Personal Finance

What is a subprime credit score?

If your goal is to get approved for a new loan or life of credit, your credit score is one of the most powerful tools that you have at your disposal. After all, the score you’re given can determine the types of loans you’ll be deemed eligible for and the corresponding interest rates you’ll be given if you’re ultimately approved. Most people are aware their score rated on a scale from poor to excellent by the credit bureaus. However, they may not be aware that another designation also exists: prime credit score and subprime credit score. Click here to take a closer look at subprime credit scores. It will cover what this designation means, how having a subprime credit score will impact you, and how to improve your credit score to be given better rates. Again, just click here continue reading:

Why you should refinance student loans now, according to a financial expert

Thanks to the Federal Reserve’s decision to cut interest rates, the timing could be right to consider refinancing debt. While you may be wondering if you can get a better deal on your mortgage, credit card or personal loan, it’s also important to think about where student loan refinancing fits into your financial plans. Rates have taken a steep drop mainly thanks to the economic fallout from the coronavirus pandemic. “Interest rates are so low right now because they’re set based on the 10-year Treasury, which is closely tied to the Federal Reserve rate,” said Matt Logan, a certified financial planner based in Greensboro, North Carolina. In March, the Fed instituted emergency rate cuts dropping rates to zero to help stimulate the economy. While that may be discouraging if you’re a saver hoping to bank higher yields, it’s good news if you owe student loans. “Currently for borrowers with good credit, student loan rates and refinancing options can be found in the low threes, which is highly competitive for borrowers,” Logan said. You can use online tools to compare multiple lenders at once and identify whether you’ll have access to beneficial rates. While lower interest rates can be alluring, it’s important to do your research when deciding whether to refinance private student loans. Logan said that starts with considering things like the interest rates you’re currently paying on private student loans, whether those rates are variable or fixed, and your current payment terms. From there, you can begin exploring your options. For example, if you have private student loans with a variable rate Logan said it might make sense to refinance those loans to lock in a lower rate for the long term. Or if you already have private loans at low fixed rates, it may be worth getting a rate quote to see if you could reduce interest even further. “You have very little to lose other than your time in completing the application,” Logan said. And if you have a better credit rating than you did when you initially applied for private student loans, you may have greater odds of qualifying for the lowest interest rates. If you have federal student loans, consider carefully the benefits you might be sacrificing by refinancing them with a private student loan lender. That includes losing potential deferment and forbearance options, as well as the opportunity to choose income-driven repayment plans. Private student loans aren’t required to offer those same benefits so keep the big picture in sight. “Be careful not to just evaluate interest rate vs. interest rate as you might with other loans,” Logan said. If you’re trying to compare student loan refinancing offers the best place to start is online. “It’s easier than ever to apply to refinance student loans privately,” Logan said. A good rule of thumb he recommended is comparing offers from at least three different lenders to get a sense of what interest rates are available. This is something you can easily do online. It’s also helpful to check your credit score before comparing offers or getting a rate quote. This can help you better gauge what type of rates you’re most likely to qualify for. Finally, don’t be afraid to ask for help, said Logan. “If options are overwhelming, consult with a financial professional.” While low-interest rates can make student loan refinancing appealing, it doesn’t always make sense. For example, Logan said it may not be advantageous to refinance federal student loans if you’re on an income-driven repayment plan and you need a lower payment because your income has dropped. Even if you could get a lower rate, your monthly payment may increase, which could make keeping up with your loans harder. Logan said you should also think twice about student loan refinancing if you have the opportunity to qualify for any type of loan forgiveness. And of course, if you’ve already paid off the majority of your loans, refinancing may not yield any real savings, despite lower rates. If you’re on the fence about the benefits of refinancing, there are online tools that can help. A student loan calculator can help you estimate what your payments might be if you decide to refinance.

How to plan for health-care costs during retirement

American’s may be making a very costly mistake when planning for retirement. Financial expert and author of ‘Everyday Millionaires’ Chris Hogan said Americans don’t realize that they need money for their own health care during retirement. “Retirement is one of these things that I’m trying to get people to wake up and actually acknowledge that the government is just not going to save the day,” he told FOX Business’ Maria Bartiromo Opens a New Window. on Tuesday. “People believe that Medicare Opens a New Window. is just going to step in and cover all those costs but people don’t understand the out-of-cost expenses of doctors’ visits and even long-term care are things that Medicare won’t cover.” A new study by T-Rowe Price found that nearly 70% of retirees are most worried about the cost of health care as they head into retirement, despite 71% of recent retirees saying they have enough to pay for health care. But Hogan believes that starting to save, utilizing retirement and health savings accounts, including 401(k) and 403(b) plans, can help to ease these concerns. “The more money we have put away,” he said, “the better we prepared we can be for the future.” Hogan also said talking to an insurance professional can “walk you through the nuances” of Medicare coverage and costs. “There are a lot of terms that can scare you,” he said. “But I want you to be informed.” Hogan said there are also things we can do to help ourselves. “With prescription drugs,” he said, “Finding out the generic brand versus the name brand can save us hundreds of thousands of dollars over the span of our retirement.”

No kidding..

How the new tax law creates a ‘perfect storm’ for Roth IRA conversions

For years I’ve lectured about the wonderfulness of Roth IRAs. While the new Tax Cuts and Jobs Act (TCJA) includes one negative change for Roth IRAs, they are still pretty wonderful. Here’s what you need to know about Roth IRAs and especially Roth IRA conversions in the post-TCJA world. Unlike traditional IRA withdrawals, qualified Roth IRA withdrawals are federal-income-tax-free and usually state-income-tax-free too. What is a qualified withdrawal? It’s one that is taken after you, as the Roth account owner, have met both of the following requirements: 1. You’ve had at least one Roth IRA open for over five years. 2. You’ve reached age 59½ or become disabled or dead. For purposes of meeting the five-year requirement, the clock starts ticking on the first day of the tax year for which you make your initial contribution to your first Roth account. That initial contribution can be a regular annual contribution, or it can be a conversion contribution. For example, say your initial Roth pay-in was an annual contribution made on 4/1/14 for your 2013 tax year. The five-year clock started ticking on 1/1/13 (the beginning of the tax year for which the contribution was made), and you met the five-year requirement on 1/1/18. Unlike with a traditional IRA, you don’t have to start taking annual required minimum distributions (RMDs) from Roth accounts after reaching age 70½. Instead, you can leave your Roth account(s) untouched for as long as you live if you wish. This important privilege makes your Roth IRA a great asset to leave to your heirs (to the extent you don’t need the Roth money to help finance your own retirement). Annual Roth contributions make the most sense for those who believe they will pay the same or higher tax rates during retirement. Higher future taxes can be avoided on Roth account earnings, because qualified Roth withdrawals are federal-income-tax-free (and usually state-income-tax-free too).

For more, click on the text above.

Analysis: Here’s how much it costs to raise a child in the US

The cost to raise a child in the United States is down from last year, but the experience still requires spending a pretty penny, a new report by the U.S. Department of Agriculture (USDA) suggests. The USDA projects that, in 2015 dollars, a middle class married couple will spend between about $12,400 and $14,000 annually, or $234,000 from birth to age 17. Those calculations don’t include pregnancy- or college-related costs. In 2014, the estimate was about $245,000. “This report, which we have produced for 55 years, gives families a greater awareness of the expenses they are likely to face, and serves as a valuable tool for financial planning and educational programs, as well as courts and state governments,” Kevin Concannon, Under Secretary for Food, Nutrition and Consumer Services, said in a news release. Projected costs vary based on region, household income and the number of children in a family.  Families with lower incomes, for example, are expected to spend $175,000 on child-rearing costs up to adulthood, whereas those with higher incomes are projected to spend about $372,000 per child during that period. According to the report, for middle-class married couples, those costs consist of housing (29 percent), food (18 percent), followed by child care and education (16 percent), transportation (15 percent), health care (9 percent), miscellaneous expenses (7 percent) and clothing (6 percent). Families in the urban Northeast, urban West and urban South saw the highest projected child-rearing costs, whereas rural areas saw the lowest. The report found those expenses were about 24 percent lower in rural areas compared to the urban Northeast, the region with the highest expected child-rearing costs. Depending on the family, those costs could potentially balloon by over 25 percent when considering the cost of childbirth and college-related expenses. A July 2015 study published in the journal Health Affairs estimated the median hospital bill for having a child was about $4,000, with the cost ranging from $1,189 to about $12,000. According to the College Board, the average single-year cost of tuition and fees for 2016 to 2017 was $33,480 at private colleges, $9,650 for state students at public colleges, and $24,930 for out-of-state students at public universities.

Wow..  Some very sobering information there.  Definitely worth passing along..

Poll: Two-thirds of US would struggle to cover $1,000 crisis

Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll released Thursday, a signal that despite years of recovery from the Great Recession, Americans’ financial conditions remain precarious as ever. These financial difficulties span all income levels, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Seventy-five percent of people in households making less than $50,000 a year would have difficulty coming up with $1,000 to cover an unexpected bill. But when income rose to between $50,000 and $100,000, the difficulty decreased only modestly to 67 percent. Even for the country’s wealthiest 20 percent — households making more than $100,000 a year — 38 percent say they would have at least some difficulty coming up with $1,000. “The more we learn about the balance sheets of Americans, it becomes quite alarming,” said Caroline Ratcliffe, a senior fellow at the Urban Institute focusing on poverty and emergency savings issues. Harry Spangle is one of those Americans. A 66-year-old former electrician from New Jersey, Spangle said he thought he would always have a job and “lived for today” but lost his job before the downturn. He said he would have to borrow from friends or family in order to cover an unexpected $1,000 expense. “I have a pension and I am on Social Security, but it’s very limiting,” he said. “It’s depressing.” Having a modest, immediately available emergency fund is widely recognized as critical to financial health. Families that have even a small amount of non-retirement savings, between $250 and $749, are less likely to be evicted from their homes and less likely to need public benefits, an Urban Institute study found. “People are extremely vulnerable if they don’t have savings,” Ratcliffe said. “And it’s a cost to taxpayers as well. Lack of savings can lead to homelessness, or other problems.” Despite an absence of savings, two-thirds of Americans said they feel positive about their finances , according to survey data released Wednesday by AP-NORC, a sign that they’re managing day-to-day expenses fine. The challenge for many often come from economic forces beyond their control such as a dip in the stock market that threatens their job or an unexpected medical bill, risks that have shattered the confidence of most in the broader U.S. economy. Yet when faced with an unexpected $1,000 bill, a majority of Americans said they wouldn’t be especially likely to pay with money on hand, the AP-NORC survey found. A third said they would have to borrow from a bank or from friends and family, or put the bill on a credit card. Thirteen percent would skip paying other bills, and 11 percent said they would likely not pay the bill at all.

Some pretty disturbing news in this awful Obama economy..  To read the rest of this article, click on the text above.