Why Your Credit Score Might Be Lowered!

If you wake up to find your credit score has taken a big drop – let me explain why. FICO scores have recently made adjustments and will soon start scoring certain items more harshly than before. FICO adjusts its scoring model every few years so this is typical. But most importantly, what items are changing for 2020?

-Consumers who have rising debt levels will be scored more harshly
-Those who have high credit utilization rates over long periods will also be penalized more than in the past
-Missed payments will be weighed more heavily
-Consumers who sign up for personal loans will be flagged and this could detrimentally affect their scores

Ultimately these changes will create a larger gap between consumers who are deemed to have either good or bad credit. Those who have credit scores that are below 600 and continue to accumulate debt or miss payments will see a decrease in scores.

The good news: Consumers who have high FICO scores already should actually see a higher score given timely payments moving forward. Rather than seeing a drop, you might be pleasantly surprised to find your score has risen.

Other items to note are that bank account balances and timely payments of utilities have been taken into consideration for consumers with limited credit histories — this gives them the opportunity to earn a higher score and a better chance at securing a loan.

Here are a couple additional tips to boost your scores…

-Always make minimum payments on all bills
-Pay off debt and keep credit balances low
-Time your inquiries for new loans or new debt (too many inquiries in a short period can hurt your score)
-Keep open old credit cards with zero balances (if you have no fee or can have the fee waived) as older accounts in good standing help your score
-Always periodically check your credit score for inaccuracies and dispute any that arise

Best of luck on your credit journey!

Student Loan Debt

There are currently 45 million borrowers with over $1.5 trillion dollars of student loan debt in the United States. Student loans are the second highest form of debt among consumers, second to only to home mortgages! As you can imagine, student loan debt is a huge burden for recent college graduates, and it’s something you want to pay off as quickly as you can.

First, let’s examine two of the most popular pay-down methods. But regardless of which method you prefer, always make your minimum monthly payments! It helps boost your credit score and keeps interest from accumulating on the balances.

Avalanche:

The avalanche method is the most logical method to pay down your loan balances. You organize your loan balances in order of interest rate, starting with the highest. You then pay them down in order from highest to lowest. Under this method, you’ll pay the least amount over time. Just as a reminder, always look at your loan balances and sub-accounts. You might only see a total loan balance on your account page, but often times the loans are broken down further into smaller sub-accounts and have varying rates of interest.

Snowball:

The snowball method takes advantage of the psychological power of paying off loan balances over time. Rather than starting with the highest interest rate loan, the snowball method orders you loans based on the smallest account balances first. Under this method, you receive a psychological boost and motivation from paying off or “closing” a loan, and it gives you more incentive to want to continue the positive momentum. The downside here is that the larger loans with higher interest rates are left untouched outside of minimum payments.

Student Loan Forgiveness:

There are a handful of ways to have your student loan debts forgiven, but unfortunately, most won’t qualify. Below we’ll outline each. As a reminder, these are for federal student loans only, not private.

Income-driven repayment forgiveness: The federal government allows your to cap your loan payments at a percentage of your monthly income. After 20-25 years, depending on the plan, your remaining balance will have the potential to be forgiven. These work great for those who have large loan balances as compared to their income. Beware, though, that the debt forgiven is taxable. I.e. if you had $30,000 of loan forgiveness, your taxable income would increase by $30,000. ($30,000 multiplied by your tax bracket).

Public Service Loan Forgiveness: this was created for graduates to pursue careers in the public services sector. This forgiveness option applies to Direct Federal Student Loans, Direct Plus loans and Direct Consolidation loans. Again, private student loans are not eligible. To qualify, an individual must be a full-time employee in a public service job and have a history of making on-time payments for 10-years, or 120 monthly payments. Public service jobs that qualify include any job in a government organization at the federal, state or local level. Also, and not-for-profit organizations, and AmeriCorps or PeaceCorps. In order to benefit here, you’ll need to be enrolled in an income-driven repayment plan, else you would’ve already paid your loan balances off after 10 years.

Teacher Loan Forgiveness: Low-income public elementary and secondary school teacher may be eligible to have all or a portion of their student loans forgiven after five consecutive years of service. They may be eligible for up to $17,500 in relief.

Student Loan Forgiveness for Nurses: Nurses who have student loan debt have several options, although the PSLF is the most favorable in almost all circumstances.

There are others, so be sure to look into each program based on your state of residence for any and all forgiveness options.

Creating an Emergency Fund

An emergency fund is a liquid sum of money that you don’t touch unless it’s an absolute financial emergency. Examples of financial emergencies would include a major home or auto repair, appliance replacement, loss of a job, or some type of urgent medical situation.

 

How much money do I need in an emergency fund?

Most emergency funds typically include 3 to 6 months of expenses, depending on your financial situation and risk tolerance. If you have high interest debts like credit cards (anything above 10% APR) you should prioritize paying that debt down first. A smaller emergency fund of $1,000 (or 1 month of expenses) should suffice until the high interest debts are paid in full.

 

Where should I keep my emergency fund?

If you currently have cash on hand for 3 to 6 months of expenses, move it into a safe, secure account that you can easily liquidate. Examples would include an FDIC-insured checking or savings account, or a certificate of deposit. It also makes sense to keep your emergency fund in a separate account so you aren’t tempted to spend the money — and you don’t want it to get commingled with your checking account. If you’re working towards building your emergency fund, start by setting aside a certain dollar amount each month and make it a part of your monthly budget.

 

What’s the purpose of an emergency fund?

The purpose of this fund is to create a net of financial stability and reduce your worry, anxiety and stress levels that can result from the unexpected. By having an available emergency fund, you don’t have to turn to credit card debt or borrowing money from friends and family. If you have to dip into your emergency fund for an emergency, great, that’s why it’s there! But afterwards, your number one priority should be replenishing it to the original amount. Once an adequate emergency fund is created and/or replenished, you can start tackling other financial goals and you will be well on your way to building wealth!

Budgeting 101

If you’re like most people, you know you can cover your monthly expenses, but you don’t truly know where your money’s going. Creating a budget is one of those things you tell yourself you’ll do ‘someday’ and by not doing it, there aren’t any immediate consequences. But the long-term consequences can be catastrophic.

Let’s look at a hypothetical example…

John Smith, currently 22 years old, created a budget and noticed he could cut his spending by $100/month. In doing so, he decided to take that $100/monthly and contribute it to a Roth IRA (Individual Retirement Account). He planned on doing this every month for the next 40 years and retire early at age 62. If we assume an 8% annual return, John’s $100 monthly investment would have grown to a whopping $310,868 over that 40-year period!

As you can see, creating a budget might be a time commitment, but it has the potential to be one of the biggest ROIs (Returns on Investment) you’ll find in life.

Now, let’s get started on the actual budget.

Step 1

Determine where you’re going to keep your budget. You can find plenty of online resources and free budget templates with a quick Google search. There’s also free budgeting apps you can download (Mint, Acorns, Personal Capital).

Here’s a snippet of what a basic budget might look like, and you can get as detailed as you prefer. Keep your personal budget in whatever way is easiest for you.

 

Step 2

Next, identify all of your income sources and also all of your expenses. To get an idea of income, I recommend looking at all the checking/savings and financial statements you can find. A lot of people have direct deposit set up for checks. You can also look back at pay stubs with your employer, look at your checking account for cash deposits, etc. Use after-tax numbers in your income categories (use what you actually take home each month).

After you’ve determined your monthly income, the next step is to determine your expenses, or outflows each month. You can look through your checking account and credit cards statements here as well. Expenses will include rent, mortgage, car payments, car insurance, student loans, cell phone, utilities, cable/internet, even the sneaky ones like dry cleaning, haircuts, Netflix subscriptions, HBOGo, any iPhone or app subscriptions… I think you’ll be surprised if you really dig through all your expenses — you’ll probably uncover things you didn’t even realize you were paying for!

Then, what you’ll want to do is add up your income and add your expenses — you’ll have either a positive number or a negative number. If you end up with a positive number, great, you’re bringing in more money than you’re spending. If you’re running in the red or negative, it’s time to make some choices on how you want to reallocate. A suggestion is to go back and look at any discretionary items (things that you don’t necessarily have to have). This would include any subscriptions, maybe you’re eating out 4 times a week, maybe there’s a cheaper gym close to you (examine some of your wants and decide if you can go without).

Step 3 – 50/30/20 Rule

As a rule of thumb, many agree on a 50/30/20 rule for spending within a personal budget. This is both practical and it also provides a high-level and flexible plan you can adjust for your own personal goals. 50% of money should be spent on needs and obligations, 30% on monthly wants, and 20% on savings and investments.

50%: Needs

Needs are those items in your spending that you absolutely cannot live without or are necessary to your survival and good credit standing. This would include rent, mortgages, car payments, groceries, insurance, minimum debt payments, etc. Half of your after-tax income should be spent on these items.

30%: Wants

These are items that are not absolutely essential, but make life more enjoyable. This would include eating out, entertainment, tickets to events, gym memberships, upgrading your phone, advanced cable package, and others.

20%: Savings

Try to allocate 20% of your take-home pay to your savings and investment accounts. This includes 401K or IRA contributions, emergency funds, savings accounts, accelerated payments on debt and others.

Step 4

Discipline is everything when it comes to maintaining your personal budget. Feel free to use the above as a rough guideline, but ultimately your financial goals and situation are specific to you.

For example, if you want to pay off a student loan faster, eliminate $100/month from your “Wants” portion of your budget and add it to your “Savings” portion and retire the debt earlier. Again, tweak your budget and spending patterns each month to achieve your specific goals.

By having and maintaining a budget, you’re going to know exactly where you’re money’s going and you can stop worrying about whether or not you’re on track financially.

Create your budget, set your goals and maintain the course! You’ll find that your money will start to work FOR YOU rather than against you!

10 Reasons for Long Term Care Insurance

FERS Special Supplement

Planning for long term care is an easy thing to put off. Maybe you think you’re too young, can’t afford it or simply won’t need it. But if you want to help preserve your choices about future care and have retirement assets and personal savings to protect, then long term care insurance could be the right vehicle for you. Here are 10 reasons why it may make sense for you:

  1. To help protect your assets and personal savings.
  2. To help preserve your quality of life.
  3. To have options for your care—with long term care insurance, you can choose to participate in deciding where and how to receive care.
  4. To have access to appropriate care—the right policy helps ensure that the care you receive will be appropriate for your needs.
  5. To relieve the burden of care from your loved ones.
  6. To help leave your assets to your family, friends or charity—long term care services are expensive and, without proper planning, can quickly use up a lifetime of savings.
  7. To gain access to a professional care coordinator in a time of crisis. A professional can help you and your family coordinate your long term care needs, which may include locating services to help with a particular illness, injury or condition.=
  8. To enable you to stay in your home for a longer period of time—comprehensive long term care insurance offers you the option of staying in your own home for as long as possible.
  9. To stay with children without depending on them for care—long term care insurance may make it possible for a parent to stay in a child’s home without being dependent on him or her.
  10. To help you and your family plan for the future.

Source: ParentGiving.com

FERS Special Supplement

FERS Special Supplement

When it comes to your FERS Retirement you must consider the three major aspects of your income including your:

  1. FERS Annuity Pension
  2. Thrift Savings Plan, Social Security Benefits
  3. FERS Special Supplement.

 

Simplifying FERS Special Supplement

I would like to simplify the FERS Special Supplement for you. Also known as the Special Retirement Supplement or SRS, it is designed to help bridge the income gap.  For those who retire before age 62, it will supplement your missing Social Security income, until a month before you reach age 62 and then stop. Since the SRS is not paid by Social Security, you do not have to start receiving benefits from Social Security at age 62. You may delay taking these benefits to help increase your future Social Security annuity.

We often hear can you start Social Security or FERS Special Supplement in the middle or end of year do to earning limits? (please see bottom of article for answer.)  To be eligible, you must have a normal immediate retirement, not an early retirement (MRA+10). This means you must have 30 years of creditable service and meet your MRA. Or, you can have 20 years of creditable service and be age 60.

You may be eligible if:

  • You retire voluntarily
  • On an Immediate Annuity
  • Annuity not reduced for age

You may still be eligible if you:

  • Retire involuntarily before attaining MRA
  • Because of a major reorganization
  • Reduction in force

You are not eligible if:

  • You receive a deferred annuity benefit
  • Disability benefit
  • Immediate MRA + 10 annuity benefit

You must be a FERS employee

You must retire on a full immediate retirement

You must have 25 years of creditable service under Special Provisions and be any age or have 20 years of creditable service under Special Provisions and be at least 50 years old. Even though you will be eligible for this benefit your FERS Special Supplement will not start until you reach your MRA.

This benefit will begin after the interim period of your retirement and typically takes two three months to start after you retire.

When it comes to your Social Security or FERS Special Supplement Benefits the first year you start these benefits there is a special Rule. The 2019 earning limit for 2019 is 17,640 annually or 1,470 a month of earned income everything over this amount you will result in $1 of their Social Security benefits withheld for every $2 in earned income in excess of $1,470 per month, or $17,640 per year. However, the special rule for the first year you start these benefits is a little different. Everything earned until the point you start drawing these benefits does not count towards the earnings limit for that year. At the point the benefit is started when this rule takes effect.

 

Still Confused?  Schedule a FREE Retirement Analysis

When it comes to retirement and your Retirement benefits it can be down right daunting.  Our specialist at GPIS can help you through the entire process.  For more information on your benefits and how they work now and into retirement and the options that can potentially have a huge impact on your retirement, contact us today to schedule your free retirement analysis.

 

3 Tips to Keep Your Retirement Safe

3 Tips to Keep Your Retirement Safe

3 Tips to Keep Your Retirement SafeIn today’s volatile market, if you are planning to retire or already retired, you want to make sure your retirement is safe.  There are a variety of things you should do to keep your retirement safe, but these 3 are key:

Know Your Risk Level

As a general rule of thumb, the younger you are, the larger the percentage you can invest in stocks.  As you get closer to retirement, your risk tolerance increases and as a result, your investments should shift to safer, less volatile options.

Shift To More Conservative Investments

The closer you are to retirement, the more conservative you should be.  If you are 5 years away from retirement or already retired and the market crashes, it could be devastating to your 401(k) balance.  Younger investors don’t have to worry as much about volatile markets because they have time on their side.

Keep Short-Term Money Safe

Once you retire, your living expenses, as well as other necessities for what you want to do during retirement, should be low-risk or no-risk investments.

 

Is Your Retirement Safe?

If you have questions about how to keep your retirement safe, schedule your free retirement analysis today.  We work with hundreds of federal retirees each week helping them protect their Thrift Savings plan assets from market risk while providing growth opportunities for future retirement years.  GPIS’ top priority is making sure each federal employee retires with the peace of mind that comes from knowing they made the right decisions to plan ahead and maximize their retirement benefits.  We’re here to help make sure what you’ve worked so hard for will be safe!

>> Download 3 Tips To Keep Your Retirement Safe

Social Security Announces 1.6 Percent Benefit Increase for 2020

The 1.6 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 63 million Social Security beneficiaries in January 2020. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2019. (Note: some people receive both Social Security and SSI benefits). The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.

Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $137,700 from $132,900.

Social Security and SSI beneficiaries are normally notified by mail in early December about their new benefit amount. Most people who receive Social Security payments will be able to view their COLA notice online through their my Social Security account. People may create or access their my Social Security account online at www.socialsecurity.gov/myaccount.

Information about Medicare changes for 2020, when announced, will be available at www.medicare.gov. For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2020 are announced. Final 2020 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and my Social Security’s Message Center.

The Social Security Act provides for how the COLA is calculated. To read more, please visit www.socialsecurity.gov/cola.

NOTE TO CORRESPONDENTS: Here is a fact sheet showing the effect of the various automatic adjustments.

Source: Social Security Administration

Thrift Savings Plan investment limit to increase to $19,000 in 2019

The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019. The highlights include:

  • The contribution limit for employees who participate in the federal government’s Thrift Savings Plan, 401(k), 403(b), and most 457 plans increased from $18,500 to $19,000.
  • If you are 50 and over and participate in 401(k), 403(b), most 457 plans and the Thrift Savings Plan, your catch-up contribution limit remains unchanged at $6,000 for 2018.

Catch-up Contributions

With the end of the year quickly approaching, be sure to take advantage of catch-up contributions. Here are a few tips to keep in mind:

  • You can make your catch-up contribution at any time, but it has to be made by the end of the calendar year. You will have to create a new catch-up contribution election each year.
  • To get started making TSP catch check out the Catch-Up Contributions fact sheet on TSP.gov or watch the Catch-Up Contributions video on YouTube.To get started making TSP catch check out the Catch-Up Contributions fact sheet on TSP.gov or watch the Catch-Up Contributions video on YouTube.

Questions About Your Federal Benefits?

If you have questions about maximizing your federal benefits, schedule your free retirement analysis today. Each member of our expert staff has extensive background working with the federal government, federal employees, and retirement planning. GPIS’ top priority is making sure each federal employee retires with the peace of mind that comes from knowing they made the right decisions to plan ahead and maximize their retirement benefits. We’re here to help!

Don’t Forget to Schedule Your “Use or Lose” Annual Leave by November 24

This year federal employees need to schedule their “use or lose” annual leave by November 24, 2018.   Most employees can carry over a maximum of 240 hours of accrued annual leave.  “Use or Lose” annual leave are your excess annual leave hours.  This year all excess annual leave must be “used” by January 5, 2019 or they will “lose” it.

Leave Year Beginning and Ending Dates

The U.S. Office of Personnel Management’s website has additional information on annual leave beginning and ending dates through year 2020.  Below are the leave year dates for most federal employees:

Leave Year Leave Your Beginning Date Leave Year Ending Date Date for Scheduling “use or Lose” Annual Leave
2018 January 7, 2018 January 5, 2019 November 24, 2018
2019 January 6, 2018 January 4, 2020 November 23, 2019
2020 January 5, 2020 Januarys 2, 2021 November 21, 2020

Be sure and check with your agency to verify the beginning and ending dates for each leave year.

Free Retirement Analysis

If you have questions about your benefits and would like a FREE personal benefit review visit our website or call 866-201-7829.