Picture the scene: My wife has a group of friends visiting. I come home from work, greet everyone, and have a glass of wine to be sociable. At some point I announce that I’ll retire to my study for the evening. What does that verb mean – to retire? It means to go away or apart; to withdraw; to be in a place of privacy or shelter. It can also simply mean that I’m going to bed for the night. It isn’t until about three generations ago that the definition expanded to mean cessation of paying work. Before that, for all of human history, people simply worked until they could no longer. Retirement, as we currently think of it, is a relatively new concept. When extended families lived together on the farm, everyone worked and contributed in some way. When the same families moved to the cities at the beginning of the last century, it was the same way. So how did our current concept develop?

You mean I’m not working but you’ll still pay me?
During WWII, the...

Charitable Giving
As a financial adviser, I am privileged to work with many wonderful and generous people who give generously. These are people who want to leave a legacy. These are clients who want to leave money behind which will continue to accomplish the good works the donor did during his or her lifetime. You may see or hear the names of prominent donors – sponsors of a university building or underwriters of NPR News – and think, Well, yes; I’d love to endow this or that organization or charity, but I’m simply not in that league.

Leave a Legacy
Even if you don’t have a lot of spare cash kicking around, you may still be able to leave a legacy. One of the best ways to do this is with life insurance. For a manageable annual premium, you may be able to leave hundreds of thousands of dollars to your favorite organization. It works like this:

Decide which non-profit you’d like to see flourish.
Typically, this is a 501(c)(3) organization such as a...

An important financial concern that we often hear from clients is, “How can I improve my credit score?” First of all, I have to give a quick disclaimer that our company, CameronDowning, is not a credit repair or debt consolidation service. Our goal is to arm you with the education you need to establish a strong financial foundation. Consequently, this often includes advice on how to raise your credit score.

If you’re considering buying a home, taking out a loan, or you’re getting yourself organized after a season of personal financial challenges, you understand that your credit score may determine what you can and cannot do in life.

The most widely used credit score are FICO scores. FICO score and credit score are often used interchangeably. FICO is an acronym for the Fair Isaac Corporation. Founded by William Fair and Earl Isaac in the late 1950s, they developed a mathematical algorithm that predicts consumer behavior, resulting in a score. These scores are...

We’ve all seen the financial headlines:

“Sell everything and buy gold!”

“Time to take profits off the table!”

“The market is poised for a big upswing – get in now!”

“Make 16% guaranteed with tax lien certificates!”

“Buy my real estate flipping system and control your own rental empire!”

…I’m getting an Excedrin headache.

The Trap of Financial Headlines
If you’re like many people, reading the financial headlines every day can make you crazy. Yet you continue to watch in order to stay informed. You want to be in the know about financial markets so you follow CNBC, Money Magazine, The Wall Street Journal, The New York Times, and others. Some outlets are better than others. There is so much economic uncertainty in the air, so you invest time and energy reading, or listening, to these “experts” to get a sense of what you need to do with your money.

We believe the best investor is an...

The Thrift Savings Plan, or TSP, is the equivalent of the 401k for federal government employees. My intention is to cover the main highlights of this fantastic retirement benefit. Much more detail is found on the TSP website.

As in a 401k, you contribute pre-tax money into a Thrift Savings Plan. Earnings in the account are tax-deferred. You are taxed only when you withdraw funds in retirement. If you work long enough, consistently contribute to your plan, and invest appropriately, you can potentially retire comfortably.

Thrift Savings Plan: military and non-military accounts
This post is for non-military TSP retirement participants. The TSP offered to those in the military is different. Elsewhere I discuss the benefits of a Thrift Savings Plan retirement account as a High-3 and as a BRS (blended retirement system) participant.

FERS – the Federal Employment Retirement System
If you are a federal civilian employee, and began employment after 1983, you are automatically a FERS...

Increasingly as we work with people of retirement age, we’re hearing a new concern: What happens when my mother runs out of money? This is something relatively new. Those in their middle ages used to be called the sandwich generation, because they were in the middle, caring for both their children and their parents. But this is something new . . . we’re speaking of people in their 60’s and 70’s caring for parents in their 80’s and 90’s.

By the time we hit our latter 60’s, most of us hope that the retirement nest egg is firmly in place, children are married off, and grandchildren are a joy. But since we’re all living so much longer, caring for one’s very elderly parents is now a large financial planning topic.

Medical issues are a primary cause for concern
Too often we see the client who is concerned about his parents outliving their assets. A parent with a long and debilitating illness is a common story, which can lead to an...

FRS participants have a choice among two retirement plan options:
The investment option, which is a defined contribution plan (DC)
The pension option, which is a defined benefit plan (DB)
In previous posts, I covered both the FRS Pension Option and the DROP (Deferred Retirement Option Program). In this post, I’m presenting the FRS Investment Option.

The salient feature of any DC plan is the number of contributions that can go into an individual’s account. On the other hand, with a defined benefit plan (also known as a pension plan) there is a pension formula. The inputs are usually based on years of service and average or final compensation. The formula calculates a pension amount that is guaranteed over the pensioner’s lifetime or lifetimes of the pensioner plus spouse. Here, though, I’m focusing in on the FRS investment option, which is the FRS defined contribution plan.

How much money goes in?
ERISA statues define limits to contributions. ERISA is the...

Oh yes. Many new Social Security retirees get a big surprise when they learn about the taxation of social security benefits. This started during the Clinton administration. That administration added a formula to the tax code to determine how much, if any, of your Social Security benefit is subject to tax. Previously social security benefits did not count as taxable income at all.

Provisional income
This formula is called the provisional income formula. It boils down to this: add all of your income together – wages, business earnings, tax-free bond income (yes – non-taxable income is included in this formula), IRA distributions – everything – plus ½ of your social security benefit. If the result falls into the following ranges, then that portion of your social security income gets taxed along with everything else:

Married filing jointly
If provisional income is:

• <$32,000, then no social security benefit gets taxed
• $32,000 to $44,000, then 50% of...

The Deferred Retirement Option Program (DROP) is available to Florida Retirement System (FRS) pension plan participants. As a DROP participant, you earn your salary while your monthly pension is paid into the FRS Trust Fund. You earn interest at the rate of 1.3% on those DROP funds. This money adds up quickly. If your pension payment is $5000/month, your ultimate DROP payment will approximate $310,000!

This is a rich retirement – there’s nothing remotely like it that we’ve see in private industry.

Before you participate in DROP, you earn one month of retirement service credit for each month you work. When you enter DROP, you are considered to be retired and your pension is frozen at that level. You will still benefit from the cost of living increases, however.

Who is eligible to join DROP?
To participate in DROP, you must be vested and eligible for normal retirement (based on your years of service or age). You must be an active member of the FRS Pension Plan, TRS,...

The Social Security benefit program is officially called OASDI – Old Age, Survivor, and Disability Insurance.  As the name suggests, it consists of two parts – the disability income part, and the retirement income part.

Funding for Social Security

The program is funded by payroll taxes under the Federal Insurance Contributions Act (FICA):  7.65% of your gross pay, matched by your employer, up to $118,500 in 2016.  This means that, on that same amount, your employer withholds $9065.25 from your pay, and matches that amount equally.  Technically, the social security amount is 6.2% and the Medicare amount is 1.45%, and these total to 7.65%.  If you earn more than $118,500, then only the 1.45% Medicare tax is withheld on the amount of your pay north of $118,500 – so you sort of get a little raise in your paycheck.  (Under Obamacare, when you earn above $200,000 the Medicare rate rises to 2.35%.)

By law, any excess of revenue that Social...