Latest news with #JoshRichner
Yahoo
4 days ago
- Business
- Yahoo
4 Reasons People Are Using 401(k)s for Emergencies, According to Vanguard
Vanguard recently released its 2025 report on how America saves. It revealed that a record 4.8% of 401(k) holders took a hardship withdrawal in 2024, up from 1.7% in 2020. Be Aware: Check Out: So why are more Americans raiding their retirement accounts? The report listed the following reasons for hardship withdrawals. Over a third (35%) of account holders who took a hardship withdrawal listed avoiding foreclosure or eviction as their motivation. 'Traditionally, homeowners in financial distress might refinance or tap home equity to stay afloat,' said Josh Richner of FaithWorks Financial. 'But with mortgage rates hovering near 7%, refinance volume has dropped to its lowest level since the mid-1990s. That leaves many turning to the only sizable resource they can access: their retirement savings.' Read Next: At 30%, medical expenses made up the second most common driver of hardship withdrawals last year. It doesn't help that many Americans have little to no emergency savings. A study by GOBankingRates found that half of Americans have $500 or less in savings. Vanguard reported that 16% of hardship withdrawals went to cover a home repair or purchase. Brett Daniel, founder of Daniel Safe Money Retirement Solutions, cautioned homebuyers against raiding their retirement savings. 'While purchasing a home can make a great financial investment, using retirement savings for the down payment or home repairs is risky due to the fees involved on the amount withdrawn from your 401(k).' It also leaves you with less money in financial investments to compound throughout your career and pay for your retirement. Another 14% of hardship withdrawals went to covering tuition costs, and 5% were uncategorized. While some of those withdrawals helped the account holders themselves get degrees and improve their future earnings, some likely went to account holders' children. But most financial experts agree that's a dangerous path, as children have many options to fund their college degree, but retirees have just one: their savings. 'Parents looking to help with tuition should look at 529 college savings plans or Coverdell Education Savings Accounts, rather than draining their own retirement accounts,' Daniel said. Vanguard noted that it is now easier to request a hardship withdrawal, due to a 2019 budget act, which could account for some of the increase. Additionally, another recent law could also help explain the bump in hardship withdrawals from 401(k)s. The Secure 2.0 Act of 2022 required employers to automatically enroll new workers in 401(k) accounts, if available. That led to many lower-income workers having retirement accounts, and for some, it represents their only source of savings. Overall, Vanguard doesn't see much cause for alarm with the heightened hardship withdrawals. The report pointed to these legal changes as significant drivers, taking a sanguine stance on the 4.8% hardship withdrawal rate. More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 10 Used Cars That Will Last Longer Than an Average New Vehicle 5 Cities You Need To Consider If You're Retiring in 2025 This article originally appeared on 4 Reasons People Are Using 401(k)s for Emergencies, According to Vanguard
Yahoo
11-06-2025
- Business
- Yahoo
How Much Money You Would Have If the U.S. Made These 3 Policy Changes
Policy changes at the federal level can impact your personal finances. It can either put thousands of dollars back in your pocket or quietly drain your wallet over time. Here are three policy changes that can have a positive impact on your finances if they become law. For You: Read Next: The most immediate financial relief could come from Senate Bill 381, which proposes capping credit card interest rates at 10%. This change would provide substantial savings for millions of Americans struggling with high-interest debt. 'One policy change that could significantly impact the average American is the pending Senate Bill 381, which proposes a cap on credit card interest rates at 10%,' said Josh Richner, founder and senior advisor at FaithWorks Financial. Discover Next: As of February 2025, the average credit card APR stands at 21.37% and the average credit card debt per American is approximately $6,455, according to TransUnion, one of the three major credit reporting agencies. 'At today's average APR, carrying a $6,455 balance results in roughly $1,380 in interest over a year. If interest were capped at 10%, the annual interest would drop to around $645, saving the average consumer more than $735 a year,' Richner said. For individuals with higher credit card debt, the savings become even more significant. Another proposed policy under Trump Accounts, dubbed the 'One Big Beautiful Bill,' would create a federally-funded savings account with a $1,000 deposit for children born between Jan. 1, 2025 and Jan. 1, 2029. Families could contribute up to $5,000 per year until the child turns 18. 'Assuming a family contributes the maximum $5,000 annually and the account earns an average annual return of 7%, the account could grow to approximately $170,000 by the time the child reaches 18,' Richner added. 'If families make no additional contributions, the initial $1,000 federal seed investment could grow meaningfully over 18 years, depending on the investment's annual return. Assuming the same 7% annual return, the $1,000 could grow to approximately $3,380 by the time the child turns 18.' This nest egg could go toward college, a first home or starting a business, giving the next generation a meaningful financial head start. Monetary policy changes that lower interest rates could deliver big savings across multiple areas of households' financial lives. 'Lower interest rates can have a ripple effect on the entire economy, influencing everything from consumer spending and business investments to the housing market and job creation,' said Aaron Razon, personal finance expert at Couponsnake. 'If borrowing costs decreased even by 1%, households might save thousands of dollars annually in loan and mortgage payments.' More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 8 Common Mistakes Retirees Make With Their Social Security Checks 5 Types of Cars Retirees Should Stay Away From Buying This article originally appeared on How Much Money You Would Have If the U.S. Made These 3 Policy Changes Sign in to access your portfolio
Yahoo
16-05-2025
- Business
- Yahoo
Who qualifies for debt forgiveness?
Debt forgiveness can reduce or wipe out certain types of debt, but you'll typically need to meet strict criteria to qualify. Debt forgiveness has benefits and drawbacks, so make sure you understand both before taking this route. Not all types of debt are eligible for forgiveness, but you may find relief for student loans, credit cards, mortgage loans, medical bills and taxes. Household debt in the United States is now at $18.04 trillion. For many, keeping up with — and paying off — this much debt can be a major struggle. That's where debt forgiveness comes in. If you're struggling with large amounts of debt, forgiveness could be a solution. Debt forgiveness doesn't erase everything, but it could ease the burden and help you get your finances back on track. Debt forgiveness is when a lender or creditor agrees to wipe out all or part of a debt. You may be able to apply if you have unsecured debts, like credit cards, student loans or tax debt. Medical debts and mortgages may also qualify for some types of relief. 'Consumers can request debt forgiveness directly by contacting their creditors, providing detailed documentation of their financial hardship, and negotiating terms for debt relief,' says Josh Richner, Founder and Senior Debt Advisor at FaithWorks Financial. Lenders aren't obligated to wipe out your debts, however. Even if you meet the conditions, the process and how much debt they'll eliminate depend on the lender and the type of relief. You may need to contact your lender directly to see what's available and how their process works. Only certain types of debt may be eligible for forgiveness. Even then, it's not always easy to qualify. 'Debt forgiveness should not be assumed to be readily available; it typically requires substantial proof of hardship,' Richner says. 'A few months out of work may be a significant hardship to you and your household, but it doesn't fall outside the norm and, while they may offer a grace period, they'll likely expect you to resume payment as soon as you are able.' It's good to know your options. These are the most common types of debt forgiveness and how to qualify. If you have federal student loans, you may qualify for relief in one of the following ways: Federal Perkins Loan Cancellation: Some professionals — including special education teachers, law enforcement professionals, first responders, attorneys, military personnel and health care professionals — may qualify for up to 100 percent loan cancellation after five years of eligible, full-time service. Public Service Loan Forgiveness program: If you've made 120 qualifying payments under an income-driven repayment plan or standard repayment plan while employed full-time for a nonprofit, local, state, federal or tribal organization, your remaining debt could be forgiven. Teacher Loan Forgiveness programs: If you've worked full-time as a state-certified teacher for the past five years, you may qualify for up to $17,500 in Direct Subsidized and Unsubsidized loan forgiveness. You could also qualify for student loan forgiveness if you have federal loans and have consistently paid them under an income-driven repayment (IDR) plan. There have been several IDRs, but many are in flux under the current administration. Those that have existed include: Income-Based Repayment Plan (IBR) Income-Contingent Repayment Plan (ICR) Pay As You Earn Repayment Plan (PAYE) Saving on a Valuable Education (SAVE) Plan If you've consistently repaid your student loans under these plans, your remaining balance may be forgiven at the end of the payment period — either 20 or 25 years. Federal student loan forgiveness may also be available in certain niche situations, such as if your school closed while you were still enrolled. If the borrower filed for bankruptcy or passed away, these loans may be discharged or canceled. Private student loans aren't eligible for federal loan forgiveness, but you can talk to your lender about your options. Eligibility may change An executive order signed by President Trump on March 7, 2025, may change who is eligible for student loan programs. Pay close attention to requirements when you apply for any forgiveness programs. If you can't pay your taxes, relief may be available in one of two ways. Offer in Compromise (OIC): You may qualify for an OIC if you can prove sufficient financial hardship. This won't cancel your debt, but it could reduce it. Applying is free, but there are no guarantees of success. Eligibility is based on your income, assets, expenses and ability to pay. If your application is rejected, you have 30 days to appeal the decision. Repayment plan: You may be able to set up a short- or long-term repayment plan with the IRS. You'll still have to pay what you owe, but you'll have more time to do so. Medical debt can be overwhelming. The Kaiser Family Foundation (KFF) reported that people across the United States owe an estimated $220 billion in medical debt — and that approximately three million adults owe upwards of $10,000. The good news is there are several forms of medical debt relief available. Some carry additional costs, but others are no-cost solutions, aside from the time it takes to apply. Assistance via your medical provider: Nonprofit providers are legally required to provide charity care or financial aid to low-income individuals. You may need to write a letter explaining why you need assistance to qualify. Medical credit card: These work similarly to regular credit cards, but you can only use them for qualifying medical expenses. Rates may be high, but some cards come with a promotional rate or deferred interest. For example, CareCredit is a health and wellness credit card with an interest-free plan available if you pay the balance within a certain period. Nonprofit organizations: Some nonprofits, like Undue Medical Debt, provide relief to those with excessive amounts of medical debt. Look into local organizations to see what's available and their criteria. Payment plan: Some providers offer relief in the form of payment plans. These work by splitting your bill over a series of payments. Depending on the plan, your payments may be interest-free. Mortgage lenders don't usually forgive your debt. However, you may find relief in a few ways: Forbearance: Your mortgage loan servicer may agree to temporarily pause or lower your monthly payments. During this time, your loan will generally still incur interest, meaning you'll have to pay more later. You may need to provide proof of significant financial hardship to qualify. Mortgage refinance: If your credit score is high enough, you may qualify for a mortgage refinance. This could reduce your monthly payment, lower your interest rate or get you a longer repayment term. Keep in mind that extending your term may lead to additional interest costs. Payment modification: Depending on your financial situation, your lender may be willing to extend your repayment term or lower your interest rate. This will lower your monthly payment but could mean paying more over time with interest. Short sale: If you want to sell your home, ask your lender if a short sale is an option. If it is, you might be able to sell for less than what you currently owe. You won't get any cash from the deal, but your lender will forgive your remaining mortgage balance. You may also qualify for financial relief if you have an FHA loan. This could be in the form of a forbearance plan, a loan modification program or foreclosure. Learn more about your options on the HUD website. While there aren't any specific forgiveness options for credit card debt, you could apply for a credit card hardship program. This could get you a lower interest rate, waived late fees, small minimum payments or even a temporary payment pause. You'll generally need proof of financial hardship to qualify. This may include a medical emergency or loss of employment. Reach out to your card issuer to see what's available and their requirements. If your credit card company doesn't offer a hardship program, there are alternatives. Balance transfer card: If you have good credit, you may be eligible for a balance transfer card with a 0 percent introductory APR. Credit counseling: This can help you get your payments back on track. Look into nonprofit and for-profit organizations, like credit repair companies. Debt consolidation loan: Consolidation lets you roll several high-interest debts into one loan, ideally with a lower interest rate. This can make it easier to keep up with payments and save you money on interest. As a last resort, you could also consider bankruptcy or debt settlement. 'If things are really bad, bankruptcy might be an option,' says Joseph Camberato, CEO at National Business Capital. 'It can protect you from your debts if you can prove you can't repay them. But bankruptcy has long-term consequences, like damaging your credit for seven years. 'Before considering bankruptcy or trying to get the whole balance forgiven (which is tough), look into a structured payment plan to pay off your debt over time. Another option is to work with a debt relief company that can help you negotiate a payment plan with your creditors.' If you're struggling with debt, take action as soon as you can to get ahead of the situation. Not all types of debt are eligible for forgiveness, but some are, including federal student loans and certain other unsecured debts. Reach out to your creditors to see if they offer any debt forgiveness programs and their requirements. 'Successful debt forgiveness often requires compelling, documented proof of significant hardship,' says Richner. 'That may be sharing the realities a family faces after a tragic loss or displaying an unchangeable inability to repay the debt with no viable chance of collection.' Is there a debt forgiveness program from the government? There isn't one universal debt forgiveness plan. The government has some programs targeting specific borrowers, like federal student loan borrowers through Teacher Loan Forgiveness or Public Service Loan Forgiveness. Who qualifies for tax debt relief? Tax relief through the IRS is handled on a case-by-case basis. You might be able to settle your debt for less than what you owe through an offer-in-compromise, but not everyone is eligible. Can credit card debt be forgiven? While credit card debt can be forgiven, it's not common. You might be able to get your credit card debt forgiven through bankruptcy. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
