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March 29, 2024

Federal Employee Retirement and Benefits News

Category: Featured

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TSP Account Holders Will See More Withdrawal Options In September 2019 | Linda Jensen

LINDA JENSEN – The Thrift Savings Plan will have broader withdrawal choice come September 2019.  This may be disappointing news for investors who were hoping the action would come quicker. Authorities in charge of the changes did not enact them until late 2017 despite years of backlash that the withdrawal choices were extremely limited.

 

According to the board, the date would ensure the changes would go into effect, despite rumors that several of them would be offered earlier.  The Board said the law’s implementation would take time, using most, if not all, the two years it was given to enacting it.

 

Surveys were conducted about the TSP, and it showed that many separated participants put their money into other retirement accounts like IRAs. Why? These offered provided them with more options to withdrawal. In its current form, the TSP only allows participants to make one partial withdrawal after they separate with an additional withdrawal to cover the rest of the balance.

 

This partial withdrawal isn’t eligible to those who had an in-service “age-based” withdrawal either. This kind of withdrawal is only available one time as well.

 

With the announcement of the September 2019 debt, the TSP included some information about the new policies it would enact. For example, the TSP will limit how many age-based in-service and post-separation withdrawal could be made. There will be four age-based withdrawals allowed each year, with no limit on the number of post-separation withdrawals.

 

The new law would offer greater flexibility in choosing substantially equal withdrawals. Right now, there is the monthly payments option, with account holders given the option to change the amount just once per year. For people who want to stop the payments must withdraw the remaining amount in the account.

 

In September 2019, people will have the option to make changes quarterly or yearly – changing how often or the amount paid. There are also changes to the lump-sum requirement. The law still applies in that investors must the minimum distributions beginning when they turn 70 1/2. What has changed is that they don’t have to make a full withdrawal decision then.

 

The TSP had previously said an upcoming change not included in the law would also be included. It would let account holders with both Roth and traditional balances determine what amount of the partial withdrawal they want removed from both times. At this time, withdrawals must be about equal from each account.

VERA and VISP

Linda Jensen is the principal and owner of Asset Care & Preservation Services with offices in Olympia, WA.  Linda began her career with Prudential Preferred in 1994 where she was an agency leader.  She earned the credentials of a financial planner and has been in practice as an investment and insurance professional since that time.  Linda started her own company in 1997.

Other Articles from Linda:

Linda Jensen | How to make the most out of your TSP Plan

Linda Jensen | Top Four Tips for IUL Shopping

Linda Jensen

BRS Enrollment and Participation Not As Strong As Predicted

More than 200,000 military personnel have signed up for the new Blended Retirement System. That’s the word coming from the federal government officials in charge of the 401(k)-like retirement savings Program – Thrift Savings Plan.

 

Starting Jan. 1, 2019 the federal government will start to match the TSP contributions of active duty service members. However, the tradeoff is that they will not be offering the kind of defined benefit pension plan current employees are used to. New armed services recruits will be automatically signed up for the BRS, and current active-duty members will have until Dec. 31, 2018to sign up for the program or stick to their current plan.

Only 52% Currently Enrolled

Tee Ramos, TSP Director of Participant Services, said 205,274 people had enrolled in the new program as of May 31 – reaching 52 percent of the armed forces. He said the number of opt-ins is a bit below than their projections due to a misunderstanding for people who had enlisted in the service before Jan. 1.

Ramos said the projections were off because they had anticipated automatic enrollments of those signing their contracts in 2017 but deferring enlistments until 2018.  He said those that did those were actually not automatically enrolled, throwing the numbers off.

Military Retirement has been confusing for some.

In Other News…

Retirement

The Office of Personnel Management said military retirees and family members would soon be granted access for expanded government-administered dental and vision insurance. Until now, the majority of federal civilian retirees, retired reservists, military survivors and their families were eligible for enrollment in the Federal Employees Dental and Vision Insurance Program.

 

However, the Nation Defense Authorization Act of 2017 gives them increased eligibility for these services.

 

The TRICARE Retiree Dental Plan will end in 2018. This plan offered coverage to those newly FEDVIP eligible participants. Those already enrolled in the TRICARE plan will have a chance to switch to the FEDVIP during the open enrollment season – Nov. 12 to Dec. 10.

 

The OPM said the FEDVIP has no automatic enrollment plan, which means individuals will have to make the switch themselves during that time. The agency has created a website that offers information about the program for the 5.4 million eligible employees and families to alleviate the transition process.

President Donald Trump has been pushing for a pay freeze for civilian federal employees, but a Senate panel recently pushed back against the idea. The panel opted to approve an appropriations bills that offered a 1.9 percent increase to federal workers starting 2019.

 

The Senate Appropriations Committee, in a 29-2 vote, approved the Financial Services and General Government Appropriations bills for 2019 after it voted down the Republican amendment that eliminated the pay raise to these workers. The appropriations committee on the House Side did not have any provisions regarding federal employee pay, which meant the White House could move forward with its pay freeze proposal.

 

A conference committee will have to take a look at the pay increase if both chambers agree to their versions of the spending package.  The Trump Administration has also asked for a $1 billion interagency workforce fund that officials claim would kick-start pay based on performance efforts and office the pay freeze, but no mention of it was in either the Senate or House appropriations bills.

Donald Trump

Linda Jensen | How You Can Successfully Fund Your Retirement Years

LINDA JENSEN- When it comes to the TSP and IRA for retirement, it’s imperative to keep a few things in mind. After all, what you do or don’t do can affect how much money you’ll have in your retirement years.

 

The first thing to bear in mind – you are not eligible to use a bucket strategy for TSP withdrawals but you can for the majority of IRA accounts. What is a bucket strategy? It’s known as a time-based segmentation approach, which allocates money intotwo or more accounts. Based on information from Investopedia, nearly 40 percent of financial advisors advise clients to follow the bucket strategy.

 

For the first bucket, money would be placedinto safe investments – lower yielding investments – that allows you to make monthly income withdrawals when you’re retired. This income bucket should have enough money in it to last for many years.

 

For the second bucket, money would be putinto riskier, higher-yielding investments that don’t need tobe usedfor years to come. Bucket two can be used to fund bucket one.

 

You don’t have to stick with just two buckets either. You could put together a third and fourth bucket to be used later on.

 

With a bucket strategy, you won’t have to make withdrawals from a volatile investment when the market is not going in your favor and gives time for the money to regain their value.

 

The TSP states withdrawals can be respectively divided between TSP investments based on how you set up the allocation. So, if you’re withdrawing $1,000 every month with the account being divided between five key funds, it means $200 would come from the C, F, G, I and S Funds. This means you can’t use a bucket strategy if money is left in the TSP.

 

It’s important also to understand how your monthly payments can be set up using any of the IRS’ life expectancy table. The TSP, however, only lets people use the Uniform table, which works well for people who spouses are close to them in age.

 

If your spouse is 10years older or younger than you, the IRS has another table to be used for the TSP. It’s called the Joint and Survivor life expectancy table. The table permits smaller withdrawals, as a younger spouse is determined to need money for a longer period of timeafter your death than a spouse who is close to you in age.

 

This strategy can also be usedwith an IRA account.

 

What if you decide to use the Joint and Survivor life expectancy table or bucket strategy for your retirement? It means you’ll need to withdraw money from the TSP into another account that offers some flexibility.

 

When the TSP Modernization Act is put into action (come November 2019), the restrictions noted above is liable to stay in place. The fact also remains that employer plans, which also includes the TSP, tends to be more stringent than individual plans such as IRAs.

retirement
Linda Jensen

Linda Jensen is the principal and owner of Asset Care & Preservation Services with offices in Olympia, WA.  Linda began her career with Prudential Preferred in 1994 where she was an agency leader.  She earned the credentials of a financial planner and has been in practice as an investment and insurance professional since that time.  Linda started her own company in 1997.

Other Articles from Linda Jensen:

Linda Jensen | How to make the most out of your TSP Plan

Linda Jensen | Top Four Tips for IUL Shopping

Planning For Retirement in the Light of Proposed Benefit Cuts

News of the impending benefits cuts is spreading like wildfire. Among these proposals are changing from a high 3 to a high 5 tension estimation method, COLA reductions, and hiked FERS contributions.

 

Recently, the Office of Personnel Management asked Congress to help narrow the gap between federal benefits and those of the private sector. Although the proposal has been drawn out, it seems likely that Congress will alter federal benefits. On the other hand, federal employees may create their own retirement plans to cater for their future.

 

But what impact will these proposals have? Below are a few examples to consider. For a deeper analysis of the effect of this proposal see this post.

Change From High 3 to High 5

A change from a high 3 to a high 5 benefit estimation process entails assessing an individual’s years of service, overall salary, and other factors that affect the amounts of pension they receive.

 

Let’s assume an individual with federal service equal to 20% of their high 3 or high 5 for that matter. Next, we require knowing which five years of federal service they had the highest salaries. To compute their pension, we average their highest 3 or 5 years salaries, taking out 20% of this figure. For example, an employee has $70,000, $72,000, $74,000, $76,000, and $78,000 as the highest five years salaries.

 

One may respond that it is impossible to get these kinds of salaries. Even so, there are two factors that are responsible for these kinds of wages. One is that these amounts are the result of periodic promotions or raised somewhere along their highest 3 year period.

 

The second reason could be wherein individual receives a raise during their highest 5 years of service. The proposed changes would extend his pension estimation from high 3 to high 5. If for five years one had a salary of $50,000, then their pension will be based on a salary of $50,000.

 

Let’s consider increases from$70,000 to $78,000, and then their high 3 could be the three last year with an average of $76,000. However, using high 5 estimations, their average would be $74,000. For both cases, 20% of this figure equates to $14,800 for high 5 and $15,200 for the high 3. The implementation of this proposal would create a reduction of $400 to an individual’s annual pension. All the same, a decline of this type is minimal. On the other hand, this reduction may increase due to higher salaries, higher percentages, or because of a salary hike in one year causing a higher average. In regards to one’s total pension, the adjustment from high 3 to a high 5 will cause a lower minimal reduction.

cryptocurrency, though volatile, can be incredibly valuable

Contributions to FERS

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Finally, federal employees will make higher contributions towards their pension schemes. The date of one’s hire determines the amount individuals contribute. Since 2013, the percentage of withheld salary was revised upwards. Though this adjustment was implemented, it only affects those hired since then.

 

Nonetheless, this proposal will affect current federal employees not just those hired after 2013. At present, it is impossible to predict how much an employee’s contribution will be with some workers paying 0.8% to 4.4%. This proposal will affect some employees more than others. According to the Congressional Budget Office, this amount may increase with 5.8%.

 

For example, if we apply this percentage to $100,000, then itis possible to estimate the actual reductions. Changing from 0.8% to 5.8% is a considerable jump. However, it is expected to be introduced through phases, meaning this is an increase of $5,000 for a $100,000 salary.

 

As this $5,000 figure comprises an employee’s taxable income, the reduction would be less. Consequently, it might be just a few dollars on an employee’s paycheck. For instance,an employee used to pay4.4% of his salary towards their pension ends up paying 5.8%. This will still make a difference in their pay, though this will be on their net taxes not as a reduction.

 

Only time will clear up the situation. Interestingly, lots of concern will be expressed regarding these changes. Keep checking with us for more stories about these developments.

You Could Soon File Insurance Claims with Robots

What is TSP?

Nowadays, Artificial Intelligence is the rage across different industries. Surprisingly, the insurance industry is a significant investor in AI-driven technology.    A 2017 Global Trends Study estimates that the insurance sector spent an average of $124 million in AI technology. Interestingly, this amount is $54 million more than the average of other surveyed industries. Recently, QBE, a global insurance powerhouse, invested massive amounts of funds in HyperScience, a machine learning company. What’s more, this is not QBE’s only AI investment.

 

Even so, a raging debate is ongoing regarding the benefits and drawback of AI technology. As a result, players in the industry have organized a summit to address the use of machine learning.

 

In the AI ecosystem, chatbots are essential elements. For instance, Allstate introduced a chatbot known as Allstate Business Insurance Expert (ABIE). Additionally, Singapore Life’s SingLifeChatbot helps clients on Facebook process their life insurance applications.

 

Consider the above examples as just the tip of the iceberg as many more companies are adopting the use of AI in business. Nonetheless, this is not to imply that the insurance industry has a monopoly over AI-powered chatbots. What is most surprising is the industry’s affinity for AI.

 

Despite perceived unsexiness of the insurance sector, it stands to reap tremendous benefits from AI applications. In particular, the widespread adoption of chatbots is a trend, now and in the future. Below are a few ways in which chatbots benefit insurance companies:

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Benefit # 1: Reduced Customer Confusion

investing doesn't have to be hard.

Data from a recent survey indicates that insurance jargon confuses 72% of clients. For instance, most consumers find it challenging to tell the difference between whole life insurance and term life insurance. But that needs not be the case, as chatbots can help reduce or eliminate confusion. Chatbots can translate complicated terms into everyday language as well as guide consumers through processing steps.

The difference between the FERS or CSRS Annuity and the TSP is that the annuity is based on your years of service, rather than how much you have contributed, and is also voluntary, as opposed to the annuity.

Regardless of which retirement system you qualify for, contributing to the Thrift Savings Plan is vital to your retirement, primarily if you contribute early. TSP compound interest means that the earlier you start to make contributions, the better. However, if you did not start saving at an earlier point, committing to a steady and consistent contribution schedule will almost always produce positive results.

Benefit # 2: 24/7 Availability

Regrettably, difficult controlling events lead to insured claims. In the event of a disaster, policyholders are restricted to filing claims during business hours. Unlike human who needs to recharge, chatbots can work 24/7 365 days. Even better, chatbots can handle all types of traffic without fatigue. This meansthat clients no longer need to wait on hold for a customer care rep.

Man and woman discuss their TSP
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Benefits # 3: Process Streamlining

Also, chatbots can help reduce the amount of paper and superfluous processing stages when filing insurance claims. Regrettably, most consumers dread the claims filing process. Despite the challenges involved, chatbots are helping transform insurance processes. In early 2016, for example, Lemonade Insurance’s chatbot, Jim, settled a claimwithin3 seconds.

 

Not all insurance chatbots can settle claims in record time. However, chatbots can reduce processing and wait times significantly. Besides that, the evolution of machine learning is still in its infancy. On the flipside, chatbots have no human empathy and are easy to manipulate. Luckily, developers are working on overcoming these drawbacks. Even so, chatbots are one way of solving challenges in this industry.

New Ruling States Federal Employees Must Reveal Cryptocurrency Holdings

If you have invested in Bitcoin, Dogecoin, or any number of other alternative cryptocurrencies, you may be obligated to reveal those holdings.

A new US Office of Government Ethics (OGE) order requires all federal employees to disclose any crypto assets they own. The guideline issued on June 18, 2018, affects 2 million federal executives and departments. This guideline includes the Departments of the Army, Homeland Security, Justice, and Veteran Affairs.

In its foresight, the OGE does not recognize cryptocurrencies as legal tender or real currencies. All crypto assets, regardless of the acquisition means or distribution channel, are subject to the OGE’s published guidelines. For this reason, employees should report all digital currencies where an asset’s value exceeds $1,000 or an income of over $200. Plus, employees must provide names of the digital currency and the exchange or platform holding it.

 

In its rationale, the OGE argues that due to the popularity and increased adoption of cryptocurrencies, federal employees holding virtual assets are ethically concerned about disclosure obligations.

Bitcoin is a very popular form of cryptocurrency
cryptocurrency, though volatile, can be incredibly valuable

Hence, the OGE ruled that federal employees must file all transactions involving crypto asset investments. Even so, reporting depends on whether a digital asset qualifies as security. Where doubts exist, employees should periodically report all digital transactions exceeding the reporting threshold.

 

As digital currencies are an “investment asset,” they can create a conflict of interest for the owner. What’s more, no conflict of interest exemption applies to employees holding digital assets. Nonetheless, the OGE will provide further guidance in tandem with the evolution of digital currencies.

 

In March this year, South Korea banned public officials from transacting or owning cryptocurrency assets. Interestingly, it’s the first recorded instance of the state prohibiting its public officials from holding digital assets. As a result, any public official transacting in virtual currencies violates civil servant’s code of ethics and practice and is liable for disciplinary action.

Why Military Pensions can be Insufficient to Retire On | Rick Spruill

RICK SPRUILL – In most companies and industries, employee sponsored 401 (k) plans phased out traditional retirement plans. Still, the military offers its uniformed members a pension scheme. Typically, military members receive a pension equal to 50% of the highest three-year base pay. Each year, pension amounts increase by 2.5% for members with twenty and above years of service.

 

Though this amount is significant, it might not be enough for you and your family’s needs, mainly since most military members serve for less than 20 years. This means that after discharge, you’ll most likely have no pension.

A New Blended Retirement System

In January 2018, the Blended Retirement System (BRS) was introduced for service members who leave before the 20-year mark. It has three retirement options: pension only, a Thrift Savings Plan (TSP), or a reduced hybrid (pension and TSP) option.

 

After January 2018, enrollments into the BRS are automatic. If you have less than 12 years of service, you can elect to enroll into the BRS. Members with fewer than eight years can leverage the BRS’ provisions to save more for their retirement.  But why is that so? It is because your matching contributions can exceed your pension’s total value. But this requires that you remain in service for twenty yearsor more to qualify for a military TSP.

 

Depending on your status, it is challenging enrolling in the BRS if you have between 8 and 12 years of service. Additionally, your TSP contributions and base pay may affect your eligibility. Often military members with 20 or more years prefer a pension based retirement scheme.

Rick Spruill talks about military retirement

But What is a TSP?

Careful investment in the TSP can be a great idea

It is a retirement saving scheme for service members and federal employees. This plan remits 1% of an employee’s base pay into a TSP with a further 4% to 5% matching contribution. With a TSP, you can choose to invest your contributions in any of the five index funds or a lifecycle fund.  An advantage of TSP indexed fund options is their relatively low expense ratios. Typically, expense ratios are 40 cents per $1,000 that you invest. Plus, you can opt between a traditional TSP, a Roth-based TSP, or a hybrid TSP. All matching contributions are deposited in a conventional TSP no matter what option you enroll in. For 2018, the maximum contribution value for a TSP is capped at $18,500.

What Other Saving Options Are Available?

Option# 1: Traditional and Roth IRAs

 

With this approach, members can contribute to Roth and non-deductible IRAs as well as TSPs. You can open either of these investment accounts at your local brokerage firm. What’s more, both function independently and contributions are capped at$5,500 per year. However, they are limits on incomes for eligibility.

 

Married service members can have their spouse make IRA contributions where applicable. Spousal IRAs have a contribution limit of $5,500 each year.

 

Option #2: Taxable Brokerage Accounts

 

Another alternative is to invest additional funds in a taxable brokerage account. Unlike IRAs and other retirement schemes, brokerage accounts charge no penalties for early withdrawals. Also, brokerage accounts impose no contribution caps.

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Estimating How Much You’ll Need for Retirement

  • Know Your Needs

 

Estimating how much money you’ll need requires understanding what retirement means as well as its implications. So evaluate your lifestyle to determine the finances you require. Below are factors that can affect your financial status during retirement:

 

  • Maintaining a large house or living in a low-cost maintenance home
  • Whether you’re traveling internationally or living closer to home
  • Spending on hobbies such as golf or engaging in volunteer work
  • Taking up a part-time job

 

Although you are retired, you might secure a part-time job, earning you some much-needed income. If so, you are better off with fewer retirement savings.

 

  • Craft A Retirement Budget

 

After knowing what type of retirement you’re looking at, it’s time to create a budget. Start with known expenses to gain an idea of your retirement expenses. Let’s say you spend $5,000 each month; you need $60,000 each year to meet your living expenses. So if you retire at age 63 and live for another 27 years, your retirement estimate equates to $1,620,000. Of course, other costs and inflation might push this figure upwards. Nonetheless, it is a reasonable ballpark estimate.

 

Increased life expectancies and kids who need support beyond college might stretch your military pension. This means you’ll have insufficient finances to cover all your needs. Typically, retirees withdraw 4% of their retirement benefits each year.  With the above example in mind, you require about $1,620,000 to cover $60,000 in monthly expenses.

 

Besides that, how much you need depends on the factors below:

 

  • Your place of residence as tax rates differ across states
  • Lifestyle choices you make during retirement
  • Any debts you might be paying while retired
  • Whether you have family members depending on you for support
  • Your revenue streams either from part-time work, real estate, or other investments

 

No matter your retirement status, a retirement calculator is a great way of simulating different saving scenarios. Alternatively, you can consult with a financial planner like Rick Spruill to help in creating a retirement plan.

About Rick Spruill

Rick Spruill is a  Financial, Retirement, Military, and Civil Service Retirement TSP Fegli and VGLI Life insurance Conversion Expert, as well as a Wealth Transfer, Nursing home, Estate, Consulting and Planning Experts and a Business Tax reduction expert. Contact Rick Spruill at [email protected] and learn how you could save more for retirement.
Rick Spruill

Linda Jensen | Top Four Tips for IUL Shopping

Linda Jensen: Your IUL Guide

LINDA JENSEN – Obtaining a universal life insurance policy that suits your unique needs is often a challenging undertaking. But why is that so? It is because universal life insurance policies are flexible products. Given that, selecting the right one requires that you evaluate between numerous available options. Most likely you might end up empty-handed.

Let us help you help you get acquainted with what it entails to get universal life insurance. Here are our four top tips for buying IUL.

Shopping carts are a metaphor for shopping for IUL.

Tip # 1: Know Your Broker

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Avoid relying on advice found online as there are many providers and calculators out there. Keep it in mind that you might be persuaded to purchase the cheapest option. Nonetheless, this might not be a suitable option for you.

 

Remember that many options are available for you to select from when shopping for an IUL. Consulting with independent brokers pays off when evaluating between multiple providers. Hence, you should go for a broker that specializes in indexed universal life to help you pick the best policy for you.

Tip # 2: Your Financial Status

Having living benefits is a bonus for many life insurance policyholders. Living benefits are policy riders that offer you benefits before your demise. These riders let you access a portion of your death benefit while still alive. Following is a list of all benefits that you are entitled to in an IUL policy.

 

  • Terminal illness benefits: this benefits applicable to terminally ill IUL policyholders with 12 to 24 months to live
  • Chronic illness benefits: applies to insured individuals who have deficiencies in completing essential living activities
  • Critical illness: this benefit is given to individuals who have cancer, kidney failure, or are at risk of heart attacks or strokes. The severity of these conditions determines the size of your lump sum payout. For instance, if you have Stage 3 cancer, the lump sum payout is higher than if you had Stage 2 cancer.
  • Critical injury: this benefit is provided to clients who are in a coma, with traumatic brain injuries, paralysis, or severe Typically, a majority of companies don’t offer this benefit to their employees. This is why you need to talk with your insurance broker to get you a policy that includes this benefit.

 

Note that living benefits are a lifesaver for your portfolio as they provide you with an alternative to other standalone solution, for instance, long-term care. This is especially important for families that have limited resources.

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Your IUL ROI could be great

Tip # 3: Leverage Your Investments

Typically, maximizing your investment ROIs requires lots of commitment, time, and effort. Plus, due to the uncertainty of the stock markets, you can potentially end up making losses. This is why you should look for ways to let you manage any tips that might occur along the way.

 

IUL policies offer a policyholder a means of evening out these dips. Usually, these products provide between 0% to 3% credit guarantees over other products. As a result, your investment is protected against market fluctuations. What’s more, the fact that IUL’s have variance guarantees is all the more reason why you should consider one.

 

But what is the implication of this? Whenever an index gains in value, your provider is bound to credit your policy accordingly. Essentially, your policy either gets capped or credited up to a certain ceiling. Typically, caps are in the range of 8 % to 18%. For example, if an index returns 20%, you receive a cap of 18%. If an index had negative returns, your provider still retains your policy. Nonetheless, the importance of reviewing policy caps cannot be overstated as these can affect the long-term performance of your investment.

Tip # 4: Premium Prices and Underwriting Costs

Even though you can use an IUL to diversify your investments, it isn’t suitable for everybody. For instance, it is very expensive to obtain an IUL in your 60s rather than in your 30s. Often, its cumulative pricing can wipe out your insurance policy. Over time, death benefits and associated charges may reduce the ability of your investment accumulate value.

 

Besides that, there is the issue of underwriting eligibility. For instance, you may receive a low rating if you have a terminal illness. If you are young and have excellent health, IUL is an excellent way of diversifying your portfolio.

 

So there you are! Apply these tips when shopping for an IUL. Also, remember to seek advice from a professionally certified and independent broker who’ll provide you with comprehensive details of your available options rather than what’s in the best interest of an insurance provider.

TSP and FERS are important parts of your retirement

Linda Jensen

CLU ChFC LUTCF CLTC CSA

 

 

Linda Jensen is the principal and owner of Asset Care & Preservation Services with offices in Olympia, WA.  Linda began her career with Prudential Preferred in 1994 where she was an agency leader.  She earned the credentials of a financial planner and has been in practice as an investment and insurance professional since that time.  Linda started her own company in 1997.

Linda Jensen

Michael Wood | How Retirement Cut Proposals Will Affect Federal Workers

Article by Michael Wood

MICHAEL WOOD –

There is much debate regarding the difference in working conditions between federal and private sector employees. On the one hand, private-sector employees think federal employees enjoy better benefits. Why is that so? Over the years, private sector employers have reduced their employee benefits. On the other hand, federal benefit packages are challenging to maintain. However, federal employees’ base salaries are lower than those of private sector employees. In turn, this creates the need for federal benefits to offset differences.

 

Recent White House proposals threatened to reduce federal employee benefits. This letter, from the director of the US Office of Personnel Management, details the proposed measures. These measures target federal employees enrolled in the Civil Service Retirement (CSRS)and FederalEmployees Retirement System (FERS). The goal of these measures is to reduce budget deficits. Already, pay freezes and compensation adjustments to affect federal employee benefits which are less than those of private sector employees are. Below are four possible measures that might be implemented.

Trump

Increases in Benefits Contributions

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In the past, private companies offered retirement benefits that require no employee contributions. Even so, most employees prefer 401(k) retirement plans as it gives them greater control over their future. In contrast, public sector retirement plans require recurring contributions. Today, a majority of employees in FERS remit 0.8% of their salaries and3.1% or 4.4% if hired after 2012.

 

Under this proposal, FERS contributions will hike with one percentage point and a ceiling of  7.25% of base pay. This is equivalent to 14.5% of total pension similar to SocialSecurity’s 50/50 allocation of contributions between employees and employers. Paying an additional 6.45% of base pay necessitates pay cuts with no significant change in benefit payouts. Over the next ten years, this will slash deficits by $69 billion and more beyond this period.

Longer Pension Calculation Duration

Currently, FERS and CSRS benefits are computed using an average of the highest annual pay over a period of three years. Typically, this is derived late in an employee’s career when salaries are highest. The proposed law will increase this period to five years. An increase in the calculation period reduces the average as well as initial payouts lasting throughout retirement. Essentially, these proposals attempt to mimic how Social Security uses an employee’s 35-year history to compute pensions. All the same, private sector pensions follow rules similar to the public sector. Implementing this measure will save the Fed $6 billion over the next ten years.

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Reductions in COLA Benefits

Similar to Social Security’s COLA benefits for retirees, federal pension benefits increase about inflation. Growing payouts in this way offset increases in the cost of living expenses.

 

The proposed new laws will reduce CSRS COLA benefits by 0.5% as well as wholly eliminate them from the FERS. This will translate to reductions of $50 billion in the next ten years and onwards.

No Supplemental Annuities

FERS supplemental annuities require that an employee quit service before age 62 and enroll in Social security. Supplemental annuities help determine what an employee’s corresponding Social Security benefits will be. However, proposed measures will eliminate these benefits saving the federal government $19 billion in the next decade.

TSP and FERS are important parts of your retirement
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Final Thoughts

Though the White House can only make suggestions, it cannot enact these measures. Given that, it’s obliged to provide direction regarding these proposals. As calls to reduce budget deficits increase, it is possible that Congress will deliberate on these and other proposals. However, federal employees will oppose these measures strongly, though if they are implemented they certainly will have to endure the cuts.

Michael Wood

Michael Wood is the principal and owner of Integrity Retirement Planning, LLC with offices located in Cambridge, Maryland. Michael began his career in Insurance and Financial Services with Bankers Life and Casualty in 1999 where he practiced insurance until 2002 at which time he started his own company.

Michael Wood

Potential Government Shutdown Looms in Fall

With the start of the next fiscal just four months away, conflict in Congress makes it likely that a continuing resolution may be procured before October 1 to keep the federal government functional. What’s more, failure to reach an accord in Congress may lead to a formal shutdown of the government just six weeks to the midterm elections.

 

But how will this happen? Below is a breakdown of the possible ways this might unfold.

 

  • In recent months, Republicans have made it clear that they won’t allow the passage of a budget resolution in Congress despite federal law requiring

 

  • Subsequently, this makes it impossible to allocate funds for the coming year unless a budget resolution is adopted first before May 1st.

 

  • Although the House had numerous opportunities to debate the appropriations bill for the fiscal year beginning October 1, 2018, the House didn’t take any action regarding2019 appropriations.

 

  • According to gov, the House Appropriations Committee has only approved5 of the 12 2019 Appropriation bills with its subcommittee approving only two others.

 

  • The present condition means that there currently isn’t any tentative approval of the 2019 appropriations

 

  • What’s more, data on Congress.gov indicates that theSenate AppropriationsCommittee and its subcommittees have approved none of the allocations despite having the capacity to act independently of the House.

 

  • Plus, there isn’t sufficient time for Congress to act. Besides, the fiscal year 2019 begins about four months time. Session 42 of the House is set to commence within 95 working days and theSenate has only 61 sitting days.

 

  • But what can change this situation? Only if the WhiteHouse, Senate, and the House jointly can a possible government shutdown is averted.

 

  • With the House FreedomCaucus flexing its political muscles, Democrats not willing to lose any political ground before the midterm elections, and a president willing to prove his mettle after okaying the 2018 appropriations bills reluctantly, gaining consensus in a fractured Congress will prove challenging.

 

  • Also, achieving an agreement between Democrats and Republicans that pleases the president looks impossible. Keep it in mind that the president needs billions of dollars for his border wall.
  • However, the House Speaker andSenate MajorityLeader are doing everything possible to prevent any potential government shutdown before fall. Accordingly, they are relentlessly working to have as many appropriations bills passed.

 

  • Nonetheless, it remains to be seen whether this will be possible with so little time left before the beginning of the fiscal year 2019.

 

  • What’s more, the House Speaker and Senate Majority Leader are keen to avoid short-lived continuing resolutions. Why is that so? It is becauseCRs will keep Democrat and Republican lawmakers in Washington instead of on the campaign

 

  • Consequently, October 1 is a most important deadline marking the beginning of a political showdown regarding a CR and signaling the possibility of a potential government shutdown.
TSP and FERS are important parts of your retirement

Rick Spruill: How to Determine if FEGLI is Right for You

Rick Spruill Talks About Optimally Leveraging your FEGLI Coverage Options

RICK SPRUILL – Use the following three factors to help determine whether FEGLI is a sustainable coverage option for you. The first factor addresses your ability to satisfy underwritersrequirementsforindividualFEGLI protection. Doing so entails meeting criteria established by your lifestyle, social habits, age, and health. A second factor that determines whether you are eligible for FEGLI protection is the duration of protection. Keep it in mind shortly, a large percentage of federal employees in their 50s and 60s will have their FEGLI coverage revoked. Finally, your life protection needs also determine your qualification status.

Presently, the Federal Employee GroupLife Insurance provides the most extensive coverage policies in the world. Accordingly, coverage plan offers you plans that require no medical underwriting with competitively priced death benefits. Besides that, death benefits begin immediately upon enrollment. However, the flipside is that FEGLI premiums increase over time for all insurees. These changes are attributed to policy design innovations within this industry over the past couple of years.

Rick Spruill

But What If I Am Terminally Ill with Cancer, Suffer a Stroke or Heart Attack?

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If this happens to you, expect to pay higher premiums. Subsequently, your ability to pay bills will adversely be affected. However, if you are eligible for living benefits, access to accelerated tax-free payments of your death benefits is available. But to do so, you need to make an application based on your needs.

 

On the other hand, the optional FEGLI offers nothing. So if you don’t have access to enough emergency funds or sick leave, you can apply for a hardship withdrawal. Even so, this can potentially wipe out of your reserves. Besides that, taxes will eat a significant chunk of your retirement assets as well as incur a 10% early withdrawal penalty.

 

With medical innovations increasing the average lifespans of most Americans, most federal employees are concerned about living longer than expected.

 

Although that is true, all types of insurance policies are geared towards ensuring that you maintain a comfortablelifestyle for your family. But families need to identify the kindof protection they require on an individual basis. Doing so can help these families prioritize their insurance needs and budgets.

 

Nonetheless, if insurance were free, then it would be possible to protect families against any conceivable harm. For this reason, most of us would opt to have full protection against multiple disasters. If we can potentially foretell the future, individuals would select optimal protection. In retrospect, it is not possible to do that, which means that we often cannot foretell what kind of protection is necessary. Consequently, selecting the best protection mandates that we identify the best coverage options at pocket-friendly prices.

 

 

Accordingly, this is a risky consideration when shopping for a comprehensive coverage option. For instance, polls of federal employees reveal that not many of them have significant savings to afford a cancer policy. Although one might have cancer coverage and then dies from a heart attack, than any cancer and LTC coverage they have is a waste of resources. Nonetheless, having a policy with multiple covers is the ideal situation. According to Rick Spruill, a perfect policy should cover all possible outcomes minus the additional costs, risks, or complications of acquiring use or lose it coverage.

So, who requires FEGLI coverage?

Initially, FEGLI coverage is suitable for federal employees under 45 years of age, why is that so? It is because at this age there is no Basic Extra Benefit as well as diminishing 5-year cost increases. This means that you have access to affordable alternatives and increased flexibility of LivingBenefits. Also, FEGLI is ideal for those with preexisting health conditions or risky lifestyles(read sea divers or tobacco smokers) that cannot be converged under a conventional insurance policy.

 

Although FEGLI coverage for all federal employees, its premiums are equal for both chain-smoking fast food aficionados and physically active vegans. What’s more, premiums are expected to rise by 2066% for both groups between the ages of 35 and 65. Here is a calculator to help you compute FEGLI premiums if you are 65 and above.

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So, What Will You Do?

You need to ponder over these questions before settling for FEGLI as your desired coverage option. Alternatively, you could shop around for an affordable option that has Living Benefits.However, to do so evaluate the following questions:

  • Ask yourself why you need coverage: is it to protect my family’s present lifestyle after my demise or is it to defend its present and future lifestyle?
  • How eligible am I for underwriting?
  • Will waiting before getting FEGLI coverage affect your eligibility for individual coverage?
  • How long do I need to have FEGLI coverage to ensure that my family is fully covered after I am gone?
  • How much retirement savings do I have for offsettingLivingBenefits?

 

Caveat! Do not wait too long before evaluating FEGLI policies as premiums are bound to rise in the future. Thus, you need to collect and evaluate available options to help you make the most suitable decision for your family and you. Once you decide to stay, leave, or drop coverage, you need to consult with a federally-certified financial advisor in making your decision.

Rick Spruill

So, What Will You Do?

Rick Spruill is a Financial, Retirement, Military and Civil Service Retirement TSP Fegli and VGLI Life insurance Conversion Expert, Wealth Transfer, Nursing home, Estate, Consulting and Planning Experts and a Business Tax reduction expert…

Other articles by Rick Spruill: Everything to Know About Denied FEGLI Claims

Linda Jensen | How to Pay Less Taxes on Your Federal Retirement Income

LINDA JENSEN- Paying tax on the federal retirement income is a necessity, but there are many ways to ensure that you pay less tax than you have been probably paying till now. If you want to learn how to pay less tax on your federal retirement income, then you must keep reading on. Here we are explaining how you can pay fewer taxes on your social security and TSP income.

The Extension on Filing Federal Retirement Income Taxes

It is a fact that most people file their federal retirement income taxes in April. However many people still prefer filing extensions and have until 16th October to file this year. Another fact is that people who have been paying income taxes may get a nasty surprise when they see the bottom line on the federal income tax return as withholding can be considerably different for retirement income as compared to employment income.

If you have ended up paying more taxes then you need to read on to know how to save taxes the next year. If you are among those people who are yet to retire, you will be glad that you read this article as you will not be paying a large amount of taxes due in the first year of retirement.

The Difference

When you are working in a federal job, you simply file a W-4, and all the vital taxes are withheld from your paycheck. You just set it and forget it. Things change when you retire.

Annuity and Taxes

Most people fill out a W-4P with retirement papers, and the taxes are withheld from the monthly payments. This withholding is usually based on the last W-4 filed when a person was still and employee. It is highly likely that the W-4 covers all the taxes that are due from CSRS or FERS annuity.

Social Security and Taxes

When you consider the social security withholding, things start to get difficult. It is very likely that 85 percent of your social security will be subject to a federal income tax at your rate for the ordinary income. However, some retirees will find that a lesser portion is considered to be taxable. Hence, the higher your income is, the higher would be the percentage of your social security benefit that is eligible for a federal income tax.

It is a fact that social security will not withhold anything from the payments for taxes until you request for the same. The main thing here is to avoid a tax surprise by paying the income tax on the social security as you go. You should ask the social security to withhold taxes from your monthly payments when you apply. In case you are applying for social security income online, you should do it by using the remarks section of the form. Alternatively, you can file a form W-4V after applying for social security.

Another useful advice to save extra tax on your federal retirement income is that you should make quarterly tax payments. These payments are due on January 15, April 15, June 15 or September 15. If you are a bit forgetful or you tend to accidentally spend the money you have set aside for tax purposes, then you should ask the social security to withhold 25 percent of your payment for paying up the federal retirement income taxes.

TSP and Taxes

If you need to know about how your federal retirement income in TSP will be taxed, you should check a booklet that is available on the website of TSP and offers a detailed table that describes the withholding on each kind of withdrawal. As per the TSP statistics, the most common withdrawal is known as substantially equal monthly payments in which withdrawal is withheld as if you were filing jointly, married and claiming three exemptions. It is usually there if the payments are likely to continue for a time span of 10 years.

A CPA expert calculated that you need to be withdrawing more than USD 1,700 per month before TSP starts the withholding process. So, you should increase the amount of withholding by completing withholding portion of TSP withdrawal form.

In case you have begun the distributions already, and you want to have more money withheld then you should file a W-4P. You should also change the withholding on form TSP-73 during the open season as this form is available on TSP website during open season. Like social security, you can also make quarterly estimated tax payments in TSP.

Conclusion:

It is a fact that most people do not like to pay taxes and they like it even less when the taxes are levied on federal retirement income but all of us need to pay them. Many people have no idea how taxes are withheld from retirement sources of revenue like social security and TSP. So the best idea could be to make changes now and avoid a penalty in the future. Talk to a financial expert such as Linda Jensen and learn more about your options.

Linda Jensen is the principal and owner of Asset Care & Preservation Services with offices in Olympia, WA.  Linda began her career with Prudential Preferred in 1994 where she was an agency leader.  She earned the credentials of a financial planner and has been in practice as an investment and insurance professional since that time.  Linda Jensen started her own company in 1997.

The Blended Retirement System

The Blended Retirement System

More than 1.5 million individuals are qualified to decide their future military retirement benefit. The new law which has been in effect since 1st of January, 2018 has given them this chance. Department of Defense offers obligatory training for those qualified individuals with specific kind of educational programs, ensuring everyone understands whether they are eligible to choose the Blended Retirement System. Similar to the Thrift Savings Plan or TSP introduced by the TSP government, the Department of Defense created this retirement plan for the service members. While a significant reason behind launching this new retirement system is to conserve the money of the government, this new retirement plan provides numerous benefits to the veterans. To get the maximum benefits, military officers need to assemble their reserve funds for retirement. They can either open an independent venture or turn into a temporary administration worker with a confirmation as a veteran-claimed small business.

Benefits of TSP

Eligibility for the Blended Retirement System:

TSP government will enroll FERS members if they were hired after 1984. In case of Blended System, the recently hired service members have enrolled automatically. Also, current service members who have been on the job for about 12 years and also those individuals with a paid status of less than 4320 retirement points. Likewise, any service who were enrolled by the service administration or consented to a service arrangement will have the option for the Blended Retirement System. This service is not provided by the TSP government.

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Difference between CSRS and FERS

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Retirement benefits of Blended Retirement System:

  • Whether you have contributed to your Thrift Savings Plan or not, you will still receive a 1 percent of the base pay in the TSP account.
  • The Department of Defense co-ordinates your TSP commitments by increasing at 5 percent of your base pay.
  • You will receive a continuation pay which is not provided by the TSP government. It is a one-time payment if you are in the service for 12 years, and in return for your duty to serve an extra four years in service. In March 2018, the current individuals of the service received 2.5 times their month to month essential pay as of the day they started the service of their twelfth year of service.
  • The Reserve and the Guard service member will receive half of their current salary.
  • Those who will be retiring soon can obtain either half or quarter of their future retirement pay by means of lump sum amount at their retirement. Retirement paychecks would come back to their full sum after they reach the age 67.

How does TSP work?

Action elements:

Just like the Monthly Annuity calculator provided by the TSP government, the Department of Defense provides the BRS calculator where one can assess the retirement benefits. Before the service members make a final decision, they take an obligatory training session which is available in the learning management system of the service. Joint Knowledge Online and also via Military OneSource. The air service members, sailors, and soldiers can choose the Blended Retirement System through MyPay. Along with that, the Marines can choose the retirement system via Marine Online.

When it comes to Retirement plans, this is one of the best financial systems for the retired service members with unbelievable benefits for their future endeavors. The Department of Defense has created a personal savings system for the service members.

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Rick Spruill | Everything to know about Denied FEGLI Claims

Everything you Need to Know About Denied FEGLI Claims

RICK SPRUILL – The FEGLI or Federal Employees Group Life Insurance program provides a living advantage to the government representatives and retirees who are critically ill with a medical diagnosis of under nine months in expectancy of life. On the off chance that you happen to be in this deplorable circumstance, you should realize that there are distinctive standards on how you can assert FEGLI living advantages, contingent upon whether you are as yet a government representative or annuitant as of now in retirement. First off, you should realize that the Living Benefit is equivalent to your FEGLI Basic protection cover. Current government representatives can pick between taking a full or fractional living advantage in numerous of $1,000.

Benefits of TSP

What to do immediately after your FEGLI claim is denied?

At the point, when a FEGLI claim is denied, you ought to counsel with an accomplished FEGLI lawyer to comprehend the explanation for the denial. Since the laws representing FEGLI claims are exceptionally unpredictable, it is important to get guidance from a life insurance lawyer gaining practical experience in the field of FEGLI laws. There are numerous reasons for a denied FEGLI claim, and in the most cases, they are identified with the inability to conform to strict FEGLI regulations. Some of these reasons include Invalid Beneficiary Designation, Problems with Eligibility, No Beneficiary Designation on Record, No coverage at the time of the death of the government representative, Incomplete documents to support a claim, Beneficiary disputes, Non-payment of the premiums and much more.

TSP and FERS are important parts of your retirement

What is the first step after a denied claim?

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At first, you need to know that how much FEGLI life insurance you have. To see that you can use the FEGLI calculator. The FEGLI calculator enables you to assess the future changes regarding coverage and premium both as a current government representative and also in your retirement years. You can regulate the nominal value of the different sequence of FEGLI coverage. Along with that, you can calculate the premiums for the different coverage of FEGLI, and perceive how selecting various FEGLI options can change the amount of the life insurance along with the premiums.

Applying for coverage

When you apply for coverage, as government representatives you are required to finish a Designation of Beneficiary form, distinguishing a person as the recipient of the extra security continues payable upon their passing under the FEGLI policy. The protection is substantial as long as premiums are paid and the guaranteed stays in the class of qualified members. Hence if the FEGLI claim is refused, the past classification of the recipient is naturally crossed out after the coverage ends within thirty-one days.

If the government representative is unable to enforce a new Designation of Beneficiary form, then the FEGLI rates will be allocated by the FEGLI request of priority as stated in the policy. This is due to the past recipient classification under the policy that had been ended which is no more substantial. For instance, if a government representative was insured when he was married, then at the time of his death, the FEGLI insurance will be provided to the widow. In case of divorce, the FEGLI insurance will carry over to the children.

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Legal steps you can take after denied claims

The FEGLI claims are administered by FEGLIA or Federal Employees Group Life Insurance Act. The FEGLIA is an intricate system and keeping in mind on how it influences your FEGLI claim, you ought to talk with a FEGLI expert. Many FEGLI legal counselors handle various cases on denied FEGLI claims. Most of the top FEGLI legal counselors are most experienced and profoundly regarded as highly proficient experts in managing the indictment of cases against insurance agencies.

Linda Jensen | How to make the most out of your TSP Plan

LINDA JENSEN – The Thrift Savings Plan, or TSP, is a retirement fund plan for the Federal employees. Individuals from uniformed services such as the Ready Reserve can also avail this plan. The Thrift savings plan was created in the year of 1986 by the Congress in the Federal Employees’ Retirement System Act. The savings plan offers similar kinds of reserve funds and tax reductions that numerous private enterprises provide their workers under the 401(k) plans. The retirement wages received from TSP account will rely upon the total income you put into your account throughout working years and the income amassed over that time. This plan has become the No.1 financial plan in the United States of America. More than 60 percent of the working men and women earn about $70,000 or more from the TSP plan. Individual retirement accounts, and another kind of savings to be their primary source of income when they retire.

Let’s have a look at some brilliant tips that will help you to make the most of the TSP plan and how to withdraw from your TSP- though remember, help from a financial professional like Linda Jensen’s company Asset Care & Preservation Services.

Place part of your income in TSP account regularly:

Based on your job and your assets, you need to periodically put a part of your income in the TSP account. The TSP government corresponds to the contributions made by the employee to an absolute limit. Numerous representatives pick TSP as an essential way they lay aside the cash every month for retirement. Unlike the TSP government, it is rare for the corporate businesses to provide retirement plans. In this way, you should enjoy the prevalence provided by the TSP government.

Contribute to your TSP account as much as possible:

After choosing TSP as your primary financial plan after retirement, it’s imperative that you contribute as much as possible. The aggregate sum you can contribute within 12 months is constrained by the Internal Revenue Service. Regulation of the TSP government dictates that the total amount is expanded marginally over the sum set for the earlier year. There are additionally age-based arrangements which you can benefit from. You can also discuss with the Office of Personnel Management about the total limit you can go.

Do not take out money from TSP account earlier than you need to:

While the TSP account holders can withdraw cash from the account under specific situations, it is wise not to do so in for the betterment of the future after your retirement. You can take it out as a loan, yet the TSP government requests the account holders to debilitate every other option before taking out from their TSP account. Taking money from your TSP account is taking a considerable loss for your future since you give up on the accrual or interest.

You can opt for Roth Option:

You can choose the Roth option which was created on May 7, 2012, and permits the account holders of Thrift Savings Plan to contribute cash to their records after the taxes have been paid. Conventional commitments are made before charges. People may contribute under both the Roth and other traditional choices. Before you choose the Roth option, it is imperative to understand the basics of the Roth plan. If you think that the rate of taxes will increase after your retirement, then the Roth plan is perfect for you. It is wise to ask a financial professional such as Linda Jensen before you make a final decision.

What Happens to your Debt when you Die?

 

Upon an individual’s death, they leave substantial amounts of debt. Sometimes, your debt obligation may end upon your death. Beware though that if you didn’t plan accordingly, creditors may wipe out your accumulated investments, assets, or savings. As a result, your dependents are left with nothing. What’s even worse they might be held accountable for your debt. However, this depends on factors such as where you live, the debt amount owed, its type, and your estate’s value at the time of your death.

Typically, all debts you owe are levied against your estate. If you have sufficient assets to pay off the debt, your estate executor has the responsibility of paying off this debt. Doing so may involve the selling of any personal properties or family heirlooms that bear your name. On the other hand, it becomes tricky to pay off any debts you have if your estate doesn’t have enough. Debts that are secured like home and auto loans fall in the precinct of your inheritors. Conversely, any unsecured debts owed by you such as student loans and credit card balances will be paid by your estate. Most likely, you inheritors won’t be held liable for any outstanding debts or balances. Here are a few exceptions to this rule.

Communal Property States

Thanks to community property laws in these nine states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin all debts accumulated by married couples equally belong to both parties. As a result, creditors can collect any debts you owe from your spouse.

However, creditors are forbidden from collecting any debts you incurred before getting married. Likewise, they can’t do so on the property you acquire together but keep separate. For instance, they can’t go after any autos that you finance even when such a car was purchased after your marriage. Given that, it’s important filing requisite paperwork so as not to saddle your spouse with debt.

Similarly, this rule applies if you have cosigned a credit card for a relative or friend. Any authorized user of that credit card won’t be held responsible for any debt. However, they must surrender the card immediately after your demise, to avoid identity theft charges.

Home Equity Loans

Similar to all secured debts, home equity loans are the responsibility of your estate, your cosigner, or your inheritor. But there is a difference between regular mortgages and home equity loans if a borrower dies: creditors have the option of demanding for full settlement of a debt upon your death. Otherwise, they can repossess your home. However, it’s perfectly acceptable for your inheritor to make an agreement for the paying debts in installments, though this depends on the lending policy or creditworthiness.

Private Student Loans

All federal student loans you owe are forgiven upon your death. Nonetheless, companies that give student loans may not do so. Moreover, this debt typically falls on your estate. For instance, companies like Sallie Mae and Wells Fargo forgive debts after your death, so consider taking a private student loan from them.

Ensuring Your Heirs Benefit from Your Estate

Here are a few precautions to take to minimize the amount of debt you leave to your heirs.

To begin with, quantify the amount of debt you hold. Try reducing the amount of debt you accumulate too minimize the amount paid by your estate. Already in debt? Create a plan to pay it off while you are still alive. Accordingly, you should prioritize debts that a cosigner or spouse will probably be left with.

Second, review or create a will. Doing so prevents the state from stepping in and creating one for you. In case this happens, there are hefty legal and administrative fees which have to be paid before an estate is divided. By writing your own will, you protect your heirs from paying off these fees.

And finally, make retirement investments and obtain life insurance. As long as you have an appointed beneficiary to survive you, creditors can’t touch any of your retirement plans like 402(k) or IRAs. Only the federal government can do so. Any debts you owe the federal government is subject to taxation or penalties. But if you don’t hold any government debt, all your savings will pass to your heirs. What’s more, all creditors including the federal government can’t access any life insurance policies you own. Remember that your heirs can use these funds to settle any debts that you owe.

 

 

Top 9 Tips for Planning Your Retirement

Between 2006 and 2016, there was a 33% rise in Americans aged over 65 to 49.2 million. What’s more, it is expected that by 2060 this figure will double. For this reason, it is imperative that you prepare accordingly as sooner or later you will be a part of this group.

 

Tip # 1: Avoid Complacency with Your Retirement

 

Typically, people plan for most life engagements than for retirement. Once you retire, you’ll have more freedom than you’re accustomed to. Plus, you will need to make significant lifestyle changes to cope with life after retirement. This is why you need to create a financial plan for you during when you are no longer working.

 

Remember that it’s not what you have that determines the quality of your retirement instead it’s what you know. Ideally, you should strive to align your spending habits with your retirement goals. In addition to that, you need to consider the impact of unforeseen expenses. Sometimes these may include buying a new car, renting a new home among others. Hence, having substantial liquidity will help you avoid selling your assets in a losing market.

 

Tip # 2: Maintain Your Dignity

 

Throughout your retirement, it’s essential that you maintain your dignity. But how can you do that? Before deciding on when to start your Social security, evaluate how this decision will impact your family as well as how long you will depend on Social Security.

 

Tip # 3: Consider Your Spouse

 

It is vital that you think about your family. For instance, women over 65years of age expect to live 20.6 years while men live another 18 years. Also, 45% of women aged 75 years and over live alone. To make matters worse, these women are inexperienced in financial management. Given that, these women can participate in financial management together with their spouses as well as with assistance from financial planners. Doing so helps women manage their financial future when necessary.

 

Tip #4: Plan for Healthcare

 

As you grow older, your healthcare needs can increase. In 2017, there was a 33% increase in the number of adults aged 85 that require personal health assistance. This figure is twice more than that of adults in the 75 to 84 age group as well as six times higher than the 3% level of adults in the 65 to 74 age bracket.

 

Hence, you should consider demographic trends impacting on your long-term and short-term healthcare costs and needs as well. Though a majority of individuals understand what healthy living entails, only a few live accordingly. Similarly, two significant risks retirees deal with are health and financial issues. An absence of any of these elements can adversely impact the quality of your life.  For this reason, ensure that you have a plan to help you meet any long-term care needs you might have. You can do so via personal savings or insurance.

 

Tip # 5: Identify Your Revenue Streams

 

Though most Americans prefer working part-time after they retire, only 20% of 65-year-olds do. It is crucial, then, that you have an ongoing investment plan and assets for when you no longer draw a paycheck.

 

Tip # 6: Plug Any Financial Loopholes

 

Periodically, you should evaluate your budget and investments to help you identify and plug any leaks. Identify ways to save some extra money month. For instance, leveraging available workplace retirement schemes to minimize your retirement expenses. Keeping an eye on your investment costs will also help you save more.

 

Tip # 7: Maintain Proper Documentation

 

Ensure that your beneficiary details are accurate for all your workplace retirement, IRA, or Roth accounts. Additionally, you should update your will, power of attorney, and any advanced medical directives. In turn, you will benefit from having peace of mind.

 

Tip # 8: Relax and Enjoy Your Retirement!

 

Remember that old age gives you the opportunity to enjoy your twilight years. So passionately engage in enjoyable activities to make your retirement worthwhile. By having these three factors sorted – enjoyment, health, and finances – you can make this time fruitful.

 

Tip # 9: Give Generosity a Place

 

During your retirement, you could do well creating endearing family videos. Additionally, you could participate in charitable activities as a means of displaying your love and generosity for others.

 

 

 

 

Americans at Risk of Bankruptcy during Retirement

Typically, bankruptcy is a considerable risk for retirees though recent saving trends portend a rosy picture. Data indicates that the number of retirees with less than $10,000 is declining. It fell from 55% to 42%according to a GoBankingRates survey. Besides, the survey indicated that half of retiring Americans have $10,000 in savings. Nowadays, it is estimated that one needs approximately$275,000 for healthcare expenses upon retiring. Having only $10,000 in savings doesn’t inspire confidence and security, though it’s a start.

This situation is especially bothersome for older individuals. According to the Bureau of Labor Statistics, adults aged over 65 spend $46,000 annually. This means that $10,000 isn’t sufficient. Below is a breakdown of these numbers:

Ages $0 <$10k $10k-$49,999 $50k-$99,999 $100k-$199,999 $200k-$299,999 $300k
18-34 18.18% 39.16% 6.69% 11.59% 8.69% 6.69% 8.99%
35-54 12.46% 24.43% 7.38% 15.35% 12.76% 10.67% 16.95%
55+ 10.56% 5.98% 10.86% 14.64% 14.64% 12.35% 23.41%

 

GoBankingRates methodology queried adult financial product consumers in the US to find out what the average American’s saves for retirement. Study participants were categorized into three group’s baby boomers, millennials, and Gen X with each category having 1,000 respondents. During the study, participants were instructed to provide tentative estimates of their retirement savings.

23% of adults aged 55 and above had savings totaling $300,000 through a significant proportion had less. Approximately a third of the respondents have less than $10,000 saved necessitating changes in behaviors to prioritize retirement savings. Those getting ready to retire can contribute a maximum of $18,500 to a 401(k), 403(b), a 457 plans, and Thrift SavingsPlan during 2018. On the other hand, individuals aged 50 and over can add $6,000 as catch up contributions each year to a 401(k) plan. Traditional IRAs and Roth plans are $5,500 per year as well as catchup contribution of $1,000 for individualsaged50 years and above. But why are most people not saving for retirement? Most don’t earn enough, struggle to pay bills, or use their money for emergencies and others think they don’t need retirement savings.

Question: Why is it that you don’t have retirement savings?

Ages I don’t make enough Don’t need retirement money Paying debt My job has no plan Struggling to pay bills (rent, car, mortgage) Money used in emergency
25-34 31.9% 10.34% 11.21% 12.93% 24.14% 9.48%
35-44 42.48% 14.16% 4.42% 11.5% 20.35% 7.08%
45-54 39.78% 13.44% 3.76% 8.06% 25.81% 9.14%
55-64 43.07% 7.66% 4.01% 8.03% 27.37% 9.85%
65+ 39.68% 9.13% 7.014% 8.33% 23.81% 11.9%

 

Today, the financial health of retirees is an issue of greater concern for the well-being of the nations. The decline in company pensions places the responsibility of creating a retirement plan squarely on the individual’s shoulders. Plus, social security is no longer a sure bet. It was created to help Americans who lack a means of financial support. With many people today signed ontoo the program, it is projected that Social Security will collapse by the early2030s.

Majority of Americans Ill-Prepared for Financial Disaster

In the event of an emergency, 40% of Americans will need to sell something off or take out a loan to raise $400. A 2017 survey of 12,000 people by the Federal Reserve indicates that retirement is far from rosy for most Americans. Why is that so? It is because 40% of working adults believe they’ll have enough when retired with 25% having no pension or retirement savings. Plus, one out of four adults can’t access medical treatment due to a lack of funding. Evidently, this situation is a cause for concern as the importance of having sufficient funds to depend on when things go wrong can’t be overstated.

 

Nonetheless, the situation isn’t hopeless. Approximately ¾ of retired Americans indicate satisfaction with the life they’re living. This figure is 10 points higher than the 2013 figure of 50% adults without $400 in emergency savings. But putting more funds into a savings account on payday can help turn this trend around. An aside: individuals hooked on opioids have a less favorable assessment of the economy among other factors.

 

How Much Does the AverageAmerican Have in a Checking Account?

 

Despite the above being true nonetheless, those in debt may have some funds stashed away somewhere. According to a 2014 Moebs Services report, on average Americans have a total of $4,436 stashed in banks. This figure represents saving account averages though it is a significant increase over 2012 figures. What’s more surprising is that this figure is higher than in 2007 before the Great Recession.

 

In 2007, Americans on average had $788 in checking accounts. What is responsible for this transformation? Today, individuals prefer having cash in hand to meet immediate expenses rather in investments or savings accounts. In turn, this doesn’t make people anymore richer than they are even though the economy is doing much better.

 

How Much Does the Average American have in a Savings Account?

 

Although average Americans have cash in checking accounts, the picture isn’t so when it comes to other investments or savings. Much hullabaloo has been going on about America’s retirement crisis as lots of Americans are heading into retirement without savings or investments. To top that, many more don’t make enough to cover living expenses making it hard for this group to even save. In 2015, a GOBankingRates survey highlighted the seriousness of the situation. Data from the survey indicates that 62% of Americans have less than $1,000 in savings. And 21% lack a savings account. Many other studies the same sentiments. For instance, a report by the FederalReserve found out that 31% of 4,000 respondents have no credible pension or savings. This figure includes19% of people between the ages of 55 to 64 with 25% having no clue as to how they will foot their retirement expenses.

 

Strengthening Your Financial Position

 

Perhaps, you are reading this and wondering where you belong. You should be aware that various factors can impact how much liquidity you accumulate. So, avoid comparing yourself to your family, friends, colleagues, or neighbors. But now is the time to evaluate your own personal ground.

 

To begin with, you need to develop a personal financial budget. Doing so entails that you consider your income while carefully analyzing your monthly expenses. In case your expenses outstrip your revenue, you need to make adjustments in your lifestyle to save more. Typically, this is easier to say than do. But if you can minimize your expenses, you will have flexibility.

 

Keep it in mind that your goal is to start saving. Many strategies are available to help you achieve this goal. One most important requirement is building an emergency stash. Basically, this is a savings account that holds the liquidity you need to cover expenses for several months. Before you realize you will have substantial savings giving much-needed peace of mind.

Dealing With Debt For A Happy Retirement

If you find yourself still struggling with loans and credit card payments now that you’re approaching retirement, you’re not alone.  With an average debt of nearly $40,000 in older households, America is still adapting to changes in life expectancy and the effect that this is having on working lives. This also means that retirement isn’t the end of life that it used to signify just a few decades ago. It’s not too late to make preparations for your retirement. Many people live long and happy lives after they stop work and it can still be a fruitful time for you if you manage your money well.

Take stock of your money

Start by assessing your finances and making the best of what you have. If you have been in real financial difficulty in the past, you might want to set aside a separate account that isn’t subject to Chexsystem. This will keep safe money that you will always be able to access for emergencies or basic living expenses, even if all your other assets are frozen. Once you have secured a safe account, make a plan for the future that avoids any further problems that could affect your credit score.

Minimize your debts

If you own a house, consider increasing mortgage payments before you retire. If that’s not possible, think about downsizing now before you stop working. At the very least, this could save you money each month and it could mean paying off your mortgage entirely, freeing up more cash for your retirement. Look at other assets too and cut back on any that you can’t afford to keep. Unless for business use, there is no tax relief on a car payment plan, so swapping to a more affordable option that you can purchase with cash makes sense.  If you must take out a loan, make sure it’s timed to end when you want to retire. Pay off credit cards with the highest interest rate first or consolidate to a card with a lower interest rate to make one easy payment every month.

Lower your expectations

You may have had great plans for your retirement and, no doubt, being in debt was not one of them. Try not to dwell on the past but learn from financial mistakes. Struggling to pay bills is the reason most Americans give for not saving more and this means that over 40% of Americans have less than $10,000 saved for when they retire. Be strict with your budget now, work as much as you can while you are able and secure what savings you do have for emergencies. Although there is insecurity about the future of social benefits, for now, they do provide a steady income. You can claim from the age of 62 but the longer you delay before taking any money the more money you will receive each month.

Taking steps to simplify and stabilize your finances, no matter what stage you are at in your life, can bring significant rewards. If you are lucky enough to live a prolonged and healthy retirement, as long as you are sensible with your money, you should still be able to relax and enjoy it without financial worry.

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