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Posts Tagged ‘College Funding’

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 tuitions, 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 www.collegeboard.com or www.getcollegecredit.com.

 

 

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 www.irs.gov.

 

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 www.fastweb.com, the CollegBoard and www.scholarshipexperts.com
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PAYING FOR COLLEGE.

 

 

Do you own a business (full time or part-time)?  Do you own investment real estate or a farm?

 

Would you be interested in learning how to use IRS rules to help you pay for college?

 

If you want to find ways to pay for college without ruining your personal retirement, there is hope (and it’s not just the renames tax credit mentioned below).

 

In this series, we’ll go over the various strategies available to help parents explore the various possibilities to reduce taxes and improve the odds for receiving financial aid, grants or scholarships.  (Consider this: There are more than 110 different strategies.)

 

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.

Tax Tips:

 

The Hope education credit is renamed the “American Opportunity Tax Credit,” is increased to $2,500, and applies to four years of

college, not just the first two. In addition, 40% of the credit is now refundable. Income limits apply.

 

Another break for those paying higher education expenses: In 2009 and 2010, funds in Section 529 college plans can be used tax-free to pay for

students’ computers, computer technology, and Internet fees.

 

For more information on this topic, continue to check out this blog as well as the weekly Wedesnday night conference call series.

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Market news got you down?  Not sure you want to go to the mailbox? Afraid your 401k has turned into a 201k? Afraid you’ll have to start searching for spare change in your couch to pay for college tuition?

Times are scary. And it is in times like these that all of our preconceived notions and assumptions get tested.

And they have been sorely tested these past 15 months or so.  Who is one left to believe or in what to believe?

This is why it is important to get back to basics and retake control over those things one truly can control.

It is in this spirit that I am launching a weekly series of teleconference calls starting next Wednesday (March 11).

During these trying times it may be easy to give up and say that there is nothing one can do.

But that would be wrong.  There is plenty you can do to get back on track.

First thing is to take control over those things you can control.

And to do this I will outline a Road Map and review the basic Rules of the Road.

 

Aimed at getting people back on course and in control of their finances, the Financial Focus Road Maps series will explore a variety of topics that may be impacting your personal bottom line.  Investing is only one part of a successful financial plan.  Yes, we will address investing strategies for volatile markets but we will also get back to basics. This series will also focus on issues like estate planning for newly married couples, elder care finances, maximizing cash flow to pay off debt, paying for college without busting what’s left of your retirement nest egg, evaluating employer-sponsored benefits, choosing insurance and understanding mortgage options in the new financial order.

 Financial Focus – Navigating through Volatile Times” will be the inaugural topic of this free recurring series starting Wednesday (3/11/09) from 7 PM to 8 PM. In this program, I will highlight the low- or no-cost strategies you can implement RIGHT NOW to protect what you have and map your fresh start.  

Please join me. 

This is a FREE series but space is limited to the first 95 participants.

You can register at http://events.linkedin.com/Financial-Focus-Road-Map-Series/pub/41788 or by calling me directly at 978-388-0020 or steve@focus-capital.com.

Future topics will include:

·         Breaking Up is Hard to Do – Financial Planning for Divorce and Beyond

·         The Special K Diet – Options for Nursing Your 401k Back to Health

·         IRA Triage – Making Your Retirement Money Last When the Market Won’t Cooperate

·         Catching a Falling Knife – How to Position a Portfolio to Preserve and Prosper in Tough Markets

·         The Sandwich Generation – Taking Over Family Finances for Aging Parents

·         Campus Treasure Hunting – Paying for College Without Going Broke

·         The Banker’s Secret – How to Live Debt Free and Gain Financial Freedom

In this format I will present each topic, sometimes introduce a guest speaker and then open the lines up for comments, questions and further discussion. Participants will also receive a link to download supporting educational materials and resources related to the evening’s topic.

Participate from the comfort of your own home or wherever else you are with a cell phone.

To participate in the live discussion, please call (712) 432-0800 and use the participant access code: 802437# approximately two minutes before the start of each teleconference.  There are no costs for using the conference line but you will be responsible for your own toll charges to connect.

Recordings of the program and resource materials will be available for free download at Steve’s blog, www.moneylinkpro.wordpress.com or www.stevestanganelli.com.

For more information, contact me directly at 978-388-0020 or 978-621-8268 (cell) or steve@focus-capital.com .

Financial Success Begins with Focus.

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