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How Should Medical Residents Tackle Student Loan Debt? PDF Print
Thursday, 12 February 2015

Student DebtAn aggressive approach beats a lax one.

 

Graduate medical school indebtedness averages about $140,000. For graduates of private medical schools, the mean is about $150,000. How do you best whittle that debt down? Should it be your first financial priority, or a lesser one?1

       

Attacking that debt now may be your best move. Look at the interest rates on checking and savings accounts today. Compare that with the interest on a college loan, usually around 5-6%. Those loans are costing you much more than your savings can earn. The takeaway here: ramping up your student loan payments today will effectively save you money over time. That doesn’t mean you have to live like a student until you hit 40, but it strengthens the argument for living on less than what you earn.

 

Do you have a spouse or a partner? Medical residents sometimes have highly educated significant others with large student loan debts of their own. If the two of you are both contending with monster college loans, the argument to try and live on 50-60% of what you collectively make becomes even more compelling.

  

If the payments are just too much right now, what options do you have? If you are a recent college graduate with outstanding federal college loans, look into income-based repayment, or IBR (find out more at ibrinfo.org). Through the IBR option, the federal government gives you the chance to limit the amount of your monthly payment to a realistic percentage of your income. IBR also effectively limits the term of your federal student loan to 25 years of payments – after 25 years under IBR, any debt remaining is forgiven. If you work for a 501(c)(3) non-profit or work in government, your student loans could be forgiven after just 10 years.2

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Pension Plans & Derisking PDF Print
Tuesday, 20 January 2015

Corporations are transferring pension liabilities to third parties. Where does this leave retirees?

 

Jan 20 15 Pension Plans  Derisking A new phrase has made its way into the contemporary financial jargon: derisking. Anyone with assets in an old-school pension plan should know what that phrase signifies.

 

The derisking trend began in 2012. In that year, Ford Motor Co. made a controversial offer to its retirees and ex-employees: it asked them if they wanted to take their pensions as lump sums rather than monthly payments. Basically, Ford realized it could someday owe these former workers more than its pension plan could pay out. The move was clearly motivated by the bottom line, and other corporations quickly imitated it.1

 

If you work for a major employer that sponsors a pension plan, you may soon face this choice if you haven't already. By handing over longstanding pension liabilities to a third party (i.e., a major insurance company), the pension plan sponsor unloads a risky financial obligation.

 

In theory, retired employees tended this kind of offer gain added flexibility when it comes to their pension: a lot of money now, or monthly payments from the insurer for years to come. Does the lump sum constitute a sweet deal for the retiree? Not necessarily.

 

If you are offered a lump sum pension payment, should you accept it? Making this kind of pension decision is akin to deciding when to claim Social Security – you've got to look at many variables beforehand. Whatever choice you make will likely be irrevocable.2

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Yes, Young Growing Families Can Save & Invest PDF Print
Wednesday, 14 January 2015
It may seem like a tall order, but it can be accomplished.

 

See howPlan to put yourself steps ahead of your peers. If you have a young, growing family, no doubt your to-do list is pretty long on any given day. Beyond today, you are probably working on another kind of to-do list for the long term. Where does "saving and investing" rank on that list?

 

For some families, it never quite ranks high enough – and it never becomes the priority it should become. Assorted financial pressures, sudden shifts in household needs, bad luck – they can all move "saving and investing" down the list. Even so, young families have planned to build wealth in the face of such stresses. You can follow their example. It is less an option than a necessity.

 

First step: put it into numbers. Most people have invested a little by the time they reach 30 or 35, and some have invested avidly. A plan is not always in place, however. The mission is simply to "make money" or "build wealth" for "the future."

 

This is good, but also vague. How much money will you need to save by 65 to promote enough retirement income and to live comfortably? Are you on pace to build a retirement nest egg that large? How much risk do you feel comfortable tolerating as you invest? What kind of impact are investment fees and taxes having on your efforts?

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Getting a Jump on Tax Season PDF Print
Tuesday, 06 January 2015

Taxes Scrabble boardWhat should you bring to your preparer?

 

You can file your federal tax return starting January 20. IRS filing season will start right on time in 2015, and there is wisdom in filing your 1040 well before April 15. You can get it out of the way earlier, and if you e-file, you can put yourself in position for an earlier refund.1

 

What should you gather up for your CPA? If you want to save time and possibly money along with it, come to your preparer's office ready with the appropriate paperwork. If you own a business, that list includes all W-2s and 1099-MISC forms you get from clients, any 1099-INT and K-1 forms displaying interest income, your Schedule C and P&L reports, and any and all paperwork you can round up detailing your expenses – your personal expenses too, not only business costs but also any tuition, medical and miscellaneous ones. If you have made charitable contributions worth itemizing, that paperwork needs to reach your preparer. The same goes for documents detailing mortgage interest, other forms of interest paid, and any tax already paid.2

 

If you have receipt management software, your CPA will love you for using it (beats getting a manila envelope, file folder or shoebox full of receipts to sort through). If a calamity or an accident destroyed a bunch of your business records, remember that the IRS may give you a break – but your CPA needs solid proof of the misfortune to try and make a case to the IRS and get you some leniency.

 

What are some things people too often forget to bring?

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The Market Is Up & I Am Not. Why? PDF Print
Monday, 29 December 2014
Remember that the major indices don't represent the entirety of Wall Street. Question

The S&P 500 is up about 10% YTD, why aren't I? If your investments are lagging the broad benchmark, you may be asking that very question. The short answer is that the S&P is not the overall market (and vice versa). Each year, there are money managers, day traders and retirement savers whose portfolios wind up underperforming it.1

 

Keep in mind that the S&P serves as a kind of "Wall Street shorthand." The media watches it constantly because it does provide a good gauge of how things are going during a trading day, week or year. It is cap-weighted (larger firms account for a greater proportion of its value, smaller firms a smaller proportion) and includes companies from many sectors. Its 500-odd components represent roughly 70% of the aggregate value of the American stock markets.2

 

Still, the S&P is not the whole stock market – just a portion of it.

 

You can say the same thing about the Dow Jones Industrial Average, which includes only 30 companies and isn't even cap-weighted like the S&P is. It stands for about 25% of U.S. stock market value, but it is devoted to the blue chips.2

 

How about the Nasdaq Composite or the Russell 2000? The same thing applies.

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