Retirement & Financial Planning Report Issue Thursday, September 23, 2004
FEDweek is the largest information resource in the federal government with now over one million weekly readers. *********************************************************** Valuable Information for the Federal Family 2004 Interactive Federal Leave Record at http://www.fedweek.com/Services/default.asp FEDweek Weekly Electronic Newsletter Go to http://www.fedweek.com to Sign Up-FREE! Brand New Federal Manager's Daily Report http://www.fedweek.com/subscribepopup.htm Job Bulletin Board Federal Job Search http://www.fedweek.com/Jobs/default.asp ********************************************************** In This Week's Issue: 1. Oil's Well 2. High Yields, Low Taxes 3. FEDweek is Announcing the Upcoming Retirement Planning Seminars http://fedweek.sparklist.com/t/294948829/821890/3/0/ 4. Real Tax Breaks 6. Now, all AFN Readers Can Get Broadband DSL-Like Speed Over Your Phone Line at Home http://fedweek.sparklist.com/t/294948829/821890/148/0/ 7. Retirement Writeoff 8. Brandon Mink, First VP-Investments is Providing All FEDweek Readers [EMAIL PROTECTED] 9. Stock Answers 10. End of Fiscal Year 2004 Next Week http://www.fedweek.com/Publications/default.asp *********************************************************** 1. Oil's Well With oil prices touching record highs, energy stocks have been top performers, a situation that may persist because of continued turmoil in the Persian Gulf region. Crude supplies are very tight, with a lack of productive capacity. Worldwide, there is 1 to 2 million barrels per day of excess production capacity in a world that's using 80 to 81 million barrels per day. Because of this strain on capacity, oil prices are staying near $40. The bottom line: the days of $15 to $17 crude won't return unless we have an economic meltdown. In such a high-price environment, many energy companies are welcoming gushers of cash. Some analysts project that energy stocks may actually double their S&P weighting over the next few years as they move up in relation to the overall market. If you'd rather not pick individual stocks, there are more than 30 natural resources mutual funds, most of which invest heavily in oil and gas companies. Funds receiving top ratings from Morningstar include RS Global Natural Resources, which has returned 15.5 percent per year for the past five years, and Vanguard Energy, which has returned 14.5 percent. 2. High Yields, Low Taxes Long-term bond funds recently were yielding a solid if not sensational 4.5 percent, according to Morningstar, Inc., Chicago. However, if you hold such funds in a taxable account, rather than in a tax-deferred retirement plan, the yield will pared by income tax. In a 28 percent bracket, for example (taxable income over $70,350 on a joint return in 2004), a 4.5 percent yield would shrink to a mere 3.24 percent. Higher-bracket taxpayers would net even less, after-tax. As a solution, you might consider municipal bond funds, which hold tax-exempt bonds issued by state and local government bodies. The interest on these bonds generally won't be subject to income tax and this tax shelter is passed through to mutual fund investors. Long-term muni funds recently paid 3.9 percent, which would put high-bracket investors ahead, after-tax. Given where yields are now, there's no reason to choose taxable bond funds, if you're in a high tax bracket. What's more, municipal bond funds might be a good choice if we're entering a period when interest rates will be rising, as is widely expected. Municipal bonds may hold up better than other bonds in such an environment. Rising rates may indicate an increased demand for credit, which is a sign of a stronger economy. A healthy economy, in turn, probably will mean more tax revenues for the states, which is good news for municipal bonds. As state and local tax revenues increase, municipal bond issuers are more likely to pay the promised interest to investors. Assuming that municipal bond funds are appealing, you have several decisions to make. * Long-, medium-, or short-term muni funds? Yields are higher on long-term funds so long-term returns likely will be better. It's true that you could see some principal losses over the next year or two, if interest rates rise, but long-term investors may be best-served in long-term funds. * National or single-state funds? A resident of Pennsylvania, for example, will owe tax to Pennsylvania on income from a national muni fund. That investor, though, can avoid state as well as federal income tax by buying a fund that only owns municipal bonds issued in Pennsylvania. If you are in a high-tax state, such as California or New York, you might be better off, after-tax, with a single-state muni fund. * Investment-grade or high-yield muni fund? As the name suggests, you can get higher tax-exempt yields (recently, the average was 5.2 percent) if you're willing to put money into riskier bonds. High-yield municipal funds might make sense for a small part of your portfolio. An improving economy likely will hold down state or municipal defaults, which is the main risk in the high-yield bond market. 3. FEDweek is Announcing the Upcoming Retirement Planning Seminars http://fedweek.sparklist.com/t/294948829/821890/3/0/ Over The Next 30 Years, the Baby-Boomers (YOU) Will Transfer to Your Heirs Over Thirty-Five Trillion Dollars! As you know, the baby-boomers are growing more mature every day and are planning for their retirement. Are you a baby-boomer? Are you prepared for your retirement and to transfer your estate to your loved ones? FEDweek has partnered with two of the most respected federal retirement and estate planning training organizations to provide federal employees with the highest quality of seminars related to your federal retirement, financial and estate planning. Below are the seminar locations through 2004: ************************ Date Sept 28-30 (PBSC) Denver, Co. http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Sept 28-30 (NITP) Washington, DC - Washington Plaza Law Enforcement Only http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Oct 5-7 (PBSC) Phoenix, AZ- Sunburst Resort http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Oct. 19-21 (PBSC) San Antonio TX - Wellesley Inn http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Oct. 26-28 (NITP) Virginia Beach, VA. - Doubletree http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Oct 26-28 (PBSC) San Diego, CA - Town & Country Resort http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Nov 9-11 (PBSC) Honolulu HI - Doubletree http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Nov. 16-17 (PBSC) Indianapolis, IN - Radisson Hotel Airport http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Nov 16-18 (NITP) Washington, DC - Washington Plaza http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Nov 30- Dec 2 (NITP) Linthicum MD - Holiday Inn BWI http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Dec 6-8 (NITP) Huntsville Al - Holiday Inn Research Park http://fedweek.sparklist.com/t/294948829/821890/3/0/ Date Dec 7-9 (PBSC) Houston TX http://fedweek.sparklist.com/t/294948829/821890/3/0/ *************************** There are still a few seats available for these locations. For a complete list of seminar locations and dates through December, 2004, Go to http://fedweek.sparklist.com/t/294948829/821890/3/0/ We've also recently added additional seminars for 2004 (Even Hawaii and San Diego!!) dramatically expanding the coverage areas to include most cities throughout the entire country, with more to come. Go to http://fedweek.sparklist.com/t/294948829/821890/3/0/ to see the latest schedule. These comprehensive programs will provide the participant with valuable information about retirement planning and ways to ease the transition into retirement. The seminar speakers, all experts in their field, will challenge you to ask tough questions. These seminars are broken down into a number of components that discuss considerations necessary for planning for retirement, including: FEDERAL RETIREMENT BENEFITS THRIFT SAVINGS PLAN INSURANCE, MEDICARE AND SOCIAL SECURITY BENEFITS FINANCIAL AND TAX PLANNING ESTATE PLANNING LIFE AFTER RETIREMENT AND SECOND CAREERS For more info on these retirement planning seminars, go to http://fedweek.sparklist.com/t/294948829/821890/3/0/. Also, pass the word along to your colleagues that there will also be multi-seminar attendee discounts for employees attending from the same agency office location. Publisher's Note: All Seminar Attendees Who Register For Any Retirement Planning Seminar Will Two Valuable FEDweek Publications FREE! 4. Real Tax Breaks If you own investment property, you may claim some non-cash deductions, such as depreciation. Thus, any cash flow from your property may avoid immediate taxation. Say you own a small apartment building. This year, your net cash flow from rents, after paying all of your expenses, puts $5,000 into your pocket. For tax purposes, though, you might wind up with a $3,000 loss, after taking depreciation deductions. In this example, you'd owe no tax on the $5,000 you receive because you have no taxable income from the property. However, the depreciation deductions lower your basis in the property. A lower basis, in turn, will increase your tax on an eventual sale. Fortunately, the tax on prior depreciation deductions is now capped at 25 percent. Thus, you may defer tax normally owed at rates up to 35 percent and pay those taxes years later, at a 25 percent rate. Under current law, investment real estate you leave to your heirs gets a basis step-up to market value. As a result, if you hold onto investment property until death, the tax-free cash flow you receive during your lifetime will remain untaxed. 5. Deferring the Tax Collector With a deferred annuity, you invest a lump-sum or a series of payments. As long as you keep your money inside the contract, no tax is due on the investment earnings. Withdrawals generally are taxable, though, and there's a 10 percent tax penalty if you take money out before age 59 1/2. (Insurers may impose surrender charges, too, for withdrawals in the first few years.) Therefore, a deferred annuity should be a long-term investment, one you don't expect to tap before age 59 1/2, at the very earliest. Among deferred annuities, variable annuities offer a menu of investment accounts, including stock funds, bond funds, balanced portfolios, etc. The chief reason to choose a variable annuity is to shoot for higher-than-bond-type returns. If your stock funds gain ground inside a variable annuity, you won't owe any tax. You can even switch among accounts without paying tax on gains you lock in. Hopefully, over time you will build up a large account that you can tap to supplement your retirement income. 6. Now, all AFN Readers Can Get Broadband DSL-Like Speed Over Your Phone Line at Home http://fedweek.sparklist.com/t/294948829/821890/148/0/ Please continue reading for more details or go to http://fedweek.sparklist.com/t/294948829/821890/148/0/ A Few Facts: Over 50% of our readers who have called the toll Free information number 1-800 452-9201, signed up for this internet service,it's that good. On-line Sign Up Is available as well! You can get the fastest and most comprehensive internet accelerator on the market and unparalled 24/7 customer service for only $13.40 per month--You'd pay more than twice that at AOL, Earthlink or any of the others. CNW has over 14,000 nationwide local access numbers to choose from compared to 7,000 Earthlinks and 4,000 AOL numbers. Plus you'll get Spam controls to help keep your inbox free of junk email IF you're in pursuit of a fast, reliable Internet connection, Computer Networks Inc. has partnered with AFN to provide Internet Services to our readers at a special low rate as low as $9.45 per month with no long term contracts to sign (like most other internet service providers require). Best Choice: Turbo Accelerator Internet Service is the new CNW Turbo Internet access version 3.1 is the fastest and most comprehensive Internet accelerator available today. CNW offers DSL like speed over 56k dial-up connection and fast downloads of e-mail and Web pages--all for only $13.40 per month! For more information or to sign up today, go to http://fedweek.sparklist.com/t/294948829/821890/148/0/ or call CNW toll-free at 1-800 452-9201. This is a special offer to all AFN readers and their families, just another value added benefit for being a AFN reader. 7. Retirement Writeoff Most workers can contribute up to $3,000 to an IRA ($3,500 for those 50 or older). In some cases, contributions may be deductible. Assuming that you are covered by an employer-sponsored retirement plan, you can deduct IRA contributions only if your income is under certain amounts. Single filers must have income under $45,000 this year, in order to get a full IRA writeoff. Lesser deductions are available with income up to $55,000. (Those amounts are $65,000 and $75,000 for joint filers.) What's more, an unemployed spouse can take a full IRA deduction if the spouse is employed and covered by a retirement plan as long as their joint income is under $150,000. Such deductions are �above-the-line,� meaning they're deductible regardless of whether you take itemized deductions on Schedule A of your tax return. The same is true if you have self-employment income and you use a retirement plan (SEP, SIMPLE, Keogh) to shelter that income. 8. Brandon Mink, First VP-Investments is Providing All FEDweek Readers a Complimentary Consultation on Your Investment and Retirement Planning [EMAIL PROTECTED] As a special offer to FEDweek subscribers, Brandon Mink, First Vice President - Investments at Smith Barney has offered his time (and that of his staff) to provide a complimentary consultation about financial planning, investing and retirement. Just email Brandon at [EMAIL PROTECTED] to send your question on to Brandon and his staff. 9. Stock Answers A popular approach to charitable giving is the donation of appreciated securities. You can enjoy significant tax benefits by contributing appreciated stock directly to charity instead of making a cash contribution. Suppose, for example, you want to contribute $10,000 to your alma mater. You have that much in the bank; you also have $10,000 worth of stock that you purchased for $2,000 some years ago. Whether you contribute the stock or the cash, the charity receives the same $10,000 and you get the same $10,000 deduction for making the contribution. However, directly contributing the stock also lets you save the capital gains tax that would have been due on the sale of the stock, so you come out ahead with this strategy. 10. End of Fiscal Year 2004 Next Week *********************************************************** The Brand New In-Print 2005 CSRS & FERS Retirement Planning Guides Are Now Available For Immediate Shipment! Plus--Get FEDweek's Social Security and Medicare for Federal Employees & Retirees FREE! We are Fully Stocked and Ready for Your Federal Agency And Library Bulk Orders Immediately . Go to http://www.fedweek.com/Publications/default.asp to place your order now or continue reading about our special FREE Offer. ******************************************************** ** FEDweek Reader Special FREE Offer ** Order Yours Now and We'll Ship Them Straight Back out To You--Along With FEDweek's Social Security/Medicare for Federal Employees & Retirees FREE. http://www.fedweek.com/Publications/default.asp That's right, when you place an order for either one of our brand new 2005 CSRS or FERS Retirement Planning Guides you will receive FREE, The Social Security/Medicare Handbook for Federal Employees & Retirees. ********************************************************** Go to http://www.fedweek.com/Publications/default.asp to place your order for Your 2005 CSRS or FERS Retirement Planning Guide now. *********************************************************** *********************************************************** The 2005 CSRS & FERS Retirement Planning Guides http://www.fedweek.com/Publications/default.asp Now in their seventh year of print (and over 550,000 sold), these CSRS and FERS Retirement Planning Guides truly help you fully understand your federal retirement. These planning guides simplify the retirement planning process, helping you calculate your annuity (with plenty of examples), warn you about possible reductions in your annuity, tell you how Social Security fits into the picture, and what to do about health and life insurance. In short, they contain everything you need to know to make your federal retirement a success. These 2005 CSRS & FERS Retirement Planning Guide are NOT Dot.com downloads or government handouts or pamphlets, they are In-print comprehensive and easy-to-understand planning guides that were written and edited by our veteran-team of federal retirement planning experts in the field. Here are some of the key features and updates that these 2005 retirement planning include: A step by step guide to embarking on the retirement journey A description of the new long-term care program, with explanations of potential traps for those close to retirement A quick reference guide to benefits your survivors would stand to receive on your death A description of how Tricare-for-Life might replace FEHB as your health benefits provider Details on how to carry retirement and other benefits into retirement and how you can change those benefits after retirement An easy to follow guide to understanding annuity statements How the new TSP investment, rollover, withdrawal and other rules will affect you before and after retirement Latest information on COLA rates and policies, payments to survivors and other benefit rates The latest information on Social Security benefit rates and eligibility rules The latest information on FEGLI, FEHB, service crediting for retirement purposes and other vital retirement-related issues ALSO IN THESE 2005 CSRS & FERS RETIREMENT PLANNING GUIDES: How to calculate your annuity (with plenty of easy-to-follow examples) Eligibility requirements Different retirement types (regular, early, deferred, special disability) Credit for military service Deposits and redeposits Cost of living adjustments The effect of divorce on annuities Social Security The Thrift Savings Plan Taking health and life insurance into retirement Annuity taxes Survivor benefits And much more! *********************************************************** Go to http://www.fedweek.com/Publications/default.asp to place your order now and get your FREE Social Security/Medicare Handbook for Federal Employees & Retirees Handbook shipped to you immediately. *********************************************************** Other Ways to Order: You may also call our toll-free order line at (888) 333-9335 to place your order for these retirement planning guides: The 2005 CSRS Retirement Planning Guide The 2005 FERS Retirement Planning Guide Or you may also mail your order with payment of $13.95 ($9.95 plus $4.00 s&h) to: FEDweek P.O. Box 5519, Glen Allen, VA 23058. Extra FREE Bonus You will receive one FREE copy of The Social Security/Medicare Handbook for Federal Employees & Retirees per order. This is just another way we can say thanks for reading FEDweek and doing business with us. FEDweek 11551 Nuckols Rd. Suite L Glen Allen, VA 23059 (804) 288-5321 Website: http://www.fedweek.com [EMAIL PROTECTED] --- You are subscribed to financialplanningreport as [EMAIL PROTECTED] To unsubscribe, send a blank email to [EMAIL PROTECTED]
