January 25, 2012
By Perspective Financial Services
 Stories abound about the fireman who retires at age 45 with a six-figure pension, or the city manager who leaves after just five years’ service with full salary and health coverage for life. What doesn’t make headlines, however, is the growing number of public sector employees who have seen their retirement benefits erode in the face of budget cutbacks and mounting public deficits.
States and cities across the country are taking steps to reduce pension costs by whittling away employees’ retirement entitlements. Even San Francisco recently saw voters approve a plan to scale back retirement benefits for city employees.
Although traditional pensions still dominate at all levels of state and local government, hybrid plans are emerging that combine a 401(k)-type component with a guaranteed benefit. In fact, 11 states now have primary retirement plans that include some defined contribution component.1
The upshot for public sector employees is that, increasingly, they are likely to need to augment their pensions with salary contributions to employer-sponsored plans or save on their own if they want to maintain their preretirement lifestyle. And since many states have “double dipping” laws in place that prevent public employees from collecting both Social Security and a state pension, the need to set aside their own funds for retirement is even more important.
How to Compensate
Several tax-advantaged retirement savings options exist that may be accessible to public sector employees. The most popular include:
- 403(b) plans are generally available to employees of qualified public organizations such as schools, hospitals and certain nonprofit employers. Similar to 401(k) plans, 403(b) plans allow employees to contribute a portion of their salary on a pre-tax basis; and no tax is paid on contributions or earnings until it is withdrawn in retirement.2
- 457 plans are available to state and local government employees and are somewhat similar to 403(b) plans. There is no penalty for early distributions from a 457 plan (however, taxes are due), although you generally cannot take in-service distributions unless you have an unforeseen emergency.
- IRAs are available to both public and private sector employees. Like 403(b) and 457 plans, IRAs also offer tax-deductible contributions and tax deferral. However, IRAs have lower annual contribution limits and eligibility for favorable tax treatment may be subject to certain income limits.2
To find more information on these or other tax-advantaged retirement savings plans, see Publication 590 at http://www.irs.gov/
Sources: 1Journal of Pension Economics and Finance, “Behavioral Economics Perspectives on Public Sector Pension Plans,” April 2011; 2Withdrawals from 403(b) plans and IRAs prior to age 59½ may also be subject to a 10% early withdrawal penalty, in addition to ordinary tax on withdrawn amounts.
Portions of this article were provided through the Financial Planning Association, the membership organization for the financial planning community (through McGraw-Hill Financial Communications), and is brought to you by Perspective Financial Services, a local member of FPA.
January 18, 2012
 The New Year is always a good time to think about your financial goals and objectives for the year ahead and beyond. But don’t feel as though you have to do everything at once. Instead of the annual ritual of overdoing New Year’s resolutions and making grandiose plans (then backsliding or giving up after a few months), why not resolve to take a series of small steps throughout the year?
During the next 12 months on our blog, we will share 12 quick, easy things you can do to help you stay on track with your financial goals. Just one thing per month — 12 proactive tasks for 12 months in 2012.
In January, resolve to call your advisor if you’ve recently had or are planning any major life changes that may impact your investment planning.
Marriage, divorce, a career change, the birth of a child, returning to school, a new car purchase and many other life events can impact your finances – both in the short term and the long term. Take just a moment to contemplate recent changes or ones you see on the horizon, and let us know what’s new. With a brief review of your investment plan, we can help ensure you stay on track with your financial goals.
Here’s a preview for the year ahead. Don’t worry, we’ll provide you with more detail when the time comes.
In February, resolve to spend a few hours organizing your personal files and documents.
In March, resolve to talk to your children or grandchildren about the importance of saving and investing.
In April, resolve to review your life, home and auto insurance policies to ensure they meet your current needs.
In May, resolve to spend a few hours volunteering your time to a charitable organization.
In June, resolve to assess your need for disability insurance.
In July, resolve to create or update your will.
In August, resolve to call a family meeting to discuss your estate plan/will, and follow it up with a fun event like a dinner or outing.
In September, resolve to review and, if needed, update all beneficiary information for your accounts and policies.
In October, resolve to create a budget for holiday spending.
In November, resolve to call your financial and tax advisor to discuss any questions you may have about your 2012 income tax filing.
In December, resolve to review your financial plan to see if the goals you’ve set are still on track and important to you.
January 12, 2012
By Perspective Financial Services
 Better Business Bureau investigates thousands of scams every year, from the latest gimmicks to schemes as old as the hills. This year, they have divided scams up into nine major categories (from jobs and dating to phishing and identity theft) and picked the top scam in each.
The year’s top financial scam centered on mortgage relief programs. According to BBB, “In challenging economic times, many people are looking for help getting out of debt or hanging on to their home, and almost as many scammers appear to take advantage of desperate situations. Because the federal government announced or expanded several mortgage relief programs this year, all kinds of sound-alike websites have popped up to try to fool consumers into parting with their money. Some sound like a government agency, or even part of BBB or other nonprofit consumer organization. Most ask for an upfront fee to help you deal with your mortgage company or the government (services you could easily do yourself for free), and almost all leave you in more debt than when you started.”
Click here to read the full list of BBB’s Top Scams of 2011.
December 27, 2011
 During the last decade, online banking has become one of the fastest growing Internet activities. Online banks, also called virtual or direct banks, have no physical network of branches. Proponents say the resulting lower cost structure allows online banks to offer reduced fees and more competitive rates.
Online bank customers can bank 24 hours a day, 7 days a week from home or office via the Internet through secure websites, by phone or chat, or via mail using postage-paid envelopes. Deposits can be made online using scanning applications provided by the bank. Disadvantages of using an online bank include the inability to make cash deposits and waiting longer for physical items such as certified checks (these can take 7 to 10 days to arrive in the mail).
Another alternative to the traditional bank is a credit union. These non-profit membership co-ops provide most of the services of a traditional bank. However, fans say credit unions deliver more personal customer service. Being non-profit, credit unions may pass savings on to their members in the form of lower and fewer fees and more attractive rates, just as online banks can. Membership usually requires an affiliation of some sort through employment or other connection. For example, one prominent credit union serves mainly current or former members of the military. But, as Mark Huffman of ConsumerAffairs.com points out, “Over the years, these requirements have been loosened to the point that almost all consumers can find a credit union they can join.”
Keep in mind that switching banks can be complicated. For example, direct deposits have to be rerouted to the new account. Any automatic periodic bill payments also must be set up anew. Some banks offer Switch Kit, a step-by-step guide (including forms, telephone numbers and other information) to walk consumers through the process of getting a new bank account up and running.
December 13, 2011
By Perspective Financial Services
 How many retirement accounts do you have? If you’ve changed jobs a few times throughout your career, you could have several accounts housed in different employers’ plans.
While it is certainly acceptable to leave money in an old plan, in some cases it may be a better idea to consolidate your assets. (If your account value is less than $5,000, your former employer can cash you out of the plan, making it imperative to have a back-up destination for those assets.) Having your retirement portfolio in one place can make it easier to track performance and make changes, which help ensure proper asset allocation of your portfolio.
Be sure to first compare the investment options of your old and new plans — and/or any IRA option you are considering — and their associated fees. Were you able to properly diversify your assets in your old plan? If your investment choices were limited, you may want to move your money. Are the investment fees in your old plan higher or lower than in your new plan? If you were paying more for the investments in your old plan, it could help save you money to move your assets. Your investment advisor or financial planner can help you find the answers to these questions and decide if a rollover makes sense in your situation.
Initiating a rollover is easy. First, check your current plan rules to confirm that rollovers are permissible (the vast majority of workplace retirement plans accommodate rollovers). Next, simply contact the financial institution that will house your account. They will either have you fill out a form or have a representative help you through the process.
Be sure to understand the difference between a rollover and a distribution. A rollover allows you to transfer your money from one qualified retirement account to another without incurring any tax consequences. A “qualified” account can be either your new employer’s plan or a rollover IRA.
A distribution is essentially a withdrawal from your account. If you request a distribution, the account administrator is required by law to withhold 20 percent of your account balance to pay federal taxes. State taxes, if applicable, are also due. If you are under age 59½, you could be subject to an additional 10 percent federal early-withdrawal penalty. You can roll over assets from a distribution within 60 days of receipt and reclaim those tax withholdings. If you wait longer than 60 days, a rollover is not permissible.
Portions of this article were provided through the Financial Planning Association, the membership organization for the financial planning community (through McGraw-Hill Financial Communications), and is brought to you by Perspective Financial Services, a local member of FPA.
Required Attribution: Because of the possibility of human or mechanical error by McGraw-Hill Financial Communications or its sources, neither McGraw-Hill Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall McGraw-Hill Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content. © 2011 McGraw-Hill Financial Communications. All rights reserved.
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