Leverage Your Work Life Insurance

Life throws us curveballs all the time. Most of these curveballs we navigate easily, but some end in misfortune with a death. Typically, if satisfactory planning is not completed, the bad luck may continue for months, years, or even decades in the form of lost income, medical bills, or final expenses. How does this happen?

Consider your family and how losing an income might change its standard of living. Do you have children? Look at your wishes for your children and ask yourself what will go unfunded if you were to pass away tomorrow. What about your spouse? What plans will go unfulfilled because of your loss? Don’t forget about debt on homes, cars, businesses, and other key items.

As you can see, having enough life insurance is important to a financial plan and risk management. (Click here to learn more about risk management.) People spend extended periods of time remaining underinsured for simple reasons like they don’t know enough about life insurance or they don’t want to go through the underwriting process.

Taking advantage of employer-provided life insurance is a great way to easily provide proper coverage. However, it is not the best alternative for everyone.

Will I have access?

Not all employers provide access to a life insurance benefit. In fact, the Bureau of Labor Statistics news release from March 2016 notes that fewer people have access to a life insurance benefit (55% for private industry) than to medical or retirement benefits (1.) Generally, plans cannot discriminate in terms of who has access to the plan. The insurer commonly requires that 75 percent of eligible employees participate in contributory plans. Also, life insurance benefits may be different based on earnings or employment position. However, the employer will not be able to set benefits for specific employees to prevent discrimination (2.)

How much life insurance do I need?

As with all financial planning, general rules of thumb work only in general, and general advice does not relate to individual circumstances. However, it is a good idea to start with generalities for comparison purposes.

The 10x factor

Simply take your annual income and multiply it by 10. For example, a $100,000 salary needs coverage of $1,000,000. This approach assumes that income and future obligations will be enough with this figure when, in fact, you may need significantly more or less.

A thorough calculation will consider future spending by your spouse, the educational needs of your children, health care expenses for aging parents, your current debt, your assets, the liquidity of current assets, your philanthropic wishes, and taxes.

Because of this complexity, it is a good idea to use a calculator or a professional to assess your life insurance needs. If you use the latter, make sure the insurance agent puts your best interests first and clearly explains the policy. Ask, “Could you describe the downside of this policy? May I repeat the policy terms in my own words?” Review the information for which the agent asks in assessing your needs. Did he or she inquire about each area listed above?

Remember, insurance protects you or your family from a low-probability and catastrophic event. (Click here for an understanding of Risk.) Insurance in its purest form is neither a savings vehicle nor a way to reduce taxes. In fact, insurance should be regarded as an expense to transfer risk.

Using your group policy is a great starting point, but comparing costs for more coverage is a good idea.

Cost comparison of university term

Low Load Life Insurance (4) was used as an outside proxy. The information below compares an individual policy with a group policy provided by Purdue University and is for illustrative purposes only (3.)

The chart below shows annual premiums for an added $250,000 of coverage at the ages of 35, 45, and 55. The term limits for the nonunisex nontobacco group (individual policy) provide level term coverage up to age 65, while the unisex group will see rate increases in five-year increments. For example, people age 30 through 34 pay the same premium and a rate increase occurs for the group starting at 35, then 40.

Upon an initial review, it appears that the group insurance is cheaper than buying an individual policy. However, premium increases every five years does influence the total premium paid over time.

Let’s examine the results if we assume that $250,000 of life insurance is purchased for coverage through age 65 and look at the average premium each year to account for the unisex group rate increases.

Quickly, one may see a different story in the average policy premium paid, leaving one wondering about the best strategy or maybe starting one’s career with the unisex policy and later moving to an individual policy. However, one must be careful with the latter notion, as higher ages and changing health conditions over time may result in higher premiums.

What are my next steps?

First, work with free online life insurance calculators to gain a better idea of the coverage you need. Note that the calculators will not use the same assumptions, so you will end up with a range of coverages. However, this should place you in the general area you need.

Second, what is your current state of health? The tables mentioned a best class and standard nonsmoker; the better your health, the lower your rate will be. Upon examining the state of your health, do you think you would be in the best class or the nonstandard class?

Three, start comparing your choices with premium comparisons. This stage may involve conversations with your human resources representative and insurance agent, as well as online research. Be sure you don’t buy policies that don’t meet your needs.

Still feeling overwhelmed? Give me a call at 317-805-0840 or email me at ncarmany@thewatermarkgrp.com to discuss your specific situation.


  1. US Department of Labor. New Release Bureau of Labor Statistics. N.p.: US Department of <Labor, n.d. Print. https://www.bls.gov/news.release/archives/empsit_04012016.pdf>.
  2. GROUP TERM LIFE INSURANCE. N.p., n.d. Web. 19 June 2017. <https://www.wallstreetinstructors.com/ce/continuing_education/nonqualified/id83.htm>.
  3. “Term Life Insurance.” – Benefits. Purdue University, 2015. Web. 08 May 2016. <http://www.purdue.edu/hr/Benefits/currentEmployees/lifeAndAccidentInsurance/term.html>.
  4. “Welcome to LLIS.” The Advisor’s Insurance Advisor. Low Load Insurance Services, Inc. Web. 08 May 2016. <https://llis.com/>.

Leverage Your Employer Healthcare Insurance

Healthcare plans are important to our quality of life and remain one of the most important benefits employers provide. Healthcare keeps citizens productive. Yet, the issue remains a hotbed for politicians, business owners, workers, and citizens. We see the headlines coming out of Washington from politicians and the posts from our friends on social media. How does the issue affect business owners and workers?

Business owners need healthcare as part of a great overall benefits package to keep and attract top talent. Workers express concern about healthcare benefits as a tool to provide for and take care of their families. This piece will focus on the common differences between a high-deductible plan and a preferred provider plan.

What is the difference between a high-deductible plan (HDHP) and a preferred provider plan (PPO)?

The major difference between these types of plans is out-of-pocket costs. The PPO requires a higher monthly premium and lower deductibles. The high-deductible plan mandates a higher deductible with payment of a lower premium. Also, a high-deductible plan may allow you to set aside funds in a health savings account, health reimbursement account, or flexible spending account. Each of these instruments creates tax savings for approved medical expenses (1).

The number of employers that offer HDHP has increased to 28% in 2016 from 7% in 2006 (2.) As a means of keeping costs low in a healthcare plan, businesses gather information about costs for lab work, specialists, doctors, and other medical services that employees may use. This accounts for the increasing number of high-deductible plans.

Which plan should I choose?

To answer this question, you’ll need to consider many factors. Here are a few to start:

–    Your current state of health: Consider how much you have paid in and the cost of care. Estimate how costs may change as you move from one plan to another.

–    Future healthcare needs: Like a retirement analysis, planning for future healthcare can be done with a health savings account. As we get older, we need more healthcare, so why not save money to cover future obligations? If needs are less than expected, the funds can be used later for retirement (click here for more information).

–    Cash flow: Monthly cash flow varies from household to household. Funding a PPO alternative may be desirable when compared to the larger deductibles of an HDHP with an HSA.

Once enough accumulation has taken place in an HSA, it may be a good fit for additional asset accumulation while taking care of current healthcare needs. If it is a participant’s first year in an HDHP plan, one may jump-start an HSA account with funds from an IRA (click here for more information).

Additional resources

For many companies, healthcare benefits go beyond basic healthcare. Wellness programs help employees change habits and behavior, such as losing weight or stopping smoking. Maybe your plan provides a lifestyle coach (3.) At some universities, healthcare benefits also may be provided with special onsite facilities, with the goal of reducing time spent waiting, traveling, and interacting with medical professionals

Wrap up

As you look ahead to the next benefit enrollment period, you will be able to track your expenses for the previous year and gain a better understanding of what to expect in the future. Look at your healthcare spending the same way you look at retirement spending. The way you spend and save – and the savings vehicles you use – will likely change over time. The right plan for one household may not be the correct plan for another. Use Dinky Town healthcare calculators to compare healthcare plan costs.

If you have questions about your healthcare planning, contact your human resources representative or an advisor, send me an email at ncarmany@thewatermarkgrp.com, or call me at 317-805-0840.


  1. “HDHP vs. PPO Plans.”HDHPs vs. PPOs. Web. 18 Apr. 2016. <http://www.bcbst.com/manage-my-plan/health-accounts/ppo-plan.page>.
  2. “Employer Health Benefit Survey 2016 – Kaiser Family Foundation.” Employer Health Benefits Survey 2016. N.p., 24 Sept. 2016. Web. 12 Apr. 2017. <http://files.kff.org/attachment/2016-Employer-Health-Benefits-Survey-Release-Slides>
  3. “Employer Health Benefit Survey 2016 – Kaiser Family Foundation.” Employer Health Benefits Survey 2016. N.p., 24 Sept. 2016. Web. 12 Apr. 2017. <http://files.kff.org/attachment/2016-Employer-Health-Benefits-Survey-Release-Slides>


Leverage Your Employer Disability Insurance

What is disability insurance?

Disability insurance replaces income if an employee becomes ill or injured and can no longer work. Like with life insurance, individual and group (employer-sponsored) policies exist. Here we discuss the general qualities of disability policies.

Benefits of disability insurance

Disability insurance coverage may provide several benefits, including:

-Replacing most income

-Preventing the erosion of amassed assets

-Helping pay medical bills while you are not working

Importance of disability insurance

If you regularly read my blog posts or view my videos, you likely have seen a discussion of Personal Benefit Buckets. Workers must realize that the buckets do not produce equal amounts of benefit. For example, a younger worker must protect his or her capacity to produce income by working. This working potential is the largest asset owned. If this potential drops, the worker must have a replacement in line to help cover any lack of income – thus, the importance of disability insurance.

Also, the odds of a 35-year-old worker using disability insurance before life insurance before age 65 are 3.5:1 (4.) This statistic reflects the same concern of Gen X and Gen Y. In fact, 70% of Millennials and Gen Xers worry about disability as a financial concern (8.) However, only 33% of employed consumers have disability insurance (8.)

Below, the discussion continues with details about and terms of many disability policies.


Occupational vs. non-occupational

Occupational coverage applies to injuries or illnesses related to the job, while non-occupational coverage is not related to one’s work. The former may constitute coverage originating from multiple sources, like a group disability plan through the employer or an individual policy and government programs such as Workers’ Compensation or Social Security.

Non-occupational and occupational coverage should not be confused with own-occupation versus any-occupation terms. Own-occupation and any-occupation as described by MyLTDBenefits.com:

An own occupation policy typically needs the insured to be unable to perform the material and substantial duties of his or her particular occupation to be considered “totally disabled.” The disability need not render the claimant totally helpless; rather the claimant must be rendered unable to perform the material and substantial duties of his or her particular occupation…an “any occupation” standard to qualify for disability benefits. These policies typically define disability in terms of the insured’s inability to engage in any gainful occupation that the insured is reasonably suited for based on his or her education, work experience, and other individualized factors (1).

Group disability policies may start providing benefits under an own-occupation provision and later move to an any-occupation (1).

What is an elimination period?

Think of an elimination period as a deductible. This is the time period after the illness or injury during which benefits are not paid. The longer the elimination period, the lower the premium is. The period may be a few days to 30, 60, 90, or 180 days.

Depending on the time period, coordinating your emergency fund to help cover expenses during the elimination period is a great practice. There are, however, circumstances in which this may be difficult. An example is a person who has landed his or her first job but who has not yet saved enough money to cover three to six months’ worth of living expenses.

Short-term versus long-term

Disability insurance will be either a long-term policy or a short-term policy. While the classifications suggest differences in time, this comparison will review more information.

Short-term disability policies are normally provided only through employers. A few states (California, Hawaii, New Jersey, New York, and Rhode Island) require employers to provide such a benefit (2). The benefits coverage may start a few days after the illness or injury and will last only a few weeks to a few months. Because the coverage duration is short, premiums are affordable. Workers may also use sick or vacation time and emergency savings to accompany short-term policies. (Please speak with your HR department for more information.)

Long-term disability policies are more important from a planning perspective, as the duration of coverage may last from months to years. This makes such policies more expensive than a short-term disability product. The elimination period – the time during which benefits are not paid – may be anywhere from 60 to 180 days. During this period, the employee must provide the means to cover expenses. Individual long-term policies may be customized to suit the specific needs of the person.

How much coverage do I need?

Like life insurance, a host of factors influences the coverage needed for a disability policy. The general idea, however, remains the same in terms of managing risk: replace the income lost because of the inability to work. Start by gathering your monthly outlays and add retirement account contributions, philanthropic giving, and health insurance premiums. Next, evaluate coverage provided by your employer. If the employer does not provide coverage, seeking an outside policy may make sense. Third, look for ways to cover a shortfall. This may depend on other income sources available. For example, a worker who is close to retirement may not need as much coverage because of his or her access to income sources like Social Security or a pension. Online calculators exist to help discover coverage gaps.

Also, private policies are more expensive than group policies; premiums are influenced by health, age, income, and terms of the policy.

Incorporating employer disability insurance into your financial plan

Depending on the time period and coverage of a short-term disability policy, coordinating your emergency fund to help cover expenses during the elimination period is a great practice. There are, however, circumstances in which this may be difficult. As previously noted, a new young worker starting her career or a worker who has little to no savings may not be able to bridge the gap.

Another technique involves using other benefits to cover short-term needs before the long-term coverage benefit begins. For example, use vacation or sick time as a possible funding source. The benefit will be complete coverage of your salary, but taxes may be taken out.


Taxation of disability benefits depends on who pays the premium and whether it was with pre- or post-tax dollars. Individual policies normally bought with after-tax money, making the benefits nontaxable. However, employer-sponsored group plans may be different. If the employer pays the premium or a portion of the premium that is not included in the employee’s taxable income, the benefit becomes taxable. Any portion of the premium paid by the employee with after-tax dollars will create a nontaxable portion of the matching benefit (3).


  1. Evaluate how much coverage you need.
  2. Examine your current disability coverage and see if a shortfall exists.
  3. If a shortfall does exist, can you buy extra coverage through your employer? If so, how long will it be before your benefits enrollment period opens? Contact your HR department for more information about policy details, or contact me for planning questions.
  4. Examine outside policies, if needed.
  5. Call me at 317-805-0840 with financial planning questions and to help coordinate your work benefits.


  1. “Own Occupation v. Any Occupation.”  com. Alan C. Olson & Associates, 2011-2016.  Web. 5 Mar. 2016.<http://getmyltdbenefits.com/own-occupation-v-any-occupation/>
  2. Walters, Chris. “Long-term Disability vs. Short-term Disability Explained – PolicyGenius.” PolicyGenius. 2014. Web. 05 Mar. 2016. <https://www.policygenius.com/blog/long-term-disability-vs-short-term-disability-explained/>.
  3. “Taxation of Disability Insurance.” Financial Planning Advice and Financial Advisors. Ameriprise Financial. Web. 05 Mar. 2016. <https://www.ameriprise.com/research-market-insights/tax-center/tax-planning/taxation-of-disability-insurance/>.
  4. “Death vs.Disability” AffordableInsuranceprotection.com. 06 Mar. 2017. <http://www.affordableinsuranceprotection.com/death_vs_disability>

Student Loan Debt: 2000 and Today

Helping Gen X parents plan for college and retirement.

1. Student loan debt from 2000 and 2016
2. Playing from a weak position
3. Balancing financial priorities

Work Cited:
1. http://money.cnn.com/2002/03/08/college/q_studentdebt/
2. http://www.morningstar.com/advisor/t/114659614/how-student-debt-affects-retirement-wealth.htm

How do I make the most of my employee benefits?

Today’s business environment changes quickly as innovations create efficiencies like being able to have a meeting with participants across the globe. Even amid change, one fundamental truth remains the same: namely, that businesses need people to run. After all, business reflects a relationship between people. Because people are involved, employee benefits to keep workers healthy, happy, and engaged require adaptation as the world changes.

How have benefits changed over the past 20 years?

An employee benefits survey released in 2016 by the Society for Human Resource Management discussed five changes in employee benefits over the past 20 years. The survey highlighted a few changes, like how telecommuting and wellness benefits have increased while other once-popular programs like access to credit unions have declined. Here are the top five trends noted by the survey (1.)

1. Professional and career development benefits- A higher percentage of employers now pay for professional memberships or offer professional development workshops.
2. Wellness Benefits- In 1996, 54 percent of employers offered wellness resources. Today, the number has increased to 72 percent.
3. Retirement Benefits- The survey discussed the nuances of retirement plan benefits (i.e., whether a Roth 401k is offered), but one of the most important reasons, offering retirement preparation advice, has not changed, at 45% (1.) Why is this important? A 2015 Retirement Confidence survey noted an increase in confidence from a low between 2009 and 2013, saying that 58% of workers are very or somewhat confident that they will have a comfortable retirement (2.) While better than half, confidence levels have a lot of room to grow. Additionally, “only about half of private-sector workers participate in a retirement savings plan, Bureau of Labor Statistics data show.” (3.)
4. Flexible work arrangements- Only 20 percent of employees were allowed to work remotely in 1996. Today, 80 percent of employers allow this activity (1.)
5. Financial and compensation benefits- While covering a range of perks, the employee benefits survey notes large decreases in programs like employee discounts and credit unions (1.)

As benefits change, employees must draft a game plan to maximize the key features of employer plans. The best way to start this task is by understanding the basics of financial planning.

Basics of Financial Planning

Most people engage in some form of financial planning, whether they know it or not. For example, the FICA taxes withheld from your pay go toward programs like Social Security (not all workers pay into this program) and Medicare. Both address retirement needs like cash flow and senior healthcare. Current citizens must have medical insurance as part of the Affordable Care Act. Disability insurance is available as a benefit through the Social Security program.

Beyond retirement and healthcare, consider estate planning. States have rules in place to divide assets if you die and do not have a will.
To attract a qualified workforce, companies improve benefits with programs other than those social initiatives previously discussed.

As people work, we take advantage of the programs, expressing concern when benefits change or close, when premiums rise, or when our retirement plan matching stops. Concern surfaces when the change affects our daily lives. What about our wish to heighten and live the best life possible? This is where most people fall short. They live in the daily grind, existing in a comatose state from Monday to Friday, only to have it start over the following Monday. When the employee approaches the subject from the perspective of using benefits for improving his/her life and as a means of taking care of family, he/she finds that benefits address most financial needs. Following are a few common areas that work benefits may address:
• Retirement – Most workers have three avenues to pursue retirement savings. The first is Social Security. We have taxes taken from our paychecks and we expect to receive a benefit at retirement. The second choice is saving through a work-sponsored plan like a 401(k.) The last alternative is saving money on your own through a Roth IRA, a Traditional IRA, or an investing account.
• Healthcare Insurance – As mentioned earlier, the requirement to have health insurance has changed the way you must address part of your financial plan. Add in new vehicles like Health Savings Accounts, and the issue becomes even more complicated.
• Long-Term Care Insurance – Some employers provide long-term care. This is not a benefit to which everyone has access. Mid- to late-career employees find this a valuable benefit.
• Disability Insurance – This insurance replaces income if a worker is no longer able to conduct the duties of his/her position. Policy features vary for each institution but address an overlooked topic in the planning world.
• Life Insurance – Group life insurance is typically provided to employees at a low cost with a cap on coverage.

Three of the four topics listed above focus on insurance. Employers and employees should understand the purpose of insurance, transferring risk from the employee to another entity. In this case, the loss of income, long-term care expenses, and current healthcare costs are the transferred risks.

Your Financial Plan

You understand the idea behind the benefits and already have an elementary plan in place, but you wonder how your benefits may be leveraged.

First, we should gain perspective on directing the plan. Great plans start with an understanding of what is important and why it is important. Core value exercises, statements of purpose, and reflection on past events and future experiences all help create a fulfilling and happy life. After all, it is the point of leveraging our work and money.
Once you paint a clear picture of what a fulfilling and happy life looks like, address your current asset base and start asking questions. Are you saving enough? Are you exposed to unnecessary risks? If you die, how will your family be affected?

What better place to start addressing these questions than with your employee benefits? You don’t have a salesperson pushing you to buy a product. Your employer completed a competitive analysis, making the benefit economical. Access is normally easy to achieve upon employment; all you need to do is fill out the forms. The major pitfall comes in coordinating the benefits across your plan.

Points of Consideration for Benefits
• Here are a few points of consideration as you review current benefits and examine new possibilities for next year:
• Retirement – How much should you be saving? Does your employer have a 401(k)? If so, can you save enough to max out your contributions ($18,000 for 2017)? Can you make Roth contributions to your retirement plan? If so, it may make sense to create tax diversification by having some tax-deferred contributions and Roth contributions. How will you manage the assets? Will you use a manager, target date fund, or self-direct? Pay attention to the cost of the funds you use. The more you pay, the less you might play.
• Health Insurance – What plans are provided in your benefits package: PPO, high deductible? Estimate your costs for use of the plan. If you use a high-deductible plan, explore your health savings account (HSA) choices. If coordinated properly, you may be able to use the HSA as a retirement supplement. Review the benefits section of your employer’s website. Often, human resources (HR) will provide details about the plan. Do not hesitate to contact HR with questions.
• Long-Term Care insurance – Long-term care remains one of the most complicated financial planning topics. The industry has experienced significant changes, from increasing premiums on existing classes of policies to creating hybrid policies (usually a life insurance policy or annuity with long-term care riders). How much does care cost in your location? How long do you think you will need the care? If you use the group policy, will you need to be underwritten? Are you in good health? What care do you want? Does the group policy have a conversion provision? Do you plan to self-insure?
• Disability Insurance – Many young and mid-career individuals do not consider disability coverage, yet it may be one of the riskiest areas (i.e., not being able to work) of your life. Late-career parties worry less about disability because retirement is often close. Does your employer-sponsored policy cover short-term, long-term, or both types of disabilities? Does the policy cover occupational or non-occupational injuries? How long is the elimination period? Will your emergency fund cover the elimination period? Does the policy have a conversion provision in case you sever relations with your employer?
• Life Insurance – You likely already have basic coverage, usually one to two times your salary. What amount do you need? Do you have large amounts of debt or college funding needs? Be aware that most group policies are term and the cost of insurance increases as you age. Are you in good health? If so, extra coverage may be cheaper if you buy an individual policy. Does your group life insurance have a conversion provision to a permanent or individual policy?
• Other Possible Benefits
• Childcare – Does your employer provide childcare benefits? If so, is the facility close to work? Is the facility accredited? Are the staff employees of your employer? When does the facility open and close? Do summer programs exist?
• Spousal Career Aid – A few employers help spouses find jobs and seek employment. If your employer provides this service, talk to the program directors and find out what connections they have with the local community. This helps shorten the search.
• Sabbatical – Some businesses provide the opportunity for workers to enjoy additional paid time away from work outside normal vacation time. Do you understand your sabbatical requirements? Have you reviewed personal duties related to taking a sabbatical, such as renting your home or home maintenance while you are away (if you are taking an extended leave)? Will your work benefits be active during your absence?

Next Steps

Remember, you profit from employer benefits with no pushy sales tactics, economical prices, and easy access. The difficulty remains in coordinating the benefits across your financial plan. Here is a list of next steps:
1. Review what a fulfilling and happy life looks like for you.
2. Identify your financial progress toward goals that support your fulfilling and happy life.
3. Review your benefits to heighten and promote your goals.
4. Review your plan and benefits three months before open enrollment. This gives you time to evaluate changes to benefits, circumstances, and needs.
On a parting note, be aware that your human resources department will not likely provide advice about which specific benefit or service you should use. Your retirement plan provider, while likely providing great service, will also be limited in addressing some of these issues as well.

If you still feel overwhelmed, use the “contact me” link and let’s schedule a time to answer your questions.



  1. Dealer, Olivera Perkins The Plain. “5 ways employee benefits have changed in 20 years: SHRM survey.”com. N.p., 21 June 2016. Web. 11 Feb. 2017. <http://www.cleveland.com/business/index.ssf/2016/06/5_ways_employee_benefits_have.html>
  2. By Ruth Helman, Greenwald & Associates; and Craig Copeland, Ph.D., and Jack VanDerhei, Ph.D., Employee Benefit Research Institute. The 2015 Retirement Confidence Survey: Having a Retirement Savings Plan a Key Factor in Americans’ Retirement Confidence, No. 413. April 2015. 11 Feb. 2017. https://www.ebri.org/pdf/briefspdf/ebri_ib_413_apr15_rcs-2015.pdf
  3. Puzzanghera, Jim . “America isn’t saving enough for retirement. Can that be fixed before it’s too late?”Los Angeles Times. Los Angeles Times, 27 June 2016. Web. 11 Feb. 2017. <http://www.latimes.com/business/la-fi-retirement-savings-plans-20160627-snap-story.html>

What is the right amount of student loan debt?

Simple; the answer should be $0, but for most families that is not a reality. So, the question needs to change: What student loan debt can I support?

First, a quick look at a few important numbers.

  1. The past few years have seen 70% of graduating students leave college with a loan (or loans) (1.)
  2. The average graduate holds $37,172 in student loan debt (1.)
  3. Fifty-nine percent of millennials do not know when their student loans will be paid off (1.)

How does this affect other financial behavior?

According to a study from Jake Spiegel, “we found that student loans do appear to have a small crowding-out effect on retirement savings.” In fact, using data from HelloWallet, Speigel found that each dollar of student loan debt results in a $0.17 decrease in retirement savings. Data from the Survey of Consumer Sciences revealed similar results, with a $0.35 decrease in retirement savings (2.)

A Navient report shares data showing that people are less likely to have children if they still have student loans (3.) This is the trickle effect of student loans. Less spending takes place because of higher debt that must be paid off. The same survey goes on to note that 32% of people who borrowed for college did not feel financially stable (3.)

From a behavioral standpoint, a lack of confidence often results in the halt of financial progress. Preserving and gaining a reasonable confidence level helps build financial momentum, leading to success. Student loans are a big factor inhibiting younger workers from building motivation and confidence when it comes to their finances.

What about after the loan is paid off?

In a separate but related article, Spiegel notes, “I found that workers who had paid off their student loans contributed nearly 12% more to their retirement accounts than workers who had not yet finished paying down their loans. This evidence reinforces our theory that there is significant interplay between student debt and retirement savings.” He goes on to discuss evidence compiled by HelloWallet that workers who do not have student loans spend less and save more for other priorities than do workers with student loans.

Even though the 12% increase helps retirement account balances, workers miss the compounding effect of higher contributions to retirement accounts from the start of their careers. As time passes, the differences between those who saved more versus those who did not create a widening gap because of this compounding.

Reality Check

The evidence clearly shows an inverse relationship between saving and student loan debt. However, most families cannot pay for college easily out of current assets or cash flow. Even if a family saves much of its income, competing priorities may take money away from college savings. The biggest competing goal: retirement, of course.

Joseph Hurley notes in a post on savingforcollege.com, “A realistic goal for many families is to aim to save 25% of projected college expenses” (4.) The article discusses a few of the assumptions behind the goal of saving for 25% of college expenses. One example reveals that, on average, a public four-year school offered $5880 in grant and tax benefits (4.)

Of course, the later a family starts saving, the more money it will need to put away every month.

The Right Amount

In an article posted last year, Mark Kantrowitz notes, “student loan debt is affordable if half of the after-tax increase in income that a student gains from obtaining a college degree is sufficient to repay that student’s loans in 10 years or less.” Mark continues, noting his rule of thumb later in the article that total student loan debt at graduation should be less than the starting salary of the student (5.)

The Chicken or the Egg

While Mark gives great information about how to gauge where you end, this information is most helpful to the parents of a young child, who have a longer time frame during which to save. What if you or your child will be attending college soon? Worse yet, what if you are in college now?

As you can imagine, the normal “save as much as you can” advice will not be new or groundbreaking. What students can do is start working during the summer months to amass funds for college. Since the admissions process is less focused on grades and more dynamic, emphasizing extracurricular activities, including work, will help in several ways:

  1. Acquire increased savings for college.
  2. Create experiences that students can use for writing admissions essays.
  3. Gain lifelong work skills that will be helpful in landing internships and possibly jobs.
  4. Increase confidence. A few students become nervous while asking questions about schools during visits or class. Universities are big and intimidating. A work history forces most of us to ask clarifying questions when we do not understand a task or situation. Gaining the confidence to seek clarification helps a young student make informed decisions.

In College Now:

  1. As noted before, start working to reduce the amount of student loan debt required for current or future semesters.
  2. Take stock of your current student loan debt. Are you on pace to meet the guidelines noted above? If not, are there similar fields of work through which you can increase your pay so the debt load will be serviced easily?
  3. Still feel overwhelmed? Start building a small emergency fund of $500-$1000. This small act helps address most emergencies after you graduate and gives you the freedom to aggressively start paying off your student loans.

Should you have questions or concerns, you can contact me at 317-805-0840 or ncarmany@thewatermarkgrp.com.


  1. “10 Student Loan Facts College Grads Need to Know | Paying …” N.p., n.d. Web. 11 Feb. 2017. <http://www.usnews.com/education/best-colleges/paying-for-college/slideshows/10-student-loan-facts-college-grads-need-to-know>
  2. Speigel, Jake. “How Student Debt Affects Retirement Wealth.”Morningstar Advisor. N.p., 16 Apr. 2016. Web. 11 Feb. 2017. <http://www.morningstar.com/advisor/t/114659614/how-student-debt-affects-retirement-wealth.htm>
  3. Kitroeff, Natalie. “Four Ways Student Debt Is Wreaking Havoc on Millennials.”com. Bloomberg, 10 Dec. 2015. Web. 11 Feb. 2017. <http://www.bloomberg.com/news/articles/2015-12-10/four-ways-student-debt-is-wreaking-havoc-on-millennials>
  4. Hurley, Joseph. “The Magic Number for College Savings.”com. N.p., 08 Feb. 2017. Web. 11 Feb. 2017. <http://www.savingforcollege.com/articles/the-magic-number-for-college-savings>
  5. Kantrowitz, Mark. “Why the Student Loan Crisis Is Even Worse Than People Think.”com. Time, 11 Jan. 2016. Web. 11 Feb. 2017. <http://time.com/money/4168510/why-student-loan-crisis-is-worse-than-people-think/>

Year-End Permanent Tax Savings

2016 will be closing quickly.  Like the Cubs, you can finish strong and put your finances in order for 2017.  One way to carry out this task involves a few simple techniques outlined by Sheryl Rowling in her article, “Permanent Tax Savings and Techniques (1.)”

Why is this important?

Every year taxpayers tell the Internal Revenue Service (IRS) a story.  A story about how their income originated and about important financial activities, like how much they saved in retirement accounts (found on the W2 for an employee’s work-sponsored plans), charitable giving, and business deductions.  Beyond these basic categories, your tax return reveals more information about your family.  Here are a few examples: that you may have student loan debt because you take a student loan deduction or that you may have a child in college.  Your tax return may suggest that you have a large portfolio; think about how much you report in dividends and interest.  For itemized filers, your tax return may reveal that you have a large home based on your mortgage deduction.

The aggregation of your tax data gives the IRS a good idea of your financial situation.

The Big Bad Wolf

Now imagine the IRS as the Big Bad Wolf in a financial story about the Three Little Pigs.  In this version, the wolf has the capability to rewrite parts of the story he doesn’t like.  big-bad-wolfWhich part will he likely retell?  Of course, it will be the part where he visits the third pig’s house.  Our nemesis will likely choose a way to blow down the house.  Now, not only will the wolf destroy all the homes, he will be able to gobble up not one but all three little pigs.

In the same way that our Big Bad Wolf will retell the story to his advantage, the IRS has the ability to influence your annual income story.  Think about how laws change and the interpretation taking place if you receive an audit.

Like the Big Bad Wolf, we can rewrite the story, this time introducing a cousin piggy who has built an underground bunker.  Here, the wolf has no building to blow down.  If properly stocked, all the little pigs will be safe for a long time.  Here is where you get to be the cousin piggy who built the bunker.

How to build your bunker

First, the cousin focuses on understanding a few basics about the wolf, specifically that thebunker strength of the wolf comes from his lung capacity.  So your objective will be to take away his breath.

Sheryl outlines tactics for knocking the wind out of the IRS by knowing that the “goal is to decrease taxes so that some or all of the reduction is never paid back to the government.”  Better yet, permanent tax savings may be realized by moving income from higher tax brackets to lower tax brackets or recognizing income without paying any tax.

Ideas for consideration (from the article.)

  1. Avoid short-term capital gains: Because ordinary rates are typically two times higher than long-term rates, review your trading and the turnover rates of your active mutual funds in retail brokerage accounts.
  2. Defer income to years subject to a lower tax bracket: This is where year-end planning may pay off. What will your income be for 2016?  What will it be for 2017?  Is there income you may defer into 2017 that may be taxed at a lower rate?
  3. idea-lightbulbRecognize zero-capital-gain tax opportunities: If you are in the 15 percent bracket or less, capital gains are not taxed up to a certain point. You may need to balance this opportunity with the chance to take money from your tax-deferred accounts and convert them to Roth at a rate of 10 percent or 15 percent, never paying tax again.
  4. Hold appreciated investments until death: The beneficiary receives a step-up in basis, thus avoiding any capital gains tax. However, Sheryl does address the possible volatility of the investment and the chance that it may go down, offsetting the potential tax benefit.
  5. Use the asset location theory: The author suggests that “moving appreciating investments to taxable accounts has the potential to permanently save the difference between ordinary and capital-gains rates on the appreciation.”
  6. Convert to Roth IRAs: Moving money, during a low-income year, from a tax-deferred account like an IRA to a tax-free account such as a Roth may help save in taxes paid over your lifetime.

As always, check with your tax advisor for specific advice about your situation.  Should you have questions or concerns, you can contact me at 317-805-0840 or ncarmany@thewatermarkgrp.com.



  1. http://www.morningstar.com/advisor/t/116935305/permanent-tax-savings-and-techniques.htm

The Financial Planners Plan: Save Money On Your Car

For most Americans, owning a car remains a part of everyday life. For the car enthusiast, frequent maintenance, as well as knowledge of how the car works, become part of regular conversations. For the non-car enthusiast, finding a trusted mechanic is like becoming a treasure hunter searching for gold on the seafloor with no boat. Frequent “trust me” conversations result in the spending of extra money while the owner does not even know what exactly the money is going toward.


I have been fortunate in that my background allowed me to build a small and useful mechanical skill set. My family had a trucking company and my dad often worked on cars. working-on-carsThis is how we spent a good portion of our time together. We built a show truck that won a few awards and appeared on a magazine cover. These skills have not been used much over the past 16 years as my professional career and family matured.

The Situation

For many years, my family—probably like yours—has been taking our cars to the mechanic to get the oil changed and for general maintenance. After all, we are busy going to soccer practice and traveling to see grandparents, friends, and relatives. Who wants to spend their limited time pulling a car apart or changing the oil in their own garage? Tools would need to be bought, oil disposed of… the list goes on and on.

My family was getting ready for a weekend getaway, the last one before school started. My wife took the car in for an oil change, as usual. We dropped the car off the night before and assumed that we would receive a call to pick it up once the oil was changed.

The News

As expected, my wife received the call, but much to her dismay the service person on the other end proceeded to describe a car in need of an immediate brake job. The cost for the brake job: $680. The representative discussed turning some rotors, replacing others, and new brake pads. Feeling pressured to make a decision and hearing me ask multiple brake-rotorquestions at the same time, Yvonne willingly gave the phone to me. (I could hear some of the conversation from the service representative.)

The conversation quickly changed as I asked questions about the brake job. When we had taken the car in, it had not displayed any warning signs of needing brake maintenance. How could it need an immediate brake job? Don’t brakes wear down slowly? During the last oil change, why hadn’t we been told that the car would soon need a brake job?

As you can imagine, not going on a trip already paid for was not an answer the family wanted. I asked the representative directly if the maintenance had to be done right away and if the safety of the car was at risk. He paused for a moment and stated, “Well, no. They can last for a little while longer.” I thanked him for the call and explained that we would be discussing his proposition to have the brake maintenance completed.

I completed the brake job myself, saving $350. The cost of the parts was $330, which included new pads, rotors, brake cleaner, and hardware.

Throw it in Reverse

Mechanics may try pressuring you into car maintenance; however, you need to watch out for neglect as well. My brother-in-law came to visit us on a business trip last year. His car had been to the shop for an oil change. Part of the maintenance involved a routine brake check. He was told the brakes were good for another year.

Yet when the car entered our street, a choir of screaming banshees strolled down the street with my brother-in-law. I immediately went on a short test-drive. The car ended apart in my garage that evening while we completed a brake job. (My brother-in-law was in for an evening and had to leave for business the next morning.) The car was unsafe to drive. He could have been in an accident with someone getting hurt.

Pump Your Brakes

I share these stories not to point fingers or claim to be a mechanic. Rather, I do so to share pump-your-brakesinformation about saving money on car maintenance and not feeling pressured to purchase a service. Take your time; ask as many questions as required about the service needed to uphold your car. Ask the service manager to speak to the mechanic directly and to see the parts so that you better understand the car and the maintenance proposed.