Kali Hassinger

Roth vs. Traditional IRA: Which is best for you?

Kali Hassinger Contributed by: Kali Hassinger, CFP®

Roth vs Traditional IRA: Which is best for you?

If you’re planning to use an IRA to save for retirement, but aren’t sure whether Roth or Traditional is best for you, we can help sort it out. Before we break down the pros and cons of each, however, we need to make sure that you are eligible to make contributions.

For 2019 Roth IRA contribution rules/limits:

  • For single filers, the modified adjusted gross income (MAGI) limit is phased out between $122,000 and $137,000. (Unsure what MAGI is? Click here.)

  • For married filing jointly, the MAGI limit is phased out between $193,000 and $203,000

  • Please keep in mind that it makes no difference whether you are covered by a qualified plan at work (such as a 401k or 403b). You simply have to be under the income thresholds.

  • The maximum contribution amount is $6,000 if you’re under age 50. Those who are 50 and older (and have earned income for the year) can contribute an additional $1,000 each year.

For 2019 Traditional IRA contributions:

  • For single filers who are covered by a company retirement plan (401k, 403b, etc.), in 2019 the deduction for your IRA contribution is phased out between $64,000 and $74,000 of modified adjusted gross income (MAGI).

  • For married filers covered by a company retirement plan, the deduction is phased out between $103,000 and $123,000 of MAGI.

  • For married filers not covered by a company plan, but who have a spouse who is covered, the deduction is phased out between $193,000 and $203,000 of MAGI.

  • Maximum contribution amount is $6,000 if you’re under age 50. Those who are 50 and older (and have earned income for the year) can contribute an additional $1,000 each year.

If you are eligible, you may be wondering which makes more sense for you. Well, as with many financial questions…it depends! 

Roth IRA Advantage

The benefit of a Roth IRA is that the money grows tax-deferred. When you are over age 59 ½, you can take the money out tax free. However, in exchange, you don’t get an upfront tax deduction when investing in the Roth. You are paying your tax bill today, rather than in the future. 

Traditional IRA Advantage

With a Traditional IRA, you get a tax deduction for the year you contribute money to the IRA. For example, a married couple filing jointly with a MAGI of $190,000 (just below the phase-out threshold when one spouse has access to a qualified plan) would likely be in a 24% marginal tax bracket. If they made a full $6,000 Traditional IRA contribution, they would save $1,440 in taxes. To make that same $6,000 contribution to a ROTH, they would need to earn $7,895, pay 24% in taxes, and then make the $6,000 contribution. The drawback of the traditional IRA is that you will be taxed on it when you begin making withdrawals in retirement.

Pay Now or Pay Later?

It’s challenging to decide which account is right for you, because nobody has any idea what tax rates will be in the future. If you choose to pay your tax bill now (Roth IRA), and in retirement you find yourself in a lower tax bracket, you may have been better off going the Traditional IRA route. However, if you decide to make a Traditional IRA contribution for the tax break now, and in retirement find yourself in a higher tax bracket, then you may have been better off going with a Roth. 

How Do You Decide?

A lot depends on your situation, such as the career path you’ve chosen and your desired income in retirement. However, we typically recommend that those just starting their careers (who will most likely see their incomes increase over the years) make Roth contributions. If your income is stable, and you’re in a higher tax bracket, a Traditional IRA and immediate tax break may make more sense now.

Before making any final decisions, it’s always a good idea to work with a qualified financial professional to help you understand what works best for you.

Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.


UPDATED from original post on June 19, 2014 by Matt Trujillo, CFP®

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 Kali Hassinger, CFP®, CDFA®, and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. You should discuss any tax matters with the appropriate professional.

Health Care Costs: The Retirement Planning Wildcard

Kali Hassinger Contributed by: Kali Hassinger, CFP®

Health Care Costs: The Retirement Planning Wildcard

When planning ahead for retirement income needs, we typically think about how much it will cost us to live day-to-day (food, clothing, shelter), and to do those things we want to do, like travel and helping grandkids pay for college. The costs we don’t often think about, those that could potentially wreak havoc on retirement income planning, are health care costs.

According to a recent article from the Employee Benefits Research Institute, the average 65-year-old couple will need $400,000 to have a 90% chance of covering health care expenses over their remaining lifetimes (excluding long-term care).

Longevity is a critical factor driving health care costs. According to the Social Security Administration’s 2020 study, a couple, both 66 years of age, has a 1-in-2 chance that one will live to age 90 and a 1-in-4 chance that one will live to age 95. And considering that Medicare premiums are means-tested, the more income you generate in retirement, the higher your Medicare premiums.

So, what can you do to plan for this potential large cost?

  1. If your goal is to retire early, plan on self-insuring costs from retirement to age 65. Some employers may offer retiree healthcare, or you can purchase insurance on the Health Insurance Exchange through the Affordable Care Act (still out-of-pocket dollars in retirement).

  2. Consider taking advantage of Roth 401(k)s, Roth IRAs (if you qualify), or converting IRA dollars to ROTH IRAs in years that make sense from an income tax perspective. You can use these tax-free dollars for potential retirement health care expenses that won’t increase your income for determining Medicare premiums.

  3. Work with your financial planner to determine whether a non-qualified deferred annuity or similar vehicle might make sense for a portion of your investment portfolio. Again, these dollars can be tax-advantaged when determining Medicare premiums.

  4. Most importantly, work with your financial planner to simulate retirement income needs for health care expenses and include this in your retirement plan. Although you will never know your exact need, flexible planning to accommodate these expenses may help provide confidence for your future.

Contact your financial planner to discuss how you can plan to pay for your retirement health care needs.

Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.


UPDATED from original post on March 11, 2014 by Sandy Adams.

Any opinions are those of Kali Hassinger and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

What happens to my Social Security benefit if I retire early?

Kali Hassinger Contributed by: Kali Hassinger, CFP®

Did you know that the benefit shown on your Social Security estimate statement isn’t just based on your work history?

what happens to my social security benefit if I retire early

The estimated benefit shown on your statement assumes that you’ll work from now until your full retirement age.  And, on top of that, it assumes that your income will remain about the same that entire time. For some of our clients who are still working, early retirement has become a frequent discussion topic. What happens, however, if you retire early and don’t pay into Social Security for several years? In a world where pensions are quickly becoming a thing of the past, Social Security will be the largest, if not the only, fixed income source in retirement for many. 

Your Social Security benefit is based on your highest 35 earning years, with the current full retirement age at 67.

So, what happens to your benefit if you retire at age 50? That is a full 17 years earlier than your statement assumes you’ll work, which effectively cuts out half of what is often our highest earning years.

We recently had a client ask about this exact scenario, and the results were pretty surprising! This client has been earning a great salary for the last 10 years and maxing out the Social Security tax income cap every year. Her Social Security statement, of course, assumes that she would continue to pay in the maximum amount (which is 6.2% of $132,900 for an employee in 2019 - or $8,240 - with the employer paying the additional 6.2%) until her full retirement age of 67. She wanted to make sure her retirement plan was still on track even after stopping her income and contributions to Social Security at age 50.

We were able to analyze her Social Security earning history, then project her future earnings based on her current income and future retirement age of 50. Her current statement showed a future annual benefit of $36,000. When we reduced her income to $0 at age 50, her estimated Social Security benefit actually dropped by 13%, or $4,680 per year. That’s still $31,320-per-year fixed income source would still pay our client throughout retirement. Given the fact that she’s working 17 years less than the statement assumes and she has the assets necessary to support the difference, a 13% decrease isn’t too bad. This is just one example, of course, but it is indicative of what we’ve seen for many of our early retirees. 

Social Security isn’t the only topic you’ll want to check on before making any final decisions about an early retirement.

You’ll also want to consider health insurance, having enough savings in non-retirement accounts that aren’t subject to an early withdrawal penalty, and, of course, making sure you’ve saved enough to reach your goals! If you’d like to chat about Social Security and your overall retirement plan, we are always happy to help!

Kali Hassinger, CFP®, CDFA® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.


Any opinions are those of Kali Hassinger, CFP and not necessarily those of RJFS or Raymond James. 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. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. The case study included herein is for illustrative purposes only. Individual cases will vary. Prior to making any investment decision, you should consult with your financial advisor about your individual situation. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Raymond James and its advisors do not provide tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Restricted Stock Units vs. Employee Stock Options

Kali Hassinger Contributed by: Kali Hassinger, CFP®

Some of you may be familiar with the blanket term "stock options." In the past, this term most likely referred to Employee Stock Options (ESOs), which were frequently offered as an employee benefit and form of compensation. But over time, employers have adapted stock options to better benefit both their employees and themselves.

20190219.jpg

ESOs provided the employee the right to buy a certain number of company shares at a predetermined price, for a specific period of time. These options, however, would lose their value if the stock price dropped below the predetermined price, making them essentially worthless to the employee.

Shares promised

As an alternative, many employers now use another type of stock option, known as Restricted Stock Units (RSUs). Referred to as a "full value stock grant,” RSUs are worth the "full value" of the stock shares when the grant vests. So unlike ESOs, the RSU will always have value to the employee upon vesting (assuming the stock price doesn't reach $0). In this sense, the RSU is a greater advantage to the employee than the ESO.

As opposed to some other types of stock options, the employer does not transfer stock ownership or allocate any outstanding stock to the employee until the predetermined RSU vesting date. The shares granted with RSUs essentially become a promise between the employer and employee, but the employee receives no shares until vesting.

RSU tax implications

Since there is no "constructive receipt" (IRS term!) of the shares, the benefit is not taxed until vesting.

For example, if an employer grants 5,000 shares of company stock to an employee as an RSU, the employee won't be sure of how much the grant is worth until vesting. If this stock value is $25 upon vesting, the employee would have $125,000 of income (reported on their W-2) that year.

As you can imagine, vesting dates may cause a large jump in taxable income, so the employee may have to select how to withhold taxes. Usual options include paying cash, selling or holding back shares within the grant to cover taxes, or selling all shares and withholding cash from the proceeds.

In some RSU plan structures, the employee may defer receipt of the shares after vesting, in order to avoid income taxes during high earning years. In most cases, however, the employee will still have to pay Social Security and Medicare taxes in the year the grant vests.

Although there are a few differences between the old-school stock options and more recent Restricted Stock Unit benefit, both can provide the same incentive for employees. If you have any questions about your own stock options, we’re always here to help!

Repurposed from this 2016 blog: Restricted Stock Units vs Employee Stock Options

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®


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 Kali Hassinger, CFP® 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. Investing involves risk and you may incur a profit or loss regardless of strategy selected. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. This is a hypothetical example for illustration purpose only and does not represent an actual investment.

New Year Financial To-Dos Help Keep You on Track

Kali Hassinger Contributed by: Kali Hassinger, CFP®

As we settle into 2019, the fresh calendar year provides an ideal opportunity to make plans and adjustments for your future. Instead of setting lofty resolutions without a game plan in mind, might I suggest that you consider our New Year Financial Checklist? Completing this list of actionable, attainable goals will help you avoid the disappointment of forgotten resolutions in February, and you’ll feel the satisfaction of actually accomplishing something really important!

20190103.jpg

New Year Financial Checklist

  • Measure your progress by reviewing your net worth as compared to one year ago. Even when markets are down, it's important to evaluate your net worth annually. Did your savings still move you forward? If you're slightly down from last year, was spending a factor? There is no better way to evaluate than by taking a look at the numbers!

  • Speaking of spending and numbers, review your cash flow! How much came in last year and how much went out? Ideally, we want more income than spending.

  • Now, let's focus on the dreaded budget. Sure, budgeting can be a grind, so call it a “spending plan”. Do you have any significant expenses coming up this year? Make sure you're prepared and have enough saved.

  • Be sure you review and update beneficiaries on IRAs, 401(k)s, 403(b)s, life insurance, etc. You'd be surprised at how many people don't have beneficiaries listed on retirement accounts (or have forgotten to remove their ex-spouse)!

  • Revisit your portfolio's asset allocation. Make sure your investments and risk are still aligned with your stage in life, your goals, and your comfort level. I'm not at all suggesting that you make changes based on market headlines. Just be sure that the retirement or investment account you opened 20 years ago is still working for you.

  • Review your Social Security Statement. If you're not yet retired, you will need to go online to review your estimated benefit. Social Security is one of the most critical pieces of your retirement, so make sure your income record is accurate.

Of course, this list isn't exhaustive. The final step to ensure your financial wellbeing is a review with your advisor. Even if you don't work with a financial planner, at a minimum set aside time on your own, with your spouse or a trusted friend, to plan on improving your financial health. Do it even if you only get to the gym the first few weeks of January!

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

Mid-Term Elections and the Market

Kali Hassinger Contributed by: Kali Hassinger, CFP®

Elections and the stock market are two topics prime for speculation.  The media will speculate on who will win elections, and then again speculate on how those outcomes will affect the markets!  With this double layer of uncertainty and recent market volatility, investors can be left with feelings of unease.  Currently the Republican president is backed by a Republican-led Congress; however, this year's midterm elections have the balance of power on the ballot.  35 Senate seats are up for grabs, and Democrats would need to gain two seats to take control.

mid-term elections and the market kali hassinger, cfp

Although there is no way to say how the markets will be affected by either outcome with certainty, history can help to keep us grounded.  The chart below shows us the average annual S&P 500 performance by the presidential party and the majority Congressional party.  Regardless of the power make-up or split, the index has averaged positive returns. A party split (i.e., Republican president and Democratic Congress or Democratic president and Republican Congress) has delivered better performance than when a single party controlled both branches of government.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.

20181106aa.jpg

The year following midterm elections has historically had the best stock returns of the president's four-year term, even when a president's party loses seats in Congress.  The last time the S&P 500 declined in the year after midterm elections was 1946, but, although a guide, history is not a fortune teller. 

We cannot control the election results or the market, but we can control our vote and how we handle our investments.As always, we preach sticking to your financial plan without making changes to your portfolio out of fear or uncertainty.Our team remains aware of the political and economic landscape, but your portfolio is always constructed with your long-term goals in mind.

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®


Source: https://www.wsj.com/articles/midterms-are-a-boon-for-stocksno-matter-who-wins-1538645400 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 website or the collection or use of information regarding any website's users and/or members.

Social Security Increase Announced

Kali Hassinger Contributed by: Kali Hassinger, CFP®

The Social Security Administration recently announced that benefits for more than 67 million Americans would be increasing by 2.8% starting in January 2019. This cost of living adjustment (COLA for short) is the largest we've seen since 2011 when the benefits increased by 3.6%. 

20181030.jpg

The Medicare Part B premium increase was also announced, and it will only be increased by a modest $1.50 per month (from $134 to $135.50).The premium surcharge income brackets have also seen a slight increase in the monthly premium on top of the $1.50 standard.These surcharges affect about 5% of those who have Medicare Part B.The biggest change, however, is the addition of a new premium threshold for those with income above $500,000 if filing single and $750,000 if filing jointly. This will affect:

20181030a.jpg

While the Social Security checks will be higher in 2019, so will the earnings wage base you pay into if you're still working.  In 2018, the first $128,400 was subject to Social Security payroll tax (6.2% for employees and 6.2% for employers).  Moving into 2019 the new wage base grows by 3.5% to $132,900.  Those who are earning at or above the maximum will pay $8,240 in Social Security tax each year.  With the employer's portion, the maximum tax collected per worker is $16,780.  

Social Security plays a vital role in almost everyone's financial plan.  If you have questions about next year's COLA or anything else related to your Social Security benefit, don't hesitate to reach out to us.

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®


Source: https://www.cms.gov/newsroom/fact-sheets/2019-medicare-parts-b-premiums-and-deductibles

Webinar in Review: 2019 Medicare Open Enrollment: Selecting the coverage that works for you

Kali Hassinger Contributed by: Kali Hassinger, CFP®

A significant part of the retirement planning process includes making the transition from an individual or group health insurance plan to Medicare. The choices are numerous and are driven by many factors – from your personal health, your choice of doctors, financial considerations and even your zip code. Join us for an upcoming webinar with James Edge of Health Plan One, a Raymond James partner and Medicare consultant, to learn the basics of how Medicare coverage works and what you need to consider before selecting coverage.

See the time stamps below to listen to the topics you’re most interested in:

  • 1:30: Understanding what HPOne is

  • 2:00: Medicare Coverage Options

  • 11:45: Medicare Part A— Hospital Insurance

  • 11:50: Medicare Part B— High Income Premium Surcharge

  • 14:15: Medicare Part D— Prescription Drug Coverage

  • 16:30: Medicare Part D—The Donut Hole

  • 21:15: Original Medicare—Coverage Gaps

  • 22:15: Medigap—Standardized Benefits but Varying Costs

  • 27:30: Closing the Coverage Gaps—Medicare Advantage

  • 28:00: Part C— Medicare Advantage

  • 30:15: Enrollment Periods

  • 36:00: Enrollment Penalties

  • 40:20: Core Capabilities of HP One

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

Volatility Isn’t Always a Bad Thing

Kali Hassinger Contributed by: Kali Hassinger, CFP®

20180807.jpg

If you’ve been paying attention to the markets this year, you’ve certainly noticed that the days of 2017’s slow and steady positive returns have disappeared.  Instead, 2018 has been full of daily market ups and downs, which, it turns out, is actually normal! 

With the calm and comfortable markets of 2017, it’s easy to let our short term memory overshadow previous years.  2018, on the other hand, has created feelings of investor anxiety as the markets switch between red and green on a daily basis.  The word volatility alone often has a negative connotation.  However, in relation to your portfolio, volatility also includes positive returns! 

Post 2008, overall portfolio and market returns have been positive. However, as presented in the chart below, each year since then has been filled with daily market movements of 1% - both up and down!  2017 is by far the greatest outlier within the most recent 10 year average.

20180807a.jpg

Investors have to be willing to endure the occasional market rollercoaster in order to reach long-term goals.  Even though we work to minimize volatility over time, avoiding it altogether isn’t realistic.  Try to remember that we never base your plan on market returns of a single day or calendar year.  Staying disciplined and committed to your financial plan can help you filter out the noise and focus on your long-term goals. 

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®


The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of June 2007 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Investing involves risk and investors may incur a profit or a loss. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James.

The Mystery Surrounding Public Service Loan Forgiveness

Contributed by: Kali Hassinger, CFP® Kali Hassinger

20180501.jpg

The Public Service Loan Forgiveness program started in 2007, and in the fall of 2017, the first round of borrowers became eligible for possible loan forgiveness.  This program, however, has been the subject of confusion and frustration by those who were hoping to qualify, and, in some cases, planning for the reprieve of student loan forgiveness.  So confusing that the recent federal spending plan earmarked $350 million to help those who would have been eligible to receive loan forgiveness but may have unknowingly enrolled in the wrong repayment plan.  The Public Service Loan Forgiveness (PSLF) rules are stringent and require that the qualifying conditions are met for a period of 120 monthly payments, or 10 years!  Even for those who followed all of the rules and have been submitting the correct documents,

If you are hoping to qualify for Public Service Loan Forgiveness, you'll want to be sure that your loans and repayment plan are eligible under the program. 

Listed below are some of the requirements that you should be sure are in order.

1. You must work full time for a qualifying Employer in a qualifying role.

  • Most jobs working for a state, local, or federal government qualify.

  • Non-profit employers that qualify as tax-exempt under Section 501(c)(3) are eligible.

*Even if you think your employer and role qualify, you should complete and submit the Public Service Forgiveness Employment Certification Form on an annual basis and every time you switch employers

It can be accessed online:  https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf 

2. Only Direct Loans are eligible for Public Student Loan Forgiveness.  There are four types of Direct Federal Student Loans:

  • Direct Subsidized – These loans are for undergraduate students who demonstrate a financial need. The U.S. Department of Education pays the accrued interest while you're still in school, for the first six months after you graduate, and during periods of deferment.

  • Direct Unsubsidized – These loans are for undergraduate and graduate students, but financial need isn't required to qualify. These loans accrue interest while you're in school and during periods of deferment.

  • Direct PLUS Loans – These loans are for graduate students and parents of undergraduate students.

  • -Direct Consolidation Loans – This loan allows you to combine all of your eligible federal student loans into a single loan.

3. You must be enrolled in an income-based federal repayment plan.  The required payments are based on what is deemed to be your "Discretionary" income in comparison to the current poverty level, and payments are updated on an annual basis.

  • Income-Based Repayment Plan (IBR Plan) – Monthly payments are usually 15% of your discretionary income, but they can be as low as 10%. Loan terms can be 20 or 25 years.

  • Income-Contingent Repayment Plan (ICR Plan) – Payments under this plan are the lesser of 20% of your monthly discretionary income or your monthly payment on a 12-year repayment term with an income factor calculation. Loan terms under this plan are 25 years.

  • Pay as you Earn Repayment Plan (PAYE Plan) – Monthly payments are limited to 10% of your discretionary income. To qualify, you must have a partial financial hardship. The loan term is 20 years.

  • Revised Pay as your Earn Repayment Plan (REPAYE Plan) – Under this plan, your monthly payments are equal to 10% of your discretionary income. Undergraduate loans have a 20-year term, and graduate loans have a 25-year term.

If you've gotten through this list and you think you still may qualify, there are a couple of additional items that you'll want to keep in mind. 

  • The 120 qualifying payments don't need to paid consecutively. That means if you work for a non-qualifying employer for a bit, you won't lose credit for past payments that qualified.

  • The income-based payment amounts are affected by your Adjusted Gross Income on your tax return. If you are married and file taxes separately to keep your payments low, this strategy could increase your family's tax obligation.

  • If your income-based payments are suppressed low enough, they may be less than the amount of interest that accrues. If you leave the plan or no longer qualify for the repayment plan, the unpaid interest is capitalized and added to your loan's principal balance.

  • Making additional and early payments won't help you in the PSLF program. The program requires monthly payments, and you can only receive credit for one payment per month. If you do want to make additional payments, contact your loan servicer to be sure that the extra amount is credited to cover future monthly payments.

Even with all of the variables that we've covered, some additional rules and qualifications can be incorporated into the program.  It's especially important to check with FedLoan Servicing throughout the process and at least on an annual basis.  Be sure that you are weighing all of the pros and cons of the program, and as with any financial strategy, staying organized is essential!

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®


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 website or the collection or use of information regarding any website's users and/or members. 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. Any opinions are those of Kali Hassinger, CFP© and not necessarily those of Raymond James. 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. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. You should discuss any tax or legal matters with the appropriate professional.

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 website or the collection or use of information regarding any website's users and/or members.