Author: CreativeOne

Is it Time for an Economic Recovery?

Post author By CreativeOne
Post date July 15, 2020

Is it Time for an Economic Recovery?

The first half of 2020 has been a rollercoaster ride. The COVID-19 pandemic completely altered our way of life and threw the economy into a tailspin. Most states have started the reopening process, but there is still significant uncertainty about the long-term impact of coronavirus and how long the pandemic will continue.

Federal Reserve Chairman Jerome Powell recently said the economy faces a “long road” to recovery, and predicted the process may take through 2022.¹ While the recovery may be a long-term journey, there have been some signs of hope in recent months:

Stock Market Returns

The stock market had been enjoying the longest bull market in history before the coronavirus pandemic hit.² The bull market came to an abrupt end starting in late February. On February 20, the S&P hit a high of 3373. From that point through March 23, the S&P fell to 2237, a decline of 33.7%.³

However, since that time, the market has increased to 3115 through June 18. That’s an increase of 39.25%. The S&P is nearly back to its pre-COVID levels.³

Of course, it’s impossible to predict the future direction of the markets. Just because the market has been on an upswing doesn’t mean it will continue. A spike in cases or a second round of shutdowns could send the markets back into a decline.

Unemployment

The pandemic has driven unemployment to record-high levels. Through mid-June, the country had 13 consecutive weeks with more than 1 million new jobless claims. Prior to the coronavirus pandemic, the record for a single week was 695,000 in May 1982.⁴

The good news is that jobless claims have been declining. At the beginning of the pandemic, weekly jobless claims exceeded 6 million. In fact, up until late-May, they exceeded 2 million. So while jobless claims remain at record highs, they are on the decline. The amount of continuing claims has also dropped from 25 million in early May to just over 20 million in early June.⁴

Consumer Spending

Consumer spending was impacted significantly by the COVID-19 pandemic. That’s not surprising, given most states were effectively shut down for two months. In April, consumer spending dropped by 16.4%, a record monthly decline.⁵

In May, consumer spending set another record—this time for biggest monthly increase. The figure rose by 17.7%, driven by large increases in clothing (188%), furniture (+90%), sporting goods (+88%), and electronics (+55).⁵

Consumer spending by itself doesn’t mean the economy is on the path to recovery. There are still plenty of uncertainties in the economy. However, it is a good sign that consumer spending is nearly back to its pre-pandemic levels.

This is uncharted territory for all of us. The situation and data changes so fast that it’s impossible to project where the economy may be headed. A comprehensive strategy that aligns with your goals and risk-tolerance can keep you on track to meet your long-term objectives.

Let’s connect today and talk about your concerns, questions and challenges. At Benefit Resource Partners, we can help you develop and implement a strategy. Contact us today and let’s start the conversation.

1https://www.marketwatch.com/story/fed-sees-rates-near-zero-through-2022-says-asset-purchases-will-continue-2020-06-10

2https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html

3https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_hL3sXpOQHsnWtAal04OQCA1:0

4https://www.cnbc.com/2020/06/18/weekly-jobless-claims.html

5https://finance.yahoo.com/news/consumer-spending-comes-back-with-a-vengeance-in-may-morning-brief-100600715.html

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20195 – 2020/6/22

July 15, 2020

Uncategorized

Financial Moves to Consider in a “Down” Year

Post author By CreativeOne
Post date July 8, 2020

Financial Moves to Consider in a
"Down" Year

It’s hard to find good news in today’s economic environment. COVID-19 single-handedly brought an end to the longest bull market in history and ushered in record-setting unemployment.

If you’re like millions of others in the country, you’ve lost income or possibly even your job. You also may have lost savings due to market volatility. Given that the coronavirus pandemic is still ongoing, there’s no telling how the economy or the financial markets may respond through the rest of the year.

Even in down years, there are still opportunities to improve your financial future. Below are three such moves to consider in your strategy:

Fund a Roth IRA.

In 2020, you can contribute up to $6,000 to a Roth IRA, or up to $7,000 if you are 50 or older.¹ A Roth can be helpful because you can take tax-free withdrawals from it after age 59 ½, assuming you’ve held the account for at least five years.

Not everyone can use a Roth. If you’re a married couple making more than $206,000 or a single person making more than $139,000, you can’t contribute to a Roth IRA.² However, if a pay cut has pushed you below the income limits, you could use this time to open a Roth.

Convert your IRA to a Roth.

Another option is a Roth conversion. This is a process that converts a traditional IRA into a Roth. You pay taxes on your IRA balance and then the net amount is deposited into a new Roth IRA. You face a current tax liability, but you get potentially tax-free income in retirement.

It may make sense to do a Roth conversion during a down year, when your income is reduced. You may be in a lower tax bracket and will thus face a lower tax bill on the conversion. A financial professional can help you explore this option.

Dollar-cost average.

Dollar-cost averaging is a strategy that can be helpful at all times, but especially during volatile periods. You contribute the same amount of money at regular intervals, like once per month. That money is then invested in a predetermined strategy.

The benefit of this is that you buy more shares when prices are low and fewer shares when prices are high. This reduces your overall cost, which increases your potential for growth. Again, a financial professional can help you implement a dollar-cost averaging strategy.

We can help you determine the right strategy in this volatile time. Contact us today at Benefit Resource Partners so we can help you develop a plan. Let’s connect soon and start the conversation.

1https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits#:~:text=For%202020%2C%20your%20total%20contributions,less%20than%20this%20dollar%20limit.

2https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020

July 8, 2020

Financial Planning Retirement Planning

Are “Penalty-Free” 401k Withdrawals Free?

Post author By CreativeOne
Post date June 22, 2020

Are "Penalty-Free" 401k
Withdrawals Free?

On March 27, the government passed the Coronavirus Aid, Relief, and Economic Security Act, otherwise known as the CARES Act. The Act had a wide range of provisions to provide Americans and small businesses with economic support during the coronavirus pandemic. The bill provided stimulus payments, enhanced unemployment, and various forms of business loans.

One provision that flew under the radar was the ability for qualified individuals to take distributions from their 401(k) plans and IRAs without paying early distributions penalties. Normally, you face a 10% early distribution penalty if you take a withdrawal from these accounts before age 59 ½.¹

However, under the CARES Act you can take up to $100,000 as a penalty-free distribution from your qualified accounts, assuming you are a qualified individual.² Are you qualified? And even if you can take a distribution, is it wise to do so?

CARES Act Qualified Plan Distributions

Under the CARES Act, you can take up to $100,000 in qualified plan distributions if you are a qualified individual. Who is qualified? Anyone who meets the following criteria:

You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or
You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.²

If you meet any of these criteria and you decide to take a distribution, you won’t have to pay the 10% early distribution penalty, even if you are under age 59 ½. However, you will still have to pay income taxes on the distribution. You can spread the taxes out over a three-year period, but you still have to pay them.²

Should you take a CARES Act distribution?

A CARES Act distribution may be the right strategy if you are in a financial crisis and have limited avenues available for relief. However, just because the distribution is “penalty-free” doesn’t mean it comes without consequences.

In addition to paying taxes on the distribution, you’ll also forego any future growth on the assets you withdraw. Tax-deferred growth is one of the biggest advantages of a qualified account. However, if you pull out funds, you lose all future tax-deferred growth on that amount. That could lead to a substantial reduction in your future assets at retirement.

Instead of dipping into your 401(k) or IRA, consider what other options you may have available. For instance, perhaps you could tighten your budget. Maybe you could refinance mortgages or other loans, or even renegotiate new payment terms. You may even consider picking up additional work until the crisis passes. It may be tempting to take an IRA distribution, but you’re only taking money from your future self.

Let’s talk about strategies to help you get through this period. Contact us today at Benefit Resource Partners. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.

1https://www.irs.gov/newsroom/what-if-i-withdraw-money-from-my-ira

2https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers

June 22, 2020

Tags 401k Planning, CARES Act, Financial Planning, Retirement Planning

Financial Planning Retirement Planning

Investing After Retirement: Tips to Protect Your Nest Egg

Post author By CreativeOne
Post date June 15, 2020

Investing After Retirement: Tips to Protect Your Nest Egg

Saving for retirement can often feel like climbing a mountain. It takes immense planning and discipline to reach the summit – the moment when you can finally retire and leave the working world behind.

Much like climbing a mountain, though, the summit isn’t the end of the story. You still have to get back down the mountain. Often, climbing down the mountain can be more dangerous than the ascent. It requires just as much planning and focus.

The same is true of continuing to grow your savings after retirement. Technically, you’ve reached the summit and retired, but you still have a long way to go. According to the Society of Actuaries, a 65-year-old man has a 50% chance of living to 87 and a 25% chance of living to 93. For a woman, those ages are 89 and 95.¹ If you retire in your mid-60s, it’s very possible that you will live another 20 to 30 years.

How do you make your savings and income last for that period of time? Your strategy should be based on your unique needs and goals, but there are a few good practices to keep in mind. Below are a few tips to keep in mind:

Be mindful of inflation.

Inflation is the increase in prices of goods and services. Annual inflation is usually modest. In fact, it hasn’t exceeded 5% since the 1980s.²

Even modest inflation can impact your strategy over the long-term, though. Consider an average 3% inflation rate. Over 24 years, that means a doubling in prices. Could you afford to see your expenses double throughout retirement?

A strategy that leaves room for growth potential can help offset the effects of inflation. As your assets grow, you may be able to take increased income to cover the increase in prices.

Many retirees opt for strategies that have little risk exposure. However, it may be wise to allocate some portion of your savings to assets that offer growth potential so you can keep up with inflation. A financial professional can help you find the right mix.

Take the “Goldilocks” approach.

Do you remember the story of Goldilocks, the girl who finds her way into the home of a family of bears? She tries their porridge, their chairs, and even their beds until she finds the one that is just right.

A “Goldilocks” approach to growing your savings may not be a bad idea, especially after retirement. Don’t look for the portfolio that offers the most return or the least risk. Rather, look for the mix that is “just right” for your needs and goals. For instance, it may be that your “just right” strategy is one that limits risk but also offers growth potential and consistent income. A financial professional can help you find your “just right” strategy.

Have a withdrawal strategy.

If you’re like many retirees, you’ll receive Social Security and possibly even a defined benefit pension in retirement. But you also may need to take withdrawals from your savings to supplement those income sources.

What’s the right amount of income to take? If you take too little, you may not live the type of lifestyle you desire. Take too much and you could drain your savings. Before you enter retirement, you may want to plan your income strategy. Determine the right level to take without draining your savings.

Also develop backup plans. For example, how will you adjust your income if your investments decline? What if you have a costly emergency? How will you cover that expense? Should you look at tools to guarantee* your income? Again, a financial professional can help you answer these questions.

Ready to develop your post-retirement strategy? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.

1https://www.fidelity.com/viewpoints/retirement/longevity

2https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. 20113 – 2020/5/26

June 15, 2020

Tags 401k Planning, Financial Planning, Investing, Retirement Planning

Financial Planning Retirement Planning

What’s Next for a COVID-19 Economy?

Post author By CreativeOne
Post date June 9, 2020

What's Next for a COVID-19 Economy?

The economic fallout from the coronavirus pandemic continues, even as states start to reopen restaurants, retail stores, and other businesses. The crisis brought an end to the bull market that started in 2009 and threatens to usher in a recession.¹

What does the future hold for the stock market and the economy? When will the economy recover? And how will this crisis impact your retirement and your financial future?

It’s impossible to definitively answer those questions. In many ways, this event is unprecedented. We don’t know how long the virus will present a threat, so it’s impossible to predict how or when the economy may recover.

However, it is possible to make adjustments to your strategy to minimize risk and take advantage of potential opportunities. It’s also helpful to keep in mind the long-term nature of the economy and the financial markets. Nothing lasts forever, including recessions and bear markets.

Stock Market Performance

The financial markets have been a rollercoaster since the onset of the pandemic. On February 19, the S&P 500 closed at 3386. On March 23, it closed at 2237, a drop of 33.93%. Since that time, the market S&P has climbed to 2863 as of May 15.²

It’s important to remember that the stock market isn’t the same as the economy. A drop in the stock market doesn’t necessarily signal a recession, just like a rise doesn’t necessarily spell an economic recovery.

It’s also helpful to remember that bear markets are a natural part of investing. They aren’t always caused by global pandemics, but they do happen. There have been 16 bear markets since 1926. On average, they last 22 months and are followed by a 47% gain in the year following the market’s lowpoint.³ We can’t predict when the market will hit its low point, or if it already has, but if history is any guide, the market will recover at some point.

Economic News

While the stock market has bounced back somewhat since its March decline, the overall economic news continues to be negative. More than 36 million people have filed for unemployment since late March. In 11 states, more than a quarter of the workforce is unemployed.⁴

In the first quarter, the economy contracted for the first time since the 2008 financial crisis. GDP declined by an annualized rate of 4.8%. That’s not as steep as the GDP decline of 8.4% annualized decline in 2008. However, it’s possible the economy could face a greater decline in the second quarter. Consumer spending, which accounts for 70% of GDP, fell by an annualized rate of 7.6% in the first quarter. That’s the steepest drop for that metric since 1980.⁵

While states may be starting the reopen process, there is still significant uncertainty surrounding the crisis and the economy’s future. The good news is you can take action to minimize risk. Contact us today at Benefit Resource Partners. We can help you analyze your goals and needs and implement a strategy. Let’s connect today and start the conversation.

1https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html

2https://www.google.com/search?safe=off&tbm=fin&sxsrf=ALeKk01UjyvpIcf62vDAgyulZ3dZuL1GWg:1589832165005&q=INDEXSP:+.INX&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyevq5uEYEB1gp6Hn6RQAAItD1MEkAAAA&sa=X&ved=2ahUKEwikycWrmr7pAhWWU80KHfhUBrcQlq4CMAB6BAgBEAE&biw=1536&bih=754&dpr=1.25#scso=_JerCXv0o9o70_A-NwLLYBg1:0

3https://www.fidelity.com/

4https://www.nytimes.com/2020/05/14/business/economy/coronavirus-unemployment-claims.html

5https://www.npr.org/sections/coronavirus-live-updates/2020/04/29/847468328/tip-of-the-iceberg-economy-likely-shrank-but-worst-to-come

June 9, 2020

Tags Economic News, Financial Planning, Retirement Planning

Financial Planning Retirement Planning

Should You Leave Money in Your 401(k)?

Post author By CreativeOne
Post date February 26, 2020

Should You Leave Money in Your 401(k)?

There’s a growing trend among new retirees. With increasing frequency, Americans are choosing to leave their retirement savings. According to data from Fidelity, 55% of workers leave their retirement savings in their former employer’s 401(k) plan for a full year after retirement. That’s up from 45% just four years ago.¹

Why are retirees leaving their assets in their old 401(k) rather than rolling those funds to an IRA? There could be a variety of reasons. Workers may be happy with the plan’s investment options and administration. They may feel comfortable with the plan’s online access and other management tools. They might not need the money immediately, so they don’t have urgency to do anything with it. It’s also possible that some retirees may not be aware that they can roll their funds into an IRA tax-free.

While there are certainly benefits to keeping your assets in your employer’s 401(k), there are also good reasons to roll the assets into an IRA. If you’re approaching retirement, now is the time to consider your options for your 401(k), which may be your largest retirement asset. Below are a few factors to consider:

Investment Options

If you’ve been in your 401(k) plan for a significant amount of time, you are likely familiar with the plan’s investment options. You may feel comfortable with your allocation and perhaps you even like the plan’s fee structure and performance.

However, your goals and risk tolerance won’t always be the same as they are today. Just as your investment strategy has evolved through your career, it will likely continue to evolve through retirement. What you’re comfortable with today may not be something you’re comfortable with in the future.

Generally, IRAs offer significantly more investment options than most 401(k) plans. That’s not necessarily true with every IRA and 401(k), but it is often the case. While a 401(k) plan may offer dozens of options from select providers, an IRA will often allow you to choose from a wide universe of stocks, bonds, mutual funds, ETFs, annuities, and more. That greater diversity of options can help you develop an allocation that is just right for your goals and risk tolerance, no matter how it changes in the future.

Management and Administration

You also may be comfortable with your 401(k) plan’s management and administration tools. Perhaps the website is easy to use. Maybe you have a dedicated support person within the plan administrator’s office. You know how to make changes and review your account, and you may not want to make changes at this time.

Again, though, consider whether it will still be convenient in the future to keep your assets in your old 401(k). If you’re like many retirees, you may have multiple 401(k) plans from old employers. You also might have IRAs and other investment accounts. It’s difficult to manage and adjust your strategy when you have accounts spread across multiple custodians and institutions. You could simplify the process by consolidating your qualified retirement assets into one IRA.

Also, when you reach 72, you’ll have to take required minimum distributions (RMDs) from your 401(k) and IRA. Again, that process may be inconvenient if you have to pull distributions from multiple accounts. If you consolidate your qualified assets into one IRA, you simply have to make withdrawals from one account to satisfy your RMD each year.

Income Protection

While you may not need to tap into your 401(k) assets today, it’s possible that at some point in the future you will need to take withdrawals from your retirement savings. Of course, it’s difficult to know how much you can safely take in a withdrawal each year. What if you live longer than you anticipate? What if the market takes a downward turn? How can you be sure your assets and income will last for life?

In most IRAs, you can use financial vehicles like annuities to convert a portion of your savings into guaranteed* income. You receive a regular consistent check that is guaranteed* for life, no matter how long you live or how the markets perform.

Historically, annuities with guaranteed income benefits have been more available in IRAs than in 401(k) plans. However, the passage of a new law, called the SECURE Act, creates the possibility for 401(k) plans to start offering these vehicles. Whether it’s through your IRA or 401(k), guaranteed income could give you a base level of financial stability confidence in retirement.

Ready to implement a plan for your 401(k) assets? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

1https://www.marketwatch.com/story/more-americans-are-leaving-their-money-in-401k-plans-after-retirement-should-you-2019-10-31

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

19563 – 2019/12/16

February 26, 2020

Tags Financial Planning, Retirement Planning

Financial Planning Retirement Planning

What in the World is an Investment Policy Statement?

Post author By CreativeOne
Post date February 25, 2020

What in the World is an Investment Policy Statement?

For decades, some of the world’s largest institutional investors have used one tool to guide their decision-making. Mutual funds, educational endowments, defined benefit pensions, and more all use this document to focus on their long-term goals and select only the investments that meet their specific criteria. It’s an investment policy statement (IPS).

An IPS isn’t just for institutional investors though. Individuals are now often using their own IPS to set long-term strategy and develop a formal process for choosing investments. While the format of an IPS can vary, most involve the following elements:¹

Goals – A description of the purpose of the investment and the investor’s specific objectives.
Risks – The various risks that may threaten the strategy and a statement about the maximum acceptable risk that the investor is willing to accept.
Strategy – A description of the portfolio strategy and target allocation.
Current Investments – A list of all current assets and investments that are covered by the IPS.
Selection Criteria – The criteria that an investment must meet to be included in the strategy. The criteria could be based on past return, volatility, expense ratios, and more.
Monitoring Policy – A description of how the strategy will be monitored. When will reviews take place? When will the portfolio be rebalanced? What would need to happen to trigger a change in policy?

Do you need an IPS? It could be a valuable tool to help you maintain a long-term strategy and stick with a consistent investment approach. Below are a few ways in which you might benefit from an IPS:

It helps you avoid emotional decisions.

The average equity investor routinely underperforms the S&P 500 index. In fact, over the past 30 years, the average investor has had a 3.98% average annual return. The S&P 500 has averaged more than 10% annually over that same period.²

Why do investors underperform the market? There are many reasons but one of the biggest is that investors change their strategy based on emotional decisions and short-term impulses.

For example, you may get out of the equity markets if they take a downward turn. However, by the time the market has improved, you’ve already missed much of the recovery. These kinds of decisions cost investors return over the long-term.

An IPS helps you avoid short-term impulse decisions because all of your actions are guided by the document. If a change or adjustment isn’t specified in the IPS, you don’t make it. In many ways, an IPS protects you from yourself.

It clarifies risk.

What is your risk tolerance? Don’t know? You’re not alone. Unfortunately, many investors jump right into their strategy without considering their own tolerance for risk. That often leads to an allocation that isn’t right for their needs and goals.

Risk tolerance is an important component in IPS. Before you can establish your long-term strategy, you have to define the specific levels of risk that are or are not acceptable to you. You then develop an allocation that aligns with your acceptable level of risk. Without an IPS, you might choose an allocation that has far more potential for risk than is right for you.

Ready to create your own IPS? We can help. Contact us today at Benefit Resource Partners. We can help you document your goals, clarify your risk tolerance, and create a comprehensive policy that keeps you focused on the long-term.

1 https://www.morningstar.com/articles/808692/how-to-create-an-investment-policy-statement

2 https://www.marketwatch.com/story/americans-are-still-terrible-at-investing-annual-study-once-again-shows-2017-10-19

February 25, 2020

Tags Financial Planning, IPS Statement, Retirement Planning

Financial Planning Retirement Planning

Year in Review: How Did the TSP Options Perform in 2019?

Post author By CreativeOne
Post date December 23, 2019

Year in Review: How Did the TSP Options Perform in 2019?

Do you contribute to the thrift savings plan (TSP)? For government workers, the TSP is a powerful savings vehicle. You benefit not only from agency contributions but also from tax-deferred growth. That means you don’t pay taxes on growth as long as the money stays inside the plan. Tax-deferral may help your assets compound at a faster rate than they would in a taxable account.

When you make a contribution to the TSP, you have the ability to allocate the funds across a range of investment options. They include the:¹

G Fund: Government Securities Investment Fund
F Fund: Fixed Income Index Investment Fund
C Fund: Common Stock Index Investment Fund
S Fund: Small Cap Stock Index Investment Fund
I Fund: International Stock Index Investment Fund
Lifecycle Funds

The “alphabet funds” generally invest in the types of securities included in their respective name. For example, the G fund invests in government treasuries. The S Fund invests in small cap stocks.

The lifecycle funds invest in the other funds. However, the allocation of each lifecycle fund is automatically set to align with a future retirement date. For example, the L 2050 fund is for those who will retire in or near 2050, and invests more heavily in stocks because of the longer time horizon. The L 2020 fund is for those who are retiring in the near future, and it has a much more conservative allocation. Lifecycle funds are a convenient way to make sure you maintain an appropriate allocation at all times.

Through October 31, 2019, the TSP funds have the following year-to-date returns:²

G Fund: 1.93%
F Fund: 8.82%
C Fund: 23.14%
S Fund: 19.83%
I Fund: 17.28%
L Income: 6.06%
L 2020: 7.55%
L 2030: 13.47%
L 2040: 15.72%
L 2050: 17.61%

How will the TSP funds perform in 2020?

It’s impossible to predict future returns, especially in the short-term. However, there are steps you can take to minimize your exposure to risk and improve your odds for a successful outcome. Below are a couple steps you may want to take as you head into the new year:

Reassess your risk tolerance. What is your tolerance for risk and volatility? Do you know? If the answer is no, you’re not alone. Many investors haven’t really analyzed their feelings and comfort level with risk. As a result, they have an allocation that isn’t appropriate for their goals and needs.

A financial professional can use a variety of tools to determine your unique level of risk tolerance. They can then help you find the allocation that is likely to provide the best mix of risk and return for your needs.

Increase your contributions. In 2020, you can contribute up to $19,500 to the TSP. If you are age 50 and older, you can contribute an additional $6,500, for a total maximum contribution of $26,000.³

Of course, that limit doesn’t even include the agency automatic and matching contributions. If you contribute more than 5% of your income to the TSP, you get your contribution plus an additional 5% from your agency.⁴ Those contributions could help offset any investment downturns and keep your nest egg moving in the right direction.

Ready to get your retirement on track in 2020? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your needs and implement a strategy.

1 https://www.tsp.gov/InvestmentFunds/FundOptions/index.html

2 https://www.tsp.gov/InvestmentFunds/FundPerformance/monthlyReturns.html

3 https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/contributionLimits.html

4 https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/typesOfContributions.html

December 23, 2019

Tags Financial Planning, Retirement Planning

Financial Planning Retirement Planning

Give Yourself These 3 Retirement Planning Gifts This Holiday Season

Post author By CreativeOne
Post date December 12, 2019

Give Yourself These 3 Retirement Planning Gifts This Holiday Season

Have you finished your holiday shopping? It’s that time of year again. It’s the season to buy gifts for spouses, children, and all the other friends and family who play a meaningful role in your life.

This isn’t just the season for giving to others, though. You may also want to think about a gift for yourself. You could splurge on an expensive item you’ve had your eye on. Or you could give yourself a financial gift that will pay benefits long into the future.

This holiday season consider giving yourself the gift of a stronger financial future. Below are three retirement planning steps you can take to improve your finances today and in the future. If you aren’t currently implementing these steps, now may be the time to do so.

Increase your TSP contributions.

In 2020, you can contribute up to $19,500 to the thrift savings plan (TSP). If you are age 50 and older, you can contribute an additional $6,500, for a total maximum contribution of $26,000.¹

Of course, that limit doesn’t even include the agency automatic and matching contributions. If you contribute more than 5% of your income to the TSP, you get your contribution plus an additional 5% from your agency.² Those contributions could help offset any investment downturns and keep your nest egg moving in the right direction.

You may not be able to contribute the maximum amount of $19,500. However, any increase is helpful. You may want to gradually increase your contribution over time. For example, you could increase your contribution rate by 1% every few months. By doing it gradually, you may not feel a crunch in your budget.

Contribute to an IRA.

One of the biggest benefits to a career in government is the retirement plan. You can contribute to the TSP, earn annuity credits, and even participate in Social Security. You aren’t limited to those options, though. You can also contribute to an individual retirement account (IRA).

In 2020, you can contribute up to $6,000 to an IRA and an additional $1,000 if you are 50 or older.³There are a few different types of IRAs but the most commonly used are the traditional and the Roth. With a traditional IRA you may be able to make tax-deductible contributions. Your contributions grow tax-deferred and then you can take taxable withdrawals in retirement.

In a Roth IRA, your contributions aren’t deductible. However, your withdrawals in retirement are tax-free. There are income limitations that restrict who can use a Roth. A financial professional can help you determine which type of IRA is right for you.

Contribute to an HSA.

In retirement, you’ll likely have the option of either enrolling in Medicare or staying in the Federal Employees Health Benefits (FEHB) system. Either way, you’ll likely have out-of-pocket health care costs above and beyond what is covered by insurance. In fact, Fidelity estimates the average retired couple will spend $285,000 out-of-pocket on health care in retirement.

You can start planning for those expenses today by contributing to a health savings account (HSA). With an HSA, you make a pre-tax contribution and allocate the funds according to your goals and risk tolerance. The money then grows on a tax-deferred basis. In the future, you can take tax-free withdrawals to pay for qualified health care expenses. It’s a tax-efficient way to pay for future medical costs.

Ready to take control of your retirement in 2020? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.

1 https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/contributionLimits.html

2 https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500

December 12, 2019

Tags Financial Planning, Retirement Planning

Retirement Planning

You’ll Be Thankful You Made These Retirement Decisions

Post author By CreativeOne
Post date November 26, 2019

You'll Be Thankful You Made These Retirement Decisions

What are you thankful for this holiday season? Family and friends? A few days off work? Perhaps your health? Good fortune in your career? You may have many blessings for which you’re thankful.

Many of our blessings and fortunate circumstances are determined by choices we made earlier in life. Your good health may be a result of your healthy lifestyle. Your financial stability is likely a result of your career choices and your savings habits.

What decisions can you make today that you will be thankful for in the future? Below are three actions your retired self may appreciate. If you’re approaching retirement and haven’t taken these steps, now may be the time to do so.

Adjust your allocation and minimize risk.

Are you feeling less comfortable with market volatility as you approach retirement? That’s normal. Most people become more risk-averse as they get older. When you’re young, you have a long time horizon. You have plenty of time to recover from a loss in the market, so you can afford to take some risk.

However, as you get closer to retirement, your time horizon shortens. You don’t have as much time to recover from a loss, so a market downturn may cause more anxiety and stress than it did in the past.

This may be a good time to review your overall allocation and possibly adjust to a more conservative strategy. Look for ways to pursue growth without exposure to high levels of risk. In addition to adjusting your allocation, you may want to explore retirement vehicles that offer growth potential without market risk. Your risk tolerance changes over time, so your allocation should change as well.

Maximizing tax-deferred savings.

If you’re like most Americans, you probably use some kind of tax-deferred vehicle to save for retirement. Accounts like IRAs and 401(k) plans are tax-deferred. You contribute money and then allocate your funds according to your goals.

In a tax-deferred account, you don’t pay taxes on your growth as long as the funds stay inside the account. Depending on which account you’re using, you may pay taxes on distributions in the future. However, the deferral of taxes inside the account may help your assets compound at a faster rate than they would in a comparable taxable account.

In 2019, you can contribute up to $19,000 to a 401(k), plus another $6,000 if you are age 50 or old. You can also contribute up to $6,000 to an IRA, with an additional $1,000 if you are 50 or older.¹Look for ways to trim your budget so you can put more money in your retirement accounts. Your future self will thank you.

Work with a professional.

Have you resisted using a financial professional for retirement income advice? Now may be the time to change your thinking, especially if you’re nearing retirement. A financial professional can help you adjust your allocations, plan your retirement income, develop a savings strategy, and even implement a personalized plan so you stay on track to hit your retirement goals. If you haven’t consulted with a financial professional about your retirement, now may be the right time to do so.

Ready to nail down your retirement strategy and make decisions you’ll be thankful for in the future? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

1 https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000

November 26, 2019

Tags Investment Planning, Retirement Planning

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Give Yourself These 3 Retirement Planning Gifts This Holiday Season

Increase your TSP contributions.

Contribute to an IRA.

Contribute to an HSA.

You'll Be Thankful You Made These Retirement Decisions

Adjust your allocation and minimize risk.

Maximizing tax-deferred savings.

Work with a professional.

Contact Us!

Menu

Is it Time for an Economic Recovery?

Stock Market Returns

Unemployment

Consumer Spending

Tags

Financial Moves to Consider in a "Down" Year

Fund a Roth IRA.

Convert your IRA to a Roth.

Dollar-cost average.

Tags

Are "Penalty-Free" 401k Withdrawals Free?

CARES Act Qualified Plan Distributions

Should you take a CARES Act distribution?

Tags

Investing After Retirement: Tips to Protect Your Nest Egg

Be mindful of inflation.

Take the “Goldilocks” approach.

Have a withdrawal strategy.

Tags

What's Next for a COVID-19 Economy?

Stock Market Performance

Economic News

Tags

Should You Leave Money in Your 401(k)?

Investment Options

Management and Administration

Income Protection

Tags

What in the World is an Investment Policy Statement?

It helps you avoid emotional decisions.

It clarifies risk.

Tags

Year in Review: How Did the TSP Options Perform in 2019?

How will the TSP funds perform in 2020?

Tags

Give Yourself These 3 Retirement Planning Gifts This Holiday Season

Increase your TSP contributions.

Contribute to an IRA.

Contribute to an HSA.

Tags

You'll Be Thankful You Made These Retirement Decisions

Adjust your allocation and minimize risk.

Maximizing tax-deferred savings.

Work with a professional.

Tags

Contact Us!

Menu

Financial Moves to Consider in a
"Down" Year

Are "Penalty-Free" 401k
Withdrawals Free?