Paying Off Student Loans

                              Paying Off Student Loans

At Watters Financial Services, one topic that comes up often in client communication is student loan debt. We see many clients struggling to pay off their personal student loan debt or their children’s debt. There are many choices for repaying student loans. This checklist provided by DST Systems, Inc. can help you weigh them.

Actively managing your debt is an important step, and your student debt may be one of the biggest financial obligations you have. There are many strategies that could help you manage student loans efficiently. Here is a checklist.

• Choose a federal loan repayment plan that fits your circumstances:

o    The Standard Repayment Plan requires a fixed payment of at least $50 per month and is offered for terms up to 10 years. Borrowers are likely to pay less interest for this repayment plan than for others.

o    The Graduated Repayment Plan starts with a reduced payment that is fixed for a set period, and then is increased on a predetermined schedule. Compared to the standard plan, a borrower is likely to end up paying more in interest over the life of the loan.

• The Extended Repayment Plan allows loans to be repaid over a period of up to 25 years. Payments may be fixed or graduated. In both cases, payments will be lower than the comparable 10-year programs, but total costs could be higher. This program is complex and has specific eligibility requirements. See the Extended Repayment Plan page on the U.S. Department of Education website for details.
• The Income-Based Repayment Plan (IBR), the Pay as You Earn Repayment Plan, the Income-Contingent Repayment Plan (ICR) and the Income-Sensitive Repayment Plan offer different combinations of payment deferral and debt forgiveness based on your income and other factors. You may be asked to document financial hardship and meet other eligibility requirements. See the U.S. Department of Education's pages on income-driven repayment plans and income-sensitive repayment plans for more information.

• Take an inventory of your debt. How much do you owe on bank and store credit cards? On your home mortgage and home equity credit lines? On car loans? Any other loans? Consider paying extra each month to reduce the loans with the highest interest rates first, followed by those with the largest balances.
• Free up resources by cutting costs. Consider eating out less, reducing snacks on the go, and carpooling or using mass transit instead of driving to work. You may also be able to cut your housing costs, put off vacations and reduce clothing purchases.
• Think about enhancing your income. A second job? A part-time business opportunity?

·         Consider jobs that offer opportunities for subsidies or debt forgiveness.

• Federal civil service employees may be eligible for up to $10,000 a year for paying back federal student loans. See the U.S. Office of Personnel Management's Student Loan Repayment Program for more information.
• Nurses working in underserved areas may be eligible for loan assistance through the U.S. Department of Health and Human Services' NURSE Corps Loan Repayment Program.
• Service members in the U.S. Armed Forces are eligible for support. Check out the service-specific programs offered by the Air Force, the Army, the National Guard and the Navy.
• Teachers can consider programs such as Teach for America and the Teacher Loan Forgiveness Program. 
• Sign up for automatic loan payments. Many loans offer discounted interest rates for setting up automatic electronic payments on a predetermined schedule. A reduction of 0.25% per year may look small, but over the life of a 20-year loan, it can reduce your total interest cost by hundreds or even thousands of dollars.
• A last resort is seeking loan deferment or forbearance. Students facing significant financial hardship may be able to put off loan interest or principal payments. To see whether you might qualify, look to the U.S. Department of
• Education's information on Deferment and Forbearance.

Please call us if there is any way that we can help with this topic. You can reach us at (201)843-0044.

Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

What Benchmark Should I Use to Evaluate My Portfolio?

What Benchmark Should I Use to Evaluate My Portfolio?

The following brief article takes a look at some of the benchmark issues associated with assessing portfolio performance.  It is an interesting article for anyone who has questions about how to evaluate their investment performance.

Assessing Portfolio Performance: Choose Your Benchmarks Wisely

You can't help but hear about the frequent ups and downs of the Dow Jones Industrial Average or the S&P 500 index. The performance of both major indexes is widely reported and analyzed in detail by financial news outlets around the nation.

Like the Dow, the S&P 500 tracks the stocks of large domestic companies. With 500 stocks compared to the Dow's 30, the S&P 500 comprises a much broader segment of the stock market and is considered to be representative of U.S. stocks in general. Both indexes are generally useful tools for tracking stock market trends, but some investors mistakenly think of them as benchmarks for how well their own portfolios should be doing.

However, it doesn't make much sense to compare a broadly diversified, multi-asset portfolio to just one of its own components. Expecting portfolio returns to meet or beat "the market" is usually unrealistic, unless you are willing to expose 100% of your life savings to the risk and volatility associated with stock investments.

Asset allocation: It's personal

Just about every financial market in the world is tracked by one or more indexes that investors can use to look at current and historical performance. In fact, there are hundreds of indexes based on a wide variety of asset classes (stocks/bonds), market segments (large/small cap), and styles (growth/value).

Investor portfolios are typically divided among asset classes that tend to perform differently under different market conditions. An appropriate mix of stocks, bonds, and other investments depends on the investor's age, risk tolerance, and financial goals.

Consequently, there may or may not be a single benchmark that matches your actual holdings and the composition of your individual portfolio. It could take a combination of several benchmarks to provide a meaningful performance picture.

Keep the proper perspective

Seasoned investors understand that short-term results may have little to do with the effectiveness of a long-term investment strategy. Even so, the desire to become a more disciplined investor is often tested by the arrival of quarterly or annual financial statements.

The main problem with making decisions based on last year's performance figures is that asset classes, market segments, or industries that do well during one period don't always continue to perform as well. When an investment experiences dramatic upside performance, it may mean that much of the opportunity for market gains has already passed. Conversely, moving out of an investment when it has a down year could mean you are no longer in a position to benefit when that segment starts to recover.

On the other hand, portfolios that are left unattended may drift and begin to take on too much risk or become too conservative. Rebalancing periodically could help bring your asset mix back in line with your preferred allocation.

There's really nothing you can do about global economic conditions or the level of returns delivered by the financial markets, but you can control the composition of your portfolio. Evaluating investment results through the correct lens may help you make appropriate adjustments and effectively plan for the future. This is why we use analytical research services like Morningstar Fund Research, Lipper and Advisory World to help analyze performance and to make sure that the funds we use:

• ·       Have competitive fees
• ·       Are doing well compared to their peer group
• ·       Have not gone through recent management changes
• ·       Do not overlap other funds we use.

If you have questions or concerns regarding this article, please feel free to call our office at 201-843-0044.

Moving Money Electronically -- Your Protections and Risks

As electronic banking increasingly becomes the favored means of moving money, the security risks posed by online transfers continue to proliferate. At Watters Financial Services, LLC we strive to educate all of our clients about identity theft. This article from Wealth Management Systems Inc. provides many important facts about fraud prevention and moving money online. We highly recommend it to all of our clients and we will be sponsoring a Client Shredding Event on April, 30^th to help our clients keep their identities safe.

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How serious is your bank about online security? Compare its practices with these common protections.

As electronic banking increasingly becomes the preferred means of conducting financial transactions for consumers and businesses alike, the security risks posed by online money transfer continue to proliferate.

For their part, banks have a vested interest in keeping their customers' assets and confidential information secure. That is why the banking industry as a whole has developed a series of standard security protocols and techniques designed to do just that.

Common Fraud Protections

Following are general protections offered by most banks. Be sure to compare this list against the measures your own banking partners have put in place to keep your identity and assets safe as you bank online with them.

Firewalls -- Firewalls are software or hardware-based security systems that create a secure barrier between your bank's internal network, where your information is stored, and the unsecured Internet. The data "traffic" flowing in and out of the bank's network is monitored and analyzed to determine its legitimacy.

Encryption -- Encryption scrambles information being transmitted between your device and the bank's network into a code that is virtually impossible to decipher, thereby protecting against unauthorized access. Many financial institutions now use 128-bit encryption, an advanced encryption technology.

Multilayered Authentication -- Many online banking/financial systems now require many layers of user identification, or authentication, that only those authorized can provide. For instance, some authentication protocols verify the device the customer is using to access the bank's website. If the device does not match the bank's records, additional authentication measures, such as one or more challenge questions, will be presented to the customer. Similarly, commercial online banking also applies a layered security approach whereby two or more identifying factors are required to gain access (e.g., a username and password plus a security token).

Monitoring -- Keeping vigilant watch over network operations is integral to the online security policies of most banks. Technology specialists continuously monitor online activity looking for out of the norm customer behavior and/or suspicious activity, particularly at login. For instance, too many incorrect login attempts will signal the system to lock a user out of their account until positive account verification can be confirmed. Transaction amounts (specifically withdrawals) that fall outside the customer's normal or pre-established limits are also scrutinized.

Industry partnerships -- Aside from internal controls, many banking institutions work closely with anti-virus and anti-malware vendors, sharing data they have collected and collaborating on new online fraud prevention techniques. Similarly, banks often work with law enforcement agencies, sharing information that may lead to safer online experiences for their customers.

The Ultimate Protection

As sophisticated as the banking industry's security measures have become, there is no substitute for a well-educated and aware customer. Toward that end, a bank's customer awareness and educational efforts should address both retail and commercial account holders and, at a minimum, include the following elements:

·         An explanation of protections provided, and not provided, to account holders relative to electronic funds transfers

·         An explanation of under what, if any, circumstances and through what means the institution may contact a customer on an unsolicited basis and request confidential account-related credentials

·         A list of risk control measures that customers may consider implementing to mitigate their own risk

·         A list of appropriate contacts for customers to use if they notice suspicious account activity or experience security-related events

Source/Disclaimer:

Source: The Federal Financial Institutions Examination Council (FFIEC), "FFIEC Supplement to Authentication in an Internet Banking Environment," June 29, 2011.

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2014 Wealth Management Systems Inc. All rights reserved.

February, 2016
Watters Financial Services, LLC
The following brief article takes a look at some of the insurance issues associated with gaps in coverage.  It is an interesting article for anyone who has questions about their current coverage. If you have questions or concerns regarding this article, please feel free to call my office at 201-843-0044.

Are There Gaps in Your Insurance Coverage?

Buying insurance is about sharing or shifting risk. For example, health insurance will cover some of the cost of medical care. Homeowners insurance will assume some of the risk of loss in the event your home is damaged or destroyed. But oftentimes we think we're covered for specific losses when, in fact, we're not. Here are some common coverage gaps to consider when reviewing your own insurance coverage.

Life insurance

In general, you want to have enough life insurance coverage (when coupled with savings and income) to allow your family to continue living the lifestyle to which they're accustomed. But changing circumstances may leave a gap in your life insurance coverage.

For example, if you have life insurance through your employer, changing jobs could affect your insurance coverage. You may not have the same amount of insurance, or the policy provisions may differ. Whereas your prior employer may have provided permanent life insurance, now you may have term insurance that will expire on a predetermined date. Review your income, savings, and expenses annually and compare them to your insurance coverage, and be mindful that changing circumstances may require a change in the amount of insurance coverage.

Homeowners insurance

It's not always clear from reading your homeowners policy which perils are covered and how much damage will be paid for. It's important to know what your homeowner’s policy covers and, more important, what it doesn't cover.

You might think your insurer would pay the full cost to replace your home if it were destroyed by a covered occurrence. But many policies place a cap on replacement cost up to the face amount stated on the policy. You may want to check with a building contractor to get an idea of the replacement cost for your home, then compare it to your policy to be sure you have enough coverage.

Even if your policy states that "all perils" are covered, most policies carve out many exceptions or exclusions to this general provision. For example, damage caused by floods, earthquakes, and hurricanes may be covered only by special addendums to your policy, or in some cases by separate insurance policies altogether. Also, your insurer may not cover the extra cost of rebuilding attributable to more stringent building codes, or your policy may limit how much and how long it will pay for temporary housing while repairs are made.

To avoid these gaps in coverage, review your policy annually with your insurer. Also, pay attention to notices you may receive. What may look like boilerplate language could actually be significant changes to your coverage. Don't rely on your interpretations--seek an explanation from your insurer or agent.

Auto insurance

Which drivers and what vehicles are covered by your auto insurance? Most policies provide coverage for you and family members residing with you, but it's not always clear-cut. For instance, a child who is living in a college dorm is probably covered, but a child who lives in an off-campus apartment might be excluded from coverage. If you and your spouse divorce, which policy insures your children, particularly if they are living with each parent at different times of the year? Notify your insurer about any change in living arrangements to avoid a gap in coverage.

Other gaps include no coverage for damaged batteries, tires, and shocks. And you might not be covered for stolen or damaged cell phones or other electronic devices. Your policy may also limit the amount paid for a rental while your vehicle is being repaired.

In fact, insurance coverage for rental cars may also pose a problem. For instance, your own collision coverage may apply to the rental car you're driving, but it may not pay for all the damage alleged by a rental company, such as loss of use charges. If you're leasing a car long term, your policy may cover the replacement cost only if the car is a total loss or is stolen. But that amount may not be enough to pay for the outstanding balance of your lease. Gap insurance can cover any difference between what your insurer pays and the balance of your lease.

Policy terms and conditions aren't always easily understood, and you may not be sure what's covered until it's time to file a claim. So review your insurance policy to be sure you've filled all the gaps in your coverage. This blog post just starts the discussion. Other possible topics could include Long Term Care Insurance and Disability Insurance as well.

What Are the Tax Issues Associated With a Gain or Loss on a Primary Residence?

January 2016

Watters Financial Services, LLC

For most Americans the most valuable asset they own is their home. At Watters Financial Services, LLC we invest a great deal of time helping our clients with their financial planning issues. One of the issues that comes up often is what to do with the primary residence, especially for those clients nearing retirement. The following brief article takes a look at some of the tax issues associated with a gain or loss on a primary residence. It is an interesting article for anyone who has questions about how real estate is taxed. If anyone has any questions or concerns regarding this article please call my office at 201-843-0044.

What Are the Tax Issues Associated With a Gain or Loss on a Primary Residence?

Description: A homeowner may be able to claim a significant tax break on any gain from the sale of a primary residence. Here's more on the break.

For U.S. federal income tax purposes, you may be able to exclude from income any gain up to $250,000 for a single taxpayer and $500,000 for a married couple filing a joint return. Generally, to exclude the gain, you must have owned and lived in the property as your main home for two of the five years prior to the date of the sale. If you lose money on a sale, the loss is not tax deductible.

Your Adjusted Basis

A dollar amount known as your adjusted basis determines whether you experience a gain or a loss. If you purchased or built your home, your initial cost basis typically is the cost to you at the time of purchase. If you inherit a home, the cost basis is the fair market value on the date of the decedent's death or on a later valuation date selected by a representative of the estate.

The formula for determining your gain or loss is as follows:

Selling price - Selling expenses = Amount realized

Amount realized - Adjusted basis = Gain or loss

The cost basis may be adjusted over time due to the following conditions:

·      Additions and other improvements that have a useful life of more than one year and that add to the value of your home. These may include a garage, decks, landscaping, a swimming pool, storm windows and doors, heating and air conditioning systems, plumbing, interior improvements and insulation. Note that repairs that keep your house in good condition but do not significantly enhance value, such as fixing gutters, repainting, or plastering, do not affect the basis.

·      Special assessments paid for local improvements.

·      Amounts spent to restore damaged property.

·      Payments for granting an easement or right-or-way.

·      Depreciation if the home was used for business or rental purposes.

·      Others as determined by the Internal Revenue Service (See Publication 523 Selling Your Home).

The definition of a "main home," according to the Internal Revenue Service, includes a private residence, condominium, cooperative apartment, mobile home or houseboat. It is to your advantage to maintain records of a home's purchase price, purchase expenses, improvements, additions, and other issues that may affect the adjusted basis.

Required Attribution: Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. © 2015 Wealth Management Systems Inc. All rights reserved.

Is your advisor prepared for a cyberattack?

Greetings,

Tim Watters of Watters Financial Services, LLC was recently quoted on cyber-security in an article on CNBC.com !

Click on the link below to view the article if you are interested   

Is your advisor prepared for a cyberattack?

Combating Cyber Crime

November, 2015

Cyber security attacks are becoming more and more prevalent. At Watters Financial Services, LLC (WFS) we have experienced fraudulent attempts to gain access to our clients’ assets and private information many times. There are a number of ways in which this can occur. Some of the methods they use are listed below.

·       IRS fraudulent calls

·       Tax Returns filed and refunds taken by scammers

·       Impersonation of the client at a bank to withdraw funds.

·       Phishing attacks to a firm requesting client funds (This actually happened again to one of our clients yesterday)

·       Fraudulent credit cards issued in the client’s name

To combat these security attacks, WFS has instituted office policies and procedures to combat cyber crime.  Some of these policies and procedures include:

·       Clients have a secret password that they use whenever requesting funds.

·       Clients are set up for electronic fund transfers from TD Ameritrade Institutional to their personal checking account.

·       WFS calls clients to verify their identity whenever funds are requested via email.

·       WFS encourages clients to change their passwords on key financial websites every 3 months.

·       WFS uses an encryption software Citrix ShareFile®, when sending and receiving sensitive data and attachments by email. 

·       WFS has a picture of clients on file.

·       WFS encourages clients to switch to email providers other than AOL.

·       WFS uses Orion® as an online portal that allows clients to access their performance securely from anywhere in the world.

·       Client data and paper documents are shredded after the appropriate holding period.

These are just some of the ways that WFS is committed to safeguarding our clients’ assets and private information.

More Information can be found on the Department of Homeland Security’s website at http://www.dhs.gov/stopthinkconnect#