Financial Frontlines®

This content is provided courtesy of USAA.

Make sure you understand the financial realities of divorce. You may feel 110% ready to divorce, but have you considered the financial implications of splitting up?

“When people are thinking about divorce, many are just ready to get out at any cost. That is exactly the wrong attitude to have. You have to plan carefully,” says June Walbert, a CERTIFIED FINANCIAL PLANNER™ practitioner with USAA. “In virtually every divorce, there is a major lifestyle change. You have to keep in mind the financial ramifications for today as well as for decades to come.”

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The Right Paperwork

If you’re splitting funds from your spouse’s 401(k) or other retirement account or pension, you’ll need a Qualified Domestic Relations Order, which:
– Officially directs the ex’s employer how to pay your portion of the account, as determined by the divorce decree.
– Must be submitted to the plan administrator.
If an annuity is divided in a divorce decree, a similar document may be required to finalize the payment plans. Check with an attorney for additional legal information regarding your particular situation.
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Dollars and Divorce

The good news is that many people seem to grasp the connection between their bank accounts and their marital status. Among the 44 states that collect divorce stats, divorce rates dropped by 5% between 2006 and 2009 — just when the economy was at its worst, according to the Centers for Disease Control and Prevention. In fact, 38% of those who responded to a survey by the National Marriage Project at the University of Virginia who were considering separation or divorce said the recession caused them to put aside their plans. However, law firms nationwide are reporting a recent surge of business, as couples feel more confident that the improving economy can more easily sustain two households.

“The economy affects whether people can afford to divorce. It affects what you do with the house, a family business, child support and alimony,” says Linda Lea M. Viken, president of the American Academy of Matrimonial Lawyers and a Rapid City, S.D., family law attorney with more than 30 years of experience. “If people don’t have money, they can’t even afford appraisers or lawyers. When considering divorce, you have to take off your emotional hat and put on your business hat because you’re making business decisions.”

Even if the recovering economy has boosted your confidence in your ability to afford divorce, make sure you have a clear picture of your financial reality.

Make a Budget

Before you divorce, sit down with a paper, pen and calculator to figure out how you will pay for everything, Walbert says. A divorced couple will suddenly have two households to maintain financially and two retirement accounts to fund.

“When going through a divorce you need to know how the numbers shake out, so know what you can afford and what you can’t,” she says. “The numbers don’t lie.”

Even if one party earns the bulk of the income, it is unlikely that person will walk away with the bulk of the monthly income or assets. Keep in mind, however, that in many states a great deal of discretion is left to the judge or courts. If children are involved, child support and even spousal maintenance often are awarded, making the keeping of the proverbial lights on in two homes a question mark for both parties.

Tax Impact

Even if you calculate your current income and expenses down to the nickel, you probably still don’t have an accurate picture of what your checkbook will look like after a divorce. Divorced couples lose out on the tax benefits of filing jointly, and only one person will have the tax advantage of filing as head of household if awarded primary custody of the kids. Child tax credits, child care deductions, and the family home’s interest and property taxes likely will be declared by just one of the parties — assuming the couple’s house was not sold. “It’s a big difference whether you have those deductions or not,” Viken says.

Further, make sure to tidy up past years’ filings before calculating your new bottom line. There is nothing worse than finding out too late that a dishonest spouse lied about paying or filing previous taxes — or worse, cheated on the filings. Remember, you will be liable for any tax obligations incurred during the marriage.

Bottom line: There’s a good chance that at least one party will be paying more taxes, which slashes take-home pay for everyone. And that further squeezes what is likely a tight financial situation.

Retirement — Your Future Now

“Even if you’re in your 30s or 40s, you must consider the impact that a divorce today will have on your retirement in decades to come,” says Walbert. In many cases, retirement funds amassed during a marriage are split 50-50 — no matter who earned the money. A spouse’s military retirement paycheck or corporate pension may also be considered part of the settlement. Likewise, when couples have been married at least 10 years, the poorer spouse is eligible for up to 50% of the ex-spouse’s Social Security benefits at age 62, if greater than his or her own.

That said, use an online calculator to figure out how far these divvied-up retirement assets will help each of you in retirement, and what earning potential you and your spouse have between now and then. Chances are both parties will have to save more and work longer than originally planned.

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
USAA or its affiliates do not provide tax advice. Taxpayers should seek advice based upon their own particular circumstances from an independent tax advisor. This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional.

New Law Change Increases Insurance Coverage for Veterans

The VA just announced that theyhave increased the limits for coverage under the Veterans Group Life Insurance (VGLI)  program. The VA press release is below. This could be a good opportunity for those veterans who need and use the VA as their life insurance provider. Keep in mind though that VGLI is term insurance, and premiums increase dramatically as we age. Many veterans determine that they can’t keep their life insurance in force later in life because the premiums are too expensive. How will you provide for your loved ones if you can no longer afford your life insurance premiums?

Take a look at the chart of VGLI premiums from the VA before you decide whether to increse your VGLI coverage.

Here is the link to the premium tables for VGLI: http://insurance.va.gov/sglisite/vgli/VGLI%20rates.htm 

Those are the monthly rates. Download the chart for a good view, broken down by monthly, quarterly, semi-annual and annual rates, of how much this insurance costs. Take a look at the costs at age 70 and beyond. Will you be able to pay those rates in later life? Obviously, you’ll need more than VGLI to complete your financial planning.  

With all life insurance, it pays to shop around and do your homework.

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WASHINGTON – Some Veterans covered under the Veterans Group Life Insurance program (VGLI) now have the opportunity to increase their coverage to the current maximum coverage under the Servicemembers’ Group Life Insurance (SGLI) program.

“Currently, 70 percent of the Veterans covered under VGLI are under age 60, have less than $400,000 of coverage, and will greatly benefit from this law change,” said Allison A. Hickey, Department of Veterans Affairs under secretary for benefits.

Under the Veterans’ Benefits Act of 2010, enacted on Oct. 13, 2010, Veterans can increase their coverage by $25,000 at each five-year anniversary date of their policy to the current legislated maximum SGLI coverage, presently, $400,000.
To date, approximately 21 percent of eligible Veterans have taken advantage of this opportunity, resulting in nearly $113 million of new coverage being issued.

The VGLI program allows newly discharged Veterans to convert their SGLI coverage they had while in the service to a civilian program. Before enactment of this law, Veterans could not have more VGLI than the amount of SGLI they had at the time of separation from service.

For example, those who got out of the service prior to Sept. 1, 2005, when the maximum SGLI coverage was $250,000, were limited to $250,000 in VGLI coverage.

Now on their first five-year anniversary, these Veterans can elect to increase their coverage to $275,000. On their next five-year anniversary, they can increase the coverage to $300,000, and so forth.
The additional coverage can be issued regardless of the Veteran’s health. To be eligible to purchase this additional coverage, the Veteran must:

• Have active VGLI coverage,
• Have less than the current legislated maximum coverage of $400,000,
• Request the additional coverage during the 120-day period prior to each five-year anniversary date, and
• Be less than 60 years of age on the five-year anniversary date of his or her coverage.

Eligible Veterans are notified of this opportunity a week before the start of the 120-day period prior to their anniversary date, and twice more before the actual anniversary date.

For more information about VA’s Insurance Program or other VA benefits, go to www.va.gov or call 1-800-827-1000. Veterans are also encouraged to visit VA’s web portal eBenefits – Insurance.
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Tricare to Offer Credit Monitoring in Wake of Data Theft

While Tricare Management Activity maintains that there is no evidence that sensitive personal patient information stolen in September has been accessed by a third party, the insurer now says it will take “proactive measures” to ensure that patients are protected.

On Sept. 12, an employee of Tricare contactor Science Applications International Corp. reported the theft of computer tapes containing personal health information of 4.9 million Texas patients. While the tapes contain no financial data, they do include patients’ names, Social Security numbers, addresses, phone numbers and personal health data.
TMA, which has insisted that information on the tapes would be difficult to access, has been criticized for not providing free credit monitoring in the wake of the theft.

But on Nov. 4, TMA announced that it has directed SAIC to provide one year of credit monitoring and restoration services to “patients who express concern about their credit.”

“We take this incident very seriously,” said Brig. Gen, W. Bryan Gamble, TMA deputy director. “The risk to our patients is low, but the Department of Defense is taking steps to keep affected patients informed and protected.” Gamble said the measures “exceed the industry standard to protect against the risk of identity theft.”

TMA said concerned individuals can contact the SAIC Incident Response Call Center on weekdays from 9 a.m. to 6 p.m. ET at (855) 366-0140 (toll free) in the United States, and (952) 556-8312 (collect) internationally.

Don’t be scammed into paying a fee for copies of records available for free!

The Army Human Resources Command alerted MOAA about a scam targeting veterans needing a copy of their separation document, the DD214.

If you need a copy of your DD214 or a family member’s DD214, go to http://www.archives.gov/veterans/military-service-records/

There are two ways to request your DD214: online and by mail/fax

1. To request your DD214 online: click on ‘Launch the eVetRecs System to start your online request’. Follow the instructions in the pop-up window. The DD214 will be mailed to you after completing the form.
2. You can also download a form to mail or fax your request for your DD214 by clicking on the ‘Download form SF-180 to Mail or Fax your request’. Click the link ‘Download form SF-180 to mail or fax your request’ to download a PDF of SF-180 to your computer. The return addresses for the completed form are located on page three (3) of the form.

Remember, a DD214 Record of Military Service is always free to obtain for the member and family members.

Information via U.S. Army.

This content is provided courtesy of USAA.

Just as your good name may get stolen by identity thieves, reputable auto dealers may have their names and websites hijacked by hucksters. Other scammers put up fake websites and post the same car ad again and again, selling it over and over to unsuspecting buyers who’ll never see that set of wheels.

As director of the Better Business Bureau’s BBB Military Line®educating military families, Holly Petraeus sees many scams that target young military men and women. But, she says, these fraudsters use sophisticated techniques that put anyone buying a car online at risk.

“More and more of the scammers have become good at pretending to be an already legitimate website,” says Petraeus, who warns crooks are becoming especially skilled at targeting people buying used cars.

“There are some very good deals to be found using online car-buying services that take the hassle out of it for you, which can be reassuring,” Petraeus says. Yet she’s seen enough evidence of scam artists at work to develop a list of red flags to watch for when surfing for a good auto deal online.

1. The vehicle is located out of state.
   “That can mean they don’t want you to come and physically inspect the car because it doesn’t exist,” Petraeus says.
2. The price is too good to be true.
   Research what the price should be for that car, at that age and in that condition. If the price you’re being offered is thousands less, think twice. “Sometimes scammers will use the military, saying a car’s being sold by someone who’s deploying or pretending to be a parent selling for a deployed son,” Petraeus warns.
3. The dealer makes you wire the money.
   “They’ll have you wire it to an individual, not to the business itself,” Petraeus says. “If you do that, your chances of seeing the money again are pretty much gone.”
4. The website offers free shipping or can ship immediately.
   Anyone might jump at the chance to get his or her dream car for a great price in record time. But always investigate the shipping service and background of the seller if the shipping time frame or price seems too good to be true.

If you see these warning signs, call the dealer directly to learn how long it’s been in business and other details about its legitimacy. You also can call the BBB office in that area and ask for help researching the dealer and the offer, she says.

Complaints on the Rise

Though the Federal Trade Commission doesn’t keep statistics on online auto fraud in particular, it does report that auto-related complaints, classified under “auto/used” and “auto/others,” rose from 2007 to 2009. And the National Consumer League Fraud Center and the BBB continue to receive complaints about bogus online car sales.

In summer 2010, the BBB reported that one Memphis, Tenn., car dealer got more than 1,000 calls from buyers who thought they had been dealing online with the legitimate business. A fraudulent site had impersonated the Memphis dealer, using its name, address and contact information. The bogus site claimed to sell repossessed cars below market value and instructed buyers to wire a deposit to an individual instead of the business. Some buyers actually came to the Memphis lot to pick up cars they thought they had purchased.

In another example, Petraeus tells of one service member who thought he’d found a dream car for his son online. The online dealer promised to ship it to him right away. Suspicious, the father called the shipping company that the online business stated it had a standing relationship with. The company had never heard of that online dealer and had a several-month backlog on shipping. The seller likely would have taken the money and never shipped a car. In fact, that car probably never even existed.

Be Smart Online …

So, why do people fall for those too-amazing-to-be-true deals, even when the red flags are waving big and bright? “Sometimes people just want to believe in the pot of gold at the end of the rainbow,” Petraeus says. A military spouse for 36 years, she knows the worry and distraction that finances can cause the troops and offers these proactive ways to avoid online auto scams:

• Google the description of the advertised car. If you see it’s been sold 20 times, you know you’re dealing with crooks, says Petraeus, who explains scammers often lift the picture and description from a legitimate car ad and use it again and again.
• Insist on an inspection. “Tell them that you can pay someone to come and inspect the car,” Petraeus says. See if the online dealer balks.
• Get help from the local BBB. Sometimes the BBB will investigate the address of a business for you and make sure it exists. Or it already may have reports about a fraudulent company to share.
• Learn more about the company you’re dealing with by looking up the company on other websites. See if the contact information matches. Call the company directly.
• If you’re completely satisfied the deal is legitimate, choose a payment method that leaves a paper trail. “Absolutely never send a wire transfer,” Petraeus says. “You could offer to pay by a cashier’s check, but you have the best protection if you pay by credit card. If you’re getting a loan, arrange for your bank to pay the company directly.”

… and on the Car Lot

Even when you’re not dealing with scammers online, here’s how to make a wise purchase and negotiate a smart deal.

• Don’t divulge how much you want your monthly payments to be. “Some dealers will write you a loan to get you there, but you may be paying for five or six years and tacking on a huge amount of interest,” Petraeus says.
• Never say upfront you have a trade-in. Wait until you’ve settled on a price. “They’ll give you a big value on the trade-in and get the money back with the extra fees,” says Petraeus, who also advises that you research the value of your trade-in ahead of time.
• Go line by line over the contract. “Question everything,” says Petraeus. “If you’re not confident, get help. A legitimate dealer will let you take a contract for legal review.”
• Calculate the true cost of ownership. “Don’t forget about how much it’s going to cost for insurance, to keep gas in it and make repairs,” Petraeus warns. Before you sign on the dotted line, contact your insurer to find out how much insurance will cost.