Money Pilot Financial Advisor Podcast

Cyber criminals have many motives and goals, but separating you from your hard earned cash is one of the most lucrative for the criminals and potentially devastating for you.  I've put  a checklist on my website at https://www.moneypilotadvisor.com you can download for free with more details and tips.

Do you use the same password to log into multiple websites? Or use common phrases or personal information in your passwords?  If someone gets your login for one account they may be able to log into other important accounts, like your bank account or investment accounts. I know it’s a pain to have all those t passwords with random letters, numbers, symbols. Try using a password manager that can generate and save unique passwords for you. If your device has biometric authentication, use it to unlock our devices and to access stored passwords. And whenever possible used two factor identification. That's when the company you're trying to login to sends you a text or an email to verify it's actually you logging in. 

Do you sharealot of personal information on social media sites? Some cyber criminals look on these sites for key information like your birth date, place of birth, or mothers maiden name which can aid them in resetting passwords associated with your financial accounts giving them access and locking you out. Consider making your social media account private where possible or hiding sensitive personal information. 

Are images in emails you receive set by default to download to your computer automatically? This is one way cyber criminals lure you into clicking links or opening attachments which are then redirected to a compromised website. When you receive an unsolicited email don't open any attachments until you can confirm who the sender really is. 

Research the apps before you install them on your phone.  And give them the minimal permission necessary to use your data. Cyber criminals can build legitimate looking apps that can steal your data and monitor your phones actions. 

Always remember if someone calls claiming to be from a government agency either offering you relief payments or demanding payments for fines or taxes, this is a scam. The IRS for example will never call or email you. Any official communication they will send you through snail mail. The same goes for someone claiming you won sweepstakes. Or someone calling from the “credit card department” asking you for your credit card information .

A common thread is the thieves will contact you by email, phone, or text, pressure you with immediate deadlines or threats, and try to get you to send them money, gift cards, credit card information, or a check. Or work to get key personal information from you like account numbers, passwords, to steal your identity and rob you through impersonation. Hang up, don’t text back, and don’t open the email. Call the company or agency directly using a phone number you know is correct to see if they are legitimately trying to contact you.

If your data is stolen, consider freezing your credit immediately by contacting the three major major credit bureaus, Experian, Equifax, and Trans Union. Change your password on any sites that have the same credentials. Report fraud immediately to your financial institutions . If you lost money in a scam or victim of identity theft file a report with your local police and the Federal Trade Commission. Check you credit report details regularly. By law you can receive a free copy from each of the three credit agencies once a year at https://www.annualcreditreport.com/index.action  
Don’t wait to find out our a victim of fraud until you get denied for a mortgage, car loan, or line of credit, or worse flagged on your security clearance investigation. 

This week I'm speaking at Military Money Conference near Raleigh, NC. It's the biggest gathering of the military and money community ever. If you've ever thought about a career in the personal finance field, this conference is for you.  Attendees can expect inspiration and actionable advice and connecting within the personal finance community. Here's all the information  https://milmoneycon.com/register/ 

Today I'll talk about some of the different career options related to personal finance. First, personal financial planning and Certified Financial Planner (CFP) designation. https://www.cfp.net/why-cfp-certification/why-get-certified CFP’s meet with clients to explore what’s important to them and create holistic financial plans to meet their unique financial dreams and challenges. CFPs provide advice in a wide range of specialties, like budgeting, planning for transitions, paying for college and retirement, managing risk, taxes, investing, and what ifs like disability or premature death. If you enjoy helping people in a very comprehensive way, this path may be for you. Learn more at The Military Financial Advisors Association (MFAA) which is a nonprofit of independent financial planning experts that specialize in military and veteran families. And we're on a mission to help service members, spouses, and veterans get started in the profession. Check out and the Military to Financial Planner podcast

Learn more at the Financial Planning Association (FPA). If you’d like real taste sign up for the FPA Externship https://fpaexternship.org which this year June - July. You get to peek behind the curtain and see over 25 firms and experts at work, and do the work yourself. No experience necessary and all are welcome. It’s totally virtual and if you miss a session live, it’s recorded. If you are interested in helping people in their financial lives but don’t know what that even looks like this will be the best $250 you’ve ever spent.

 If you like educating and counseling check out the Association for Financial Counseling & Planning Education® (AFCPE®) It believes in empowering all people to achieve lasting financial well-being through the highest standards of financial counseling, coaching, and education. Their Accredited Financial Counselor (AFC) designation delves into financial issues relevant for lower and middle-class Americans, like managing credit cards and debt, budgeting, and managing cash flows. For  military spouses, this can be a great way to enter the personal finance field,  find volunteer and PAID opportunities. AFCPE also offers special pricing for military spouses.

Like people, but love numbers and rules? You might excel as a tax preparer and become an Enrolled Agent (EA). An enrolled agent is a person who can represent taxpayers before the IRS after passing a test covering individual and business tax returns. You could start your own tax return preparation service or work for another preparer. There's volunteer work like the IRS Volunteer Income Tax Assistant (VITA) Program provides free income tax preparation for servicemembers and lower income Americans. There's paid work with commercial tax preparation companies like H&R Block which also provide entry level training, often for free.

 If you have questions and would like to know more, don’t hesitate to reach out. This field is really breaking open opportunities for new faces in different places. Come join the party.

You may have heard that the Thrift Savings Plan (TSP) may finally be joining us in the 2st century. There are some good and important changes coming, and there's going to be a transition period when you won’t be able to access to your TSP.

According to TSP, it is launching its official mobile app that will give you access to your TSP My Account. You'll be able to log onto your account using biometric identification software on your mobile device, like fingerprint access and facial recognition which will add an extra level of security. They are also promising virtual assistance  via the mobile app or the web. There will be an interactive virtual assistant and automated support 24 hours a day. The virtual assistant can transfer you to an in-person representative during business hours, if needed. TSP is also promising an online chat function to connect you directly to a real representative for personalized support during business hours.

New streamlined paperwork processing is also coming, promising the ability to complete many transactions online with an "Easy, secure, and legally binding e-signature.”  In particular, they're promising assistance and a streamlined processing for rollovers from other 401(k)s or IRAs into TSP. And you should be able to make electronic transfers for loan payments and payoffs, and disbursements from your account.

Here's the key dates they need to know:

April 8 – Last day to request paper loan documents by telephone

• April 21 – Last day to submit paper loan documents
• April 29 – Last day to request all other paper forms, whether by phone or online.
• Mayy 16 – Last day to submit or access all forms (online or hard copy). This includes withdrawal, rollover or transfer requests as well as beneficiary changes..
• So basically if you want to make any request that needs a form you must submit it by May 16. 
• May 16 is also the last day to contact TSP via email
• May 26 – Last day to make transfers between different mixes of investments  or change contributions. So if you want to rebalance, do it before May 26th. 
• May 26th is also the last day you can contact TSP via telephone.
• From May 26 at noon Eastern time through the first week of June, account access of any kind will NOT be available. All your investments in TSP will still be there, your automatic payroll contributions will continue, and invested funds will continue to reflect market changes. 

Think of this May 26th through the first week of June as a total eclipse of the TSP. Seeing the world go dark in a total eclipse of the sun can be scary. But have faith the sun is still there and will come out again from behind the moon. In the same way TSP will “go dark” from May 26 through the first week of June. But what comes out on the other side should be a much improved, more participant-friendly TSP.

Now after the upgrade, all TSP users will have to update your login information before accessing your online account for the first time. TSP is promising step-by-step prompts to walk you through it. You’ll verify your identity, update your contact information and set up your account security.

Coming later this year, but not with this upgrade TSP plans to add a window within TSP where you could purchase outside mutual funds through the TSP website. I'm keeping an eye on this as well and will certainly do a podcast on that as details become available.

For more information watch your emails or go to tsp.gov and click on the banner right at the top of the page New features and other changes coming to TSP later this year.”  Can I put a link to that in the show notes

https://www.tsp.gov/new-tsp-features/key-transition-dates/

There are two types of 529 plans: prepaid tuition plans and education savings plans. Today I'm only focusing on the 529 Education Savings Plan which is an investment account you use to save for future education tuition and expenses. The plans are set up by each state. You to invest your savings in the plan, where your investment grows tax-free. And when you withdraw the money for approved education expenses, that distribution is also tax-free. 

You can use it to pay for higher education tuition, mandatory expenses, room and board at any college or university, and some vocational schools. Now 529 accounts can also be used for up to $10,000 a year of K-12 school tuition only.

If you pay state income tax, you may get a break for your 520 contributions, including deductions on your state income tax or getting matching grants. You'll only be eligible for these state specific benefits if you invest in a 529 plan sponsored by your state of residence. It’s important to note that you can participate in ANY state’s 529 plan. Look at the plan’s administrative fees and investment fees. If you don’t pay state income tax, like many active duty military, you may be best off going with a plan with lower fees, better customer service, and/or investment options that best fit your needs. Details are on each plan’s website. There are also websites you can use to compare different states plans. A great place to start is Morningstar’s 529 plan ratings. https://www.morningstar.com/articles/1006084/the-top-529-college-savings-plans-of-2020

Anyone can open a 529 account for a designated beneficiary, family, friends and even the designated beneficiary themself. Anyone can contribute to the 529 plan once it’s open. Many plans also make it simple for others to gift money to the 529 account, like providing a donation link unique.

You typically choose from a range of investment portfolio options that often include mutual funds or exchange traded fund. Many also include age-based portfolios, which automatically shift from more aggressive investments to more conservative  investments as a beneficiary gets closer to college age. Give these  a look if you’d like to fire and forget.

529 accounts owned by a parent or dependent student are count as parental assets toward your expected family contribution. Higher expected family contribution can mean lower financial aid. Parental assets are counted to a max of 5.64% which is more favorable than student assets which are counted at 20%. So accounts owned by parents or the student may decrease financial aid. But not as much as if the student had the savings outside of a 529 account.

Assets held in 529 plans owned by grandparents or anyone else have no affect on the FAFSA. But when funds are distributed to pay for college expenses, it will be counted as student income on the FAFSA. One strategy to avoid this problem is  wait to withdraw funds until after the student’s third semester of college, since the FAFSA looks at income from two years prior. 

The owner that opened the account can change the beneficiary at anytime. There is a long list of people you can make a new beneficiary, including nearly any relative of the beneficiary. And you can change the beneficiary more than once. Check with your plan to see who qualifies. 

If you withdraw money from a 529 plan that is not used for qualified education expenses it may be subject to both state and federal income tax and an additional 10% early distribution penalty. There are a few exceptions to the penalty if the beneficiary dies or becomes disabled. 

 One last note for parents. Remember, you can borrow money for college, but you can’t borrow for retirement.  At a bare minimum invest enough in your TSP or 401k to get any match. 

Most of you already know that digital assets like Bitcoin, Etherium, and Nonfungible Tokens (NFT) experience huge price swings or volatility. Today's focus is diversification of your portfolio and digital assets. When you choose from among different investment options, you diversify. You likely already started do this by investing in mutual funds or exchange traded funds through a workplace retirement plan like the Thrift Savings Plan or a 401k. If you  have a portfolio of stock and maybe bond funds, what happens  if you add in VERY volatile digital assets in the hopes of earning a bigger return (profit)? Will  those stormy seas will turn into a tsunami of risky volatility?

Not necessarily. That’s due to correlation, the tendency of different investments to swing up and down together.  Two investments with a correlation of 1, are perfectly correlated, they go up and down together. If the value of investment A goes up, investment B also always goes up. If the value of investment B goes down, investment A goes down too.  This could be the stormy seas turned tsunami scenario. If you need that invested money for something else, you’re going to take a loss. 

If two investments have a correlation of -1, they are perfectly negatively correlated, when one investment goes up the other always goes down. And vice versa. But just like unicorns, perfect negative correlation pretty much never occurs. it they have a correlation of 0, there is no correlation. If A goes up,  B has an equal chance of going up, going down, or not changing at all. 

The volatility, or price swings of digital assets is VERY high.  Fortunately digital assets are NOT perfectly correlated to stocks, or any other assets. In plain English, most of the time digital assets values do their own thing and fluctuate in ways that do not match stocks or bonds.

Although Bitcoin is almost a decade old and many investors have jumped on the digital asset band wagon, the digital asset market is still more like the wild west than traditional investments. In addition to wild price swings, regulations and insurance programs that help protect investors of traditional assets haven’t developed yet for digital assets. Fees associate with buying, trading, and holding digital assets can be high and are often buried in fine print. If you do invest in digital assets, you literally need to be prepared for the possibility you could lose your entire investment.  

Because digital asset prices are not strongly correlated to other assets like stocks and bonds they could be beneficial to broader portfolio. But be careful. Adding too much digital assets to a portfolio can have the affect of the tail wagging the dog. How much? Depending on your tolerance for risk probably just 1% to 5% of your overall portfolio. Yes, that small an amount could make a meaningful difference in your portfolio’s return, while managing the risk of price volatility and the very real uncertainty of the new investment type over all. 

Always keep very detailed trading records. You are responsible for reporting and paying taxes on your profits and losses. If you’re a HODLer that buys and never sells, you won’t owe taxes until you eventually do trade or sell your assets. If you are an active trader, be very careful. You can wrack up a huge tax bill before you realize it if your unfamiliar with the tax laws, especially around short term capital gains, short term capital losses, and the wash rule. One way to minimize these problems is not to sell an asset within one year of buying it. If you plan to trade more often, seriously get some tax help.

For more information on investing, check out Ep 63 Crypto Currency, Ep 57 Risk Profile, Ep 52 Stocks, Ep 45 Rebalance, and Ep 44 Capital Gains.

I've put a small, tax season gift for you on my website moneypilotadvisor.com. You can go there and download a free checklist “What Should I Consider When Reviewing My 2021 tax return”. This information also should help you prepare your return. 

If you take the standard deduction and made cash contributions to qualifying charities you can deduct up to $300 if you single or $600 for married filing jointly. A deduction reduces the amount of income we have to pay tax on. Be sure to have your donation receipts.

If you recently married or divorced, review your filing status which is determined by your situation on December 31, 2021. If you married any time last year, you'd be considered married for the entire year. The same as true if you had a child born in 2021. You would qualify for the child tax credit for the entire year. 

If have dependent children under age 18 you may qualify for the child tax credit. In 2021, half this tax credit should have been paid to you directly in monthly payments beginning in July. As long as you still qualify, you’re eligible to get the rest of the credit when you file your tax return. But you need to report the total amount you have already received  You can find this information in a letter the IRS sent to you, or from you online IRS account, or even reviewing you own bank records.

If you paid child care expenses for a dependent child under 13 so you and your spouse (if you're married) could work or pursue work, you can also qualify for the Child and Dependent Care tax credit. If you have dependent children or your spouse in college you may qualify for the Lifetime Learning Credit or the American Opportunity Tax credit. There are quite a few rules associated with all these tax credits. So be prepared to answer questions about your family situation in detail  and bring receipts when you talk with your tax preparer or use tax preparation software to do it yourself.  

Did you receive the third COVID  Economic Impact Payment (EIP3)  in spring 2021? It was  $1,400 single, $2,800 for a married couple, PLUS $1,400 per dependent child or qualifying dependent relative. There was a phase out over certain income. If you enter the wrong amount you received on your tax return, it will go through a manual review at the IRS  delay any refund for months. The IRS is supposed to mail out reminders this month or in March of the amount of EIP3. If you don’t have the IRS letter, go back and look over your bank statements from spring 2021 to find it. 

If you find you owe more tax or get a higher refund this year than you expected consider changing your W-4 withholding through HR or military MyPay to adjust it.

Watch out for 1099 forms you should receive which report your investment capital gains, dividends, interest, and other income. You may need to log into your accounts and download them yourself. The key is to make sure you’ve rounded them all up and have them on hand.

One thing catching people off guard is reporting their income, gains and losses from trading, staking, interest, or rewards in crypto or digital assets. These are treated like other investments for taxation. It is critical to detailed records of all your transactions, even if you use a broker like Coinbase or Venmo. The 1099s they issue may have partial or inaccurate information.  If you’ve been an active trader, I highly recommend you use a CPA knowledgable in crypto to help you with your taxes and make sure your record keeping is up to snuff. 

Hello and welcome back to the podcast. I was listening to something this week about Maslow's hierarchy of needs. You may remember this from school or reading. It’s basically a pyramid where one need has to be met before you are motivated and are able to address the next level up the pyramid. The most basic needs, at the bottom of the pyramid are physical like shelter and food. Then the next higher is safety and security. Above that is love and belonging, then the next up is esteem and respect. Then at the very top of the pyramid is self-actualization the need to realize your potential and grow. The basic idea was that if you haven't the needs at the bottom of the pyramid you don’t have the capacity to address the needs higher up.

I was interested to hear recently that Maslow didn't actually come up with the pyramid, but that it  was an idea was based on his writings. And since then still also reimagined this idea of a pyramid. And one that I liked and thought was especially fitting for financial planning is envisioning these needs as a sailboat rather than a pyramid.

In the sailboat version, life as a voyage on a vast ocean full of opportunities for meaning and discovery, but also danger and uncertainty. In order to stay afloat and keep from drowning you need a boat. A boat without a sail will keep you out of the water but you’re not going anywhere. You’re just bobbing along where the ocean takes you. The hull of the boat represents safety and security. The sail represents growth with the needs of exploration, love, and purpose. Exploration is the desire to seek out and make sense of new, challenging, and unpredictable events despite the pressure that comes with it. Love basically means the desire to feel connected and love with others. Purpose represents the continual pursuit of goals.

I really love about this idea of the sailboat with the hull providing all the safety, security and basic needs and the sail providing the things that really bring personal meaning to our lives. You can survive working and saving solely to build the boat’s hull. Yes the security the boat’s hull provides is critical. It doesn’t matter much much how you feel about love, exploring, and purpose if you boat is sinking and your surrounded by sharks. On the other hand, spending all your energy only focusing on that physical security, safe but adrift at sea isn’t much of a life either.

That’s why I love approaching financial planning as a sail boat. Absolutely, we need to make sure your money keeps you and your family alive, safe, and cared for at every stage of life. That’s essentially a life raft. But how much better is it to plan and build a sail boat? Where do you want your sail to take you? Your exploration, love, and purpose should guide your journey and be the blue print for the ship you build. That’s the part of financial planning I love. Listening and teasing out what kind of life journey you want. What are your needs for exploration, love, and purpose in your life? We’ll definitely make sure you have a safe and secure boat. But let’s get past just the lifeboat and help you use what you have to build the sailboat and navigate the life you want.

I hope todays’s podcast has helped you look past just the dollars and spreadsheets of building your best life you. And helped you think about your sailboat and the journey you want it to take you on.

I’ve had clients close to retirement to asking, “Should I pay off my mortgage before I retire?”  The bottom line up front is that in the long run, dollar for dollar its very likely you would much better keeping a low interest mortgage and investing that cash in a moderate risk portfolio. But YOUR decision to keep or pay off your mortgage depends on a lot more than just a spreadsheet. 

First do you have the cash available to pay off your mortgage or  some extra income now that you can use to make extra payments and pay it off sooner? Why are you considering paying it off early?  Will it help you sleep at night? Honestly, if having a mortgage payment in retirement will have you living in fear of losing your home, it doesn’t really matter what the numbers say or what opportunities you leave on the table.

Other benefits of paying it off are you won’t have to pay  interest on a loan you don’t have. No mortgage can improve your cash flow with lower fixed costs each month. This can be a big help if your circumstances change. 

And keeping your mortgage? First, you’ll need to have income coming in to make a mortgage payment along with your other expenses. If you can, you may end up much better off if you don’t pay that mortgage off now. And instead invest that money, and enjoy years of compounding growth. Especially if you financed or can refinance at these historically low home mortgage interest rates.

Let's say you have a mortgage with a 3% interest rate,  balance right now of $200,000, and 15 years of payments left. Or refinance to a 15 year mortgage at 3%.  Over 15 years, you would pay just over $48,000 in interest. Pay off now and you save $48,000. 

Now  instead of pay off the mortgage, you invest that $200,000  in a fairly conservative, diversified investment portfolio of half stocks and half bonds. Historically, this will earn you a return of at least 6%. That $200,000 invested for 15 years with a 6% annual return will grow to just over $490,000. That’s a profit of $290,000. Now you still had to pay $48,000 of mortgage interest. Which still leaves you more than $250,000 better off by keeping your mortgage and investing!

I mentioned your decision is about more than just a spreadsheet. Paying off your mortgage is a sure thing. That $200,00 disappears form you bank account and you own your home free and clear, period. If you keep your mortgage, with a fixed interest rate that interest cost is a sure thing. BUT, that investment return is not guaranteed. 

For keeping your mortgage to be a better option for you, your overall return on your investments needs to be higher than your mortgage interest rate over the life of your loan. Even with conservative investment portfolio there is a very good chance that keeping your mortgage with a low interest rate is better choice, but there is no guarantee. Again, this is where having a reliable cash flow in retirement and emergency fund are key.

In the end it comes down to what options are available to you and how you tolerate uncertainty.  Let’s do a quick review. If you are comfortable with some uncertainty, you will have reliable income to pay your expenses in retirement, including a mortgage payment, and you can lock in a mortgage interest rate that is lower than the profit you can expect from investing, keeping that mortgage could be a very good choice for you and leave you with a higher net worth.

If you don’t think you’ll have the income to cover all your retirement expenses and a mortgage, or you won’t sleep at night with a mortgage payment having over you head, no matter what the numbers say, your best choice will probably be to go with the sure thing and pay it off. 

And if you still have a mortgage over 3% your window for getting a lower rate is is probably closing. For more info on the refinance decision go back to Episode 18. 

When you separate from military or federal employee service without a retirement or a family member leaves a current job, you lose your healthcare associated that employment. 

For active duty military and reservists covered under Tricare if you separate without a retirement you qualify for the Continued Health Care Benefit Program (CHCBP). The deductibles and cost shares are relatively low, but premium for individual coverage about $6,000 a year. For a family it’s a little over $16,000 a year. https://www.humanamilitary.com/beneficiary/benefit-guidance/special-programs/chcbp/

If you are a separating federal civilian employee, you can qualify for Temporary Continuation Coverage (TCC) which is a continuation of your existing FEHB policy. But you must pay the full premium for the plan you select, both your and the government's shares of the premium. So you can expect TCC to be about 4x as expensive . https://www.opm.gov/healthcare-insurance/healthcare/temporary-continuation-of-coverage/#url=separate 

COBRA coverage is available for regular civilian employees of companies with 20 or more employees. COBRA is a federal law that gives you the right to keep their employer’s group health plan after a job loss. You will have to pay the full health insurance premium, including the employer portion. Check with HR for details.
F
or all three of the current employer continuation plans temporary the service member or employee can get 18 months of coverage, eligible family members 36 months.

There are other options on the Health Care Exchange at https://www.healthcare.gov/  You'll see plans, costs, and possible premium tax credits that can greatly reduce your overall costs,  Click the search box at the top of the website and enter Preview Plans. You’ll need to enter some basic info like your state and anticipated income for the year you want coverage for details. Your costs will depend on your income relative to the federal poverty level. If you qualify for the premium tax credit subsidies. You can have this credit applied to reduce your monthly healthcare.gov insurance premiums. Or you can wait to you file your tax return at the end of the year and apply it to the federal income tax you owe for the year. 

If your income is below 138% of the federal poverty level, you may be eligible for Medicaid and /or Children’s Health Insurance Program (CHIP).  But these are state based, whichcan be challenging if don’t know where you will be settling. If you qualify for Medicaid, but choose to buy health insurance on the exchange anyway, you are NOT eligible for for a premium tax credit.

For 2022,  if you earn more than 400% of the poverty level the premium tax credit begins to phase out. In 2023 it will revert to being a cliff. One dollar past 400% and you get no subsidy.

You  need to enroll in a particular Silver plan or better to receive the premium tax credit. Your costs  are based on your expected household income for the year you want coverage.  If your income doesn't match your estimate for the year it will be reconciled when you file your federal income taxes. For your household size count yourself, your spouse if you're married, plus everyone you'll claim as a tax dependent, including those who don’t need coverage.

You can also shop around with different health insurance companies or brokers. If you will earn too much for an exchange premium credit, you may find a cheaper alternative directly from an insurance company.

Today we’re talking about combat pay and the Thrift Savings Plan (TSP). I’ll be throwing around some tax terms terms, so let me take a minute to go over them.

Tax-exempt - You don’t pay any state or federal income taxes on tax-exempt pay, ever. This applies to all of the pay our enlisted and warrant officers earn in a combat zone. For commissioned officers combat pay is tax-exempt up to $107,868 for 2022, your pay above that is taxed as normal.

Pre-tax, also called tax-deferred - Contributions to Traditional TSP are pre-tax or tax deferred. Your TSP contribution is pulled from your pay first, then you pay income tax on what’s left. You DO you pay income taxes later on both contributions and on the amount your it grows when withdraw it from TSP. 

After-tax -  Contributions to ROTH TSP or a ROTH IRA are called post-tax, or after-tax contributions. You pay income tax on your pay first, then make contributions to ROTH accounts with what’s left. So you pay tax on all your taxable your income now. But,  when you withdraw it after after age 60, your initial contributions and all the growth comes out tax free. 

So let’s envision a chart about combat pay contributions to retirement accounts like Traditional TSP, ROTH TSP, and ROTH IRAs. Our chart has four columns. The 1st column lists the type of contribution, the 2nd column asks “Are my contributions taxed when earned?”, 3rd column  “Are contributions taxed when withdrawn?", and 4th “Is the growth taxed when withdrawn?” No-one loves to pay taxes, so we’re looking for no answers to these tax questions.

Non-combat pay, Traditional TSP contributions - No, Yes, Yes

Non-combat pay, ROTH TSP or IRA contributions - Yes, No, No

Tax-exempt Combat pay, Traditional TSP contributions - No, No, Yes

Tax-exempt Combat pay, ROTH TSP or IRA contributions - No, No,No, This is the Triple Crown of No Taxes.

Military members deployed to a combat zone can contribute more than the normal $20,500 to their TSP, all the way up to $61,000 in 2022. The details are important. Last week we went over TSP contributions by the numbers. So if you missed it go back to Episode 76 Change TSP Contributions for all the details.

I’m going to boil down all the info from last week and this week into a strategy to get the biggest bang for your compbat pay contributions. First, make sure you have enough cash for an emergency fund, you don’t have high interest debt like credit cards. Go over your cash flow or budget and see how much you can afford contribute while you’re deployed. This money will be locked up for a long time, so don’t over extend yourself.

Alright, here’s my recommendation for your combat pay contributions. 

First, contribute up to $20,500 limit into your Roth TSP or up to $27,000 if you will be 50 or older this year.

If you want to save more, next contribute up to $6,000 into a Roth IRA. Or $7,000 if 50 or older. You could also contribute to a ROTH IRA for a non-working spouse.

Want to save even more? Contribute up to another $40,500 of your tax-exempt combat pay into your Traditional TSP, $34,000 if 50 or older.

And once again, for more information on contributing to these accounts, head back to Episode 28 Meet ROTH, Episode 29 ROTH IRA, and Episode 30 To ROTH or Not to ROTH, and last week’s Episode 76 Change TSP Contributions. 

When changing your Thrift Savings Plan (TSP) contributions. three dollar limits that apply The annual limit  is $20,500. This limit is to the combined total that you can contribute in 2022 to your Traditional and Roth TSP combined. This limit does not apply to Traditional TSP contributions made from combat pay. The next limit  is $6,500 on additional catchup contributions for those turning age 50 or older in 2022. So if that's you, can make total TSP contributions of up to $27,000. For military in a combat zone, your contributions toward the catch-up limit must be Roth. And you can't contribute toward the catch-up limit from incentive pay, special pay, or bonus pay.

The third limit  is the $61,000 Annual Addition. Its the total amount of all the contributions that can be made to your TSP a year. This limit is includes your employee contributions and for you BRS military and FERS civilians the Automatic 1% Contributions, and up to 4% Matching Contributions. It doesn't include catch-up contributions. The annual addition limit affects mostly our military service members who can contribute tax-exempt pay earned in a combat zone up to this  limit.

Next decide how much your can and want to contribute. Remember with ROTH TSP, you pay your income taxes now, up front on your contributions. So you will have less money paycheck each pay period when you contribute to ROTH TSP than if you contribute to Traditional TSP. YFor more info listen to Episode 28 Meet ROTH and Episode 30 To ROTH or Not to ROTH.

Civilian employees usually designate a dollar amount to contribute from each paycheck, while our service members will need to elect a percentage. FERS civilians and BRS military, in order to get your full match, you need must contribute at least 5% of your pay in every single pay period to get your full match. If you hit one of those limits before the end of the year, you give up that match from your pay for the rest of the year. Check out their online Elective Deferral Calculator .  You’ll need your most recent LES and guess how many pay periods it will take your personnel center to make the change to your pay. For Military and DoD civilians, MyPay says, it will be effective at the beginning of the next pay period. So enter 0 for this box. 

The calculator will give you the new amount you can contribute each remaining pay period if you want to maximize your contributions for 2022. Pick what you can afford, or that max number from the website, whichever is lower for your contribution.

Next use your electronic payroll system to change your TSP contributions. For  military service members and DoD civilians thats myPay. For other for federal employees there are other payroll systems, like Employee Express, EBIS/GRB, LiteBlue, and NFC EPP. 

Generally, feds will use enter the dollar amount and service members a percentage of your pay. Military can keep this simple by contributing from your base pay. Take the monthly TSP contribution you want to make, divided by your monthly base pay, times 100

Then go to myPay and log in. Under the “PAY CHANGES” heading, select the “Thrift Savings Plan (TSP)” link. Then click the yellow pencil icon to make a change to your TSP contribution. Enter your changes in the pop-up window. Enter that percentage in the base pay box for either Traditional TSP or ROTH TSP or split between both. There’s boxes to enter percentages for other pays  as well.

Then click Continue to review then Submit.

Merry Christmas and welcome back to the podcast. I hope yo’ve a had a bit of a break to spend time with the ones you love. Here’s a special shout out to our military and civil servants that are spending another holiday far from home and family. We love you and we’re thinking of you. Thanks for being there for us.

Today’s podcast is a short one. It’s a time for rest, fun, and joy. So believe it or not today’s podcast is on how our military service members can change their income tax withholding and change your Servicemen's Group Life Insurance (SGLI). 

Whaaat? REALLY? Why? Who wants to think about this at Christmas. Especially if you’ve been in awhile you know almost any personnel action you have to do that’s related to your pay is a pain, can go bad fast, involves who knows what paperwork and chasing done the right person to hand it to.

So this Christmas, my gift to you is the ‘EASY” button for changing your SGLI and W4 withholding. It’s the Christmas miracle of military paperwork. If you are getting a big refund each year or a nasty tax surprise at filing time, you can instruct your employer to change your withholding amounts by filling out a new W4. I did an entire episode on the W4 Withholding form in Episode #40 Withholding. So refer back to that to see what information you need to update your withholding. And I’ll put a link in the show notes to the IRS Form W4 too. https://www.irs.gov/pub/irs-pdf/fw4.pdf

For our serving and retired military and DoD civilians it is, no kidding, easy. You log into your MyPay account at  https://mypay.dfas.mil/#/. The information you input directly on the MyPay website is the same as the W-4 form. On MyPay look for the Pay Changes category and under that you can chose federal withholding or state withholding. Fill in the blanks online and its all done online in a few minutes.

The other Christmas miracle easy task is changing your SGLi. Our serving military now can make changes to your SGLI online using the the SGLI On-Line Enrollment System (SOES). Go to MilConnect (link again in show notes) https://milconnect.dmdc.osd.mil/milconnect/ 

On the MilConnect main home page you’ll find front and center a “I want to…” section and Manage my SGLI is an easy to see choice. Once you click that button, you’ll be prompted to sign in with your DS login, your CAC card, or your DFAS myPay credentials. Your choice. You’ll se a ‘If you have had a life event” choice. If you’ve gotten married since you joined the military, or divorced, had children, or a previous beneficiary has passed, now is a good time to relook how much coverage you have and who you have listed as beneficiaries. You can change your amount of coverage and beneficiaries  all on-line, oh so easy.

And that’s it for today! If your end of year to-do list or New year’s resolution includes finally updating your income tax withholding or SGLI coverage. Hop on it. So quick and easy. A military Christmas miracle.

If you have cash savings that you will not need for at least a year, consider investing in US Government I Series Savings Bonds. Check out the Treasury Direct information page for Series I Savings Bonds: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm#irate  The I Bonds you buy between now and April 22, 2022 will earn you at least 3 1/2 percent interest over 1 year. After that you should reevaluate and consider redeeming them if other cash savings rates are better.

The interest that the I Bonds pays has two parts. The first part is based on a bond interest rates when you purchase your bond . This interest is fixed for the life of the bonds which is 30 years, unless you sell it first. This fixed part rate for is now 0%. 

Now the second part is a floating interest-rate. So you know that if you invest now, that the first part is gonna be 0%. But the second, floating rate is based on inflation and changes every six months in November and April. We had an inflation spike in 2021 . Because of that recent spike in inflation the floating rate for bonds purchased through April 2022 is 7.12% annualized. What this means is for those first six months you'll earn 3.56% on your bond which is half of the annualized rate. Then the floating rate will change for the second six months. The floating rate could also drop to zero if there is no inflation. But even if that happens you would still have a total of 3.56% return for one year.

You can buy up to $10,000 in electronic I Bonds now for calendar year 2021 and up to another $10,000 for calendar year 2022 after January 1st. The bonds are backed by the federal government and it guarantees you will get you money back, plus the interest. You will pay federal income tax on the interest when you redeem the bond, but they are exempt from state tax. You cannot redeem I Bonds in the first year. And if you redeem within 5 years of purchase, you will forfeit the last 3 months of interest earned. The unusual combination of recent high inflation and low general interest rates make the return on I Bonds you purchase between now and the end of April 2022 a pretty good deal compared to other places you can stash your cash.

If you are interested, you buy electronic I Bonds directly from the US Treasury online for amounts from $25-$10,000. You purchase these online directly from the Treasury at https://www.treasurydirect.gov/global_open.htm  Each person can buy up to $10,000 in electronic I bonds each calendar year. To open an account you will need your drivers license, Social Security number, and bank routing and account numbers for the electronic transfer of funds and you can designate one beneficiary for your bond.

You can also buy I Bonds as a gift for someone else including minor children. That person would also have to have a treasury direct account. More information is here: https://www.treasurydirect.gov/indiv/planning/plan_gifts.htm

There are also paper I bonds they can only be purchased with a federal income tax refund. You can use up to $5000 of any refund on your federal taxes to purchase these paper Io bonds. More information at https://www.treasurydirect.gov/indiv/research/faq/faq_irstaxfeature.htm And this $5000 limit is in addition to the $10,000 a year electronic I Bond. You would need to file IRS form 8888 with your tax return to do that.

If you’d like more information on bonds in general, check out Episode 53 Bonds. And for an overview of paces to safely invest cash listen to Episode 39 Stash the Cash. Have a wonderful Christmas and we’ll talk again next week.

Today's content comes directly from  Brian O'Neill’s recent blog post Top 10 TSP Quirks You Need to Know.  Brian is a fellow Military Financial Advisor Association member , former Air Force fighter pilot, and Certified Financial Planner who writes a great weekly blog with a fighter pilot twist. Thanks, Brian.

If you’ve ever compared the Thrift Savings Plan (TSP)  to a civilian 401(k), you probably noticed the TSP has quite a few quirks:

1. Minimum balance: As long as you leave at least $200 in your TSP when you seperate from service, you can keep your TSP account open.  This is great because you never know when a change in employment or the tax law will make it advantageous to roll money into the TSP. 

2. Accepts rollovers: Except for a Roth IRA dollars, you can roll a Traditional IRA, and most other employer plan (e.g., 401(k)) funds into the TSP.  This can be great for simplifying your roster of retirement accounts.
3. Three Withdrawal options after separation:
Fixed or life-expectancy-based installment payments. For installments of less than 10 years, you can rollover the distributions to an IRA.  Single withdrawal: The minimum is $1,000 and you can only do one every 30 days.  Purchase an annuity. This locks in a fixed stream of payments for life, but you forfeit any right to leave the annuity balance to your heirs.

 4. Roth or Traditional withdrawals: You can choose Roth, Traditional or pro-rata withdrawals.  If you have contributions from a combat zone, your contribution is not taxable but the earnings are. Withdrawals from your Traditional balance will always be pro-rata from pre-tax and after-tax dollars.

 5. Processing delays.  Along with the military and civil service human resource bureaucracy delays, the TSP can be pretty slow processing any request.  Plan ahead, it’s not an ATM.

6. Spouse rights. If you choose to receive your TSP as a separately-purchased annuity, your spouse will need to consent to anything other than a 50% survivorship feature.

7. Death Treatment: Your balance will go to your beneficiaries on file with TSP, and NOT according to your will. And you must use form TSP-3 to change the d default beneficiaries.  A surviviing spouse's TSP account is automatically invested in an age-determined Lifecycle Fund. A non-spouse beneficiary can't keep the TSP account and will need to receive the funds in an Inherited IRA. If your beneficiary then dies, the TSP will pay the balance directly to that beneficiary’s beneficiary allot once, potentially creating a “tax bomb.”  If you inherit a TSP account, roll it to an Inherited IRA so a successor beneficiary keeps the tax-advantaged status.

8. The G-Fund. The G-Fund invests in special government bonds that its guaranteed to never lose principal value. But the G-Fund is usually the lowest performer of the 5 core TSP funds.  It can make sense as part of a portfolio, but usually is  NOT all.

9. Withdrawals are pro-rata from all funds. You can’t take a distribution from only the G-Fund or C-Fund, for example. A withdrawal is pro-rata across all them.  For a work around  after your withdrawal comes out, log into TSP and rebalance your funds to the allocation you want to keep. 

10. Roth RMDs. A Roth IRA does not have a Required Minimum Distribution (RMD).  Traditional IRAs, 401(k)s, and the both Roth and Traditional TSP all require you to start taking RMD every year starting age 72. Evaluate moving of Roth TSP dollars into a Roth IRA prior to 72.

For you military and federal employees out there, TSP has a detailed notice that provides great info and includes a chart and explanation of how to calculate your RMD yourself. I’ll put a link in the show notes https://www.tsp.gov/publications/tsp-775.pdf 

The simplest way to calculate an RMD is to go to investor.gov's online RMD calculator https://www.investor.gov/financial-tools-calculators/calculators/required-minimum-distribution-calculator 

You need two key pieces of information. How old will you be on December 31st and what was the value of your Traditional TSP, 401k, and/or IRA at the end of last year. Hopefully, figuring out how old you will be at the end this year is pretty easy. To find the value of your account at the end of last year, pull up your end of year statement.

The main thing to remember about RMDs is that they are mandatory for Traditional IRAs, Traditional TSP, and Traditional 401k. RMDs now start at age 72 and must be taken every year. The dollar amounts are dictate by the IRS. RMDs are taxable income. And There is a very stiff penalty if you don’t take the full required distributions. So you lose a certain amount of control over how much and when those retirement savings are taxed. This may not be a big concern if those RMDs don’t push you into higher income tax bracket. 

But if they will push you into a higher tax bracket, there are some strategies you can consider to minimize the tax impact. You could work past age 72, contribute to ROTH retirement accounts now instead of Traditional accounts, and do ROTH conversions is years you have lower income (like between stopping working and receiving social security or a pension). Just remember with ROTH accounts you must pay the income tax upfront for the benefit of tax-free withdrawal later. And don’t delay your very first RMD into the second year if that will push you into a higher tax bracket.

Also you can take your total RMDs for several IRAs from just one of the IRAs. But you can’t do that with other retirement accounts, like the TSP or 401k. And each spouse must take RMDs from their own retirement accounts, even if you file jointly.

Today I we're talking about real financial planning.  It's not hard to find financial advice. You can read books, look on the Internet, rumors, ask that crazy uncle.  But I'm talking about a professional that has your best interest at heart of everything they do.  The Certified Financial Planner Board describes financial planning as “looking at a client's entire financial picture and advising them on how to achieve their short- and long-term financial goals. From saving for education and planning for retirement to effectively managing taxes and insurance, financial planners develop valuable relationships with their clients to provide them with confidence today and a more secure tomorrow.”  A good financial planner takes in all your information, does the math heavy lifting for you, and then comes back with a plan on how to achieve you goals. This holistic approach is good financial planning, and will give you the "What and the How" to help you accomplish your stated goals.  When you seek out financial advice, your should absolutely look for this as a minimum. 

But you don’t have to settle for just “good”. A real financial planner takes the time  to explore your “Who and your Why”. They listen to your story, your passions, your way of doing things, and your fears. Who and what is most important to you? Why? They explore with you the life you want and what keeps you awake at night. Everyone has a different relationship with money. And we don’t check that at the door when we head into a meeting to discuss our financial goals.

Personal financial planning is personal. A financial plan developed from an short interview or questionnaire and review of your documents may result in a clear, detailed road map to a great financial destination. But is that your destination? Is it the best journey for you? Do you see yourself really carrying out this plan? Did you planner explore options, what ifs, or possible other paths with you? It takes time and most of all it takes great listening. When you walk out of a meeting with your financial planner or advisor you want to be confident they know what they are doing and that they are bound to put your best interest first. But you also need to know you were really heard. That your financial plan isn’t just a good financial plan. It’s YOUR plan. It’s the best plan for you and you see yourself in it.

If you’ve been thinking about getting some financial advice, you have choices out there. Most good financial planners offer a free introductory call or meeting, which is your chance to see they they might be a good fit for you. Ideally, they ask some open questions and really listen. If it sounds like a sales pitch, it probably is. And you can shop around. There are planners that you can hire by the hour, or for a specific project. Others like me work with clients on an ongoing basis to answer questions along way and reorient as your life’s journey evolves. Many advisors expect to manage and invest your money for you. Others like working with do-it-yourselfers by providing advise you can carry out yourself. I do both. 

But finding a real financial planner comes back to you. Do they hear you? Do they invest the time to explore your who and your why? Do they “get” you and do you see yourself in the advice and planning they give back. If not, move on. You deserve better and it’s out there for you.

Here's some links to help your search for a real financial planner. My website, the Military Financial Planner Association, XY Planning Network, and the National Association of Personal financial Advisors.

Today we’re looking at things you should consider before the end of this year. If you single and have less than $40,400 taxable income in 2021 or $80,800 if married filing jointly you’re in the 0% capital gains tax bracket. You have a capital gain when you sell an asset, like property, stocks, bonds or mutual funds, for more than you paid for it. So this may be an opportunity to sell assets that have grown in value,  pay 0% taxes on that profit and reinvest into something else. For more info on the capital gains tax check out Episode 44.

If you saving for college in a 529 account, you may be eligible for State Income tax deductions or credits. Some sates will even add or match contributions for taxpayers with modest incomes. Check out your states 529 account website for rules and details. 

If you haven't maxed out your 401k or TSP contributions this year there's still time to increase your savings. For 2021 the max is $19,500 a year or $26,000 if you are 50 or over. At least save enough to get your  full match. For BRS military and FERS federal employees, that's at least 5% of you annual income.

If you are single with an Adjusted Gross Income less than $125,000 or Married Filing Jointly with under $198,000 of income, you can contribute earned income to a Roth IRA. And a non-working spouse can also contribute to a ROTH IRA as long as your working spouse has enough earned income. You contribute money to Roth IRA after you’ve paid tax on it. Then it grows tax-free. It's a great way to take advantage of being a low tax bracket now to save something, grow overtime, and be tax-free to you in retirement. You can contribute up to $6,000 a year to an IRA or $7000 a year if you’re 50 or older for this year through April 15, 2022. 

If you  will be in a higher income tax bracket when you retire, consider doing a Roth conversion. You take money from a traditional IRA, 401k, or TSP, pay income tax now on the  withdrawal, and deposit it in a ROTH 401k or ROTH IRA. You cannot covert a traditional TSP into a ROTH TSP. You can convert a Traditional TSP into a ROTH IRA. Conversions must be completed within 60 days of making your withdrawal to avoid penalty. And It is best to use cash to pay the income tax on the conversion, instead of using retirement savings to keep your savings growing and avoid possible early withdrawal penalties. ROTH conversions can take a while, so if you want to do one for 2021, don't delay. To learn more about ROTH accounts listen to Episode 28 Meet Roth, Episode 29 Roth IRA, and Episode 30 To Roth or Not to RotH.

Did you get a raise or a bonus or your spouse start working this year? Did you owe federal income tax  or get a big refund last tax season? Then take another look at your federal income tax withholding to make sure you don’t end up with a large tax bill or a refund at the end of next year. The IRS has a great online tool to help you determine how much withholding you should have and print out a new W-4 to your employer. https://apps.irs.gov/app/tax-withholding-estimator

If you do not itemize your taxes you are eligible for a tax deduction for cash charitable contributions you make this year of up to $300 if your single or $600 if MFJ. Save your receiptsand make the gift before the end of the year.

If you have a Flexible Savings Account you may be able to carry over unused benefits from this year into 2022. Check with your particular plan. Federal employee with a FSAFEDS account, can carry over all remaining funds into 2022. But you must re-enroll in the same account(s) during Open Season,  Nov 8th to December 13th this year. If you fail to re-enroll, you forfeit all your unused funds. Note though, this benefit carryover only applies to Health Care FSAs. You cannot carry over any balance left in a 2021 Dependent Care FSA.

If you served on active duty in the military and then become a federal civilian employee, that military time may count as time in service for calculating your FERS or CSRS pension. Periods of active duty while in the any of the military reserves, including your annual active duty training, count. However, National Guard active duty only counts if it was Title 10, section 233(d), or under a call by the president. Service must be honorable. And a deposit has to be received before you retire (that’s the buyback). 

You need to qualify for a FERS or CSRS pension, which generally means serving at least 5 years as a federal civilian. Then the military time you deposit, nicknamed buyback, is added to the years you actually work as a civilian when calculating your FERS or CSRS pension benefit.

The pension formula for a FERS employee is the average of your High 3 salaries times your creditable service times our multiplier. If you have 24 years of federal civilian service, a high-3 pay of $110,000, and will retire before age 62, your pension would be $110,000 x 24 years x 1%. That’s   $26,400 a year. If your buy back 6 years of military time, that 30 years which is $33,000. That’s $6,600 more a year in your FERS pension. Live 30 years in retirement and that’s almost $200,000 more with the buyback. And buying back military time may give you enough creditable years you to retire earlier. 

A buyback for a FERS employees is about 3% of your total military BASE pay for the years you are depositing. If you wait more than 3 years to buyback, you will also have to pay interest Even with the interest it is usually worthwhile to buy back the time.

The multiplier for CSRS employees is about 7%. But the rules for CSRS employees are more complicated. If you are a CSRS employee that will not be eligible for Social Security, no deposit, or buyback, is required and you will get full credit for military service after 1956. 

If you’re a CSRS employee that will be eligible for Social Security, the military time you buy back will count towards eligibility for retirement and computation of your pension. If you don’t buyback any time, your military time will count towards eligibility for retirement. And if you retire before your eligible for Social Security at 62, your military time will count toward your pension computation just up until you reach 62.

If you have a regular military pension and buy back those years you will have to give up your military pension. This very rarely makes financial sense. But if you’re entitled to a reserve pension that starts at age 60 you can keep that, whether you buyback or not. This often does come out as a great deal.

You don’t need to do all the math your HR office will do the calculations for you. You will need a copy of your DD 214 the Report of Transfer or Discharge. If you can’t find it, you can request a copy it from the National Personnel Records Center by filling out a Standard Form 180.  

Then complete a form RI 20-97 Estimated Earnings During Military Service and mail with a copy of your DD214 to your appropriate military finance center. They send back your statement of estimated earnings.

Take your estimate of earnings and your DD214 to HR and fill out an SF 2803 Application to Make Deposit or Redeposit. HR will then compute the amount of your military deposit using the Military Deposit Worksheet, let you know the amount, and options for making payments.

Once HR gives you the buyback cost, compare that to how much more your pension payments would be with the buyback. The process can be a pain, but it is usually well worth it. You can payoff all at once or in payments over time. And remember, your application to deposit, buyback, military time has to be approved and paid BEFORE you retire.

 The Federal Benefits Open Season starts November 8 this year and goes through December 13. This is the opportunity for our federal employees out there to re-look your benefit choices and explore your options for 2022. During the annual open season, you can enroll in a Federal Employees Health Benefits (FEHB) Program and the Federal Employees Dental and Vision Insurance Program (FEDVIP) plan. You can also change plans, change plan options, you can change enrollment type between self, self plus one, or family coverage, or cancel your enrollment. Do nothing and your current coverage will automatically continue.
 
 You also have choices to make with the Federal Flexible Spending Account Program (FSAFEDS). https://www.fsafeds.com With an HCFSA, you use pre-tax dollars to pay for qualified out-of-pocket health care expenses. The maximum amount you can allot to an HCFSA is $2,750 (per individual) a year and the minimum is $100. You declare your savings amount and set up the allotment during open season and the total amount you elect to save will be available on day one of 2022. Your fund contributions are withdrawn automatically from each paycheck and deposited into your FSA before taxes are deducted. You can only carry over $550 of a the Health Care FSA from one year to the next.

With the Dependent Care FSA (DCFSA). You can contribute up to $5,000 a year  to pay for care for your child under age 13.  It also covers care for your spouse or a relative who is incapable of self-care and lives in your home. Dependent Care FSA savings cannot be carried over to the next year at all.  If you do nothing during open season your FSA election will NOT automatically continue. You must reenroll. 

 A High Deductible Health Plan (HDHP)  combines a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA), medical coverage and a tax-advantaged way to save for future medical expense.  With an HDHP, you must meet the entire annual deductible before plan benefits are paid for services other than in-network preventive care. Once you hit the  catastrophic limit, the plan pays 100% of the allowable amount. Th insurer will set up an HSA for you and put a set amount of money in it. You can also put contribute to the account with pre tax dollars. Funds deposited in your HSA are not taxed, interest on the HSA grows tax free, and you can withdraw it tax free to pay qualified medical expenses. There are more rules, so be sure to read more on this before making a decision. I’ll put a link to a good OPM fact sheet on HSAs in the show notes.  https://www.opm.gov/healthcare-insurance/fastfacts/high-deductible-health-plans.pdf

Don’t assume your plan is staying the same. Review your plan documents every Open Season for changes to  and what new options may be available. Is there are newer plan choices that is a better buy. Read the plan brochures. Some FEHB plans offer basic dental and vision benefits or discount programs. You might be better off in a FEHB plan with some dental benefits than paying a separate FEDVIP premium.

If you require extensive medical treatment in the 2022 it may be worth paying higher premiums for a plan that covers more of your claims. If everyone is healthy, consider paying less for a plan with less coverage and putting the extra cash in savings, like an FSA or HSA. 

OPM has a great online tool you can use to compare the various plans available and their costs for 2022. You can search for the plan options using your location or employee type, and you can review any changes to the plan you already have. https://www.opm.gov/healthcare-insurance/healthcare/plan-information/compare-plans/

The Department of Education recently announced some significant temporary changes to the Public Service Loan Forgiveness (PSLF) program called the Limited Waiver Program. 

Who? Full time service members and federal employees are all eligible, as well as those of you working full time for state governments and most non-profits.

What is PSLF? It's a Loan Forgiveness program. If you work for a qualifying employer, have qualifying loans, work full-time, and make 120 on-time monthly loan payments, you can apply and have the remaining balance of your student loans forgiven. 

Why? Why has there been a change to the program? As it turned out in practice, PSLF was mostly an unfulfilled promise. Many borrows misunderstood the requirements, were misled by loan servicing providers, or never even qualified in the first place. The recently announced changes to PSLF are supposed to help correct some of these problems and fulfill the PSLF promise.

What has changed? A key requirement for PSLF is that you must have federal Direct Loans to qualify. The Federal Family Education Loans, Federal Perkins Loans, and Graduate Plus Loans are not a federal Direct Loans and don’t qualify. Loan payments under those programs didn’t count toward forgiveness. To meet this requirement and qualify most borrowers consolidated those loans into a federal Direct Loan. If you didn't before, there’s  good news. Now, any payments you made in the past in these federal student loan programs count toward your 120 payments, BUT only if you consolidate to a federal direct loan by Halloween 2022. 

Don’t know what kind of federal loans you have?  Log into your account on StudentAid.gov https://studentaid.gov/fsa-id/sign-in/landing , and go to the My Aid page StudentAid.gov/aid-summary/, then scroll down to the Loan Breakdown section. If you haven’t already, consolidate (DON’T refinance), consolidate into a federal Direct Loan . You’ve got one year. Details here https://studentaid.gov/app/launchConsolidation.action Once consolidated into a Direct Loan, your previous monthly payments made before October 31 this year, 2021, in those other federal loan programs will count toward PSLF retroactively. 

Change #2. Past payments under any repayment plan now count toward loan forgiveness. Up to now, you had to enroll in an Income Driven Repayment (IDR) plan like ICR, IBR, PAYE, and REPAYE or the standard 10-year repayment plan. These payments are supposed to be automatically recounted, but  keep an eye on it.

Temporary Change #3.  Some borrowers missed out because their payments were off by one or two pennies or late by just a few days. As a fix, the Department will automatically adjust PSLF payment counts for payments made on or before October 31, 2021 for borrowers who have already certified some employment for PSLF. This look back is a temporary benefit. So if you have not yet applied for PSLF forgiveness or certified employment do it by October 31, 2022 to get all those payments counted.

Lastly for service members, months spent on active duty will now count toward PSLF, even if your loans are in deferment or forbearance. Federal Student Aid is supposed to develop and implement a process to address this. .

For more information see https://www.ed.gov/news/press-releases/fact-sheet-public-service-loan-forgiveness-pslf-program-overhaul

For tons of helpful information and PSLF application go to the official website at https://studentaid.gov/pslf/