|
|
|
Alphabet Soup
FEGLI - New Premiums
With
all the talk of reducing your federal benefits package, January 1
marked a change to FEGLI premiums that actually works in your favor.
Due to increased life expectancy over the past few years, life
insurance premiums have actually gone down, and the new FEGLI premiums
reflect that.
Depending
on your age, it might be a fairly dramatic decrease. Here's an example
of what someone with five times their salary in Option B can expect to
see in their first paycheck of 2012:
A
federal worker making 99,500 has that salary rounded to the nearest
thousand - $100,000 - and then taken times 5 for a maximum amount of
Option B at $500,000. In 2011, a 50-year old would have paid
$151.50/month for that coverage. In 2012, they will pay $141/month.
For
a 55-year old with the same amount of coverage, the 2011 premium was
$303.50 vs. the 2012 premium of $249/month - a significant savings. The
premiums only went down for Option B and Option C coverage.
2012
could bring some changes to your federal benefits. This is a great
opportunity for you to take advantage of a life insurance review - not
only of your FEGLI but other outside life insurance you may be
carrying, as well. You'll receive an assessment of your current
coverage, whether it's an appropriate amount for your situation and
whether you have any options for lowering your premium payments. |
|
Steps to Retirement Planning
Federal employees
spent much of 2011 thinking about what proposed legislation might be
affecting you, or worrying about a furlough, or addressing how future
budget cuts might impact your agency. These are all things that happen
to you. This month's Steps to Retirement Planning focuses on the things
related to your benefits that are within your control.
- How much you save - whether it's saving in your Thrift Savings
Plan or outside investments or real estate, you control how much you
save now. This is a piece that Congress can't dictate. You get to
determine how much you're willing to forego today in order to protect
your interests for the future.
- Where you save - if you're in
FERS, of course, you'll save at least 5% in the TSP...you get a 5%
match from the government. Savings beyond the 5%, however, are a
different story and require more thought. TSP has very low fees (which
can erode your return), but there are a limited number of investment
choices. You may want to investigate a wider range of investment
options or you might prefer that some of your funds go to a Roth IRA
investment where the growth is tax-free. There will be a Roth TSP
option coming in 2012, so pay attention to determine whether it makes
sense for you to save something here.
- How you allocate the
funds you're saving - this is probably the most common question we hear
from federal employees. How should I allocate my TSP? It's particularly
difficult in the economic times we live in. Many TSP participants
started in the TSP in the '90s when investing was nearly as easy as
throwing a dart. The last eleven years have been more difficult.
There's no one who cares about your TSP more than you do, so developing
a strategy for allocating and managing your TSP is more important than
ever before. If your pension benefits were cut, the TSP is the piece of
your retirement that you control.
- Keeping the cost of your
benefits (i.e., insurance coverage) at the appropriate level - you'll
notice that I didn't say keeping them low at all costs. You have to
evaluate the overall expenses involved with your coverage.
For example, if you choose a low-cost Federal Employee Health Benefit option, only to pay huge out-of-pocket expenses, it didn't do you much good to save on premiums. Your overall health care expenses are the marker you're looking to lower.
The same is true for the Federal Employees Group Life Insurance plan. Start with how much coverage you need, then start to look at the
best place to obtain your coverage. This is different from the FEHB in that you can go outside of the federal universe to look for this other
coverage. Are you healthy enough to get private life insurance? Would
it provide a lower cost, longer term coverage or better benefits?
Having a plan that is tailored to your situation can save you money. Watch this column in future months for more tips on taking control of your benefits. |
Double-Up
The United States
has created as much national debt for our country in the last 7 years
as we created in our country's history up to 7 years ago. As of
4/30/04, the total debt of the US government was $7.13 trillion. As of
4/30/11, the total debt of the US government was $14.29 trillion, and
stands at $15.2 and counting today.
Source: Treasury Department |
|
It was the best of times, it was the worst of times
The total return for the S&P 500 was +2.1%
(total return) in
2011. If you missed the 3 best percentage gain days last year, the
+2.1% gain falls to a 10.7% loss. On the other hand, if you avoided the
3 worst percentage days last year, the +2.1% gain rises to +20.2% gain.
Source: BTN Research
|
Get the Umbrella
Last month's quiz
was a geographical question about the mountain location that receives
the most precipitation in the US. The answer to the question is Mt.
Waialeale on Kauai, Hawaii.
Congratulations
to Leanna Obermiller, VA - Western Iowa for being the first to respond
wtih the correct answer. Thanks to all who participated. |
|
Auld Lang Syne
It's a tradition
for those who are still awake at midnight on New Year's Eve to watch
the ball drop from New York's Time Square. The first celebration
commemorated the opening of the New York Times headquarters.
What year was it?
Be the first to reply to the address under Contact Us and win a holiday prize. |
|
Contact Us
Premier Financial Services, Inc.
202 West 7th St.
Carroll, IA 51401
Phone: 866-792-6668 (toll-free)
712-792-6400 (local)
712-792-6670 (fax)
|
|
|
Economics 101
Welcome to 2012!
We leave one crazy financial year behind and begin what should prove to be another!
There's an old
adage about the safest way to commute being on a rollercoaster.
Even though it goes through twists and turns, and can even go upside
down, it is generally safe and always gets you back to where you
started. Unfortunately, at the end of the commute you have not
advanced at all and the ride cost you money. Looking back over
2011, this seems like an appropriate description. Looking forward
to 2012, it looks like more of the same, without knowing exactly where
it will end!
While
unemployment has fallen slightly, the US economy is replacing high
paying jobs with low paying jobs. A recent study from Rutgers
University ("Out of Work and Losing Hope", Zukin, Van Horn, and Stone,
September 2011) shows that of the people who lost jobs in 2008-2009,
52% of them took a pay cut when they found a new job. Of course,
this only applies to those that found a new job, which was roughly 43%
of the group. That's not good news for those who lost their jobs,
and it is terrible news for those just entering the workforce. It
is this pressure that is keeping wages low, which ripples through the
economy in the form of lower spending, less use of credit, and a
generally higher level of repayment delinquencies and foreclosures.
On the real
estate front there are competing forces. Builders have been
selling more new homes, but at lower prices. This could be the
normal outcome of having builders sit on empty land for years.
Eventually they have to build homes in order to get rid of their raw
land. If the way to do this is by selling at lower prices, then
so be it. However, this has a huge side effect, it puts even more
downward pressure on existing home prices, which have continued to fall
in price for another year.
These types of
macroeconomic issues would generally be enough to cause a stall in
equity prices, but lately there has been an up-tick as large companies
have posted decent profits. Among these companies are large
multinational firms that earn significant portions of their revenue
outside of the US. With Europe on the ropes and China slowing
down, the outlook for foreign revenues has dimmed.
What all of this
means is that the financial crisis of 2008 has yet to be fully
addressed. There have been continual government programs meant to
push the economy higher, only to have limited, if any, success.
The same is true in Europe and even in China. The secret source
of all of our woes is not very secret at all - it's debt. We have
too much debt in the US, the Europeans are certainly weighed down by
it, and the Chinese are just now revealing the massive amounts of debt
that were used to propel their economy higher over the last few
years. Until there are clear plans for dealing with all of the
debt, the rest of the programs that are being implemented or discussed
will have limited positive affect. To us as investors, this means
another crazy year of tumultuous market moves, punctuated by government
pronouncements and, most likely, more failed policies.
The act of investing has become much harder in
the last four
years, but that does not mean that we can shy away from it. Now,
more than ever, investment discipline and the hard work of research and
education show their worth. |
|
Big Days, Small Year
There were 13
trading days during calendar year 2011 (i.e., an average of 1 day every
4 weeks) when the S&P 500 gained more than +2.1% (total return) in
a single trading day (note that +2.1% was the index's total return gain
for the year). The last of the 13 days was on 12/20/11. |
|
TSP Returns
After
huge swings in equity market returns in 2011 (C, S and I Funds), the
funds ended up with either low or negative returns. The S&P 500
ended the year within just a few points of where it started, yet your C
Fund showed a small 2.11% return. How does this occur?
Dividends!
Dividends
are payments made by a corporation to their shareholders that are
counted in the S&P 500's results. Even if the overall share price
of the 500 companies stay relatively the same, dividends can increase
your return.
As
for the S and I Funds, they did not fare so well, and ended the year
with negative returns. Interestingly enough, the losses from 2011 were
lower than the losses from 2001, so when the 10-year average returns
are calculated, the long-term average returns went up. For this issue
only, you'll see those returns listed below.
G Fund
December- .15%
YTD - 2.45%
10-year Average Return- 3.94%
F Fund
December- 1.01%
YTD - 7.89%
10-year Average Return - 5.86%
C Fund
December - 1.04%
YTD - 2.11%
10-year Average Return - 5.05%
S Fund
December - (.04%)
YTD - (3.38%)
10-year Average Return - 9.63%
I Fund
December - (2.03%)
YTD - (11.81%)
10-year Average Return - 7.71%
L Income
December - .20%
YTD - 2.239%
L 2020
December - .11%
YTD - .41%
L 2030
December - .09%
YTD - (.31%)
L 2040
December - .07%
YTD - (.96%)
L 2050
December - (.01%)
|
|
