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Economics 101
Recession Silver Linings
While
the stock market has enjoyed a healthy thirteen-month rally - with only
the last two months causing some angst - Americans are still
worried. Frankly, they should. While the bottom has stopped
falling out from under us as it did during the 2008 and early 2009
meltdown, the economy remains weak. Demand may not return to its
2007 highs for things like houses, cars, and even high-end clothes for
years-or possibly ever!
When demand for something falls
but the supply remains the same, prices have to fall in order to move
the merchandise. This is true of services as well as goods.
If you are in the business of delivering goods and
services with limited demand, this can mean severe hardship-possibly
even business failure or bankruptcy. But if you are in the market
to buy, things are quite different. Today, we see "buyer's
markets" in just about everything. Consider what the Wall Street
Journal had to say about home remodeling:
People who refrained from splurging on big home-improvement projects during the housing boom are reaping the rewards now.
Depending
on the region and the job, some homeowners are paying as much as 20%
less for home-remodeling projects than they would have a few years ago.
Many contractors are willing to accept smaller jobs and "handyman"
projects that they used to snub. And more projects are being delivered
on time and on budget-a stark contrast from the boom years.
Source: "Why Homeowners are Raising the Roof"
Our
economy is geared for a higher level of output than current demand
would justify. It may take years - even decades - for supply and
demand to favor the seller again. So, in our careers and
businesses, we should be cautious. But in our personal spending,
we should enjoy the bargains as we see them. |
Steps to Retirement Planning
No-Nonsense Tips for Retirement Investing
Over
the first 6 months of this year, this column has covered a wide
range of thoughts and ponderings around investing for your retirement.
Before we begin a new series next month, here is a short compilation of
the articles that have appeared so far this year.
1. You don't have any friends on Wall Street.
2. Your neighbors are delusional.
3. The promise of market-beating returns deserves your skepticism.
4. There's no substitute for saving.
5. You can control risk and investment costs, but you can't control returns.
6. Sophistication is an excuse for Wall Street to charge you fat fees.
7. Your portfolio's growth is driven, more than anything, by how much you save.
8. If an investment is exciting, it probably won't be especially profitable.
9. The privilege of a sound investment.
10. Your worst investment enemy is often found in the mirror.
11. Sound investment strategies don't change with the news.
12. Land appreciates, houses deteriorate.
13. If financial forecasters are unanimous that stocks or bonds are about to plummet, they almost certainly won't.
14. Tax deductions are money losers.
15. Insurance is an important component to any retirement plan.
16. Many stock mutual funds are laggards and it's hard to find the winners.
17. Leverage bites when you get it wrong.
18. You can't get rich by spending money.
There
you have it. Whether you agree, disagree or it simply makes you
wonder, the point is to think about your investment decisions and
recognize your values and beliefs.
If you would
like to receive a copy of all the first 6 month's worth of
articles, e-mail me with "No-Nonsense Tips" in the Subject line and
we'll forward them to you.
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Last month's quiz gave baby boomers a good shot at winning if they grew up watching Steve McQueen on TV.
The correct answer to the show where McQueen appeared as a bounty hunter - Wanted: Dead or Alive.
Congratulations to Gretchen Van Walbeek, USDA, Des Moines,
Iowa for being the first to respond with the correct answer.
Thanks to all who responded! |
In celebration
of Independence Day (aka the 3-day weekend that celebrates the middle
of summer), how much do you really know about the event that gave us
something to celebrate?
The original Declaration of Independence was drafted by
Thomas Jefferson. How many people signed the Declaration as
representatives of their colonies?
For quicket response, reply to:
federal.info@sklenar.com |
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Contact Us :
202 West 7th St.
Carroll, IA 51401
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Alphabet Soup
Can I roll my IRA into my TSP (and what will the result be)?
Many federal employees have tax-qualified savings
in addition to their Thrift Savings Plan. A question arises when the
employee considers putting their IRA, former 401(k), or SEP account
into their TSP.
Either active or separated federal employees can
transfer these types of accounts into their existing TSP account. If
you are separated from service, you are still allowed to transfer money
into the TSP as long as you have not made a full withdrawal of your
account and are not receiving monthly payments. Keep in mind, the
TSP only accepts transfers that consist of before-tax dollars.
If
you decide to combine your tax-deferred accounts under the TSP
umbrella, there are two ways to accomplish this. If you have not
received the funds from your former plan (401(k), 403(b), etc.),
complete TSP-60 (available on www.tsp.gov). Forward the completed
TSP-60 to the IRA custodian or plan administrator for certification
that your distribution is from a traditional IRA or eligible employer
plan. Once certified, the plan administrator/custodian forwards the
form to TSP and the funds transfer directly into your TSP account.
If
the funds from your former plan come to you directly, you have 60 days
to roll over the funds for them to be eligible and to avoid a taxable
event. Your former plan is required to withhold appropriate taxes when
sending you the distribution, so if you want to rollover the entire
amount, you will have to make up the difference out of your own pocket
and wait for a refund from the IRS next year.
You will
use the TSP-60 in this instance, as well. Although you have
already received the funds, your former custodian or plan administrator
must still certify that the funds were distributed from an eligible
retirement plan. You must then submit the TSP-60, along with your
personal check or money order, payable to the Thrift Savings Plan so it
is received by TSP within 60 days of the date you received the funds.
Include your TSP account number on all correspondence with TSP
(including your check/money order) to help them match up the funds with
your account.
What would a good
reason be to consider rolling outside IRA funds into your TSP?
One example is for CSRS or CSRS Offset employees who are utilizing the
Voluntary Contribution Program. When they go to convert those
funds to a Roth IRA, they do not want any other tax-qualified IRA
accounts to affect the taxes on the conversion of
the VCP to the Roth IRA.
For more information
on rolling IRA funds into the TSP or utilizing the Voluntary
Contribution Program, contact my office.
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Futbol and Football
ESPN and ABC estimated that an average of 400
million soccer fans would watch each of the 64 games that it televises
during the 2010 World Cup, a total of 26 billion viewers over the
month-long
tournament. By comparison, 106.5 million people watched the Super Bowl in February 2010, an all-time record for NFL football.
(source: ESPN, Nielsen) |
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TSP Returns
June 2010
G Fund
June: .24%
YTD: 1.61%
F Fund
June: 1.56%
YTD: 5.31%
C Fund
June: (5.24%)
YTD: (5.87%)
S Fund
June: (6.90%)
YTD: .8%
I Fund June: (1.75%)
YTD: (14.47%)
LIFECYCLE FUND RETURNS
L Income June: (.61%)
YTD: .12%
L 2010
June: (.68%)
YTD: .04%
L 2020
June: (2.34%)
YTD: (3.25%)
L 2030
June: (2.98%)
YTD: (4.18%)
L 2040
June: (3.47%)
YTD: (5.00%)
Returns courtesy of : |
Big Bucks
The wealthiest 1% of Americans own 35% of the total net worth in the nation.
(source: Edward N. Wolff, New York University) |
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Letter from the Editor
Many of you may have read of the recent account of a
financial advisor working with federal employees in Florida who
invested their funds in an account set up especially for them. In
what now appears to have been a Bernie Madoff-type investment, it turns
out the investors who came into the fund later were funding the returns
for those who got in first - a classic Ponzi scheme. As the SEC began
investigations, the advisor took his own life, leaving behind only an
apology letter for the investors.
Some federal employees will take this as
confirmation that they shouldn't work with an advisor. Others
will recognize the event for what it was - an isolated situation of a
misguided person. The keys here for anyone looking to work with a
financial advisor are to do your homework. Make sure the
advisor is registered with the agencies mandated to provide
oversight. If your statements look like they might have been
prepared on a home computer - this is a clue that the investment might
not be on the up and up. And finally, if it sounds too good to be true
(e.g., 10% returns each and every year), it probably is!
In the current economic environment, it's more
important than ever to have the benefit of thoughtful advice from a
trusted advisor. Don't let one bad apple ruin your experience.
Cordially,
John Sklenar
CPA/PFS, CFP
ChFEBC - Chartered Federal Employee Benefits Consultant
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