Monthly Archives: January 2018

Should You Sign Up for the Surviving Spouse Benefit?

Posted by Gary Raetz Should You Sign Up for the Surviving Spouse Benefit?

Most of us worry about our children when they’re young; specifically, what would happen to them, if you pass away prematurely? However, as the kids grow older, most of us worry about them less and less. Your spouse might be another story. The two of you are a team, both financially and in other ways, and without you they might struggle to cover the household bills or live comfortably in retirement.

The Surviving Spouse Benefit is aimed at this concern. As the two of you move into retirement together, it makes sense to analyze your pension as compared with your overall cost of living. If something happens to you, can your spouse survive without the income from your pension? The Surviving Spouse Benefit would replace a portion of your income, in the event that you pass away and your pension payments end.

Similar to life insurance, you will pay a premium if you elect the Surviving Spouse Benefit. Unlike many types of life insurance, however, you are not subject to medical qualifications. Therefore, the Surviving Spouse Benefit might be a good option for those in poor health, who otherwise have trouble obtaining a life insurance policy.

If you’re in good health, though, you might get a better “deal” through life insurance. We can’t guarantee that, of course, because so many factors are calculated before arriving at life insurance premiums.

How much is the Surviving Spouse Benefit? CSRS employees could provide surviving spouses with any amount of income, ranging from one dollar per month up to 55 percent of their original pensions. Premiums for the maximum benefit fall just under 10 percent of your annuity payments each month, and are adjusted each year along with COLA.

For FERS employees, options for Surviving Spouse Benefits are more limited. You can provide your spouse with either 25 percent of your pension (for a premium of 5 percent), or 50 percent (for a premium of 10 percent).
Along with the monthly income, your spouse could also continue to participate in the Federal Employee Health Benefits program.

There are distinct advantages and disadvantages to the Surviving Spouse Benefit, and you should call us to analyze your situation in further detail before making a decision. We can help you compare the benefit to other comparable forms of protection for your spouse, and decide how to proceed.

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What Will You Do With Your Pay Raise?

Posted by Gary Raetz What Will You Do With Your Pay Raise?

The new year has arrived, and with it comes a raise in pay for many federal employees. The calculation of these pay increases is a complicated subject, far beyond the scope of this blog, but you will be notified of any raise by your employer anyway. Beyond that, you might be wondering when your pay raise will take effect, and what you should do with the increased cash flow.

When will you receive your raise? If you are subject to an increase in compensation, the exact arrival of a higher paycheck will depend upon your employee classification. For GS employees, the time table is simple; your raise will take effect during the first pay period after the new year.

For FWS employees, raises will not take effect until after the FY 2018 pay limitation is released. When you do receive your raise, paychecks will be adjusted to retroactively reflect your new pay grade. If you’re an FWS employee, you will receive more information from your employer.

What should you do with that extra money? And now we arrive at the main topic of this blog. While it can be tempting to utilize a pay increase to cover a new purchase, consider your retirement savings. If you aren’t maxing out contributions to your Thrift Savings Plan (TSP), diverting the extra cash to that retirement fund will benefit you more in the long run. You’ll not only be stashing extra money for the future; that money can also earn interest over time.

Paying down debts is another excellent idea. Work with a debt counselor to make a plan to get out of debt, stick to a regular payment schedule, and avoid taking on any new debts if possible. Entering retirement free of high credit card and other payments is one of the better ways to establish a stable lifestyle on a fixed income.

Of course, you can always give us a call if you’re trying to decide what to do with extra money in your budget. We can review your financial plans with you, and help you identify ways to put that money to its most beneficial use.


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How the New Tax Plan Might Affect You

Posted by Gary Raetz How the New Tax Plan Might Affect You

As you have probably heard by now, Congress finally agreed upon a new tax plan. While your own individual circumstances might vary from the norm, the following breakdown of the most major changes can help you see how the new tax laws might affect you. More importantly, this might help you begin to think about your budget for 2018 and following years.

Standard Deductions versus Itemized Deductions. This is the major change that will most affect taxpayers. The new tax code will include drastically different standard deductions, in the following amounts…

  • For single taxpayers, the standard deduction increased from $6,350 to $12,000
  • For married (filing jointly) taxpayers, the standard deduction increased from $12,700 to $24,000
  • For heads of household, the standard deduction increased from $9,350 to $18,000

Currently, about 70 percent of taxpayers elect the standard deduction, versus itemizing their returns. It remains to be seen whether these new higher standard deductions will encourage more people to forego itemization. At the very least, those who do take standard deductions will be paying income taxes on less of their income.

As for common deductions utilized on itemized returns, many of those have now changed.

Medical expenses. Previously, taxpayers could only deduct medical expenses in excess of 10 percent of gross income. That threshold will revert back to 7.5 percent for the next two years, allowing those who have suffered under high healthcare expenses to potentially recoup a bit more of their losses.

State and local taxes. Previously, taxpayers could deduct state and local taxes such as property taxes and sales taxes. Now, under the new law, that deduction is limited to $10,000 (or $5,000 if you’re married filing separate returns). The major reason this might matter to you: No matter where you currently live, you might be considering a move in retirement. Keep in mind that if you decide upon a state with unusually high property taxes, income taxes, or even sale taxes, your income tax deduction (if you itemize) will now be limited.

Miscellaneous deductions. Many deductions are lost completely, such as those related to tax preparation, investment fees, moving expenses, some transportation expenses, and unreimbursed job expenses. These are things to keep in mind as you create your budget for 2018. Remember that what was once tax deductible, might not be any longer.

Of course, you should always work closely with a tax professional before making any decisions regarding tax planning.

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