Monthly Archives: December 2017

What is the Advantage of a Fed-Focused Advisor?

Posted by Gary Raetz What is the Advantage of a Fed-Focused Advisor?

There are plenty of financial advisors in the world; it seems there is at least one in every town! For most people, the decision to choose an advisor might come down to who is close to home, who has more experience, and who their friends or co-workers recommend. But when you’re a federal employee, you must confront an additional criteria for choosing a financial professional: Does this person understand your unique retirement system?

Some general retirement planning advice applies to everyone, or at least most people. But your retirement plan is structured very differently from most plans in the private sector. You need to carefully choose a financial advisor who can help you identify unique opportunities and benefits available to you.

A Fed-focused Advisor focuses on the federal employee retirement system to become a specialist in this area. This person can help you fine-tune your plans to include issues that affect you specifically, such as:

  • choosing the investment allocations that fit your specific needs
  • diversifying your portfolio, based on your risk tolerance, desire for growth, and retirement income requirements
  • help you avoid short-term mistakes and focus on long-term goals
  • design a distribution plan and efficient income strategy once you reach retirement
  • preparing for tax liability issues

It is preferable to conduct these activities with a Fed-focused advisor who understands the complexities of the federal retirement system. However, you might not find this type of advisor practicing in your hometown, so what do you do?

With today’s technology, we can conduct appointments via phone or even live video stream, so there is no need to settle for an advisor who lacks expertise in your situation. Licensing from oversight organizations such as FINRA and SIPC applies on a national level, meaning you’re free to choose a Fed-focused advisor in any state.

We are Fed-focused Advisors, and we work with clients around the country. To learn more about your federal retirement benefits, and devise a strategy for a satisfactory retirement, give us a call. We will be happy to help you.

 

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Should You Choose a Roth TSP?

Posted by Gary Raetz Should You Choose a Roth TSP?

As a federal employee, you have the option to set aside money for retirement via your Thrift Savings Plan (TSP). That’s on top of your annuity plus Social Security benefits, meaning you have quite a bit of power to establish a healthy retirement income for yourself! So, deciding to utilize your TSP is probably not a difficult decision… But deciding which type of TSP could present a dilemma.

With a traditional retirement account, including the TSP, taxes are deferred until distributions begin in retirement. All money that you set aside now is free of taxes – essentially reducing your taxable income for each year that you contribute to the fund – but will be taxed as regular income when you begin taking distributions someday.

With a Roth account, you make after-tax contributions. It doesn’t help you with your income taxes at all right now, but all distributions from the account will be free of taxation once you retire. For some people, the allure of tax-free income in the future can be a major selling point for the Roth option.

At this point, you might realize the main deciding factor for most people: If they believe they will fall into a higher tax bracket in retirement, they often choose to fund a Roth account now. On the other hand, if they believe they will drop down by one tax bracket (or more), they often stick with a traditional TSP.

That’s an important consideration, but here is another piece of the puzzle. How much do you need to lower your income tax burden now? What if, by saving money on federal income taxes each year, you would actually be able to save more for retirement? That’s a difficult opportunity to pass up, too!

As you can see, choosing between a traditional or Roth TSP can be a difficult decision for many people. There are several factors to weigh carefully, along with attempting to predict the future.

Since this is an important decision that could make a significant different to both your current and future tax status, give us a call to discuss the issue further. We can help you calculate your approximate retirement income, compare the two tax scenarios, and come to a decision that works for your unique situation.

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Could Working During Retirement Actually Cost You Part of Your Social Security Benefits?

Posted by Gary Raetz Could Working During Retirement Actually Cost You Part of Your Social Security Benefits?

Once you retire, you will rely upon your Social Security benefits, your annuity from years of service as a federal employee, and any money saved in your Thrift Savings Plan. That all sounds pretty straightforward, right? But what if you decide to take on a part-time job, start a home-based business, or even begin a new career after you retire?

In some cases, your Social Security benefits could be reduced, so take note of the rules regarding post-retirement earnings.

The first thing you need to know: If you wait to reach your full retirement age (currently somewhere between 65 and 67, defined by Social Security, and based upon your birth year), then you won’t have to worry about the Administration withholding any of your Social Security benefits.

The potential problem happens when you retire before your full retirement age. In that case, part of your Social Security benefits might be withheld, depending upon your income.

The earnings threshold is currently set at $16,920 per year. If your earnings from work fall below this limit, you don’t have to worry about anything. However, if you earn more than $16,920 per year, one dollar of your Social Security benefits will be withheld for every two dollars that you earn above the limit.

Remember, once you reach your full retirement age, this rule won’t affect you anymore. So, it’s not a situation that will last throughout retirement, but one that specifically affects those who take an early retirement.

Keep this rule mind if you decide to retire before your full retirement age. If an unexpected expense comes up, if you decide to earn extra money, or if you simply get bored and want to go back to work, your Social Security benefits could be affected. Give us a call and we can answer your questions or help you decide how this rule might affect your situation.

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How to Make Sure Your Charitable Contributions Count

Posted by Gary Raetz How to Make Sure Your Charitable Contributions Count

It feels good to give to the less fortunate, especially at this time of year. But, it also feels good to earn a valuable deduction on your income taxes. You can accomplish both of these goals at the same time, by claiming your charitable contributions as a deduction on your federal income tax return in the spring. But, as with any other deduction provision, you must carefully follow guidelines set by the IRS. So, if you consider gifting a charity, make sure to follow these rules.

Research your chosen charity. In order for your deduction to count, the charity of your choice must be qualified by the IRS. Fake charities do exist, and are especially prevalent during the holiday season. They might even appear quite official. So, use this search tool, provided by the IRS, to ensure that you are gifting to a qualified charity and you will be able to use the gift as a tax deduction.

Keep appropriate proof. Without proof of your charitable donations, you can’t claim the deduction. And, if you try to claim it anyway, you will lose the deduction (and probably owe the IRS money) in the event your return is ever audited. Credit card or bank statements will suffice, or ask for a written receipt for gifts of cash and household goods.

Value household goods correctly. It’s a common misconception that you can claim the original purchase price of household goods when donating them to charity. Actually, you can only claim their fair market value (for example, the amount for which you or the charity could sell the item). Of course, in some cases people do donate antiques or other items that have appreciated in value. In this case it would be wise to keep a copy of an appraisal, or some other proof of the item’s worth. Remember, too, to keep your documentation secure. Aside from paper copies, it might help to snap pictures of receipts and upload them into your cloud system.

Make donations by December 31. This is the deadline for counting them toward your 2017 tax deductions.

Work with a skilled tax professional. As with any tax matter, experienced advice can spare you headaches in the future. Work with a tax pro to claim deductions correctly, and help prevent problems with your return.

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