Focusing on what you Can Control

Contributed by: Nick Defenthaler, CFP®

“Don’t stress about the stuff you can’t control, doing so will ruin the present.” Simple but powerful advice my dad gave me nearly a decade ago which has always stuck with me. Personally, I’ve always been a bit of a “worry wart.” Those words of wisdom, however, provided by my dad—that I probably already knew, but needed to hear from someone I loved and respected—have proven to dramatically reduce the things I lose sleep over because that I know deep down that I have virtually no control over them. As I had to remind myself of this recently, it made me think of a graphic J.P. Morgan put together that we often times share with clients:

Often times, the major area that we as investors become fixated on (and rightfully so!) are market returns. Ironically, this is an area, as the chart shows, we have no control over. The same goes for policies surrounding taxation, savings and benefits. As you can see, employment and longevity are things we do have some control over, by investing in our own human capital and our health. The areas that we have total control over—saving vs. spending, and asset allocation and location—are what we need to focus on, in my opinion. Consistent and prudent saving, living within (or ideally, below) your means, and maintaining a proper mix of stocks and bonds within your portfolio are what we try to have clients be laser focused on. Over the course of 31 years of helping clients achieve their financial goals, The Center has come to realize that those two areas are the largest contributors of a successful financial plan. 

With so many uncertainties in the world we live in today that can impact the market, it’s always a timely reminder to focus on the areas that we have control over and make sure we get those things right.  Chances are, if we do, the other things that we might be stressing over today, will potentially fall into place. If you need help focusing on the areas of your financial wellbeing in which you CAN control, give us a call! We’re always happy to help.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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Opinions expressed are those of Nick Defenthaler, and are not necessarily those of Raymond James. Investing involves risk and investors may incur a profit or a loss regardless of the strategy or strategies employed. Asset allocation does not ensure a profit or guarantee against loss.

Millennials Matter: To Rent or to Buy?

Contributed by: Melissa Parkins, CFP®

The infamous question – should I continue to rent or should I buy a house? The answer – it completely depends! The right answer for you will depend on a number of factors:

• How long you plan on living in the same location

• The prices of rent compared to buying in your location

• Costs such as maintenance and repairs, insurance, property taxes

• The inflation rate that rent will rise

See Matt’s blog for more considerations and details when contemplating buying a home. It is one of the largest financial decisions you will make in your life, and there are a lot of common misconceptions to also consider before pulling the trigger:

• Paying rent is the equivalent of throwing away money.

  • Either way, you have to pay to live somewhere, because of the way amortization schedules work, only a small portion of your monthly mortgage payments go towards building equity in your home (even smaller than you probably think!). Most of your monthly payments are going towards paying the bank interest, which can also be seen as throwing away money. Some say you are better off renting unless you plan on being in the home more than 5 years because of this reason. Plus there are added costs that come up when you own a home, like property taxes, insurance, maintenance, and repairs.

• You’re getting married. Time to buy a house together.

  • Give yourself time to get settled, decide on a location together, do you research, and especially, learn to manage your finances together before you jump right in to buying a home. There are enough changes going on at this point in your life, so don’t be in a rush to get in a house just because you think it is what you are expected to do next. Take the time to find a home you love that is in your price range and meets all of your other requirements. That being said, my fiancé and I bought our house together right before getting married, and it (hopefully?!) was the right decision for us.

• The real estate market is only getting more expensive. You must buy now.

  • You should really wait until the time is right for you, and not just buy because of the market. Do you have an adequate emergency fund saved? Have you saved to cover the down payment without depleting your emergency fund? Do you have other debts that should be paid off first? All of these factors should be worked out before you try and buy a home. When the time is finally right for you to buy, don’t fret…there will still be houses on the market!

• Buying a house is a good investment.

  • It takes years to build equity in a home. The market must cooperate. You will undoubtedly have costs coming up that detract from your “return.” Your primary home should not be looked at as an investment only.

So if you are looking to be a first-time homebuyer: take a step back, don’t be in a rush, and consider all of the factors. It is important to be sure that you are financially ready to buy a home, and if not, continuing to rent may be the best option for you for more reasons than one.

Melissa Parkins, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Opinions expressed are those of Melissa Parkins and are not necessarily those of Raymond James. Raymond James Financial Services, Inc. does not provide advice on mortgage issues. These matters should be discussed with the appropriate professional.

Millennials Matter: The Importance of a Budget

Contributed by: Melissa Parkins, CFP®

No one likes making a budget. It takes time to make, time to maintain, and it can provide some depressing information. All this considered, you still SHOULD make a budget! Actually, no matter your age or where you are in life, a budget is a critical piece to your financial plan. A financially successful future can depend on your actions today, and budgeting is an effective way to keep your actions in check.

Why budget:

A budget helps you best plan for your short term goals (like a vacation, or paying down student loans) and long term goals (like a home purchase, or a comfortable retirement). First you lay out your goals with specific amount and timeline, then you track your spending habits and monitor your progress, and before you know it, your dreams can become a reality! I know, easier said than done. But in all seriousness, a budget is one of the best ways to keep yourself accountable AND focused so that your goals can be met. It also forces you to realize your bad spending habits (the depressing part of any budget) and then work towards correcting them. First know what you earn and what you need to spend to live then determine how much you need to save to reach your goals. As you’ve heard many times before, don’t spend money that you don’t have! Especially if you already have unwanted debt (like student loans!). Even if you are currently comfortable with your income and spending each month, creating a budget is still helpful to identify unnecessary spending and redirect those funds to your priorities. I mean, do you really need to be spending $100 a month on lattes?! A budget will show you what little guilty pleasures actually add up to in the long run, and it may surprise you.

How to setup a budget:

Taking the time to start your budget is the hardest part.

• First, collect your paystubs and any other regular monthly income statements to determine the amount that comes in each month.

• Next, collect bank and credit card statements, and other monthly bills to figure out your fixed expenses, necessary expenses, and unnecessary spending.

• Compare multiple months of statements to determine on average how much you spend monthly.

• Break down your spending into categories (living expenses, household bills, debt payments, groceries, eating out, shopping, savings etc.).

• Analyze your spending categories to see which areas are your “bad habits” and you’d like to consciously make improvements.

• Review your goals and make sure you are appropriately saving for them.

Once you have done all this, you now have your bottom line, and it is just a matter of sticking to it. The way you go about maintaining and tracking your budget is a matter of personal opinion. Some prefer using an excel spreadsheet. Others find online tools such as Mint, Level Money, or You Need a Budget to be most helpful. There are also alternatives to the traditional budget like utilizing multiple checking/savings accounts at the bank to organize your spending and savings (opening different savings accounts and titling them for different goals like emergency fund, travel, etc. or having separate checking accounts for necessary spending and discretionary spending).

It doesn’t matter how you do it, you just need to find the way that works best for you. Creating and sticking to a budget involves discipline, and maybe some sacrifice at times, but it will break the bad habits and replace them with good spending and savings habits. At the end of the day, a budget can help you eliminate your debts and build your net worth quicker. If you have dreams of luxury purchases, traveling the world, paying down student loans quickly, or just having a happy retirement, you need a budget! It can help you reach your goals quicker and easier.

Melissa Parkins, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Melissa Parkins and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Qualified Charitable Distributions: Giving Money while saving it

Contributed by: Nick Defenthaler, CFP®

Late last year, the Qualified Charitable Distribution (QCD) from IRAs for those over the age of 70 ½ was permanently extended through the Protecting Americans from Tax Hikes (PATH) Act of 2015. Previously, the QCD was constantly being renewed at the 11th hour in late December, making it extremely difficult for clients and financial planners to properly plan throughout the year. If you’re over the age of 70 ½ and give to charity each year, the QCD could potentially make sense for you. 

QCD Refresher

The Qualified Charitable Distribution only applies if you’re at least 70 ½ years old. It essentially allows you to donate your entire Required Minimum Distribution (RMD) directly to a charity and avoid taxation on the dollars coming from your IRA. Normally, any distribution from an IRA is considered ordinary income from a tax perspective, however, by utilizing the QCD the distribution from the IRA is not considered taxable if the dollars go directly to a charity or 501(c)(3) organization.    

Let’s look at an example:

Sandy, let’s say, recently turned 70 ½ in July 2016 – this is the first year she has to take a Required Minimum Distribution (RMD) from her IRA which happens to be $25,000. Sandy is very charitably inclined and on average, gifts nearly $30,000/year to her church. Being that she does not really need the proceeds from her RMD, but has to take it out of her IRA this year, she can have the $25,000 directly transferred to her church either by check or electronic deposit. She would then avoid paying tax on the distribution. Since Sandy is in the 28% tax bracket, this will save her approximately $7,000 in federal taxes!

Rules to Consider

As with any strategy such as the QCD, there are rules and nuances that are important to keep in mind to ensure proper execution:

• Only distributions from a Traditional IRA are permitted for the QCD.

• Employer plans such as a 401k, 403b, Simple IRA or SEP-IRA do not allow for the QCD

• The QCD is permitted within a Roth IRA but this would not make sense from a tax perspective being that Roth IRA withdrawals are tax-free by age 70 ½ *

• Must be 70 ½ at the time the QCD is processed.

• The funds from the QCD must go directly to the charity – the funds cannot go to you as the client first and then out to the charity.

• The amount you can give to charity through the QCD is limited to the amount of your RMD.

• The most you can give to charity through the QCD in a given year is $100,000, even if one’s RMD exceeds that amount.

The QCD can be a powerful way to achieve one’s philanthropic goals while also being tax-efficient. The amount of money saved from being intentional with how you gift funds to charity can potentially keep more money in your pocket, which ultimately means there’s more to give to the organizations you are passionate about. Later this month, we will be hosting an educational webinar on philanthropic giving – click here to learn more and register, we hope to “see” you there!

Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Any opinions are those of Nick Defenthaler and are not necessarily those of Raymond James. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Recent Mortgage Rate Decline may offer Financial Opportunities

Contributed by: Nick Defenthaler, CFP®

Over the past month, interest rates on mortgages have declined significantly, posing the question to many clients if it would make sense for them to refinance or potentially accelerate a new home purchase that they may have been considering. Many factors cause mortgage rates to decline, but the most recent cause can primarily be attributed to the UK leaving the European Union, dubbed “Brexit” (click here  to read our recent blog on this topic and don’t forget to check out our investment focused webinar as well on 7/28!). Typically, when there is a surprise in the markets or volatility spikes, there is a “flight to safety” by investors and bonds are purchased. Bonds are a bit tricky at times to understand in the sense that when bond prices rise, interest rates usually fall. This “flight to safety” caused the yield on the 10-year Treasury bond to hit an all-time low of 1.36% on July 5th. Mortgage rates typically have a direct correlation to the 10-year Treasury bond yield so when you see those rates decline, usually mortgage rates will follow suit. 

Here are some items to consider if you’re thinking of taking advantage of these once again, historically low mortgage rates:

• How long do you plan on staying in your home? There is usually a cost to refinancing and we’ve found that you typically need to live in your home for at least two to three years after the refinance to justify the fees lenders will charge.

• Lowering the payment isn’t always the best option – consider reducing the term on the loan even if it means the payment will slightly increase. Being mortgage free in retirement is a beautiful thing!

• If you have an outstanding second mortgage or home equity line of credit, consider combining them into one loan with a fixed interest rate.

• If you have an adjustable rate mortgage (ARM), now could be a great time to move to a fixed rate to avoid payment fluctuations in the future.

• Consider a modest cash-out refinance to pay down high interest rate loans or use as a low interest rate option to fund higher education costs.

• Don’t make an impulse home purchase just because mortgage rates have declined – the cost of rushing into a major decision like buying a home can cost you far more than the savings you’d see by having a very low mortgage rate.

As with any major financial decision, such as a refinancing or a new home purchase, we encourage all of our clients to reach out to us before making a final decision so we can ensure it is in their best interest for their own personal situation. Please don’t hesitate to reach out if you’d like to talk through your options and see if changing your mortgage rate or term aligns with your overall financial plan and goals. 

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. . Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investments mentioned may not be suitable for all investors. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Webinar in Review: Taking Control of your Student Loans

Contributed by: Clare Lilek

If you or a loved one has student loans, then you know it’s easy to feel overwhelmed at times. According to The Institute of College Access & Success, 70% of undergraduates have student loan debt of $35,000 on average upon graduating. Moreover, these numbers and percentages increase with degree level. With increasing numbers of Americans with student loan debt and the fact that managing multiple loans of various types and interest rates can cause confusion, Melissa Parkins, CFP®, and Kali Hassinger, CFP®, hosted a webinar on the subject in order to provide some clarity.

First, it’s important to determine whether you have federal or private loans; there are various sub-categories of loan types for federal loans. The majority of loans you will come in contact with are federal loans and they tend to have fixed-interest rates and the possibility of flexible repayment plans. Private loans tend to have less flexible repayment plans and interest rates are determined by credit scores.

Federal loans tend to be considered the preferred type of loan. They offer flexible repayment plans, varied interest rates, loan consolidation options, and the possibility of loan forgiveness (note on loan forgiveness: if you still owe money at the end of your federal loan period, the government will forgive that loan but the remainder will be taxed as income that year). Private loans, however, tend to be more straight forward since there is a standard repayment plan that is not based on your income.

One big tip Melissa and Kali offered is first getting organized with your loans. Create a list that outlines the type of loan, the lender, interest rates, and the term. (For help with creating this inventory check out Melissa’s latest blog on the subject.) They also offered a helpful flow chart for deciding whether or not you should refinance your federal loans:

Taken from Social Financial, Inc

At the end of the webinar, Melissa and Kali went over an in depth case study looking at specific examples of loans and potential refinancing options to save you money and to pay back your loans at a faster rate. Listening to this case study can provide more clarity on how creating a loan inventory may help you save money in the long run.

If you have questions regarding your own student loans, listen to the webinar and see if any of the information applies to you. As always, feel free to reach out to your financial planner or Melissa and Kali for any remaining follow up questions or to talk about your specific situation.

Clare Lilek is a Challenge Detroit Fellow / Client Service Associate at Center for Financial Planning, Inc.

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of and Clare Lilek, Melissa Parkins and Kali Hassinger not necessarily those of Raymond James. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Your Early Retirement and Your Aging Parents

Contributed by: Sandra Adams, CFP®

Last month, I wrote about how caring for aging parents can be a roadblock to planning for your retirement, particularly if you don’t have an aging plan in place for your parents. Well, let’s assume you successfully make your way to retirement. You’ve made it to the promised-land and are ready to do all of those things you’ve dreamed of doing for years…travel, spend more time with the kids and grandkids, and explore those hobbies you haven’t had time to enjoy.

And then…bam! Your parents are now older and in need of your assistance, just in time! On the one hand, it is perfect – you no longer have the stress of needing to balance work with the stress of caregiving, and you can give them your undivided time and attention. But on the other hand, this is now your time…the time you’ve waited years to enjoy…not to spend tied to someone else’s schedule and needs. For many retired couples, they are the primary caregivers for not one, but multiple sets of aging parents, which only adds to the stress (not to mention the marital tension!). Many are worried that their retirement will be spent caring for aging parents; or that by the time the caregiving is done, they will need a caregiver themselves!

So what can you do to ease the family stress and give your retirement a needed boost?

• Make sure that you and your family have planning conversations about the care for your aging parent and that you have a Family Care Agreement in place outlining everyone’s roles and responsibilities.

• Consider having professional resources that you can use, when and if needed, to give family members breaks (i.e. Home Care Agencies, Geriatric Care Managers and Professional Physicians that can serve as advocates in your absence, paid companions and drivers, etc.).

• Look into Respite Care Centers where your aging parent can stay for a short period of time and be safe and well cared for while you are away (if they are unable to stay alone).

Again, if possible, planning ahead is always critical. Knowing the available resources (and then actually using them) is an important part of the process. Caring for your loved ones yourself and being their personal advocate is something people take very seriously. But taking care of you, including taking some time off and tending to other personal relationships, is the key to a happy and healthy life. So, I strongly advocate for families sharing responsibilities and/or taking advantage of professional advocates like Geriatric Care Managers or Professional Physicians that serve as advocates so that they can take time off from full time caregiving. Taking advantage of such resources can allow for better quality personal lives and better quality time and caregiving with your aging parent in the long run.

If you have questions or wish to discuss this type of planning in greater detail, do not hesitate to contact me.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Any opinions are those of Sandra Adams and not necessarily those of Raymond James. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Are your Medicare Premiums about to Increase?

Contributed by: Nick Defenthaler, CFP®

If you’re like most, chances are you have not heard of what’s known as the “hold harmless” provision set forth under the Social Security Act. To keep things simple, this provision is essentially in place to protect the majority of those on Medicare from seeing jumps in Part B premiums when Social Security benefits do not increase through cost-of-living adjustments (COLA). 

For the second year in a row, due to low inflation, the hold harmless provision is coming into play. This year, there was no COLA for those receiving Social Security and 2017 is projected to only see a minuscule 0.2% bump in benefits. If you’re single and have an adjusted gross income (AGI) below $85,000 or are married and have an AGI below $170,000, your Medicare Part B premiums will not increase – you are part of the group whom the hold harmless provision protects (approximately 70% of those on Medicare). For those with income higher than the thresholds mentioned above, however, (which is approximately 30% of those on Medicare), you will more than likely see yet another increase in your Medicare Part B premiums in 2017 that is currently projected to be approximately 22%.    

It’s also important to note that those who are “sheltered” under the hold harmless provision (AGI below $85,000 for single filers, AGI below $170,000 for married filers) are only those who are currently receiving Social Security benefits. For example, if you’re 66 years old, receiving Social Security benefits and enrolled in Medicare, you will not see a jump in your Part B premium. If you’re currently age 64 but plan on delaying Social Security benefits until age 70, however, there is a very high probability that when you begin Medicare at age 65, your Part B premiums will be higher than they are for current enrollees. 

As mentioned previously, the same situation occurred last year and the actual increases in Medicare Part B premiums ended up being much less than what was initially projected (here’s a link to when I covered the topic last year). In October, we will be hosting a webinar on Medicare and we’re hoping to have more clarity on any potential premium increases at that time. Keep your eyes open for more information surrounding this topic and our October webinar! As always, if you have questions before then, please contact us.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James. These hypothetical examples are for illustration purposes only. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Millennials Matter: Student Loans

Contributed by: Melissa Parkins, CFP®

The average 2016 college graduate will have just over $37,000 in student loan debt upon completing their undergraduate degree. If it is a graduate degree they have just earned, the average debt is almost $60,000. When it comes to more specialized degrees such as a master’s degrees, law degrees, or medical degrees, the number dramatically increases (up to $250,000!). These numbers are up 6% from last year. Clearly the questions about student loan debt are not going away. This is a complex topic to understand, and it has big impact on people’s financial situations. Loans are taking longer to pay off and thus more interest is being paid, making them more and more expensive to have. That’s why it is important to understand student loans and know your potential options so you can create an efficient plan for paying them off.

Determine Your Goal

For most, your goal is going to be to minimize the cost of your student loans and pay them off as quickly as possible. However, some may have a goal to maximize federal loan forgiveness if they will qualify. Others may have a goal to free up current cash flow and thus need to find a way to lower monthly payments. Whatever your overall goal is for your student loans, you will need to first get yourself organized, and then create a plan to help get you there.

Make a Student Loan Inventory

Whether you are planning on making changes to your loans or not, it is important to first build an inventory of all of your student loans to keep yourself organized. Your inventory should include information on each individual loan like your current balance, monthly payment, interest rate, remaining term, loan servicer, if it’s private or federal, and if federal, what type of loan and what repayment plan you’ve selected.

• For your federal loans, you can utilize the National Student Loan Data System to get all of the necessary information. You will need to create a login if you don’t already have one. Once you are logged in, you can access information regarding all of your federal loans.

• For private loans, there is not one single resource that you can use to collect information like the NSLDS for federal loans. Instead, you will need to contact each of your private lenders to obtain the details of your loan and/or request a copy of the Promissory NOTE: If you are unsure who all your lenders are or you just want to double check that you have        accounted for all of your loans, you can actually use your credit report to find out. If you didn’t already know, you can download a copy of your credit report from annualcreditreport.com at no cost once a year with each of the 3 credit bureaus. All of your student loans – federal and private – will show up on your credit report. You can then compare the loans from your credit report to the loans on your NSLDS inventory to determine what private loans are currently outstanding.

Know Your Options

You know your goal and you have an inventory of all your student loans with the important details. Now you need to consider what changes to make in order to most efficiently meet your goal.

• Federal loans have many different repayment plans that you can choose from, including a few that are based on your current income level. The repayment plans that you are eligible for depend on what type of federal loan you have and when it was taken out. You can switch between repayment plans whenever you want, but you should thoroughly review your situation before doing so because it is not the most straight-forward process and changing plans can impact your loans in some instances. Depending on your goal, however, switching repayment plans may be in your best interest.

• Consolidating federal loans will give you a single monthly payment and access to additional repayment plans in some instances. The interest rate on a new consolidation loan is a weighted average of the loans that were consolidated (your interest rate is not lowered). At consolidation, you can select a new term or length of the loan, as well as a new repayment plan option. Consolidating helps to simplify your federal loans and your payments, and it is also a way to restructure your federal loans to be more suited for your personal situation.

• Refinancing is something you have probably heard about. It can be a great way to restructure your current loans in a way that is more efficient and better suited to your current financial picture. In many cases, you can get a lower interest rate which can help save significant dollars over the term of your loan. The rate you are approved for is based on your credit score, so the better your credit score, the better interest rate you will qualify for. You can refinance both private and federal loans, but before refinancing federal loans, you need to understand that you are giving up some benefits of federal loans (such as flexible repayment plans, loan forgiveness, and sometimes forbearance protection). Before refinancing, do you research, and look at multiple lenders to compare and find the best deal for your personal situation.

Student loans are very complex.  It makes sense to work with a financial planner to help you sort through your options -- we are here to help!  Contact us anytime if you would like us to take a look at your personal situation. Also, Join Kali Hassinger and me next week, Thursday, for our webinar “Taking Control of Your Student Loans.” We will be providing more in depth information on types of student loans and their certain characteristics, a few resources to help you organize your loans, and some options that could help you handle your loans more efficiently. We will also be walking you through a case study to show what this all looks like in real life and how getting yourself organized and considering different options could help you pay off your loans quicker and more efficiently! 

Melissa Parkins, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.

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This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Melissa Parkins and are not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any outside website or the collection or use of information regarding any website's users and/or members.

Social Security Survivor’s Benefits

Contributed by: James Smiertka

We’d all like to think that we can all count on receiving Social Security benefits during our lifetimes if we work and reach retirement. But in the case that the unforeseen happens, it is important to know how Social Security benefits can affect our survivors. When someone dies who has worked and paid Social Security taxes over their lifetime, certain family members may be eligible for survivor benefits.

Per the Social Security Administration, there are approximately 5 million widows/widowers receiving Social Security benefits based on their deceased spouse’s earnings record. This can be a very important part of a survivor’s overall income.  

What are the benefits that a deceased’s surviving family members might be eligible for?

• A widow/widower can receive a reduced benefit as early as age 60 or full benefits at their full retirement age (FRA). At FRA, they would receive their full benefit, but if they applied between age 60 and FRA they would receive an amount that equals between 71.5% and 99% of their benefit. Divorced surviving spouses are also eligible if the marriage lasted 10 or more years and they did not remarry before age 60 (age 50 if disabled).

• A widow/widower can begin be benefits as early as age 50 if he/she is disabled with the disability starting before or within seven years of the deceased spouse’s death. In addition, if the widow/widower gets remarried after age 60 it will not affect their eligibility (again, age 50 if disabled).

• Surviving spouses and ex-spouses caring for a child, or children, of the deceased spouse (with the child being under age 16 or disabled) are eligible to receive 75% of the deceased spouse’s benefit at any age.  Note:  A survivor benefit is treated the same in regards to the earnings test with the benefit being reduced based on any earnings if the recipient is under FRA. Check out the blog I wrote previously on the earnings test for more information.

• Surviving unmarried children & dependent parents can also receive survivor benefits depending on the circumstances. Keep in mind that the aggregate amount that a family receives in survivor benefits is limited to around 150% to 180% of the deceased worker’s benefit. Here is a breakdown of the amount of benefits survivors may receive:

  • Widow or widower, FRA or older: 100 percent of the deceased worker's benefit amount

  • Widow or widower, age 60 to FRA: 71½ to 99 percent of the deceased worker's basic amount

  • Disabled widow or widower aged 50 through 59: 71½ percent

  • Widow or widower, any age, caring for a child under age 16: 75 percent.

  •  A child under age 18 (19 if still in elementary or secondary school) or disabled:  75 percent.

  • Dependent parent(s) of the deceased worker, age 62 or older:

  • One surviving parent: 82½ percent.

  • Two surviving parents: 75 percent to each parent.

How this information could affect you: If your survivor’s benefit is more than your own benefit, it may make sense to receive this benefit at age 60, as the Social Security Administration states that “survivor benefits based on age will be about the same total amount over a lifetime.” If your own benefit will be greater you are able to switch to your own benefit at age 62 to 70. Additionally, in some cases it can make sense for the spouse with the higher benefit to suspend/grow their benefit until age 70 (depending on age & life expectancy of both spouses) in order to provide a larger survivor benefit to the potential surviving spouse. Even after many lost the ability to file & suspend with the recent Social Security law change, there are still strategies & items to be aware of that can help you be most efficient with your plan. As always, contact your financial planner with any questions or concerns.

James Smiertka is a Client Service Associate at Center for Financial Planning, Inc.

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