Retirement Advisor
A monthly resource for protecting your income
September 2009
By Lynda Wilson
INVESTING
Unlike private sector jobs, federal jobs are
How federal government jobs generally less susceptible to cyclical fluctuations in
affect the economy the economy, according to the Bureau of Labor
Statistics. Even in the event of layoffs, federal jobs
he federal government is the country‟s largest have a higher retention standing than private sector
T employer, with about 14.6 million employees
and contractors, including the postal and
military services. Workers employed by the
federal government play a vital role in homeland
jobs.
In fact, a recent study showed the number of
federal civil servants and employees working for
government-funded contractors and for organizations
security, representing U.S. interests abroad, enforcing that receive government grants has been increasing
regulations, and administering domestic programs and and the hiring forecast remains fairly positive.
agencies. Also, about 550,000 federal employees are
Most federal government jobs aren‟t located in the expected to retire from the government between 2007
Washington, D.C., area. In fact, 90 percent of jobs are and 2012 and need to be replaced. In addition, the
located elsewhere. They provide services ranging American Recovery and Reinvestment Act, or the
from weather forecasting, education, banking, and stimulus law, is expected to create around 600,000
ensuring the freshness and safety of foods on grocery new government jobs by 2012.
shelves to managing natural resources, researching
new vaccines, making traveling by highway or air
possible, and much more.
The jobs have a significant impact on their TAX AND LEGAL
communities. For example, a regional council of
governments organization looked at the federal Common tax mistakes of the self-employed
employment impact on the four-county region around
any self-employed people are do-it-yourself
Sumter, S.C. It found not only did the region come to
depend on those dollars but the workers were also
better paid than those in the private sector, with the
federal government paying on average $200 a week
M people not only in business but also in
paying their taxes. But self-employment tax
rules are somewhat more complicated than
the rules that apply to the employed. As a result, many
more. The study also found that government spending
was proportionally greater in the region‟s more rural commit mistakes that lead to costly fines and penalties
areas and added stability to the entire region in bad from the IRS as well as to paying more than required.
economic times. The self-employment tax (SE tax), which is filed
In a tight job market, federal government with the Individual Income Tax (1040) return, is a
employment opportunities provide an alternative for Social Security and Medicare tax for individuals who
job seekers. With the average unemployment rate at work for themselves. It is similar to the FICA taxes
9.2 percent this year and with 6.7 million payroll jobs withheld from the paychecks of most employees.
lost since the recession began, many people see However, because self-employed individuals are both
federal jobs as a smart recession-proof career route. employers and employees, they are responsible for
paying all the FICA taxes.
Life’s Benefits and Insurance Services * 815 N. La Brea Ave. #371 *Inglewood, CA 90302
213-239-3142
Most people who are newly self-employed forget chili cheese dog and take control of our health.” That,
that they now have to cover both the employer and in a nutshell, is the philosophy behind preventive care.
employee portion of Social Security and Medicare tax. Chronic diseases such as diabetes, cancer and
Instead of the Social Security employee-only tax rate heart disease, as well as their preventable underlying
of 6.2 percent, the SE tax rate is actually 12.4 percent. causes such as obesity, smoking, alcohol use, poor
The SE tax rate for Medicare is 2.9 percent and not diet and lack of exercise, account for approximately
the 1.45 percent Medicare tax rate for employees. 38 percent of all deaths in the United States, according
Another common mistake made by the self- to Dr. Susan Blumenthal, former assistant surgeon
employed is missing out on legitimate deductions general. They also account for 75 percent – $1.5
because they are not aware that they qualify for these trillion each year – of U.S. health-care spending.
write-offs. Consequently, many business owners end Although prevention has been proven to reduce the
up paying more than they owe the government. Here incidence of chronic disease, the U.S. government‟s
are examples of deductions that are available to the investment in prevention has remained low.
self-employed: President Barack Obama has said he would
Payments made to 401(k), IRA, KEOGH, or SEP require insurance companies to pay for cholesterol
and other qualified retirement plans. tests, cancer screenings, mammograms,
A portion of rent, mortgage payments, utilities colonoscopies, vaccines, and other routine checkups
and maintenance for businesses operating and preventive measures as one of the consumer
partially or completely in any part of the owner‟s protections in any health-care reform legislation.
home (for example, a room that has been Although few would dispute that preventive care
converted into an office). saves lives, the Congressional Budget Office (CBO), a
Cost of toner for printers, reams of paper, nonpartisan agency that estimates the cost of
shipping expenses, postage, software, pens, pads legislation, said expanding the use of preventive
and other office supplies used directly for measures and screening tests would actually increase
business. medical spending overall. The CBO cited The New
Cost of advertising materials for radio, TV, England Journal of Medicine 2008 review that found
magazines, the Internet and other media. that about 80 percent of the hundreds of preventive
Cost of cellular and telephone calls made for services included in the study added to the costs.
business purposes. Preventive care doesn‟t bring down cost because
Cost of the Internet or a Web page for business the tests themselves are costly and often lead to more
purposes. doctor‟s visits and procedures.
A separate study found that preventive services
There are many other expenses that can be such as measuring the cholesterol level of people at
claimed as “business expenses” and are therefore tax- high risk for heart disease would cost almost 10 times
deductible. However, there are various rules that apply as much as the savings. As a result, the country‟s total
to the different deductions and it is important to medical bill could increase by 162 percent.
understand these rules before incorporating them into But even the CBO maintains that there is no
the tax returns. reason to abandon preventive measures if the country
decides they are worthwhile and as long as the cost is
HEALTH AND WELL-BEING recognized. “Just because a preventive service adds to
total spending does not mean that it is a bad
Does preventive care save money? investment,” CBO Director Douglas Elmendorf said.
“Experts have concluded that a large fraction of
TV commercial for a new prescription drug preventive care adds to spending but should be
A for heartburn shows a guy suffering from the
condition after eating a chili cheese dog.
“Stop eating the chili cheese dog!” responded
Jonathan Harris, a managing editor for the
deemed „cost-effective,‟ meaning that it provides
clinical benefits that justify those added costs.”
The legal and tax information contained in these articles is
merely a summary of our understanding and interpretation of
philanthropic group Causecast. “Let‟s put down the some current provisions of tax law and is not exhaustive. Consult
your legal or tax advisor for advice concerning your particular
circumstances.
Life’s Benefits and Insurance Services * 815 N. La Brea Ave. #371 *Inglewood, CA 90302
213-239-3142
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