September 16, 2018
Every week, Simply Money’s Nathan Bachrach, Ed Finke and Amy Wagner are answering your financial questions in The Cincinnati Enquirer. If you, a friend, or someone in your family has a money issue or problem, please feel free to send those questions to email@example.com
Evelyn in Clermont County: I’ve heard it usually makes more sense to wait to claim Social Security, but does it ever make sense to claim early? I’m 62 and trying to figure out if I should start claiming now.
Answer: Deciding when to take Social Security is a very personal financial decision, and it’s dependent upon numerous factors including (but not limited to) your life expectancy, other sources of income, and whether or not you’re married (or if you’re divorced). And yes, while it does generally make sense to claim your benefits once you hit your Full Retirement Age (FRA) or later (you’ll get an eight percent bump to your monthly check for every year you wait past your FRA until age 70), there are some scenarios in which claiming at age 62 (or earlier, in some cases) can make more financial sense.
The Simply Money Point: Just remember that when you claim Social Security before your FRA, you’ll see a reduction to your monthly check. However, in some cases, it can be a smart financial decision to claim early. We advocate working with a trusted financial advisor, such as a CERTIFIED FINANCIAL PLANNER™ or Chartered Financial Consultant®, so he or she can give recommendations based on your specific situation.
Charley from Bridgetown: My grandson has asked me to help him pay for college by co-signing on his student loans. I feel like I can’t say no. What are your thoughts on doing this?
Answer: We get it. You want to give your grandchild every opportunity possible and the best education possible. And your situation isn’t unique. More and more grandparents are being asked to carry some of the burden of college costs. According to the Consumer Financial Protection Bureau (CFPB), people over age 60 are the fastest-growing segment of the population for the student loan market, and of those, about two out of three are borrowing on behalf of a child or grandchild.
But understand that when you co-sign a private student loan (federal loans don’t require a co-signer), you’re not just the “back-up” if your grandson can’t pay. No. In reality, this loan becomes your loan. You and your grandson are equally obligated to repay the debt. If he can’t, the lender will come to you and expect payment. Is that something you’re financially prepared to do?
Moreover, this loan will be a part of your credit report. Any other lender or creditor will see you as a borrower of the total loan amount. This could potentially make taking out a loan, qualifying for a new credit card, or refinancing your mortgage a little more difficult. Plus, if your grandson misses any payments, that ‘delinquency’ will also show up on your credit report.
Here’s The Simply Money Point: When you co-sign a loan, you’re taking all the risk and getting very little reward in return (if any). We don’t want to see this ruin your relationship with your grandson, and/or your own financial situation. So instead, talk with him and figure out if you can support his college dreams in another way, such as helping him exhaust all his federal loan and scholarship options. Websites such as MyScholly.com, Fastweb.com, and Scholarships.com are great tools for finding available scholarship money.
Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Nathan Bachrach and Ed Finke and their team offer financial planning services through Simply Money Advisors, a SEC Registered Investment Advisor. Call (513) 469-7500 or email firstname.lastname@example.org.