Category : debt

Don’t Sit: How to Rollover Your 401k

Congrats! You’ve landed a new job (never a doubt) and didn’t even have to list us as a reference (Oh, the accolades we would’ve thrown your way). While you’re busy getting acclimated to your new work digs, if you have a 401k with your previous employer, don’t forget to bring it with you, along with your trusty stapler. Here are a couple options on how to roll it over:    

Direct rollover to new company plan

If you plan on performing a direct rollover of your old account, first check to make sure your new employer’s retirement plan will accept 401k rollovers. If so, contact the 401k administrator at your new company for a new account address [Example: ABC 401k Plan FBO (for the benefit of) YOUR NAME]. Once you fill out all required paperwork, your 401k funds will either be transferred directly from your old plan to the new plan, or mailed to you as a check made out to the new account address. Just make sure to turn it over to your new company’s 401k administrator.

Rollover to an IRA

You can also roll over your 401k to a traditional IRA, either by transferring the funds to your existing traditional IRA, or by opening a new IRA to receive the funds. No dollar limit is required for either one. You can also roll over – or convert – your non-Roth 401k money to a Roth IRA. The taxable portion of your distribution from the 401k plan will be included in your income at the time of the rollover.

Leave it where it is.

Sometimes the best move you can make with your 401k is to not make any move at all. At least for the time being. For instance, If you’re happy with the investment alternatives your former job offers, or if you need some more time deciding your next move, or if your new company requires a certain amount of time before you can participate in their 401k plan, you may be able to simply leave your 401k where it is.  

Cash out.

Please advise, we only recommend this as a “last resort” option. After you leave your previous employer, you can choose to withdraw your 401k funds in a lump sum after leaving your previous employer. To do this, request that your 401k plan administrator cut you a check. While the check amount will look great in your hands, remember that cashing out could put a dent in your retirement savings, plus you may be faced with significant taxes and penalties in the short term, too.

Of course, not all 401k plans are created equal. So before you make a final decision, we’ll help you choose the best fit for your retirement goals. Hey, it’s what we’re here for, so let’s chat.  

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Before Booking Your Summer Getaway …

These Money Moves Can Keep You From Sweating the Details on Vacation 

In the heat of summer, it’s hard not to daydream about lounging on sandy beaches and sipping on your favorite frozen concoction. But is taking a summer vacation realistic for you? Before you start planning your escape, consider these vital financial moves first before spending on your next getaway. 

Pad that emergency fund.

Did you know four out of every ten Americans can’t afford a $400 emergency, according to a report from the Federal Reserve Board? Before you hit the road on that summer trip, make sure you’re saving cash to cover any unexpected injuries, illnesses or life-threatening home repairs. Once you have at least $1,000 saved, congratulations! You’re doing better than most. From there, commit to saving at least three to six months of living expenses to ensure you’re protected against any future emergencies.

Don’t be tardy paying down student debt.

Student loans are becoming more and more of a necessary evil for many Americans seeking higher education. The average student loan debt for a graduate in 2017 was $39,400, according to Student Loan Hero. Ensure you have a plan to pay back your debt that works within your budget before you start looking at vacation destinations.

Stay focused on future you.

We all know we should be saving as much as we can for retirement. But if you’re looking for a hard number, 10% to 15% of your income is a good rule of thumb. Once you’ve established the habit of saving for retirement, it’s important to save the right way – by investing in a mix of stocks and bonds in line with your age and risk tolerance. This is where blooom helps.

Save for vacay before spending on vacay.  

Taking a summer vacation is more of a luxury than a cultural norm, according to a recent survey from Bankrate. Forty-nine percent of Americans don’t plan to take a vacation this summer, and one in four survey respondents are not taking a summer vacation because they can’t afford it. Only 36% of respondents who get paid vacation days plan to use all of them this year. So how can you get that well-deserved R&R?

If you think you might have to stay home until next summer, consider changing your destination and/or accommodations to something more practical first. Check out the New York Times’ recent article about the 11 Ways to Save Money When Booking Travel for valuable tips and tricks to maximize your vacation budget.

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Springtime and Student Loans

Springtime also means graduation time for millions of high school students. This is often a time of mixed emotions for those students’ parents. On one hand, you celebrate the accomplishment of your child. On the other hand, you feel a bit nostalgic about how fast the time has gone. It feels like just yesterday that you tearfully walked your son or daughter into their first day of kindergarten.

Student Loans are the Norm

This can also be a time of great financial stress for parents. Especially for the those Americans who aren’t able financially to simply stroke a check for their child’s college education. For a few, there are academic, athletic, or need-based scholarships and grants. But overall, those are still few and far between. More and more, we see college graduates leave school with a load of student debt. According to debt.org, the average college graduate in 2017 had $38,000 of student loan debt.¹ The number of graduates (undergrad or post-grad) with over $100,000 of student loan debt continues to climb at an alarming rate.

The Changing Cost of College Over Time

In fact, over just the last decade we have seen the cost of college growing at a rate of almost 5%.² This is twice the rate of inflation in this country over the same period. Long gone are the days of paying for your entire college education through a summer job. The average cost of a 4-year in-state college education is $39,880 (4 years at Private college average will run you nearly $138,960)³. I certainly am not aware of any summer jobs that are paying this much! So it’s no surprise that student loan debts are approaching epidemic proportions (over $1.49 trillion in total outstanding student loan debt in the US as of December 20174).

The Impact of Student Loans on Jobs

For graduates leaving college with lots of debt, there will absolutely be unintended negative consequences. For example, we see a decline in the number of graduates going into badly needed social services like teaching, nursing, and social work. It is clear to me that a lot of this is due to the burden of debt. If you have $100,000 of student loan debt, the attraction of a higher paying job in finance or consulting can easily sway your decision away from what could be your passion—be it teaching or social work.

Additionally, we see a decline in entrepreneurship from our college graduates. Starting your own business is incredibly hard as it is. Tack on six figures of student loan debt, and the allure of a salary can be too tempting to pass up. I shudder to think of the entrepreneur that could have found the cure for cancer but ended up working on Wall Street so they could pay off their student loans.

Consider This When Your Child Applies for College

My advice to parents of high school students today: If you are unable to pay for a significant portion of the cost of college, help your son or daughter carefully weigh this decision. This is most important if they are considering a private or out-of-state college. I would not expect the majority of 18-year-olds to understand the financial implications of their college choice. I often hear stories where people carry student loan debt well into their 40s and even 50s. Therefore, if we burden generations of students with debt that might take decades to pay off, we also limit how much they can save for their retirement. We owe it to our kids to help them understand the expense of college before they take on an obligation that could affect them financially for the rest of their life.

 

Chris Costello
Chairman & Co-Founder


1 https://www.debt.org/students/
2 https://www.savingforcollege.com/tutorial101/the_real_cost_of_higher_education.php
3 https://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064
4 https://www.federalreserve.gov/releases/g19/current/default.htm


Optimizing your retirement savings not only helps you, but indirectly also your child. Not a blooom member yet? Get started with a free analysis to see how we could optimize your savings.

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Study Abroad at 37? How to Hoard Cash for Return to College

This is part two in a three-part series addressing how people can save for college or reduce or eliminate student loan debt.  In our first post, we shared some tips that are “better than faking your death” to pay off student loan debt. In this sampler tray (or beer flight) of savings ideas, we’ll share how adults who are looking to return to college can find financial assistance or reduce the cost of post-secondary education.

We covered the reasons why in more detail in our first post, but we’re chatting about college savings and student loan debt for two reasons:

  • First, plain and simple. The quicker you can wipe out debt, the quicker you can start saving properly for other life events.
  • Second, we recently launched a personal financial advice service. Clients can access it via mobile or desktop using the chat feature on the bottom-right of the screen. Since we’ve launched, the topic of student loan debt has been a top question posed by our clients.

A Happy Hour of Options for Adults Wanting to Return to College

So maybe you’ve always eyed going back for that graduate degree. Perhaps you launched yourself into the workforce early and never quite finished your undergrad. Or you’re looking to make a career change. Whatever your reason for returning to the BIG U, many options exist for scholarships, financial assistance and strategies to reduce your overall cost.

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Student loans :(

Faking Your Death to Pay Off Student Loan Debt? 6 Better Ways

How much do you owe in student loan debt? Enough to consider fleeing the country? (All of a sudden I get why many recent U.S. college graduates want to backpack Europe and never return.) Or worse. You contemplating faking your own death?

According to The Wall Street Journal, the number of Americans with federal student loans grew to 42 million in the last decade. (1.) In that same article, they quote a gentleman whose solution to dealing with his student loan debt is to stretch it out until he dies.

Don’t believe me? Read the entire Journal article. (And BTW … only Federal loans discharge with death. Private loans do not.)

Now that I’ve thoroughly depressed you, you may be asking, this isn’t about retirement or my 401k.

Why Are You at blooom Talking About Student Loan Debt?

We’re addressing student loan debt for two reasons.

First, you’re right, we focus a great deal on helping you with your retirement. We want you to wipe out this student loan debt so you can save more for it. But we also recently launched a personal financial advice service that clients can access via mobile or desktop using the chat feature on the bottom-right of the screen.

Once we launched the service, how to deal with student loan debt was one of the most frequently asked questions posed to me and my advisor team.

We’ve seen so many varied inquiries about student loan debt that we’ll be running a three-part series:

  1. Tackling debt: This post will help if you currently have student loan debt and you’re looking to pay it off faster (if you’re exploring forgiveness options, I recommend reviewing the following guide.
  2. Working adults returning to college: Later this summer, we’ll talk about how non-traditional students or working adults who want to go back to school can proactively address (read: avoid or take on as little as possible) student loan debt.
  3. New college students: Our final post will provide tips and resources to high school students and parents on ways to avoid student loan debt.

Who knows? Perhaps we’ll receive some real-world triumphs of people who’ve defeated this insidious whack-a-mole known as student loan debt (Hint, hint. If you’re a victor, message us with your story. Let us celebrate your achievement with a proper victory lap).

First, the Simplest Thing You Can Do to Get Out of Student Loan Debt

Okay. I’m NOT going to be jerk and say the simplest way is by never getting into student loan debt in the first place. Too late for that.

So …

1. One of the simplest things you can do is set up automatic payments. It works for saving and it works for tackling that debt head on. To sweeten the deal, some services even offer discounted interest rates if you set up auto-pay.

Auto-pay

We like it simple here at blooom. Set it and try to forget it.

How About the Most Effective Ways to Tackle Student Loan Debt?

I’ve covered the simplest tip, but what about the most effective. My next five tips could provide the points to pierce that ballooning student loan debt.

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