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The PFC’s Corner – January

ROSECRANS AIR NATIONAL GUARD BASE, Mo. --

So Long to 2019, and HELLO 2020!

The holiday season is behind us and I hope that everyone had a safe, enjoyable time with family and friends.  Let’s get this year off on the right foot by looking at these four topics:  1) Best savings rates; 2) TSP performance; 3) IRS tax planning and 4) Elective contributions.

Best Savings Rates - When you establish a good, thoughtful financial plan the industry standard for your emergency (“rainy day”) fund is 3 to 6 months of your living expenses.  While I recommend the higher level (and continued monthly deposits), the point is that you might as well get the best rate on those funds which could/should be several thousands of dollars.  In doing so, the first question is “Do I need a brick and mortar branch or am I comfortable with an online account”.  To this point, for 2019 the rates for online facilities ranged from 1.8% - 2.1% while local branches were closer to 0.8% - 1.0%.  Using a $3,000 balance over 1 year, this could mean a difference between $288 and $756 for the year.  Don’t let your cash reserves be TOO lazy, but be sure you understand minimum balance, accessibility and account fees in your decision.

TSP Performance – The stock market performed very well in 2019 and while future fluctuations are probable (and necessary), make sure you are comfortable with your TSP investment selection.  Generally I would encourage anyone with more than 5 years until expected use of the funds to invest mainly in the equity or stock index choices in your TSP:  C, S and I Funds (or your age-specific Lifecycle Fund).  For 2019, the respective returns for the individual index funds were:  C – 31.45%; S – 27.97 % and I – 22.47%.  The Lifecycle Funds ranged from 17.6% - 23.3%.  For more detailed information access the https://www.tsp.gov website.  Remember, if you haven’t recently accessed your account the TSP initiated 2-step authentication at the end of the year.  If you have trouble logging on, call the TSP Thrift Line at (877) 968-3778.

IRS - It won’t be long before you start your process of filing your 2019 taxes.  Employers, qualified plan administrators, mortgage lenders and others are required by law to mail your necessary 2019 tax documents by 31 January 2020.  This usually holds true and while there are always exceptions, establish your 2019 Tax Folder now if you haven’t already and put all of these documents in it as they arrive.  Remember that while itemizing deductions is tougher after the change in 2018 (Single Standard Deduction = $12,000; Married Filing Joint = $24,000; Head of Household = $18,000) keep track of any previous deductions that you had:  mortgage interest; real estate/property taxes; state/local income taxes; medical expenses (>AGI exclusion); charitable donations, etc., you might still be able to itemize.  This month is also the best time to evaluate your withholding exemptions.  Don’t force yourself to save by over-withholding just to get a huge refund next year.  No one I’ve ever counseled would be interested in 12-15 month “investment” that returned 0%, yet some still do.  Use the withholding calculator on the IRS website to estimate your 2020 tax liability so you have more each month for living expenses and still avoid tax bills next year.

Annual Elective Contributions – Supplementing the previous IRS notes, know that the IRS has increased elective contribution limits to $19,500 for employer retirement plans like your TSP, 401k, 403b and others (+$6,500 catch-up if over 50).  Unfortunately the individual IRA plans were not included in the inflation adjustment and remain at $6,000 (+$1,000 catch-up if over 50).  Remember that individual IRA (Traditional or Roth) contributions must come from earned income with the exception of a non-working spouse who can have a Spousal IRA contribution from the other spouse’s income.  There are also income limits on the individual accounts so be sure you qualify if considering this.

If you have any questions on the above or another topic, call, text or email me for an appointment!

The best time to start a financial plan was years ago, the second best time is now!

In other words, it is never too early or too late to start, just start!

Randy Gerard, C 573-415-6934 or O 816-236-3939, #6, pfc.rosecrans.ang@zeiders.com.