3 Helpful Student Loan Tips for Recent Graduates

University Graduates

Graduating college is not only a huge milestone in one’s life, but a moment that is filled with eager excitement for what’s to come next. While life is full of surprises, especially after school, one thing is for certain if you’ve borrowed money for your education- your loans will become a big part of your life until they are resolved.

With tuition costs rising every year, students are often forced to adapt a “college by any means necessary” approach to their secondary education; and we aren’t even including additional expenses for books, rent, parking, and meals! This causes a mad rush to secure financial assistance, sometimes to the detriment of fully understanding the small print in loan agreements and interest rate explanations.

Experts suggest that you try to keep your post college debt under your realistic first year salary expectation. While that’s a first step, there’s much more to solving the puzzle that is student loans. Here are a few more helpful tips to assist you in obtaining post collegiate financial freedom by quickly repaying your loans.

  1. Know Your Loans and Their Grace Periods– It is pivotal to start your repayment process on the right foot with extreme organization, so be sure to keep track of the lender, balance, and progression/status for each of your student loans. Take advantage of a site like nslds.ed.gov, where you can log in to see this pertinent information for all of your federal loans; check your original agreement or most recent billing statement for this information pertaining to any private loans you may have. Since different loans have different grace periods (how long you can wait after leaving school before you have to make your first payment), you should consult these varying deadlines to come up with a proper plan of attack for your first repayments.
  2. Pay Off Your Most Expensive Loans First– If you are able to put together more money than expected and are considering paying off a loan ahead of schedule, be sure to start with the one that has the highest interest rate. Eliminating the amount of time that these loans remain outstanding will be a huge help in stopping any further debt through interest. Furthermore, if you have private loans, start repaying them before your federal government ones; private loans typically have a much higher interest rate attached to them and often don’t offer the same flexible repayment options federal ones do.
  3. Always Make Your Payments– While repaying your loans is far from an easy thing, it is unfortunately often a necessary evil of post graduate life. If you are foolish enough to try and ignore them, however, you can crush your financial future with serious consequences that can last a lifetime. If you don’t pay off your loans, your account can go into delinquency and eventually default. Delinquency looks bad enough on any credit report, but defaulting is far worse. When you default, your credit score not only plummets, your total loan balance also becomes due; the government can even garnish your wages and take your tax refunds if it was a federal loan that was defaulted on. Defaulting on a private loan, on the other hand, is not only often easier to do if you aren’t careful, but can also put anyone who co-signed for the loan in financial danger too. Don’t be a fool- if you get in financial trouble DO NOT just ignore your loans. Talk to your lending bank representative right away and explore your options before it is too late!

 

 

Changing Jobs? Take Your 401(k) and Roll It

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If you’ve lost your job, or are changing jobs, you may be wondering what to do with your 401(k) plan account. It’s important to understand your options.

What will I be entitled to?

If you leave your job (voluntarily or involuntarily), you’ll be entitled to a distribution of your vested balance. Your vested balance always includes your own contributions (pretax, after-tax, and Roth) and typically any investment earnings on those amounts. It also includes employer contributions (and earnings) that have satisfied your plan’s vesting schedule.

In general, you must be 100% vested in your employer’s contributions after 3 years of service (“cliff vesting”), or you must vest gradually, 20% per year until you’re fully vested after 6 years (“graded vesting”). Plans can have faster vesting schedules, and some even have 100% immediate vesting. You’ll also be 100% vested once you’ve reached your plan’s normal retirement age.

It’s important for you to understand how your particular plan’s vesting schedule works, because you’ll forfeit any employer contributions that haven’t vested by the time you leave your job. Your summary plan description (SPD) will spell out how the vesting schedule for your particular plan works. If you don’t have one, ask your plan administrator for it. If you’re on the cusp of vesting, it may make sense to wait a bit before leaving, if you have that luxury.

Don’t spend it, roll it!

While this pool of dollars may look attractive, don’t spend it unless you absolutely need to. If you take a distribution you’ll be taxed, at ordinary income tax rates, on the entire value of your account except for any after-tax or Roth 401(k) contributions you’ve made. And, if you’re not yet age 55, an additional 10% penalty may apply to the taxable portion of your payout. (Special rules may apply if you receive a lump-sum distribution and you were born before 1936, or if the lump-sum includes employer stock.)

If your vested balance is more than $5,000, you can leave your money in your employer’s plan until you reach normal retirement age. But your employer must also allow you to make a direct rollover to an IRA or to another employer’s 401(k) plan. As the name suggests, in a direct rollover the money passes directly from your 401(k) plan account to the IRA or other plan. This is preferable to a “60-day rollover,” where you get the check and then roll the money over yourself, because your employer has to withhold 20% of the taxable portion of a 60-day rollover. You can still roll over the entire amount of your distribution, but you’ll need to come up with the 20% that’s been  withheld until you recapture that amount when you file your income tax return.

Should I roll over to my new employer’s 401(k) plan or to an IRA?

Assuming both options are available to you, there’s no right or wrong answer to this question. There are strong arguments to be made on both sides. You need to weigh all of the factors, and make a decision based on your own needs and priorities. It’s best to have a professional assist you with this, since the decision you make may have significant consequences–both now and in the future.

Reasons to roll over to an IRA:

• You generally have more investment choices with an IRA than with an employer’s 401(k) plan. You typically may freely move your money around to the various investments offered by your IRA trustee, and you may divide up your balance among as many of those investments as you want. By contrast, employer-sponsored plans typically give you a limited menu of investments (usually mutual funds) from which to choose.
• You can freely allocate your IRA dollars among different IRA trustees/custodians. There’s no limit on how many direct, trustee-to-trustee IRA transfers you can do in a year. This gives you flexibility to change trustees often if you are dissatisfied with investment performance or customer service. It can also allow you to have IRA accounts with more than one institution for added diversification. With an employer’s plan, you can’t move the funds to a different trustee unless you leave your job and roll over the funds.
• An IRA may give you more flexibility with distributions. Your distribution options in a 401(k) plan depend on the terms of that particular plan, and your options may be limited. However, with an IRA, the timing and amount of distributions is generally at your discretion (until you reach age 70½ and must start taking required minimum distributions in the case of a traditional IRA).
• You can roll over (essentially “convert”) your 401(k) plan distribution to a Roth IRA. You’ll generally have to pay taxes on the amount you roll over (minus any after-tax contributions you’ve made), but any qualified distributions from the Roth IRA in the future will be tax free.

Reasons to roll over to your new employer’s 401(k) plan:

• Many employer-sponsored plans have loan provisions. If you roll over your retirement funds to a new employer’s plan that permits loans, you may be able to borrow up to 50% of the amount you roll over if you need the money. You can’t borrow from an IRA–you can only access the money in an IRA by taking a distribution, which may be subject to income tax and penalties. (You can, however, give yourself a short-term loan from an IRA by taking a distribution, and then rolling the dollars back to an IRA within 60 days.)
• A rollover to your new employer’s 401(k) plan may provide greater creditor protection than a rollover to an IRA. Most 401(k) plans receive unlimited protection from your creditors under federal law. Your creditors (with certain exceptions) cannot attach your plan funds to satisfy any of your debts and obligations, regardless of whether you’ve declared bankruptcy. In contrast, any amounts you roll over to a traditional or Roth IRA are generally protected under federal law only if you declare bankruptcy. Any creditor protection your IRA may receive in cases outside of bankruptcy will generally depend on the laws of your particular state. If you are concerned about asset protection,
be sure to seek the assistance of a qualified professional.
• You may be able to postpone required minimum distributions. For traditional IRAs, these distributions must begin by April 1 following the year you reach age 70½. However, if you work past that age and are still participating in your employer’s 401(k) plan, you can delay your first distribution from that plan until April 1 following the year of your retirement. (You also must own no more than 5% of the company.)
• If your distribution includes Roth 401(k) contributions and earnings, you can roll those amounts over to either a Roth IRA or your new employer’s Roth 401(k) plan (if it accepts rollovers). If you roll the funds over to a Roth IRA, the Roth IRA holding period will determine when you can begin receiving tax-free qualified distributions from the IRA. So if you’re establishing a Roth IRA for the first time, your Roth 401(k) dollars will be subject to a brand new 5-year holding period. On the other hand, if you roll the dollars over to your new employer’s Roth 401 (k) plan, your existing 5-year holding period will carry over to the new plan. This may enable you to receive tax-free qualified distributions sooner.

When evaluating whether to initiate a rollover always be sure to (1) ask about possible surrender charges that may be imposed by your employer plan, or new surrender charges that your IRA may impose, (2) compare investment fees and expenses charged by your IRA (and investment funds) with those charged by your employer plan (if any), and (3) understand any accumulated rights or guarantees that you may be giving up by transferring funds out of your employer plan.

What about outstanding plan loans?

In general, if you have an outstanding plan loan, you’ll need to pay it back, or the outstanding balance will be taxed as if it had been distributed to you in cash. If you can’t pay the loan back before you leave, you’ll still have 60 days to roll over the amount that’s been treated as a distribution to your IRA. Of course, you’ll need to come up with the dollars from other sources.

 

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IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. NASA Federal Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

New Feature of eBranch Online Banking Provides Free Access to FICO® Scores

UPPER MARLBORO, Maryland, June 2 2016—Committed to offering the very best in banking convenience, NASA Federal Credit Union today announced they are providing to their members free online access to their FICO® Scores, the top factors impacting their scores, and comprehensive credit education. The scores, which will be updated monthly, will be available to members through smarter, easier, faster eBranch, the credit union’s recently upgraded online banking service.

“We are very pleased to begin offering this benefit to our membership,” said Douglas Allman, President and CEO. “By educating members and increasing their awareness of their FICO® Scores, the Credit Union will be providing a valuable program to help members better understand their financial health and ultimately achieve a brighter financial future.”

FICO® Scores are used by more than 90 percent of U.S. lenders to quickly assess your credit risk, and can influence terms and rates consumers pay on car loans, mortgages, credit cards and other forms of credit.

To learn more about FICO® Score through eBranch and how it works, visit https://www.nasafcu.com/fico.

Building a Financial Emergency Kit for Your Family

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What would a sudden financial emergency be in your life? It could be a storm causing massive property damage to your home. It could also be something more personal, like an accident that would cut off your ability to make a living.

Whatever it is, if someone else had to step in to help you in an emergency situation, it’s important to have a plan in place so they know what to do.

A financial emergency kit is a crucial component in financial planning. In short, a financial emergency kit involves identifying and planning for potential financial emergencies that could affect you and your loved ones. Building a successful one goes beyond sorting paperwork – it involves looking at a variety of potential situations in your life and then asking, “What’s the worst that could happen?”

You will want to create a kit – a set of physical or digital documents and instructions – that can help you or someone else you trust manage in a crisis. Here are some items you’ll likely want to include:

1. Estate documents. Estate planning is really the highest form of financial emergency planning, because it addresses the ultimate personal financial emergencies – medical incapacitation or death. Would your family have easy access to this material if something happened to you? In your family financial emergency kit, estate documents would include copies of current wills (for you and your spouse or partner), your advanced directives (which instruct doctors on end-of-life or other stages in medical care), health/financial powers of attorney (which designate specific individuals to step in to manage your money or healthcare if you cannot do so) as well as other documents that provide additional guidance for operating businesses and managing and distributing other assets you have. Make sure these documents are always current and that contact information is included for all the qualified experts you used to prepare them – estate or business attorneys, tax professionals and financial planners.

2. Insurance policies. Being able to find home and auto policies in a natural disaster is a no-brainer, but it’s important to think a little more broadly. File as much policy and contact detail as you can for any health, disability, business, life and accident coverage you have – and remember that it’s particularly important to note or file documentation on this coverage at work, too. Sometimes we sign up rather blindly for work-based benefits only to realize how important they may be in a financial emergency.

3. Tax materials. If a family member dies or becomes incapacitated, tax matters still need to be attended to. If you work with a tax professional, make sure their contact information is in the digital or physical kit (see indexes, contacts and guides, below), but it’s also important to keep past returns and relevant supporting data based on your individual tax situation.

4. Investment, savings and retirement documents. If you work with a qualified financial planner or tax expert, you may have access to a particular system that lists and track this information in an organized way that many of us don’t have at home. However you plan and track your investments, it should be included in your kit.

5. Indexes, contact sheets and guides. Some people need a little guidance, others need a lot. A family financial emergency kit needs to be usable by all designated family members. Put yourself in the role of a friend or family member who’s been called in to help you in a crisis. If you had to step in to settle an estate, healthcare or disaster emergency for a friend or family member and they weren’t around to advise you, what information would you need to get started? In any category of information you include in a financial emergency kit, include a separate file or digital instruction that details people to call, account numbers if necessary, relevant online and physical addresses and other key data to advise that person about what’s in front of them and what they should do. If you work with qualified financial experts, make sure their contact information is included.

6. Easy access to essentials under lock and key. If you’re away from home when damage occurs or if family members need to access vehicles or other spaces, make sure you have keys and access codes locked safely in your emergency kit. You will also want to ensure that your emergency contacts have the necessary access to your emergency kit in order to retrieve these materials. You or loved ones might also need access to funds, particularly cash in an emergency. If you don’t have a bank account established strictly for emergencies that allows specific family members to write checks or make cash withdrawals, you should consider it.

Bottom line: Building a financial emergency kit requires some thinking, but it can help you avoid major losses and speed up decision making in a crisis. Work with people you trust to make it accessible and useful to your family and trusted individuals.

 

By Nathaniel Sillin

Craigslist Scammers May Steal Your Home Out From Under You

Two men carry chest of drawers onto a moving van

Craigslist is a great way to find cheap stuff. Unfortunately, you have to use caution when taking advantage of the deals. There are three scams circulating now that can cost you a lot of money if you fall victim. In this article, we will discuss hiring people to help you move your belongings.

In this scam, a family in Georgia found a bargain moving company on Craigslist that consisted of two “guys” and one of those do-it-yourself moving trucks. The family was somewhat suspect and tried to be cautious. They were planning to follow the truck to their new house. Unfortunately, once they hit the freeway the “movers” were gone and took all their belongings with them, plus the cash the family paid.

When hunting on websites such as Craigslist, eBay, or other such sites, use extra caution. Don’t provide personal information and don’t pay for a service until the service has been completed to your satisfaction. If the person on the other end of the phone won’t take a check or credit card, perhaps you want to go to the next one. And if they ask for payment in the form of wire transfer or gift cards, they could be trying to scam you.

Always do some extra research on companies before hiring them or providing information and try to stick with reputable and well-known companies. Ask them a lot of questions and if you don’t get satisfactory answers, skip them.

Look for reviews on reputable websites and make sure there are more than a few of them and that they are not all glowing. No matter how good services or products are there are usually a few negative points people make in their reviews, even if they rate them highly. Check to see if they have a Better Business Bureau rating or other rating from a similar agency. Sometimes a simple search in the browser will come up with information for you to consider before hiring any service provider.

If there is any hint of something suspicious, it is probably your sixth sense telling you something. Listen to it.

For this family, there is some good news. It appears the thieves only wanted valuable physical goods they could sell. A box that had important documents in it was found and the documents were still there. Unfortunately, the iPads and mobile phones packed inside with them were not. The estimated loss for these poor people was $75,000.

© Copyright 2016 Stickley on Security

2 Important Things to Consider Before You Buy Your Vacation Home

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For many of us, the “American Dream” typically includes a combination of personal and professional success coupled with a slew of expensive possessions like cars, boats, and of course- the ever popular, always desirable vacation home. Think about it. Every time you are on vacation it just creeps into your mind, “we should do this for a month every year” or “wouldn’t it be nice to own some property here?”

Well if you are ever lucky enough to actually be in the position to seriously consider these thoughts, there are a few things you’ll want to work on beforehand. If you don’t plan out the purchase of a vacation home properly, it can not only evaporate your bank account, but bring along nasty tax and credit implications too. Therefore, here are two things that experts suggest you must prioritize before you can realistically purchase your vacation home:

  1. Plan to Rent, Rent, and Rent Some More!– One of the first questions you need to ask yourself is- “how often am I actually going to be able to get here every year?” Since most of us don’t have the luxury to make a vacation home a weekly or monthly getaway, you’ll want to strongly consider establishing the home as a rental property. Maintaining a house that no one is living in can be expensive, and coupled with a second mortgage and additional utilities payments, why not have renters pick up some of the tab throughout the year? There’s two ways to look at it from a schedule standpoint- you can either pick the big weekends (i.e. 4th of July/Memorial and Labor Day for a beach house) for yourselves and then rent out the rest of the season; or truly capitalize on the high tourism during those dates with a raised rental cost, which would then allow you to enjoy more of the season during those nice “less crowded” weekends. Either way, come up with a plan that the whole family can agree upon and map out your rentals well in advanced. Once you get things going, it’ll be up to you to maintain a desirable location that attracts repeat renters year after year; it may take a few seasons to get established, but then the house can really start to pay for itself through your busier months.
  2. Understand the Taxes and Local Rules– It’s important to remember that the majority of income you receive through renting one of your properties is actually taxable on state and federal returns. Experts claim that “if you are doing short-term rentals, usually of less than six months, your state and county consider you an innkeeper and expect you to collect the same lodging taxes that hotels collect and pay those to the appropriate authorities.” Furthermore, not every home can legally be leveraged as a rental property; Homeowner or condo associations may set rules for rentals, as may certain cities that are against the practice in support of a “locals only” private setting. Therefore, you’ll want to do some serious due diligence with not only local government, but potential listing agent partners in the area and even your direct neighbors as well, before putting a bid in on the house. Do not overextend without educating yourself first; the last thing you want is your vacation home dreams putting you in hot water with either the IRS or your current property’s payment structure.