Five Things Small Business Owners Need To Know About Retirement

Five Things Small Business Owners Need To Know About Retirement

A majority of America’s small business owners are not saving for retirement. Many know they should, but feel that saving will hurt their business. According to David Deeds, Schulze Professor of Entrepreneurship at the University of St. Thomas in Minneapolis, small business owners do not save because they consider the business their retirement plan. “The plan is that when they retire, they are either going to transfer the business to a family member in exchange for a share of future wealth or a buyout or they are going to sell it off and turn that into cash.”

However, many circumstances may prevent the sale of a small business. Even if the business can be sold, the sale may not provide enough income to cover one’s entire retirement. Entrepreneurs may also have to retire earlier than they expected due to health problems or other unforeseen events.

Having a well-rounded retirement plan can help protect entrepreneurs against these and other risks. Here are five things small business owners need to know to plan their retirement effectively.

First, know the numbers. Small business owners should calculate how much money they will need to live on in retirement. Factors such as where they want to live (a pricier home or a modest apartment), how they want to spend their time (traveling or working part-time), and healthcare costs play an important role in this assessment.

Once they have an idea of how much they will need, entrepreneurs should get a valuation of their business to see if its sale or transfer is a viable retirement option. As part of their valuation, small business owners should consider whether the business can operate without their involvement. If it cannot, it may be difficult to sell or generate income from it once the business owner retires.

Next, determine a goal. This might seem elementary, but the power of having a firm vision for the future of a small business and retirement cannot be overstated. Entrepreneurs who set firm goals take steps to make sure their goals are met. This helps them find the best tools to save and also prepares them to wind down the business when it is actually time to retire.

Know the best tools. Business owners do not need to move significant amounts of money from their business in order to start saving for retirement. Investing just a little bit can help entrepreneurs save on their present-day taxes until they make withdrawals in retirement. There are four main instruments to choose from.

SEP-IRA: Like a traditional IRA, this retirement plan is tax-deductible. For returns filed this year, small business owners can contribute up to 25% of their income or $54,000. A SEP-IRA is a great retirement plan for sole proprietors because it is self-directed, but the 401(k) described below offers similar benefits but may be more cost effective due to lower administration fees.

Simple IRA: This plan is designed for entrepreneurs who employ 100 or fewer employees. Like for a 401(k), contributions are taken directly from employee paychecks and are pre-tax. Contributions cannot exceed $12,500 in 2017, but employees who are 50 or older may contribute up to $15,500.

Solo 401(k): This plan is for sole proprietors but may include the proprietor’s spouse. Proprietors may contribute up to 25% of their salary plus up to $18,000 ($24,000 for people aged 50 or older), but the total contribution may not exceed $54,000. A spouse who works in the business may also contribute the same amounts.

Simple 401(k): Small businesses with 100 or fewer employees may utilize this plan. Owners and employees have the option to contribute up to $12,500 this year, or $15,500 for people aged 50 and older. This plan also allows for borrowing against it and making penalty-free withdrawals to cover financial hardship.

A sole proprietorship, a partnership, limited liability company, or corporate can qualify for every plan except the SEP-IRA.

Keep investments simple. Most small business owners should probably invest in a globally diverse collection of low-cost index funds. An index fund invests broadly across entire markets like the U.S. stock market, U.S. bond market, and developed foreign stock markets.

Another option for simple investment is a target-date fund, which automatically adjusts the balance of fixed-income investments based on age and the selected date.

Diversify all investments. Diversification does not apply only to the retirement plans described above but to any asset a small business owner may choose to invest in. Getting all of one’s savings or investments caught in one basket can be risky.

This is especially true of home ownership. The real estate market is cyclical, so it can yield high returns or unexpectedly big losses. Small business owners who place most of their net worth in their home are cautioned to spread their wealth around.

Put it all together. With their numbers as their foundation and their goals in mind, small business owners have terrific opportunities to save for retirement. By utilizing the tools we describe to invest in a diverse portfolio, more small business owners can effectively build their wealth without hurting their present-day business growth.

Would you pass this three question retirement planning quiz?

Would you pass this three question retirement planning quiz?

Reports claim that 10,000 Baby Boomers are retiring every day. But many of them are retiring into a standard of life that is significantly less ideal than they imagined. You don’t want that for you.

Don’t worry. If you’re smart, retirement will be a breeze. It just boils down to asking the right questions. 

Those questions are:

  1. Can you afford it?
  2. Where should you retire?
  3. How do you maximize social security benefits?

Retiring broke

One of the biggest fears people have about retirement is that they’ll retire broke. The problem with this way of thinking is that retirement isn’t an event. Rather, it’s a process that starts even before you reach your prime working years.

Unfortunately, more than half of Americans go into retirement broke, with nothing to show for the 35+ years they’ve been working. According to a GoBankingRates research, there is a significant chunk of the population that has less than $10,000 saved for retirement. Worse, many don’t have any savings at all.

A survey by Bank of America Merrill Lynch revealed that about 81% of Americans don’t even know how much they need to save for retirement.

Below are 3 questions to help you be more proactive in how you handle the retirement process.

1. “Can you afford it?”

The current economic environment has led to a rise in the number of people who are ready to retire but can’t. The common phenomenon is a hybrid; people are in retirement but they’re still working.

So, how much money do you need to avoid this situation?

To be able to answer that question, it boils down to one simple idea: your expenses need to be less than your income. There’s more to it, but that’s the basis.

Being retired means living on a fixed income without a possibility of salary increment. Also, your expenses won’t always be fixed: healthcare goes up, taxes fluctuate, and things cost more in general over time. There are assumptions you’ll need to make when saving up.

As a guideline, many financial planners advise you to start saving up to 15% of your income while you’re still in your 20s. If you want to know the exact amount, professionals estimate that you should have at least 10 times your last full-year income by retirement. Thus, if you make $100,000 in your last year of work, you’ll need at least $1,000,000. Use this online calculator to estimate how much you need.

To increase your income, start saving and investing as early as possible. Take advantage of accounts such as Roth 401(k)s and Roth IRAs.

2. “Where should you retire?”

Another thing most people overlook is the impact where they live has on their income. For instance, did you know that 13 states tax Social Security benefits while 37 don’t? Of the 13, 9 exempt tax up to a certain limit. The remaining 4 (Minnesota, Vermont, North Dakota and West Virginia) tax your benefits, no exemption.

Also, different states have different laws regarding estate and inheritance taxes. Some states have estate tax while others have inheritance tax. Yet, New Jersey and Maryland have both taxes.

You may also want to understand the different property tax rates across states. This will be crucial in helping you understand how you spend your money once you retire.

Bottom line: Understand the tax implications of your retirement state or city to save yourself from unnecessary surprises.

3. “Do you know how to maximize your Social Security benefits?”

A MassMutual quiz aimed at testing how much Americans know about the Social Security retirement benefits asked over 1,500 adults 10 basic Social Security questions and only one answered all correctly. Only 28% got seven or more questions right––this was the passing grade.

Will you be part of the many that retire without understanding how they can maximize their Social Security Benefits?

Although Social Security is designed to cover the disabled and survivors of deceased workers, is primary purpose is to assist retired workers with their monthly expenses and without it, most retirees would probably be in big trouble. According to a Gallup report, more than half of the retirees says Social Security is a major source of income.

While the Social Security benefits at Full Retirement Age (FRA) are capped at $2,687 a month in 2017, there are a number of ways that a retiree could use Social Security to boost benefits.

For instance, there’s a “Social Security secret” you can use to get an additional $15,978 each year. Retirees can influence the amount they are paid in Social Security by choosing when (what age) to claim their benefits. At FRA, a retiree is entitled to 100% of their benefits. Retiring before reaching the FRA reduces the monthly benefit. However, holding off filing for the benefits by a year increases your benefit by about 8%. This method works so well that 23% of retirees regret not waiting longer before filing.

Depending on how “lavish” you plan your retirement being, you might need a little more or less money. When in doubt, always opt for the higher amount. You never want to be surprised by post-retirement costs, and you always want to be ready.

Fixed Annuities Or Bonds––Which Should You Choose For Your Retirement?

Fixed Annuities Or Bonds––Which Should You Choose For Your Retirement?

If you’re worried about money for retirement, you’re not alone. 64% of Americans say they are moderately or very worried about having enough money in retirement. In fact, they’re more worried about retirement than yearly medical bills.

What’s the best way to prepare for retirement? Spending more time thinking about your portfolio. After all, you want to get the most out of your retirement investments.

Two products you may decide between are fixed annuities and bonds. Let’s take a look at which is better.

What are fixed annuities and bonds?

Usually purchased from life insurance companies, fixed annuities are insurance products that provide owners with lifetime income. Life insurance companies provide a fixed interest rate in exchange for a lump sum of capital.

Bonds, which are purchased from municipalities, governments, or corporations, are debt securities in which a fixed rate of interest is paid to the lender throughout the life of the loan. You are paid the principal back when the loan matures, or is due.

While fixed annuities and bonds have their similarities, they are some key differences when it comes to taxes, fees, risk, and liquidity. Let’s dig deeper.

Tax advantages

With fixed annuities, not only is there no annual contribution limit (like with IRAs), you also can defer taxes. This makes them very useful to someone approaching retirement or with a large chunk of cash. When you begin to withdraw the money throughout retirement, you only pay taxes on earnings.

With bonds, you can actually make tax-free income. Certain types of municipal bonds are tax-exempt, meaning you don’t have to pay federal taxes on interest income you make. This makes bonds highly attractive to certain investors, especially those with high incomes and/or savings, provided the interest income is actually competitive (often, bond interest is very low).

From a tax standpoint, bonds sometimes offer you the chance to make more tax-free income, but overall earnings aren’t necessarily higher. That’s why it’s important to look at the rates being offered before making the investment. Make proper calculations and get the help of a certified financial advisor to choose the plan that can deliver you the best overall growth.

[Hidden] Fees

Though fixed annuities typically come with lower fees (less than 1%) than variable annuities, fees for annuities are still high. Sometimes insurance brokers aren’t entirely transparent about exactly how much you’re paying in fees, either.

There has been progress made to reduce fees, but the cost of owning an annuity is precisely the reason why it’s not as popular as before. It’s worth mentioning that the earnings annuities bring investors, especially in a high-interest rate environment, are more than enough to offset the fees. In some cases, they can be a much better investment vehicles than bonds.

Bonds, which are still praised for their higher yields, are also popular for their lower fees and commissions. This may seem like bonds are a no-brainer, but keep in mind your situation, as lifetime income does offer tremendous peace of mind. Also, think about risk.

Risk and Security

Fixed annuities can be set up for payouts over a lifetime, while bonds are paid in full at maturity. Considering that Americans are now living longer thanks to medical advancements and healthier habits, this makes annuities attractive, as many want the security of knowing their accounts are generating income regardless of how long they live. After all, 43% of Americans fear outliving their investments; fixed annuities are a viable solution.

Another positive development in the annuity world is the income rider. Lifetime annuity income riders provide investors with a guaranteed income account rate, typically around a minimum of 6–7% and sometimes higher. This can potentially allow your annual income to increase, as previous annuities only offered a “flat payout” and may not have actually kept up with inflation.

A fixed annuity does appear to remove market risk from your investment, but remember that payouts can be much lower than bonds, especially for products that have high fees and no inflation protection. In some annuities, If you die early you don’t get the full value of the annuity, and your surviving spouse or children might not be entitled to anything (unless you get a joint life annuity). Private annuity contracts also aren’t guaranteed by a federal agency, so there is a company failure risk as well.

When it comes to risk and security, bonds are seen as a way to preserve capital and earn a predictable rate of return. During any financial crisis, investors from all over the world buy U.S. Treasury Bonds, which are seen as a safe haven during tough times.

In this sense, there doesn’t appear to be much risk, but keep in mind the following:

  1. Bonds have maturity dates, and you’re at the mercy of whatever rates the “new bonds” are offering when the loan matures. These rates could be negative.
  2. Bond yields can vary tremendously if you don’t choose governments and corporations with high credit ratings. Always look at credit ratings.
  3. Municipal bonds do come with a default risk. For example, debt levels in Illinois should make bond investors cautious as to whether the state can fulfill its obligation.

To manage such risk, retirees can invest in short-term bonds for a much more predictable stream of income. Another good idea to avoid risk is to steer clear of bond funds, which can expose you to some bad investments.

Target date funds may also deliver low or negative growth if you’re nearing retirement, and the bond market isn’t good. For instance, due to rising interest rates, there was a bond market pullback in early 2017, which undoubtedly affected those with 2020 target date funds.

Liquidity

Based on your age and timeline for needing retirement money, liquidity may be a factor. Most annuities have a surrender term, usually spanning anywhere from 3–10 years. Many annuities enable you to access 10% of your investment per year, which is arguably more than you’ll need during retirement if you’ve planned well. But if you must access all of it, you will pay a surrender penalty.

Most experts recommend that you wait until maturity to access your bond investment. Early withdrawal puts you at the risk of the bond price rising or falling, and this may not be favorable to you. You could sell the bond at a discount and receive less than the principal. Holding the bond until maturity ensures you get your money back.

It’s all about balance and diversity

You’ve heard the proverb: Don’t put all your eggs in one basket. It’s especially true with retirement savings. Both annuities and bonds have their pros and cons. The best solution is to diversify and spread your assets into both annuities and bonds, as well as other investment and insurance products (like a Roth IRA and health savings account).

Whatever investments you choose, make sure your portfolio aligns with your comfort level for risk and your goals for retirement. This will help you find a balance that gives you peace of mind during your working years and financial security in retirement.

Would You Fail These 3 Retirement Questions?

Would You Fail These 3 Retirement Questions?

Once upon a time, when you hit retirement age, you could retire. It doesn’t work like that anymore. No longer is the question: “am I old enough to retire?”  Now, the question is: “how am I possibly going to afford life after work?”

Reports claim that 10,000 Baby Boomers are retiring every day. But many of them are retiring into a standard of life that is significantly less ideal than they imagined. You don’t want that for you.

Don’t worry. If you’re smart, retirement will be a breeze. It just boils down to asking the right questions.

Retiring broke

One of the biggest fears people have about retirement is that they’ll retire broke. The problem with this way of thinking is that retirement isn’t an event. Rather, it’s a process that starts even before you reach your prime working years.

Unfortunately, more than half of Americans go into retirement broke, with nothing to show for the 35+ years they’ve been working. According to a GoBankingRates research, there is a significant chunk of the population that has less than $10,000 saved for retirement. Worse, many don’t have any savings at all.

A survey by Bank of America Merrill Lynch revealed that about 81% of Americans don’t even know how much they need to save for retirement.

Below are 3 questions to help you be more proactive in how you handle the retirement process.

1. “Can you afford it?”

The current economic environment has led to a rise in the number of people who are ready to retire but can’t. The common phenomenon is a hybrid; people are in retirement but they’re still working.

So, how much money do you need to avoid this situation?

To be able to answer that question, it boils down to one simple idea: your expenses need to be less than your income. There’s more to it, but that’s the basis.

Being retired means living on a fixed income without a possibility of salary increment. Also, your expenses won’t always be fixed: healthcare goes up, taxes fluctuate, and things cost more in general over time. There are assumptions you’ll need to make when saving up.

As a guideline, many financial planners advise you to start saving up to 15% of your income while you’re still in your 20s. If you want to know the exact amount, professionals estimate that you should have at least 10 times your last full-year income by retirement. Thus, if you make $100,000 in your last year of work, you’ll need at least $1,000,000. Use this online calculator to estimate how much you need.

To increase your income, start saving and investing as early as possible. Take advantage of accounts such as Roth 401(k)s and Roth IRAs.

2. “Where should you retire?”

Another thing most people overlook is the impact where they live has on their income. For instance, did you know that 13 states tax Social Security benefits while 37 don’t? Of the 13, 9 exempt tax up to a certain limit. The remaining 4 (Minnesota, Vermont, North Dakota and West Virginia) tax your benefits, no exemption.

Also, different states have different laws regarding estate and inheritance taxes. Some states have estate tax while others have inheritance tax. Yet, New Jersey and Maryland have both taxes.

You may also want to understand the different property tax rates across states. This will be crucial in helping you understand how you spend your money once you retire.

Bottom line: Understand the tax implications of your retirement state or city to save yourself from unnecessary surprises.

3. “Do you know how to maximize your Social Security benefits?”

A MassMutual quiz aimed at testing how much Americans know about the Social Security retirement benefits asked over 1,500 adults 10 basic Social Security questions and only one answered all correctly. Only 28% got seven or more questions right––this was the passing grade.

Will you be part of the many that retire without understanding how they can maximize their Social Security Benefits?

Although Social Security is designed to cover the disabled and survivors of deceased workers, is primary purpose is to assist retired workers with their monthly expenses and without it, most retirees would probably be in big trouble. According to a Gallup report, more than half of the retirees says Social Security is a major source of income.

While the Social Security benefits at Full Retirement Age (FRA) are capped at $2,687 a month in 2017, there are a number of ways that a retiree could use Social Security to boost benefits.

For instance, there’s a “Social Security secret” you can use to get an additional $15,978 each year. Retirees can influence the amount they are paid in Social Security by choosing when (what age) to claim their benefits. At FRA, a retiree is entitled to 100% of their benefits. Retiring before reaching the FRA reduces the monthly benefit. However, holding off filing for the benefits by a year increases your benefit by about 8%. This method works so well that 23% of retirees regret not waiting longer before filing.

Depending on how “lavish” you plan your retirement being, you might need a little more or less money. When in doubt, always opt for the higher amount. You never want to be surprised by post-retirement costs, and you always want to be ready.

 

How Tax Reform Might Affect Your Retirement

How Tax Reform Might Affect Your Retirement

During his campaign, President Trump promised a significant overhaul to the federal tax code. If he comes through on his promises, the seven federal tax brackets would be streamlined to just three: 12, 25, and 33 percent.

Under such a plan, taxpayers who make between $48,000 and $83,000 would see roughly a $1,000 reduction in income taxes per year. High earners—America’s 1 percent—would enjoy an average reduction of $214,000. But not everyone will pay less.

For instance, removing the head of household filing status, as Trump proposes, would force single parents to pay more in taxes. So, it’s important to assess how these tax policies could affect what you pay. Because you could end up with more or less money in your hand each year.

With all that said, a new tax plan like the one White House leadership wants will impact your retirement as well, especially if you change tax brackets. Here’s what you need to know:

The possibility of lower taxes equals more options for retirement

As mentioned, Trump’s tax plan will save many folks money each filing season. Overall, taxes would decrease by $2,940 per filer on average. That extra money can be spent on retirement investments, like life insurance, stocks, mutual funds, or real estate, rather than a new TV or car.

If a new tax plan is implemented, and your taxes are reduced, start planning for what to do with the extra cash you save. You want to make the right investments for your retirement, which involves taking a look at how the entire tax plan affects where you should put your money.

Pre-tax investments may become less attractive

One of the advantages of a pre-tax investment, like a traditional IRA or 401K, is that it reduces your present tax burden. You can let that investment grow and then pay taxes on it when you retire.

But if you have less tax to pay, then it becomes less beneficial to save money on those taxes today. It may actually be smarter to pay the taxes now and then invest the money (especially if you believe taxes will go up in the future).

Consider this scenario:

  • In Trump’s proposed plan, a married couple with $100,000 in taxable income would pay $12,000 in taxes (a 12 percent rate).
  • Previously, a married couple having $100,000 in taxable income would have paid $25,000 in taxes (a 25 percent rate).

Clearly, it makes less sense to toss money into a traditional IRA or 401K to decrease your taxes. What you’re able to save is reduced because you’re already paying less in taxes (at least in this case).

Also, since pre-tax investments would become less attractive for most, after-tax investments, like a Roth IRA or annuity, would become more attractive. For most people, it might be wise to pay taxes on income now since rates are lower, and invest in something like a Roth IRA account to ensure money can be withdrawn tax-free in retirement.

Cutting Medicare surtax would benefit the wealthy

The Affordable Care Act helped fund Medicare partially with a surtax on investment income of 3.8 percent for those in the highest tax bracket. Trump and the GOP plan to eliminate this surtax, which would give high-income investors significantly more return on their investments.

The capital gains tax rate for them would decrease from 23.8 percent to 20 percent.

Opponents say this surtax would reduce federal revenues by $117 billion over a decade and accelerate Medicare insolvency, all the while putting an incredible amount of money back in the pockets of the wealthy. This could result in Congress raising Medicare’s eligibility age from 65 to 67 or higher. It also could lead to a reduction in benefits from Medicare, which is seen as a bedrock of health care coverage.

You should pay serious attention to what goes on with the Medicare surtax and even the Medicare employer tax (which could change).

Other factors to consider

Although President Trump has promised to protect Social Security, no concrete plans have been put forward. Some research institutions estimate Social Security will be insolvent by 2035, and there may be changes in the tax code that will impact the program. Pay serious attention to this, especially if you’re going to depend on that income in retirement.

Additionally, Medicare isn’t the only medical issue you need to consider. The Trump administration has talked a lot making Health Savings Accounts (HSAs) more accessible for Americans. Plans include increasing contribution limits, establishing easier ways to pass HSAs on to beneficiaries, and making the accounts more portable.

HSAs, which are tax-deductible, will definitely become a more useful option if the Medicare surtax is repealed and the Cadillac plan is canceled. That plan, starting in 2020, would impose a 40% excise tax on high-cost employer-sponsored plans.  

Wait to see what happens—then make the right move

Tax policies change with every administration, so it’s always best to observe what’s being changed and how it affects what you’re doing for your retirement.

Analyze your personal situation and do your research. See what investment vehicles suit you best—and make those investments. Watch out for changes in the tax plan that will affect Social Security and health care in retirement—and prepare accordingly. Doing all this will put you in a better spot for retirement.

How to Navigate Student Loans in Retirement

How to Navigate Student Loans in Retirement

Student debt is at an all-time high; about 44 million Americans hold almost $1.4 trillion in outstanding debts. The issue was hotly debated during the presidential elections, and higher education institutions have been soul-searching for innovative ways to help students deal with rising costs of education.

While the topic has gotten a lot of attention, though, the perception of those affected usually fits a certain stereotype: young millennials just starting down the road to a long-term career, with many years ahead of them to pay down their debt. The reality is more complicated. Currently, 6.4% of student loan borrowers are age 60 or older. That number is expected to grow as young Americans carry their debt further into their futures. Borrowers would do well to understand the resulting implications and the best ways to approach student debt as they get older.

Setting favorable terms for loan repayment

Some borrowers mistakenly think that their student debts will automatically be forgiven after a certain age. There is indeed precedent for this line of thinking; in the U.K., for example, federal student loans are forgiven when the borrower reaches age 65.  This is not the case in the U.S., and federal loans are only cancelled upon the borrower’s death.

While this fact may be grim, it can still be used to the borrower’s advantage. Because older Americans are usually living on a set fixed income and federal loans are nullified upon death, it often makes sense to reduce monthly payments by arranging to stretch out the loan term. While this increases the total amount of interest paid, it serves to keep monthly payments to a minimum which can assist with budgeting purposes. Also, if the borrower passes away before the loan is completely paid off, the resulting loan forgiveness would end up reducing the total lifetime costs.

Additionally, borrowers should be aware that some loan servicer providers automatically enter borrowers into a repayment plan where costs start low and increase gradually, in anticipation of a recent graduate starting with a lower salary and slowly increasing their income. This arrangement clearly does not make sense for older borrowers on a fixed income, who should work with their servicer to arrange an alternate agreement that is a better fit for their predicted future income.

Forgiveness programs do exist

Although an automatic, one-size-fits-all forgiveness program does not exist, borrowers should be aware that there are still other avenues to help lessen their debt. Some older borrowers may be eligible for programs that help limit total payments.  

While three-fourths of older borrowers with student loan balances are only holding balances on their own education, the remainder are holding balances on a child or other relative’s education. The latter may be eligible for an Obama-era repayment program called the Pay as You Earn PAYE program, which limits required payments based on earnings. Borrowers can check on the Federal Student Aid website to determine eligibility.

Another federal program of interest is the Income-Based Repayment (IBR) program, which caps maximum monthly payments at 15% of discretionary income. One of the most appealing aspects of this program is that after 25 years of continuous repayments, borrowers may be eligible for loan forgiveness for the remaining balance.

Be prepared to pay a Social Security offset

In 2005, the U.S. Supreme Court upheld the principle of “administrative offsets” that allow the government to collect on unpaid student loan debts by withholding Social Security benefits. The amount of the offset can range up to 15% of the borrower’s disability and retirement benefits, which may come as a surprise to elderly Americans who are depending on the income.

Many people are caught off guard is that Social Security used to be off limits for student loan offsets. Until 1991, there was a 10-year time limit on the government’s ability to collect student loan debt through administrative offsets. And until 1996, those offsets could not include Social Security. Now, though, 173,000 Americans received reduced Social Security checks because of unpaid student loan debts.

These factors are important to consider early so that Americans with student loan debt can be aware of the costs that may lie ahead.

Communicate with your loan servicer

The best repayment arrangement always depends on the specific circumstances of each individual borrower. To avoid getting lumped into terms that may not be the best for you, make sure to communicate with your loan service provider frequently and update them on any major changes. Open and frequent communication is the best way to help them help you.