Mellen Money Management LLC
Principal, Financial Planner
After spending much of his 11-year career as an advisor for a large regional bank, Scott Snider decided it was time to break away from corporate America and start an independent financial planning firm -- Mellen Money Management. Scott's firm is based in Jacksonville, Florida with the ability to work with clients around the country via video conference. His company's offerings include full-service investment management and comprehensive financial planning. While their specialty is helping young professionals and families navigate past the confusing maze of college financial aid and student loans.
It is Scott's mission to end the student debt crisis one family at a time through proactive planning. In fact, Scott believes the cost of college cannot be solved in a vacuum. Financial trade-offs, like saving for retirement, must be prioritized and included with such large expenditures. In other words, Scott's company helps their clients plan for the financial impact of major life transitions so that they are prepared for life's biggest moments. Such an approach has helped Scott's client realize their dreams and live a more fulfilling life.
Please explore the Mellen Money Managment website, check out the FAQ page for answers to our most common questions, subscribe to The Money Blog to stay up to date with the latest content, or contact Scott to learn how we can help.
BS, Finance, Miami University
Assets Under Management:
Absolutely. Your IRA is a tax sheltered account. Therefore you can buy and sell securities within your IRA account without incurring any tax consequences. This includes moving your funds to cash. The taxation on your money occurs when you withdraw the cash out of your IRA and put it in your bank account. Note that the exception to this is the Roth IRA, which allows for tax free withdrawals because the money contributed was already taxed going in. Just be mindful that there are other nuances to be aware of if you ever consider taking money out of your IRA. The good news, in your case, is that you don’t have to pay taxes for holding cash inside your IRA.
Probably not because while you might avoid the 10% IRS penalty, you still have to pay taxes on any earnings and likely some of the principal given that your employer match is pre-tax. Furthermore, the S&P 500 has averaged 10% annual returns since 1928, which is greater than the 6% - 7% interest rate you would pay on your Federal student loans. However, more details are necessary to make the right recommendation.
Here's a general rule of thumb with student debt, make sure that the total debt you graduate with does not exceed your expected salary in the field you are pursuing. For example, the average MBA graduate can expect to enter the workforce making $100,000, so anything less than $100,000 in student loans is manageable. Anything more, and careful planning is necessary.
If for some reason it is unavoidable that your student debt exceeds your expected income, then you should consider using a portion of your retirement funds. While I don't like my clients robbing their retirement to pay for their education, there are some instances where there is no other good choice. In that scenario, it is also wise to enroll in one of the income-driven repayment plans like PAYE, REPAYE, or IBR because the standard 10-year payment plan will likely exceed what you can afford. From there you need to project and compare if your student debt is eligible for forgiveness -- 2 types, public sector (PSLF, 10 years) and private sector (20-25 years), and compare to refinancing for a period of 10-15 years. At that point, you select from the lowest cost option that fits your budget.
I hope this helps. For more helpful tips about student loans, check out the content on my blog.
It sounds like the proposed investment vehicle is a structured CD AKA market-linked CD. These are popular instruments for more conservative investors looking to protect their principal while getting the upside benefits of the markets, with one exception - the gains are capped at a level set by the bank.
The key to the protection feature is making sure that you don't cancel (sell) the CD prior to maturity. If you do, the market value of that CD can be up or down relative to the price you paid. Therefore, you will notice account fluctuations (much less than the stock market) over the course of the 7 year period you hold the CD. This particular aspect sometimes gets swept over by the person selling the product, so just be aware that you need to hold to maturity to realize the protection feature.
Ultimately, for those who like the idea of getting access to better growth potential than cash or bonds without the risk of principal loss, this is a potential investment strategy worth considering. With the main drawback being liquidity.
The wash sale rule isn't limited to a singular account and is evaluated at the individual level. For example, you have violated the wash sale rule if you sell XYZ stock from your Fidelity brokerage account and then repurchase XYZ stock from your TD Ameritrade brokerage account before the 30-day period has expired.
Vanguard, Fidelity, Charles Schwab, Bettermint.com, Robinhood, and whole other host of other investment platforms are out there to help you get started with minimal amounts to invest. With the exception of Robinhood, all of those companies offer customer support that can lead you in the right direction if you need further guidance. Charles Schwab even offers a monthly subscription service for more in-depth financial planning advice. Or if you would rather work with someone independent, XY Planning Network offers a vast list of financial advisors who don't require investment minimums to work with and are required to sign a fiduciary oath. At the end of the day, there are several options available to you...it's really a matter of figuring out what is the right fit for you.