MERCER BENEFITS U

MAKING SMART MONEY DECISIONS TODAY

By consistently making good financial choices, you can live more comfortably today and set yourself up for future success. Learn how to take charge of your money and get the most out of every dollar.
HOW TO SAVE MORE MONEY NOW
ORGANIZE YOUR FINANCES
ORGANIZE YOUR FINANCES
BURIED IN DEBT
BURIED IN DEBT
SMALL CHANGES CAN ADD UP
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Borrow Smart for Your Kid's College

If you're helping fund a child's bachelor's degree with a loan of your own, follow these rules.

With every start of the school season, parents of college-bound kids may have one more financial hurdle to clear: finding a loan to fill the gap between the savings you've earmarked for college, your child's financial aid and student loans, and the big bill that's coming up fast.

The most popular options are federal parent PLUS loans, private student loans, and a home-equity line of credit (HELOC). The best one for you comes down to several factors, including how long you need to pay off the loan and your credit history. Here's how to weigh your choices.

For Flexibility, Pick a PLUS
A federal parent PLUS loan has, well, pluses and minuses. The current interest rate, 6.8%, is high compared to other options, and you'll owe an origination fee of more than 4%. If you plan to retire the debt in less than a year, the more than $400 you'd pay to take out a $10,000 loan would essentially raise your rate to 11%.

Still, the application process is simple, and the credit requirements are looser than those for other loans — your income and credit score aren't factors. You can take up to 30 years to pay back the loan (though 10 years is standard), and you automatically qualify for repayment breaks if you run into a financial hardship, like a lost job.

For a Low Rate, Go Private
With a private student loan from a bank or credit union, you can beat a PLUS loan's high rate and avoid origination fees. Traditionally your student takes out this loan, with you as a co-signer. But increasingly many banks, including Wells Fargo and Citizens, are offering private loans directly to parents. Lender SoFi (sofi.com) has a borrowing program for parents of students attending one of 2,200 schools.

Variable rates on private loans run from 3% to more than 10%, depending on your creditworthiness, while fixed rates range from 4.5% to double digits. You can deduct up to $2,500 in student loan interest a year on your taxes, as long as your income is below the cap ($160,000 for a married couple filing jointly in 2015).

For Ready Cash, Tap Your Home
Another way to get a low rate is to borrow against your home equity. On average you'll pay a 4.75% variable rate on a HELOC in 2015, reports Bankrate.com, and just a few hundred dollars upfront.

Trouble is, you'll pay more for your HELOC once the Federal Reserve starts hiking interest rates. That makes them best if you can pay off the loan quickly. Or lock in. With many lenders, you can convert the outstanding portion of your HELOC to a fixed loan (rates average 6% in 2015), leaving the rest of your line available for future costs.

Finally, trust your instincts. "What keeps parents up at night varies," says Leonard Wright, a California certified public accountant and personal financial specialist. "For some a HELOC takes away the peace of mind of having a paid-off or nearly paid-off home loan. For others there's peace of mind in having the guaranteed options for payment breaks from a federal loan."

Mercer HR Services, LLC and Mercer Trust Company do not provide investment, legal or other advice and are not responsible for the opinions contained in this article. This article represents the opinions of the author and not those of Mercer HR Services, LLC or Mercer Trust Company.

Adapted from the July 2015 issue of Money. © 2015 Time Inc. All rights reserved.

How to Save More Money Now

Tricks to help you make, save, and potentially grow some green.

The economy is in flux, but that doesn't mean you're destined for a downward financial spiral. The following tips will help you manage your bills, stash away savings and set yourself up for the future.

Place Your Bills on a Budget
Utility payments, along with mortgages and car notes, are typically one of the largest monthly payments. Opt for budget billing: You pay a preset monthly amount based on your annual average energy consumption, advises James Petty, senior vice president of Regions Mortgage in Atlanta. If your home consumes more energy than the budgeted amount pays for, the difference can be added to a single bill or split over several months. If you use less energy, your account will be credited. Call your utility company for details.

Negotiate a Better Credit Card Rate
Don't pay 23% interest on credit cards. Visit CardRatings.com and search the comparison list for a better deal with lower ongoing rates and perks like airline miles, cash back and gas rebates. Keep in mind: Most introductory rates of 0% can expire in six, 12, or 15 months, so pay your bills on time and build up positive credit to negotiate a decent rate.

Pay Your Mortgage Principal First.
While mortgage interest rates are low, Jordan Goodman, personal finance expert and author of Master Your Debt: Slash Your Monthly Payments and Become Debt-Free, advises that you apply extra payments to the principal to build equity in your home. Owing less on the principal means less interest over the life of the loan, which eventually equals smaller mortgage payments and more money in your pocket. You can also consider borrowing money against the equity in your home to pay off higher-interest-rate loans. For example, you can take out a home-equity line of credit (HELOC) and pay your credit card, student loan, or auto loan out of it, since, as of February 2016, HELOC rates were averaging approximately 5% interest, according to Bankrate.com, vs. the higher interest rates on other loans. HELOCs, which are revolving lines of credit at variable rates, can sometimes be refinanced or converted into fixed-rate loans. To get started, you need positive cash flow, sufficient equity, and a high credit score. Visit TruthInEquity.com for more information. Keep in mind that you put your home at risk of foreclosure if you can't make the required payments.

Make Your Kids Match Your Money
Paying for your children's college tuition is an investment, so treat it like one, says Ellie Kay, author of The 60-Minute Money Workout: An Easy, Step-by-Step Guide to Getting Your Finances Into Shape. When you invest, you seek to have your stocks work for you and you expect a regular report on progress. So think of your students' contribution as your 401(k) company match: Tell them they need to match your investment with their own money from a work-study job, scholarship, or part-time gig to help pay for books, meals, and gas. They also need to provide you with a report of their performance. A bonus: They'll be more invested in doing well if they're paying for part of the ride.

Move Your Money Around
If you think you’re paying too much for loans, you probably are. With the low interest rates currently available, you should shop around for the best deal. Adrian Nazari, CEO of CreditSesame.com, which helps consumers optimize their loans, recommends charting all of your loans: home, auto, student, credit cards. Write down whom you owe, what you owe, the current interest rate, and the terms. Optimizing your loans allows you to move money where it is needed. If you have a credit card with an 18% interest rate, for example, consider transferring the balance to a lower-interest-rate card, which will allow you to pay down the balance faster.

Mercer HR Services, LLC and Mercer Trust Company do not provide investment, legal or other advice and are not responsible for the opinions contained in this article. This article represents the opinions of the author and not those of Mercer HR Services, LLC or Mercer Trust Company.

Adapted from the January/February issue of Essence. © 2015 Time Inc. All rights reserved.

Saving for Health Care in Retirement

If you think health care is expensive now, have you considered what it might cost you in retirement?

The truth is, it’s likely to be one of your biggest expenses. According to a recent Mercer survey, only 22 percent of U.S. employees believe they will have enough money to pay for their health care in retirement.1 If this describes you, it’s time to boost your confidence by making a plan.

Crunch the Numbers
The total amount you’ll need to cover health care expenses in retirement depends on many factors, including your life expectancy, your retirement age and the rate at which health care costs increase. For example, the Employee Benefit Research Institute estimates that in 2014, a woman would need $131,000 saved and a man would need $116,000 saved in order to be confident of covering their health care costs in retirement. If your retirement is still years away, it’s safe to assume your number will be higher.

However, these estimates do not include the costs of long-term care. The U.S. Department of Health and Human Services estimates that about 70 percent of people over age 65 will require some type of long-term care services during their lifetime — and that comes with a steep price tag. For example, according to a 2015 Genworth study, the median annual rate for nursing home care in the U.S. is $80,300.2 Some quick math, and we can see that five years in a nursing home could cost more than $400,000.

As you’re considering what your future health care expenses might look like, it’s also important to know how government programs, like Medicare, may play a role. For example, Medicare will generally help cover a range of services and supplies deemed medically necessary, like hospital visits, preventive care and medical equipment. But it won’t cover long-term care in a nursing home for people who need help with basic daily activities, like bathing and dressing. Visit http://www.medicare.gov to see more information about what’s covered and what’s not.

To get a clearer picture of your future health care costs:

Budget for it
No one can know for sure how healthy they will be in the future or exactly what their health care might cost. That’s why it’s so important to plan ahead as best you can — and that means factoring in health care as a big part of your total retirement expenses. Also consider:

By preparing now, you can feel more confident that you’re ready for both the fun and the necessities that retirement will bring.

Need Some Help?
When in doubt, turn to a financial adviser who can help you prepare for future health care costs. If you’re searching for a financial adviser, visit reputable websites such as the Financial Planning Association or the National Association of Personal Financial Advisors.

1 Mercer’s 2015 Inside Employees’ Minds survey.
2 Genworth 2015 Cost of Care Survey; cost is for a semiprivate room.
3 Employee Benefit Research Institute, October 2014 report. Estimates do not include the costs of long-term care.

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