Top Posts of June 2012

Below are the 10 most viewed posts on the Upperline Financial Planning Blog in June (word cloud from

Certified Financial Planner - Top Posts of June 2012

  1. Student Loan Consolidation Deadline 6/30!
  2. 6 Tips for Refinancing Your Home – Financial Rules of Thumb Series
  3. “If You Don’t Get It Built, The Work Doesn’t Matter”
  4. Who Are Your Beneficiaries?  Are You Sure?
  5. Financial Rules of Thumb – A Planner’s Perspective
  6. Teaching Kids Using “Money As You Grow”
  7. Financial Rules of Thumb Series – How Much Should My Car Payment Be?
  8. A Financial Plan for When (If) You Get Laid Off
  9. 100 Minus Your Age? – Financial Rules of Thumb Series
  10. A Difference Between an Employee and an Entrepreneur

Student Loan Consolidation Deadline 6/30!

If you’ve got Student Loans, you need to be aware of this deadline and the opportunity it presents.

The Department of Education is offering the opportunity to consolidate student loans from a private lender with student loans held directly by the Department of Education.  The opportunity to consolidate these Direct Student Loans as well as any Family Federal Education Loans (also know as FFEL Loans) is going to expire on 6/30 and I think that it’s an amazing opportunity to simplify your financial life, as well as potentially benefit from other federal student loan program benefits such as forgiveness programs that are not available to loans issued by private lenders

A few key benefits:

This program would allow you to have one servicer and one payment for all of your eligible student loans.  That’s a huge benefit.  I’m always recommending to clients that they simplify their financial lives and consolidate accounts when possible, and this is a great opportunity to do just that.

You can save on interest.  Loans consolidated in the program will receive a 0.25% interest rate deduction on any private loans that are consolidated. The interest rate is fixed for the life of the loan, so you’ll lock in your current terms.  (If you sign up for automatic debit from your bank account, you can save another 0.25%.  That’s easy savings.)

Eligible for Public Service Loan Forgiveness Program.  If you work for a public entity or certain 501(c)3 not for profits, you may qualify for the balance of your loans to be forgiven after making 120 contiuous payments.  This is a huge benefit for those of you that work in education but don’t qualify for the teacher student loan forgiveness programs, or for others who work for other not-for-profits.

To consolidate your Student Loans, go to and log into your account.  If you’re eligible, you’ll have a message in the “Alerts” box on the top right of the page.  Here’s a link to the Department of Education’s Frequently Asked Questions about the program.

If you have any questions, please contact me and I’ll do my best to help you out!

100 Minus Your Age? – Financial Rules of Thumb Series

[This post is part of the Financial Rules of Thumb series.  Check out the rest here!]

Today’s rule of thumb is:

“100 minus your age equals the allocation you should have to equities in your portfolio”

The Upperline:  It’s far more important to know how much risk you’re comfortable with, than to use this as a guideline.

This rule of thumb is dangerous not because it’s generally untrue, as I think that this is often a reasonably appropriate guideline for many investors.  The problem is, if it’s not right for you, it could have huge consequences.  I often hear from investors that they’re taking more risk in their 401k because they’re younger.  Conversely I hear from investors nearing retirement that they’re moving their entire portfolio into bonds and Certificates of Deposit.

That may be exactly what they should be doing, but the problem is that those strategies don’t have value on their own.  Those strategies only make sense within the context of your personal risk tolerance and your family’s financial goals. [Read more…]

“If You Don’t Get It Built, The Work Doesn’t Matter”

The above is a great quote from Seth Godin’s Blog today.  He references the work of architects and how it doesn’t matter how beautiful the plans are if the building never gets constructed.

I think Financial Planning operates in much the same way.   We can craft elegant financial plans for clients that will help them reach their goals.  We can generate pages of material to back up these plans, and present them in a beautiful manner.

But if we can’t help clients build those plans, brick by brick, month by month, it doesn’t matter.  We’ve given them beautiful blueprints for a building that will never exist.

What’s more important?  The plan, or the outcome?

We all need to focus more on the daily and weekly actions that will lead to successful years and ultimately to a life well lived, and with the financial resources that support our goals and dreams.  This reason is why an ongoing relationship with a financial planner that can help to guide and revise plans as life’s inevitable changes come at us is so important.  Writing a plan and putting it on your bookshelf isn’t going to help you reach your goals.  Regular consultations with a caring planner can.

Inherited IRAs: What You Need To Know

I’ve recently had issues with a few different clients recently who have inherited IRAs and are not clear on the rules surrounding them.  Here are a few questions that can help you understand the rules around your Inherited IRA.

  • Was it your spouse’s IRA?  If so, you can generally combine it with your own IRA.  This can greatly simplify your financial situation, but there can be reasons to maintain it separately (if there are children from a previous marriage who will ultimately inherit the remainder of this account, etc).  You will need to eventually take Required Minimum Distributions from this account, but typically not until after you’ve reached age 70 1/2.
  • Was it your parent’s or aunt/uncle’s IRA?  Or anybody else that you weren’t married to?  Things are a bit trickier with IRAs inherited from your parents.  You must begin taking required minimum distributions (RMD’s) on those assets by December 31st of the year following the account owner’s death.  The RMD rules are critical, and must be followed explicitly.  The tax penalties for not taking your RMDs on time are severe, so be sure you’re on top of this.  A simple calendar reminder in November of each year to check and be sure you’ve taken your distribution for the year can be enough to save you from a costly mistake.
  • Were you named as the beneficiary of the IRA?  Or did the deceased’s estate take ownership and transfer it to you through the probate process?  I realize this is a bit of industry jargon, but the distinction is critical.  If you were named as the beneficiary of the IRA, you can ‘stretch’ out the distributions from that IRA over the course of your working life, allowing you to extend and benefit from the tax-favored nature of the asset.   If you were not named as the beneficiary directly, you need to know how old the person whose IRA you are inheriting was when they passed away.  If they were over age 70 1/2, then you can take distributions over the IRS tables calculated based on their life expectancy.  If they were under age 70 1/2, then you must take the distributions over 5 years and the entire balance of the account must be completed distributed by December 31st of the fifth year after the IRA owner’s death.  (You can find the tables and other great information in IRS Publication 590, which has everything you’d ever want to know about IRAs).

The above general principles should help you stay on track when inheriting an IRA.  If you’ve got additional questions about your situation, please contact me and I’ll do my best to answer your questions.