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Should You Stop Paying Your Student Loans in Forbearance?

The possibility of student loan forgiveness is on the horizon, so should you stop making payments on your own loans?

That depends, but let’s take a look at where we stand so far:

  • On the campaign trail, then-candidate Joe Biden promised to wipe out at least $10,000 for student loan borrowers.
  • Now that he’s president, Biden is getting pressure from some to increase that amount to $50,000 or more. But he’s also getting pushback from other groups who aren’t in favor of wiping out any student loan debt. (More on that later.)
  • An administrative forbearance that freezes interest rates and payments for federally held student loans has been extended until Sept. 30, 2021.

So what does all this mean for you, the student loan borrower?

Depending on your loans and financial situation, you might actually be better off making larger payments right now… or none at all.

Don’t worry, we’ll explain.

Is Student Loan Forgiveness Likely to Happen?

During his campaign, Biden announced that part of his Emergency Action Plan for the economic recovery would include forgiveness of at least $10,000 in student loans for borrowers, plus additional relief for those who attended public colleges or historically Black colleges and universities.

Bur remember, not all campaign promises come true.

Some groups have been pressuring the Biden administration to up the limit to $50,000 in student loan debt or wipe out all $1.7 trillion outstanding student loan debt. And there are plenty of other factions who aren’t in favor of forgiving student loans at all and instead want to focus on relief efforts for other parts of the economy.

With all these plans on the table, there’s no guarantee of anything, according to Betsy Mayotte, president of The Institute of Student Loan Advisors, a non-profit organization that offers free student loan advice and dispute resolution assistance to borrowers.

“I’ve been working in the student loan industry for over 20 years, and we’re closer to some sort of broad student loan forgiveness than we’ve ever been before,” she said. “With that said, I think the chances of broad student loan forgiveness are very, very slim still.”

And even if some sort of forgiveness does come to pass, it’s highly unlikely the federal government will simply wipe out all debt in one broad stroke.

It’s important to be realistic about which groups of people and types of loans will be forgiven, said Steve Muszynski, the founder and CEO of Splash Financial, a student loan refinancing marketplace.

“What President Biden campaigned on was a $10,000 forgiveness amount for select groups,” he said. “Select groups tend to be people that didn’t get an advanced degree, maybe make less than $125,000 a year, as an example.”

We’re closer to some sort of broad student loan forgiveness than we’ve ever been before. With that said, I think the chances of broad student loan forgiveness are very, very slim still.

However, one thing that is certain right now is that federally held student loans are in forbearance — interest rates are automatically set to 0% and all payments are suspended.

Forbearance was originally part of the Coronavirus Aid, Relief, and Economic Security Act — aka the CARES Act — passed in March 2020 and extended a few times to its current deadline of Sept. 30, 2021.

So with forbearance a sure thing and forgiveness a possibility, should you be making payments on your student loans? Let’s look at the factors that can help you decide.

6 Questions to Ask Before You Stop Paying Student Loans in Forbearance

Before you start celebrating that your student loans are going to disappear, let’s do a reality check and figure out how forgiveness might affect you.

1. What Type of Student Loans Do You Have?

Not all student loans are eligible for forbearance — and it’s highly unlikely they will all be eligible for forgiveness.

The forbearance covers all loans owned by the U.S. Department of Education, which includes Direct Loans, subsidized and unsubsidized Stafford loans, Parent and Graduate Plus loans and consolidation loans.

If you have private student loans, these loans are not covered by the administrative forbearance period and there’s almost zero chance they’ll be wiped out by a mass forgiveness.

Not sure who owns your student loans or how much you owe? You can call the Federal Student Aid Information Center at (800) 433-3243 and check out this guide to help you get organized.

If you have a mix of private and federally held student loans, your best strategy may be to use the money you’d normally pay toward federal student loans to pay off more of the private loans still actively accruing interest.

If you qualify, refinancing private student loans could help you lower your interest rate and monthly payments.

“If you have anything over, say, 5 or 6% on your private loans, it doesn’t hurt to look,” Mayotte said.

2. How Much Do You Owe?

The amount you owe may help you decide if you should use the forbearance period to make a dent — or wait.

Even if $10,000 in forgiveness is on the horizon, you’d still be responsible for any remaining debt over that limit.

“If you can afford to make the payments and you owe more than $10,000, you should absolutely be taking advantage of the 0% interest period to chip away at your debt,” Mayotte said. “But there’s no harm in taking that extra amount that you would be making in payments and socking it away somewhere you could earn some interest.”

As the forbearance deadline approaches, you can then use those saved payment amounts to make a lump-sum payment.

If you have less than $10,000 in student loans? Then it might pay to wait out the forbearance period, since forgiveness could potentially be approved in this time period.

However, you should continue to set aside the extra amount you would’ve paid and make the lump sum payment at the end of forbearance — if forgiveness doesn’t end up panning out.

3. Are You on the PSLF Track?

If you’re pursuing Public Service Loan Forgiveness — you have a direct loan, you’re on an eligible repayment plan and you work for a qualifying employer — then you can and should take advantage of the relief period by making no payments.

Those zero-dollar payments still count toward your total to earn forgiveness, and if your loans happen to be forgiven during this period, all the better.

Despite their eligibility, Mayotte said she knows of numerous cases where PSFL participants have continued to make payments — which might be understandable given the numerous issues that have beleaguered PSLF over the years (like borrowers discovering years’ worth of payments didn’t count because they were on the wrong repayment plan).

If you have been making payments since March, you can reach out to your servicer to request a refund for those payments.

But if you’ve lost your job or have had your hours cut to less than the 30-hour minimum, your non-payments will not count toward forgiveness (but you still don’t have to pay while in the forbearance period).

PSLF does not require consecutive payments, so you can still pause on payments if you think you’ll return to your non-profit or public sector job.

However, if you think it’s unlikely you’ll get eligible employment again, you may want to take advantage of the forbearance period to start paying on the loan. At the very least, you should update your income (if you’ve lost your job) on your income-driven repayment plan.

4. What Kind of Degree Do You Have?

If you have loans that you took out to get an advanced degree, don’t bank on forgiveness.

“People with advanced degrees are unlikely to get mass forgiveness, if any forgiveness, from the government because you’re seen as part of a society that has greater upward mobility,” Muszynski said.

Although undergrad loan debt may still be eligible for forgiveness, your graduate Plus loans are less likely to be included in a forgiveness plan. They’re also likely to have higher interest rates, which means the forbearance period is a good time to be putting a dent in that debt.

However, as with all federally held loans, Mayotte said she’d advise against refinancing into a private loan.

“I’m running into a lot of people right now who are kicking themselves because in the last couple years they did refinance their federal loan into private,” she said. “Now they can’t get the 0% and if [the government] does forgiveness, it’s not going to happen for them.

“They’re begging for a way to take it back, and you can’t.”

5. How Close Are You to Retirement?

If you’re nearing retirement and paying on student loans — whether it’s your own loans or those you took out to pay for your kids’ education — forgiveness may potentially help you wipe out some of your loans. Focusing on saving as much as you can for retirement may be the better bet during this forbearance period.

“Retirement should always come first as far as deciding where your money goes,” Mayotte said.

If you default on student loans after forbearance ends, the loans can be sent to collections, and your wages, tax returns and Social Security benefits may be garnished up to 15% for repayment.

But solely relying on forgiveness is probably not the best strategy, especially if you have more than $10,000 in loans or took out loans to get an advanced degree. In that case, you should start preparing for a future with a fixed income by aggressively paying off the student loan debt and looking into an income-driven repayment plan.

“Understand that you might be 80 years old when the loan is finally gone but at least the payments are going to be affordable and [they’re] not going to change,” Mayotte said.

6. What Does the Rest of Your Financial Situation Look Like?

All of these strategies for getting the most bang for your buck may not mean much if you’re struggling to pay the bills. If you are in a situation where you need the money to pay for your basic needs, take advantage of the forbearance period to get yourself back on your feet and to start building an emergency fund.

Also take into account how using this time to pay off student loans might help your stress levels vs. betting on forgiveness.

“Student loan debt can feel suffocating, and getting out of it can be a mental health benefit,” Muszynski said. “It’s important for people to recognize how they think about their debt, and whether they would prefer to be rid of it so they could be healthier from a mental perspective.”

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

Source: thepennyhoarder.com

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Everything to Consider Before You Sell Pokemon Cards

The resurgence of Pokemon has young adults rummaging through their closets in hopes of finding their old collection of trading cards. 

And, if they’re lucky, a rare card that could make them a fortune.

The 1997 Japanese anime-turned-trading-card-game-turned-video-game series holds a special place in the hearts of ‘90s kids, who cherished the furry creatures with elemental powers that could be traded and battled and hoarded for years to come. 

For Scott Pratte, a Pokemon enthusiast and card-trading expert, the hobby never dimmed. Pratte collects and sells some of the most treasured Pokemon cards in the world.

“I’ve done 7-figure deals,” Pratte says. “That’s just one deal, not even my lifetime” earnings.

Due to nondisclosure agreements, he can’t say exactly which cards have made him the most money, but he says that his trophy cards, aka the rarest Pokemon cards on the market, easily rake in upwards of $1 million.

Only a select few people hold these trophy cards, usually those who won Pokemon tournaments in the early 2000s and were awarded ultra limited edition cards. But there are a fair amount of more common Pokemon cards that could sell for hundreds or even thousands of dollars.

Pokemon Cards Worth Selling

The two biggest value factors to consider about old Pokemon cards are their rarity and condition.

In terms of rarity, “base-set” cards are where the money is for most collectors, and these cards are the most traded ones in the hobby. Set cards are “any card you can pull from a pack” bought from the store, says Pratte. The base set comprises the original 102 cards printed in 1999 and includes classic Pokemon like Pikachu, Blastoise, Charizard and Venusaur.

A complete first-edition base set in mint condition sold for $100,000 in December 2017. If you have a base-set card in your collection, there are a few visual indicators of its worth.

A graphic compares rare and common Pokemon cards
Illustration by Chris Zuppa and Adam Hardy

  1. Holographic cards: These are the most discernable at first glance. The background of the Pokemon illustration is shiny and reflective — not the whole card, only the picture of the monster. They’re typically referred to as “holo” cards, and only 16 of the original 102 are holo.

  2. First-edition cards: Directly next to the left corner of the illustration appears the “edition 1” logo. These cards were bought up shortly after initial release and remain some of the rarest and most sought-after cards.

  3. Shadowless cards: This version is almost identical to the first-edition prints but exclude the first-edition logo. If you don’t have a newer card for comparison, this is particularly hard to notice: the illustration box appears 2D. On newer cards, the picture box has a shadow along the right border to give it a 3D appearance.

  4. Unlimited cards: These cards are still old and rare, but they do not include the first-edition symbol and have an added shadow behind the illustration to give the picture box a 3D effect. To check if your card is part of the base set, look at the bottom right corner of the picture box. If you do not see one of the many later-added set symbols, then you have a base-set, Unlimited card.

The second important factor in a card’s value is the condition. If you do happen to have a first-edition, holographic base-set Charizard, you’re not guaranteed thousands of dollars. The price it fetches depends on how well the card has been taken care of.

If you have a card that you expect is worth more than $100, Pratte recommends getting it graded by Professional Sports Authenticator (PSA). 

Despite its name, the PSA grades all kinds of trading cards, including non-sports cards like Pokemon. PSA’s 10-point grading scale is accepted as the industry standard, and the company also publishes price guides to help determine a card’s worth. According to its current valuations, first-edition cards in perfect condition are valued at a minimum of $40. Those aren’t rarer, holographic cards either. A first-edition holo in mint condition can rake in between $1,000 and $24,000.

So why Pratte’s $100 limit? Well, the number isn’t a hard-and-fast rule, but the card-grading services offered by PSA will cost $20 or more per card, meaning a lower-value card doesn’t always merit the cost to get it authenticated.

“It’s a process,” says PSA spokesperson Terry Melia. “But it’s something that could reap big rewards in the end.”

In addition to grading the condition of the card, PSA ensures the card isn’t a forgery by using high-powered lights and magnifying equipment to check for tampering.

“There are a lot of forgeries and bogus merchandise out there,” says Melia.

Especially so online.

Where to Sell Pokemon Cards

After you’ve done some homework — checking the type of card, estimating its value and sending it in for authentication, if needed — you’re finally ready to sell.

“The main marketplace is for sure going to be eBay,” Pratte says. “Even if you’re someone who just stumbled upon your childhood collection, it’s really easy to take a couple of pictures [and] make a decent listing.”

The PSA’s grading system and authentication make selling online much easier. This process allays fears that the card is a fake and curbs arguments over its true condition. Each authenticated card comes in a protective case with the grade and barcode clearly visible at the top.

As Pokemon re-enters mainstream culture with the release of new video games and movies, expect to see an uptick in buying and selling activity of old cards. But interest doesn’t pick up overnight.

“It’s not binary in that sense,” Pratte says.

Instead, it’s a more gradual process where each new Pokemon-related release reminds twenty- and thirty-somethings of their childhood: the crinkling sound of ripping open a new pack of cards followed by a strong whiff of ink as they shuffle through the set, hoping to find something rare.

Pratte offers this caution about getting rich overnight: “Be realistic.”

“If you put in little or no effort back in the day,” he says, “you probably don’t have the homerun card.”

But as you rummage through your collection, remember that there’s no rush to purge now. Spend some time with your cards. See if they’re valuable. Consider getting them authenticated. Then decide if they’re worth selling. 

After two decades, Pokemon — and its card-collecting hobbyists — aren’t going anywhere anytime soon.

Adam Hardy is a former staff writer at The Penny Hoarder. 

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Source: thepennyhoarder.com

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How to Turn an Idea Into an App

The CEO of Knack does work on his laptop at the office's headquarters. A light up Knack signs is hung on the wall behind him.

Samyr Qureshi is CEO of Knack, an app that connects college students with tutors at more than 60 college campuses across the United States. Qureshi co-founded the app in 2015 with Dennis Hansen and David Soker. Qureshi was photographed at the company’s headquarters in Tampa, Fla, on February 2, 2020. Chris Zuppa/The Penny Hoarder

Samyr Qureshi and his college friend Dennis Hansen had an idea for an app that would match students with student tutors on the same college campus. That was 2015. Six years later their company, Knack, has secured more than $1 million in equity investments and is worth 20 times more than when it started. It also landed Qureshi, CEO, and Hansen, Chief Product Officer, on the 2020 Forbes 30 under 30 list, which highlights the country’s top innovators.

The steps they took to make Knack a reality offer a game plan for anyone with a viable idea and the drive to turn an idea into an app.

1. Find a Need and a Solution

Qureshi was tutored as a young child and then was a tutor himself in college. He and Hansen knew tutors helped with academic success, but realized it wasn’t always easy to find one. Through research they learned the “near peer” concept was successful. The more recently someone has taken a class and learned a concept, the more effective they are at helping someone else understand it. They decided to create an app that would match students at the same campus, one needing help in a course and another who has had recent success taking the same course.

2. Do your Homework

Airbnb and Uber were taking off so Qureshi and Hansen learned all they could about how these apps got started and why they were a success. They also researched how people were finding tutors on Craigslist, Wyzant and other resources, and what was working and what wasn’t. They decided what they wanted their app to offer and researched what it would take to create it.

3. Build a Team with the Variety of Talent Needed

The friends asked David Soker, who had a master’s in electrical and computer engineering and knew how to build apps, to join their team. He’s also a co-founder and now Chief Technology Officer at Knack.

“We intentionally put our team together to have engineers,” Qureshi said. Paying an outside company to build the app would have easily cost six figures.

This is a portrait of a woman who finds tutoring gigs through the Knack app. She has long curly dark hair. Behind her is a painting of the magic school bus.
Sonia Duraimurugan is an MBA student at the University of South Florida who used the Knack app to make money as a tutor. Before using Knack, she relied on food banks for groceries. “I was literally strapped for money,” she said. The app provided a way for her to earn as much as $12 per hour. Chris Zuppa/The Penny Hoarder

4. Take Advantage of University Incubators

Qureshi and Hansen, both graduates of the University of Florida, secured a spot at UF’s Gator Hatchery, an incubator that offers students workspace, office support, mentors and other resources for startups. There are hundreds of University Business Incubators (UBIs) across the country at schools of all sizes. Some offer grants or stipends to help support students financially while they create their business or product. Others have relationships with banks that provide special loans to entrepreneurs. Most UBIs are adept at creating networking opportunities for students to gain access to potential funders, often alumni. They also have media relations teams that get publicity for students and their endeavors.

5. Get Feedback

Whether it’s a product, service or app, testing a beta version with a wide audience (beyond your mom and next-door neighbor) is essential for understanding what works and what doesn’t. Knack launched a beta version at the University of Florida and the University of Central Florida to work out the kinks.

6. Enter Contests, Apply for Grants and Raise Equity

UBIs keep students informed about competitions and grant applications. But even if you aren’t in a UBI, there are many competitions for entrepreneurs and college students launching an idea as well as grant opportunities. In 2016, Knack won first place and $25,000 cash in UF’s Big Idea Business Plan Competition. That led to more interest from investors. A few family members wanted to invest in the company to help it get off the ground. The Knack co-founders sold them shares in the business in exchange for equity. They priced their stock by comparing their company to the market value of similar existing startups.

7. Get Your App in Front of Users

To reach an audience of users and tutors, they ran digital ads and marketed the app to students on numerous college campuses. One of the most effective marketing tools was creating a network of ambassadors on college campuses to represent Knack

“We recruited them cold from job postings, interviewed them and hired them,” Qureshi said. “We gave them $300 to $500 a month and a list of tactics that we had tested at UF: ‘Go buy pizza and entice some students to hear about it.’”

8. Have a Side Gig or Full-Time Job

Qureshi, who had been working professionally about two years, quit his job and lived off of his savings after joining the UF business incubator to create Knack. Later, when the company moved to Tampa, he worked for a cookie delivery business on the side to make ends meet.

Final Advice: Go For It

Qureshi’s advice to college students or recent grads who have an idea that could turn into an app is to “go for it.”

“We were pretty naive and that gave us some pause. I was a pre-law student so I didn’t have any business experience. The majority of our team did not study business,” he said. “We learned a lot from mentors. We were srappy, scraping up dollars where we could.”

Katherine Snow Smith is a freelance editor and reporter in St. Petersburg, Fla., and author of Rules for the Southern Rulebreaker: Missteps & Lessons Learned.

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Source: thepennyhoarder.com

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Indexed Universal Life (IUL) vs. 401(k)

Indexed Universal Life (IUL) vs. 401(k) – SmartAsset

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When creating your personal retirement plan, there are a variety of tools you can use to fund your long-term savings goals. An employer-sponsored 401(k) is one of them while indexed universal life insurance (IUL) is another. A 401(k) allows you to invest money on a tax-deferred basis while also enjoying a tax deduction for contributions. Indexed universal life insurance allows you to secure a death benefit for your loved ones while accumulating cash value that you can borrow against. Understanding the differences and similarities between IUL vs. 401(k) matters for effective retirement planning. Working with a financial advisor can also make a substantial difference in the amount of money you’ll have when you retire.

What Is Indexed Universal Life Insurance?

Indexed universal life insurance is a type of permanent life insurance coverage. When you buy a policy, you’re covered for the rest of your natural life as long as your premiums are paid. When you pass away, the policy pays out a death benefit to your beneficiaries.

During your lifetime, an IUL insurance policy can accumulate cash value. Part of the premiums you pay are allocated to a cash-value account. That account tracks the performance of an underlying stock index, such as the Nasdaq or S&P 500 Composite Price Index. As the index moves up or down, the insurance company credits the cash value portion of your policy each year with interest.

IUL is different from fixed universal life insurance or variable universal life insurance. With fixed universal life insurance your rate of return is guaranteed, making it the least risky of the three. With variable universal life insurance, your cash value account is invested in mutual funds and other securities so you’re exposed to more risk. An indexed universal life insurance policy fits in the middle of the risk spectrum.

Cash value that accumulates inside an IUL insurance policy grows tax-deferred. You can borrow against this cash value if necessary, though any loans left unpaid at the time you pass away are deducted from the death benefit.

What Is a 401(k)?

A 401(k) is a type of qualified retirement plan that allows you to set money aside for retirement on a tax-advantaged basis. Contributions are deducted from your paychecks via a salary deferral. Your employer can also offer a matching contribution. The IRS limits the amount you can and your employer can contribute each year.

With a traditional 401(k), contributions are made using pre-tax dollars. Any money you contribute is automatically deducted from your taxable income from the year. When you begin taking money out of your 401(k) in retirement, you’ll pay ordinary income tax on withdrawals. Any withdrawals made before age 59.5 may be subject to a 10% early withdrawal penalty as well as income tax.

Traditional 401(k) plans allow you to invest in a variety of securities, including mutual funds and exchange-traded funds. Target-date funds are also a popular option. These funds automatically adjust your asset allocation based on your target retirement date.

There’s no death benefit component with a 401(k). This is money you save during your working years that you can tap into in retirement. Unless you’re still working with the same employer, you’re required to begin taking minimum distributions from a 401(k) beginning at age 72. Failing to do so can trigger a tax penalty equivalent to 50% of the amount you were required to withdraw.

IUL vs. 401(k): Which Is Better for Retirement Savings?

Indexed universal life insurance and 401(k) plans can both be used as investment tools for retirement. But there are some important differences to note. With IUL, returns are tied to the performance of an underlying index. If the index performs well, then your policy earns a higher interest rate. If the index underperforms, on the other hand, your returns may shrink. Your insurance company can also cap the rate of return credited to your account each year, regardless of how well the underlying index does. For instance, you may have a cap rate of 3% or 4% annually.

In a 401(k) plan, you have the option to invest in index mutual funds or ETFs but you’re not locked in to just those investments. You can also choose actively managed funds, target-date funds and other securities, based on your time frame for investing, goals and risk tolerance. Your rate of return is still tied to how well those investments perform but there’s no cap. So, if you invest in an index fund that goes up by 20%, you’ll see that reflected in your 401(k) balance.

A 401(k) also affords the advantage of an employer matching contribution. This is essentially free money you can use to grow retirement wealth. With an indexed universal life insurance policy, you’re responsible for paying all of the premium costs.

Another big difference between the two centers on tax treatment and withdrawals. With an indexed universal life insurance policy, you can borrow against the cash value at any time. You’ll pay no capital gains tax on loans and no penalties unless you surrender the policy completely or fail to repay what you borrow. Death benefits pass to your beneficiaries tax-free.

With a 401(k), you generally can’t tap into this money penalty-free before the age of 59.5, even in the case of a hardship withdrawal. You may be able to avoid a tax penalty if you’re withdrawing money for qualified medical expenses but you’d still owe income tax on the distribution. You could take out a 401(k) loan instead but that also has tax implications. If you separate from your employer with an outstanding loan balance and fail to repay the loan in full, the entire amount can be treated as a taxable distribution.

Qualified distributions in retirement are taxable at your regular income tax rate. And if you pass away with a balance in your 401(k), the beneficiary who inherits the money will have to pay taxes on it. Talking with a tax professional or your financial advisor can help you come up with a plan for managing tax liability efficiently both prior to retirement and after.

The Bottom Line

Indexed universal life insurance and a 401(k) plan can both help you build wealth for retirement but they aren’t necessarily interchangeable. If you have a 401(k) at work, this may be the first place to start when creating a retirement savings plan. You can then decide if IUL or another type of life insurance is needed to supplement your workplace savings as well as the money you’re investing an IRA or brokerage account.

Tips for Investing

  • When using a 401(k) to invest for retirement, pay close attention to fees. This includes the fees charged by the plan itself as well as the fees associated with individual investments. If a mutual fund has a higher expense ratio, for instance, consider whether that cost is justified by a consistently higher rate of return.
  • Consider talking with a financial advisor about how to maximize your 401(k) plan at work and whether indexed universal life insurance is something you need. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool makes it easy to get personalized recommendations for professionals in your local area in just minutes. If you’re ready, get started now.

Photo credit: ©iStock.com/yongyuan, ©iStock.com/kupicoo, ©iStock.com/Piotrekswat

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

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How to Retire in Turkey: Costs, Visas and More

How to Retire in Turkey: Costs, Visas and More – SmartAsset

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Turkey is filled to the brim with beautiful architecture, art and a melange of cultures that reaches back thousands of years. It’s home to artifacts from communities like the Hittites, Ancient Greeks, early Christians and Mongols, which fill this nation of some 82 million, with a rich sense of history. Lying as it does at a crossroads of Europe and Asia, visitors can see a unique blend of Western and Eastern influences. Its Mediterranean and Black Sea beaches are renowned for their beauty. Istanbul’s Grand Bazaar extends across 58 covered streets hosting some 1,200 shops. If you’re considering retiring in Turkey, here’s an overview of some basic information you’ll need. A financial advisor can offer valuable guidance as you consider retiring abroad.

Cost of Living and Housing

It’s much less expensive to live in Turkey than it is to live in the U.S. Without accounting for rent, Turkey’s cost of living is 53.56% lower than in the U.S. on average, according to Numbeo, a cost-of-living database.

U.S. rent prices are 556.13% higher when stacked against those in Turkey, on average. To rent a one-bedroom apartment in a city center will run you around $215.26 in Turkey, whereas a comparable setup in the U.S. would run about $1,340.16. If you wanted to pursue purchasing an apartment in Turkey, you would find that the price per square foot in a city center is averaged out to $83.07. In comparison, the same square footage in a similar city location in the U.S. would cost about $328.96.

To further illustrate the contrast, we can compare Istanbul, Turkey’s most populated city, to the U.S.’s New York City. To maintain the same standard of life, you would need around $8,203.10 in New York, which contrasts starkly to the approximately $1,960.45 necessary in Istanbul, assuming you rent in both.

So, if you’re looking for a country to retire in with both affordable renting prices and lower property costs to make the most out of your savings, Turkey may be a solid option.

Retire in Turkey – Visas and Residence Permit

Turkey doesn’t have a visa specifically for retirement, so you have to apply for a residence permit instead. This requirement applies to anyone who intends to remain in the country more than three months. You’ll first have to apply for a short-term residence permit, and you must do so within a month of your arrival in Turkey. There is an online application you fill out at the Turkish Ministry of Interior’s website. Once you finish, it will prompt you to make an appointment with the nearest DGMM office to continue the process and pay the fee your visa requires.

A short-term residence permit is issued on a two-year basis. After you’ve lived in Turkey uninterrupted for eight years under your short-term visa, you can apply for a long-term residence permit. These extend indefinitely.

No matter what residence permit you are applying for, you will likely need to show proof that you possess adequate assets. This can shift whether or not you have dependents, but a single person is generally required to have the equivalent to a month’s worth of Turkish minimum wage. As of early 2021, that would be around $400.

Retire in Turkey – Healthcare

The World Health Organization ranking of national healthcare systems puts Turkey’s at 70th out of 191. The central government body responsible for healthcare and related policies is the Ministry of Health (MoH). There is also a private sector and university-based care; however, the MoH is the main body responsible for providing healthcare. You can expect the quality of healthcare in Turkey to vary between regions. Although it’s cheaper than some of its European neighbors, access is limited in more rural areas. You’re more likely to have high-quality care in major urban locations like Istanbul – as well as the ability to communicate with your healthcare providers in English. This increase in quality is why most expats choose to go to private medical facilities over public ones.

All residents under 65 must have either public or private health insurance. Expats who have resided in Turkey for over a year under their residence permit can apply to have public health insurance through the state-run Sosyal Güvenlik Kurumu (SGK). Expats usually choose to supplement this with private insurance (or just choose private) to cover additional fees at private facilities.

As Turkey has grown as a country and political entity, it has experienced a great deal of reform around its healthcare system. It likely will continue to experience further changes in the future.

Retire in Turkey – Taxes

Like many countries, residents and non-residents are subject to different taxes in Turkey. Residents pay taxes on their worldwide income, whereas non-residents only have to pay taxes on Turkish-sourced income. The country uses a progressive tax scale, ranging from 15% to 35%, depending on your income bracket.

Turkey does possess a tax treaty with the U.S., which can provide some relief. You will only have to pay into one country’s Social Security program as a result, which in Turkey is a 14% flat tax for employees. Otherwise, there are also tax exemptions that may allow you to pay less on your U.S. income taxes. One example is the foreign earned income exclusion, which lets you exclude the first (approximately) $100,000 for foreign earned income if you can prove your Turkish residency.

Retire in Turkey – Safety

Each expat’s experience is unique. Some may travel through Turkey and find they encounter little to no issues on a security level. That’s not to say you shouldn’t be cautious. The U.S. Department of State’s travel advisory warns travelers either visiting or moving through Turkey to be wary of both terrorism and arbitrary detentions. The advisory heavily suggests that you avoid the Sirnak and Hakkari provinces, which are in the southeastern part of the country, as well as any area within six miles of the Syrian border to avoid terrorist activity. The State Department’s most recent report on human rights practices in Turkey bears a close reading, especially sections 1 and 6.

Although you should speak with locals and enjoy the culture, you should also be wary of your surroundings and keep an eye on political developments. It is also advised that you don’t engage with political topics online either since that can still be a red flag.

The Takeaway

Turkey is still in the process of significant political change, making settling down difficult for the average retiree. That, along with terrorism concerns, may encourage you to look at other countries instead. However, Turkey has a strong sense of identity with a warm populace who wants to share their cultural. That sense of belonging, along with the country’s beautiful features and its low living costs, may make the challenges worth it to you.

Tips on Retiring

  • Finding the right financial advisor who can help address your needs doesn’t have to be hard. SmartAsset’s free tool matches you up with local financial advisors in as little as five minutes. If you’re ready to be meet with advisors in your area that will help you achieve your financial goals, get started now.
  • Planning your retirement comes with its challenges, especially if you intend to move abroad. While Turkey may have low living costs, there still may be other financial burdens you have to address. To get an idea of what to expect, stop by our retirement calculator.

Photo credit: ©iStock.com/hadynyah, ©iStock.com/Nikada, ©iStock.com/TEZCAN

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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How to Retire in Barbados: Costs, Visas and More

How to Retire in Barbados: Costs, Visas and More – SmartAsset

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An island in the West Indies, Barbados is a jewel of the Caribbean. Its turquoise waters and golden beaches are a perfect match to many people’s idealized days in the sun that they hope is waiting at the end of their working life. While this commonwealth country, where English is the official language, does have good reason to boast, you may wonder whether it’s right for you to retire in Barbados. Before contacting your financial planner to see if your finances are in order for the move, here are a few matters to consider first.

Cost of Living and Housing

Barbados’s cost of living tends to run a little higher than the U.S.’s on average, according to Numbeo, a cost-of-living database. At 12.24% above the U.S.’s average, without taking into account rent, the difference is not as significant as some other percentages found between the two.

For example, although Barbados has a higher cost of living, it has a much lower rent average. In comparison to the U.S., Barbados’s rent is generally 48.53% lower. You’ll find that renting is the cheaper way of living in Barbados, with a single-bedroom apartment in a city center at about $654.55. However, purchasing is a different story. At about $3,087.21 per square meter to buy an apartment in the same setting, it’s in the same price range as the U.S. There, it’s around $3,533.12 per square meter.

So, if you’re looking to stretch your retirement funds further, it makes more sense to pursue renting Barbados rather than purchasing a property.

Retire in Barbados – Visas and Residence Permit

For those who want to retire in Barbados, the process is relatively simple. Individuals over 60 with sufficient funds to support themselves can apply for immigrant status. After living in the country for five years, those people can then apply for permanent residence. You’ll have application and approval fees, in this case, $300 and $1,200, respectively.

Another option open to retirees is a special entry permit (SEP). This permit is offered to retired property owners and allows them to visit the island and leave as they please. The main requirements include owning Barbados real estate valued at $150,000 or higher and health insurance coverage. The latter’s value depends on the person’s age; below 50 has to have $350,000, and over 50 has to have $500,000 worth of coverage.

There are flat fees to cover for the SEP. It’s $5,000 for those below 50 and above 60 with $3,500 for those in between 50 and 60. Once you hit 60, this permit is indefinite, but you must renew it until then.

Retire in Barbados – Healthcare

Barbados enjoys a high standard of living and, thus, its people’s health is overall quite good. Its healthcare system is even viewed as among the best in the Caribbean. However, if you’re not a Bajan (as citizens of Barbados are sometimes called), you are not included under the island’s universal healthcare system. Therefore, if you’re an expat looking to retire in Barbados, you should ensure that you have private health insurance. Otherwise, numerous travelers and potential residents seek out the U.S. for treatment instead.

This outsourcing is also partially due to the difficulty in accessing professional care, such as rehab services. Otherwise, you’ll generally find four types of institutions: hospitals, both private and public; polyclinics; alternative healthcare clinics; and somewhat specialized hospitals, such as the five geriatric hospitals on the island.

Retire in Barbados – Taxes

After you spend 182 days of one year in Barbados, you are considered a resident. So, it’s important to know the tax distinctions between resident and non-resident status. Residents must pay taxes on their worldwide income, or the income they earn both inside and outside Barbados. In contrast, non-residents only pay taxes on income earned in Barbados.

For residents, they must file their income taxes on a minimum threshold of BBD50,000, or approximately $24,786. Incomes up to and including BBD50,000 incurs a 12.5% tax rate, while going over that amount leads to 28.5%. Residents are ensured a basic personal allowance of BBD25,000 ($12,500) and BBD40,000 ($20,000) for pensioners older than 60.

Non-residents receive the same tax rates. However, it’s important to note that even if you live outside the country, you must file taxes with the U.S. as an expat as well. Barbados and the U.S. have a tax treaty that can offer benefits and help ease the burden. There are also opportunities for U.S. expats through the foreign earned income exclusion and foreign tax credits to avoid double taxation on their Barbados earned income.

Retire in Barbados – Safety

While U.S. expats are not specific targets of crime in Barbados, they are still susceptible to crimes of opportunity and violence. Theft, such as burglary and gun violence, among other crimes, exist in Barbados. So, it is essential to remain vigilant, to avoid walking alone, particularly at night, and to know who you’re with at all times.

In particular, the U.S. Department of State advises against traveling through specific areas on the island to avoid these dangerous interactions. Areas to avoid include Crab Hill, Nelson and Wellington Streets and general nighttime party cruises.

Be cautious about which activities you enjoy, such as water sports or tourist events. This advisement comes more from a practical, safety concern than a pointed targeting of tourists, though. So, keep your wits about you.

The Takeaway

Barbados is the island of dreams for some retirees. Thanks to the prominent U.S. community as well as an English-speaking citizenry, there’s less of a culture shock to shake you up. There is also the gorgeous weather, a location out of most hurricanes’ paths and the relative ease in becoming a resident. However, before you start to plan out your future on this island, it’s best to speak with a trusted financial advisor. Such a person can lay out the commonwealth’s tax and healthcare systems and help you determine whether the high purchasing price of property is in line with your long-term goals.

Tips for Achieving Your Retirement Goals

  • Finding the most suitable financial advisor for your needs doesn’t have to be complicated. SmartAsset’s free tool matches you with local financial advisors in as little as five minutes. If you’re ready to be matched with your financial advisor, who will help you achieve your financial goals, get started now.
  • Barbados may not have a high cost of living compared to the U.S., but the difference could still affect your finances. To see  if your finances will support this, try our retirement calculator. Just put in a few details about where you want to retire, when you want to retire and the value of your current savings.

Photo credit: ©iStock.com/Fyletto, ©iStock.com/isitsharp, ©iStock.com/zstockphotos

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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How to Retire in South Africa: Costs, Visas and More

How to Retire in South Africa – SmartAsset

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Home to both lively landscapes and a highly diverse and fascinating culture, South Africa stands out as a place of opportunity for many potential retirees. Bask in a glowing sun while out on the golf course or relax in the shade on a beach. If you are a foodie or oenophile, you can enjoy this country’s culinary treats and excellent wines. Between all the things to do and see, this southernmost African nation, where English is widely spoken, can sound like a dream. So, if you’re considering how to retire in South Africa here are a few areas to look into first. A financial advisor can help you determine if your U.S.-based assets will cover expenses in the Rainbow Nation.

Cost of Living and Housing

A common draw for U.S. expats when selecting a country to settle down in is a low cost of living, and South Africa tends to suit that criteria. Generally, its cost of living is 41.77% lower than that in the U.S., with rent 60.88% lower on average as well.

According to Numbeo, one of the largest cost-of-living databases, these averages stay relatively consistent across the country’s most important cities. Whether you examine one of its three capital cities, Pretoria, Bloemfontein and Cape Town, or its most populated urban location, Johannesburg, both the average cost of living and rent remain low.

For example, Johannesburg’s cost to rent a one-bedroom apartment in a city center averages around $470.22, and the price to purchase an apartment, by foot, in the same location is $92.53. According to World Population Review, Johannesburg’s 2021 population sits around 5,926,668. A comparable city is the U.S.’s New York City with 8,622,357. The cost of living in comparison to New York is less than half at 54.59%. For example, the average single bedroom in New York City is $3,269.65 for rent and $1,515.09 per square foot to purchase.

So, if your ideal retirement location has lower-cost housing, regardless of whether you want to rent or buy property, South Africa may be a suitable location.

Retire in South Africa – Visas and Residence Permit

While South African does have a visa that foreign nationals can apply for in the hopes of retiring there, there is no set age range for such a visa. Anyone of any age can apply for the retired persons’ visa as long as they meet other requirements.

It’s important to note that none of these rules concern working in South Africa. Generally, to retire in a foreign country and obtain a retirement visa, work is barred from the applicant. They have to have a sustainable pension to support them instead. However, while you still must prove a set amount of assets or funds, you are free to work.

Retirees tend to take two routes when retiring in South Africa: a retired permit or an independent financial person permit. The main difference between the two is that the retired permit allows for a temporary residency basis. A retired visa for a temporary residence is valid for up to four years and asks for a minimum income per month or year to be proven. Similarly, a retired permit application for permanent status asks for an increased minimum monthly income. Still, it lasts forever as long as the holder visits South Africa once every three years.

Lastly, the independent permit requires a minimum net worth of about $800,000 at time of writing and fee of about $8,000 at time of writing, but it has the same lifespan as the retired permit.

Retire in South Africa – Healthcare

The majority of South Africa’s hospitals are public, which tend to be overcrowded and under-resourced. They often have issues you would expect from an overburdened staff, including a need for updated equipment.

Expats are more likely to find excellent healthcare through the country’s private hospitals and practitioners, which can mostly be found in major urban areas. There, you’ll find several well-established, nationwide hospital chains that offer a high standard of care. You also won’t run into the issue of non-English speaking staff at these hospitals. However, their services are expensive. While South Africa’s Bill of Rights demands healthcare for all, it is based on a sliding scale. Typically, expats are put into a category that forces them to pay for healthcare out of pocket, so it’s a better idea to have private health insurance.

Retire in South Africa – Taxes

South Africa experiences extreme income inequality. The Gini coefficient, the standard index to measure inequality, of the country is 0.58 – one of, if not the, highest among any nation. South Africa, as a result of this and historical instability, is only just beginning to recover. However, because of this wealth disparity, personal income tax and most forms of revenue are only collected from a small percentage of the population.

South Africa’s personal income tax rates for residents are progressive and range from 18% to 45%, depending on your income bracket. Non-residents are only subject to taxes on income made from South African sources. The country defines a resident as someone present in the country for more than 91 days during the current and preceding five years.

It’s important to keep in mind that the U.S. requires all of its citizens to file taxes regardless of where they currently are in the world.

Retire in South Africa – Safety

The U.S. Department of State warns its citizens that South Africa is a location that experiences crime and civil unrest. More than the petty theft you may find in a travel advisory, South Africa experiences violent crimes, such as rape and mugging, which generally only occur at a higher frequency in central urban locations after dark. It’s also possible to find a demonstration or protest that has devolved into violence, disturbing the area and its traffic in the process.

On a lower level, some crimes, such as scams, also call for caution. It’s essential to be careful with your money, where you walk (especially at night) and keep your wits about you when interacting with things such as ATMs. Some are tampered with to obtain your cards and information.

The Takeaway

South Africa offers many potential benefits to the average retiree. It’s a naturally beautiful country that hosts a number of exciting sights and events to keep anyone entertained. Not only that, it’s a low-cost option in comparison to many countries and doesn’t put as many regulations in place for its retired foreign-born residents. There are legitimate safety concerns for the average tourist and a healthcare system that needs fine-tuning. Depending on your preferences for your retirement, the benefits may outweigh the difficulties or vice versa.

Tips for Achieving Your Retirement Goals

  • Finding the right financial advisor who can help you towards your goals shouldn’t be hard. SmartAsset’s free tool pairs you with financial advisors in your area in as little as five minutes. If you’re ready to be matched with your local advisor, get started now.
  • Retiring can come with all sorts of unexpected costs and obstacles. This is true even when you’re looking at a low cost of living country like South Africa. To prepare yourself, stop by our retirement calculator. All you have to do is input a few details about where you want to retire, when you want to retire and the value of your savings.

Photo credit: ©iStock.com/Byelikova_Oksana, ©iStock.com/ManoAfrica, ©iStock.com/Picture_Perfect

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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How to Retire in the Netherlands: Costs, Visas and More

How to Retire in the Netherlands – SmartAsset

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With just under 4,000 retired Americans getting Social Security benefits in the Netherlands at the end of 2019, this Western European country may not stand out as an obvious choice for retirement among some of its neighboring countries, but its high standard of living, universal health system and centuries of rich traditions, culture and food could make this the ideal retirement place for you.

If you want to retire in the Netherlands, a financial advisor can help you create a retirement plan to reach all of your goals and needs. 

Cost of Living and Housing

The cost of living database Numbeo says that consumer prices in the Netherlands are 9.9% higher than the U.S., when you exclude rent. And if you compare the overall cost of rent between both countries, American retirees can save a small amount — the Netherlands is 4.19% cheaper than in the U.S. But when you compare rents between specific cities, your Social Security dollars could go in some cases a lot further in this Western European country than in the U.S.

For a specific comparison, let’s take a look at Amsterdam, which has just over 1.1 million people. Average rent in the Dutch capital is 41% lower than in New York City. A one-bedroom apartment in Amsterdam’s city center averages $1,932.64, while a similar apartment in the Big Apple could cost you $3,269.65.

If you want to compare the average cost of rent in Amsterdam with other U.S. cities, the Dutch capital is 19.72% cheaper than in Los Angeles and 2.32% lower than Miami. However, Amsterdam rent is 3.54% higher than in Chicago, 41.80% higher than in Houston and 53.65% higher than in Phoenix.

So while the Netherlands may not be as affordable as other European countries, it may still be a reasonable choice depending on your financial options.

Retire in the Netherlands: Visas and Residence Permit

The Netherlands, like other European countries, is part of the Schengen Agreement, which means that American retirees are allowed visa-free entry into the Dutch country as tourists or for business purposes up to 90 days. If you plan on a longer residency, you will have to apply for a permit. Requirements will differ, depending on the reason for your stay. However, you should note the Netherlands has no specific option for retirees. So your pension income needs to be sustainable.

You can apply to the Immigration and Naturalisation Service (IND) for your residence permit once you have arrived in the Netherlands. In some cases, you will need a sponsor, such as an employer or partner, who will also need to submit an application (TEV). Once the IND approves your permit, it will be valid for up to five years.

Retire in the Netherlands: Healthcare

Universal healthcare is mandatory in the Netherlands — the country’s system makes health insurance compulsory for all residents, and expats are no exception to this rule. So American retirees who are permanent residents living in the Dutch country for more than three months will have to purchase private insurance. And to do so, you’ll need to register with your local council and receive a service number (BSN).

The basic insurance plan costs between $121 to $146 out of pocket, which will then become a monthly recurring payment. The government also reviews the mandatory deductible account and adjusts it yearly when needed. For example, in 2019, this amount was $493. In addition, consumers can pay a voluntary deductible on top of the mandatory payment in exchange for a lower monthly premium.

Retire in the Netherlands: Taxes

If you are earning money in the Netherlands, then that income is subject to taxes. Those employed by a company will have the amount automatically deducted from their salary through a wage tax. But if you are self-employed, you will have to calculate and pay your income tax on the annual tax return.

The Dutch tax office divides income tax into three categories based on income bracket, worldwide income, individual gross salary and pensionable age. Non-residents are only subject to a tax on the income they earn from sources in the Netherlands.

Beyond the Netherlands, you should keep in mind that American citizens are still required to file tax returns with the U.S. government, independently from where they reside. However, expatriates in the Netherlands could get some relief thanks to a tax treaty between both countries that eliminates double taxation. On top of that, expats can also benefit from the 30% ruling. This policy allows employers to pay their foreign-born workers 30% of their income tax-free continuing for up to 10 years.

Retire in the Netherlands: Safety

While the Netherlands can be picturesque from the windmills to the tulips, general safety precautions are advised, as in other countries, to safeguard against crimes that could target tourists and other expats.

The U.S. Department of State’s Travel Advisory says that the Netherlands is a low-crime threat, but puts the Dutch country at a Level 2 due to possible terrorism threats. The Netherlands raised its own threat level as well in 2019 and put forth counterterrorism measures to address the situation.

But while individuals are urged to exercise caution, the average traveler in the Dutch country has a generally safe experience, even in major cities like Amsterdam, Rotterdam and The Hague.

Bottom Line

While the high standard of living in the Netherlands could be challenging for budget-savvy retirees, the Dutch country’s universal health system and rich culture could make it the ideal retirement place for you.

Tips on Affording Retirement

  • If you want to retire in the Netherlands or any other country, a financial advisor can walk you through all the steps that you’ll need to take for a comfortable retirement abroad. SmartAsset’s free tool matches you with local financial advisors in your area within five minutes. If you’re ready to speak with an advisor that will help you hit your financial goals, get started now.
  • The Netherlands is one of the more challenging European nations to rely on your Social Security benefits alone. SmartAsset’s Social Security calculator can help estimate your benefit amount and compare it with the costs of living that you will have to pay during retirement.
  • Whether you want to retire comfortably abroad or in the U.S., both an IRA or a 401(k) plan will offer you tax benefits, and help you grow your retirement savings with compound interest.

Photo credit: ©iStock.com/Budanatr, ©iStock.com/Madkruben, ©iStock.com/Yasonya

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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