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May 9th, 2018 by

student debt

Normally, it’s recent college graduates or young professionals that complain about the burden of student debt. However, the number of consumers age 60 and older with student loan debt quadrupled from 2005 to 2015 (see chart). During this period, the average amount owed by those 60 and older rose from $12,100 to $23,500.1

late life student debt

Repaying student debt can make it more difficult to save for retirement. Student loan borrowers who are 50 to 59 have lower retirement account balances than those without such loans. In 2015, 29% of loans by borrowers age 50 to 64 were in default, compared with just 17% for those under 50. For borrowers who are 65 or older, the default rate was even higher at 37%.2

If you have student debt or are considering a higher-education loan, here are some factors to keep in mind:

1. Federal Offsets

The federal government can withhold all or part of a tax refund and up to 15% of monthly Social Security benefits to pay back defaulted federal student loans.3(These federal “offsets” do not apply to private student loans, but private debt collectors may threaten to take such action.) Unlike some forms of loans, student debt is not dischargeable through standard bankruptcy proceedings.

2. Student Debt Payment Considerations

Federal student loans offer a variety of income-based repayment plans, but it’s important to make sure you are enrolled in the appropriate plan if your income changes, such as when you shift into retirement. Borrowers of Parent PLUS loans, designed specifically for parents, are eligible for a limited income-based repayment plan, but the student debt must be converted to a federal consolidation loan.

When making payments for a student who has multiple loans that have not been consolidated — for example, if you co-signed a loan for a student who has other loans under his or her name — make sure that your payments are being applied to the appropriate loan in order to preserve your own credit.

3. Think About Your Own Future

Although some older Americans still carry debt from their own education or a spouse’s education, almost three out of four student loan borrowers age 60 and older carry loans for children or grandchildren.4 Many parents feel a deep sense of responsibility to help put their children through college. But it’s also important to focus on your own financial future and maintain a consistent and realistic retirement strategy.

Sources:
1–2, 4) Consumer Financial Protection Bureau, 2017
3) U.S. Government Accountability Office, 2016

There are no scholarships to help pay for retirement.

I know you may have strong feelings about putting your children or grandchildren through college. But, there may be other solutions available to you. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. Contact me 1-833-313-7233.

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March 22nd, 2017 by

College graduates gain a serious edge in earning potential. Workers with a bachelor’s degree typically earn 77% more over their lifetimes than those with only a high school diploma.

While it may be true that new grads are rich in “human capital,” they are often low on funds when first entering the workforce. Here are two ways to start off on the right foot financially.

First Financial Steps for New Grads

Hold down your living expenses.

Housing, transportation, and food comprise the majority of spending for most people, so committing to high rent or car payments could kick off a constant struggle to make ends meet. Finding a cheaper place to live (possibly with roommates), settling for an older-model vehicle, or cooking more meals at home could free up money for fun activities that are important to you.

Plump up your cash cushion.

It’s important to build an emergency fund that would cover three to six months of living expenses. Begin by determining how much income you can afford to set aside and transfer that amount automatically from your paycheck to a separate account. Having access to a healthy savings account makes it less likely that you will resort to borrowing, and it also gives you the financial freedom to switch jobs or change your living situation if you so decide.

Source: The Wall Street Journal, May 7, 2015

Freeman Owen, Jr -Retirement Specialist

Retirement planning seems so far away when you’re a recent college graduate. But, the earlier you begin, the more you’ll save and the easier it will be! Let’s talk.

Meet me for a FREE retirement strategy consultation at my office at 1-833-313-7233. 

 

July 28th, 2016 by

More than nine out of ten parents believe it is important for students to learn about personal finance in school, and three out of four think there should be a finance requirement to graduate from high school. Even so, 72% express at least some reluctance when it comes to talking about finances at home.(1)

Certainly, learning about finance in school is important, but there are limitations. Forty-seven states include personal finance in their standards for K–12 education. Every state includes economics. However, state standards do not necessarily translate into class offerings or individual requirements.
Teach Your Kids About Money

Moreover, a new academic study of state programs suggests that financial education in school may not correlate directly with financial success. On the other hand, students who take more mathematics courses do seem to be more successful financially after they graduate. To put it simply, understanding financial concepts may not be that helpful unless you can do the math.(2)

1. Start with Saving.

Opening a savings account not only may help your child learn to save but also can be an introduction to banking. (Some banks allow teens to access their accounts through mobile apps.) Talk about saving for goals that require a financial commitment, such as a bike, car, college, and travel. Consider matching the funds your child saves for a worthy purpose.

2. Practice Budgeting.

If your child has income from an allowance or a job, help him or her develop and follow a budget. Teach your kids about money by giving older children responsibility to buy items such as special clothing and luxury items. It’s better to learn the consequences of overspending now than later in life.

3. Illustrate Interest.

Even young children can understand the idea of borrowing and returning the borrowed item. When children understand fractions and percents, it’s time to explain interest. Offer real-world examples, such as an auto loan or home mortgage. Teach your kids about money by using an online calculator and showing them how a payment schedule works.

4. Introduce Nest-Egg Dollars.

Your kids probably hear about the stock market, but even older teens may not understand what it is. Explain the concept of buying stock in a company and the idea of risk and reward. Teach your kids about money by using board games that can help bring learning to life.

5. Open Up.

You don’t want to worry your children. But research suggests that it’s better to discuss money on a practical level than to keep them completely in the dark(3). You might use a real-life situation to teach your kids about money. For example, you can teach about the decision to buy one product versus another. And, you can teach on the commitment to save for retirement.

Teach Your Kids About Money

Although it’s important to educate your children about financial matters, don’t overemphasize the importance of money. Explain that managing money is a necessary skill, but — as the saying goes — money can’t buy happiness.

Sources:
1) Forbes.com, June 8, 2015
2–3) The Wall Street Journal, February 2, 2015

July 21st, 2016 by

Economic Education
More states see the need for better economic education. Still, fewer than half of states have made financial education courses a requirement for high school students. In fact, in 2012 U.S. students scored below average for developed nations (OECD) in a test of financial literacy. This test was taken by 15-year-olds all around the world. Shockingly, more than one in six U.S. students failed to reach the baseline level of proficiency(1).

Hands On Economic Education For Kids

There is a program in Denver, CO that takes on the challenge of teaching 5th graders about money. Young Americans Center for Financial Education is on a mission to develop the financial literacy of young people through real-life experiences and hands-on programs. They purposefully design environments to enable youngsters to prosper in a free enterprise system.

Using constructed stores, utility companies, government offices, young 5th graders experience first hand how money and business work together. Also, Young Americans Center for Education offer a 21 years-and-younger bank. This is where children learn lessons about loans, certificates of deposits (CDs), savings accounts, checking accounts, debit cards, ATM cards and credit cards. Furthermore, they offer free classes and workshops.

Moreover, the economic education doesn’t end in just a classroom. Entrepreneurial kids can sell their  goods at the Young Americans YouthBiz Marketplace events after learning about taxes and accounting. What a great idea, don’t you think?

See more about what they do:

Young Americans Center For Education

What Can Parents Do?

Young Americans from all social backgrounds need to learn about money early. There isn’t enough of this kind of economic education in public schools. Yes, parents, you can help too. Begin by developing your child’s money knowledge at a young age. They desperately need money education to thrive in today’s complex global economy. You can make an effort to devote time at the dinner table or in the car to discuss financial concepts. Ultimately, it’s also a good idea to encourage your children to take economics or personal finance courses offered at school. They may not need it to graduate, but they will certainly need it in real life.

Source: 1) Council for Economic Education, 2016

March 14th, 2016 by

More student loan borrowers are expected to gain access to new federal programs designed to reduce monthly payments and lessen the wider economic toll of student debt.

The Revised Pay as You Earn (REPAYE) program will expand an existing income-based repayment program. It may be available to as many as 5 million Direct Loan borrowers (not Parent Direct PLUS Loan borrowers), without their having to demonstrate “financial hardship” and regardless of when they took out their Direct Loans.

Student Debt Relief
With this repayment plan, your monthly student loan payment would be 10% of your annual discretionary income. Discretionary income refers to what you earn above 150% of the federal poverty line ($17,655 in 2015). A borrower earning $40,000, for example, would make payments based on discretionary income of $22,345.

After 20 years of on-time payments, the remaining balance would be forgiven. If you borrowed money for graduate school, you must wait 25 years for forgiveness. Debt may be forgiven after 10 years for those in certain public-service jobs.

To qualify for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program, you must make 120 on-time payments on your Direct Loans (Direct Subsidized and Unsubsidized Loans, Stafford Loans, Direct PLUS Loans, and Direct Consolidation Loans). Only payments made after October 1, 2007, will qualify.

While making the 120 payments, you must be working full-time at a qualifying public-service organization, which may include federal, state, and local government entities such as the military, public safety and law enforcement, public education and libraries, public health and legal services, as well as tax-exempt, not-for-profit groups.

Source: The New York Times, August 14, 2015

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM

There is expert guidance available to you for your retirement planning goals.

Meet me for a FREE retirement strategy consultation at my office at 833-313-7233 | MD, VA & DC. 

 

September 10th, 2014 by

Costs of College

Will College Pay Off? High Costs Call for Smarter Choices

With the financial futures of college-bound students and supportive parents at stake, it may be more important than ever for families to make informed decisions.

The average total cost for one year at a four-year public college surpassed $18,000 in the 2013–2014 academic year, and charges rose to nearly $41,000 at private institutions (costs include tuition, fees, room, and board). A four-year undergraduate education can range from $100,000 to $200,000 per student, which means even affluent families might find it difficult to pay for their children’s college expenses without borrowing money and/or putting their own retirements at risk.1

As the price of college tuition has increased faster than incomes, students have been borrowing more to fill the gap.2 The total amount of U.S. student-loan debt reached $1.2 trillion in 2014, nearly three times the amount in 2004. In fact, about 70% of the class of 2014 graduated with student debt averaging $33,000, up from $18,600 in 2004.3

College loans are relatively easy for students and parents to obtain, but a growing number of defaults suggests that college debt is often more difficult to repay.4 A weak job market has resulted in an increasing number of underemployed graduates, a situation that can be especially tough for those who are mired in debt.5

Bang for the Buck

Soaring costs and diminishing rewards have left many people wondering whether college is worth the time and expense. Still, the earnings gap has continued to widen: Workers with four-year degrees earned nearly twice as much as those without degrees in 2013. According to one study, not going to college could cost someone about $500,000 in lost earnings over a lifetime.6

Life After Debt

When making college decisions, students often review college rankings and data indicating which schools or programs produce the highest-paid graduates. But they might also consider the surprising results of a recent Gallup poll.

Graduates of the top 100 universities (ranked by U.S. News & World Report) were no more likely to say they were thriving in five aspects of well-being than were graduates of other institutions. Only 4% of graduates with $20,000 to $40,000 of college debt said they were “thriving,” compared with 14% of those with no debt.8

One takeaway is that elite universities may not provide as many economic and career advantages as one might assume. In fact, where a person studies may matter less than having the opportunity to earn a degree without racking up a burdensome amount of student debt.

Sources:
1) The College Board, 2013
2) The Wall Street Journal, January 15, 2014
3–4) The Wall Street Journal, June 14, 2014
5, 7) Federal Reserve Bank of New York, 2014
6) The New York Times, May 27, 2014
8) Gallup, 2014

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM I want to help you KEEP your retirement money safe.  If you have a student planning to go to college or university, let’s review your payment strategy before you decide to use your retirement money like an ATM machine. Toll Free: 1-833-313-7233 | MD, VA & DC. 
July 25th, 2013 by

Baby boomers are easing into retirement, but some may find their golden years are haunted by student loan debt that could follow them until they die.

It’s not their children’s debt, however. It’s their own. Many boomers returned to graduate school during the recession to bolster their skills, reports the Chronicle of Higher Education. Student loan debt is actually growing fastest among people over 60, the report notes. More than 2 million Americans over 60 owe student loan debt, with the average balance standing at about $19,500, up from just under $11,000 in 2005, according to the Federal Reserve Bank of New York.

life_guide_retirementIn all, that amounts to $44 billion in student loan debt carried by people who often qualify for senior discounts. Older students have seen their debt loads mushroom not only because of rising tuition, but because they often take more time to complete a degree while juggling full-time jobs and family life. The bottom line, financial expert Mark Kantrowitz tells the publication, is that older students should avoid debt. “They should not borrow more than they can afford to repay in 10 years or by the time they retire, whichever comes first,” he said.

Source: msnmoney.com | april 16, 2013 | http://money.msn.com/now/post.aspx?post=6fe668fd-0119-4caa-8f4e-661a9da41a58

Retirement Readiness

Call Freeman Owen Jr For Retirement PlanningRetirement readiness is different for everyone. How ready are you to retire? Get my free resource “Thinking of Retirement” to determine your retirement readiness.

 

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June 13th, 2013 by

money lessons for your kidsIn a recent survey of American households, 61% of parents said they pay their children an allowance that averages about $15 a week or $780 per year. The allowance often rises with age, but 54% of parents said they began payments when a child turned age eight. About 48% of parents give more to school-age children who earn good grades — with payments for an “A” averaging $16.60.

Only 1% of parents reported that their children save any allowance money, despite the fact that mom and dad tend to cover many of their discretionary expenses.

Here are a few tips for parents who might prefer to tie an allowance to important money lessons:.

  • Clarify (and stick to) your conditions. You can help your children comprehend that money is earned by explaining why you are giving them an allowance, what tasks you expect them to do in return, and what actions will cause them to lose it.
  • Encourage kids to think about the future. Introduce some guidelines for saving. Suggest that children set aside a certain percentage each week for long-term goals (like a college education) and for shorter-term wants and needs. As an incentive, you might offer to match their savings dollars.
  • Talk about family money issues. Use time at the dinner table, and/or lengthy car trips, to discuss budget challenges and plan large purchases. This could help prepare your children to practice sound money management throughout their lifetimes.

Source: American Institute of Certified Public Accountants, 2012

life_guide_retirementBe informed about how to plan for your retirement. Sometimes, that means getting help from experts who specialize in retirement planning strategies. I have helped thousands of my clients plan for a successful retirement. I want that for you too! Download my free life-guide resource to start the planning process.

 

December 6th, 2012 by

planning for college chart

One study by a Washington, D.C., think-tank concluded that the long-term benefits of a four-year college degree are equivalent to a financial instrument with a 15.2% average annual return. In calculating the cost/return, researchers included typical college tuition and fees plus the wages that students often forego while attending classes. Room and board were not considered because people must eat and sleep whether they are in school or not.

Fortunately, researchers found that college graduates often begin to recover the costs right away. At age 22, the average college graduate earns about 70% more than the average worker with only a high school diploma. And at age 50, a college graduate earns roughly $46,000 more per year than someone with only a high school diploma.

life_guide_paying_for_collegeOf course, the up-front cost of a four-year degree is substantial (calculated at $102,000 for this study), so families may want to start saving as early as possible to help their kids pay for college.

Planning for your child’s college education should not conflict with your retirement goals. Planning early will prevent anxiety and stress. Use my free life guide “Paying For College” to help you with your planning.

Source:  CNNMoney, June 30, 2011

August 31st, 2012 by

Funding Higher Education with 529 Savings PlanParents generally don’t have to be convinced of the value of a college education for their children. Studies show that college graduates not only earn more but are healthier, more satisfied with their jobs, and more likely to remain employed during tough economic times.1 But paying for college becomes more challenging every year. Over the last decade, undergraduate in-state tuition and fees at four-year public colleges and universities rose at a 5.6% average annual rate above the rate of general inflation. For the 2011–12 academic year, the average cost of tuition, fees, room, and board reached $17,131.2 Private institutions are even more expensive, although their costs are rising at a somewhat slower pace. For the 2011–12 academic year, the average cost for tuition, fees, room, and board was $38,589 at nonprofit four-year colleges and universities.3

A Tax-Advantaged Savings Plan

As with saving for retirement, the key to saving for a college education is to develop a strategy and make regular contributions. One helpful savings vehicle is a Section 529 plan — a state-sponsored or college-sponsored program designed to help families save for future higher-education costs. Each plan has its own rules and restrictions, which can change at any time. The money in a 529 savings plan accumulates on a tax-deferred basis and can be withdrawn free of federal income tax as long as it is used for qualified education expenses at accredited post-secondary schools, such as colleges, universities, community colleges, and certain technical schools. Qualified expenses include tuition, fees, room and board, books, and other supplies. Section 529 plans feature high contribution limits (set by each state), and there are no income restrictions for donors.

As with other investments, there are generally fees and expenses associated with participation in a 529 savings plan.  Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents and taxpayers.

Source: (1–3) The College Board, 2010–2011

Call The Host of Radio ShowPlan to make good investments in your children’s education. Let me help you find the best strategies that give you the best tax benefit while achieving your goals. Contact me at 833-313-7233 for a free consultation.