Category: Thrift Savings Plan (TSP)

Shakespeare’s tragic play Romeo and Juliet features a line from Juliet Capulet asking, “What’s in a name?” (Act II, Scene II). What we refer to as a rose could just as quickly be called something else and still have the same pleasant aroma. In Act I of their new comedy show, “The Latest TSP Changes,” the TSP appeared to pose the same question more than once.

What exactly is meant by the term “contribution allocation”? Even though we call it an “investment election.”

Investment elections designate where your TSP contributions will go after you receive them. Your investment preference will apply to all future deposits your account makes. Your investment decision will not affect funds already in your account. Your investment decision will be valid until you create a new one. In some publications, the TSP refers to this action as a “contribution election,” which sounds like a combination of contribution allocation and investment election.

What exactly is meant by the term “interfund transfer?” Whatever we call “reallocation” or “fund transfer,” it will still be crystal clear what you want to do with the money already invested in your TSP.

Reallocation and transfer of fund

The difference between a reallocation and a transfer of funds might interest some people. With a fund transfer, you can move money within your account from one designated fund to another designated fund (or funds) without affecting any other funds. A fund transfer is a method for transferring money into or out of a mutual fund account. This does not affect the other funds in your account.

When you reallocate, the money in your account is moved between the TSP investment funds. When you reallocate, you decide how much of your money you want to put into each fund. You can’t transfer money between funds from one source to another. For example, if you have both traditional (including tax-free) and Roth money in your account, your reallocation will move a certain amount from each type of money into the funds you choose.

It tells us they’re the same thing, but the TSP seems to believe there’s enough difference to warrant two new terms. Why use one term (fund reallocation) when you can use both (fund transfer and interfund transfer)?

Even though they now go by different terms, reallocations and fund transfers are still bound by the same restrictions applied to interfund transfers. Each calendar month, you can use your first two reallocations or fund transfers to move money from one TSP fund to another. After the first two of either type, you can only move money into the G Fund for the rest of the month. Each account has its rules if you have both a civilian account and a uniformed services account.

You should download a copy of the Summary of the Thrift Savings Plan for yourself if you’re interested in understanding how the TSP functions in light of the most recent changes. It was updated in May 2022 and now contains information on the mutual fund window and other changes to the TSP.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Retirement is a stage of life everyone aspires to reach as quickly as possible because there is freedom in not having to work any longer. Many believe it will be a golden time of being able to do whatever they want. However, there are many financial considerations to make before actually retiring. Below are a few of the issues with retirement that are not often discussed, as well as helpful solutions.

1. Your net worth becomes meaningless when you retire.

You may have meticulously saved money in the future and currently have a sizable nest egg fund. However, if you reside in a place with a high cost of living, then $1 million might not be enough to support you during retirement.

Solution: Establish an income plan.

Start by not assuming that your retirement spending will be significantly lower. You might need to change your expenditures if you’re already retired and didn’t figure out how much income you’d need to fund your monthly expenses. It’s essential to separate your necessities from your wants to determine what you’ll need to survive each month as opposed to how much you spend on your desires.

2. Taxes can significantly reduce retirement income.

A larger-than-expected tax burden on their retirement income is another significant issue that retirees deal with. Everyone believes their tax rate will decrease once they retire, but that’s not true.

You’ll be responsible for paying taxes on withdrawals at your ordinary income tax rate if you have saved most of your cash in a tax-deferred pension plan, such as a 401(k). 

Solution: Establish tax-free income sources.

If you want to bring down your tax burden and keep much more of your money, you need to have money saved up that you can access tax-free. You can achieve this by investing in either a Roth IRA or a Roth 401k because retirement withdrawals from these accounts are tax-free. 

Ask your HR if you have a Roth alternative or would like to add one to your account.

3. Your income in retirement may be impacted by inflation.

Inflation impacts our ability to buy things, and it’s crucial to realize that this impact can be subtle.

Expect to pay more over time as the cost of living increases if you want to retain your current standard of living in retirement.

Solution: Invest in stocks.

Investing in assets with a greater rate of return is essential if you don’t want inflation to erode your purchasing power and want to prevent running out of cash in retirement.

The answer is to incorporate stocks into your financial portfolio since you’ll need the savings to increase during retirement.

4. You might live longer than your savings.

Most people would most likely respond that their goal is to live a long and healthy life if asked. However, for individuals who have insufficient savings, this may be a drawback to retirement.

The Social Security Administration estimates that one in four 65-year-olds will live above the age of 90 in the current population.

Solution: Plan for a lengthy retirement.

The future cannot be predicted. However, the Social Security Administration has a life expectancy calculator that can estimate how many years you can expect to live on average based on your age and date of birth. However, your plan must offer you enough money to cover your expenses for a minimum of 30 years and possibly longer.

5. The cost of long-term care could eliminate your savings.

If you don’t have a plan to pay for long-term care, you could still run out of money even if you have a sizable nest egg and won’t outlive your assets. According to the U.S. Department of Health and Human Services, your chances of requiring long-term care are around 50/50 after you reach the age of 65.

According to Genworth Financial, the median yearly cost of an assisted living home is $54,000 in 2021.

Solution: Get long-term care insurance.

Expect Medicare or health insurance to not cover the expense of long-term care. The Administration for Community Living says these only offer a small amount of coverage for some forms of long-term care.

Consider purchasing long-term care insurance or getting a life insurance policy with a long-term care benefit.

6. Maybe you are not ready for high healthcare costs.

If you don’t have the funds set aside to pay for medical expenses in retirement, you might be in for a surprise. According to Fidelity Investments, a 65-year-old couple who retired this year will require $315,000 to cover medical costs. Even the expenditures of long-term care are not included in that.

Solution: Reduce costs and increase health savings.

You might profit from working more hours to continue obtaining subsidized health insurance through your company to deal with escalating healthcare expenditures in retirement. If you’ve got a high-deductible health plan, you can also contribute to one while you are still at work. Retirement HSA withdrawals for eligible medical costs are tax-free.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Did you know that on average most people need over $1 million to afford a comfortable retirement? Are you one of 75% of all Americans who worry they cannot afford to retire? Less than 22% of surveyed individuals feel confident they have adequate savings for their retirement years. Just a little half of all retirees have less than $250,000 put away, further highlighting the importance of a diversified retirement portfolio.

Most of America’s aging workforce is now facing a scarcity of retirement funds. The current belief among citizens is that they have failed to accumulate enough savings to retire altogether, which motivates them to increase funds for savings. Younger workers, who will statistically enjoy a longer lifespan, will have more time to grow said savings.

By taking a moment to delve into the numbers, we find a higher level of angst surrounding retirement, with only 3% of all retirees saying they are living the dream.

On the other hand, 37% of retirees feel they are living comfortably, with the remaining 37% feeling uncomfortable with their financial situation. Expenses are undoubtedly on the rise, which has led to nearly half of all retirees feeling as though they are paying too much in their golden years due to inflation.

If you are one of the many workers planning to fund retirement through a 401(k) or IRA plan, you won’t have to rely on Social Security payments. By making strides to save early, and often, you are poised to feel more confident in your tax-advantaged retirement savings accounts rather than risk playing catch-up. As a big, long-term goal, retirement usually requires individuals to focus on regularly occurring goals rather than the final goal.

Due to various standards of living, as well as the cost of inflation, Social Security often falls short of providing throughout retirement. Even though getting started is the most challenging step, there are many ways to begin saving for retirement. By creating a budget, you are more likely to prioritize retirement savings overall, with a figure you can stick to. You can begin to amass your retirement account savings by tracking expenses and simply living by a budget.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

The Federal Employee Group Life Insurance program, or FEGLI, is one of the many FERS benefits available to federal employees. You can get group life insurance while you’re employed, and under some circumstances, you might be able to keep using it after you retire.

Young federal employees are urged to get life insurance via FEGLI if needed, especially if they have a family or would leave someone else to care for if they pass away. The amount of insurance you require varies based on several factors, but FEGLI is affordable and can typically be afforded at the highest level when younger. FEGLI becomes more expensive as you age and may no longer be affordable, especially if your retirement plan predicts that you’ll also need long-term care insurance coverage.

The Importance of Life Insurance

Both young and old may find life insurance to be helpful. The most common life insurance application is to replace lost income while working. FEGLI is the most affordable option for meeting this demand while employed. Term insurance offers the next best instant price.

It’s crucial to remember that there are various schools of thought regarding the appropriate amount of life insurance. What would you wish you had done to support your family after you passed away? Replacing the financial resources you would have otherwise contributed is one straightforward solution. Many people want to use their early death to pay off their home and their children’s college loans.

Another way to look at it is to ensure that the current objectives are still reachable for those you leave behind.

Your FERS pension is secure as a qualified federal employee up until the time of your passing. Your surviving spouse could receive up to 50% of your FERS annuity if you chose the survivorship benefit. Over time, that loss can become substantial, reducing one of your Social Security benefits, particularly if one spouse passes away significantly sooner than the other.

Term insurance provides life insurance for a set amount of time (term). This can often be purchased in 5-year installments between five and 30 years. Utilizing this to cover a particular risk at certain points in your life is preferable. If both of you pass away or just one of you, things like having money set aside for mortgage payments, student loans, preschool, college, weddings, etc., would be helpful.

Renewing is pricey beyond your “term.” Insurance companies may occasionally allow holders of term policies to upgrade to a permanent policy at the age they reach without undergoing additional medical testing. Your advanced age may significantly raise the expense of waiting. Furthermore, the policy you would select today and the policy that would be presented to you upon conversion might not be the same.

Considering Long-Term Care Insurance

One vital thing to remember is that neither the FEHB nor Medicare will pay for lengthy long-term care requirements. A Medicare component covers the initial few months of an event, but any expenditures incurred beyond that are your own.

Long-term care events often last two to three years. At this point, you may need to live in an assisted living or skilled nursing facility, or you may need assistance from caregivers who visit your home. The duration of long-term care events has occasionally increased to five or six years due to advancements in medical care.

A long-term care event may be self-insurable for some families with no problem. These prices may vary significantly depending on where you live and the type of service you receive.

FLTCIP first seems to be a reasonable purchase, but its price gradually rises over time.

The Premium Stabilization Feature  (PSF) of FLTCIP is one great advantage. These conventional long-term care insurance policies typically have prohibitive costs as you get older. Due to the expense, many families renounce their insurance just as their children reach the age when they most need it. Long-term care insurance costs typically increase dramatically over time, but not when they are included in specific insurance policies. The PSF for FLTCIP is determined by taking a percentage of the premiums paid for the FLTCIP 3.0 group policy.

The PSF amount may reduce your future premiums or result in a premium death benefit reimbursement. If you haven’t opted out, are 85 years old or older, and have participated in FLTCIP 3.0 for at least ten years, you are eligible for this. Additionally, you need to have enough PSF to cover 50% of your monthly premiums for the upcoming 12 months or longer. The premium refund death benefit is calculated based on your coverage at the time of your death. The remainder would go to your beneficiary.

Insurance prices may be less high the earlier you plan and get the coverage you require. But this does not imply that you should buy insurance right now. It involves attention, study, and must-have features that suit your needs, just like purchasing a car.

Similar to purchasing a car, if you’re not diligent, insurance too might have a lot of unnecessary and hidden charges. Certain carriers specialize in various types of insurance. Some have ideas that work well in one area but poorly in another. As your future is at stake, be sure your advisors are having these crucial conversations with you.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Social Security is a significant source of retirement income, particularly for women. But how well do you comprehend the advantages you are entitled to? Here’s what you should know about social security for women.

1. Women in retirement face more financial difficulties than males.

Although women rely on Social Security more than men, their payouts are usually less. After all, you earn more Social Security credits and receive larger benefits if you work more and pay more taxes. According to the Social Security Administration, women often live longer but earn smaller pensions and have fewer assets than men.

Women should make sensible investments and be aware of the Social Security benefits to which they are entitled if they want to avoid financial difficulties in retirement.

2. You can begin receiving partial benefits at age 62.

The Social Security Administration (SSA) states that you can begin collecting partial benefits at age 62 if you have been employed and paid Social Security taxes for at least ten years and have accrued at least forty work credits.

You will receive all your legally due benefits if you wait until you reach full retirement age.

Depending on your birth year, the SSA defines “full retirement age” as being between 66 and 67. Locate the chart on page 7 of SSA Publication 05-10024 to know your exact full retirement age.

3. Marital Status Doesn’t Limit Social Security Benefits

According to Christopher Liew, CFA charter holder and creator of Wealthawesome.com, you and your spouse can apply for Social Security benefits independently and individually. However, you both must have prior employment history and separate service records.

That implies that your combined retirement benefits should automatically exceed $3,500 per month if you have a claim for $2,000 per month and your spouse has a claim for $1,500 per month. You are not just allowed to receive 50% of your spouse’s pension, which is surprising.

4. You are often paid a higher rate if you are eligible for two benefits.

If you’re married, you might qualify for a portion of your spouse’s Social Security payment, ranging from one-third to one-half. Women with a spotty job history will find this helpful.

You’ll likely get the benefit with the highest rate, though, and not both. Because of this, most working women in retirement receive their own Social Security pension rather than their husbands.

The higher your spousal Social Security benefit or your own Social Security benefit will be paid to you as a spouse.

5. Working While Retired Can Reduce Social Security Benefits

You become eligible for a portion of your Social Security benefits when you turn 62. But if you choose to continue working while getting those benefits, the Social Security Administration will lower your payouts by $1 for each $2 you make over the yearly cap, which is $19,560 in 2022.

The Social Security Administration (SSA) will only lower your benefits by $1 for every $3 you earn beyond the yearly cap ($51,960 in 2022) if you continue to work in the year you reach full retirement age. Your benefits won’t be cut in this way after you hit FRA.

6. Widows are Entitled to Social Security Benefits From Their Spouse

A widow may be eligible for 71% of her deceased spouse’s benefits at age 60. Once a widow reaches the full retirement age, this percentage increases to 100%.

The SSA might be able to provide you with a lump sum payment of $255 if you were cohabitating with your spouse at the time of their death.

7. You May Still Be Eligible for Your Ex’s Benefits If You’re Divorced

You might believe that once you get divorced, all of the financial advantages of marriage are lost. But it doesn’t usually work that way when it comes to Social Security.

If you are currently single and your ex-spouse was married for at least ten years, you might be eligible to file for benefits depending on their employment. (This does not reduce the advantages they get.)

Just make sure that neither of you was married to anybody else when you were eligible for Social Security pension benefits. Your ex-service spouse’s history will determine how much of a Social Security pension you can receive.

During the divorce process, some women might consent to waiving their claim to their ex-spouse’s social security benefits. But the SSA hardly ever carries out these orders.

If you are aged 60 or older, and your ex-spouse has passed away, and you want to know your exact full retirement age, you are still eligible to receive benefits based on their job (or 50 if you have a disability).

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].