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What the New DOL Fiduciary Rule Means For You

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Geeting advice on future investments

Seven years in the making, the Department of Labor’s long-awaited Fiduciary Rule finally went into effect June 9.* The full breadth of the rule’s impact won’t officially be felt until January 2018, when advisors must be fully compliant with the rule’s requirements.

The rule survived an upheaval by the Trump administration, which had hinted earlier this year that it might seek to block the rule’s implementation.

Aimed at saving consumers billions of dollars in fees in their retirement accounts, the Department of Labor’s new fiduciary rule will require financial advisers to act in your best interest. However, the final rule includes a number of modifications, including several concessions to the brokerage industry, from the original version proposed six years ago.

Here’s what you need to know about these new rules and how they may affect your money.

*This story has been updated to reflect the rule’s successful release.

What is a Fiduciary?

So what exactly is a fiduciary? According to the Certified Financial Planner (CFP) Board, the fiduciary standard requires that financial advisers act solely in your best interest when offering personalized financial advice. This means advisers can’t put personal profits over your needs.

Currently, most advisers are only held to the U.S. Securities and Exchange Commission’s suitability standard when handling your investments. This looser standard allows advisers to recommend suitable products, based on your personal situation. These suitable products may include funds with higher fees — with revenue sharing and commissions lining their own pockets —  which may not reflect your best possible options.

What is Changing Exactly?

Affecting an estimated $14 trillion in retirement savings, the Department of Labor’s new fiduciary rule is meant to help you receive investment advice that will aid your nest egg’s ability to grow. Many investors have been pushed toward products with high fees that quickly eat away at profits.

All financial professionals providing retirement advice will now be required to act as fiduciaries that must act in your best interest. This applies to all financial products you may find in a tax-advantaged retirement accounts. Because IRAs offer fewer protections than employment-based plans, the Department is concerned about “conflicts of interest” from brokers, insurance agents, registered investment advisers, or other financial advisers you may turn to for advice.

Despite these new protections, the Department of Labor also made some key concessions. Previously, brokers were required to provide explicit disclosures about the costs of products to their clients. This included one, five, and ten year projections. However, this requirement has been eliminated. After heavy pushback from the industry, the Department of Labor also agreed to allow the use of proprietary products.

Additionally, the Department of Labor has pushed the deadline for full implementation of their new rules. Firms must be compliant with several provisions by June and fully compliant by January 1, 2018.

Despite all of these concessions, the Department of Labor’s highest official insists the integrity of their rule is still in place.

Exceptions You Should Know About

Although advisers working with retirement investments will no longer be able to accept compensation or payments that create a conflict of interest, there’s an exception many brokers will likely pursue.

Firms will be allowed to continue their previous compensation arrangements if they commit to a best interest contract (BIC), adopt anti-conflict policies, disclose any conflicts of interest, direct consumers to a website that explains how they make money, and only charge “reasonable compensation.” The best interest contract will soon be easier for firms and advisers to use because it can be presented at the same time as other required paperwork.

How These New Rules Might Affect Your Investment Options

Although these new rules don’t call out specific investment products as bad options, it’s expected advisers may direct you to lower-cost products, like index funds, more regularly. New York Times also predicts the new regulations may also accelerate the movement toward more fee-based relationships. They also suggest complex investments like variable annuities may soon fall out of favor.

What Will the Larger Impact of These Changes Be?

Backed by extensive academic research, the Department of Labor’s analysis suggests IRA holders receiving conflicted investment advice can expect their investments to underperform by an average of one-half to one percentage point per year over the next 20 years. Once their new rules are in place, they are anticipating retirement funds will shift to lower cost investments, savings consumers billions of dollars.

What You Can Do To Protect Yourself

Although these new rules are a positive step for consumers, it’s important to remember there are still a wide variety of financial professionals out there. And the quality of the advice you receive can vary greatly based on their level of education, experience, and credentials. In order to find someone who is equipped to handle your unique financial situation, you will still need to do your homework.

You may want to start by looking for a fee-only financial planner. Due to the nature of how they are compensated, fee-only financial planners operate without an inherent conflict of interest. They are paid a fee for the services they provide and they don’t earn commissions from product sales.

Once you’ve narrowed down your options you’ll want to ask about their credentials, what types of clients they work with, what types of services they offer, while carefully checking their background and references. Like any professional working relationship, you’ll want to feel comfortable with someone you are receiving financial advice from, so it’s important to make sure your personalities and priorities are aligned. Remember, no one cares more about your money than you do. That’s why it’s essential to carefully vet anyone who is working with you to secure a healthier financial future.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Pay Down My Debt

Options to Get Out of Your Timeshare

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Options to Get Out of Your Timeshare

You’ve finally escaped the stress of your commute, stacks of unfinished paperwork, and the never-ending demands of the office. You’re staying someplace warm, enjoying pina coladas on the beach or working on your tan by the pool.

The resort’s sales manager has casually mentioned an affordable way to return to this same place every year. And in your relaxed state of bliss, you start daydreaming about future vacations. You imagine making the resort an annual family destination or the spot to celebrate your wedding anniversary.

Let’s face it — buying a timeshare is often an impulsive decision. And one you may regret after the drinks have worn off, your vacation is over, and reality sets in. Because chances are, your timeshare is not the amazing deal the resort’s sales manager sold you on. If you’re stuck with buyer’s remorse or simply can’t afford your timeshare, here is how to minimize the damage to your wallet and credit score.

What is a Timeshare?

So what is a timeshare exactly? A timeshare allows you to buy the right to use a property every year for a certain period of time. And the property is usually part of a resort. A deeded timeshare means you’re purchasing a portion of the property. And a non-deeded timeshare mean you’re leasing the right to use the property for an agreed upon number of years (usually 10-50).

How Much a Timeshare Actually Costs

The cost of a timeshare varies based on the size of the unit, the resort’s location, the time of year, amenities, and more. But the National Timeshare Owners Association (NTOA) says the average timeshare sales price is $20,020.

What does typical report-based financing looks like?

  • Loan Amount – $20,000
  • Term of Loan – 6 years (72 months)
  • Interest Rate Charged – 15.9%
  • Monthly Payment – $432.74
  • Actual Cost – $31,157.28

Many resorts also offer a 1-year loan with a 0% interest rate if you’re willing to put 50% down within 30 days of purchasing the timeshare.

In addition to the cost of the timeshare itself, you’re also responsible for an annual maintenance fee. The National Timeshare Owners Association (NTOA) says the average maintenance fee for 2015 is a whopping $880. This annual maintenance fee can increase over time. And you’re responsible for paying this fee every year regardless of whether or not you visit.

Selling a Timeshare

Are you thinking about trying to sell your timeshare? Although the National Timeshare Owners Association (NTOA) lists three preferred resellers on their website, it’s not always that simple.

Resale websites operate as a subscription service. And their fees range from $14.99 to $125 per year. Plus, resellers may take a portion of the sale.

Remember, timeshares are not real estate investments. And the secondary market is oversaturated with buyers. Want to see further evidence? A quick search on eBay revealed dozens of timeshares practically being given away for $1.

Try Refinancing Your Loan

Between the high interest rates of resort-based financing and the annual maintenance fee, what was sold as an affordable vacation becomes expensive very quickly. If you’re struggling to afford monthly loan payments, you may want to try refinancing to secure a single-digit interest rate.

LightStream, a division of SunTrust bank, offers timeshare-refinancing options if you’re a U.S. citizen with good credit. They don’t charge fees to refinance. And their interest rates are fixed.

Here’s an example of what the numbers may look like for refinanced timeshare loan:

  • Loan Amount – $20,000
  • Term of Loan – 6 years (72 months)
  • Interest Rate Charged – 8.49% – 14.74% APR with Autopay
  • Monthly Payment – $349.10 – $368.91
  • Actual Cost – $25,135.20 – $26,561.52
  • Money Saved – $4,595.76 – $6,022.08

Your timeshare might be such a financial drain that you decide to sell (or give it away) and then refinance the remaining debt to pay it off quickly and with a lower interest rate.

Consider Timeshare Exchanges

Did your resort’s sales manager mention the option of timeshare exchanges? It’s a major selling point for many buyers. And who wouldn’t like the option of trading timeshares with owners in other locations? But does it make sense for you? It depends.

If you’ve paid off your debt, it may be worth the additional fees to list your timeshare on an exchange. The National Timeshare Owners Association (NTOA) lists preferred exchange companies on their website. But you need to read the fine print. Less popular destinations and off-peak season timeshares tend to be more difficult to exchange. And there may be other restrictions that weren’t mentioned at the closing table.

Try To Negotiate With Original Owner

Have you paid off your debt but you’re sick of coughing up annual maintenance fees? It’s worth reaching out to the original owner to see if they’re willing to negotiate. They may agree to let you out of your original deal if you agree to cover a few years of maintenance fees. And they’ll have the option of reselling the timeshare to another buyer. It doesn’t hurt to ask!

Can’t negotiate with the original owner? Try getting a team of experts to help you legally get out of the contract with the Time Share Exit Team.

The Truth About Timeshares

It’s cheaper than ever to find affordable places to stay on vacation. Websites like Airbnb, VRBO, and HomeAway make it easy to find affordable listings all over the world. A timeshare at a luxury resort may seem attractive today, but what happens when your tastes and lifestyle change? The truth is, timeshares don’t always get used as often as buyers originally planned.

If you have to finance a timeshare, it’s probably not worth buying. Why? Resort-based financing can incur interest rates of 15-16%. And even once you’ve paid off the loan, you’re still stuck with expensive annual maintenance fees averaging $880 or more! Plus, attempting to resell can be a nightmare. It can get costly and there’s just not a strong secondary market. And all this doesn’t even include the cost of travel to get to your timeshare in the first place.

Despite all these drawbacks, almost 400,000 timeshares were sold in 2015. And it’s easy to see how buyers get roped in. It’s not easy to make a clear-headed decisions on a white sand beach after a couple of margaritas.

If you’re regretting your choice to buy or can’t afford your timeshare, you can minimize the damage to your wallet and credit by refinancing, exchanging, or negotiating with the original owner.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Life Events, Pay Down My Debt, Strategies to Save

8 Money Resolutions You Haven’t Considered

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Black woman using credit card and laptop

With the holidays winding down, many of us are shifting our focus toward the New Year. And that means the annual brainstorm of resolutions. With massive amounts of cash spent on holiday gifts, it’s not surprising financial resolutions are top of mind.

A study from Fidelity found the top three financial resolutions have been consistent for the past four years — save more, pay off debt, and spend less. However, financial resolutions declined 28% between 2014 and 2015. Why? Respondents are feeling better about their finances.

Despite the decrease in financial resolutions and increased confidence about money, Fidelity also discovered 51% of respondents who made resolutions are better off financially. And 49% found breaking resolutions into smaller, short-term goals made them more attainable.

Are you ready to work toward a more prosperous 2016? But you are not sure where to get started? Here are 8 important money resolutions you probably haven’t considered:

1. Pick up a Side Hustle

Is there still a significant gap between what you’re earning and how much you’d like to be earning? If you’re still months away from your annual review and you’re not expecting any quarterly bonuses, it may be time to pick up a side hustle.

There are countless options for earning extra money in your spare time. And many side hustles can even be done from the comfort of your home. Think about your own diverse skillset. Chances are you have multiple talents to offer. And you could use these talents to save a busy person a lot of time.

Personally, I’ve earned a steady side income from blogging, freelance writing, and social media consulting. In the past, I’ve waited tables, sold beer at Tennessee Titans games, and been hired as a production assistant or runner for concerts.

What are some ways you could earn extra money in 2016?

2. Stop Obsessing Over the Latte Factor

Let’s face it — your monthly expenses can only be cut down so low. And skipping that cup of coffee with an important new contact really isn’t going to make that much of a difference.

Rather than depriving yourself with extreme frugality, redirect that energy and think about the big picture. Focus on activities that can help you earn more money rather than constantly trying to cut back. If your frugal lifestyle is getting in the way of your career or side business, it’s time to rethink your priorities.

3. Learn How To Save on Taxes

When it’s time to file your taxes, nothing is more frustrating than endlessly searching for business expense receipts, education costs, medical bills, and more. Why not create a system to stay more organized all year?

If your tax situation has become more complicated, it may pay off to seek professional advice from a certified public accountant. They can provide tailored advice for your unique financial situation and offer suggestions for getting ahead of next year’s tax bill.

[7 Ways to Minimize Taxes on Your Side Income]

4. Dive Deep into Your Company Benefits

When was the last time you reviewed your employer’s benefits package? The beginning of the year is a great time to carefully check these details to make sure you’re not leaving anything on the table. This may include looking closely at the details of your health insurance, health savings account (HSA), retirement plan, vacation policy, and other on-the-job perks. Don’t overlook the benefits you’ve worked hard to earn. And don’t be afraid to ask questions if you discover something you don’t understand.

5. Talk To Your Parents About Their Retirement

Ready for a wake up call? The median retirement savings for 55 to 64-year-olds was only $14,500 in 2013. And the average 65-year-old American can expect to live for nearly 20 years.

It’s never a fun or comfortable topic, but it pays to talk to your parents about their plans for retirement. Why? You could be on the hook for their excessive spending or debt problems. Get ahead of potential issues by having these conversations as early as possible. You’ll have more time to work on solutions together.

6. Create a Will

Many adults don’t start thinking about a will until they’ve had children because it can determine future guardianship. But it’s smart move to start planning before that.

Even if you’re young and healthy, it’s never too early to draft a will. If something happened to you, the last thing you’d want is loved ones arguing over your assets. Or even worse, letting your state of residence determine what happens to your estate.

An estate-planning attorney can help you write a will. And you’ll want to name a trustworthy executor to carry out your wishes. It’s a good idea to periodically review your will and make changes as needed.

7. Budget For Self-Care

Did you know burnout can be as bad for productivity as illness? The American Institute of Stress has indicated almost half of all American workers are showing symptoms of burnout.

So how can it be avoided? Experts recommend taking time to socialize, develop interests outside of work, exercise, and take time to relax. Instead of stressing about these added expenses, make room for them in your budget. Bottom line? Don’t be stingy when it comes to self-care.

[Creating an Emergency Fund While Saddled with Debt]

8. Establish an Emergency Fun Fund

On top of a healthy self-care budget, it’s important to prepare for unexpected fun stuff. The concept of an emergency fun fund was introduced to me by MagnifyMoney’s Erin Lowry.

She described it as some extra money she’d stashed away for last-minute weekend trips out of New York City or an impromptu celebratory dinner, because it’s important to recharge. And you may be willing to treat yourself more often if you’ve planned for it in advance.

Looking Ahead

Saving more, paying off debt, and spending less are important financial resolutions. But where should you begin? As Fidelity’s survey revealed, breaking goals down into smaller, more manageable chunks may be the secret to actually accomplishing them. Try and imagine your future self, one year from today. And ask yourself, what do you want to have accomplished?

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.