financial focus may 2012

MAY 2012 FINANCIAL READINESS of 6 (301) 677-5590

Roth TSP Coming Soon The Defense Finance and Accounting Service (DFAS)

will begin processing Roth Thrift Savings Plan (TSP)

elections for its civilian and military customers using a

phased approach beginning

in June 2012 and

continuing through

October 2012.

As a new choice for

retirement investment

planning, the Roth TSP

will give service members

the option to contribute

after-tax wages into TSP

for the first time. Both the contributions and the earnings

will be tax free when withdrawn, as long as the Internal

Revenue Service (IRS) requirements are met.

The phased implementation will ensure taxable wages

and TSP contributions are computed accurately.

According to DFAS officials, the schedule will provide

time to complete and thoroughly test the complex

changes needed to the various civilian, active duty

military, and reserve component payroll systems. The

complex changes address the unique and multiple pay

types in the pay systems including the different

requirements of the Army, Navy, and Air Force and the

active duty and reserve component requirements.

Implementation will begin with Marine Corps service

members in June 2012, then all Department of Defense

(DoD) civilians, as well as other civilians serviced by

DFAS in July 2012, to be followed by the Army, Navy,

and Air Force service members in October 2012.

Look for more specific deployment dates Roth TSP

elections coming soon on www.dfas.mil. For more

information about the Roth TSP, see www.tsp.gov.

(Source:

http://www.militaryfamily.org/publications/enewsletters/military-family-

topics/roth-tsp-updated-information.html)

Financial ffooccuuss May 2012

Happy Armed Forces Day May 19

http://www.dfas.mil/

http://www.tsp.gov/


Investing is the act of

committing money or

capital to an endeavor

with the expectation of

obtaining an additional

income or profit.

Investing 101: What is Investing? It's actually pretty simple: investing means putting your money to work

for you. Essentially, it's a different way to think about how to make

money. Growing up, most of us were taught that you can earn an income

only by getting a job and working. And that's exactly what most of us do.

There's one big problem with this: if you want more money, you have to

work more hours. However, there is a limit to how many hours a day we

can work, not to mention the fact that having a bunch of money is no fun if we don't have the leisure time to enjoy it.

You can't create a duplicate of yourself to increase your working time; so instead,

you need to send an extension of yourself - your money - to work. That way,

while you are putting in hours for your employer, or even mowing your lawn,

sleeping, reading the paper or socializing with friends, you can also be earning

money elsewhere. Quite simply, making your money work for you maximizes

your earning potential whether or not you receive a raise, decide to work

overtime or look for a higher-paying job.

There are many different ways you can go about making an investment. This

includes putting money into stocks, bonds, mutual funds or real estate (among

many other things), or starting your own business. Sometimes people refer to

these options as "investment vehicles," which is just another way of saying "a way to invest." Each of these vehicles has

positives and negatives, which we'll discuss in later issues of Financial Focus. The point is that it doesn't matter which

method you choose for investing your money, the goal is always to put your money to work so it earns you an additional

profit. Even though this is a simple idea, it's the most important concept for you to understand.

What Investing Is Not

Investing is not gambling. Gambling is putting money at risk by betting on an uncertain

outcome with the hope that you might win money. Part of the confusion between

investing and gambling, however, may come from the way some people use investment

vehicles. For example, it could be argued that buying a stock based on a "hot tip" you

heard at the water cooler is essentially the same as placing a bet at a casino.

True investing doesn't happen without some action on your part. A "real" investor does

not simply throw his or her money at any random investment; he or she performs thorough analysis and commits capital

only when there is a reasonable expectation of profit. Yes, there still is risk, and there are no guarantees, but investing is

more than simply hoping Lady Luck is on your side.

Why Bother Investing?

It's pretty easy to understand that people invest because they want to increase their

personal freedom, sense of security and ability to afford the things they want in life.

However, investing is becoming more of a necessity. The days when everyone worked

the same job for 30 years and then retired to a nice fat pension are gone. For average

people, investing is not so much a helpful tool as the only way they can retire and

maintain their present lifestyle.

In much of the industrialized Western world, governments are tightening their belts.

Almost without exception, the responsibility of planning for retirement is shifting away

from the state and towards the individual. There is much debate over how safe our old-

age pension programs will be over the next 20, 30 and 50 years. But why leave it to chance? By planning ahead you can

ensure financial stability during your retirement. (Source: http://www.investopedia.com/university/beginner/beginner1.asp#ixzz1tjVqO5lV)

http://www.investopedia.com/university/beginner/beginner1.asp#ixzz1tjVqO5lV


Test Your Knowledge: Life Insurance Life insurance is critical to financial planning. It's a necessity for anyone with dependents who would be affected

financially by your demise. Yet life insurance is one of the hardest financial products to understand and it's sold by

agents who are sometimes more concerned with their commissions than your needs. Answers on page 6.

Source: http://cgi.money.cnn.com

1. The two basic types of insurance policies are:

a) General and term.

b) Whole and indemnified.

c) Term and whole life.

d) Load and no-load.

2. True or false: Insurance policies cost pretty much the same and they are very much alike.

a) True

b) False

3. When shopping for life insurance, the best strategy is to:

a) Do what the agent tells you. After all, they are the experts and it is the agent's job to make sure you get the products that are right for you.

b) Buy your coverage at work if possible.

c) Figure out how much you need, then comparison shop using the Web and other resources.

4. The purpose of life insurance is to:

a) Pay your funeral and final expenses.

b) Provide investment income and help fund retirement.

c) Allow your dependents to maintain their lifestyle in the event of your demise.

5. You should buy a policy with sufficient face value to:

a) Match your current annual salary.

b) Match two times your annual living expenses.

c) The answer to this question varies, but most planners say five to ten times your annual salary is normal.

d) Pay your funeral expenses.

6. The key factors in determining the term of your policy are:

a) The number of years you need to keep the policy in force to cover your dependents.

b) The number of years before your children leave the nest.

c) When you plan to retire.

d) All of the above.

7. Mortgage life insurance is:

a) Just like life insurance.

b) A good supplement to life insurance.

c) Something you should steer clear of.

8. You'll pay substantially more for life insurance due to which of the following factors:

a) You are over age 60.

b) Your health is poor or you smoke.

c) Your driving record is poor.

d) All of the above.

9. The best time to get life insurance is when:

a) You are a baby.

b) You get out of college or start working.

c) You have dependents.

10. When shopping for life insurance on the Internet you should look for:

a) A low rate.

b) A company with a good rating

c) A company with a low rate and a good rating

d) A company that gives frequent flier miles with its policies.

“The chief beneficiary of

life insurance policies for

young, single people is the

life insurance agent.” – Wes

Smith


How Much Are Funeral Costs?


Just for Laughs . . . Something to Think About


Answers to Quiz: Life Insurance 1. C) Term and whole life. Whole life combines

insurance with an investment component, and term is pure life insurance, nothing added.

2. B) False. There's a huge difference in pricing and products when it comes to life insurance.

3. C) Figure out how much you need, then comparison shop using the Web and other resources. The best approach is to do it yourself. Buy term and buy from a low-cost company that has a top rating.

4. C) Allow your dependents to maintain their lifestyle in the event of your demise. You want to have enough face value so that the proceeds of the policy could be conservatively invested to yield enough to cover the loss of your income.

5. C) The answer to this question varies, but most planners say five to ten times your annual salary is normal. Five to ten times your annual salary is the normal range, but this can vary widely. For most people, the idea of life insurance is to help them get through the first five to 10 years after your tragic loss. That's why some experts fall back on the old life insurance rule of thumb: Buy enough to replace your salary for five to seven years. However, we highly recommend using an online insurance calculator to help you determine your needs, such as http://www.bankrate.com/calculators/insurance/life-insurance-calculator.aspx.

6. D) The correct answer is all of the above.

7. C) Something you should steer clear of. This is a product you don't need. It's often more expensive than life insurance and provides declining coverage as your mortgage is paid down. Buy enough life insurance to take mortgage payments into account should you die.

8. D) The correct answer is all of the above.

9. C) You have dependents. The purpose of life insurance is to allow your dependents to maintain their lifestyle in the event of your demise.

10. C) A company with a low rate and a good rating. This is the combination for a great deal on life insurance.

FREE Credit Scores FICO® credit scores are now available FREE to active duty service members and their spouses. Every Wednesday from 1000-1500. Call (301) 677-5590 for your 30 minute appointment today!

financial focus may 2012

Education