Important Details on Student Loan Relief

The White House recently forgave up to $10,000 to student loan borrowers as part of a larger debt forgiveness program. There are still quite a few questions to be answered, but here are some key points to know.

Pell vs. non-Pell: Loan forgiveness of up to $10,000 is available to non-Pell Grant recipients and up to $20,000 for Pell Grant recipients. Only Federal student loans are able to be forgiven. Loans held through a private lender are ineligible for this program.

No Surplus: The amount of student loan forgiveness available depends on how much you still owe. If you only owe $8,000 in federal loans but qualify for $20,000 of relief, you will not be receiving the surplus of $12,000.

Income Cap: Borrowers with pandemic-era salaries under $125,000 (for individuals) or under $250,000 (for married couples or heads of households) are eligible for relief.

Loan Dates: Federal loans taken out after June 30, 2022, do not qualify for loan forgiveness.

Application Process: Depending on your lender, you may already be approved and have your account credited by the end of the year. However, an application is expected to be released in the coming weeks before the student loan payment pause ends on December 31, 2022.

Be Aware: As more details are released, scams may also pop up. Remember to practice caution and good business sense if someone contacts you about your student loans.

As always, I’m happy to help with any questions you may have.

Choose Your Own Retirement Adventure

Retirement Realities

Expectations vs. Reality

Predicting exactly what your retirement will be like is about as possible as a meteorologist predicting the weather correctly every single time. In fact, few retirees find their financial futures playing out precisely as they assumed. But, understanding some of the more common assumptions about retirement may help you get closer to your goal than most.

Do retirees actually “outlive” their money?

Generations ago, as people retired, many did live in dire straits, sometimes “down to their last dime,” which lead to the creation of Social Security. Today, Social Security is still around and a common supplement to one’s retirement strategy. True, health crises can sometimes impoverish retirees, but working with a financial professional may even help you prepare for this hard-to-anticipate cost.

Retiring on 70-80% of your end salary may not be feasible

A quick internet search reveals all sorts of sources instructing new retirees should strive to retire on 70-80% of their end salary, but it can be a tough one to achieve.

Most new retirees often want to travel, explore new pursuits, learn some hobbies, and finally get around to those things they had put off when they were too busy with work. So, in the first few years, some may spend roughly as much as they did before retirement.

For many retirees, median household spending increases on the way to a retirement transition. But, with a smart financial strategy, the annual median household spending in retirement tends to decline gradually after age 65.¹

Practice makes perfect, even in retirement

On average, households headed by those older than 65 spend 25% less annually than younger households (a difference of more than $15,000). While health care spending increases in retirement, other household costs decline, particularly transportation and housing expenses.²

Retirement may arrive earlier than expected

Most people retire closer to age 60 than age 70. Believe it or not, the average retirement age in this country is 65 for men and 63 for women. That means you could find yourself claiming Social Security earlier than you expected if only to avert drawing down your retirement savings too quickly.³

Living the life you want

In general, American retirees seem to have it pretty good. A recent survey found that 7 in 10 retirees are confident they will have enough money saved to live comfortably throughout retirement.⁴

Remain flexible in retirement

Your retirement may differ slightly or even greatly from the retirement you have imagined. Fortunately, it may be possible to create a flexible retirement strategy with the help of a financial professional. It’s never too late to start!

These Months are More Volatile Than Others

We’re entering a tricky time of year: September and October have a reputation for bringing an extra measure of market volatility.

Some of the stock market’s most challenging events have hit in September and October, and other seasonal trends can also play a part. Investopedia found that institutions start preparing for year-end distributions around this time. Plus, individuals tend to reposition their portfolios after the summer months.

This chart shows the average weekly S&P 500 performance since 1923. I’ve highlighted September and October so you can see how they compare to the rest of the year.

So what’s an investor to do? Just be prepared to roll with an uptick in volatility, and don’t let seasonal trading influence your overall strategy.

Working With A Financial Professional

An Everything Bagel of Good News

These days, an encouraging word can feel like a relief. Here are a few positive stories I’ve noticed lately – like an “everything bagel” sprinkled with good news.

• I saw a recent report in The Guardian about the Great Barrier Reef. It shows that despite concerns about pollution and other threats, scientists have seen record coral cover for the Australian aquatic wonder, the most in 36 years.
• I’ll admit I’m a little addicted to my phone. How about you? A University College London study says that smartphone use actually aids memory skills, by taking on mundane memory tasks and freeing your brain up to think about other things. Phew!
• Did you see the emu videos going around? Viral social media star Taylor Blake and her bird pal Emmanuel Todd Lopez are using their newfound fame to provide classroom supplies for teachers around the country.

Hope this makes your day a little shinier! As for the markets, the economy, and all the other financial news, I’m keeping an eye on those stories for you, too.

School’s Back. Who is Paying for It?

Schools across the nation are getting back to business. For students, it’s a return to education after vacations, summer jobs, and other activities.

For parents, grandparents, and guardians, “back to school” often means an outlay of cash. There are computers to upgrade, after-school activities to fund, and college planning to consider.

The White House recently forgave $10,000 to student loan borrowers as part of a larger debt forgiveness program. Further Presidential or Congressional action isn’t guaranteed to future borrowers, underscoring the importance of creating a wise college strategy.

If you look at the students in your life and think, “Time flies…” you’d be right! This is one area where you don’t want to be behind the clock. If you have questions, reach out anytime.

Recession or Growth Scare? Your Guide

I’m hearing a lot of mixed messages these days about the economy. Some headlines say we’re already in a recession; some say one is looming. Others hint that we’ll avoid a recession and have a soft landing. It makes you wonder who’s in charge of putting a label on the economy.

I did a little digging on the topic, and here’s what I found.

The National Bureau of Economic Research (NBER) is the official arbiter of recessions. A recession is a “significant decline in economic activity that is spread across the economy and lasts more than a few months.” You may be surprised that the NBER no longer defines back-to-back quarters of negative Gross Domestic Product growth as a recession–that’s considered old-school economics.

While the current economy includes inflation and rising interest rates, it’s also creating jobs. This economy created over half a million jobs in July alone. Given that indicator, I think it’s safe to say that our economy is expanding, not receding.

An old saying goes, “Don’t worry about the horse. Just load the wagon.” It’s a good time to stay focused on your goals and not worry too much about what you can’t change.

Three Ways the Inflation Act Could Impact You

Have you heard? The Inflation Reduction Act was signed into law on Tuesday, August 16. While the $430 billion package includes many provisions, I thought I’d highlight three key areas where you may benefit the most.

1. Tax credits for energy-related home improvements – The bill includes a 30% tax credit for installing energy-efficient windows, heat pumps, or newer appliances. There’s another tax credit for installing solar panels, and up to $14,000 worth of rebates for upgrading to new, energy-efficient appliances.
   
   
2. Expanded EV tax credits – If you have an electric vehicle, you’re in luck! New tax credits are immediately available, with up to $4,000 offered for used EVs and up to $7,500 for new EVs. There’s also a tax credit for installing an electric charger in your home (just read the fine print to ensure you qualify).
3. Prescription drug caps – Some changes don’t take effect right away. For example, insulin payments will be limited to $35 per month for Medicare Part D beneficiaries starting next year. In 2024, overall out-of-pocket drug costs will be limited to $4,000 annually, dropping to $2,000 in 2025.

New legislation can come with benefits as well as new complexities. If you have questions that we can help answer, please feel free to reach out.

‘Smart Money’ on Interest Rates

Have you ever heard the expression, “What’s the smart money doing?”
“Smart money” is an expression that often refers to experts and suggests that well-informed people have a better perspective on current events and what actions to take. However, there’s little evidence to suggest that “smart money” performs any better.

Still, some “experts” can be confident enough to take action based on their beliefs or opinion. The table below shows what the smart money zeitgeist thinks the Federal Reserve will do during its upcoming meetings on interest rates.

As a reminder, the current target Federal Funds rate is 2.25% to 2.5%. At this point, smart money appears to favor a 0.5% increase over a 0.75% bump at the September 21 meeting. But remember, these percentages can change as quickly as the fluctuating economy.

The Meeting Probabilities table is one of many data points I look at when considering what’s next for markets. But for you, the smartest move is to make sure you’re on track with the investment goals we’ve already outlined.