Retirement & Financial Planning Report Issue Thursday, September 16, 2004
FEDweek is the largest information resource in the federal government with now over one million weekly readers. *********************************************************** Valuable Information for the Federal Family 2004 Interactive Federal Leave Record at http://www.fedweek.com/Services/default.asp FEDweek Weekly Electronic Newsletter Go to http://www.fedweek.com to Sign Up-FREE! Brand New Federal Manager's Daily Report http://www.fedweek.com/subscribepopup.htm Job Bulletin Board Federal Job Search http://www.fedweek.com/Jobs/default.asp ********************************************************** In This Week's Issue: 1. Loan Arrangers 2. Signing Bonus 3. FEDweek is Announcing the Upcoming Retirement Planning Seminars http://fedweek.sparklist.com/t/294945073/821890/3/0/ 4. Withdrawal Symptoms 5. Senior Studies 6. Two-Week Shelter 7. Take And Give 8. Wednesday: September 15, 2004 12:00PM Eastern Time End of Fiscal Year 2004 This Month *********************************************************** 1. Loan Arrangers When shopping for a car, most people decide to obtain a loan through the car dealership itself. It's the most convenient option and dealerships promise you the best available rate, However, most dealers simply arrange financing for you--they obtain a loan commitment from the automaker's financing company and then mark up the loan by adding two to three percentage points to your rate. If you qualify for a 5 percent interest rate loan, for example, you may actually pay 8 percent. This practice can add at least $1,000 to the cost of your auto loan. How can you avoid this extra charge? * Get pre-approved for a loan before you go shopping. A bank loan may be available. Then you can negotiate the best price on a vehicle without hassling about the financing. * Call your credit union. Many credit unions have a list of dealerships they recommend to their members. In return, those dealerships provide loans to those members at the credit union's interest rate, without a markup. * Tap your home equity. If you're willing to use your house as collateral for a car loan, you'll get a low interest rate, easy access to credit, and the interest you pay may be tax-deductible. 2. Signing Bonus When a variable annuity is "annuitized," you (and perhaps your spouse) agree to receive lifelong cash flow. Each payment you receive will be part taxable and part a tax-free return of your investment. Now, some annuity issuers are offering "guaranteed living benefits." To get these benefits, you would have to annuitize the contract rather than receive a lump-sum cash distribution, and you'd have to keep your money with the original company. Suppose, for example, you buy a variable annuity from one issuer. If you decide to annuitize, you can annuitize with the same company or move your contract to another annuity issuer, tax-free. Today, some variable annuity issuers are offering to base your monthly payments on a minimum contract value, if you keep your money with the same company. The contract value on which the annuity is based may be determined as if it had grown by at least 5 percent per year. However, these guarantees come with a cost so you should read the contract carefully to see if you're paying a reasonable price for what you're getting. 3. FEDweek is Announcing the Upcoming Retirement Planning Seminars http://fedweek.sparklist.com/t/294945073/821890/3/0/ Over The Next 30 Years, the Baby-Boomers (YOU) Will Transfer to Your Heirs Over Thirty-Five Trillion Dollars! As you know, the baby-boomers are growing more mature every day and are planning for their retirement. Are you a baby-boomer? Are you prepared for your retirement and to transfer your estate to your loved ones? FEDweek has partnered with two of the most respected federal retirement and estate planning training organizations to provide federal employees with the highest quality of seminars related to your federal retirement, financial and estate planning. Below are the seminar locations through 2004: ************************ Date Sept 28-30 (PBSC) Denver, Co. http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Sept 28-30 (NITP) Washington, DC - Washington Plaza Law Enforcement Only http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Oct 5-7 (PBSC) Phoenix, AZ- Sunburst Resort http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Oct. 19-21 (PBSC) San Antonio TX - Wellesley Inn http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Oct. 26-28 (NITP) Virginia Beach, VA. - Doubletree http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Oct 26-28 (PBSC) San Diego, CA - Town & Country Resort http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Nov 9-11 (PBSC) Honolulu HI - Doubletree http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Nov. 16-17 (PBSC) Indianapolis, IN - Radisson Hotel Airport http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Nov 16-18 (NITP) Washington, DC - Washington Plaza http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Nov 30- Dec 2 (NITP) Linthicum MD - Holiday Inn BWI http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Dec 6-8 (NITP) Huntsville Al - Holiday Inn Research Park http://fedweek.sparklist.com/t/294945073/821890/3/0/ Date Dec 7-9 (PBSC) Houston TX http://fedweek.sparklist.com/t/294945073/821890/3/0/ *************************** There are still a few seats available for these locations. For a complete list of seminar locations and dates through December, 2004, Go to http://fedweek.sparklist.com/t/294945073/821890/3/0/ We've also recently added additional seminars for 2004 (Even Hawaii and San Diego!!) dramatically expanding the coverage areas to include most cities throughout the entire country, with more to come. Go to http://fedweek.sparklist.com/t/294945073/821890/3/0/ to see the latest schedule. These comprehensive programs will provide the participant with valuable information about retirement planning and ways to ease the transition into retirement. The seminar speakers, all experts in their field, will challenge you to ask tough questions. These seminars are broken down into a number of components that discuss considerations necessary for planning for retirement, including: FEDERAL RETIREMENT BENEFITS THRIFT SAVINGS PLAN INSURANCE, MEDICARE AND SOCIAL SECURITY BENEFITS FINANCIAL AND TAX PLANNING ESTATE PLANNING LIFE AFTER RETIREMENT AND SECOND CAREERS For more info on these retirement planning seminars, go to http://fedweek.sparklist.com/t/294945073/821890/3/0/. Also, pass the word along to your colleagues that there will also be multi-seminar attendee discounts for employees attending from the same agency office location. Publisher's Note: All Seminar Attendees Who Register For Any Retirement Planning Seminar Will Two Valuable FEDweek Publications FREE! 4. Withdrawal Symptoms If you use the so-called 72(t) rules to take penalty-free withdrawals from your IRA before age 59-1/2, you can choose among three approved methods: * Life expectancy (also known as the required minimum distribution, or RMD, method). If your life expectancy is 46.5 years, you'd withdraw 1/46.5 of your IRA balance. The next year, you'd withdraw 1/45.5 of the new balance, based on your new life expectancy. And so on. This method is chosen by people who want to minimize penalty-free withdrawals and leave as much as possible in the IRA. * Amortization and annuitization methods. These methods assume your IRA will grow at a certain rate. Therefore, the IRA is projected to become larger and you can take out greater amounts each year. These two methods are used by people who want to maximize penalty-free withdrawals for living expenses. Generally, the amount you withdraw in Year One is the amount you'll withdraw in each successive year. In some circumstances, by using the amortization method you might be able to take out three times as much, penalty-free, as you can with the life expectancy method. 5. Senior Studies A 529 college savings plan may double as a retirement plan. All you have to do is designate yourself as the beneficiary of your 529 plan and use the money for your own education. Under current law, all investment earnings are tax-free if the withdrawn funds are spent on higher education expenses, supplies, room and board. (The tax benefits are scheduled to dim after 2010 but it's probable that this popular provision will be extended.) To qualify as education expenses, the institution from which you take classes must be an accredited post-secondary institution or consortium of such institutions. There is no requirement that you actually complete a degree. Many local colleges and universities offer extension, certificate, and for-credit courses that include travel, cruises, archeological digs and other interesting opportunities. Examples of accredited schools include: *The Golf Academy of San Diego. This college offers other "golf courses" at several campuses. * The Cooking School of the Rockies in Colorado. Your local college also may offer such courses. * The Nashville Auto-Diesel College for car repair and refinishing. You can find accredited schools for scuba diving, horticulture, fashion design, and so on. Just make sure you enroll in a 529 plan (Oregon's, for example) that puts no age limit on beneficiaries. Fortunately, you don't have to be living in the state where the plan was set up to use it. 6. Two-Week Shelter The tax code allows you to rent a home (including a vacation home) for up to 14 days per year without having to declare any taxable income. If you own a vacation home in a resort area or near a major sporting event you might collect thousands of dollars without owing tax or losing any tax benefits. What's more, if you or your spouse is a principal in a sideline business or professional practice, you can rent your vacation home to the company for a retreat or a management meeting. The company can deduct the payment, as long as it's reasonable for the length of the meeting and the time of the year; you won't pick up any taxable income on your personal return, as long as you observe the 14-day limit. A problem may arise, though, if your spouse runs a business structured as a sole proprietorship; the business may not be able to deduct the rental expense if your spouse owns the vacation home. However, if the property is held in your name (the name of the non-business-owner spouse), the deduction can be taken. 7. Take And Give An estate planning tool known as a grantor retained annuity trust (GRAT) lets you remove assets from your estate without giving up the income they generate. Using such a trust, you can remove an asset from your estate with reduced gift tax consequences. Meanwhile, you can continue to enjoy annuity income from the asset transferred to the trust for a predetermined period of time. Your family members (the GRAT beneficiaries) ultimately will receive the gifted assets, which might be stocks, other investments, or real estate, at the end of the trust term. Because they are annuities, GRATs pay you a fixed dollar amount each year. Be cautious, however: if you take more income from the trust than you can use during your lifetime, you will wind up putting that unspent money back into your taxable estate and possibly paying estate taxes on it. Your gift tax is based on the present value of the remainder interest going to your heirs. Therefore, with GRAT you will be transferring the assets at a discounted rate, which means a lower gift tax bill for you. GRATs are irrevocable so you can't take the assets back later if you decide you need them. Thus, you should be sure you can afford to lose control of those assets before placing them in the trust. 8. Wednesday: September 15, 2004 12:00PM Eastern Time End of Fiscal Year 2004 This Month *********************************************************** The Brand New In-Print 2005 CSRS & FERS Retirement Planning Guides Are Now Available For Immediate Shipment! Plus--Get FEDweek's Social Security and Medicare for Federal Employees & Retirees FREE! We are Fully Stocked and Ready for Your Agency Bulk Orders. Go to http://www.fedweek.com/Publications/default.asp to place your order now or continue reading about our special FREE Offer. ******************************************************** ** FEDweek Reader Special FREE Offer ** Order Yours Now and We'll Ship Them Straight Back out To You--Along With FEDweek's Social Security/Medicare for Federal Employees & Retirees FREE. http://www.fedweek.com/Publications/default.asp That's right, when you place an order for either one of our brand new 2005 CSRS or FERS Retirement Planning Guides you will receive FREE, The Social Security/Medicare Handbook for Federal Employees & Retirees. ********************************************************** Go to http://www.fedweek.com/Publications/default.asp to place your order for Your 2005 CSRS or FERS Retirement Planning Guide now. *********************************************************** *********************************************************** The 2005 CSRS & FERS Retirement Planning Guides http://www.fedweek.com/Publications/default.asp Now in their seventh year of print (and over 550,000 sold), these CSRS and FERS Retirement Planning Guides truly help you fully understand your federal retirement. These planning guides simplify the retirement planning process, helping you calculate your annuity (with plenty of examples), warn you about possible reductions in your annuity, tell you how Social Security fits into the picture, and what to do about health and life insurance. In short, they contain everything you need to know to make your federal retirement a success. These 2005 CSRS & FERS Retirement Planning Guide are NOT Dot.com downloads or government handouts or pamphlets, they are In-print comprehensive and easy-to-understand planning guides that were written and edited by our veteran-team of federal retirement planning experts in the field. Here are some of the key features and updates that these 2005 retirement planning include: A step by step guide to embarking on the retirement journey A description of the new long-term care program, with explanations of potential traps for those close to retirement A quick reference guide to benefits your survivors would stand to receive on your death A description of how Tricare-for-Life might replace FEHB as your health benefits provider Details on how to carry retirement and other benefits into retirement and how you can change those benefits after retirement An easy to follow guide to understanding annuity statements How the new TSP investment, rollover, withdrawal and other rules will affect you before and after retirement Latest information on COLA rates and policies, payments to survivors and other benefit rates The latest information on Social Security benefit rates and eligibility rules The latest information on FEGLI, FEHB, service crediting for retirement purposes and other vital retirement-related issues ALSO IN THESE 2005 CSRS & FERS RETIREMENT PLANNING GUIDES: How to calculate your annuity (with plenty of easy-to-follow examples) Eligibility requirements Different retirement types (regular, early, deferred, special disability) Credit for military service Deposits and redeposits Cost of living adjustments The effect of divorce on annuities Social Security The Thrift Savings Plan Taking health and life insurance into retirement Annuity taxes Survivor benefits And much more! *********************************************************** Go to http://www.fedweek.com/Publications/default.asp to place your order now and get your FREE Social Security/Medicare Handbook for Federal Employees & Retirees Handbook shipped to you immediately. *********************************************************** Other Ways to Order: You may also call our toll-free order line at (888) 333-9335 to place your order for these retirement planning guides: The 2005 CSRS Retirement Planning Guide The 2005 FERS Retirement Planning Guide Or you may also mail your order with payment of $13.95 ($9.95 plus $4.00 s&h) to: FEDweek P.O. 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