If you are in the SAVE repayment plan, your loan is now in forbearance indefinitely.  That means no loan payments are due until this issue is resolved, which could take a while.  You also will not be charged any interest on your loan while it is in forbearance.

The important difference with the SAVE forbearance relative to the previous pandemic forbearance is that you will not earn Public Student Loan Forgiveness (PSLF) or Income Dependent Repayment (IDR) forgiveness credits.  This could ultimately lead to forgiveness taking longer than you planned.  Click here to access the U.S. Department of Education’s updates.

With SAVE repayments paused what should you be doing?

• Login to your student loan account and make sure that you are not accruing interest on your loan, loan servicers can make mistakes.
• Use this opportunity to shore up your emergency fund, save toward a goal or pay down high interest credit card debt by redirecting your monthly loan payment.
• Don’t let the money that would otherwise go toward monthly student loan payments get spent elsewhere in your budget, then when loan payments resume, you will have to make difficult adjustments.
• If you are in the PSLF close to the 120 monthly payment milestone, you may decide to change your repayment plan to avoid delaying forgiveness. Carefully weigh the pros and cons of making a change.
• It is possible that the SAVE repayment plan will end. Explore the other repayment plans so you know what to expect and can start planning for your future!

It has been an interesting few years for student loan borrowers with repayment stopping and re-starting.  In addition, the uncertainty of loan forgiveness may be making planning for the future difficult.  On the bright side of things…you have a wonderful opportunity to get ahead on your other financial goals right now!  If you want to take full advantage of this opportunity but don’t know where to begin, give us a call and we would be happy to help!

The post SAVE Plan Blocked…Student Loan Repayment Uncertainty Continues appeared first on MainStreet Financial Planning.

As a parent and financial planner, ensuring that we make the smartest financial decisions for our families is crucial. In this article, we will explore three popular savings and investment options: 529 Plans, Roth IRAs, and Real Estate. Each has unique benefits and drawbacks, and understanding these can help you decide which fits best with your financial situation, risk tolerance, and goals.

529 Plans

529 Plans are specialized savings accounts designed to help families save for future education costs. Here are the key benefits and drawbacks:

Benefits:

1. Tax-deferred growth: Earnings grow tax-deferred, meaning you won’t pay taxes on the account’s earnings until the money is withdrawn.
2. Tax-free withdrawals for qualified expenses: Withdrawals used for qualified education expenses are tax-free, which can lead to significant savings.
3. State tax benefits: Many states offer tax deductions or credits for contributions to a 529 Plan.
4. High contribution limits: These plans allow for substantial contributions, which can grow significantly over time.

Drawbacks:

1. Impacts financial aid: Assets in a 529 Plan can affect eligibility for financial aid.
2. Must be used for qualified expenses: Withdrawals not used for qualified education expenses may incur taxes and penalties.
3. Potential penalties: If funds are not used for education, they may be subject to penalties and additional taxes.

Roth IRAs

Roth IRAs are individual retirement accounts that offer unique advantages for both retirement and education savings.

Benefits:

1. Tax-free growth: Contributions grow tax-free, and qualified withdrawals in retirement are also tax-free.
2. No FAFSA impact: Roth IRA assets are not considered on the Free Application for Federal Student Aid (FAFSA), which can be beneficial for financial aid purposes.
3. Dual-purpose: Roth IRAs can be used for both education expenses and retirement savings, providing flexibility.

Drawbacks:

1. Contribution limits: Annual contribution limits are relatively low compared to other savings vehicles.
2. Can impact retirement savings: Using Roth IRA funds for education expenses can reduce the amount available for retirement.

Websites Where You Can Open Roth IRA Accounts: Vanguard, Fidelity, Charles Schwab.

Real Estate

Investing in real estate can provide substantial returns, but it also comes with its own set of challenges.

Benefits:

1. Continuous rental income: Real estate can generate steady rental income.
2. Property appreciation: Properties often increase in value over time, contributing to overall wealth.
3. Higher income potential with Airbnb rentals: Renting properties on platforms like Airbnb can yield higher income than traditional rental agreements.

Drawbacks:

1. Requires property management: Owning rental property requires ongoing maintenance and management.
2. Market risks: Real estate markets can be volatile, with property values subject to fluctuations.
3. Compliance with local regulations:Property owners must adhere to local laws and regulations, which can be complex and vary by location.

Anna’s Takeaways

When choosing the best savings or investment option, consider your financial situation, risk tolerance, and long-term goals. Here’s a quick summary:

– 529 Plans: Ideal for those seeking a simple, tax-advantaged way to save for education.

– Roth IRAs: Great for individuals who want flexibility and a dual-purpose account for education and retirement.

– Real Estate: Offers consistent income potential but requires active management and carries market and liquidity risks.

Regardless of the option you choose, it’s essential to consult a financial advisor to tailor your savings strategy to your unique circumstances. Diversifying your savings strategies can also help mitigate risks and maximize returns. With careful planning and informed decisions, you can secure a financially stable future for you and your family.

Website & Links mentioned:

• Websites Where You Can Open Roth IRA Accounts: Vanguard, Fidelity, Charles Schwab.
• Podcast Episodes to Check Out:
  • #210 – 529 College Savings Plan: Getting Started [Part 1]
  • #211 – Maximizing 529 Plans: Tax Benefits and Best Practices (Part2)

The post Comparing College Savings Options: 529 Plans, Roth IRAs, and Real Estate Investments appeared first on MainStreet Financial Planning.

529 Plans: The Popular Choice

529 college savings plans offer tax-deferred growth and tax-free withdrawals for qualified education expenses. They also provide potential state tax deductions or credits for contributions. Here’s a closer look at the benefits and drawbacks:

Check out epissode #241 – Which is Better for College Savings? 529 Plans vs. Roth IRAs & Real Estate, where I cover in-depth 529 plans and how you can combine them with Roth IRAs and Real Estate.

Coverdell Education Savings Accounts (ESAs) formerly  Educational IRA

A Coverdell ESA is a tax-advantaged account allowing up to $2,000 per child per year until the child turns 18. Funds can be used for qualified education expenses from elementary school through college.

Benefits:

– Flexibility in Usage: Funds can be used for a wide range of educational expenses, including elementary and secondary education.

– Broader Range of Investment Options: Unlike many 529 plans, Coverdell ESAs allow investments in individual stocks, bonds, and mutual funds, providing more control over investment strategies.

Expenses that can be covered:

• • Tuition
  • Mandatory fees
  • Books and supplies required for enrollment or attendance
  • Computers, equipment and other technology required for enrollment or attendance

Drawbacks:

– No Tax Deduction for Contributions: While the earnings grow tax-free, contributions are not tax-deductible.

– Income Caps: Contributions are limited if your MAGI exceeds $110,000 (individual) or $220,000 (married filing jointly), potentially excluding higher-income families.

-Will be counted on FAFSA-  5.64% of EFC (expected family contribution)

Pre-Paid Tuition Plans- aka 529 plans

Pre-paid tuition plans, a type of 529 plan, allow you to pay future college tuition at today’s rates, potentially leading to significant savings.

Benefits:

– Locks in Tuition Rates: Protects against future tuition increases, offering substantial savings.

– State Guarantees: Many state-sponsored pre-paid tuition plans guarantee the investment, reducing financial risk.

Drawbacks:

– Limited to In-State Colleges: Typically only applies to public colleges in the state offering the plan, which may limit options if your child decides to attend an out-of-state or private college.

– Restricted Usage: Generally covers only tuition and mandatory fees, excluding room, board, and other expenses.

Custodial Accounts

UGMA and UTMA accounts are custodial accounts that provide more flexibility in investment choices and usage.

Benefits:

– Investment Flexibility: Offers a wide range of investment options, including stocks, bonds, mutual funds, and real estate.

– No Usage Restrictions: Funds can be used for any purpose once the child reaches the age of majority (usually 18 or 21).

Drawbacks:

– No Tax Advantages: Earnings are subject to taxes, and contributions are not tax-deductible.

– Impact on Financial Aid: Assets in these accounts are considered the child’s and can reduce financial aid eligibility, as up to 20% of the account balance is counted in the SAI.

Investment Accounts

Taxable brokerage accounts offer the potential for higher returns with investments in low-cost index funds or ETFs.

Benefits:

– Higher Potential Returns: Over the long term, diversified investment portfolios can offer significant growth.

– Flexibility in Usage: Funds are not restricted to education expenses and can be used for any purpose.

Drawbacks:

– Market Risks: Investments are subject to market fluctuations, which can affect the value of the account.

– Taxable Gains and Dividends: Earnings are subject to capital gains taxes and dividends are taxable, which can reduce overall returns.

Making the Right Choice

Choosing between a 529 plan and other college savings options depends on your financial situation, risk tolerance, and long-term goals.

– 529 Plans: Best for families who want a straightforward, tax-advantaged way to save for college.

– Coverdell ESAs: Ideal for those seeking flexibility in using funds for various educational expenses and broader investment options.

– Pre-Paid Tuition Plans: Suitable for families certain their child will attend an in-state public college.

– Custodial Accounts: Good for parents who want flexible investment choices and usage beyond college expenses.

– Investment Accounts: For those willing to take on market risks for potentially higher returns and flexibility in fund usage.

Choosing the right college savings option depends on your family’s unique financial situation and goals. Whether you opt for a 529 plan, Coverdell ESA, pre-paid tuition plan, custodial account, or investment account, each has its own benefits and drawbacks.

Consider what best aligns with your needs and don’t hesitate to seek personalized advice from a financial advisor. By thoughtfully selecting and possibly diversifying your savings strategies, you can confidently support your child’s education and secure your family’s financial future.

Website & Links mentioned:

• Websites Where You Can Open Investment & Custodial Accounts: Vanguard, Fidelity, Charles Schwab.

Podcast Episodes to Check Out:

• #210 – 529 College Savings Plan: Getting Started [Part 1]
• #211 – Maximizing 529 Plans: Tax Benefits and Best Practices (Part2)
• #241- Which is Better for College Savings? 529 Plans vs Roth IRAs vs Real Estate

The post 529 Plans vs. Coverdell ESAs, Prepaid Tuition Plans, Custodial Accounts, and Investment Accounts appeared first on MainStreet Financial Planning.

The post College Planning with Help from Grandparents! appeared first on MainStreet Financial Planning.

1. Plan Early

Planning early is essential for any wedding, but it’s especially important for a destination wedding. Notify your family and friends as soon as possible so they can arrange time off work, update passports, and book travel. Whether you’re getting married within the US at the beach or in the mountains or somewhere outside of the US, like Mexico or Italy, give yourself at least a year to fully plan your destination wedding.

2. Get Some Help

Using a specialist or company that focuses on destination weddings can save you time and stress. They act as a hybrid of a wedding planner and travel agent. My sister’s planning company helped secure the wedding date, coordinate a block of hotel rooms for guests at a group discount, and manage transportation from the airport to the hotel. They also handle any travel or room changes needed, making the process smoother.

3. Choose Off-Season Dates

Opt for an off-season date to save on costs. My sister and her fiancé are getting married at the end of October, which is off-season in Mexico. This choice resulted in lower costs for flights, accommodations, and the wedding venue itself. Off-season weddings can significantly cut expenses while still providing a beautiful setting.

4. Know the Rules

Be aware of any extra fees for bringing your own vendors. If you prefer a specific photographer or officiant over those offered by the resort, there may be additional charges for “outside vendors.” To simplify budgeting and reduce costs, many hotels offer all-inclusive packages that cover the ceremony, reception, food, and drinks.

5. Use Travel Rewards

Leverage travel rewards and cash-back incentives to save money. This can be especially beneficial for a destination wedding, potentially saving you thousands on travel expenses. Use points for flights and accommodations to reduce overall costs.

I have the unique insight of helping my sister plan her wedding, and I’ve seen both the successes and challenges of planning a destination wedding. I hope these tips help you save money if you or a friend or family member decides to plan a destination wedding.

Other resources:

Budgeting for wedding season

Tips to save money on travel

The post 5 Money Saving Tips for a Destination Wedding appeared first on MainStreet Financial Planning.

FAFSA has announced more delays in relaying information to colleges, which means that financial aid packages could be delayed, and some colleges are already pushing decision day out a month from May 1^st to June 1st.  Needless to say, all of this is frustrating but out of your control!  So instead of feeling stressed and worried, use this time to work on your college cash flow plan so you are ready for anything.

There will be out-of-pocket expenses once your student goes to college.  Developing a college spending plan can help you identify the out-of-pocket expenses for the year, so you know what to expect.  Having this awareness will help you determine if you already have the cash on hand or if will you have to adjust your “normal” spending to build up more cash reserves.  Below is a list of potential out-of-pocket expenses you can start planning for:

• College Payments– Once your child commits to their college of choice, you will have to make a down payment ($50-$500) immediately. Then you will make lump sum payments for each semester (or trimester depending on the school’s schedule).  Some schools offer monthly tuition installment plans but beware of fees.  Now is a good time to make sure you know how to make withdrawals from your 529 Plan.
• Travel– Travel is not a qualified 529 Plan expense, so travel may be an out-of-pocket expense for your family. Perhaps you will need to make a last-minute trip to visit a school or two before your student can decide on which school to attend.  Also, if your student will be going to college out-of-state planning for trips to return home for holidays needs to be factored into your out-of-pocket expenses.  Also, will you go to parents’ weekend in the fall?  You will want to set aside funds for this too.
• Dorm Supplies– Your student may need some supplies for their dorm room/apartment. Many colleges now offer on-campus apartments, they typically come furnished, but your student may need kitchenware, bedding, and storage solutions.
• Student Club Memberships– Does your student plan on joining a fraternity, sorority, or other club? These membership fees and costs are out-of-pocket expenses.
• Dining Out/Entertainment– Set a budget with your student. The dangerous combination of food delivery services, peer pressure, and a busy college student can really rack up food expenses.

Be gentle with yourself, this is a big life transition.  I found this time particularly joyful with my two sons!  They both went to public in-state schools that they were thrilled to be attending.  It is really fun to watch your kids fly away from the nest!  My husband and I are still navigating many of these out-of-pocket expenses (we have a Senior at UCSB living in an off-campus apartment).  There will be unexpected things (parking tickets, crazy food bills, etc.), just keep talking with your student and adjust the plan when it is no longer working.

The post College Out-of-Pocket Expenses appeared first on MainStreet Financial Planning.

At MainStreet Financial Planning, every member of our dedicated team is proudly affiliated with the Garrett Planning Network (GPN). This affiliation goes beyond a mere association; it signifies a commitment to providing exceptional service and embracing a unique model of financial planning. Our approach aligns with the five defining characteristics upheld by the Garrett Planning Network that set us apart in the realm of financial planning.

Here is what makes us different:

1. Hourly, Fee-Only Service:

We operate on an hourly or, flat, fee-only basis, ensuring transparency and alignment of interests with our clients. Importantly, we do not accept sales commissions or any compensation beyond what is directly agreed upon with our clients. Clients pay only for the time your advisor actively works with you.

2. No Minimums, Maximum Accessibility:

Unlike traditional financial advisors, being a Garrett Advisor means that we have no income or investment account minimums for hourly engagements. This eliminates barriers, making our services accessible to individuals across different income brackets.

3. No Product Sales, Pure Expertise:

This is probably the most distinctive part of being a Garrett Planning Network advisor. We, as Garrett Advisors, distinguish ourselves by not selling financial products. Instead, we offer our time and expertise to guide clients through their financial journey. This commitment to objectivity ensures that the advice provided is solely focused on the client’s best interests.

4. Tailored Recommendations:

While not selling products, we do offer specific recommendations and opinions on various products and services that may be suitable for a client’s situation. Additionally, we can guide clients on where to obtain these products or services. If requested, we can also assist with plan implementation so whether it is rebalancing your employer’s 401(k) or giving a recommendation for how to invest your ongoing IRA or brokerage account contributions so that they align with your risk tolerance and time horizon, we can help regardless of whether they are held at Schwab, Vanguard, Fidelity, Betterment, etc.

5. Accessible Financial Guidance for All:

This is my favorite quality of being a Garrett Planning Network advisor – with fees structured as flat or on an hourly basis, MainStreet provides accessible options for individuals at every stage of their financial journey. Whether you’re a beginner with a quick question, a middle-income earner seeking ongoing financial assessment, or a do-it-yourself enthusiast in need of direction, Garrett Advisors cater to diverse financial needs. Our team has a wealth (pun intended) of knowledge ranging from:

• Debt payoff plans
• Experience with government employees, including both military and civilian
• Evaluating equity compensation
• Helping small business owners
• Working with individuals who are widowed or divorced.
• Planning for college
• Taking a gap year
• Relocating to another state or country
• Retirement income planning
• And so much more

In embracing the Garrett Planning Network model, clients gain not just financial advice, but a partnership built on trust, transparency, and a commitment to their financial well-being. If you’re intrigued by this innovative approach to financial planning, feel free to reach out with any questions. I say this with the most humility one can communicate in a brief article that our entire team at MainStreet loves what we do, and we are here to guide you every step of the way.

The post Unlocking Accessible Financial Advice The Garrett Planning Network Advantage appeared first on MainStreet Financial Planning.

In the past, the daunting task of filling out the FAFSA caused many families to elect to not complete the application.  That is why the Government has worked on simplification of the process to get more aid to more families.  Don’t miss an opportunity to potentially reduce the cost of college for your family.

Here is what to expect when completing the new FAFSA:

Federal Student Aid (FSA) ID: The student and each parent/contributor will need to create their own FSA ID for the FAFSA to be complete.  It can take up to 3 days to complete the registration process, so be sure to factor that into the timing.  Create an account at studentaid.gov

Shorter Application: The questionnaire is down from 108 questions to 36 (in some cases as few as 18 questions will need to be answered).  The direct IRS import of tax data and smart question skip technology reduced the number of questions.  Now there is no reason to skip this important step in the college application process!

Expect Delays: Usually, the FAFSA opens on October 1 each year, but this year with a January 2024 release families have less time to complete the form and colleges could be delayed with sending out financial aid packages to applicants.  Also, FAFSA will initiate pauses for site maintenance and applicants may experience a waiting room feature to control website volume.  All of this could lead to frustration…but keep calm and keep going!

Sibling Discount Removed: If you have multiple kids in college at once there is no longer a discount.  For some families, this change will mean that you may lose some aid for the 2024-2025 school year.

Direct Import of Tax Data from IRS: You will need to agree to have your tax data automatically imported from the IRS.  Your student will not be eligible for financial aid if you do not agree.

Cash Support No Longer Adverse Impact on Aid: For example, if the student receives a non-taxable gift from a grandparent to help pay for college, that gift will not reduce financial aid eligibility.

New Lingo: The Expected Family Contribution (EFC) has been replaced with the Student Aid Index (SAI).  The SAI is used to determine the eligibility for financial aid.  The lower your SAI the greater the need for aid.  The calculation uses the income and asset information you provide through the FAFSA.

Hopefully, completing the new FAFSA is stress-free and results in the opportunity to reduce the cost of college for your family! If you need help with a plan to pay for college or strategies to maximize your eligibility for student aid, please reach out.  I have put my two boys through college, I will use my personal experience along with my formal training to create a plan that is right for you!

The post New FAFSA goes live this month! appeared first on MainStreet Financial Planning.

Buying a home

Pro – You can build equity Real estate can be an investment that appreciates over time while renting is often seen as an expense without any kind of return.

Pro – There are tax benefits Homeownership can offer tax benefits like deductions on mortgage interest and property taxes. Furthermore, if you have a home office – there are also potential deductions you can take if you meet the criteria. These are subject to certain limits but are advantageous when taxes are due

Con – Higher ongoing costs Owning a home requires higher ongoing costs than renting, such as home insurance, property taxes, maintenance, and repairs. If the fridge stops working or your roof needs to be replaced those expenses can add up quickly and it is wise to consider if you can cover the additional costs that come with being a homeowner.

Con – More upfront costs When you are renting you may have to put up a security deposit and/or 1-2 month’s worth of rent. However, when you purchase a home, the upfront costs can be substantial. Not only is there a down payment but there are also fees for closing costs, inspections, appraisals, and other costs you may be responsible for covering. Be sure to work with a realtor who can inform you of the full amount of money you will need to purchase your new home.

Renting a Home

Pro – Flexibility – If you need to move for work or are unsure if you want to stay in the area – it is much easier to move if you are renting. There are no worries about having to sell a house if you need to move for work or want to move closer to your family.

 Pro – If something breaks, you’re off the hook (normally) – Most of the ongoing maintenance costs for renters are taken care of by the landlord. If the air conditioning stops working, you may be hot for a few days but you won’t have to fork up $5k for a new HVAC unit.

Con – You have less control Your landlord can decide to raise your rent, sell the property, or choose to not renew the lease. These are worth considering if you want to stay in an area for longer than a year (or the term of the lease).

Ultimately, your specific financial situation, lifestyle preferences, and long-term goals all play a significant role in the decision between renting or buying a home.

Join us next Tuesday, August 15th at 4:30PT/7:30ET at our Chalk Talk to discuss this topic in more depth with Tori Young of Exit Realty.

The post Renting vs. Buying a Home – Which is right for me? appeared first on MainStreet Financial Planning.

Beginning September 1, 2023, interest will resume accruing on any outstanding federal student loan balances and payments will begin again in October. Here are some tips to get ready for repayment:

• Make sure you know who your loan service is and make sure your login information still works for their website. You may need to reset your password or create a new account if your servicer has changed.
• Check your account to ensure that your information is up to date.
• Review your balance and monthly payment amount, it may be necessary to call your servicer so you know exactly what the amount may be.
• If you have the amount to pay your account in full, we recommend doing so before September.
• If you need to continue payments, examine your monthly cash flow and discretionary spending, and if necessary, see where anything can be trimmed so that you have enough money for your student loan payment to fit into your budget.
• Don’t think you can make your payments? Make sure to contact your servicer as soon as possible to understand the different payment plan options available to you.

The post Student Loan Update July 2023 appeared first on MainStreet Financial Planning.