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Retirees Under Attack for Doing the Right Thing – AGAIN!

Posted on Friday, 10th February 2012 by

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A recent Pew Research Center report titled The Rising Age Gap in Economic Well-being contends that the old prosper relative to the young and they provide abundant statistics to prove their assumption. I’m tired of the constant subtle attacks on anyone that did the right things throughout their lives; saved, worked hard, spent responsibly, paid off their mortgages AND DID WITHOUT TO GET AHEAD.

Reports like this are referenced in studies and used by the media to support claims of inequality to foment discontent and resentment for those who have acted responsibly.  Just look at the 99 Percent and the Down with Wall Street movements. Facts can be interpreted in many ways and when you don’t fully evaluate the root causes and underlying precepts you often come to partial truths or misinterpretations.

This report infers that retirees, and those over 65 still working, that paid off their mortgages, saved for a rainy day, and have an average net worth of $170,000 — this figure includes the value of their homes —  have so much more than those under age 35 and the disparity is growing.  They also mention that those over age 65 receive cost of living adjusted Social Security which puts the younger group at a disadvantage!  Surely they know that the younger generation pays Social Security and FICA taxes so they too someday will have these same benefits assuming the President and Congress stop the excessive spending and balance the budget.

According to the Pew Report, “In 2009, households headed by adults ages 65 and older possessed 42% more median net worth (assets minus debt) than households headed by their same-aged counterparts had in 1984. During this same period, the wealth of households headed by younger adults moved in the opposite direction. In 2009, households headed by adults younger than 35 had 68% less wealth than households of their same-aged counterparts had in 1984.”

They go on to  say, “ As a result of these divergent trends, in 2009 the typical household headed by someone in the older age group had 47 times as much net wealth as the typical household headed by someone in the younger age group–$170,494 versus $3,662 (all figures expressed in 2010 dollars). “

Why should any of this be news? Typically retirees had decades to build their nest egg and what business is it of anyone other than the person or persons who did what they needed to do to prepare for retirement… Today, those who prepared and sacrificed to secure their later years are now looked upon as greedy, selfish, and RICH!!! Instead of being admired for owning up to their responsibilities they are chastised for not sharing the wealth. When has owning property, honor, personal initiative, self sacrifice, hard work, and being responsible for your actions become something to loath? When did it become wrong or selfish to save for a rainy day and actually own property rather than have it mortgaged to the hilt?

Another article in the Wall Street Journal titled Aging and Broke relays an often times more realistic picture of what many face in retirement and it isn’t pleasant. According to this report, “The problem has been building as more Americans age 55 and older have lost jobs or run through life savings.”  The reasons for this are many and we in retirement face them daily. Even those who have retirement resources now because they prepared face the uncertainties of what lies ahead.” Today 20% of adults over 65 now live with relatives, up from 17% in 1990 due to the times.

The recession, housing bubble, student loans, credit card debt, and unemployment contribute to much of this inequity. It is reported that student loan debt has increased dramatically and one of the precepts of the Occupy Movement is to forgive the Trillion dollar student debt loans! I watched TV interviews where the Occupy supporters demanded free college tuition, housing, medical and everything else imaginable. Who will pay for this? You guessed it; anyone that has anything, and who are they saying has the most in this report? SENIORS and it will also be all those working hard in all income groups!

When my wife and I purchased our first home in Topeka Kansas in 1973 the banks refused to include my wife’s income to qualify for the loan.  I was just discharged from the military working for the Department of Defense as an avionics repairmen and my wife was working for the State of Kansas. They advised us it was best to rely on one income for the home loan for obvious reasons. What if my wife would be laid off or stop working to be a stay-at-home mom?  Now doesn’t that sound rational and reasonable? Didn’t many lose their homes just for that reason? They depended on two incomes and then borrowed irresponsibly, often up to 100% of the home’s value with no down payment. Then they obtained adjustable interest rate mortgages with payments that went through the roof when the bubble burst.

This same group took out second mortgages to buy home furniture they really couldn’t afford. Then they used easy credit to purchase cars, vacations, and luxury items that they didn’t really need.  Too many lived well beyond their means simply because they had to have it all now. Yet, the NOW Generation is suffering. Shouldn’t they? If they spent recklessly and continue on this same path it is their problem to deal with not societies as a whole. If you live life irresponsibly you and only you are responsible for the consequences.

Many good hard working people lost their jobs and homes during the recession and I’m not berating them.  It happens all of the time and it’s tragic under any circumstances. However, we seldom hear about the excesses and the many who acted irresponsibly. We too often are fed a diet of the responsible failures without any thought to all of the others who just did the wrong things for the wrong reasons.

This same carelessness extends to student loans. Many leave college with $60,000 or more in debt that won’t be paid off for decades.  Unfortunately we own this debt through Sallie Mae, a government entity, and the debt is fast approaching 1 trillion dollars.  Is it unfortunate or a blessing that they owe this money?  Didn’t’ they get an education and a hand up, not a hand out? They lived on that money and used it for student housing, books, and tuition along with some living expenses for up to 4 years or more! They choose to go to school and in many cases attend additional semesters because they changed their major several times along the way or took too few credits each semester to give them more me time.

Many opt for college instead of community colleges and trade schools because they make it so easy today to get grants and tuition assistance. It’s almost a rite of passage today unlike in my day where the draft was our rite of passage with a staring pay of $98 a month, a two to four year commitment, and a path to Vietnam and other undesirable locations.  We put our education and aspirations on hold for the greater good of our country and in most cases not by choice.

If graduates and students are upset about college expenses why don’t they picket the source of their discontent? It’s the universities; many publicly funded that charge outlandish tuition. There is little incentive to cut costs. Colleges pay professors huge salaries for working only a fraction of the year, offering sabbaticals at full salary, and they can’t be fired because of tenure. Then to add insult to injury they can often retire in their 50s with full salary and health care for life on our dime.

These same institutions charge tuition, take money from the states, federal government, and alumni and still can’t manage to control costs. What is particularly perplexing is the fact that government is always saying we have to improve education and they opt to throw more money into a system that is failing, and by failing I mean failing our children. Most of the additional money they receive goes for salary and benefits most everyone else would give their eye teeth for. Our entire education system must become student centered instead of teacher/administration centered as it is today.

There are many issues to consider when weighing this report and others like it and if you look under the surface and at the substance of these issues you come to a completely different conclusion.

The Pew report goes into great depth to show just how much wealthier the aged are today and how this wealth gap is growing at an alarming rate. I read the Pew report front to back and the more I read the more alarmed I became of the class warfare that is being waged today across this country. Our President constantly talks about everyone paying their fair share and asks audiences why the rich shouldn’t pay more.  He never mentions that the top 10%, according to the Congressional Budget Office, pays more than half of all federal taxes and 70% of federal income taxes.

Redistribution of wealth doesn’t stop with what many of us consider rich. These contentious attacks ripple across all income groups. When did you ever consider that a retiree with a total net worth of $170,000 — including the value of their homes — to be excessive? The spreading of the wealth mantra, perpetuated through our tax code and under what they call social justice Initiatives, doesn’t stop at your neighbor’s door or in uptown communities.  It eventually spreads to ALL groups and before you know it even what you considered to be sacrosanct; your home and retirement savings are at risk.

Property rights and free enterprise are the cornerstones of our republic and we should ALL be alarmed by those who espouse “Social Justice” and want to spread the wealth — especially when they are talking about YOUR ASSETS and not theirs.

Updates

Senior Discounts – We updated our section on Ways to Save and Econoimize in Retirement adding offers for prescription eye glasses for as little as $39, discount hotel reservations, car rentals, and vacations.

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Retiree Job Postings

We continue to post new job listings on our Jobs Board from employers nationwide that are looking for retired federal employees. Many retirees supplement their retirement income with full or part time work.

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.

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.

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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 RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE

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Pension Survivor Alert – Don’t Let This Happen to You

Posted on Thursday, 9th February 2012 by

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A few months ago, while meeting with a federal employee couple, I came across a story that I think is worth repeating. I’ve changed the names and some of the details, but the overall theme of the story is true.

Mr. Jones was a good man and longtime CSRS government employee with many years of service. His wife was not a federal employee. Mr. and Mrs. Jones had a wonderful life together. One day, many years into Mr. Jones’ retirement, he fell ill and passed away. Mrs. Jones was greatly distraught and the last thing she wanted to do was worry about the bills coming in the mail. You see, up to her husband’s passing, all their benefits were being paid by his monthly pension and there were no worries. Now, however, she continues to get bills and can’t understand why.

Well, the reason why Mrs. Jones was getting bills in the mail was because someone had approached Mr. Jones years earlier and talked to him about Pension Maximization.

At the time, this may have seemed like a wonderful thing to do. However, Mrs. Jones is now in her 80’s and had long forgotten that she would only be receiving a small retirement benefit following the passing of her husband.

So, what is Pension Maximization and how does it work? Pension Maximization is giving your spouse a lesser benefit when the primary annuitant passes away. Under the CSRS system an annuitant may give their spouse between 0% to a 55% benefit. As a FERS employee, an annuitant may give their spouse either a 0%, 25%, or 50% benefit. To continue health benefits in the CSRS system you must give your spouse at least a 1% benefit and a 25% benefit under FERS. You then take the difference and purchase a life insurance policy to make up the difference in income in retirement.

Let’s do an example:

Bob is a FERS employee and is nearing retirement. His full gross annuity will be about $3,000 a month. He can give his spouse a survivor benefit of $0, $750, or $1,500. It costs Bob about $150 a month (5%) to give his spouse a $750 monthly benefit and $300 (10%) a month to give his spouse a $1,500 monthly benefit. The idea of pension maximization is to give Bob’s spouse a $750 benefit and take the $150 and buy a life insurance policy. Bob would then purchase a life insurance policy large enough to provide $750 of monthly income.

What Mr. Jones did in the story above was to give his wife a very small survivor benefit which was enough to keep health benefits at the time, but not enough to pay the premium. So, Mrs. Jones lost her health care coverage because she didn’t know she needed to pay any premiums. Another issue to consider is that Bob’s annuity increased most years due to COLAs and at the time of his death his wife would have received a much higher amount. The insurance coverage did not increase annually to keep up with the CPI and his annual COLA adjustments. Typically, due to COLA adjustments, an annuitants’ annual payment increases dramatically over a 20 year period. One retiree recently reported in one of the articles on this blog that his annuity increased 19% since he retired in 2005 not counting any compounding! Look under Updates in the referenced article under 2012 COLA.

I’m not saying I’m totally against Pension Maximization, but it’s not the first time I’ve heard a story like the one above. If a federal employee is planning to give a spouse anything other than the maximum benefit I would strongly encourage you to inform other family members. It’s important for family members to understand that when either Mom or Dad passes away bills might need to be paid.

In my experience I have found that it’s pretty difficult to purchase a permanent life insurance policy with the difference of premium saved through Pension Maximization. The one thing federal employees may not understand; according to OPM if your spouse predeceases you, there is paperwork to fill out and you “may” get your annuity reinstated in full.

Paul H Risser is an Investment Advisor Representative with and securities and investment and investment advisory services offered through Transamerica Financial Advisors, Inc. Member FINRA, SIPC, and Registered Investment Advisor.

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While the author and publisher have used their best efforts in providing retirement and financial planning information, they make no representations or warranties with respect to the accuracy or completeness of the content of this article, forum and Website, replies to site visitor questions, or prepared articles, and they specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. The advice and strategies contained herein may not be suitable for your situation. You should consult with a financial professional where appropriate. Neither the author or publisher shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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

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Travel Safety Tips – Sea, Air or Land, Be Aware

Posted on Wednesday, 8th February 2012 by

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The recent Costa Concordia cruise ship accident got me thinking about Travel Safety.  I love cruising and have gone on at least 25 cruises.  Most cruise lines conduct a Life Boat Drill prior to leaving the dock, but completing it within 24 hours of sailing does meet maritime recommendations.  In the past the drills were typically conducted with passengers meeting on the deck nearest to their assigned life boat.  These drills familiarize passengers with exactly where they have to go and how to wear their life jacket.

The cruise ships I’ve traveled the past two years have changed this practice with passengers gathering in large meeting areas for a general briefing.  The passengers of the Concordia had neither.  I’m not sure how the crew could manage getting passengers from a large theater or lounge through the narrow passage ways and out to the life boats in an orderly manner.

Learning your way around the ship is another concern, especially the ships that carry more than 2000 passengers.  I can generally negotiate my way around the ship after about 5 days on board.  In other words, just before it’s time to disembark the vessel and go home!  The passengers had exactly 3 hours on board before the Concordia ran aground.  It sounds like the entire incident was confusing for all with the crew giving directions to return to cabins in some reports.  That is the reason I decided to share some safety tips.  While cruising is still a safe mode of travel and a great option for resort style travel, it’s just as important on a ship as it is in a hotel to know what to do in case of an emergency.

From a safety perspective, the first thing you should do when traveling is to make yourself aware of your location as it relates to emergency exits.  On a cruise ship, after finding your cabin, locate the nearest stair case and know how many landings you need to pass to reach the deck where your muster station is located (life boat stations are called Muster Stations on the ship, meaning you must come there is case of a drill or emergency).  Relate the number of landings with something you know you can remember, i.e. if you were born in October and you have to reach the 10th landing for your muster station you can remember 10 as the 10th month.  I recommend you spend your time prior to the ship’s departure using the closest stair way (the elevators are full anyway!) and climbing/descending to the deck where your muster station is located a couple of times.  You’ll know whether to go to your right (starboard) or to your left (port).  This helps in case you find yourself stressed in the unlikely event of an emergency.

This same advice applies to checking into a hotel.  Find the nearest stairwell in relation to your room and know which way to turn and which side of the hall it is on.   Count the number of doors you will have to pass before reaching the emergency exit.  This may sound unnecessary but should there be a lot of smoke in the hall way, you will need to crawl and visibility will make it difficult to figure out which door is the exit.

Air travel is one of our safest modes of travel however if there is an emergency keep these precautions in mind. Look at the aircraft briefing in the seat pocket in front of you.  It doesn’t matter how often you fly, you need to do this for your safety.  Determine if the nearest exit is in front or behind you.  Count the number of seats you will need to pass before you reach the closest exit, but keep both in mind.  Remember Captain Sully’s emergency landing on the Hudson River.  Passengers at the rear of the aircraft started to open the rear exit ignoring the instructions of the flight attendant. Follow the directions of the flight crew.  If the flight attendant hadn’t fought to get passengers attention to go to the wing exits, the plane would have sank quickly into the river.

Fire is the biggest hazard during aircraft emergencies.  Dress to minimize injuries.  Wear only cotton clothing as it will quickly burn away, not melt into your skin like polyester and other synthetic material.  Wear hard sole shoes, preferably leather so you can move through the aircraft without the problem of heat against the bottom of athletic shoes.  It’s a good idea to skip hair spray and avoid carrying flammable materials, i.e. cigarette lighters.  Skipping the hair spray is the hardest for me to remember.  I do it every day and it’s automatic but I do plan ahead when I travel by air.

When traveling abroad, be sure to register with the US State Department.  They send email alerts in case they have issued any travel warnings for the countries you plan to visit.  It helps them assist you if you have problems while abroad.  They can reissue a passport should yours be lost or stolen.  If you do find yourself in need of assistance while abroad go to any US Consulate or US Embassy.

Keep things in perspective.  Remember you and your family are irreplaceable.  Forget the purse, jewelry, and other valuables in your cabin, hotel room or luggage/carry-ons.  Report to the muster station, get in the stairway fire escape, or find your exit and make sure your family is doing the same.  The valuables can be replaced but humans are priceless and can never be replaced.

Below you will find links covering some of the topics in this article as well as tips for personal safety while traveling.

Travel Safely!

http://travel.state.gov/travel/tips/safety/safety_1747.html

http://safetravel.dot.gov/

http://besttraveldeals.net/Travel-Safety-Tips

http://www.womenstravelclub.com/tips.html

http://www.travel-security-and-safety.com/

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

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. 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.

Posted in LIFESTYLE / TRAVEL, Travel

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1099-R Replacements and Updates

Posted on Friday, 3rd February 2012 by

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For those of you not yet retired this is good to know information. A 1099-R is what retirees receive from OPM for filing your taxes.  It lists your gross and taxable annuity amounts, federal and state tax withholding, healthcare premiums, and other relevant information.  If you are retired and haven’t received your 1099-R yet you aren’t alone. Many have written because theirs hasn’t arrived and they are having difficulty requesting a duplicate copy.  My 1099-R came in the mail on February 1.  I downloaded a copy from OPM’s Online Services Retiree site last week.

Typically you will receive a 1099-R by the end of January each year.  With all of the turmoil in the Postal Service and planned closings of processing facilities they may come a little later from now on. You have several options for requesting a replacement. You can call OPM or download a copy from OPM Services Online if you have an access code. OPM’s Online Retirement Information Services are similar to Employee Express that those still working can access to initiate allotments, make withholding changes, and download pay stubs.  I highly recommend that all retirees sign up for OPM’s retiree site access after their retirement processing is complete. It saves time and aggravation because it can be frustrating contacting OPM during peak times by phone.

If your 1099-R still hasn’t arrived call OPM at 1-888-767-6738 (weekdays between 7:30 AM to 7:45 PM EST), fax requests to 1-724-794-6633, or email questions to retire@opm.gov. Call early in the day if possible to get through and you must have your retirement claim number or Social Security number available. OPM advises that “the internet is not a secure environment for transmitting personal information via email.” Replies via email typically take 15 days or more.

The problem with calling is that you will more than likely receive a busy signal, especially if you call later in the day or during peak periods like now when everyone and their uncle is looking for their 1099-R statements.  I find Tuesday mornings around 7:30 to 8:30 AM the best time to call and get through. Once you get through you have to answer several voice prompts before getting to a live person.  Print out our Retiree master Contact list for your records and keep it handy for easy reference.

Many who contacted us this year had an OPM web site user password but couldn’t get into the system. OPM changed the password requirements and your password must be 8 to 12 characters long and must include at least one upper and lower case letter and a number.  Current users that enter the system with their original password are redirected to a page where you must reset your password.  Unfortunately, the directions on the site are confusing because OPM asks for a temporary numeric password instead of asking you to enter your current password to begin the process.  You can use your original password if you accessed your account anytime in the past 15 months or use a new numeric password that OPM will send out to you upon request.  I simply entered my original password, established a new password using their new password composition requirements, and gained access immediately.

New retirees, retirees that haven’t to date requested access, and anyone who hasn’t used the site for 15 months or more must contact OPM by phone or fax to request a temporary numeric password to use the site.  New retirees can’t apply until their retirement is completely processed and they are receiving their full monthly annuity payment.

Updates

TSP Performance – It is interesting to note that the C fund gained a meager 0.91% last year while the F Fund was the winner with a 7.79% gain. All of the Life Cycle funds lost money except for the L-2010 which broke even. The S&P 500 Index was essentially flat while the G Fund gained 2.03%, the S fund lost 4.81% and the I Fund lost 11.89%.  Add to the discomfort the historically low CD rates offered at many banks nationwide of less than .5% for up to a year or more.  We found one bank locally offering .75% for a 1 year and 1.25% for a 15 month CD.  Not bad for today’s market but still meager by any definition.  Visit our TSP pages for more information about your TSP.  Many are projecting the markets to improve in this election year; only time will tell.

Presidential Letter Request Timeline – We posted updated procedures for requesting a presidential letter for retirees on our site last month. Krista, one of our site visitors, requested a letter for one of their employees on 10/31/2011. It was printed on 1/6/2012 and mailed on 1/9/2012. It took 71 days for the letter to arrive.

Retiree Job Postings – We continue to post new job listings on our Jobs Board from employers nationwide that are looking for retired federal employees. Many retirees supplement their retirement income with full or part time work. Here are several new job listings that you may find interesting:

  • In-Store Representatives (New Locations) Pay from $8.00 to $9.50 per hour and flexible hours.
  • Shipping Manager, Memphis, TN.
  • Comptroller / Accounting Manager, Washington, DC

Recent Forum Host Articles:

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.

Request a FREE 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.

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, EMPLOYMENT OPTIONS, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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GETTING OFF ON THE RIGHT FOOT IN 2012

Posted on Thursday, 26th January 2012 by

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A look at some financial changes & the opportunities they may present.

Presented by Paul H. Risser

Every year brings some financial change, so here are some relevant changes relating to investment, tax and estate planning for 2012.

Retirement plans. 401(k), 403(b), and TSP annual contribution limits rise slightly to $17,000, and you can contribute an additional $5,500 to these accounts if you are 50 or older this year. IRA contribution levels are unchanged from 2011: the ceiling is $5,000, $6,000 if you will be 50 or older in 2012.1

As you strive to contribute as much as you comfortably can to these accounts this year, you will probably notice some changes with the retirement plan at your workplace. In 2012, retirement plan sponsors (i.e., employers) will have to note all of the fees and expenses linked to the funds in the plan to plan participants. So if you have a 401(k) or 403(b), you may notice some differences in the disclosures on your statements and you will probably notice more information coming your way about fees. There is also a push in Washington, D.C. to have financial companies provide lifetime income illustrations on retirement plan account statements, projections of your expected monthly benefit at retirement age.2

Income taxes. Wealthy Americans are set to face greater income tax burdens in 2013, so 2012 may be the last year to take advantage of certain factors. For example, the top tax bracket in 2013 is slated to be at 39.6% instead of the current 35%. This year, capital gains and dividends will be taxed at 15% or less for everyone, 0% for those in the 10% and 15% tax brackets. In 2013, the qualified capital gains tax rate is scheduled to rise to 20% and qualified dividends will be taxed as ordinary income. So taking a little more income in 2012 could be smart.3

In 2013, the wealthiest Americans are supposed to be hit with new Medicare taxes: a new 3.8% levy on unearned income (such as capital gains, income from real estate, dividends and interest) and a new 0.9% tax or earned income. So next year, the truly wealthy could effectively face in the neighborhood of 45% federal taxes.3

Additionally, the IRS is planning to limit itemized deductions for upper-income taxpayers in 2013. A phase-out will also apply for the personal exemption deduction.3

Estate & gift taxes. At the end of 2012, some very nice estate tax breaks could sunset. Barring action by Congress, 2013 could see a 20% leap in the federal estate tax rate from 35% to 55%. The individual estate tax exclusion (currently $5.12 million) is scheduled to be reduced to $1 million.3

As we have unified gift and estate tax rates, those numbers and percentages also apply to gift taxes. That is, from 2012 to 2013 top federal gift tax rate is set to go from 35% to 55% and the lifetime gift tax exemption amount is scheduled to fall $4,120,000 per individual to $1 million. The annual gift tax exemption is $13,000 per recipient in 2012; there is an exemption limit for qualifying educational and medical payments. If you want to gift relatives or friends, you may want to avoid procrastinating for another very good reason: when you make such a gift early in a year, the recipient will gain both the principal and any appreciation tied to the gifted asset in that year.3,4

Speaking of gifts, we said goodbye to charitable IRA gifts in 2011. The IRA charitable rollover, a boon to non-profits and a handy tax deduction option for taxpayers older than age 70½, was not extended into 2012, not even temporarily as a sweetener to the payroll tax extension bill. There is hope it will be back. Two bills have been introduced in Congress with that goal, one sponsored by Sen. Olympia Snowe (R-ME) and Sen. Charles Schumer (D-NY) and another by Rep. Wally Herger (R-CA) and Rep. Earl Blumenauer (D-OR). The proposed legislation would let IRA owners start making charitable IRA gifts at age 59½ and remove the $100,000 limit on the rollovers.5

The limits on the generation-skipping transfer tax could change, too: assuming the Bush-era tax cuts do sunset, the GSTT rate would jump from 35% this year to 55% in 2013, with the GSTT exemption falling from $5,120,000 per person this year to roughly $1.3 million per person next year.3

So given all these changes, it might be wise to meet with the financial professional you know and trust early in 2012 as you strive to start the year off on the right foot. You have until April 17 to file your federal return, but you can plan now.

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.

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. Neither TFA nor its representatives provide legal, tax nor accounting advice. Persons who provide such advice do so in a capacity other than as a registered representative of TFA.

LD42567-01/12

Citations.

1 – www.irs.gov/retirement/article/0,,id=96461,00.html [10/20/11]

2 – www.marketwatch.com/story/retirement-plan-changes-coming-in-2012-2011-12-29 [12/29/11]

3 – www.sbnonline.com/2012/01/how-to-approach-tax-and-estate-planning-opportunities-for-2012/?full=1 [1/3/12]

4 – advisorone.com/2012/01/06/10-tax-tips-for-advisors-in-2012 [1/6/12]

5 – www.northjersey.com/news/business/business_opinion/136217658_Payroll_tax_cut_benefits_charities.html [12/25/11]

While the author and publisher have used their best efforts in providing retirement and financial planning information, they make no representations or warranties with respect to the accuracy or completeness of the content of this article, forum and Website, replies to site visitor questions, or prepared articles, and they specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. The advice and strategies contained herein may not be suitable for your situation. You should consult with a financial professional where appropriate. Neither the author or publisher shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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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2012 Changes, Temporary Service Credits, & Updates

Posted on Friday, 20th January 2012 by

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We received a question from a federal employee concerning credit for temporary service. Linda was hired as a temporary employee in 1985 and two years later she was hired full time. Last April she bought back her two years of temporary service and her SCD has not changed on her Employee Express Benefits Statement. She did receive a confirmation from OPM after submitting the SF-2803 form and she wanted to verify when the 2 years of temporary service will be included in her SCD date.

When you make a deposit for temporary service it is made directly to OPM and OPM notifies you when the deposit is complete. This bypasses the HR office. Once you supply the HR office with documentation from OPM that the deposit is complete, your HR office should update your Retirement SCD… if the deposit affected your retirement eligibility. Make sure you keep a copy of the OPM letter to submit with your retirement application when you retire.

Depending on your service history/retirement system, the service may have already been credited toward your service history.  If the service was creditable towards eligibility without the deposit, then the deposit only increases the amount of the annuity (not your years of eligible service). This shouldn’t alter your Leave SCD that appears on your SF-50.

Check on the Employee Express site.  Many benefit statements are only updated once a year.  Your HR office can tell you if your Retirement SCD has been updated to include the service

2012 Changes & Updates

  • FEGLI Rate Changes. New rates were posted for employees and annuitants starting this year. Not all rates increased, Option B rates decreases for all age bands below age 75 and Option C rates for those below age 45 decreased while premiums for anyone over age 45 increased. Annuitant’s premiums for Basic coverage increased for the 50 percent and no reduction options.
  • Savings Bonds. For the first time since 1936 paper savings bonds can no longer be purchased from your local bank or credit union. Savings bonds are now only available in book entry format online through Treasury Direct. Book entry simply means that you do not receive a paper bond and your purchases are listed online in your account. If you are having difficulty accessing your Treasury Direct account read my article titled Treasury Direct Login Help for assistance. I Bond yields are currently 3.06%, a much higher rate and any CD that you can purchase today. My article titled When CDs Come Due Earn Higher Yields discusses I Bonds and ways to earn higher yields on your savings.
  • Social Security Direct Deposit. When signing up for Social Security this year you must arrange for direct deposit of your payments. All paper checks for beneficiaries will be phased out by 2013. It costs the government a dollar per check and they are still sending out over 120 million checks a year.
  • Paper Check Delivery. The postal service plans to close half of its 487 processing centers this year.  This could delay receipt of paper checks by a day or two. Retirees that receive their annuity and social security checks by mail may wish to consider direct deposit. Typically direct deposit is faster and you don’t risk someone stealing a paper check from your mail box.
  • 2012 COLA. We announced this previously but it bears repeating again. COLAs resume after a two year absence for federal annuitants and Social Security, 3.6% for CSRS and 2.6% for those in the FERS system.

Recent Forum Host Articles:

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.

Request a FREE 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.

Visit our other informative sites

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, SURVIVOR INFORMATION

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What Beneficiaries Need to Know and what do You do When an Account Owner Passes Away

Posted on Friday, 13th January 2012 by

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If your loved ones have invested, saved or insured themselves to any degree, you may be named as a beneficiary to one or more of their accounts, policies or assets in the event of their deaths. While we all hope “that day” never comes, we do need to know what to do financially if and when it does.

Legally, just who is a “beneficiary”?

IRAs, annuities, life insurance policies and qualified retirement plans such as 401(k)s and 403(b)s are set up so that the accounts, policies or assets are payable or transferrable on the death of the owner to a beneficiary, usually an individual named on a contractual document that is filled out when the account or policy is first created.

In addition to the primary beneficiary, the account or policy owner is asked to name a contingent (secondary) beneficiary. The contingent beneficiary will receive the asset if the primary beneficiary is deceased.




Some retirement accounts and policies may have multiple beneficiaries. Charities, schools and nonprofits are also occasionally named as beneficiaries. If you have individually listed one (or more) of your kids or grandkids as designated beneficiaries of your 401(k) or IRA, that designation should override a charitable bequest you have stated in a trust or will.1

A will is NOT a beneficiary form.

When it comes to 401(k)s and IRAs, beneficiary designations are commonly considered first and wills second. If you willed your IRA assets to your son in 2008 but named the man who is now your ex-husband as the beneficiary of your IRA back in 1996, those IRA assets are set up to transfer to your ex-husband in the event of your death. Sometimes beneficiary forms are revised; often they are never revised.1

If a retirement account owner passes away, what steps need to be taken?

First, the beneficiary form must be found, either with the IRA or retirement plan custodian (the financial firm overseeing the account) or within the financial records of the person deceased. Beyond that, the financial institution holding the IRA or retirement plan assets should also ask you to supply:

  • A certified copy of the account owner’s death certificate
  • A notarized affidavit of domicile (a document certifying his or her place of residence at the time of death)

If the named beneficiary is a minor, a birth certificate for that person will be requested. If the beneficiary is a trust, the custodian will want to see a W-9 form and a copy of the trust agreement.2,3,4

 

If you are named as the primary beneficiary, you usually have four options regardless of what kind of retirement savings account you have inherited:

1)    Open an inherited IRA and transfer or roll over the funds into it.

2)    Roll over or transfer the assets to your own, existing IRA.

3)    Withdraw the assets as a lump sum (liquidate the account, get a check).

4)    Disclaim as much as 100% of the assets, thereby permitting some or all of them to be inherited by a contingent beneficiary

However, these options may be influenced or limited by four factors:

1)    The kind of retirement plan you have inherited.

2)    Whether the named beneficiary is a spouse, non-spouse, trust or estate.

3)    The age at which the account owner passed away.

4)    The resulting tax consequences.

Before you make ANY choice, you should welcome the input of a tax advisor.3,5

What if you are a spousal beneficiary?

If that is the case, you may elect to:

  • Retain the deceased’s TSP account
  • Roll over or transfer assets from a traditional IRA, Roth IRA, SEP-IRA or SIMPLE IRA into your own traditional or Roth IRA, or an inherited traditional or Roth IRA
  • Withdraw the assets as a lump sum
  • Roll over or transfer qualified retirement plan assets from a 401(k), 403(b), etc. into your own retirement account, or take them as a lump sum
  • Disclaim up to 100% of the assets within 9 months of the original account owner’s death3,5,8

 

What if you are a non-spousal beneficiary?

If this is so, you may elect to:

  • Roll over or transfer assets from a traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA or qualified retirement plan into an Inherited IRA
  • Withdraw the assets as a lump sum
  • Disclaim up to 100% of the assets within 9 months of the original account owner’s death
  • Leave the assets in the plan (sometimes permissible with qualified retirement plans) 3,5

 

What if a trust, estate or charity is named as the beneficiary?

If that is the circumstance, there are three choices:

  • Transfer assets from a traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA or qualified retirement plan into an Inherited IRA
  • Withdraw the assets as a lump sum
  • Disclaim up to 100% of the assets within 9 months of the original account owner’s death3,5

 

The next calendar year will be very important.

Inheritors of retirement accounts have until September 30 of the year following the original account owner’s death to review and remove beneficiaries, and until December 31 of that year to divide the IRA assets among multiple beneficiaries. Usually, December 31 of the year after the original retirement plan owner’s passing is the deadline for the first RMD (Required Minimum Distribution) from an inherited traditional or Roth IRA.6

Now, how about U.S. Savings Bonds?

If you are named as the primary beneficiary of a U.S. Treasury Bond, you have three options:

  • Redeem it at a financial institution (you will need your personal I.D. for this).
  • Get the security reissued in your name or the names of multiple beneficiaries. You do this via Treasury Department Form 4000, which you must sign before a certifying officer at a bank (not a notary). Then you send that signed form and a certified copy of the death certificate to a Savings Bond Processing Site.
  • Do nothing at all, as the primary beneficiary automatically becomes the bond owner when the original bond owner passes away.7

What about savings & checking accounts?

Bank accounts are often payable-on-death (POD) assets or “Totten trusts.” All a beneficiary needs to claim the assets is his or her personal identification and a certified copy of the death certificate of the original account holder. There is no need for probate. (Some states limit charities and non-profits from being POD beneficiaries of bank accounts.)7

How about real estate?

Lastly, it is worth noting that about a dozen states use transfer-on-death (TOD) deeds for real property. If you live in such a state, you have to go to the county recorder or registrar, usually with a certified copy of the death certificate and a notarized affidavit which informs the recorder or registrar that ownership of the property has changed. If the deed names multiple beneficiaries and some are dead, the surviving beneficiaries must present the recorder or registrar with certified copies of the death certificates of the deceased beneficiaries.7

Portions of this text have been adapted, with permission, from Peter Montoya, Inc’s Monthly Economic Update

LD42404-12/11

 

Citations.

  1. www.cbsnews.com/8301-505146_162-37941197/ira-beneficiary-forms-may-be-more-important-than-your-will/ [6/10/09]
  2. 2 www.ehow.com/info_12081482_ira-beneficiary-require-death-certificate.html [9/20/11]
  3. www.schwab.com/cms/P-1625576.3/CS13416-02_MKT13598-10_FINAL_118091.pdf?cmsid=P-1625576&cv0 [12/10]
  4. personal.fidelity.com/accounts/pdf/InheritedNonRetirementIntro.pdf [12/16/11]
  5. www.fidelity.com/ira/inherited-ira [12/16/11]
  6. www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/12/14/investopedia6585.DTL [12/14/11]
  7. www.nolo.com/legal-encyclopedia/claim-payable-on-death-assets-32436.html [12/16/11]
  8. http://www.montoyaregistry.com/Financial-Market.aspx?financial-market=who-should-inherit-your-ira-andor-401k&category=22 [12/16/11]

While the author and publisher have used their best efforts in providing retirement and financial planning information, they make no representations or warranties with respect to the accuracy or completeness of the content of this article, forum and Website, replies to site visitor questions, or prepared articles, and they specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. The advice and strategies contained herein may not be suitable for your situation. You should consult with a financial professional where appropriate. Neither the author or publisher shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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

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Retirement Precautions, TSP Changes, Updates, and Retiree Jobs

Posted on Friday, 6th January 2012 by

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Recently OPM clarified a number of issues around interim annuity payments and what retirees can expect when they first leave federal service. It is essential that federal employees have sufficient cash available and are financially prepared when retiring to allow OPM to complete a final adjudication of their claim.

OPM is now processing applicants in an average of 133 days however they can take up to a year to process a retirement application if information is missing or problems are encountered. Last year OPM processed over 100,000 retirements, a significant increase over the previous year. The Federal Times reported that “retirement applications saw an unexpected spike in October. That month’s 11,411 applications were 42 percent higher than October 2010, and 60 percent higher than October 2009.” With the possibility of many agencies offering VERAs and VSIPs in 2012 the delays can only get worse.

Many are receiving interim payments for far less than they anticipated due to a number of issues. OPM indicates that annuitants will receive approximately 90% of their expected NET monthly payment, less federal income tax withholdings. NET payments equal what is remaining after deducting health care and life insurance premiums from the gross amount. I received an interim payment of 70% and my claim was processed in 90 days when I retired. Some have reported receiving as much as 50% less due to extenuating circumstances and the problems still not resolved a year after they retired.

FERS retirees need to be aware of the fact that OPM doesn’t include the FERS Supplement in the interim payment because they don’t have the data available until the retirement is completely processed. OPM reported that a number of factors cause reduced interim payments or prevent OPM from initiating interim payments. These factors include:

  • Court orders that are on file at OPM. Court orders can contribute to as much as a 50% reduction in interim payments. Check out our Divorce Forum for clarifications and informative articles on this subject.
  • Part time service
  • Unpaid military deposits
  • When a redeposit wasn’t paid for refunded service creditable towards disability retirement
  • Employees entitled to special retirements for LEO, FF, ATC or other special retirement programs
  • CSRS offset applicants with 90 days of or over the age of 62
  • Non-deduction service performed after 10/1/1982 creditable under CSRS where the deposit has not been paid in full
  • Deposits have not been paid for FERS creditable non-deduction service
  • VA part time direct medical solutions (DMS)physicians, including doctors, scientists, and surgeons
  • Refunded service creditable towards CSRS non-disability retirement ending on or after 3/1/1991 where the deposit has not been paid
  • Excess LWOP
  • Service that is unverified or missing
  • Where an insurable interest survivor election is made
  • When no survivor election is made
  • Receipt of military retired pay

Don’t be left in a lurch when you leave. Check out my article titled “Can You Survive on Interim Retirement Checks” to avoid OPM retirement processing delays when you leave and learn how to be prepared for the unexpected.

TSP Salary Deferral Amount Increased

A few months ago the IRS released the new deferral limits for the TSP. For 2012 you may defer up to $17,000 into your TSP. If you are 50 or older you may take advantage of the catch up provision and defer an additional $5,500. A common question that I’m asked is, if I’m turning 50 during 2012 when can I start deferring the additional amount. The answer is if you are turning 50 during 2012 and wish to take advantage of the catch up provision you may begin the extra deferrals with the first payroll of 2012.

  • To change you TSP contribution amount you will need to fill out  form TSP 1.
  • To take advantage of the catch up provision you will need form TSP-1-C.

The end of the year is also a great time to review your beneficiaries. A number of life changing events can happen throughout the year. If you’ve not reviewed your beneficiaries for a while I would recommend taking a few moments to review them. I had a client pass away a few months ago. He had changed his beneficiaries without his wife’s knowledge. When he had passed away unexpectedly I had to inform his wife that she wasn’t the sole beneficiary of his accounts. I can say first hand that visiting the spouse in this case was very difficult.

Paul Risser, our new Financial Planning Forum Host, submitted this timely update. Visit his forum for additional guidance. You can add Paul’s articles to your email newsletter list by clicking here and type in your email address. Instructions on how to update your newsletter profile will be emailed to you. Paul will be contributing insightful articles on economic trends and retirement planning targeted towards federal employees and retirees.

Paul H Risser is an Investment Advisor Representative with the Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. Member FINRA, SIPC, and Registered Investment Advisor.

Updates

Recent Forum Host Articles:

2012 Leave Chart

The 2012 Excel Leave Chart that we posted online late last year was originally published in the 2007 Excel version. Many with earlier versions of Excel were not able to open it. We converted the leave chart to an earlier version of Excel with the standard xls extension that you will be able to download. Use this chart to track your leave and to set target retirement dates. The updated Leave Chart is now available online. 

Retiree Job Postings

We continue to post new job listings on our Jobs Board from employers nationwide that are looking for retired federal employees. Many retirees supplement their retirement income with full or part time work. Here are several new job listings that you may find interesting:

  • Comptroller / Accounting Manager for the Washington D.C. area. Maintain accounts of assets, liabilities, commitments, receipts, disbursements and other financial transactions of a federal agency.
  • Coupon Merchandisers for Reston/Great Falls, VA, Collinsville, VA, Richmond/Chesterfield, VA, Tuscaloosa, AL,   Greensboro/Centreville, AL, and Bangor, ME. Pay from $8.00 to $9.50 per hour and flexible hours.
  • Ski Resort Jobs – Vail CO, UT, CA and other locations. (Multiple positions)
  • Telesales Exec Trainee NE I, Orlando Florida

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.

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.

Print This Article

Visit our other informative sites

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, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE

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