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Tuesday, October 14, 2014

Another way to think about college planning




By Teresa Kuhn, JD. RFC, CSA
Living Wealthy Financial



College tuition rates are increasing at a breathtaking pace leaving many American parents tossing and turning at night wondering how, or if, they’ll be able to pay for college when the time comes.


Adding to this worry is the very real possibility that a decision of where to park college funds might turn out to be more important than standardized tests, grades, or extracurricular activities in determining a child’s ability to attend a college of their choice.


In fact, more and more parents have realized that, next to retirement planning, college planning is one of the most vexing, yet critical components in a family’s healthy financial future.   That’s why most parents are willing to undertake arduous, often frustrating steps to learn more about the choices they have when it comes to solid educational planning.


There are, of course, several acceptable methods of planning for a child’s higher education, including 529 plans, Uniform Gift to Minors Accounts (UGMA), Uniform Trust to Minors Accounts (UTMA), Coverdell Education Savings Accounts, and of course, ordinary savings and investment vehicles.   Each of these, as you probably suspect, each has its’ own advantages and disadvantages as well as its’ own unique rules and requirements.


Let’s take a look at one of the most popular ways people are currently choosing to plan for their child’s education, the 529 plan, and see how the pros and cons line up to help you determine whether or not this is a good choice for your child.

I’ll also explain a little-known way that, even if you have one of these plans and it seems to be working well, you can improve it and add to your peace of mind.


What IS a 529 Plan Anyway?

“529” refers to the section of the Internal Revenue Code that describes a government-administered savings plan that is designed to be a tax-advantaged way for people to save for qualified higher education expenses.


Such plans are usually sponsored by individual states and are regulated by state agencies under professional management. Qualified withdrawals are now free of federal tax and depending on the state in which you live; you can save in excess of $200,000 per beneficiary.


 Additionally, 529 plans have no income limitations or age restrictions.   You can start one no matter how much you make or how old the beneficiary may be.


While there are several advantages of 529 plans that make them attractive to parents, they also have certain non-negotiable requirements that could, depending on your individual circumstances, become problematic for you when the time comes for your child to use them.


For example, although 529’s have generally fewer restrictions on distributions and offer a place to shelter funds when financial aid is being calculated, they often offer few to no state tax incentives.
Another critical issue with 529 plans is the stipulation that funds may only be used for qualified educational expenses such as tuition, books, and room and board.

Should your child decide to not attend college, if he or she receives a full scholarship, or if your child wants to attend an unaccredited school, you are usually forced to either transfer the 529 funds to another beneficiary or withdraw them.

If you don’t have another qualified beneficiary, you can pull out the funds, subject to tax penalties.  These penalties could be substantial.   If you have been able to take state tax deductions, for example, you may wind up getting a bill for back taxes as well as a 10 percent penalty on earnings.

Because 529 plans are administered by the individual states, they vary substantially in quality.   An analysis of state plans published by Saving for College.com (http://www.savingforcollege.com/articles/2014-plan-performance-rankings-q1)
ranked New Jersey, District of Columbia, and California as having the best performing plans in 2014, based on an array of criteria over 3, 5 and 10 year periods.

According to Saving for College.com, New York, Alaska, and Utah were the three worst-performers.  Parents living in low-performing states might want to look into other alternatives to finance their children’s’ education.

Fees

Like most investment funds, the typical 529 savings plans charges a percentage of your investment to cover operating costs.  These fees vary from state to state and also depend on whether you purchase your plan directly from your state or buy it through a broker.

Citing a report by Financial Research Corporation, Forbes magazine points out the typical 529 plan offered through a state has an average annual fee of 0.69%.  A 529 sold through a broker has an average annual fee of 1.17%.

Explains Forbes, “Although the difference may seem negligible at first, it adds up. If you invested $10,000 over 18 years (assuming you’d get a 6% return), you could have $2,000 less in a 529 plan with a 1.17% fee, compared to a plan that charges 0.69%.”
 (http://www.forbes.com/sites/learnvest/2013/07/18/529-savings-plans-9-mistakes-people-often-make/)


Risk and reward?

Because they are tied to the market, earnings in a 529 plan are uncapped.  
However this ability to earn without limit is tempered by the inevitable amount of risk associated with investments tied to Wall Street.

While promotional materials and brokers often tout the “risk-free” nature of 529’s, the fact is that many states do not guarantee their plans, including Illinois, Kentucky, Maryland, Michigan, Nevada, Pennsylvania, South Carolina, Virginia and West Virginia.

In certain states, you may have no commitment that your money will cover the cost of a college education if tuition hikes outpace your investments.

Fewer choices

Depending on the state in which you live, investment options within 529 plans can be limited.  In some states, you have only one investment option. 

A blended, balanced approach to college planning

Just as there is no “one size fits all” blueprint for retirement planning, there is also no one college planning vehicle that is perfect for everyone.  Each family has its’ own resources, challenges, and unique circumstances.

This is why I recommend that, regardless of whether or not you have one of the qualified government plans, you consider the power of a Bank on Yourself® plan to help you meet or exceed your college planning goals.

Here are just a few ways having a Bank on Yourself plan as either the cornerstone of your college planning or as a supplement to existing plans makes sense:

  • Flexibility.  529 distributions must be for "qualified education expenses”.  The cash you put into the specially-designed whole life policies like the ones used in Bank on Yourself plans can be used for anything.  So, if junior decides to skip college and become an entrepreneur, your BOY policy could be used as seed money to help him realize his dream.
  • No impact on financial aid calculations.  Unlike other savings vehicles, money you put into a Bank on Yourself policy is not used in determining eligibility for financial aid.
  • Liquidity. If you need to, you can borrow from your Bank on Yourself policy and then pay yourself back.  You get the interest, instead of a bank.  If circumstances ever forced you to skip a Bank on Yourself payment, your credit would not be impacted.
  • Safe, sane growth.  Since Bank on Yourself plans aren’t tied to the stock market, your money isn’t exposed to the risky business on Wall Street.  BOY offers safety and predictability. When you borrow from a Bank on Yourself policy, your money will continue to grow… as if you had never taken out a cent!
  • Tax advantages- When you have a professionally-tailored Bank on Yourself plan, your money is generally tax-free.  In fact, if you ever have to borrow from the policy, you will pay no fees, penalties, or taxes on that money.
  • No limits on how much you can contribute.  Bank on Yourself policies can be structured so that you can retain their advantages regardless of how much money you want to contribute.
  • Additional peace of mind with the death benefit.
  • Control.  With most qualified plans, allocation changes can only be done a specific number of times and dates on an annual basis.  Having money in a Bank on Yourself plan allows you to remove funds when you come across other attractive investment opportunities. For example, instead of paying college dorm or apartment expenses, if you had enough in your Bank on Yourself policy you could purchase a house or income-producing property where your child could live while they earned their degree.
  • Fewer limitations:  Most Bank on Yourself BOY plans can be structured to exceed the limits of a 529 plans, and they are not subject to the $350,000 lifetime limit of a 529 plan.
  • Beneficiary options: In a 529 plan, investors can change plan beneficiaries without penalty, at any time, and for any reason. However, 529 plans have family beneficiary restrictions.  A customized Bank on Yourself plan allows the owner to change the beneficiary to any person, or to a charity, as well as to choose multiple beneficiaries to receive whatever percentage deemed appropriate by the policy owner.
  
These are just a few of the reasons why I recommend that my clients consider adding the power of a well-designed Bank on Yourself plan to their college plans.  Having Bank on Yourself in addition to anything you already have in place is a great way to plug holes in your plan and create a more predictable path to college planning success.

You can learn more about how you can tap into the amazing potential of Bank on Yourself by going to the Living Wealthy Financial site at http://www.livingwealthyfinacial.com, or by calling us at 1-800-382-0830









Friday, October 10, 2014

Living Wealthy Goes British

re: check out our new Living Wealthy Financial  podcast commercial



Thursday, August 14, 2014

Two Great Living Wealthy Shows You Don't Want to Miss

re: free your mind


from Teresa:   Check out these recent shows with Nelson Nash, creator of the Infinite Banking System, and Harry Dent, contrarian economist and demographer.  Both of these shows really nailed it when it comes to dissecting the problems in our current economy.  Listen to how Nelson Nash became his own banker and avoided paying thousands of dollars in unnecessary interest and fees to bankers.  Harry Dent, financial media darling, also has some interesting things to say about why putting money into specially modified whole life policies is a pretty smart idea.

File under: "Bank on yourself," "infinite banking", "Nelson-Nash,"  "Harry-Dent," "Living-Wealthy-Radio," "whole-life-insurance,"


Saturday, June 28, 2014

Men- Keep Your Wealth By Keeping Your Health: A conversation with Dr. John LaPuma, MD.

I sat down recently with one of the most interesting men in the health and wellness movement, Dr. John La Puma.  Dr. La Puma believes that medicine has largely ignored men when it comes to diet, nutrition, and fitness advice.

He is on a mission to change all that with his revolutionary ideas about food as the ultimate medicine.  Dr. La Puma is a trained chef famous for creating healthy, delicious versions of the foods you love.

Check out the interview here:


Sunday, June 8, 2014

Why Bank on Yourself (R) Anyway?



by Kristin Colca
Living Wealthy Financial Group
Authorized Bank On Yourself Advisor

http://www.livingwealthyfinancial.com



As a Bank on Yourself authorized advisor, I often find myself playing apologist for the system.

Regaining the use, liquidity and control of one's finances is, for many people, a concept that is far removed from all that they have learned about money.  Switching over to BOY requires a drastic shift away from traditional money wisdom and the willingness to objectively consider the claims made by BOY advisors.

I've put together a few of the most common objections, along with my responses to those objections, to give a better base from which to explore Bank On Yourself.  

If you'd like to learn more or receive our free, no obligation, no annoying sales calls information packet, contact me directly.

Kristin Colca
kristin@livingwealthyfinancial.com
(512) 308-6658


Bank on Yourself frequently asked questions

Question :"No pain, no gain.  Isn't the stock market is the best, most reliable place to park your money?"

Kristin's response: 


When you look at the total return of the S&P 500 (including reinvested dividends), the real (inflation-adjusted) purchasing power of your investments remains negative after thirteen years. (referring to the graph on page 23 of The Bank on Yourself Revolution.



Question: How can you say there is "no risk" for BOY policyholders?  Isn't it an investment?

Kristin's response:



A whole life insurance policy is not an investment. In fact is is illegal to refer to it as an investment in most states. Per the Texas Department of Insurance, "Life insurance isn't an investment. An investment is a financial risk- you might make money, but you might also lose some or all of your money. In contrast, life insurance pays a guaranteed death benefit."



Question: How does BOY save you money off your taxes?  Isn't it taxed just like an IRA?

Kristin's response:



You will owe taxes on every penny you take from traditional retirement accounts in retirement. If someone retires at an effective tax rate of 20% or 25%, the 5.38% return is reduced to 4.30% or 4.03% respectively. Add that to the 1% minimum account fee and the 5.38% return is likely to be close to a 3% annual return. 


Question: If this is so great, why don't I know more people who are using it?

Kristin's response:


Leveraging the power of permanent life insurance is a wealth preservation and growth technique that has been used by business owners and upper class individuals for years.  Many people have used this method, including Walt Disney, J.C. Penney, and Doris Christopher, who launched The Pampered Chef with a whole life insurance policy loan.


 
For more questions and answers about Bank On Yourself, check out my recent interview on Living Wealthy Radio. Go here to listen now:


 

Thursday, May 8, 2014

Pamela Yellen-Bank On Yourself Workshop-Austin

re: great event- thanks to you all

Thanks everyone who took time out from their busy lives to join us as the Austin Club on April 10th to hear the latest from bestselling author and Bank On Yourself (c) creator.

Here are a few photos from the event.


Pamela Yellen took time to chat with Living Wealthy
clients and sign copies of The Bank On Yourself
Recolution for attendees.

 Getting caught up in The Bank On Yourself Revolution,
Pamela's latest.

 The fabulous women of Living Wealthy Financial 
Group vamping at the Pamela Yellen event in Austin.


Teresa Kuhn practicing her standup routine
...NOT!
 
 
Hey!  What's a Bank On Yourself event without some
money-shaped thingabobbers to give away to attendees?
 
 






Saturday, May 3, 2014

Living Wealthy Radio: Adam Kokesh- Freedom and Civil Disobedience Activist

re: talking about freedom with Adam Kokesh





You won't believe what activist Adam Kokesh has to say about freedom, the Constitution, and a government gone wild.

Check out the interview recording here:

http://traffic.libsyn.com/livingwealthynetwork/042714_AdamKokesh.mp3