Jacob Sensiba, Author at The Free Financial Advisor

Retirement Bill in Congress

March 30, 2022 by Jacob Sensiba 2 Comments

Congress has a new retirement bill in the works. They’re calling it Secure 2.0 and it has a few transformational pieces to it that will change retirement saving and retirement income planning. Before we get too far into what this new bill looks like, let’s take a look at what the original Secure Act did.

Secure Act 1.0

The Secure Act was enacted on January 1, 2020, and was the largest retirement reform bill since the Pension Protection Act of 2006. The full title is Setting Every Community Up For Retirement Enhancement (SECURE). And it passed through Congress with a 417-3 vote.

The beginning age to which to start taking required minimum distributions (RMD) from retirement accounts (excluding Roth accounts) was moved from 70 ½ to 72.

People can make retirement contributions no matter what age, as long as they have earned income. The previous limit was 70 ½ when RMDs would begin.

Inherited IRAs (non-spouse beneficiaries) have to have the entire account withdrawn within 10 years of receiving it. This means that if someone passes away and their beneficiary is someone other than their spouse, that beneficiary needs to have the entire account withdrawn and closed within 10 years of receiving the inherited IRA. However, there are exceptions, including a surviving spouse, a minor child (the 10-year rule starts when a child reaches the age of majority), a disabled individual, a chronically ill individual, an individual who is not more than 10 years younger than the IRA owner.

Employees who work part-time, at least 500 hours per year, are now eligible to contribute to their employer-sponsored retirement plan.

Secure 2.0

What’s different with this new law?

For one, the vote passed 414-5. Not as lopsided as the previous one, but still an incredibly convincing tally. “Secure 2.0 is fundamentally designed to make it easier for people to save” – Susan Neely, American Council of Life Insurers President and CEO.

The catch-up contribution provision got a facelift. 401k account owners that are 50 and over are eligible to contribute up to $10,000 more than the maximum for those under 50.

The beginning age for required minimum distributions (RMD) also went up, from 72 to 75. The Yahoo Finance article noted that some reps took it a step further. “ My goal is to get rid of it completely.” – Representative Kevin Brady (R-TX).

The bill would also push employers to automatically enroll new employees into the company-sponsored retirement plan.

Small businesses that stare down the, sometimes, daunting expense of establishing and maintaining a company-sponsored retirement plan can receive assistance. They can receive credits for matching contributions.

One very progressive part of the bill that is sure to garner a lot of attention is the ability of people paying down student loans to save for retirement. The bill would allow employers to “match” a students’ loan payment as a retirement contribution. For example, if the student made a $100 student loan payment, the employer would contribute $100 to their retirement account on their behalf.

The bill introduces a SAVERS credit, which would give lower-income individuals a tax break if they save for retirement.

This is another transformative retirement bill. I’m very pleased society is taking steps to encourage individuals to plan and save for the future.

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Jacob Sensiba

My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com

www.crgfinancialservices.com/

End-Of-Life Care Costs

March 23, 2022 by Jacob Sensiba Leave a Comment

End-of-life care is a treatment someone nearing death receives in the final days, weeks, months, or sometimes years of his or her life. During this time, medical care and support continue regardless of whether the patient’s condition is curable or not. Many receive professional medical care in hospitals, nursing homes, or even in their own home. Patients are then placed in either palliative care or hospice care, and the costs are paid by Medicare, Medicaid, private insurance, charities, the individual, or other payment programs. Here are some things to know about end-of-life care costs.

Eligibility for Medicare’s Hospice Benefit

The patient must be 65 years or older
Diagnosed with a serious illness
Certification from a doctor that he or she has six months or less to live
Agrees to forgo life-saving or potentially curative treatment
Hospice provider must be Medicare-approved

Medicare provides care for two 90-day periods in hospice, followed by an unlimited number of 60-day periods. At the start of each period of care, a doctor must re-certify that the patient has six months or less to live.

Medicare’s hospice coverage includes a broad range of services:

Nursing care
Medical social worker services
Physician services
Counseling (including dietary, pastoral, and other types)
Inpatient care
Hospice aide and homemaker services
Medical appliances and supplies (including drugs and biologicals)
Physical and occupational therapies
Speech-language pathology services
Bereavement services for families

Hospice costs not covered by Medicare

Room and board
Emergency care such as ambulance fees or emergency room costs
Treatment or prescription drugs attempting to cure illness

Hospice costs are paid for in the following manner: Medicare – 85.4%; Medicaid – 5%; managed care or private insurance – 6.9%; other (including charity and self-pay) – 2.7%.

Respite care is a short-term break for caregivers of terminally ill patients. The patient can stay for up to five days in a Medicare-approved nursing home, hospital, or hospice facility.

Some Costs

Studies showed 42% of people died at their home at $4,760 in their last month of life. Whereas in a hospital it cost $32,379. Dying in a nursing home was the second most expensive, hospice care was third, and the emergency room.

Now that all of this has been explained, there are some things you need to do or things you should do to prepare for these costs.

Planning

You have to save for it. A lot of retirement planning is determined by how much you are going to spend in retirement. Heck, that’s basically all of what retirement planning is. You need to save and plan for this.

Not everyone has to be concerned about it. If you have all of your debts paid off and your retirement account is in a place where you don’t have to be worried about running out of money, then you probably don’t have to think about it too much. That doesn’t negate the fact that you should plan, your planning just looks a little different. Instead of buying final expense life insurance, maybe you’re buying a plot in a cemetery.

If you have all of your debts paid off and your retirement account is in a place where you don’t have to be worried about running out of money, then you probably don’t have to think about it too much. However, that doesn’t negate the fact that you should plan; it will just mean that your planning may look a little different from that of others. For example, it may be the perfect time to think about looking into final expense policies.

Final expense insurance is a life insurance product that’s purchased to pay for burial and/or funeral expenses. It’s also called burial insurance and senior insurance. In most cases, the benefit from the insurance product reimburses the costs incurred from burial and funeral, as this can take longer for those to get paid out. This could provide significant help to you and your family when that time comes and is something that you may want to consider if you want to start thinking about these scenarios now.

Planning will look different for everyone, but your circumstances don’t excuse you from planning. So, start thinking about it today.

End-of-life care is a necessity for most people. It’s important to plan for it.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Investment Risks in the World Today

March 16, 2022 by Jacob Sensiba Leave a Comment

The world is crazy right now. The war with Russia and Ukraine has created investment risks and opportunities with commodities, specifically. Inflation is also an issue. What do you do with all of these moving parts in the global economy?

Gold

Gold has only gone up since the war began, up over $2,000 for the first time since 2020. The reason being is that gold is a store of value and is often seen as a safe asset during times of uncertainty, like war, inflation, or a pandemic.

Gold isn’t the only asset that’s used in times of uncertainty. Cash, bonds, and other precious metals have also seen a massive inflow lately.

Crypto

Cryptocurrencies have also seen a run-up in recent weeks, for two reasons. One, some people do see cryptocurrencies as a store of value like gold. And two, cryptocurrencies have played a role in this war. Because Russia has been cut off, financially, from the rest of the world, they’ve used crypto to finance operations. Ukraine has done the same, but for the reason of being able to raise money from different channels.

Oil

The price of oil has been on a roller coaster since the war began. Russia supplies a lot of energy to the world. It supplies the U.S. with just 3% of oil, but it supplies Europe with most of what they use. That said, the price of oil went up very fast to about $125/barrel because the US and other countries blocked them off to further disrupt their finances.

It’s come back down since then thanks to OPEC+. They pledged to increase production to make up for the loss in supply.

Inflation

Inflation is off the charts right now. The most recent reading came in at 7.9%. There are quite a few things that are seeing the effects of it. Food is getting more expensive. Gas, obviously, due to supply constraints and inflation is getting more expensive. Property is also getting more expensive. Interest rates are going up as well. My wife and I refinanced late last year and locked our rate in at 3%. The most recent reading came in at 4.5%.

The FED is going to make some moves as well. Because of the war with Russia and Ukraine, they will take a more measured and conservative approach, so it’s possible that inflation is a problem for longer because the FED won’t hike rates as quickly as they may have previously intended.

Commodities

There are some other commodities, besides gold and other precious metals, that are feeling a pinch due to the war between Russia and Ukraine. Wheat is the biggest example of this because between Russia and Ukraine, they produce and ship a third of the world’s wheat.

Unintended consequences

Even though the war is between two countries, it’s affecting everything (though differently than how it’s affecting Russia and Ukraine). There are logistical problems that are delaying shipments of things. The air space above the scuffle is off-limits, so flights around the area are taking longer than they previously would have. Longer flights = more fuel and reduced volume on flights = increased costs.

There are a lot of investment risks and opportunities due to the moving parts in the world right now and the market will continue to be volatile until things settle down. If you have time to ride out some ugly markets, stick to your plan. If you’re in retirement or close to retirement, reducing your risk might not be a bad idea.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Online Payment Processing

March 9, 2022 by Jacob Sensiba Leave a Comment

Last week we talked about the pros and cons of being self-employed. This week I’d like to discuss online payment processing. Regardless of what industry you decide to start a business in, have some sort of presence online, especially the ability to take payments. With that said, there’s a lot we need to talk about, so let’s get into it.

Payment processing

If you’re going to accept payments online, there are three key pieces you’ll need: a payment processor, payment gateway, and a merchant account.

Payment processor – Responsible for the bank/credit card stuff. Communicating between your bank and the consumer’s bank. Responsible for validating the card number, expiration date, security code, account numbers, and all of that.
Payment gateway – An online version of a point-of-sale system. The payment gateway can help connect the merchant account with the credit/debit card issuers.
Merchant account – A type of bank account that allows you to accept and receive payments from consumers. Without it, the money that customers are transferring to you has nowhere to go.

How it works

The customer adds items to their cart, enters in payment details, and completes that payment process. Next, the payment information gets transferred to the payment gateway through the payment processor. Then the payment gateway transfers that information to the credit card network to confirm the card details.

The credit card companies run checks to make sure all the information entered was accurate and that the transaction wasn’t fraudulent. Once that’s been done, the credit card company submits a response to the credit card network that indicates whether or not the transaction was approved. This information is sent to the payment processor and requests funds transfer from the issuing bank. The funds will be sent to the merchant account, where they will sit for a few days until they transfer to your bank account.

Which payment processing platform to use

Now that you know how these payment processing platforms work, you need to figure out which one to use. Evaluate the most popular and most widely used payment processing platforms, and then review the security protocols and techniques used by those platforms. Check on the platform’s automated billing features – this is a must if you’re selling things like subscriptions. What kind of gateway options are available? The last thing to consider is the cost of the platform.

What are the best online payment platforms? According to TechRadar, the best payment gateways are Paypal, Stripe, Payline, Adyen, and Authorize.net. If you want to learn more about those, here’s the TechRadar article.

Advantages of online payment processing

Speed and convenience – Your customers don’t have to drive to your store. They don’t have to walk around and they don’t have to stand in line. The shopping that they need to do can happen so much faster and it can happen right where they are.

Increased sales – More people shop online. By having online payments available, you’re opening yourself up to that consumer base.

Reduced costs – There are no additional costs to cash payments, but there are extra costs for store-based transactions. The cost of driving to the store. As the merchant, you have to pay for the storefront and the overhead that surrounds that. Online transactions, though they do charge an extra processing fee, don’t come with those other kinds of costs.

Disadvantages of online payment processing

Security concerns – Because more is happening online, there’s a greater chance that you open yourself up to hackers and fraudsters. That’s why it’s important to do your research.

Increased business costs – The payment processing platform costs money. The increased online exposure and security risk warrants some extra equipment, software, and security system. Everything costs money and when you’re doing business online like this, it’s worth the cost.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Pros and Cons of Self-Employment

March 2, 2022 by Jacob Sensiba Leave a Comment

The number of businesses that have started since the start of the pandemic has shot through the roof. People realized how short life can be and decided to take their earning potential and work-life into their own hands. Here are a few stats to illustrate the self-employment picture in the U.S.:

As of 2019, the self-employed section of the population accounted for nearly 30% of total employment (Source).
As of November of 2021, there are 9.9 million self-employed people in the United States.
96% of self-employed people don’t want regular jobs (Source)

Business structures

Sole proprietorship – There is no separate business entity. You are the business entity. That means your assets and liabilities are your assets and liabilities. Banks are more hesitant to lend to sole proprietors than they are for other entity types.

Partnership (LP/LLP) – An limited partnership (LP) has one general partner with unlimited liability and all the other partners have limited liability. Creditors can come after all of the general partner’s assets including things they personally own. Limited liability partners can only lose what they put in. A limited liability partnership provides limited liability to all partners. Profits are paid through on personal tax returns, except for the general partner – they must pay self-employment taxes.

LLC – Very similar to the LLP in terms of how profits, losses, and liabilities are treated. Profits are passed through to employees on personal returns. However, members of the LLC are required to file and pay self-employment taxes.

Retirement plan options

As a self-employed individual, you have a few options when it comes to retirement accounts – Traditional IRA and Roth IRA (available to everyone), SIMPLE IRA, Solo 410(k), and SEP IRA.

Traditional IRA and Roth IRA – Contribution limits up to $6,000 ($7,000 if you’re 50 and older). Withdrawals prior to 59 ½ are subject to a 10% tax penalty unless certain conditions are met.

SIMPLE IRA – available to employers with fewer than 100 employees. Contribution limits up to $14,000 ($17,000 if 50 or older). Employer match available.

Solo 401(k) – Contribution limit is $61,000 ($67,500 if 50 or older). Available to self-employed individuals and self-employed individuals that have their spouse as their only employee.

SEP IRA – Contribution limit is 25% of employee compensation up to $61,000.

Click here for more information about business retirement plans.

Be your own boss

You get to set your own hours and work with whoever you want to. There’s no one to tell you what to do and how to do it. For people that like to make their own schedule and like to go to the beat of their own drum, self-employment makes a lot of sense.

Earning potential

There’s no ceiling on your earning potential. You don’t have a salary range, you make what you make. You can make $10,000 or you can make $10 million. That’s a double-edged sword though, your effort determines your income. You will only make money if you work for it. Someone who isn’t a self-starter, should not be self-employed.

Costs

You have to pay for everything. Whatever the cost of business is for your sector or industry, that’s on you. Health insurance, you have to pay for that. There’s no business or employer that can foot those costs for you. Same with your retirement plan, a lot of employers offer an employee match. If you’re the business owner and the employee, ALL of your contributions are your responsibility.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Finance Lessons Learned from the Pandemic

February 23, 2022 by Jacob Sensiba Leave a Comment

The Covid-19 pandemic changed life for two years and there are definitely still elements of what life was in the world today. No doubt there were some terrible things that happened. People lost their lives and their jobs. But there were also positives that came out of it. We’re going to highlight the lesson we can learn from this pandemic, particularly some personal finance lessons we can learn.

Working from home

This new type of work does not apply to everyone and I don’t like leaving people out, but this needs to be talked about. Working from home and articles about it took over during the pandemic and continue to be discussed.

Working from home, at least from some of those articles and studies, appears to be a net positive for employees and employers. Let time commuting, less overhead costs, more productivity thanks to no commute, increased job satisfaction, and improved work-life balance.

Thanks to the work-from-home setup, people who were able to do that moved out of the city or rented an Airbnb for an extended amount of time. In either case, those people were, likely, able to reduce their housing costs by moving to the suburbs or giving themself a little vacation/change of scenery.

Savings rate

A lot of people saved money during the pandemic thanks to stimulus payments. In April of 2020, the personal savings rate for Americans was 33%. In March of 2021, the personal savings rate for Americans was 26.6%.

The savings rate has fallen since then but is still above 12% which is higher than it was before the pandemic (less than 10%).

Stimulus payments

According to the National Bureau of Economic Research (NBER), most Americans either saved or paid down debt with the majority of their stimulus payments. 40% of the stimulus payment was spent, 30% was saved and another 30% was used to pay down debt.

Personal finance lessons

I think there were a lot of personal finance lessons that can be learned from the pandemic. Here’s a list of them below:

People saved more money

The future was very uncertain so people were more conservative with their spending and less conservative with their savings. That mindset shouldn’t change. The future, in principle, is uncertain. We do not know what tomorrow holds, so saving for a rainy day/goals/retirement is very important.

You don’t need to spend money to have fun

At the very beginning of the pandemic, you couldn’t go anywhere. Quarantine and lockdown orders came in right away. Instead of getting together in person, people utilized Facetime, phone calls, and Zoom. I, personally, had group Zooms with family members where we played and had conversations like we would if we were in person.

Diversification is important

Early in the pandemic, the market tanked. We lost over 30% in six weeks. Granted, it came right back up not long after, but that might not always be the case. If you don’t have time to ride out the ebbs and flows of the market, it’s important you get your asset allocation right. Talk with your adviser to make sure your investment matches your time horizon and risk tolerance.

Get rid of debt

You never know when your job and your ability to earn can be taken from you. Some people lost their jobs, some people were furloughed, and some people just weren’t able to go to work. If you don’t have an income, the only other part of the balance sheet you can affect is your expenses. Get rid of your debt. That’ll help you reduce your expenses in case that happens (you can also save more).

Protect your loved ones

Get life insurance. A lot of people passed away during the pandemic. If you contribute income to your household, you need to make sure you financially protect the people that rely on your income.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

What To Do With Your Old 401k

February 16, 2022 by Jacob Sensiba Leave a Comment

When you leave your job and you have a 401k, there are a few things you can do with it. You can leave it there, you can cash it out, you can roll it into an IRA, or you can roll it into a retirement plan with your new employer. So what should you do with your old 401k?

Theoretically, you have four options.

Withdrawing your funds

If you are under the age of 59 ½ and you withdraw the money, you’ll have to pay a tax penalty on it. UNLESS, you meet some of the exceptions: medical expenses, your first, primary residence (up to $10,000), health insurance premiums while unemployed, distributions from an inherited IRA, pay off an IRS tax levy, higher education expenses, as well as a few others.

If you don’t meet any of those criteria and you’re under 59 ½, you’ll have to pay that penalty. It’s not worth it. UNLESS you’re using that money to pay off a credit card. Credit card interest rates are usually well above 10%. So if you’re saving yourself from paying a 27% interest rate, theoretically, you’re making a 17% return on your money (27–10=17). But this calculation doesn’t account for taxes so you might come out even, or behind.

95% of the time, it makes the most sense to pursue other options.

Keep it where it is

Some people will leave their old 401k with their previous employer. I think a lot of that has to do with laziness, but it could be a good, rational decision as well. The primary factor has to do with cost. What are the expenses of the 401k? Typically, if it’s a large employer and/or a large plan with a lot of assets, the fees are going to be low.

That might be a good reason to leave it. The plan might also have good investment options. If the fees are reasonable, or at least average, then the investment options might be reason enough to stay.

Roll it to your new employer

Nine times out of ten, I’ll have people roll their old 401k into their new one. If they’re able to. Some employers don’t allow income transfers. Having everything with one firm makes managing it so much easier.

The only time I don’t think it would be appropriate is if the new firm has high fees, but it’s also important to compare the new fees to the fees of the alternative. That alternative is rolling it into an IRA at a separate firm.

Roll it into an IRA

As an independent financial advisor, this option is best for me, but not typically best for the client. If you take a standard fee for a financial advisor (1.00 %) and compare it to the standard expense paid by a 401k participant. Employers with 2,000 employees pay below 1% and employers with 50 or fewer employees pay 1.25%. Here’s some more info on that.

That might be the case if it’s a small plan. The large plans, however, can have ALL IN fees of around .5%.

As is the case with a lot of things in the finance world, the answer is not black and white. You need to compare and contrast your options and then make a decision. Here are things to consider: cost, investment options, ease of management, and customer service. How do the fees compare? What are the investment options? Do you have everything in one place and is it easy to make changes? Can you get in touch with someone if you have problems/questions?

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Student Loans – Do you have too much?

February 9, 2022 by Jacob Sensiba Leave a Comment

I had this question posed to me and I thought it was interesting, I also think I have a different response than most people would, so let’s talk about it. Do you have too much borrowed for student loans? Does a dollar amount define the answer? Or is it situational?

Current student loan debt dilemma

To illustrate what the current student loan debt landscape looks like, I’d like to show some statistics.

Since 1970, the average student loan debt has increased by 2,807%. After adjusting for inflation, the average student loan debt has increased 317%.
The current average student loan balance is $37,113.
Total student loan debt is currently $1.75 trillion and grows 6 times faster than the national economy.
Those aged 25-34 are most likely to hold student loan debt, but people aged 35-49 hold the greatest proportion of debt – $600 billion.
Over 25% of borrowers owe more than $100,000

Student loan debt is a problem. I do believe it’s a manageable problem though. At least, it’s manageable going forward. Which brings me to my next point and the answer to the proposed question.

Situational answers

Here’s my no answer, answer. It depends. Some students will borrow over $100,000, but they could go to school to become a doctor, dentists, lawyers, or engineers.

Another question to ask is what school are you going to? Is it necessary for you to go to a big school that costs $50,000 per year? I think in most instances, probably not.

I think those are the two biggest questions that help answer the “how much too much” question. What are you going to school for and what school are you going to?

I think that the push to go to college to get an education is cyclical. Obviously, there are professions where it is very much needed, but there are others where that’s arguable. I also think that there’s been a lot of innovation done in the educational space that has provided legitimate alternatives to your typical college education. As with most things, however, only time will tell.

What are your post-graduation plans?

Do you anticipate you’ll earn a lot of money? Does your profession have a track record for medium to high earning potential? That is definitely a factor to consider. You could have your sights set on going to college already, but answering those two questions will help you decide what type of university to go to (online, state-run, private, etc.).

Mathematical answer

There’s a percentage answer, there’s not really a dollar amount answer because it’s relative to your income. Lenders, specifically, want to see your debt to income ratio below 43%. So if your projected income to debt ratio is above that number, then you need to think about alternatives.

How much is the average starting salary in your industry for your position? If it’s $50,000 per year, that’s where you start. How much student loans will you have when you graduate? Using the national average, it’s $37,113.

Breaking it down. Your monthly gross income is $4,166.67. You plan to pay off your student loans in 10 years and your interest rate on that debt is 8%, so your monthly payment is $450.28. Your debt to income ratio is roughly 11%.

If you’re looking for a home to purchase, the proposed mortgage will get added to that monthly student loan payment to help calculate your new debt to income ratio, so pay attention to that as well.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

How to Increase Your Net Worth

February 2, 2022 by Jacob Sensiba Leave a Comment

Your net worth is a benchmark for your financial success. Notice that I said financial success and not just success. That was intentional because money doesn’t define your success. Money can afford you freedom, but I believe real success doesn’t involve money. That was free of charge, now let’s talk about how to increase your net worth.

What is net worth?

Net worth is assets minus liabilities. How much wealth do you have after you subtract what you owe versus what you have? It’s typically used to gauge your progress in your financial life. If you have debt, then when you pay it down, your net worth goes up. The same happens when you increase your savings.

How to increase your assets

Honestly, the only way to increase your assets is to save money. At least, that’s where it all starts. The more you save, the more you have to work with.

How do you save money? Decrease your expenses and/or make more money. That’s what it comes down to. Figure out what’s important – in terms of your budget and spending. Everything else that doesn’t fit on that list needs to either be removed or reduced.

Once you have money saved, then you can put it to work. Invest it in securities or assets that have a chance to increase in value. What kinds of things have a chance to increase in value? Stocks, bonds, mutual funds, ETFs, precious metals, real estate, certificates of deposit (CDs), and cryptocurrency/NFTs (though I would tread carefully here).

Growing your assets will help you increase your net worth.

How to decrease your liabilities

Pay down your debts. That’s it. Obviously, it’s more challenging than that. Ideally, what you’d want to do is pay down your debts before you focus on the saving aspect of it. If you have debts with high-interest rates, like credit cards, those should be your first priority.

We’ve gone into detail about the repayment methods before so we’ll only touch on them briefly, but what’s important is decreasing your expenses so you can make larger, more regular payments towards your debts.

The next step is developing a repayment strategy. The two we’ve talked about before are the debt avalanche and the debt snowball. The debt avalanche – you pay the debt with the highest interest rate off first before moving to the next one. The debt snowball – you pay the debt with the smallest balance off before moving on to the next one.

Paying down your debts will really help you increase your net worth.

Is there a net worth number you should hit?

At the end of the day, your net worth number is really a reflection of what you’ve saved for retirement. Ideally, you will not have any debts, including your mortgage. So there’s no math that needs to be done. What are your assets? Primary home, any rental properties, and then your retirement savings, with primary home and retirement savings being the two most common for everyone.

So the question becomes, how much should you save for retirement? Thankfully, we’ve created a guide for you to help answer that question (see below).

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

What’s a Thrift Savings Plan?

January 26, 2022 by Jacob Sensiba Leave a Comment

A thrift savings plan is a retirement plan available to federal employees and members of the uniformed services.

Real quick…Uniformed services are bodies of people in the employment of a state who wear a distinct uniform that differentiates them from the general public. Their purpose is to maintain the peace, security, safety, and health of the public they serve.

Back to it. A thrift savings plan is a defined contribution plan, like a 401k, that offers federal employees the same benefits as people who work in the private sector.

In this article, we learn about what a thrift savings plan is, as well as the rules and regulations.

What is it?

As mentioned in the introduction, a thrift savings plan (TSP) is a defined contribution retirement plan for federal employees.

A TSP includes deferred contributions from employees and can include matching contributions from the federal agencies. The employee also has the option of contributing pre-tax to a Traditional TSP, or post-tax to a Roth TSP.

If applicable, you can rollover a previous 401k or IRA into a TSP, and vice versa if you retire or move back into the private sector.

Investing

Currently, Blackrock is providing the investment products used in the Federal TSP. The investment options include:

The Government Securities Investment (G) Fund
The Fixed-Income Index Investment (F) Fund
The Common-Stock Index Investment (C) Fund
The Small-Capitalization Stock Index Investment (S) Fund
The International-Stock Index Investment (I) Fund
Specific lifecycle (L) funds designed to include a mix of securities held in each of the other five individual funds

Rules and Regulations

Not only is it a retirement plan, but it’s also a government-sponsored retirement plan. Obviously, there are going to be some regulations that accompany it.

The TSP contribution limit for 2022 is $20,500. The government has a sliding scale match, starting at 1% and topping out at 5%. The match is available even if you don’t contribute, though it is at the 1% base amount. It’s a percentage for a percentage match. If you contribute 2%, the match is 2%. If you contribute 5%, the match is 5%.

Fees are considerably lower with TSPs, usually .05%. Like IRAs, TSPs also have required minimum distributions that must start at 72. IRAs have an early withdrawal penalty of 10% if you pull money before 59 ½ years of age. TSPs will waive that 10% penalty if you retire at 55 or older.

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Jacob Sensiba

Secure Act 1.0

Secure 2.0

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Eligibility for Medicare’s Hospice Benefit

Medicare’s hospice coverage includes a broad range of services:

Hospice costs not covered by Medicare

Some Costs

Planning

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Gold

Crypto

Oil

Inflation

Commodities

Unintended consequences

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Payment processing

How it works

Which payment processing platform to use

Advantages of online payment processing

Disadvantages of online payment processing

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Business structures

Retirement plan options

Be your own boss

Earning potential

Costs

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Working from home

Savings rate

Stimulus payments

Personal finance lessons

People saved more money

You don’t need to spend money to have fun

Diversification is important

Get rid of debt

Protect your loved ones

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Withdrawing your funds

Keep it where it is

Roll it to your new employer

Roll it into an IRA

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Current student loan debt dilemma

Situational answers

What are your post-graduation plans?

Mathematical answer

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What is net worth?

How to increase your assets

How to decrease your liabilities

Is there a net worth number you should hit?

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What is it?

Investing

Rules and Regulations

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