Financial                                      focus                                                   May 2012Roth TSP Co...
Investing 101: What is Investing?                                                 Its actually pretty simple: investing me...
Test Your Knowledge: Life InsuranceLife insurance is critical to financial planning. Its a necessity for anyone with depen...
How Much Are Funeral Costs?MAY 2012                      FINANCIAL READINESSPage 4 of 6                           (301) 67...
Just for Laughs . . .   Something to Think AboutMAY 2012                                FINANCIAL READINESSPage 5 of 6    ...
Answers to Quiz: Life                                  FREE Credit Scores                                                 ...
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Financial focus may 2012

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Financial focus may 2012

  1. 1. Financial focus May 2012Roth TSP Coming SoonThe Defense Finance and Accounting Service (DFAS)will begin processing Roth Thrift Savings Plan (TSP) Happy Armed Forces Dayelections for its civilian and military customers using a phased approach beginning in June 2012 and continuing through May 19 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 TSPfor the first time. Both the contributions and the earningswill be tax free when withdrawn, as long as the InternalRevenue Service (IRS) requirements are met.The phased implementation will ensure taxable wagesand TSP contributions are computed accurately.According to DFAS officials, the schedule will providetime to complete and thoroughly test the complexchanges needed to the various civilian, active dutymilitary, and reserve component payroll systems. Thecomplex changes address the unique and multiple paytypes in the pay systems including the differentrequirements of the Army, Navy, and Air Force and theactive duty and reserve component requirements.Implementation will begin with Marine Corps servicemembers in June 2012, then all Department of Defense(DoD) civilians, as well as other civilians serviced byDFAS 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 TSPelections coming soon on www.dfas.mil. For moreinformation about the Roth TSP, see www.tsp.gov.(Source:http://www.militaryfamily.org/publications/enewsletters/military-family-topics/roth-tsp-updated-information.html)MAY 2012 FINANCIAL READINESSPage 1 of 6 (301) 677-5590
  2. 2. Investing 101: What is Investing? Its actually pretty simple: investing means putting your money to work for you. Essentially, its 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 thats exactly what most of us do. Theres 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 wecan work, not to mention the fact that having a bunch of money is no fun if we dont have the leisure time to enjoy it.You cant 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, Investing is the act ofwhile you are putting in hours for your employer, or even mowing your lawn, committing money orsleeping, reading the paper or socializing with friends, you can also be earningmoney elsewhere. Quite simply, making your money work for you maximizes capital to an endeavoryour earning potential whether or not you receive a raise, decide to work with the expectation ofovertime or look for a higher-paying job. obtaining an additionalThere are many different ways you can go about making an investment. This income or profit.includes putting money into stocks, bonds, mutual funds or real estate (amongmany other things), or starting your own business. Sometimes people refer tothese options as "investment vehicles," which is just another way of saying "a way to invest." Each of these vehicles haspositives and negatives, which well discuss in later issues of Financial Focus. The point is that it doesnt matter whichmethod you choose for investing your money, the goal is always to put your money to work so it earns you an additionalprofit. Even though this is a simple idea, its 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 doesnt happen without some action on your part. A "real" investor doesnot simply throw his or her money at any random investment; he or she performs thorough analysis and commits capitalonly when there is a reasonable expectation of profit. Yes, there still is risk, and there are no guarantees, but investing ismore than simply hoping Lady Luck is on your side.Why Bother Investing?Its pretty easy to understand that people invest because they want to increase theirpersonal 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 workedthe same job for 30 years and then retired to a nice fat pension are gone. For averagepeople, investing is not so much a helpful tool as the only way they can retire andmaintain 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 awayfrom 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 canensure financial stability during your retirement. (Source: http://www.investopedia.com/university/beginner/beginner1.asp#ixzz1tjVqO5lV)MAY 2012 FINANCIAL READINESSPage 2 of 6 (301) 677-5590
  3. 3. Test Your Knowledge: Life InsuranceLife insurance is critical to financial planning. Its a necessity for anyone with dependents who would be affectedfinancially by your demise. Yet life insurance is one of the hardest financial products to understand and its sold byagents who are sometimes more concerned with their commissions than your needs. Answers on page 6.Source: http://cgi.money.cnn.com1. The two basic types of insurance policies are: 6. The key factors in determining the term of your a) General and term. policy are: b) Whole and indemnified. a) The number of years you need to keep the policy in force to cover your dependents. c) Term and whole life. b) The number of years before your children d) Load and no-load. leave the nest.2. True or false: Insurance policies cost pretty much c) When you plan to retire. the same and they are very much alike. d) All of the above. a) True 7. Mortgage life insurance is: b) False a) Just like life insurance.3. When shopping for life insurance, the best strategy is to: b) A good supplement to life insurance. a) Do what the agent tells you. After all, they are c) Something you should steer clear of. the experts and it is the agents job to make 8. Youll pay substantially more for life insurance sure you get the products that are right for due to which of the following factors: you. a) You are over age 60. b) Buy your coverage at work if possible. b) Your health is poor or you smoke. c) Figure out how much you need, then c) Your driving record is poor. comparison shop using the Web and other d) All of the above. resources. 9. The best time to get life insurance is when:4. The purpose of life insurance is to: a) You are a baby. a) Pay your funeral and final expenses. b) You get out of college or start working. b) Provide investment income and help fund retirement. c) You have dependents. c) Allow your dependents to maintain their 10. When shopping for life insurance on the Internet lifestyle in the event of your demise. you should look for:5. You should buy a policy with sufficient face value a) A low rate. to: b) A company with a good rating a) Match your current annual salary. c) A company with a low rate and a good rating b) Match two times your annual living expenses. d) A company that gives frequent flier miles c) The answer to this question varies, but most with its policies. planners say five to ten times your annual salary is normal. d) Pay your funeral expenses. “The chief beneficiary of life insurance policies for young, single people is the life insurance agent.” – Wes SmithMAY 2012 FINANCIAL READINESSPage 3 of 6 (301) 677-5590
  4. 4. How Much Are Funeral Costs?MAY 2012 FINANCIAL READINESSPage 4 of 6 (301) 677-5590
  5. 5. Just for Laughs . . . Something to Think AboutMAY 2012 FINANCIAL READINESSPage 5 of 6 (301) 677-5590
  6. 6. Answers to Quiz: Life FREE Credit Scores FICO® credit scores are now available Insurance FREE to active duty service members 1. C) Term and whole life. Whole life combines and their spouses. Every Wednesday insurance with an investment component, and from 1000-1500. Call (301) 677-5590 term is pure life insurance, nothing added. for your 30 minute appointment today! 2. B) False. Theres 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. Thats 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/insura nce/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 dont need. Its 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.MAY 2012 FINANCIAL READINESSPage 6 of 6 (301) 677-5590

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