When it comes to retirement planning, the term “pension” is becoming almost archaic. According to the Office of National Statistics (ONS) only 35% of workers in the private sector paid into a company pension fund last year. Most employers have adopted 401k plans and put the responsibility on the employee’s shoulders to take care of funding their own retirement. While having control can be a blessing, it can also be a double-edged sword. Especially, for those that don’t take the time to fully understand all of their investment options. For those people, there just might be a solution. It’s called the DB(k) pension plan and here are the rules on how it works.
401(k) Match + Pension Plan = DB(k)
What exactly is a DB(k) pension plan? Essentially, it combines the benefits of an income stream of a pension with the matching of a 401(k) plan. Many boomers that still have pensions, love them because they know they have an income stream that they can depend on. The DB(k) offers the luxury of that stable income with a matching contribution to boot. Might be the closest example of having your cake and eating it too when it comes to retirement planning.
DB(k)s Could Be Popular to Employees
Many small businesses will bypass a Simple IRA or a SEP IRA and go straight to the 401(k) plan purely because of name recognition. Employees like perks and a potential employer with a 401(k) plan with a match sounds much more attractive that a SEP IRA. The DB(k) has the potential to be the next household name of retirement plans. Most workers that I come across that have 401(k)’s don’t really understand them. Having a pension-style income like the one Mom and Dad had, may be a safer and less complicated solution.
Are DB(k) Plans Expensive for Employers?
It’s tough to say. With the recent adoption of these plans, it doesn’t seem that employers are rushing off to get these started. I’m sure the slumping economy is the largest barrier. For those companies that do start these, they most likely have a very good cash reserve. However, it isn’t as if a business is funding two retirement plans at once. In fact, any businesses that offer both defined benefit plans and 401(k) plans may unite them in this new option.
Less Paperwork Makes Everybody a Happy Camper
Companies with 2-500 employees are eligible to have DB(k)s pension plans. Where 401(k) plans must meet certain “testing requirements” for top-heavy rules, the DB(k) is exempt and with a plan document and one simple form 5500, your business is ready to rock and roll DB(k) style.
These plans are exempt from “top-heavy” rules, and a company can put one in place with just one Form 5500 and one plan document. The cost of the overall plan is the question. Being new plans, it’s hard to say, but based on most reports I’ve read the cost should be cheaper compared to having both a 401(k) and a pension plan.
Employee Benefits from DB(k) Plans
An income stream, an employer match and a really neat tool to save for retirement. In brief, the DB(k) has four compelling attributes:
Monthly Paycheck for Life. The income stream won’t replace an employee’s end salary, but it certainly will help. Employees that have worked for the company for a longer period of time are rewarded: the pension income equals either
a) 1% of final average pay times the number of years of service, or
b) 20% of that worker’s average salary during his or her five consecutive highest-earning years.
Automatic Enrollment for 401k. That employees save for the future by default. (They can choose to opt out.)
The company automatically directs 4% of a worker’s salary into his or her 401(k) account. The company also has to match 50% of that amount, which is vested upon the match. (Employees do have the choice to alter the contribution level up or down from 4%.)
It only takes three years for an employee to become fully vested in a DB(k) pension plan. So even if they leave the company, the money is theirs.
Is the DB(k) the Retirement Savior?
For now, it’s too tough to say. The strongest benefits I see is the ability to offer more to your key employees. If you’re able to offer a sweet retirement package, it may help retain and gather more productive and easier to manage staff.
When I worked for my old brokerage firm, I was a W-2 employee and the retirement plan options were simple. I had the 401k and could also do a Traditional or Roth IRA outside of it. Things changed a bit when I started my own company.
I officially became a small business owner and had man more choices on retirement plans. What options do hands-on owner-operators have and which one is the best for you? If you have a small company and want a retirement program, you want to consider these plan choices.
Traditional or Roth IRA
I know what you’re thinking. A traditional or Roth IRA isn’t exactly a “business retirement plan”. But, if you are self-employed or own a business, you can still take advantage of these retirement accounts. An IRA is an Individual Retirement Account and can be a great way to save for retirement while also taking advantage of tax benefits.
There are two types of IRAs: traditional and Roth. With a traditional IRA, you will make your contributions with pre-tax dollars, reducing your taxable income for the year. The money will then grow tax-free until you withdraw it in retirement, at which point all of the withdrawals are taxed as ordinary income. With a Roth IRA, you will make contributions with after tax dollars (reducing your take home pay). The money will still grow tax-free until you withdraw it in retirement, but the difference is that all of your withdrawals are tax free.
With either type of IRA, there are contribution limits and other rules you should be aware of before setting up an account. It’s also important to do research on different providers so you can find an IRA with low fees and good investment options.
Feature
Roth IRA
Traditional IRA
Tax Treatment
Contributions are made with after-tax dollars and grow tax-free. Distributions in retirement are tax-free.
Contributions are made with pre-tax dollars, reducing your taxable income. Distributions in retirement are taxed as ordinary income.
Income Limits
Contributions are limited based on income. In 2023, the phase-out range for single filers is $130,000-$145,000 and for married filers is $195,000-$205,000.
There are no income limits for contributions, but there are limits on tax deductions based on income and participation in an employer-sponsored retirement plan.
Required Minimum Distributions
Roth IRAs do not have required minimum distributions (RMDs) during the account owner’s lifetime.
Traditional IRAs have RMDs starting at age 72, which require the account owner to take a certain amount of money out of the account each year.
Early Withdrawals
Contributions can be withdrawn at any time without penalty. Earnings can be withdrawn penalty-free after age 59 1/2 and after 5 years of account ownership.
Early withdrawals before age 59 1/2 may be subject to a 10% penalty, in addition to income taxes.
Contribution Limits
In 2023, the contribution limit is $6,500 per year ($7,000 for those age 50 or older).
In 2023, the contribution limit is $6,500 per year ($7,000 for those age 50 or older).
The SIMPLE IRA
These plans are very easy to create, and they have very low administrative costs and no annual IRS reporting requirements. You set up traditional IRAs for each eligible employee; they can contribute to the IRA on a tax-deferred basis (via payroll deductions, and you can either match the contributions of plan participants or contribute a fixed percentage of all eligible employees’ pay. The employees own the money in their IRAs.
I had considered going with the Simple IRA initially, but the one item I didn’t like is that it has a 25% early withdraw penalty for the first two years. This is well over the standard 10% all other plans have. In the event I did get into a bind, I didn’t like the idea of having to pay the extra to get it out.
The SEP IRA
A Simplified Employee Pension plan lets you make contributions toward your retirement and your employees’ retirements. (You can even have a SEP and another kind of retirement plan at your business simultaneously.) A SEP allows business owners annual tax-deductible contributions equal to 25% of your compensation (if you have a corporation) or 20% of self-employment income (for a sole proprietor).
This is currently what I have and should satisfy me for a few more years. I even opened up two separate accounts so I could invest with Betterment and another where I control my own investments. Pretty soon I hope to graduate to the next level…
The Solo 401(k)
Are you ready to fly solo? As in a “Solo” 401(k). Yes, you can have a 401(k) when you are self-employed. A business owner may establish one and include their spouse in the plan, provided the spouse is an employee of the business. A solo 401(k) throws in a profit-sharing twist on the standard 401(k). Solo 401ks may be funded by the employee (deferred compensation) and the business (a percentage of profit).
As an employee of your business, you can contribute an amount up to the standard yearly 401(k) contribution limit (catch-up contributions permissible if you are 50 or older). Additionally, solo 401(k) plans allow you to make tax-deductible profit-sharing contributions equal to 25% of your compensation (corporate entity) or 20% of self-employment income (sole proprietor). It is even possible to have a solo Roth 401(k). These plans do require a TPA (third-party administrator).
Ultimately, the Solo 401(k) will allow me to contribute the most pre-tax, but my income has to get me there first 🙂
Profit-sharing plans
Here’s one way to compete with larger companies for prime employees. Contributions are usually deductible at both the federal and state levels, with contribution limits equivalent to a SEP. Contributions aren’t mandatory. If your business has a bad year, you don’t have to make them. The assets placed within the plan grow tax-deferred. Again, annual tax-deductible contributions may be made according to the 25%/20% rule depending on your business entity.
New comparability plans
Basically, this is a form of profit-sharing plan that rewards senior or key employees more than others. The classic situation for this plan is when you have a small business whose multiple owners take home similar earnings but are of different ages. The plan must be tested to meet Internal Revenue Code nondiscrimination requirements, of course. It allows different levels of compensation to different groups within a small business.
Plan Type
Description
Contribution Limits
Employer Contributions
Employee Contributions
Eligibility Requirements
401(k) plan
An employer-sponsored retirement plan that allows employees to save for retirement on a pre-tax or after-tax basis.
$22,500 per year (2023), with catch-up contributions allowed for those over 50.
Employers can choose to match employee contributions up to a certain amount, or make a profit-sharing contribution.
Employee contributions can be made on a pre-tax or after-tax basis.
Available to any business, including self-employed individuals.
Traditional IRA
An individual retirement account that allows individuals to save for retirement on a pre-tax basis.
$6,500 per year (2023), with catch-up contributions allowed for those over 50.
None, but some employers may offer a SIMPLE IRA option for employees.
Contributions are made by the individual.
Available to anyone under age 70 1/2 who has earned income.
Roth IRA
An individual retirement account that allows individuals to save for retirement on an after-tax basis.
$6,500 per year (2023), with catch-up contributions allowed for those over 50.
None, but some employers may offer a SIMPLE IRA option for employees.
Contributions are made by the individual.
Available to anyone with earned income below a certain threshold.
SEP IRA
A Simplified Employee Pension Plan that allows employers to make tax-deductible contributions to a traditional IRA for each eligible employee.
The lesser of $66,000 or 25% of employee compensation for the year.
Contributions are made by the employer.
None, but employees can contribute to a traditional IRA outside of the SEP plan.
Available to any business, including self-employed individuals.
SIMPLE IRA
A Savings Incentive Match Plan for Employees that allows employers and employees to make contributions to a traditional IRA.
$15,500 per year (2023), with catch-up contributions allowed for those over 50.
Employers can choose to match employee contributions up to a certain amount, or make a non-elective contribution.
Contributions are made by the employee.
Available to businesses with 100 or fewer employees.
Defined Benefit Plan
A retirement plan that provides a specific benefit amount at retirement, based on factors such as salary and years of service.
Contributions are determined by an actuary based on funding requirements.
Contributions are made by the employer.
None, but employees may be required to meet certain eligibility requirements, such as a certain length of service.
Generally available to larger businesses with the ability to fund ongoing plan obligations.
What plan is best for your business?
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If you are reading this, you are probably thinking about putting a plan into place or switching to a retirement program more easily administered than the one you have now? But which one should you choose – and what is the next step? Take a big step today and take advantage of all that is available in the marketplace – consult an independent financial professional and a CPA to review your options and find the program that fits your needs.
The Southwest Rapid Rewards Priority Credit Card is the most rewarding of Southwest Airlines’ personal credit cards, offering a $75 annual Southwest credit and 7,500 anniversary bonus points. With a healthy sign-up bonus and the most benefits of any of the airline’s offerings, this is the card to get if you’re a Southwest loyalist. Card Rating*: ⭐⭐⭐½
*Card Rating is based on the opinion of TPG’s editors and is not influenced by the card issuer.
Southwest Airlines has a legion of fans — largely due to its flexible change/cancellation policies and offering two free checked bags for all passengers. Unlike other airlines, Southwest doesn’t offer lounges, premium cabins or even seating with extra legroom. But it does offer a full suite of cobranded credit cards to help frequent flyers fulfill their Southwest travel goals.
The Southwest Rapid Rewards Priority Credit Card is the most premium personal credit card in the Southwest lineup. It offers hundreds of dollars in value with Southwest each year, and its current sign-up bonus offers a healthy point bonus.
But are its benefits valuable enough to warrant the $149 annual fee? And is now the right time for you to apply? Let’s find out.
OWEN CL/UNSPLASH
Southwest Priority Card Welcome offer
The Southwest Rapid Rewards Priority Credit Card currently offers a welcome bonus of 60,000 bonus points plus a 30% off promo code after spending $3,000 on purchases within the first three months of account opening. TPG values Rapid Rewards points at 1.5 cents each, meaning 60,000 points are worth $900.
This is the first time Southwest has offered a promo code as part of a sign-up bonus on a credit card. The code will appear directly in your Southwest.com account within eight weeks of meeting the spending requirement. It can be used — only once — on a single one-way or round-trip Wanna Get Away, Wanna Get Away Plus, Anytime and Business Select fare, and is available for use until October 31, 2024.
Given it is a single-use promo code, it would be best to save this for a more expensive ticket. You’ll get the biggest savings when using the code for round-trip travel and/or during peak travel periods like the summer or the holidays.
Note that the welcome bonus will count toward earning the carrier’s venerated Companion Pass, which typically requires 135,000 points in a calendar year.
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Related: 13 lessons from 13 years’ worth of Southwest Companion Passes
All Southwest cards are subject to Chase’s 5/24 rule. This means if you’ve opened five or more credit cards in the past 24 months (from all banks, not just Chase), you may not be approved. Also, you can’t open a new personal Southwest card if you currently have one open or if you earned a sign-up bonus in the past 24 months on any personal Southwest card.
WYATT SMITH/THE POINTS GUY
Earning points with the Southwest Priority Card
Here’s what you’ll earn with the Southwest Priority card:
3 points per dollar on Southwest purchases.
2 points per dollar spent with Rapid Rewards hotel and car rental partners.
2 points per dollar on local transit and commuting, including rideshare apps.
2 points per dollar on internet, cable and phone services; select streaming.
1 point per dollar on all other purchases.
This is a wide variety of bonus categories compared to other airline credit cards, though top travel cards are typically even more lucrative.
Related: The best rewards credit cards for each bonus category
Redeeming points with the Southwest Priority Card
Redeeming points with the Southwest Rapid Rewards Priority Credit Card is very straightforward. Southwest award prices are directly tied to the cash value of the ticket, meaning the number of points you need for a flight will fluctuate, but you’ll rarely encounter times when you can’t use your points. Plus, if your plans change, you can redeposit your award without penalty.
While Southwest’s Rapid Rewards points won’t help you fly in first-class suites, they can provide great value. For instance, you can fly from Los Angeles (LAX) to Chicago-Midway (MDW) for just 8,091 points one-way, depending on the time of year. Meanwhile, other airlines often charge 10,000 miles or even more (assuming you can find availability).
SOUTHWEST.COM
If you book during one of Southwest’s flash sales, you could score awards for less than 2,500 points one-way. You can even fly to fun faraway destinations like Hawaii, Costa Rica and Mexico with your Southwest points.
Southwest Rapid Rapid Rewards Priority benefits
The Southwest Priority card offers the following benefits:
Anniversary bonus: Each year on your card-opening anniversary, you’ll receive 7,500 Rapid Rewards points, worth about $112, based on TPG’s valuations.
Annual Southwest travel credit: During each cardmember year, you’ll receive a $75 travel credit that can be used on most Southwest purchases, including tickets (but excluding upgraded boardings and inflight purchases), dropping the card’s actual cost to $74.
25% inflight savings: Receive 25% back (as a statement credit) after you use your card to purchase inflight drinks, Wi-Fi, messaging and movies.
Tier qualifying points boost: Earn 1,500 TQPs that count toward A-List and A-List Preferred status for each $10,000 you spend in a calendar year.
In addition to the Southwest-specific benefits, the card comes with lost luggage reimbursement, baggage delay insurance, extended warranty coverage and purchase protection. The card has no foreign transaction fees, and the annual fee is $149.
Which cards compete with the Southwest Priority Card?
Southwest Airlines currently offers three personal cards — all with the same sign-up bonus. Thus, it can be difficult to choose the right one.
If you want Southwest benefits with a more modest fee: The Southwest Rapid Rewards Premier Credit Card has the same welcome bonus but extra perks to justify its $99 annual fee. These include 6,000 anniversary bonus points, 2 EarlyBird check-ins per year, 25% back on inflight purchases and 1,500 TQPs towards A-List status for each $10,000 spent on the card. For more details, read our full review of the Southwest Premier card.
If you want a Southwest card with an even lower annual fee: The Southwest Rapid Rewards Plus has a $69 annual fee and an anniversary bonus of 3,000 points. You’ll also receive 2 EarlyBird check-ins every card anniversary. For more information, read our full review of the Southwest Plus card.
If you want points you can use with Southwest and other airlines: The Chase Sapphire Preferred Card earns Chase Ultimate Rewards points, which you can transfer 1:1 to Southwest — as well as a wide range of airlines — for making flight redemptions. You’ll get numerous travel protections, a $50 annual hotel credit and robust earning categories, and the card has a $95 annual fee. For more information, read our full review of the Sapphire Preferred.
For more options, check out our full list of travel credit cards.
Related: Comparing the Southwest Rapid Rewards Priority, Premier, and Plus Credit Cards
Is the Southwest Rapid Rewards Priority Card worth it?
If you fly Southwest at least a few times each year, you will come out ahead with the Southwest Priority Credit Card. The card’s everyday earning rates aren’t the most lucrative out there, but impressive built-in perks like upgraded boardings, a $75 annual travel credit and a 7,500-point anniversary bonus easily make up for it.
Bottom line
The Southwest Rapid Rewards Priority Credit Card is the most rewarding of Southwest Airlines’ personal credit cards, with a solid sign-up bonus and the most benefits of any of the airline’s offerings. If you fly Southwest often, it’s the card for you.
Official application link: Southwest Rapid Rewards Priority Credit Card
Additional reporting by Ryan Wilcox, Benét J. Wilson, Jennifer Yellin, Joseph Hostetler, Christina Ly and Ryan Smith.
Auctions can be great fun, as well as places for genuine bargains. The key is to know how the auction process works and to take advantage of a bargain if it fits your plans.
Prior to attending an auction, potential buyers should try to find out as much as possible about specific properties they are interested in. While most real estate auctions allow prospective buyers some inspection rights, direct contact with the administrator of the auction is frequently needed to arrange personal inspections.
Know The Property
Be sure to check the features, location and condition of the property. Attempt to discern the current market value of the property by looking at sales of comparable properties in the same area. Compare properties with the same number of rooms, particularly bedrooms and bathrooms, but be sure to allow for price differences due to “extras”-swimming pools or decks, garages, etc. Arriving at an auction well prepared will help you determine your bid price and even help you decide whether to bid on a specific property at all.
A property is put up for sale through an auction format for any number of reasons – a foreclosure action, a tax deed application, a court-ordered sale, provisions in a contract, a divorce resolution, a provision to satisfy the needs of an estate, a dissolution of a partnership or trust or because the owner chooses the auction as a means to quickly dispose of the property.
Get Familiar With Auction Process
Real estate auctioneers employ a variety of auction formats and bidding procedures. Many factors play a part in determining which methods will be used. Following are some of the more common real estate auction formats and bidding procedures used today.
An absolute auction is an auction in which the property is sold to the highest bidder, regardless of how low that bid might be. This type of real estate auction typically attracts the most bidders since the public knows that the property has to sell.
A reserve auction also referred to as a minimum bid auction, sets a pre-determined minimum bid amount prior to the start of the auction.
A subject to owner withdrawal auction allows the seller to bid on the property for himself or herself or to withdraw the property from the auction outright if he or she does not like the amount of money bid.
A silent or sealed bid auction allows bids to be made in advance and submitted for review. No one knows what anyone else is bidding.
In the case of a foreclosure or other court-ordered sale, state laws generally establish a period of time over which the property must be advertised prior to the sale. This serves several different goals. The most important is to give ample notice to draw prospective buyers. The other main reason for such announcement of the auction is to give all interested parties sufficient time to react to protect their interests. However, even with advance notice and advertising, it is rare for an auction to draw many prospective buyers.
Have a Talk….With Yourself
Once you understand how the auction works, you need to ask yourself: Is this for me? It can be fun to bid, but it can be costly. Never bid because you get caught up in the fever of the moment. Some auctions can be very intimidating. It’s a good idea to go to a few as a spectator, so you get used to the speed of the bidding and terminology used.
There will always be a degree of risk when buying a home at an auction, but with a little due diligence, potential homebuyers could save a lot of money buying in this manner.
Excerpted, in part, from The Real Estate Investor’s Answer Book by Jack Cummings, a McGraw-Hill publication.
American Savings Bank invests more than $4.3 million in Hawaiʻi Community Lending. PC: Hawaiʻi Community Lending
American Savings Bank, in collaboration with Hawaiʻi Community Lending, made a $4.3 million investment in homeownership opportunities for Native Hawaiians eligible to reside on Hawaiian home lands.
Hawaiʻi Community Lending, a nonprofit community development financial institution, will use $4 million of American Savings Bank’s investment to offer interim construction loans requiring no down payment to Native Hawaiians across the state.
American Savings Bank’s investment comes at a time when the Department of Hawaiian Home Lands, under the leadership of new director Kali Watson, plans to spend $600 million in state funds for housing.
American Savings Bank invests more than $4.3 million in Hawaiʻi Community Lending. PC: Hawaiʻi Community Lending
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“We mahalo American Savings Bank for their commitment to housing Hawaiians,” said Jeff Gilbreath, executive director at Hawaiʻi Community Lending. “This $4.3 million is just the beginning. It represents a down payment on what we believe will grow into the largest investment of private capital into housing Hawaiian home land beneficiaries since the creation of the trust lands more than 100 years ago.”
In addition to the investment, American Savings Bank will provide a $365,000 grant to Hawaiʻi Community Lending to support operations of the construction loan fund.
American Savings Bank leveraged a 2.6x match from the Federal Home Loan Bank of Des Moines under the Member Impact Fund, a $15 million initiative aimed to increase resources for affordable housing in Hawai‘i and other underserved states and territories.
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According to Gilbreath, nearly 800 Native Hawaiians with paper leases under Department of Hawaiian Home Lands’s Undivided Interest Lessee Program are unable to build homes due to lack of affordable construction financing and infrastructure.
“This type of partnership does not happen overnight,” Gilbreath said. “It requires us to be upfront and clear with one another about our intentions. As we move forward, American Savings Bank and Hawaiʻi Community Lending continue to have many conversations about how to best support the community.”
“I feel confident that we can provide interim construction loans to Hawaiian families who deserve them, and over time develop a larger, more extensive partnership that always puts community at the forefront,” Gilbreath added.
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With Department of Hawaiian Home Lands’ plan to use part of the $600 million allocation from the State for critical infrastructure needs, American Savings Bank’s investment in Hawaiʻi Community Lending will give native Hawaiians new capability to construct and own a home in Hawai‘i.
“We are committed to building on our efforts to expand access to affordable homeownership,” said Ann Teranishi, president and CEO at American Savings Bank. “It is our obligation and privilege to give back to the communities we serve. We are proud to partner with Hawai‘i Community Lending to create positive change for Hawai‘i.”
Native Hawaiian families in need of a construction loan on Hawaiian home lands are encouraged to sign up for Hawaiʻi Community Lendingʻs interest list so they can apply for a loan once funding becomes available.
To join the interest list, call Hawaiʻi Community Lending at 808-587-7656 or visit HawaiiCommunityLending.com/buy-a-home to complete the contact form.
If you live in Florida — or are thinking of relocating — the Sunshine State has several prestigious colleges and universities, including Embry-Riddle Aeronautical University, the University of Florida and Rollins College.
Higher education is less expensive in Florida than in most other states. The state also operates several robust financial aid programs, such as the Bright Futures scholarship program, that can make college more affordable for residents.
The cost of education in Florida
Florida’s education system includes 40 public colleges and universities. There are also at least 30 private, non-profit schools throughout the state.
Generally, a college education in Florida is cheaper than the national average. Here’s how much you can expect each year of your degree to cost at different types of institutions, based on 2020-21 average tuition rates as reported by the National Center for Education Statistics:
Public four-year, in-state: Nationally, the average cost of a public, in-state university was $21,337 per year. In Florida, the cost was $15,543 per year — a difference of almost $6,000.
Private non-profit: Private colleges and universities are usually more expensive than public schools. The average cost of a year at a private school in Florida was $28,860, about $4,500 less than the national average.
Community college: The average cost of attending a two-year school was $3,501 per year at the national level. In Florida, the average cost was $2,506 per year, nearly $1,000 less.
Financial aid options in Florida
To qualify for state-based financial aid, you must establish residency. For the purposes of in-state tuition rates and other state aid, you or your parents must live in Florida for at least 12 consecutive months before the first day of the term.
Currently, undocumented and Deferred Action for Childhood Arrivals (DACA) students can qualify for in-state tuition rates at Florida public colleges and universities if they meet the following criteria:
Attend a secondary school in Florida for at least three consecutive years before graduating.
Enroll in a Florida postsecondary institution within 24 months of graduating from high school.
Submit an official Florida high school transcript as evidence of attendance and completion.
However, the 2014 law that allowed those students to qualify for in-state tuition is facing challenges. Current Florida Governor Ron DeSantis has proposed repealing the measure, so this benefit may not be available in the future.
If you are a Florida resident, you may qualify for one or more of the following financial aid programs:
529 plans.
In-state tuition.
Scholarships.
Student loan repayment assistance.
Florida 529 plans
529 plans are tools to save for a child’s future education. In Florida, there are two programs:
Prepaid tuition plan: Florida Prepaid College Plans allow you to purchase college credits for future use at today’s prices. The credits can be used in-state or out, and the child can attend public or private schools. The funds are available for up to 10 years after the child’s projected high school graduation date, and plans start at $45 per month. There’s also a $50 application fee.
529 college savings plan: The Florida 529 Savings Plan is an investment account you can use to save for a child’s education. You can choose from a range of investment options to grow your contributions tax-free as long as you use the money to pay for eligible education expenses.
While some states offer special benefits, such as state account contributions or tax credits, Florida does not provide the same incentives or benefits.
Florida in-state tuition
Florida participates in the Academic Common Market. This network allows resident students to attend school in other states and pay in-state tuition rates. Through the network, students can qualify for in-state tuition at eligible programs in the following states:
Louisiana.
Mississippi.
South Carolina.
Tennessee.
West Virginia.
Not all schools or programs qualify, so talk to your selected school’s financial aid office to find out if you’re eligible for in-state rates.
Florida grants
Grants, as a form of gift aid, don’t need to be repaid, and they’re typically awarded based on financial need. Florida has three state grant programs:
First Generation Matching Grant Program
The First Generation Matching Grant Program is for Florida undergraduate students with substantial financial need and whose parents did not earn a college degree. Award amounts vary by year and the needs of the student.
Florida Student Assistance Grant Program
José Martí Scholarship Challenge Grant Fund
Florida scholarships
Students from Florida may qualify for one of nine scholarships.
Bright Futures Scholarship Program
Florida’s best-known and most valuable scholarship is the Bright Futures Scholarship Program. Through Bright Futures, students can qualify for an award for as much as 100% of college tuition and fees.
To qualify, students must be Florida residents, earn a Florida high school diploma or its equivalent, and maintain a GPA of 3.0 or higher in high school. Students must also complete volunteer service or paid work hours to qualify for the Bright Futures program.
Benacquisto Scholarship Program
The Benacquisto Scholarship Program is a merit-based award for high school graduates who achieved National Merit Scholar status. The award amount varies, but it can cover the total cost of attendance at participating schools, minus other financial aid.
Florida Farmworker Student Scholarship Program
The Florida Farmworker Student Scholarship Program is both merit-based and need-based. Each year, up to 50 eligible students can qualify for financial assistance that covers up to 100% of the credit hours required for degree or certificate programs. To qualify for the scholarship, students must be farmworkers or the children of farmworkers.
Mary McLeod Bethune Scholarship
As a merit- and need-based scholarship, the Mary McLeod Bethune Scholarship provides up to $3,000 in financial aid to academically strong students with financial need. To qualify, students must have a 3.0 GPA or higher and enroll at Bethune-Cookman University, Edward Waters College, Florida A&M University or Florida Memorial University.
Minority Teacher Education Scholars program
Administered by the Florida Fund for Minority Teachers, the Minority Teacher Education Scholars program is a performance-based scholarship for African American, Hispanic American, Asian American and Native American students. Eligible students can receive up to $4,000 per year in financial assistance.
Randolph Bracy Ocoee Scholarship Program
Students who are direct descendants of the victims of the Ocoee Election Day Riots of November 1920 or are current African American residents of Ocoee are eligible for the Randolph Bracy Ocoee Scholarship Program. Eligible students will receive up to $6,100 per year in financial aid.
Rosewood Family Scholarship
The Rosewood Massacre occurred in 1923. Students who are direct descendants of Rosewood families affected by those events can qualify for the Rosewood Family Scholarship. Qualifying students will receive up to $6,100.
Scholarships for Children and Spouses of Deceased or Disabled Veterans
This award is for the children or spouses of deceased or disabled military veterans who were Florida residents. Eligible students can receive funding for up to 110% of the required credit hours for an initial baccalaureate degree or certificate program.
William L. Boyd, IV Effective Access to Student Education Program
Student loan repayment programs in Florida
If you have student loans and live and work in Florida, you may be eligible for help from the state in repaying your loans. Florida has programs for attorneys and health care workers who will repay a portion of your debt if you complete a service obligation in a high-need area. The following loan repayment assistance programs (LRAPs) are available:
Florida Bar Foundation
The Florida Bar Foundation designed its LRAP to encourage attorneys to work for legal aid organizations. Under the terms of the LRAP, eligible lawyers can receive up to $5,000 per calendar year to repay federal or private student loans.
Florida John R. Justice
Florida’s John R. Justice LRAP provides repayment benefits to state and federal public defenders and state prosecutors who commit to remaining as defenders or prosecutors for at least three years. Participants in the program can receive up to $10,000 in loan repayment assistance per year, up to a maximum of $60,000. This program will only repay federal student loans; borrowers with private student loans aren’t eligible.
Florida Reimbursement Assistance for Medical Education program
The goal of the FRAME program is to recruit and retain medical professionals to practice in underserved areas. Through the program, nurses, physicians and physician assistants can receive assistance with their student loans. Award amounts vary by profession, but eligible borrowers can receive up to $20,000 per year in student loan repayment benefits. Federal and private student loans can be repaid through FRAME.
Nursing Student Loan Forgiveness Program
The Nursing Student Loan Forgiveness Program provides up to $4,000 annually in loan forgiveness to nurses working full time at a designated site. Examples include public schools, state-operated medical and health care facilities, and county health departments.
Nurses can participate in the program for up to four years. The program will repay federal and private student loans.
How to apply for financial aid in Florida
Florida has several financial aid programs, including gift aid in the form of grants and scholarships. To ensure you get all of the aid you’re eligible for, follow these steps:
Fill out the FAFSA: Need-based programs will determine your financial need based on the information that you submit with the Free Application for Federal Student Aid (FAFSA). The FAFSA can take less than an hour to complete. Fill it out online at FAFSA.gov.
Look up deadlines: Although Florida’s FAFSA deadline is in mid-May, some scholarship or grant programs may have different deadlines and requirements. Review the application materials of each program carefully, and make a note of any deadlines.
Create an account with Florida’s Office of Student Financial Assistance: Some of Florida’s programs require you to have a student account with the Office of Student Financial Assistance. It’s free to create an account, and you can open one at FloridaStudentFinancialAidSG.org.
Fill out the Florida Financial Aid Application: Some grant and scholarship programs require the Florida Financial Aid Application as well as the FAFSA. You must have a student account with the Office of Student Financial Assistance. Once your account is created, you can access and fill out the application.
Apply for specific programs: Some programs, such as the Benacquisto Scholarship Program or the Minority Teacher Education Scholars program, require separate applications or additional materials. Review each program’s eligibility requirements online so you can fulfill the application requirements.
Frequently asked questions
Is Florida Bright Futures based on income?
No, Bright Futures scholarships are not awarded based on your family’s income. In fact, the FAFSA isn’t required at all. Eligibility is determined by your residency, grades, standardized test scores, and volunteer or paid work hours.
Are undocumented or DACA students eligible for Florida in-state tuition?
Currently, undocumented and DACA students are eligible for in-state tuition rates under Florida House Bill (H.B.) 851, which was passed into law in 2014.
Can Florida residents get help completing the FAFSA?
Yes. Visit the Florida College Access Network for free resources, including detailed videos and tutorials, that can help you fill out the required forms to get the maximum amount of financial aid possible.
What is the FAFSA deadline for Florida?
Florida’s FAFSA deadline for the 2023–24 academic year was May 15, 2023. The application typically opens to students on Oct. 1 each year, so it’s a good idea to fill it out as soon as possible. If you missed this deadline, you can still complete the FAFSA for federal aid through Jun. 30, 2024.
Small business owners have many options when it comes to setting up a retirement plan for their business and employees. Previously, I had mentioned the SEP IRA as one of the more common choices. Another option is the the SIMPLE IRA. But don’t let the name fool you. When it comes to the rules of the SIMPLE IRA, I actually think it’s one of the most confusing when compared to the rest of the retirement plan options.
SIMPLE IRA stands for Savings Investment Match Plan for Employees. Often times I’ll refer to it as the “mini-401k” as it’s traditional used for employers with less than a 100 employees. In addition to that, the administrative cost of a SIMPLE IRA for your employer is considerably much less than what a 401(k) would be.
If you are a business owner, here are some consideration if your interested in opening a Simple IRA for you and your employees.
What You Give to Your Employees is Theirs-Immediately
In 401k plans, you are allowed to put a vesting schedule that requires the employee to work there for a certain number of years before they can take the money if they quit or get fired. This is not the case with the Simple IRA. The day that you make a contribution to your employee’s account, the money is immediately theirs. If they want to cash it out, then they can; although they have to pay a pretty stiff penalty.
Employers Have To Match in a SIMPLE IRA
Each year, the you are required to make a contribution to your SIMPLE IRA account whether it be in the form of a match or what’s called a non-elected contribution. Matching contribution states that the employer has to match at least what you match. So, if you’re matching 3%, the employer has to match 3% as well. Note that 3% is the most that the employer has to match, which could be considerably different than compared to a 401(k) or SEP IRA.
You do have the option to reduce the matching amount to 1% for two of a five year period. That means if you do decide to do this, that you have to match the full 3% for the remaining three of those five years. This aspect makes the Simple IRA a little tricky and not quite that “simple”.
If you don’t want to worry about the match, then you can elect to do a non-elective contribution. This means that you will have to contribute 2% of your employee’s salary no matter what.
Remember, what you match is based on the employee’s salary, not yours or the businesses. Business owners often times get this confused.
The Employees Control the Investments
With most 401(k)s, you are limited to the investment options of the 401k provider. This is considerably different when compared to the SIMPLE IRA. Being a self employed retirement plan, the SIMPLE IRA gives you the discretion of what exactly you want your money invested into. If you want to buy 100 shares of XYZ stock, then you have the capability and freedom to do so. (Note: you are allowed to do this in a SEP IRA, too)
Employees Can Defer, Too.
Employees, if they choose, can defer up to $11,500 per year into the Simple IRA. You are currently allowed to contribute up to $11,500 per year in a SIMPLE IRA. If they are over the age of 50, then they are allowed a catch-up contribution, which is $2,500. These are the same contribution limits as the business owner, as well. Please note that the $11,500 is far less than the $16,500 that you are eligible to contribute to a 401k.
No Borrowing Allowed
Simple IRA’s do not allow you to borrow as a 401k plan may. If they have to get money, they’ll have to pay tax and penalty, which is higher than most plans-see below.
The SIMPLE IRA Two-year Rule.
This is something that should be definitely noted within the SIMPLE IRA. Most retirement plans — 401(k)s, regular IRAs, or Roth IRAs, etc. — have the 10% early withdrawal penalty if under the age of 59.5. But with the SIMPLE IRA, it takes it one step further. If the SIMPLE IRA that you’ve started is less than two years and you cash that out, instead of the normal 10% penalty, you will be subject to a 25% penalty in addition to ordinary income tax. That is a huge item to not be overlooked. Keeping in mind as well too that doesn’t apply to just cashing it out. If you were attempting to roll over your SIMPLE IRA into a rollover IRA, the 25% penalty would apply as well. The key point is just to wait the two years before converting into either a regular IRA or cashing it out.
Editor’s note: This is a recurring post, regularly updated with new information.
Last year, an average of over one in five flights were delayed, and about 2% were canceled. While that means most flights went out on time, millions and millions of travelers still found themselves not flying when they hoped.
Another busy travel season is upon us. When flight delays and cancellations do happen, there may not be a ton of additional seats available to simply hop on the next flight in some situations.
Here are tips on how to decrease your chances of getting stuck and increase your chances of arriving at your destination as quickly as possible, even if you get the unwelcome news that you are facing a flight delay — or worse.
How to find out if your flight might be delayed
In the current era of full flights and easily available information, don’t wait for the airline to tell you there is a problem.
You can keep an eye on general flight trends across the country on FlightAware, which gives you a good overview of how a day in the sky looks.
This page focuses on delays. Manually check the status of your flight on your airline’s website in the 24 hours leading up to travel. Also, check where the plane is coming from, if possible.
UNITED.COM
Also, opt in to flight notifications with your airline and download the carrier’s app on your phone. Here are details on that process with American Airlines and United Airlines. You’ll likely have more up-to-date flight departure information from your airline’s mobile app than what’s reflected on the airport departure and arrival boards.
You can also get flight status updates sent directly from FlightAware.
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When to arrive at the airport if your flight is delayed
PEOPLE IMAGE STUDIO/SHUTTERSTOCK
This can be a tricky one. If your flight is still listed as “on time” when you check the app, leave for the airport according to the original schedule.
Even if your flight shows as delayed in the app, it can be subject to change. It’s best to be at the airport ready to go at the originally scheduled time in most cases. We’ve certainly heard stories where the flight is suddenly ready to go sooner than expected, leaving some passengers behind. Sometimes you’ll receive confirmation well in advance that the flight will be significantly delayed. However, it’s safer to be at the airport, just in case.
Bad weather will sometimes cause a temporary ground stop at the airport. As soon as the weather gets better, the stop is lifted, and airlines try to get their flights off the ground ASAP.
Related: 3 things to do if your flight is delayed
What to do if there is bad weather
Monitor weather patterns starting a few days before your flight to see if any major systems are anticipated. It’s then vital to check the forecast on the night before and the day of travel to see how any issues could affect your departure and arrival airports.
Again, be sure to opt in for updates on your flight’s status. If you know bad weather is coming later in the day, ask for an earlier flight if you can. Alternatively, if you leave the night before, that’s a good idea, too.
BYCHYKHIN OLEXANDR/GETTY IMAGES
More and more airlines are allowing travelers to change plans with no fare difference prior to severe weather problems, like impending blizzards, ice storms or even heavy thunderstorms. Some will even proactively change your flight for you.
If you know bad weather is on the horizon, either go to your airline’s website and look for an advisory notice or call the airline to talk about options. If an airline gets ahead of weather issues, you may be able to reschedule your flight by a few days in either direction with no fees. Additionally, you can try asking for a nonstop flight if the weather is putting your connecting flight in jeopardy.
However, if the airline hasn’t issued its own advisory, you could have to pay out of pocket for any fare differences if you really need to get where you are going.
Related: How the weather affects your flight — the atmosphere and winds
What to do if your flight is delayed or canceled
If a flight delay happens and you want an alternative to waiting it out, check the airline’s app or in-airport kiosk for rebooking options. You don’t have to stand in line to talk to a real person in many cases, as you can self-service the rebooking with most major airlines. In fact, it may be faster to do it online or at a kiosk in the airport — and speed matters. You may be able to rebook at a new flight time or even to a new “nearby” origin or destination city.
There are times when automated rebooking systems are not your best option, though. Sometimes, the only automated option is for a red-eye flight or a future flight heading to your destination more than two days later. That’s especially true with flights as full as they are right now.
If you can’t find what you need online, find an airline employee who knows how to work the ticketing desk. Look at their uniforms and name tags to ensure you get a ticket agent and not a baggage handler or similarly outsourced contractor.
If the U.S. call center has a long hold time (which happens during widespread issues), you can try dialing an international number for faster service. You might also find success reaching out to an airline on Twitter, via chat or other social media channels when customer service lines are busy.
For example, when the first leg of an American Airlines flight from New York City to Arkansas just before Christmas was delayed, TPG editor Madison Blancaflor missed her connection.
She reached out to American Airlines on Twitter to help ensure she was rebooked on the earliest possible flight. She still had to endure a long layover in Charlotte, but it was better (and less stressful) than rushing to the customer service desk to try and rebook upon arrival in Charlotte.
If there are no reasonable booking options left with your carrier, ask if there are options on another airline. If the delay is weather-related, and you are on a basic-economy ticket or are flying on a low-cost carrier, there might not be other airline options at your fingertips. Still, it’s worth asking and — if possible — presenting available options you have researched yourself.
Related: Top tips to get through to airline customer service faster
Retreat to a lounge
If you have airline club access at a United Club, Delta Sky Club or similar, you can head there for help from experienced agents with potentially shorter lines. Use it as a spot to gather your thoughts, charge your phone and make level-headed decisions. The agents there might be able to help you change or track your flight.
In third-party lounges, such as an American Express Centurion Lounge, you won’t be able to get that type of airline-specific assistance, but you’re still probably in a better spot to wait out the storm than in a crowded terminal.
Related: Best credit cards for airport lounge access
Rebook your flight
Sometimes, if you really need to get home, you may need to do the work and layout for the expenditure for a new flight yourself.
During a delay while traveling from Orlando to Houston when my original carrier couldn’t get me home for more than 24 hours after my initial flight was canceled, I found a nonstop Southwest Airlines flight with one last seat available for $463.
Even though rebooking yourself will not typically be covered by any insurance or carrier, I went for the Southwest option and got my original United ticket refunded, which at least offset some of the pain of a new ticket. In my case, it was worth controlling my own destiny and not being stuck.
Your credit card’s built-in trip delay or trip cancellation coverage can help with many unexpected expenses in the face of delays and cancellations, but a brand-new flight home isn’t likely to be one of them. Still, in some cases, it may be the only way home for a while, so you’ll have to weigh the pros and cons.
Related: When to buy travel insurance vs. when to rely on credit card protections
Check airport hotels
While thinking through what to do in case of a flight delay or cancellation, consider your options at airport hotels, which can fill up if there are major delays and cancellations. Sometimes, it is best to pull the plug on getting home that day, get some good rest and try again in the morning.
Airport hotels are generally pretty affordable on points, although cash rates can skyrocket when demand surges. Accommodations are typically covered by trip delay protection, offered by cards like the Chase Sapphire Reserve and The Platinum Card® from American Express.*
* Eligibility and benefit level vary by card. Terms, conditions and limitations apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.
The Hyatt Regency Orlando International Airport. SUMMER HULL/THE POINTS GUY
Show up early for standby flights
If you know in advance that your flight is canceled or delayed, heading to the airport early could score you a same-day standby flight that gets you to your destination early.
For example, a TPG staffer was able to use this strategy to avoid getting stuck overnight when a hiccup with his flight from Austin to New York City would have caused him to miss a connection in Dallas. Since he had A-List status with Southwest, he showed up at the airport a bit earlier and did a free same-day standby onto an earlier flight that connected to a different city. His A-List status bumped him to the top of the standby list and onto the flight.
Getting on the standby list isn’t a foolproof method, especially if the earlier flight is almost full. This is a case where having elite status can help since you’ll have priority over non-elite travelers. Additionally, some airlines charge a fee for non-elite travelers to get on the standby list for an earlier flight.
Related: Best credit cards for airline elite status
How to get a refund or flight compensation
If you decide not to fly your originally scheduled flight in light of major delays and cancellations, get your money or points back. Do not settle for an airline voucher that may be hard to use and eventually expire.
You may have a cancel-and-refund option available to you online or in the airline’s app. If not, you can ask an airline employee for assistance in person or over the phone. Just be sure to cancel your original flight before its eventual departure so you can get the money or miles (hopefully) returned.
Know your rights and take stock of your credit card protections. You’ll have to read some fine print, but you may be entitled to accommodations, credits or expense reimbursement by the airline or from your credit card (usually depending on the length of your delay and the reason for delay or cancellation).
Many travel credit cards offer trip delay insurance that can save you money when you’re stuck somewhere. While it won’t help you avoid cancellations or delays, it could help you cover expenses while you wait for your flight.
Related: You are entitled to a refund for your canceled flight — even if the airline says you aren’t
Cards that provide travel protection
WYATT SMITH/THE POINTS GUY
There are many rewards credit cards that help confer valuable travel protections when you do have a delayed or canceled flight (if you used them to book your flight). Below are just a few examples of cards that provide some built-in coverage:
Chase Sapphire Reserve: Provides a $300 annual travel credit, up to $20,000 in trip cancellation coverage, up to $75,000 in car rental coverage, trip delay benefits of up to $500 per person that kick in starting at a six-hour delay and more.
Chase Sapphire Preferred Card: The Chase Sapphire Preferred includes trip cancellation and interruption insurance, trip delay reimbursement, emergency assistance services and more.
American Express Platinum: In addition to the extensive lounge benefits and up to $200 in annual airline fee credits, the Platinum card also provides trip cancellation and interruption insurance for up to $20,000 of a covered trip and incident.
Make a decision
Last but not least, we don’t recommend being too indecisive in the face of delays and cancellations. If you are, expect your options to dwindle. Once you finally decide to wait it out or try and switch flights, you will be at the mercy of whatever options the airline has to offer … which may not be great.
As you wait, flight options are likely to disappear as hundreds (or thousands) of other passengers beat you to rebooking. Weigh your realistic options and make a quick decision if you want to keep some control of your schedule.
If you’re OK getting stuck somewhere for a bit or taking a creative route home, waiting for the airline to direct you is a feasible option. Just don’t stress about your decision once you make it.
Your credit card’s built-in travel protections may cover unexpected expenses not covered by the airline (such as a hotel for an overnight weather delay, though not a new flight) if you get stuck during your journey.
In my Orlando example, my original flight was stuck in Denver with a five-hour weather delay, so the odds of that flight getting me where I needed to be that day didn’t seem great. When I didn’t clear standby on the other United flight to Houston from Orlando that night, I made a decision and stuck with it.
I left the terminal and headed to my new Southwest flight in another terminal (Clear and PreCheck helped with that quick transition). Yes, that choice cost me a new flight home, but I had to make that call right then or roll the dice on my United flight making it out that day.
I wasn’t in a gambling mood when it came to getting home, and I understood the out-of-pocket implications.
SUMMER HULL/THE POINTS GUY
Bottom line
Most of the time, your flight will get you where you need to be close to when you want to be there. Still, flight delays and cancellations happen.
If your flight is delayed by an hour or two, there’s not usually much to do other than be patient. However, when facing a long delay or cancellation, it’s good to have a plan to reduce the odds of getting stuck.
Given the common theme of full passenger loads on flights these days, acting quickly, researching options and making a speedy decision will put you ahead of the pack.
Related: Best credit cards that offer trip delay reimbursement
Additional reporting by Melissa Klurman, Kristy Tolley, Victoria Walker, Madison Blancaflor, Benji Stawski and Benét J. Wilson.
Throughout my military career I’ve constantly been surrounded by acronyms. The Army is notorious for them: APFT, MOPP, PMCS, AWOL. These are just a handful of the thousands of them that exist. Some I know. Most I don’t. I was constantly having to research what the heck most of them stood for.
While acronyms were expected in the military, I didn’t imagine how prevalent they would be in the financial services industry. One of the acronyms that I came across that I felt like I was in the military again was QDRO. What makes it even more confusing is that I’ve heard it pronounced both “Quid-dro” and “Quad-dro”. What’s the correct pronunciation? The jury stills out on that one.
What is a QDRO?
And exactly what does it have to do with your 401K or pension plan? A QDRO is a Qualified Domestic Relations Order from the court which indicates the beneficiaries of your retirement account, other than you. These beneficiaries are also called “alternate payees” and this comes into play should you and your spouse get a divorce.
Usually, the beneficiaries of your retirement account(s) might be your spouse, child or other dependent, or a former spouse, and the QDRO will define how each of these people receive distributions from the retirement account through child support or alimony payments and/or property ownership.
It’s necessary that the information in the QDRO is followed exactly in order to minimize your potential to paying penalties on money you don’t even receive from your 401k plan.
The Importance of a Qualified Domestic Relations Order
If you should go through a divorce, the QDRO becomes extremely important. Following the QDRO is the key to avoiding 10% early withdrawal penalties imposed by 401k plans, because if you don’t follow the QDRO you can be taxed on money taken from your 401k even if it landed in the hands of your beneficiaries! Make sure to enlist professional help (either through your 401k plan administrator or a tax professional) to minimize your own tax implications of having to distribute your 401k to alternate payees due to divorce.
Take Steps to Verify Information in the Qualified Domestic Relations Order
If your 401k plan is subject to a QDRO during a divorce (typically if you have been married at least 5 years before getting divorced), you want to give the administrator of your 401k a copy of your QDRO. This allows them to carry out the order. They’ll review the QDRO to ensure it’s valid within 18 months and determine whether or not any payments must be made to beneficiaries. You’ll receive notification of any alternate payee (beneficiary) receiving funds from the 401k, and provided the QDRO was followed correctly, you will not have to pay a 10% early withdrawal fee from the withdrawal of the funds distributed to your beneficiaries.
The few QDRO’s that I’ve dealt with had been drafted directly by the attorney. All I had to was open the appropriate account (in my cases they were IRA’s) and the money was transferred directly in. I like simplicity 🙂
Who Receives Money From Your 401k After Divorce?
Where you live will determine how your 401k funds are distributed after a divorce. Most states have equitable distribution rules, which means your 401k is divided 50/50 between you and your ex-spouse – but it depends on how long you were married and how much was contributed, as well.
Some ex-spouses win 50% of a 401k plan even in states without equitable distribution rules, during the divorce proceedings. If you live in any of the following states, you can count on paying out half of your retirement to your ex-spouse: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. These are “common property” states.
For the QDRO cases I’ve worked in, all have been in the state of Illinois. Although, not a “common property” state, each spouse did receive 50% of the retirement account balance.
What About QDRO’s and Pensions?
QDRO’s are most commonly associated to 401k’s, but while I was doing my research I learned that they can also apply to pensions. According to the PBGC.gov website here are three items that QDRO’s must do:
Identity of the plan participant, each alternate payee, and each pension plan. A QDRO must specify the name and last known mailing address of the plan participant and each alternate payee covered by the order. A QDRO also must identify the name of each plan to which the order applies—this should be the plan’s formal name.
Amount to be paid and when payments start. A QDRO must state how much of the plan participant’s benefit is to be paid to the alternate payee, such as a dollar amount or percentage of the benefit, or make clear the manner in which the amount is to be determined. A QDRO also must specify or allow the alternate payee to choose when payments to the alternate payee will start.
What happens on the death of the plan participant and the alternate payee. A QDRO should specify whether the alternate payee will be treated as the participant’s spouse for purposes of any survivor benefits. A QDRO also should specify what happens to benefits when the alternate payee dies.
What a QDRO Must Not Require
There is sometimes a misconception on what a QDRO must and must not do. The PBGC.gov site offers what a QDRO must not require the PBGC to do:
pay any benefits not permitted under ERISA or the Code;
provide any type or form of benefit, or any option, not otherwise provided by PBGC;
pay benefits with a value in excess of the value of benefits that would otherwise be payable by PBGC;
pay benefits to an alternate payee when those benefits are required to be paid to another alternate payee under an order previously determined to be a QDRO;
pay benefits to the alternate payee for any period before PBGC receives the order;
pay benefits as a separate interest to the alternate payee if the participant is already receiving benefit payments; or
change the benefit form if the participant is already receiving benefit payments.
To say that today’s housing market is a tough one for first-time home buyers would be an understatement. Not only is housing inventory low, but mortgage rates are elevated at a time when home prices are still pretty high. That’s a very costly combination.
Now, the good news is that today’s first-time buyers aren’t necessarily letting current housing market conditions get them down. Many are still making plans to buy a home this year. But they’re also planning to refinance their mortgages once rates come down.
In fact, 27% of 2023 buyers are gearing up to refinance after purchasing their homes, according to TD Bank’s First-Time Homebuyer Pulse. But while that’s a good plan in theory, it may not come to pass for quite some time.
Mortgage rates may not fall anytime soon
It’s definitely a good idea to plan to refinance your mortgage loan once borrowing rates drop across the board. And you should especially make an effort to maintain a great credit score so you’re able to qualify for a competitive rate once refinancing your mortgage makes sense.
But if you’re going to buy a home today with the plan to refinance your mortgage as soon as you can, know this — you may be stuck with your current mortgage rate for quite some time.
Mortgage rates have been stuck in the 6% range for 30-year loans since the start of the year. And based on general market and economic conditions, it’s not unreasonable to assume that mortgage rates could easily stay where they are not just for the remainder of 2023, but also beyond.
More: Check out our picks for the best mortgage lenders
That’s why if you’re going to buy a home today, you’ll need to really crunch the numbers and make sure you can swing your monthly costs based on the mortgage rate you’re locking in initially. If today’s rates make buying a home a stretch, then you may want to put your plans to purchase one on hold.
Will mortgage rates ever get down to 3% again?
Historically speaking, today’s mortgage rates actually aren’t so high. Rather, it’s that buyers got used to the record low rates that became available earlier in the pandemic.
In 2021, it was more than feasible to sign a 30-year mortgage at or around 3% if you had great credit. These days, you might be looking at more than double that rate, even if your credit is excellent.
There’s a good chance that mortgage rates will drop over time. But whether we’ll see 3% rates anytime soon is questionable. Those rates aren’t very profitable for lenders, so chances are, we’ll only see them on offer if the housing market takes a dive and lenders grow increasingly desperate to drum up business.
But that said, if you sign a mortgage today in the 6% range and rates drop to the low 5% range or upper 4% range a few years from now, refinancing could result in a world of savings. So while you shouldn’t bank on a refinance to be able to afford your home, you can always pursue a refinance once it makes sense to get a new mortgage.
