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Important issues regarding your benefits

Posted on Friday, 8th June 2012 by

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Over these last couple of months I’ve had the opportunity to correspond with a number of federal employees and these two concerns were at the top of their list:

  1. the length of time it is taking OPM to finalize annuity payments, and
  2. the desire to obtain life insurance in the private sector, but neglecting to do so in a timely manner.

When it comes to financial planning, one of the main considerations advisors plan for is the need for liquid cash reserves, or what we refer to as your emergency fund.  Emergency funds for the private sector have generally been recommended at 3-6 months of income.  After the downturn in 2008, with the decline in net worth, job losses or both, that number has now been increased to 6 months to a year of income.

In the federal market, the need for a larger cash reserve fund has increased as well; due to the length of time it is taking the Office of Personnel Management (OPM) to calculate your income.  After speaking to a number of federal employees over the last couple of months, it has become apparent that many employees are not receiving their full federal retirement annuity in a timely fashion. I say this with no disrespect to their actuaries, but with concern for the employees and the financial planning perspective of having an adequate emergency fund to tie you over should indeed this should happen to you.

As an advisor, I strongly recommend that you have at least one year of income in your cash reserves account (emergency fund).   Then, if it does take a year or more to finalize your monthly annuity, you’ll have the cash required to meet your monthly income need.   Without that cash reserves, where would you go to get the money you need to meet your monthly bills?   You may look to Roth IRA accounts, Traditional IRAs, TSP assets, or other non-qualified accounts.  Unfortunately, depending upon your age at the time, it may cost more due to taxes and penalties and not be a prudent option.  Each type of account is treated a little differently by the IRS. The important thing is to have a plan and know the rules.   You may want to consider speaking to a financial consultant when determining which assets to liquidate first?

Secondly, is the need for life insurance planning. Most federal employees know they have life insurance options A, B, and C and may need to consider alternative life insurance options in the future. One of the best solutions to the higher cost of insurance benefits from the federal government later in life or at retirement, is to consider a permanent life insurance solution when you are young and healthy.  It saddens me greatly to see federal employees get turned down for life insurance in the private sector due to a health issue that developed later in life. You can avoid this by planning ahead and I can’t stress enough that it’s never too soon to start.

LD 43708-5/12

Paul H Risser, host of this site’s Financial Planning Forum, is an Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA. TFA and Risser Financial Services are not affiliated.

LD42986-2/12

Learn more about your benefits,  employment, travel, and financial planning issues on our site and visit our Blog frequently at https://fedretire.net to read all forum articles.

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All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS

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Early Out Offers Revisited Plus Updates

Posted on Monday, 4th June 2012 by

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I wrote an article titled “Is a Voluntary Early Retirement (VERA) in Your Future” last July about the impending early retirements and the VERA and VSIP programs. We continue to receive questions about these programs and we expanded our Voluntary Early Retirement Authority (VERA) and Voluntary Separation Incentive Payment (VSIP) guidance to help you decide what to do if an offer comes your way.  It is never an easy decision to make because there are so many variables to consider.

There is an expanding list of agencies now offering early outs including the DOA, DOE, FTC, GPO, Postal Service, the Air Force and others. More may be coming as government prepares to address the debt crisis. Are you prepared?

I was offered and applied for a VERA in the mid 1990s without a VSIP.  I had 25 years service and was eager to expand my business. My application was rejected and I retired 10 years later with 36.5 years of service including my sick leave. The annuity I would have collected with the VERA was approximately 65% less than what I eventually received at age 55; not counting the impact of ten years worth of COLAs! That is a dramatic decrease in annuity benefits especially considering that your last 10 years are typically your highest earning years.  Are you financially prepared?

If a VERA is something you would consider start planning now.  Here is an index with links to helpful information and reports for various issues that you may need to consider:

The Move – Continued

In my last article titled “Are You Considering A Move or Vacation Home Purchase After You Retire” I discussed my recent move and the options retires have to look forward to. Cynthia, one of our newsletter subscribers, provided some insightful advice to anyone contemplating a move in retirement.  Her husband retired 5 years ago and she is still working in federal service and hopes to retire soon.

She and her husband were considering a move to a 55 and older retirement community sometime in the next 5 years. They weren’t in any rush until her husband started cleaning out their garage in Florida and discovered their home had a “very large sink hole” under it.  After living in their home for 25 years they had to vacate on short notice after settling with their insurance company. Cynthia lamented, “Try packing up everything you’ve accumulated after 25 years in such a short period of time!

I can only imagine the heartache, trials and tribulations they had to go through.  They had to move in August one of the hottest months of the year in Florida!  During the move Cynthia fell and ended up with black and blue chin, scraps on her hands and arms, and a big bruise on her knee. She was sore for three weeks! She advises everyone to be careful and pay attention to where you are walking during a move.  Her advice to anyone planning a move is to:

  • Plan, plan, plan
  • Purge, and purge now
  • Prepare mentally and physically
  • Save money for the moving expenses
  • And be kind to your partner during the stress

Good advice for all

Recent Forum Host Articles:

Request a Retirement Benefits Summary & Analysis from a local adviser. A sample analysis is available for your review. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. This service is not affiliated with www.federalretirement.net.

Learn more about your benefits, employment, and financial planning issues on our site and visit our Blog frequently at  https://fedretire.net to read all forum articles.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS

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THE ROTH TSP OPTION

Posted on Saturday, 26th May 2012 by

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Who might want to take advantage of it? Who might not?

Presented by Paul H. Risser

Do you have a Thrift Savings Plan account? Then you should know about an important new development. Starting in spring 2012, FERS and CSRS employees will be able to have two types of balances in their TSPs: a traditional (non-Roth) balance and a Roth balance. Service members will also eventually be able to have this option.1

Why is the Roth option such big news? For comparison, let’s use the example of the traditional IRA and the Roth IRA.

  • With a traditional IRA, your contributions aren’t taxed, but your withdrawals are when you retire. You also have to make mandatory withdrawals from the IRA when you hit your seventies.
  • With a Roth IRA, your contributions are taxed today, but your withdrawals aren’t taxed when you retire (provided you follow the rules). You never have to make mandatory withdrawals from a Roth IRA.2

So now that the TSP is adding a Roth option, you have the choice of paying income taxes on either the front end or the back end of your retirement savings contributions. If you think that your federal income taxes will be higher in future years than they are today, you have an argument for boosting your Roth TSP balance.

Who would potentially benefit the most? As TSPs are portable, the Roth TSP option may be very appealing to…

  • Younger federal employees who need to start retirement nest eggs yet don’t plan on lifelong civil service careers
  • Younger service members who see themselves transitioning to civilian life before serving long enough to qualify for retired pay
  • Service members earning tax-exempt pay in a combat zone
  • Judges & other select federal employees who may pay lower taxes during their years of government service

If you are in one of these groups, the Roth TSP option may be worth a look.

And who wouldn’t? If you are not in one of the above groups, the Roth TSP option may not be so worthwhile. Here’s why: many federal employees retire to a lower income than his or her end salary, with correspondingly lower taxes. If your taxes are going to be lower when you retire, wouldn’t you rather pay the taxes on your retirement contributions tomorrow rather than today?3

A look at the fine print. Here are some key details to remember about the Roth TSP option:

  • You will be able to contribute to a Roth balance and a non-Roth balance within the same retirement savings account. It isn’t an either/or choice. You can invest in both balances up to a combined annual dollar limit ($17,000 for 2012).
  • Agency contributions will never be Roth contributions. They will always be added to your non-Roth balance.
  • You can designate your own contributions however you like – they can be Roth contributions or non-Roth contributions as you prefer.
  • When/if you start making Roth contributions to your TSP, any money that is already in your plan will remain in your traditional balance. You won’t be able to convert it over to the Roth side.
  • You can transfer funds from Roth 401(k)s, Roth 403(b)s and Roth 457(b)s into a Roth TSP, and you can transfer funds out of a Roth TSP to Roth 401(k)s, Roth 403(b)s, Roth 457(b)s and Roth IRAs.
  • If you turn 50 sometime in 2012, you can make a catch-up contribution to a Roth TSP balance just as you can for a traditional TSP balance. So if this applies to you, your combined annual dollar limit for TSP investment in 2012 is $22,500.1,3,4

The bottom line. Chat with the financial professional who helps you out with your TSP before you direct contributions to a Roth balance. You will want to spend some time thinking about your potential retirement income and whether federal income tax rates might rise or fall in the coming years relative to today. More information on the Roth TSP option may be found at www.tsp.gov.

Learn more about your benefits,  employment, travel, and financial planning issues on our site and visit our Blog frequently at https://fedretire.net to read all forum articles.

Visit our other informative sites

Helpful Retirement Planning Tools
Distribute these FREE tools to others that are planning their retirement

Paul Risser is an Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. and Bookhaven Press LLC is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

LD43093-03/12

 

Citations.

  1. www.tsp.gov/whatsnew/roth/compareRoth.shtml [3/7/12]
  2. money.cnn.com/retirement/guide/IRA_Basics.moneymag/index2.htm [3/7/12]
  3. www.federaltimes.com/article/20120212/DEPARTMENTS01/202120301/ [2/12/12]
  4. www.washingtonpost.com/local/dc-politics/tsp-readying-investors-for-roth-alternative/2012/02/28/gIQA2lJ0gR_print.html [2/28/12]

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS

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Are You Considering A Move or Vacation Home Purchase After You Retire?

Posted on Wednesday, 16th May 2012 by

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My wife and I recently moved for the tenth time since we married in 1969; Seven years after I retired at age 55! We are both in our early 60s and a move at any age is STRESSFUL. We’ve been looking for many years now and found a home that covered most on our must-have list and it was in an area close to family and friends.

Many retirees consider relocating to less costly and more senior friendly locations and others choose to downsize or purchase their dream home. We purchased our new home because much of our time is centered in and around our home and for me that includes work, home projects, landscaping, and hobbies.

In our travels I talk to many retirees.  Most relocated from high cost Northern cities and we talk about the dramatic savings and life style changes they have experienced since relocating. A couple in their early 70s related how moving to North Carolina in 2005 decreased their real estate taxes from $14,000 to $1,500 a year plus they sold their property up north for a considerable profit before the real estate bubble burst a few years back.  Others including those in Arizona and Florida were not so lucky and got caught buying high priced homes that dropped as much as 50% in value since the crash in 2008.

Even the ones who bought high, for the most part, are enjoying the lower cost of southern living, warmer weather, and pursuing their hobbies; everything from golf and boating to you name it.  The property value drop was not a major issue for most who got caught in the free fall because they intend to stay put and enjoy their retirement.  Why worry about what you don’t have the power to change?

A wise retiree advised me some time ago that there is rarely, IF EVER, a truly ideal situation and we have to be willing to compromise and take risks if we desire to move on and enjoy this life.  You most likely won’t find the ideal location, property or situation however many do find peace of mind, lower costs and enjoyable lifestyle changes.

If you’re contemplating relocating in retirement there are many things to consider. Do you want to downsize or right size in your area, simply buy a vacation property — the prices are really good right now — or are you up for a total change of venue by moving out of the area all together?

A vacation home is probably the least stressful path to take because you aren’t packing up your home and moving out. Many enjoy the search, decorating their new vacation property, and of course the freedom it affords a couple when you want to get away from it all plus you are staying in a place reserved for you and your family. There are many opportunities to buy reasonably priced vacation property right now and it is still a buyer’s market with prices off as much as 50 percent or more in some areas.

Are you physically able to cope with the physical and emotional distress associated with a move? That is a hard question to answer because you don’t know how you will feel once you start the journey.  Typically, when you purchase a vacation home stress isn’t a big issue,  most looked forward to the search and furnishing their new home away from home.

That wasn’t the case with our most recent move where we relocated to another home in our area. There was tons of planning to do including 5 spreadsheets worth of checklists, contractor contacts, and many vendors to deal with along the way.  It isn’t necessarily the move that gets you; it’s the minutia along the way.  I tend to question everything and when you are dealing with property you have inspections to review and consider, additional costs to weigh, and of course compromise because as I mentioned above there is never an ideal home, vacation, or anything for that matter. There is one exception to this rule in my case. My wife of 43 years has always been my ideal partner, soul mate, and best friend; a rare find by any standard.

If you’re considering a move in the future start planning early. A little advance work can make all of the difference in the world. Here is a short checklist of things you can do to reduce the stress of your pending move:

  • Start your search early.
  • Define what you are looking for: a get-a-way, a new home in your area, or an escape to an exotic location.
  • Visit the areas you are considering first to see if it is a good fit for you and yours.
  • Purge your existing home of unnecessary stuff. You will be surprised at how much junk you can sell at flea markets and garage sales even if you aren’t planning a major move.  This action alone will help you mentally by getting rid of the clutter in your life and your move will go much easier if you decide to go that route.
  • Research your options online and if you know of someone in the area you are looking at          call them up to find out more about the area.
  • Put away savings for the move and identify what funds you will need. Budget for it and keep to your budget.
  • Weigh your options and prepare for the move mentally and physically.
  • Don’t rush things – let life take its course and go with the flow. Otherwise you will end up a mental and physical wreck.

Now, that being said, our latest move was and still is stressful. That’s life; you deal with it and move on.  Most things heal with time and we have only been in our new home for a week and things are starting to get back to normal. This is my first article in a month and I’m enjoying getting back to my writing routine and activities in our new home.

If you are considering a move preparation and planning are the keys to success. Just be aware that no matter how much you plan and prepare there will be problems to deal with along the way.  Isn’t that life in a nutshell?

Recent Forum Host Articles:

Request a Retirement Benefits Summary & Analysis from a local adviser. A sample analysis is available for your review. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. This service is not affiliated with www.federalretirement.net.

Learn more about your benefits, employment, and financial planning issues on our site and visit our Blog frequently at  https://fedretire.net to read all forum articles.

Visit our other informative sites

Helpful Retirement Planning Tools
Distribute these FREE tools to others that are planning their retirement

The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

Posted in BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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Ways to Put A Refund to Work – What could that money do for you?

Posted on Tuesday, 15th May 2012 by

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Is a tax refund coming your way? If you have already received your refund for 2012 or are about to receive it, you might want to think about the destiny of that money. Here are some possibilities.

  • Start (or add to) an emergency fund. Many people don’t have a dedicated rainy day fund, only the presumption that they might have enough cash in case of a financial tight spot.
  • Invest in yourself. You could put the money toward education, career training, personal improvement, or some sort of personal experience with the potential to enhance your life.
  • Use it for a down payment on a car or truck or real property. Real property represents the better financial choice, but updating your vehicle may have merit – cars do wear out, and while a truck also ages, it can help you make money.
  • Put it into an IRA or workplace retirement account. If you haven’t maxed out your IRA this year or have a chance to get an employer match, why not?
  • Help your child open up a Roth IRA. Has your under-18 son or daughter worked and earned money this year? He or she can open a Roth IRA. Your child’s contribution limit is $5,000 or the amount of his or her earned income for 2012 (whichever is lower). You can actually make this Roth IRA contribution with your own money if your child has spent his or her earnings.2
  • Buy some warehouse memberships. If you have a large family or own a small service business, why not sign up to save regularly?
  • Pay down debt. Always a smart choice.
  • Establish a financial strategy. Some financial advisors work on a fee-only basis. They can perform a review of your current financial situation and give you pointers for the future for roughly $1,000 with no further obligation.1
  • Pay for that trip in advance. Instead of racking up a bigger credit card bill, consider pre-paying some costs or taking an all-inclusive trip (some are not as pricey as you might think).
  • Get your home ready for the market. A four-figure refund may give you the cash to spruce up the yard and/or exterior of your residence. Or, it could help you pay a professional who can assist you with staging it.
  • Improve your home with energy-saving appliances. Or windows, or weatherstripping, or solar panels – just to name a few options.
  • Create your own food bank. What if a hurricane or an earthquake hits? Where would your food and water come from? Worth thinking about.
  • Write a proper will. Your refund could pay the attorney fee, and the will you create might end up more ironclad.
  • See a doctor, optometrist, dentist or physical therapist. If you haven’t been able to see these professionals due to your insurance situation or your personal cash flow, the refund might provide a way.
  • Give yourself a de facto raise. Adjust your withholding to boost your take-home pay.
  • Pick up some more insurance coverage for cheap. The typical flood insurance policy in a low-to-medium risk area costs less than $1,000 (and sometimes less than $500). A $1 million personal liability umbrella policy can usually be bought for $400 or less.2
  • Pay it forward. Your refund could turn into a charitable contribution (deductible on your 2012 federal tax return if you itemize deductions).

In the past two years, federal tax refunds have averaged about $3,000. That’s a nice chunk of change – and it could be used to bring some positive change to your financial life and the lives of others.2

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

LD43253-03/12

Citations.

1 www.dailyfinance.com/2012/03/23/tax-refund-surprising-smart-ideas/#photo-1 [3/23/12]
2 www.kiplinger.com/slideshow/10usesforyourrefund/1.html [3/12]

Learn more about your benefits,  employment, travel, and financial planning issues on our site and visit our Blog frequently at https://fedretire.net to read all forum articles.

Visit our other informative sites

Helpful Retirement Planning Tools
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Posted in UNCATEGORIZED

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Tips for Traveling Abroad

Posted on Monday, 30th April 2012 by

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I lived in Heidelberg Germany, thanks to the US Army, from May of 1975 to November of 1976.  While initially I wasn’t looking forward to being so far from home, once I arrived in Frankfurt I took advantage of every opportunity I could to see Western Europe.  I learned enough German to carry on a conversation, though no more than friendly exchanges and found a use for the French I studied in High School and College.  After a 24 year absence from the European continent I finally returned in October of 2010 and I’m currently preparing for a late spring trip via a Transatlantic Cruise.  I thought it might be helpful to share some of the things I’ve learned from living there and visiting to help you with any plans you may have to travel abroad.  I’d also invite you to send me any tips you would like to share from travels around the world.  I’d be happy to compile them for a future travel forum article.

Currency Exchange

I like to arrive in a foreign country with some of the local currency.  You never know if you’ll need it right away for local transportation or to purchase an emergency item when you get off of the plane.  US Airports with international flights usually have a convenient kiosk. I recommend exchanging between $50 and $100. Make sure you know the exchange rate before you leave home.  These kiosks often charge a fee for exchanging funds in addition to the exchange rate they are offering. I found the exchange rate was approximately 20% lower than what was quoted via online sites the day before my departure.  I was aware that the best exchange rates come from banks in the countries you are visiting.  I opted to get $100 exchanged, but the kiosk representative tried to tell me I was getting a really good rate from them and that fees would be higher and the exchange lower than their exchange rate.  I was certain I would do better waiting.  I was correct!  At the kiosk I was given 62 Euros and charged $5 for my exchange, so 62 Euros for $105.  I went to the bank the morning after I arrived in Venice and got over 75 Euros for each $100 and no fee was charged to make the exchange.  I would have lost more than 91 Euros had a listened to the kiosk sales clerk.  Do check though on when banks may be open following your arrival.  You wouldn’t want to be without local currency for a couple of days waiting for the bank to open.  Of course credit cards are accepted and the exchange rate used for the banking day of processing. Capital One does not charge a fee when using their card abroad.  They will charge your card according to the exchange rate the day your purchase is processed.  Just remember that the best exchange rate will be at a bank that handles international currency.

Electric Power

Be sure to buy and take a kit containing power adapters so that you can use any needed electrical or charge electronic devices while you are traveling.  Outlets in Europe take round prongs, not flat prongs. You will also need to make sure your devices work with the voltage supplied. European power is set at 220 volts. Most Apple electronic chargers for iPods, iPads, or iPhone devices will work with 120 volts as well as 220 volts. Read the fine print to verify before plugging them in.  I can’t speak for electric razors or other convenience items you may want to take along.  You can research to find out what type of power you’ll be provided during a visit abroad to make sure you aren’t carrying extra weight for no reason.  Hotels abroad are very good at providing some items commonly used so you won’t need to carry them anyway.

Be a Polite Guest

I found that your visit abroad will be more enjoyable if you take a little time to learn some of the local language when visiting non-English speaking countries. At a minimum I recommend learning the local greeting, how to ask for something you want to eat or buy, where the restroom is, and “could I have the bill please”.  Some tourists forget they aren’t at home and get frustrated that “no one speaks English”!  It’s not hard to find folks who speak English as a second language, however if you are rude they may not offer assistance when you need help. When going into a shop or store be sure to greet the sales clerk first before asking a price or asking for a specific item you are trying to find. You can relax when stopping for a meal and rest just about as long as you like in a restaurant in Europe after dining.  If you decide to wait for them to give you the bill though, you may be there awhile.  Unless most of the clients are tourists, the waiters will usually wait until you ask before delivering the checks. That’s why it’s good to know how to ask for the bill. If you have an iPad they have free Aps that for learning foreign languages.  If all else fails you can let your iPad speak for you if you need to find a restroom. A simple please and thank you in the local language is also a good way to get assistance from the locals.

Picking a Restaurant

I don’t pick restaurants close to my hotel, especially when I am in an area of the city that is packed with tourists.  I learned this the hard way. You will likely be disappointed.  Not only that, if the meal is so bad you don’t think you should have to pay or expect an adjustment to your bill, it’s not likely to happen.  Ask the Concierge at your hotel or even some of the local vendors while shopping for their favorite places to eat and try those.  Often travel books will make good recommendations but sometimes they are hard to find.  Be sure to check their hours of operation before spending taxi fare or walking a long distance to eat.  They may be closed in mid-afternoon and reopen later that evening.  I’ve never been disappointed by a local recommendation.  If you do find you’re disappointed by a recommendation by the Concierge, be sure to let them know.

Picking a Hotel

There are many options here.  You can pay in advance and save money, especially if you believe the exchange rate is really good and you are sure you’ll save even more.  Many travel sites have this option.  You can trust the ratings assigned hotels by these sites, but if you are familiar with the area that is helpful.  A four star hotel in a bad area of the city, or one with few restaurants and shops nearby may not be what you’re looking for.  Google Earth is a good tool for finding out the location of prospective hotels and what is nearby.  When I visited Venice I paid in advance for 3 nights for the hotel.  I was not disappointed in the location or the quality of the lodging, but I did find that I could have just made a reservation and for a few Euros more per day it would have included breakfast.  This time I have a reservation and breakfast is included.  In addition to that I used my Chase rewards to get a gift card that will cover $100 US on my hotel bill.

Renting a Car

I have never driven outside the US or Canada.  I had thought about renting a car to explore Tuscany but opted to wait until next time.  The first order of business is to get an International Driving Permit.  It is required in some countries but having it won’t lead to any unpleasant surprises.  You will also want to avoid driving in big cities.  If driving in New York City or Chicago intimidates you, so will driving in Paris or Rome. The best advice is to travel by train into large cities, but if you’re visiting small towns and exploring the countryside take a car.

Travel Resources:

Exchange Rates: http://www.x-rates.com/

Language advice:  http://goeurope.about.com/cs/languages/a/europe_language.htm

Picking Restaurants or Hotels: http://www.tripadvisor.com/

Trip advisor has a phone and iPad application that will detect your location let you know what is nearby and give you reviews.  But, be sure you know the cost of using the data or find a free Wi-Fi spot before using the Ap.

Renting a car in Europe:  http://europeforvisitors.com/europe/articles/driving_in_europe.htm

Learn more about your benefits,  employment, travel, and financial planning issues on our site and visit our Blog frequently at https://fedretire.net to read all forum articles.

Request a FREE Retirement Benefits Summary Analysis from a local adviser. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. A sample analysis is available for your review. This service is not affiliated with www.federalretirement.net

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The information provided may not cover all aspect of unique or special circumstances. Travel policies and packages are subject to change without notice. To ensure the accuracy of this information, contact travel providers and hotels at the time of your bookings to confirm pricing, itinerary, and all costs. The comments and observations are limited to the author’s personal experience and your results may vary significantly. This article and replies to comments are not intended to substitute for professional travel services. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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How Much Retirement Income Will You Really Need?

Posted on Sunday, 22nd April 2012 by

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Many people underestimate lifestyle costs, medical expenses and inflation.

Presented by Paul H. Risser

What is enough? What is not enough? If you’re considering retiring in the near future, you’ve probably heard or read that you need about 70% of your end salary to live comfortably in retirement. This estimate is frequently repeated … but that doesn’t mean it is true for everyone. It may not be true for you.

You won’t learn how much retirement income you’ll need by reading this article. You’ll want to meet with a qualified financial professional who can help you estimate your lifestyle needs and short-term and long-term expenses.

That said, there are some factors which affect retirement income needs – and too often, they go unconsidered.

Health. Many of us will face a major health problem at some point in our lives – perhaps even multiple or chronic health problems. We don’t want to think about that reality. But if you’re a new retiree, think for a moment about the costs of prescription medicines, and recurring treatment for chronic ailments. These minor and major costs can really take a bite out of retirement income, even with a great health care plan. While generics have slowed the advance of prescription drug costs to about 1-2% a year recently,1 one estimate found that a 65-year-old who retired in 2007 would need $215,000 to pay for overall retirement health care costs – up about 7.5% from 2006.2

Heredity. If you come from a family where people frequently live into their 80s and 90s, you may live as long or longer. Imagine retiring at 55 and living to 95 or 100. You may need 40-45 years of steady retirement income.

Portfolio. Many people retire with investment portfolios they haven’t reviewed in years, with asset allocations that may no longer be appropriate. New retirees sometimes carry too much risk in their portfolios, with the result being that the retirement income from their investments fluctuates wildly with the vagaries of the market. Other retirees are super-conservative investors: their portfolios are so risk-averse that they can’t earn enough to keep up with even moderate inflation, and over time, they find they have less and less purchasing power.

Spending habits. Do you only spend 70% of your salary? Probably not. If you’re like many Americans, you probably spend 90% or 95% of it. Will your spending habits change drastically once you retire? Again, probably not. Most people only change spending habits in response to economic necessity or in pursuit of new financial goals. People don’t want to “live on less” once they have had “more”.

Social Security (or lack thereof). In 2005, SSI represented 39% of a typical 65-year-old retiree’s income. But by 2030, Social Security may only replace 29% of that income, after deductions for Medicare premiums and income taxes. Since 1983, retirees earning more than $25,000 in SSI have had to pay income tax on a portion of their benefits.3 This is all presuming Social Security is still around in 2030.

So will you have enough? When it comes to retirement income, a casual assumption may prove to be woefully inaccurate. Meet with a qualified financial professional while you are still working to discuss these factors and estimate how much you will really need.

Paul Risser is a Representative with Transamerica Financial Advisors, Inc.

These are the views of Peter Montoya Inc., not the named Representative, the Broker/Dealer or Bookhaven Press, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer nor Bookhaven Press gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

LD28030-08/11

Citations. 1 nytimes.com/2007/09/21/business/21generic.html?_r=1&oref=slogin

2 marketwatch.com/news/story/health-care-costs-retirement-rise/story.aspx?guid=%7bEF2B6CDA-E176-4747-B528-76AC814051C5%7d&print=true&dist=printTop

3 money.cnn.com/2007/05/14/pf/retirement/nasi__report/index.htm

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Posted in ANNUITIES / ELIGIBILITY, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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WEP, the 1940 Census, and Higher Yields

Posted on Thursday, 12th April 2012 by

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The Windfall Elimination Provision primarily affects you if you earned a pension in any job where you did not pay Social Security taxes and you also worked in other jobs long enough to qualify for a Social Security retirement or disability benefit.

For example, this provision affects Social Security benefits when any part of a person’s federal service after 1956 is covered under the Civil Service Retirement System (CSRS). However, federal service where Social Security taxes are withheld under the Federal Employees’ Retirement System (FERS) will not reduce your Social Security benefit amounts.

If you are a CSRS employee and accrued 40 quarters (10 years) of employment where social security payments were withheld you are eligible for Social Security benefits. Your Primary Insurance Amount (PIA), which is simply your Social Security payment, will be impacted. The Windfall Elimination Provision (WEP) can significantly reduce your Social Security payout.

Social Security benefits are based on the worker’s average monthly earnings adjusted for inflation. They separate your average earnings into three amounts and multiply the amounts using three factors. For example, for a worker who turns 62 in 2012, the first $767 of average monthly earnings is multiplied by 90 percent; the next $3,857 by 32 percent; and the remainder by 15 percent. The sum of the three amounts equals the total monthly payment amount.

The 90 percent factor is reduced in the modified formula and phased in for workers who reached age 62 or became disabled between 1986 and 1989. For those who reach 62 or became disabled in 1990 or later, the 90 percent factor is reduced to 40 percent.

There are exceptions to this rule. For example, the 90 percent factor is not reduced if you have 30 or more years of “substantial” earnings in a job where you paid Social Security taxes.  If you have between 21 and 30 years of substantial earnings the percentage of benefit increases from 45% with 21 years to the full 90 percent with 30 years of earnings.

Use one of the WEP Calculators that we have posted on our site to estimate the impact on your benefit.

The 1940 census

The National Archives and Records Administration will be publishing the 1940 census report online April 2 at http://1940census.archives.gov/.   The digital images will be accessible free of charge through 2013 at NARA facilities nationwide through their public access computers as well as on personal computers via the internet.  This is the first time the agency has released census reports online and you can now discover more about your family and what they were up to at the end of the great depression.  The forms will initially be searchable by district only. The NARA anticipates having name searches available in the future.

The questions they asked covered a wide range of subjects from what was your income in 1935 and 1939 to employment status,  place of birth,  occupation, education, Languages spoken in the home, veteran status, and 5% of all surveyed responded to 15 supplemental questions.  For anyone interested in their ancestry these reports will provide a wealth of information about their families at this critical time in our history.

Higher Yields

With CDs now at historically low yields – many earning as little as .25% and lower – where does one go to actually earn a decent return on their cash?  Savers, retirees, and investors alike are realizing negative returns on cash accounts when you factor in inflation and the devalued dollar.

Kiplinger’s February retirement report suggests considering mature dividend paying stocks such as AT&T, Johnson & Johnson, Procter & Gamble and other stocks that have yields ranging from 3 to 6 percent. They say, “Dividend payers usually decline less than other companies when the stock market tanks.”

Many today are considering mature dividend paying stocks to at least earn something on a portion of what they had in their money market, savings, and certificate of deposit accounts. There are 51 companies that are considered Dividend Aristocrats.  These stocks have increased dividends every year for the past 25 years.  The good thing about dividend stocks, according to Kiplinger’s, “is that they decline less than other companies when the market tanks.”

That being said, stock prices fluctuate in good and bad times so proceed with caution. A good example is Frontier Communications (FTR). This communications company is not considered a dividend aristocrat however it has been one of the highest dividend payout stocks on the market for several years, currently paying 9% with a market price of around $4 a share.  This company bought former Verizon territories and they provide high speed internet and communications services in rural areas. There stock price has dropped from a high of $8.90 in 2009 to a low of around $4 today and they cut their dividend by half a few months ago, although it is still paying a 9% yield.

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Request a Retirement Benefits Summary & Analysis from a local adviser. A sample analysis is available for your review. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. This service is not affiliated with www.federalretirement.net.

Learn more about your benefits, employment, and financial planning issues on our site and visit our Blog frequently at  https://fedretire.net to read all forum articles.

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Helpful Retirement Planning Tools
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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE

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