Archive for March, 2010
March 14th, 2010 | 
Author: When your salary stops at retirement, will you have enough to pay your bills, travel and live the lifestyle that you want in your Golden Years?  Sure, you may be one of the lucky ones with a pension. Social Security may even still be around. But if you want to live your vision of retirement, then saving and investing properly is important.  And how you pay for college for your kids will impact your own retirement.  Think about this: College tuition, books, fees and housing continue to increase at a rate faster than inflation in general. Based on current trends, the cost of sending just two kids to a private or elite college for a total of eight years will cost more than $360,000 if paid after taxes. This means that those in the 28 percent tax bracket need to earn more than $500,000 in order to meet the costs from cash flow.  Regardless of where you send your kids to school, the bottom-line fact is this: How you pay for college impacts how much you save for retirement. For every dollar that you save on college costs means more for your personal retirement down the road.  There are a number of strategies you can use to improve your chances at a better retirement and a solid education at a lower personal cost.  There are more than thirteen strategies for increasing needs-based aid. There are at least a dozen cost-cutting ways that any family can use to improve their bottom line.  Ultimately, it depends on how well you know how to use the IRS code for your advantage to lower your own Expected Family Contribution (or EFC in financial aid parlance).  Regardless of whether you expect to qualify for needs-based aid or not, here are some examples of cost-cutting strategies available to you.
Strategy 1: Get College Credit Through Exams By taking Advanced Placement exams or even a “challenge” exam for basic college courses, a student can get through school quicker potentially saving thousands in tuition and fees. Opportunities are available for Advanced Placement (AP), College-Level Examination Program (CLEP) or DSST exams for 37 different courses. For more information on these, check out the CollegeBoard or search “Get College Credit.”
Strategy 2: Stay Local In-state tuition and fees at a public higher education institution is a bargain compared to the elites and even crossing the border to go to another state’s public college. If you are considering going across the border or away, consider having your child establish residency in that state. Find out what the residency requirement are ahead of time by contacting the admissions office.
Strategy 3: Get the Credit You Deserve from the IRS Use the Hope Education Credit, renamed the “American Opportunity Tax Credit.” This was recently increased to $2,500 (from $1,200) and now applies to all four years of college, not just the first two. In addition, forty-percent of the credit is now refundable. Another helping-hand comes in the form of the Lifetime Learning Credit which is available for one family member and allows you to take up to 40% credit on educational expenses up to $10,000. Income limits apply so be sure to consult a qualified tax professional or visit the IRS website.
Strategy 4: Employ Your Child If you own a business, work as an independent contractor or own rental real estate, consider hiring your child to work for you. Maybe your child can provide administrative support or help with marketing or real estate related chores. By hiring a child and paying him or her, you will lower your own personal taxable income through a business expense deduction and provide income for your child. In addition, the child can use the earnings to open a Roth IRA, a tax-favored retirement account which is not assessed as an asset for financial aid purposes. And if needed, a child can withdraw a portion of the proceeds to pay for qualified educational expenses. There are certain limits and time restrictions that apply.
Strategy 5: Establish a Section 127 Educational Assistance Plan As a business owner you can establish a Section 127 employer-paid tuition benefits program for your employees. This plan allows the business owner to pay up to $5,250 per year to employees (including employed children) as a qualified tax deductible expense. This can be used for both undergraduate and graduate programs of study. Assuming that Junior was going to work in the family business during the summer and throughout the year, Junior can earn a wage (deductible expense for the business) which he can use for his own support and Roth IRA contribution (which may be eligible for paying educational expenses) and earn a tuition benefit (another deductible business expense). If you were going to give the child the money anyway, you may as well structure it to be tax deductible.  Consider this: There are more than 110 different other strategies for you to consider. All the more reason to have a coordinated plan in place by speaking with a professional advisor who can help evaluate these options with you.  Food for thought:
Encourage your pre-teen to open a Roth IRA with earnings from their paper route or other jobs.
Consider hiring your child to work in your business or help with chores related to your investment property.
Use a CollegeSure CD issued by an FDIC-insured bank to accumulate savings
Think about using a fixed income annuity to hold a portion of money for college to avoid the potential loss in principal that can happen with a 529 plan invested in mutual funds.
Pursue private and merit-based scholarships (For more information on some of these options, check out Fast Web, the CollegBoard and the Scholarship Experts or the Scholarship Coach on the web.
Steven Stanganelli, CRPC®, CFP®, is a CERTIFIED FINANCIAL PLANNER ™ Professional and a CHARTERED RETIREMENT PLANNING COUNSELOR (sm) with an independent fee-only financial planning and investment advisory firm with offices in Massachusetts in Woburn, Lynnfield and Amesbury.
Steve is a five-star rated advisor by the independent Paladin Registry. He specializes in working with business owners, busy executives, medical professionals and their families to help them live richer lives through smarter money moves during life and business transitions.
Steve’s practice includes the areas of retirement planning, low-cost index investment strategies, divorce, college funding and asset protection for business owners and professionals.
Steve frequently writes and presents on these topics. For more information on these topics, please go to his Linked In profile at http://www.linkedin.com/in/stevestanganelli or his blog at http://www.moneylinkpro.wordpress.com.
Article Source: Pay For College Without Busting Your Retirement Nest Egg
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Asset allocation is crucial for the upkeep of one’s wealth. It starts with the intention of creating a well-diversified portfolio and consists of dividing the investments with foresight among several different categories of all assets such as real estate, stocks, bonds, and cash. To increase wealth, all the categories have one precept in common, Buy low; sell high. To keep the wealth, however, one will need to diversify wisely.
Stocks are the most volatile of all the categories with unbearable losses at times, but they may also offer the highest returns. Picking diverse groups of stocks may somewhat limit the losses, although this may mean sacrificing big gains. Bonds still offer good returns even if not as high as stocks, but they may be slightly safer. Cash and cash equivalents of savings are savings accounts, certificates of deposits known as CDs, money market accounts, and Treasurys that come as bills, bonds, and notes, according to the time frames they are issued in. Unless inflation is in the horizon, with cash and cash equivalents, the nest egg will not lose its value, but it will not gain much either.
Asset allocation depends first on the projected time left in one’s life, in ratio to risk toleration. This is measured by the years left to retirement and the earning and saving ability in those years. For example, if a person has about thirty years to retirement, he may be able to take more risks, since the money making ability and keeping on building a nest egg will be there until retirement. On the other hand, another person retiring in two years will need to reduce the risks while distributing his assets for maximum return.
Second, adjusting and readjusting the assets to the markets of asset categories are also important. During the height of the real estate boom, people who bought highly expensive condos and other real estate lost a lot of wealth when the bust suddenly came about. Then, those who put their entire wealth in stocks lost a lot when a crash or a recession occurred.
If one portion of the portfolio grows much faster or loses more than others, some investors prefer to rebalance by selling off investments in bulkier assets and using that money for their other low-keyed but safer assets and for purchasing new investments. If the investor can make continuous contributions to his portfolio, he may also consider shifting the weight of his investments from heavier to lighter portions to provide a balance that would protect him against future risks. Reevaluating one’s investment at least once every quarter is good practice. While doing that, it is also important to take into account the transaction fees and tax consequences.
Once serious investment strategies take hold, the investor may want to acquire the services of a financial professional or group. Even then, the investor should keep on top of what is happening with his savings and investments through publications and serious websites. Should a problem occur with a financial professional, Securities and Exchange commission’s Complaint Center can be brought in to help.
To sum up, determining one’s long-term goals, knowing the specific categories to invest in, measuring the risk-versus-gain ratios correctly, and being ready to revise and reallocate the investment plan will succeed in the accumulation and protection of overall wealth.
This article has been submitted by Joy Cagil in affiliation with http://www.StockBee.Com/ which is a free online stock ticker quiz.
Article Source: The Ultimate Protection Against the Loss of The Nest Egg – Asset Allocation
Health Savings Accounts (HSAs) combine lower cost premiums, higher deductibles, and a tax favored savings account. With an HSA you get a tax deduction on the money that you put into the HSA account and your money grows tax deferred in your account. You spend the savings, tax free to help pay your deductible or to pay for qualified medical care (which often includes prescriptions, vision, and dental care).
The money that is not used at the end of the year will continue to accumulate over the years. With many HSAs, you will earn interest on your savings beginning with the first dollar deposited. Clients that may be interested in HSAs are those who want more control over how their healthcare dollars are spent; families interested in one calendar year deductible per family; and those interested in trading low deductible health insurance for a higher deductible plan to save money on premiums and taxes. Below is some basic HSA tax information:
- Eligibility - Those covered by a qualified high deductible health insurance plan and are not covered by any other health insurance or enrolled in Medicare, and cannot be declared a dependent on another person’s tax return.
- HSA Contributions – 100% tax deductible from gross income.
- Qualified Medical Withdraws – Tax Free.
- Interest Earned – Tax deferred; if used for qualified medical expenses; tax free
- Non-Medical Withdraws – Income Tax + 10% penalty tax (under age 65); income tax only (for age 65 and older).
- Death, Disability – Income Tax only – no penalty.
High deductible plans usually accompany the HSA. This is the actual major medical insurance that the client purchases. As a health insurance agent you want to make sure a high deductible plan and HSA is appropriate for your clients. Be sure to explain all of the tax implications and deductibles with your clients.
Those who may benefit from a high deductible plan are those who are willing to take financial responsibility for routine healthcare expenses in exchange for a lower premium; those seeking lower cost protection from unexpected accidents and illness; and those who retire early and need a bridge to Medicare.
Health insurance agents may also want to consider Short-Term coverage to bridge client’s gap in health insurance coverage. These types of plans are becoming more popular and you can create a niche in your business by locating clients with this need. Good candidates for this type of insurance are those who:
- Recently lost coverage due to a job loss
- Are students no longer eligible for coverage under their parent’s plan
- Are seasonal workers
- Retired and are waiting Medicare eligibility
Get more information about niche markets and increase your sales: healthinsuranceagenthelper.com
Article Source: Find Your Niche Through Health Savings Accounts