The Department of Labor has recently released new rules requiring 401(k) plan sponsors to disclose fees much more fully to participants. This is great news. Hear more from Secretary of Labor, Hilda Solis:
On September 13th at 2pm Eastern time, Secretary of Labor Hilda L. Solis and Assistant Secretary Phyllis Borzi of the Employee Benefits Security Administration will explain how the new rules will work and share tips about how you can keep more of what you save.
Imagine that you are shopping for a car; you walk into a lot and see three cars lined up, side by side: one is a clunker that is totally within your price range, the other is a nice car that is in good condition but has a lot of miles on it, and lastly, a car that is a little out of your price range but in beautiful condition; which vehicle would you choose? Would you take the clunker and save some money but perhaps end up paying for it via repair bills? Or would you maybe take the car with the high amount of miles which may be a great option now but may not be such a great investment in a few years? Or do you reach and go for the car that you cannot quite afford because you know in the end it will probably be the better investment? This seems like a silly hypothetical situation but it is the way many people view the process of choosing an institution of higher learning. It seems that college has become more of a question of cost and less of a question of what is the best fit in regards to education and opportunity for the prospective student. Many schools of the third option (great condition but expensive) have begun the process of making tuition more affordable by offering financial aid to those who qualify. This is determined by the expected family’s contribution or EFC:
“Your EFC represents what a college will expect you to pay at a minimum for one year of a child’s college. The EFC, which is expressed as a dollar figure, is calculated based on such factors as family income, certain investment assets, number of people in the household and, in some cases, home equity.”
Not every school will meet your exact EFC; usually they will give you a good amount. Below is an example of how one school may not be able to offer aid while another may offer about half depending on how high your EFC is or how low the tuition is:
School No. 1: Private College School No.2: State University
Family EFC: $24,000 Family EFC: $24,000
Cost of attendance: $52,000 Cost of attendance: $14,000
Potential financial aid award: $28,000 Potential financial aid award: $0
For the private college the family would be awarded around that range ($28,000) because they could only afford around half the tuition. The State College would offer no aid because aid was not necessary in order to afford to send their child to their institution. Here is a list of all the schools which boast 100% aid met for each student. Aid is not free money; it can come in many forms: grants, scholarships, work study programs, loans, etc. It is also important to keep in mind that a school with a very high price tag may not actually offer much more than a competitive state school in regards to aid so it is important to recognize and understand college rating and not choose a school based on just any one factor.
If you do choose an expensive private college, loans are sometimes inevitable and they are not all the same. There is now a way to compare lenders online at Simple Tuition. This site allows you to do side by side comparisons of different lenders and how they will charge you as well as help you see options in regards to what you will be required to pay after graduation. Another extremely helpful resource for determining what college will cost you would be College Calculator which provides links from hundreds of top colleges to their websites; some of which offer very in-depth looks at what it may cost to attend while others offer a ballpark number in regards to cost and of what a financial aid package might look like depending on your financial situation.
Choosing the right college at the right price affects the entire course of your life! There is no reason to avoid sending out applications to both private and public universities in order to see what kind of financial packages schools may be able to offer to you. Don’t let a price tag scare you; there are resources to help!
Do you cut your own hair, sew your own clothes, or do complex repairs on your cars? I certainly don’t. Those who push the idea that 401ks are a good substitute for pension plans believe that financial planning for retirement is a job that every American is capable. If I try to cut my own hair and fail, I have is a bad haircut—if I try to manage all the details of retirement investing and fail, I have much bigger problem than a bad haircut. Noted economist Theresa Ghilarducci wrote an op-ed featured a few days ago in the New York Times that highlights some of these points.
“In March, according to the Employee Benefit Research Institute, only 52 percent of Americans expressed confidence that they will be comfortable in retirement. Twenty years ago, that number was close to 75 percent.” (Our Ridiculous Approach to Retirement, New York Times)
The retirement system is failing more and more working families!
“Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts.”(NYT)
Head over to our section on retirement and see whether you have enough savings to be comfortable in retirement.
The Labor Department’s pension office is educating women around the country about saving for their retirement through free workshops in selected cities.
Assistant Labor Secretary Phyllis Borzi, who heads the Labor Department’s Employee Benefits Security Administration, joked that it’s so difficult to navigate the fees and services offered by the financial services firms that even she needs help to plan for her retirement.
The Labor Department is holding panel discussions on retirement savings in conjunction with the Consumer Financial Protection Bureau, the Social Security Administration, and women’s groups such as Women’s Institute for a Secure Retirement.
The next workshop will be held in Chicago at the University of Illinois campus on Saturday,July 28 from 9:30 a.m. to 12:30 p.m. Christine Benz, director of personal financeat the Chicago-based financial research firm Morningstar, will moderate the panel.Ms. Borzi said the Labor Department also plans to hold a similar workshop in Washington, D.C.
If you’re interested in attending the Chicago program, or learning more about other upcomingworkshops being organized by the Labor Department, contact Meredith Regineat regine.meredith.e@dol.gov or 202-693-8300.
