An older couple sit at a table going over their finances.

How to Retire Without Savings

Retiring without savings is not ideal. Yet, 42% of baby boomers nearing or in retirement, have no money set aside. Read more

An escalating stack of coins leading to a jar of coins with a graduate cap.

7 Ways College Students Can Save Money

Heading off to college is often a student’s first taste of independence. With parents no longer dictating a curfew and professors not taking attendance, it is easy to get lost in the new-found freedom. Read more

Supercharging your student loan repayment.

5 Creative Ways to Supercharge Your Student Loan Repayment

Heavy student loan debt makes headlines, but has not resulted in significant policy changes over the last few years. In the meantime balances continue to grow and students struggle with the best strategies to repay the ever-growing debt. Total student loan debt sits at 1.48 trillion dollars with the average 2017 graduate carrying $39,400 in balances at the time of graduation. An increase of six percent over 2016 graduates. While the average payment of $351, is less than the average car payment, the higher debt amounts can keep student loans on the balance sheet for over two decades. The traditional repayment of loans is only ten years. Yet more and more students find they must extend payments through the new extended repayment plans, allowing payments to last as long as 25 years.

There are strategies you can employ that will reduce debt balances faster, paying off loans sooner, without requiring larger monthly payments.

  1. Choose to Work in Public Service the First Decade of Your Career

    One of the most popular routes to loan forgiveness of Federal student loans is through public service employment, which will lead to loan dismissal after ten years of work. If you carry high loan balances, it might be a small sacrifice to make at the beginning of your career.

    There are a limited number of jobs that count, and you must file for employment certification to qualify for forgiveness. You can certify each year, with each employer, or at the end of ten years. Many find it easiest to certify employment each year. Doing so will identify any issues early in the process. Other requirements include enrollment in an income-based repayment plan and full-time employment during the ten-year period, which does not need to be consecutive.

    Qualifying jobs include public service, non-profits and the military. You can also work in education with the federal or state government or a qualified 503 (C) agencies for employment credit. Working as a contractor for a qualifying agency is not considered public service employment under current rules.

  2. Join the Military

    The military has one of the most generous loan repayment programs, called the Military College Loan Repayment Program or CLRP. It consists of a series of payments towards student loans, rather than requiring monthly payments, and relying on loan forgiveness after a set period. You must enlist with existing student loans and file the proper paperwork each year. The student loan program also offers waivers, which allow for a single annual payment in place of monthly payments. Using the waiver can eliminate the need to make ongoing payments during military service.

    The Army, Navy, and Air Force will repay up to $65,000, with the National Guard repays a maximum of $50,000. You are required to pay taxes on the payment as income each year. You can combine the CLRP with the Public Service Loan Forgiveness, for any remaining balance if you stay in the military for at least ten years.

  3. Look for an Employer with Student Loan Repayment Benefits

    More employers, looking to attract recent graduates, are offering student loan repayment as part of the benefits package. Essentially the way it works is your employer will pay a certain percentage of your pay up to a maximum dollar amount for each year of employment. While the benefit will not replace your monthly payment, it can speed the payoff.

    You are not required to be in a certain repayment plan to qualify, and many employers will pay both private and federal loans associated with the cost of higher education. Congress currently has a bill in the works that would make such payments tax free to employees – up to a certain limit – which could increase the number of employers offering the benefit.

  4. Identify Special Loan Forgiveness Programs in Your Profession

    Many states and organizations have programs for in-demand fields like nursing and teaching, to attract talent. These programs are separate from Federal student loan forgiveness options.

    For example, nurses certified to work in Florida could receive loan forgiveness of up to $4,000 annually for a maximum of $16,000 over four years if they work in areas with nursing shortages.  Those willing to work in a critical shortage facility can have up to 60% of their loans repaid within two years.

    Similar to nursing, teachers can choose from multiple programs, if you teach in areas of critical need. Teaching in subjects such as math, science, and special education qualify, along with employment in schools located in low-income districts. There are two federal programs, in addition to the public service loan forgiveness, and several state programs which can whittle down loan balances faster. In some cases, you could qualify for multiple programs to expedite the loan payoff.

  5. Take Advantage of Tax Breaks

    You can use tax breaks to pay down student loans even before repayment begins. Unless you qualify for subsidized loans, the interest on the balance borrowed accumulates while you are in school. To get the balances down before graduation, re-direct tax credits for college expenses toward applicable loan balances. Most students qualify for the American Opportunity Tax Credit which will directly reduce the amount of taxes owed.

    After you begin repayment, you can also deduct up to $2,500 in paid student loan interest from taxable income.  There is an income limit of $80,000 for those filing as single and up to $160,000 for couples filing a joint return. Both Federal and qualified private student loans meet the requirements for the deduction.

Conclusion

With 70% of college graduates carrying student loans, finding faster and more efficient ways to eliminate student loan debt can free up money for other financial needs. Whether you want to beef up your retirement accounts or pay off credit card debt, the lack of a student loan payments can add up to thousands of extra dollars to your bottom line.

If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a FREE financial analysis.  Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs.  You don’t have to struggle with high-interest credit card debt any longer.  Call (855) 250-8329 or get in touch with us by sending a message through our website.

 

A couple on vacation in Italy.

Last Minute Strategies to Lower Vacation Costs

When it comes to planning a vacation, typically the highest benefit goes to those who plan. Advanced reservations secure the best spots at the lowest price. You have more time to set aside money for your trip and gain more control over where you go and what you do.

The good news is that those who don’t like to plan in advance, can also score lower prices by taking advantage of last minute deals. Many aspects of travel involve high fixed costs, which encourage companies to lower rates at the last minute to fill empty spots. Hotels, flights, and boats, from dinner cruises to ships, all have nearly the same costs whether they are full or empty.

As a result, companies use promotions to fill empty rooms and seats to increase business when sales run short. You can save money by taking advantage of these steep discounts. Use the following strategies to locate promotions and save money on last minute travel deals. In some cases, you might benefit from altering existing plans to ramp up savings.

Combine Costs Through Package Deals

Travel packages combine two or more aspects of travel at a lower price. In some cases, you might get a flight and a hotel room for less than a standalone flight. You could find a deal for independent travel, which includes both accommodations and a rental car.

Other common areas to find last-minute savings are through bundled attractions. City passes, tourist cards and combination attraction tickets can save both money and time. You do not have to stand in line for tickets, and you pay less through the advanced purchase. Online ticket purchases to individual venues can save an average of 10%, whereas combo passes or tourism cards can ramp the savings up to 60% of the cost of individual tickets.

Compare Transportations Costs

The two largest costs of travel are getting to the destination and the accommodations used upon your arrival. To save money on transportation, compare the cost of flying, train or bus fares, and driving. The total cost of travel will vary based on the number of people in your party and the distance between home and your destination. During the summer months, everything costs more, from airfares to gas prices. You can save money when you compare prices across modes of transportation, as well as comparing different travel dates.

Find Last-Minute Savings on Accommodations

With the average hotel costing $131 per night, a week stay can account for a large portion of your vacation budget. You can save money by adjusting the week of vacation, searching for rental homes by individual owners rather than hotel rooms, or camping. For example, VRBO lists homes for rent by individual owners. They have the power to offer steep last-minute discounts to fill their calendar. Airbnb is another website that caters to individuals renting rooms. By speaking to the owner directly, you can receive discounts up to 50% for last minute bookings. Another benefit of rental homes is the access to a kitchen and sometimes laundry facilities, which can increase the amount you can save.

Last-Minute Cruise Deals

Cruise ships are floating cities with high fixed costs. In most cases, the company would rather lower the price of a cruise to increase the number of guests. While they promote an all-inclusive vacation, cruises increase profits through on-board services, premium restaurants, and shore excursions. When you book within six weeks of the departure date, you can find major savings even to popular destinations. A flexible vacation schedule can lead you to significant savings on a last-minute cruise.

Loyalty Pays

Individual companies, as well as aggregator sites, offer flash sales, promo codes, and eleventh-hour discounts. They notify customers through social media, email promotions, and the company newsletter. You can also find specials through the tourist bureau at your chosen destination.

Skip Vacation Hot Spots

Popular destinations cost more because of the increase in demand, which can change from year to year. When a destination receives coverage in major magazines, celebrates a benchmark year, or hosts a major event, demand rises and more people want to visit. With the higher exposure, the location will raise prices on everything, from flights and accommodations to local activities.

Rather than choosing your destination first, begin with what you want to do. Then select a destination that offers the same activities, without the heavy promotion to drive demand and prices up. You will not only save money on travel, but will face fewer crowds, even during the peak season. For instance, you might choose to visit Savannah, Ga., rather than the more popular counterpart, Charleston. Both feature a quaint historic district, beaches, and a lively food scene. Hotels in the Charleston historic district trend between $200 and $400 per night, whereas a comparable room in Savannah will cost between $150 and $250.

Use Rewards

Cashing in points or miles to pay for rooms and flights is an effective way to lower vacation costs. Most reward programs allow you to accumulate points with everyday purchases, which you can then convert to free travel. Be aware, when you use reward points for last minute travel, some companies will charge last-minute booking fees, which could reduce the value of the reward.

Another way to convert reward points into travel savings is to use points from your credit card reward program. You can obtain gift cards at no cost for gas stations or restaurants. Gift cards are considered a form of payment, allowing you to double up on savings by combining them with other specials, promotions, or discounts. If you don’t have enough points for a free gift card, you can buy discounted cards at membership clubs like Costco, or websites such as Gift Card Granny.

If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a FREE financial analysis.  Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs.  You don’t have to struggle with high-interest credit card debt any longer.  Call (855) 250-8329 or get in touch with us by sending a message through our website.

A retired couple going over their finances.

Key Influences Impacting Your Social Security Payout

The Social Security Administration makes an estimated 69.7 million dollars in Social Security payments each month to retirees. Recipients received an average monthly payment of $1,360 in 2017, according to the SSA, many households depend on this income for survival. For three out of five retirees, this income accounts for over half of total household income. Without these payments, the poverty rate among the elderly would drastically increase.

There are many factors that determine the amount of money you will receive each month. Given the high level of reliance on Social Security payments, understanding ways to increase the monthly payout can add thousands of dollars to your income throughout retirement. The most important factors affecting the monthly payout include the following:

The Year You Were Born

Your birth year establishes your full retirement age or FRA. The FRA ranges from 66 to 67 years of age, for those retiring today. The age matters because anyone can begin receiving benefits at the age of 62. However, filing before your full retirement age will permanently reduce the monthly payout.

Once you reach your full retirement age, you can claim 100% of your Social Security benefit. Waiting beyond the FRA will increase payouts for every month you wait until you reach the age of 70.

Everyone born before or in 1954, has a full retirement age of 66 years old. For those born after 1954, the retirement age uses the following schedule:

Table 1: Full Retirement Age
Year You Were Born Full Retirement Age
1954 or earlier 66 years old
1955 66 years and 2 months old
1956 66 years and 4 months old
1957 66 years and 6 months old
1958 66 years and 8 months old
1959 66 years and 10 months old
1960 or later 67 years old

 

The Age You Claim Benefits

Aside from the full retirement age, the age you choose to file for benefits has the highest impact on your potential payout. If you claim Social Security benefits before reaching your full retirement age, the benefit amount will decrease by up to 30%. For example, receiving your Social Security payments up to 36 months before your FRA will result in a 6.7% reduction, or 5/9th of a percent reduction for every month you claim early. The earliest you can qualify for benefits is age 62, which could give you five extra years of payments at a lower amount.

For every year you postpone filing past your full retirement age, you can receive an 8% increase until you reach 70 years old. At that point, there is no pay increase for waiting longer. The following chart shows the benefit payouts based on age, assuming full retirement is age 67.

Table 2: Age You Claim Social Security
Age You Claim Social Security Benefits Reduction or Increase Effect On a $1,500 Monthly Benefit
62 30% reduction $1,050
63 25% reduction $1,125
64 20% reduction $1,200
65 13.3% reduction $1,300
66 6.7% reduction $1,400
67 —- —-
68 8% increase $1,620
69 16% increase $1,740
70 24% increase $1,860

If you delay filing for Social Security benefits until the age of 70, you can receive up to 76% more monthly than an individual who claims their benefit at 62.

Work History

Social Security payments rely on your work history, which is determined by how much money you earned and how many years you worked. Calculating the full benefit considers your 35 highest earning years and will adjust for inflation. Those who have not worked all 35 years will have zeros calculated into the formula to determine the 35-year average. Workers who were not employed may receive half of the spouse’s benefit when reaching retirement age.

Work history can also lower your Social Security benefit if you file before reaching the full retirement age. Claiming your benefits before the full retirement age will result in a Retirement Earnings Test on income, which calculates benefits to consider current earned income while receiving benefits. When you surpass the threshold, you could lose $1 in benefits for every $2 in income above $17,040. Earning over $45,360 will result in $1 in benefits withheld for every $3 in earned income. After reaching full retirement, there are no income limits.

Total Income

The IRS can tax up to 85% of benefits based on household income. The IRS uses the adjusted gross income, or AGI, to determine taxation on Social Security benefits. This includes both passive and earned income.

In 1983 Congress included an amendment to the Social Security Program, which gave the Internal Revenue Service the ability to tax Social Security benefits. Currently, you will not pay taxes on earnings up to $25,000 per year for individuals and $32,000 for couples. Individuals who earn between $25,000 and $31,999 and joint filers earning between $32,000 and $43,999, pay taxes on up to 50% of Social Security benefits. Earning above these thresholds can result in 85% of the Social Security benefits becoming subject to taxation.

The above amounts have not been adjusted for inflation in over 34 years, resulting in over half of Social Security recipients owing taxes on their benefits.

Where You Live

In addition to paying taxes at the federal level, some states also tax Social Security benefits. Some states provide residents with low-income exemptions.

For example, Minnesota, North Dakota, Vermont, and West Virginia mirror the federal tax schedule. While Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, Rhode Island, and Utah tax all Social Security benefits, with limited income exemptions.

State level taxation does not directly impact your Social Security check, but it can determine how much money you get to keep.

If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a FREE financial analysis.  Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs.  You don’t have to struggle with high-interest credit card debt any longer.  Call (855) 250-8329 or get in touch with us by sending a message through our website.