Company – MetLife). Make sure that you read up on the pros and cons of purchasing a TSP annuity directly through the TSP (We at PSRetirement.com suggest to strongly consider NOT taking this option). You may also mix up your withdrawals. You may use the methods outlined in the TSP Full Withdrawal option in a number of combinations – single payment, TSP monthly payments or the life annuity. You can combine two options or all three, which ever fits into the plans you have made for you and your family and always make sure to speak with a trust Financial Professional before making any decisions.

Read over your TSP account(s) and make sure you understand how your TSP works in retirement and how to maximize your federal retirement benefits. If you have put a retirement action plan in place, then you want to gain as much information as possible to help you live in retirement on your own terms. FERS employees have to be especially cautious, yet assertive, by fully funding their TSP whenever possible because the TSP is the larget monetary component of the FERS retirement system.

How you manage your financial affairs is an individual matter. However, just like any good work, it takes time to examine and analyze to choose the best options that fit your situation. No two situations are alike, so don’t take a position because it sounds good. Use your planning tools and take a position because it works for you.

P. S. Always Remember to Share What You Know.

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What Thrift Saving Plan Fund Choices Do You Have?

July 7, 2014 /by Admin

Image Credits

The Thrift Savings Plan (TSP) offered to the current or retired employees of the federal civil service, is one of the simplest and most efficient retirement plans used today. However, out of thousands of civilian and military employees who defer a portion of their earnings into the plan each year, many of them do not have a clear picture of the TSP fund options available in this plan

There are five core investment funds available in the TSP:

**#1 – TSP G Fund – Government Securities Investment Fund**

Objective – to generate a higher rate of return than inflation without exposing the fund to risk of default and market price fluctuations.

Key Features

– Offers opportunity to earn interest rates similar to U.S. Government notes and bonds without risk of loss of principal.

– Is invested in short-term U.S. Treasury securities particularly issued to the TSP. Payment of principal and interest is guaranteed by the U.S. Government, so no “credit risk.”

– Interest rate resets monthly; is based on the weighted average yield of all outstanding Treasury notes and bonds with 4+ years to maturity.

– Earnings comprise entirely of interest income on the securities.

– Subject to inflation risk.

**#2 – TSP F Fund – Fixed Income Index Investment Fund:**

Objective – to match the performance of the Barclays Capital U.S. Aggregate Bond Index, a broad index representing the U.S. bond market.

Key Features

– Offers opportunity to earn rates of return more than money market funds in long term, with relatively low risk.

– Risk of nonpayment of interest or principal is relatively low because the fund includes only investment-grade securities and is broadly diversified.

– Earnings comprise of interest income on the securities and gains (or losses) in the value of the securities.

**#3 – TSP C Fund – Common Stock Index Investment Fund**

Objective – to match the performance of the Standard and Poor’s 500 (S&P 500) Index, a broad market index made up of stocks of 500 large to medium-sized U.S. companies.

Key Features

– Offers opportunity to earn high investment return in long term from a diversified portfolio of stocks of large and medium-sized US companies.

– Risk of loss if the S&P 500 Index declines in response to changes in overall economic conditions (market risk).

– Earnings comprise of gains (or losses) in the prices of stocks and dividend income.

**#4 – TSP S Fund – Small Cap Stock Index Investment Fund:**

Objective – to match the performance of the Dow Jones U.S. Completion Total Stock Market Index, a broad market index made up of stocks of U.S. companies not included in the S&P 500 Index.

Key Features

– Offers opportunity to earn high investment return in long term by investing in stocks of small and medium sized US companies.

– Risk of loss if the Dow Jones US Completion TSM Index moves up or down due to changes in economic conditions.

– Earnings comprise of gains (or losses) in the prices of stocks and dividend income.

**#5 – TSP I Fund – International Stock Index Investment Fund”**

Objective – to match the performance of the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index.

Key Features

– Offers opportunity to earn a potentially high investment return in long term by investing sticks of companies in developed countries outside the US.

– Risk of loss if the EAFE Index responds to changes in economic conditions or to increase in the value of US dollar.

– Earnings comprise of the gains (or losses) in stock prices, currency fluctuations of US dollar value and dividend income

**#6 – TSP L Funds – “Lifecycle” Funds:**

Objective – to provide the highest expected rate of return for the amount of risk expected.

Key Features

– Diversify participant accounts among the G, F, C, S, and I Funds by using tailored investment mixes.

– Do not guarantee protection against loss or elimination of risk.

– Returns are nearly equal to the weighted average of the G, F, C, S, and I Funds’ returns.

– Earnings are calculated daily, with a daily share price for each L Fund.

Retirement Planning: Prepare Financially, Physically, Emotionally

July 7, 2014 /by Admin

Federal Retirement brings a major change in the life of not only the retiree, but also their family. It is a shift from a structured way of life to an unstructured one, which can be unnerving and overwhelming, especially if you are not prepared.

This article will help people prepare themselves financially, physically and emotionally for the next phase of life:

Being Prepared Financially

– Start Saving – Saving, whether for retirement or any other goal, is a rewarding habit. If you are already doing it, great; if not, you should get started. Start saving from a small amount, and gradually develop a habit of keeping aside a specific amount of money every month. Retirement savings programs like the Thrifts Savings Plan can help you plan for the future.

o Federal Employees receive a match to every dollar they invest into their TSP Account – up to the first 5% of their income. It’s like giving yourself a raise by simply putting the money in the account.

– Know Your Retirement Needs – if you wish to maintain the same standard of living after retirement that you currently have you should absolutely perform a Retirement Cost Analysis and a Retirement Benefit Analysis. There are rules of thumb when it comes to retirement planning but as a federal employee your benefits can be very complex. It is always best to operate with as much knowledge as possible. PSRetirement.com offers readers a free retirement Benefit Analysis.

– Know What You Are Eligible For Through Your Employer’s Pension Plan – Through your High-3 calculations and depending on whether you are covered by FERS or CSRS your Federal Annuity can be significantly different than your friends or colleagues. Don’t rely upon their figures to determine what you think you might be eligible for. Work with your HR Department and you may even want to talk with a knowledgeable financial planner who can help you determine how your Annuity should impact what other investments you may need to make before retirement to give you the income you need.

– Know Where Your Money Is Invested – The type of investments you make play a significant role in how much you will have saved at retirement. Keep a track of where your savings and TSP money is being invested. Diversifying investments can minimize risk and depending on your age certain investments may be more appropriate than others.

– Learn About Social Security Benefits – If you are a CSRS employee you may not be eligible to receive Social Security. For FERS employees there are also impacts to your Social Security payments depending on when you claim it and how much you earn in the way of your Federal Annuity. Because of the complexity of the different systems and how they impact one another – it is incredibly important to talk with an expert about what your benefits will be.

Being Prepared Physically

– Stop Smoking – Smoking causes life-degrading and life-shortening diseases.

– Control Blood Pressure – after quitting smoking, the next most important thing that Americans should do is to control their blood pressure by eating healthy and having an active lifestyle.

– Eat Healthy – The expression ‘you are what you eat’ proves to be right when people start having health problems after retirement because of their preceding unhealthy lifestyle. They should eat healthy both before and after retirement to avoid common health issues like blood pressure, hypertension, ulcers and others.

– Stay Active – Many people have an active workout regime while they are employed, but once they retire, they give it up. Having an active lifestyle after retirement is equally important to stay fit.

– Control Blood Pressure – High cholesterol means blocked blood vessels. The best way to lower cholesterol is to keep a check on your weight and exercise regularly.

– Get a Regular Checkup – Even if you feel fit, getting an annual medical checkup is important as some health problems like diabetes, cholesterol and others might not have any obvious symptoms until they get worse.

Being Prepared Emotionally

– Set Lifestyle Goals – Make a list of things that you would like to do or places you would want to visit after retirement, for which you were too busy while employed. You can also plan your financial savings accordingly. Occupying yourself with interesting activities will offset feelings of uselessness after retirement.

– Build a Network – It is important to have a good support system and social circle after retirement to mingle with people who are going through the same transition as you are.

– Consider Your Spouse’s Feelings – Retirement is as much of a life-changing event for you as it is for your spouse, especially if they are still employed. Discuss their expectations, your feelings and sharing of responsibilities to make the transition easy for both of you.

Whether you are nearing the end of your service or are thinking to plan ahead, PSRetirement is your complete source of for all retirement-related solutions!

Death and the TSP

July 1, 2014 /by Dianna Tafazoli

When a retired federal employee dies, notification should not only be made to the Office of Personnel Management but to the Thrift Savings Plan (TSP) if the deceased was a participant. Notification should be made as soon as possible to the TSP by a family member or a representative of the deceased.

If an individual dies who is still an active employee in the federal service or a member of the uniformed services, then the report of death should be made to the deceased employing agency or service. If the employer is a former or retired employee, the family member or representative should call the TSP at 1-877-968-3778 to speak to a TSP service representative.

With the TSP, it is important to move forward as quickly as possible in providing the necessary information to the TSP so that a determination of potential beneficiaries can be made. After completing the forms, a TSP-17 for regular employees and a TSP-U-17 for the uniformed services, a death certificate must accompany the submission. The completed form and all supporting documents can be mailed to TSP Death Benefits Processing Unit-P.O. Box 4450, Fairfax Virginia 22038-4450 or you may overnight it to ATTN: TSP Death Benefits Processing Unit, 12210 Fairfax Town Center, Unit 906, Fairfax, VA 22033.

P. S. Always Remember to Share What You Know.

Death Benefits

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Thrift Savings Plan / Power of Attorney (POA)

June 20, 2014 /by Dianna Tafazoli

There are circumstances where the death of a loved one is so overwhelming, taking care of necessary business might have to be delegated to someone else – this is where the Thrift Savings Plan Power of Attorney (POA) would come into play. There is absolutely nothing wrong with getting help to handle affairs when the task simply seems too much or you might decide the situation would be best handled by a professional.

The Thrift Savings Plan (TSP) has provisions for a Power of Attorney (POA) to be used to represent your account. The TSP Power of Attorney can be used to appoint someone else to act on your behalf. It does not have to be a professional, but someone you trust to handle your affairs and act in your best interest.

The person you designate as your TSP Power of Attorney may handle all of your affairs associated with your TSP, including borrowing or making withdrawals from the account. On the other hand, you might simply want the TSP Power of Attorney to handle certain aspects of your account. The extent to which you want your TSP Power of Attorney to act on your behalf is entirely up to you. There is a Special Power of Attorney Form that is available at the TSP allowing for the designation of your TSP Power of Attorney.

The TSP suggests reading the booklet Court Orders and Power of Attorney to gain a better understanding of the provisions, issues and guidelines and language used for granting Power of Attorney. It is important to understand the process, procedures, your rights and responsibilities and the decision to withdraw a TSP POA.

P. S. Always Remember to Share What You Know.

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