Retirement Planning

Life Planning: When Real Life Trumps Technical Financial Planning

Contributed by: Matthew E. Chope, CFP® Matt Chope

A meeting I had recently with the daughter of some long-time clients reminded me that sometimes what matters most in what we do with clients isn’t the dollars and cents and the detailed tax analysis, but what we call life planning. What am I talking about? Well let me tell you a little bit about the kind of planning we did.

The client’s daughter, a successful, single 30 year old woman, came in for a basic financial check-in after finding out that her job was being discontinued with her employer. She seemed somewhat relieved, because her job was not challenging her intellectually and she needed a change. She wanted to make sure she was making the right financial decisions, and needed some guidance on planning for her next stage of life. What she really wanted to know was if it was okay to take four to six months off from working, and what the financial implications would be on her short and long term goals. It seems that her primary objective at this point in her life was to find someone to spend her life with and to ultimately build a family, and taking the time to do this was a higher objective than saving for retirement—if she could swing it financially.

This young woman had been on the path of multi-generational financial planning for years.  Her parents had been guiding her based on their good habits, and we were able to provide some financial education before she went off to college to help build a strong base of financial knowledge and etiquette. In addition, she was able to get a solid college education and had been earning a good income, saved very well, and had lived below her means up until this point. Upon termination from her employment, she would be receiving a severance and health care for a couple of months, and had built a very comfortable nest egg in taxable, Roth and traditional IRA’s. She had a home with over 50% equity and was very flush with liquidity and confident in her financial situation.

After reviewing all the things in her financial life, we came to the conclusion together that she was in a strong enough financial position to pursue her primary objective of finding a life partner and building a family.

What’s Next?

We came up with a temporary travel budget for the next four to six months so that the sabbatical could take place and she could feel comfortable with it. She could travel abroad and around the United States, visit different places and experience new adventures; all while being creative to find someone that she could spend the rest of her life with. We talked about the things that needed to be done during her time off:

  1. A Belief Statement:  Write down at the top of a blank piece of paper, “What Do I Believe.” By writing this down, capturing at this moment in time how she felt, she’d be able to return to it in the future. This will help her realize when she is close to finding her partner—does this person fit her values and belief systems. Or she can decide if it's crucial that they do or don't believe in the same things as she does.

  2. 100 Thing List:  List of the 100 things she wanted to experience in life so that the money, she has spent all this time earning and saving, has some reason and goal behind it in order to be used for experiences that matter to her. Ideally we don’t just work to grow a big pot of money, but grow it and use it for life fulfillment. We want no regrets later in life. 

  3. Vision Statement: Her idea of where she wanted to be in one year, three years and in ten years. Vision statements help guide current choices and offer a great reflection tool to check personal progress.

So, while we talked about some financials at this meeting, it was only enough to know that she was going to be okay to take time off from work. The majority of our time was spent on things that were not financial topics but were life planning issues—those non-financial issues that were most important to her at this point in her life. Sometimes we have to look at the big picture and go beyond money in order to dig deep into life planning issues, because how you chose to live your life and use that money in meaningful ways trumps the financial nuances or details of taxes, savings, and investing.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc.® Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions.


Any opinions are those of Matthew Chope and are not necessarily those of Raymond James. This case study has been provided for illustrative purposes only. Individual cases will vary. Every investor's situation is unique; prior to making an investment or withdrawal decision; please consult with your financial advisor about your individual situation. It is not known whether the client referenced in this case study approves or disapproves of Matthew Chope or the advisory services provided.

Focusing on what you Can Control

Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

“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.


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.

529 Plans: Saving for your Child’s Education

Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

Doesn’t it always seem like you blink and summer is over? For some reason, this glorious season seems to go by especially fast when you live in the state of Michigan! Hopefully you all took advantage of the hot and sunny weather and had a chance to explore all of the great things our state has to offer with your family. 

If you have children, your focus has probably shifted from weekend getaways to getting back into a more structured routine now that school is back in session.  Since school is top of mind for many, I felt it was a good time to touch on education planning and saving for college. 

Below is a brief refresher of the 529 plan, a popular type of account you can save into for future college expenses.  Many people refer to the 529 plan as the “education IRA” but there are some caveats:

Advantages:

  • State tax deduction on contributions up to certain annual limits

  • Tax-deferred growth

  • No taxation upon withdrawal if funds are used for qualified educational expenses (such as tuition, books, room and board, computers, etc.)

  • Parents have control over the account and can transfer the account to another child

  • Not subject to kiddie tax rules, unlike UGMA accounts (Uniform Gift of Minors Act) and UTMA accounts (Uniform Transfer to Minors Act)

Disadvantages:

  • No guaranteed rate of return – subject to market risk

  • Certain taxes and penalties will apply if funds are withdrawn for non-qualified expenses

Items to be aware of:

  • Keep records of how money was spent that was withdrawn from the 529 account in case of an audit

  • Review the asset allocation/risk profile of the account on an annual basis – typically, the closer the child is to entering college, the more conservative the account should become 

Just like saving for retirement, the sooner you can start saving for college the better. With that being said, if your children are only a few years out from college and your savings isn’t where you’d like it to be, there is still hope. Chances are you still have options and this is where good financial planning can come into play. There are also nuances with financial aid and completing the FAFSA that you want to be aware of—check out our webinar on the topic! If we could provide guidance in this area, don’t hesitate to reach out, we would be 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.


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 Nick Defenthaler and are not necessarily those of Raymond James. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state. Asset allocation does not ensure a profit or guarantee against loss.

What is a Non-Qualified Stock Option (NSO)?

A stock option is a right to buy a specified amount of company shares at a specified price for a certain period of time, as Matt Trujillo, CFP® introduced last month in his blog on ISOs. Unlike ISOs, NSOs (also sometimes referred to as NQSOs) do not receive special federal tax treatment and are more commonly granted by employers. Often preferred by established companies, NSOs granted to an employee will result in ordinary income when exercised and are easier to administer as they do not have to adhere to rules specific to ISOs. Like any stock option, the intent is to give extra incentive to focus participants on increasing the company’s stock price. They are a flexible tool that can allow companies and participants to take advantage of stock price growth at a fairly low cost.

The Basics:

  • Initiation date of the contract is known as the grant date. This is not a taxable event.

  • Employees must comply with a specific vesting schedule to exercise.

  • Exercise date is the date an employee is allowed to take full ownership of the specified lot of shares.

  • After the expiration date, the employee no longer has the right to purchase the company stock under the agreement terms.

Taxation:

  • In contrast to ISOs, NSOs result in additional taxable income to the recipient at the time of exercise, which is the difference between the exercise price and the market value on the exercise date.

  • To determine the amount of tax to be paid, the exercise price is subtracted from the market price on the date the option is exercised. This is called the bargain element which is considered compensation to the employee and is taxed at their ordinary income rate.

  • The sale of the security results in another taxable event. If sold less than a year from the exercise date, the transaction is considered as a short-term capital gain and is subject to ordinary income tax rates. If the employee waits a year or more from the exercise date, the transaction is considered a long-term capital gain (LTCG) and taxed at the applicable tax rates (which are much more favorable than ordinary income tax rates).

Planning Opportunities:

Some plans may allow participants to exercise unvested options when they are no longer “subject to a significant risk of forfeiture.” This may be referred to as “early exercise” or “exercise before vest.” This can allow the exerciser of the options to realize ordinary income at a more favorable time when the difference between the exercise price and market value of the stock is low.

Ideally, if you know that you are going to be exercising NSOs that will generate a large amount of ordinary income tax, you can look to lower your income in other ways to reduce your tax burden (ex: maxing out your contribution to your employer’s retirement plan, accelerating charitable contributions, utilizing deferred compensation if available).

Perhaps the most important planning consideration is the effect that stock options will have on your overall asset allocation. It often makes sense to pay the taxes on your stock options to make sure your portfolio is properly diversified.

Hopefully this information is helpful if you are new to NSOs or even if you’ve held them for years but don’t fully understand them. Many employees may not fully understand their stock options. Here at The Center we are always looking at your entire comprehensive financial plan, and stock option strategy is a small but important part of your total financial picture. Consult your financial planner and/or tax specialist to determine the best execution strategy for your stock options.

Any opinions are those of the author and not necessarily those of RJFS or 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. 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. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. 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.

http://www.investopedia.com/articles/optioninvestor/07/esoabout.asp
http://www.payscale.com/compensation-today/2013/01/non-qualified-stock-options-are-much-better-than-they-sound
https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Non-Qualified-Stock-Options/INF12046.html

How to Make Grants from Donor-Advised Funds

Contributed by: Matthew E. Chope, CFP® Matt Chope

I talk to a lot of clients who have set up Donor-Advised Funds or family foundations and are confused. They’ve figured out how to put money in, but how to make grants isn’t always as clear. The IRS prohibits using these funds to satisfy a pledge. That doesn’t prohibit you from supporting organizations like churches, but it does mean you need to follow certain steps.

The first step is to talk to your attorney and your CPA. They can give you tax and legal advice about making a grant. Carla Hargett, the Vice President of Raymond James Trust, told me if you’re planning on giving to your church, for example, she believes the best way to handle the Donor-Advised Fund Grants is to start by discharging any pledge made in the past. Donor-Advised Funds cannot be used to satisfy a pledge. You can let your church know you intend to provide General Support for a certain amount of money and year(s) going forward. The amount can be close to an amount you’ve given in the past – that’s up to you. But any legally enforceable pledges must be cancelled first. This should stop the audit trail if the IRS ever decides to get into the particulars with a grantor. So make sure the grant requests from your Donor-Advised Fund should say something like "2016 General Support.”  

When pledge time comes around, I recommend that you write on the pledge card something like, "I intend to request a distribution of $XXXX.XX from my Donor-Advised Fund during the 20XX fiscal year." Your church or charitable organization will be familiar with this language and can use it for budget planning similar to a pledge.

We just want to make sure that Grantors of donor-advised funds are doing things as accurately as possible and if an IRS auditor someday digs into your grants, you’ll have nothing to worry about.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions.


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 Matt Chope and not necessarily those of Raymond James. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Rio Olympics: A Lesson in Commitment

Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

If you’re like me, you spent the majority of your nights this month tuning into the Summer Olympics held in Rio de Janerio, Brazil. I’m more of a football and hockey type of guy but I must admit, watching some of the best athletes in the entire world compete for their respective countries, even in sports I wouldn’t consider myself a die had fan in, was captivating. The level of competition was incredible and you could truly feel the passion each athlete had as they competed for gold. 

While watching the actual games and being engaged in the competition is very entertaining, what hit home the most to me was the level of commitment each athlete had, especially those who are dominant in their respective sport. Athletes like Usain Bolt, Michael Phelps, Katie Ledecky, and Simone Biles are in a league of their own when it comes to training, execution, and their overall commitment to their goals. Training is rigorous and is often times 6 – 8 hours per day 5 – 6 days a week for nearly 4 years in preparation for a 2 week competition. Just think about that for a moment. That’s over 1,000 days of hard work, persistence, consistency and probably ten additional adjectives necessary to describe what it takes to be an elite Olympic athlete. 

As you hopefully already know, setting and committing to goals are at the core of what we help clients with here at The Center. We need to know what’s important to you and what you want to accomplish to help you with your own unique situation to ensure your financial plan is aligned with what’s important to you. Often times, some might perceive this as too “touchy feely” or you might ask yourself, “Why do they want to know this stuff? They’re financial planners, aren’t they just concerned about the numbers?” Simple answer – absolutely not. Committing to goals, whether they are for your family, career, personal life or financial well-being, are critical for your success, just as they are for Olympic athletes. 

As you start to think about the goals you might have, keep in mind what Michael Phelps had to say about them – “Goals should never be easy; they should force you to work, even if they are uncomfortable at the time.” If goals were simple, they wouldn’t be fulfilling. Personally, watching the Olympics re-energized me to better commit to my own goals. Do you have a clear vision of what your goals look like? If so, are they challenging? Commit to the things that bring real value to your life and work hard to make them a reality. Life is too short not to. As always, feel free to contact your financial planner to help prioritize and strategize when it comes to these 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.

3 Reasons Discretionary Investment Management could be Right for You

Contributed by: Angela Palacios, CFP® Angela Palacios

We all have busy lives. Whether you are getting down to business or enjoyingyour retirement to the fullest who wants to worry about missing a call from their advisor because something in their portfolio needs to be changed? Perhaps cash needs to be raised to meet that monthly withdrawal to your checking account so you can keep paying your traveling expenses. Or money has to be deposited to your investment account, if you are still saving, and needs to be invested. Regardless of your situation, many investors find it difficult to make time to manage their investment portfolios. We argue this is far too important to be left for a moment when you happen to have some spare time. 

What is Discretionary Management?

It is the process of delegating day-to-day investment decisions to your financial planner. Establishing an Investment Policy Statement that identifies the guidelines you need your portfolio managed within is the first and arguably the most important step. Investment decisions are then made on your behalf within the scope of this statement. It is kind of like utilizing a target date strategy in your employer’s 401(k). You tell it how old you are and when you are going to retire and all of the asset allocation, rebalancing and buy/sell decisions are made for you.

3 reasons this can be a suitable option for investors:

  1. Frees up your time to do what you love most. Time is the resource we all struggle to get our hands on. Need I say more?

  2. Markets move quickly and sometimes portfolios must also to respond. Changes can happen in a timely fashion whether you are within reach on your cell phone or not.

  3. May reduce the potential for poor investor behavior. Let those not emotionally charged by fluctuations in the market make decisions on your behalf.

If you have questions on whether or not this is right for you and your portfolio don’t hesitate to contact us.  We’d be happy to help!

Angela Palacios, CFP® is the Director of Investments at Center for Financial Planning, Inc.® Angela specializes in Investment and Macro economic research. She is a frequent contributor The Center blog.


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 Angela Palacios and not necessarily those of Raymond James. 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. 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.

Millennials Matter: The Importance of a Budget

Contributed by: Melissa Parkins, CFP® Melissa Parkins

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.®


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® Nick Defenthaler

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.


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.

Webinar in Review: Taking Control of your Student Loans

Contributed by: Clare Lilek 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

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.


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.