| Get our FREE Taylored Wealth Tips Newsletter |
|
|
Taylored Wealth Tips September 2006
| News you can use to Shift your Personal Plan into Motion |
Topic: Paying for College
To Begin……according to the College Board, the average cost of a four-year education at a public university is currently $42,544, and $107,416 for private colleges. They also indicate expenses at public institutions have increased nearly 40% over the past decade.
Other sources indicate the cost to be closer to $2000 for tuition & fees and $2000 for room & board which totals to $16,000 for 4 years or $20,000 for 5 years at a public in state college and $80,000 for out of state. Additional increases are touted at closer to 6% per year.
A reasonable plan we suggest with our clients for 1 child is to allow for $40,000 in today’s dollars which translates to $73,000 in 10 years & 100,000 in 15 years allowing for cost increases/inflation of 6%.
Now how to fund it….as with most things, a little at a time goes a long way.
There are a number of plans you can put money into that don’t have federal tax deductions but may have state deductions and most of which allow the earnings to grow tax free & withdrawals are tax free.
If you only have 10 years which seems to be a magic number for most of our clients you will need to put $400/mo ($4800 per year) into the a fund earning an average of 8% to end up with $73,000in 10 years.
As with all coaching we stress that understanding the end objective is critical to determining the best path to take.
Coverdell
Max annual contribution : $2000 per year
This is great if you have more than 10 years; although investment choices are limited and not in your control
Max income is $95,000
Tax benefit : earnings grow tax free and withdrawals are tax free
Use: nation wide
Down side: counts against student loan calculation at some institutions.
529 Savings Plan
Max annual contribution: $55,000 up to $250,000 total
Note anyone can give $11,000 per year to anyone else, without a gift tax, so each grand parent & parent can provide 11,000 per person
Max income: unlimited
Tax benefit: grows tax free and can be withdrawn tax free,
but again offers no federal tax benefit up front. Some may offer state tax deductions. Note anyone can give $11,000 per year to anyone else, without a gift tax, so each grand parent & parent can provide 11,000 per person.
Use: nation wide
Down side: counts against student loan calculation at some institutions.
529 Pre paid Tuition
Same benefits as 529 savings plan
BUT it requires the student to attend a specific state university or small subset of universities in return for tuition credits that are not affected by increase in prices.
Recommended path ….
For those earning under $110,000 who want full control of choices of investments including no load funds with the same tax free withdrawal and tax free earnings as well as a fall back plan ….should your student not choose to go to college (or you choose not to pay)…………
Invest in a ROTH IRA
This allows contributions up to $5000 for 2006 & 2007 and up to $6000 for 2008. You can withdraw without penalty, the contributions (not earnings) after 5 years of putting them in and use them for education (anyone’s education).
For those earning over $110,000 adjusted gross income…call our Wealth Coach to find out the options on reducing adjusted gross income or get info on alternate equity indexed based products that work just like the ROTH IRA.
| News you can use to Shift your Business Plan into Motion |
What makes a good deal?
While there are always complexities in buying a property, don’t let yourself suffer from “paralyses by analysis”. Once you have your initial approval and know what the target purchase price range is, the first 3 things to consider are really as simple as you might think.
1) How much will it cost to repair ?
This is where your TEAM of experts comes to bear.
By using the advice of others you help to mitigate your risk and you learn to be discerning in the process. Additionally you may ask the seller as they often have priced things out as well. Take their information “with a grain of salt”.
2) What is the value of the property?
The real question is how much will someone else buy it for? The answer is based on comparable sales in the area of similar properties.
The best advice on this comes from an appraiser; so make use of Our TEAM of professionals. Values can easily swing by 5% without much effort. Provide your financing coach the low and high end of the property value. When you are just getting started obtain this from the TEAM realtor. Your financing coach can provide the rest of the detailed information to the appraiser so you get an accurate value range based on the comparable sales in the area.
3) How much are you willing to pay?
For a “good deal” to be a good deal the purchase price should be less than 20% of current value. If the property value is 200,000 and the seller starts the offer at $160,000 you know you have a good starting point to negotiate a “good deal”. If there are repairs involved take another 10% right off the top so you have enough wiggle room for a few oops.
Now that you have the facts…MAKE AN OFFER. In Colorado, using the standard real estate contract you have up to the final inspection to back out of a contract, so stop worrying and get busy negotiating.
| |
If you or
someone you know has an investment opportunity to present, contact
us at info@tmwealthcoach.com to
get your presentation scheduled. Be prepared with fliers and
financial information regarding return on investment and timing
of that return. Your information will also be posted on our
website for those that may not have been able to attend. For
those doing research on stock investments, feel free to contact
us to post your findings and relevant financial information.
|
|
