Here is a thought on how to accommodate both summer camps AND college funding that represents our typical “out-of-the-box” thinking.

Start by deciding if you have funded your own retirement well enough and then consider what type of college fund or other account you will use.  Most importantly don’t bow down to mis-guided traditions at the expense of your own financial security. What do we mean?

All of these strategies start with …… A PLAN. If you haven’t sat down and really thought through what you want to do, when you want to do it by and exactly how you will do it, this is where we can really help. We don’t care about what stock , bond, or mutual fund you use, we just care that you have a plan and that you are sticking to it and changing it as life changes occur.

For creative college planning that can help with taxes before college and helps provide education on managing money for your children, we tend to recommend a custodial account.  Another option is funding your own ROTH IRA to fund college with hidden benefits.  If you feel you have waited too long, we have also found a real estate strategy that works well for some students and parents. If you can start early, planning ahead goes a long way to minimizing the impact on your lifestyle. This does require the greatest discipline and some gutsy “growth” thinking.

One advantage of the custodial account is that the funds are available for use for anything that benefits the child (not food, clothing, shelter )  including the summer sports camps, senior trip to Europe with the soccer team or club sports dues during high school (or before) and the many expenses paid during college that aren’t tuition, room & board. The account can receive funds from anyone. Grandma Mary or Uncle Louis can give up to $12,000 (each) in any given year to the custodian of the account without the recipient being taxed on that “income” because it is a gift. The custodian of the account manages the funds until the student turns 18. If you aren’t planning on financial aid for college this can be a great way to go and there are lots of educational opportunities for the student owner of the account. If you are worried about turning over a nest egg to an 18 year old, we have found some specific strategies that work well to prevent this and help the student learn to manage their money before and after 18.

If you have waited too long to fund college, another excellent strategy we have helped clients in Fort Collins & Boulder use is the purchase of real estate to house their college student in. The student becomes the landlord, learns how to manage the receipt of rent, pay mortgage, taxes, insurance and other bills and most importantly can learn about appreciation of assets.  You also are not providing a fully taxed “allowance” to them but rather using a business expense called a management fee that is deductible to you.

A 529 college savings plan may fit, but for many it does not. It is restricted to use for just college expenses. The benefits of the 529 are that it can be withdrawn tax free if used for qualified education expenses and the assets are considered the property of the owner (the parent) and have minor impact on the child’s eligibility for financial aid.

A third strategy we recommend if you haven’t really funded your own retirement as fully as you need to is to fund your ROTH IRA first ( $4000 / year) and then your other retirement buckets and finally the students college education. While this may seem a little self serving, it is not prudent to expect that your children will take care of you in your “old age”.

You may be fortunate to find that at the time your students goes off to college you will have the necessary funds to finish filling your own financial freedom bucket. If this is the case, you can pull education expenses from your ROTH that has been earning tax free and now is being withdrawn tax free and thus create savings of 25-33% on your hard earned money depending on your tax bracket at that time. The funds from the ROTH that are pulled out for education are tax free. You may be able to create your ROTH IRA with more than $4000 per year by understanding “roll over” and other related tax advantages.

If you are interested in some of these creative tax savings and planning tools for your future or your children’s future, give us a call to setup a complimentary strategy session.

We have all heard the grim stories of more than 2 million borrowers that have lost their home or will loose it. The value on appraisals has dropped and the appraisals are scrutinized more carefully by lenders. Credit score requirements have gone up such that you need better credit to get the same great rates. But how does this affect you? And what is the GOOD news?  More…

The good news is that the media is doing a lot of hyping that doesn’t reflect the OTHER part of the numbers. There were 73 million homeowners from the US government census released Oct 28, 2004 and in 2005 HUD reported 75 million homeowners.  The 2 million having a serious problem represents less than 3% of homeowners.  The bad lending practices have hit us all in the pocket book but be careful about looking at ALL the numbers and in proper context.

In 1991 we had a housing “skid” that was twice as bad. Do you remember it? Did you suffer in a significant way?

In contrast to the 1991 housing skid, worker productivity is increasing, interest rates remain within 1 percentage point of the 40-year low and the jobless rate has fallen or remained flat. In late 2007, per Bloombergs reporting, 7.4 million new and existing homes were sold at an annualized pace, more than twice the 1991 bottom.

Most of you already have credit that is just fine (680-700 or above). If you are trying to refinance and got a good deal when you purchased, you will be able to refinance just as you planned. If you had only a little equity (low down payment) into the home, you will have to wait at least 1 year to get money out. Most of you reading this don’t have a 2 year ARM that has a high adjustment point.  The bad news is not about most of you.

More good news to really get focused on: If you have ever thought about buying a rental or second home NOW is the time. Even if housing rates go down some more, the value on property is lower than it has been in many years. 

You could wait until prices go up and then you will know for sure … the bottom of the market was reached and ….. you missed out.

If you have good credit, stable income and some money in the bank, it’s a buyers market. For Colorado you should plan to have 10% down payment for most programs and about $3000 in 401k , retirement, or other funds, but there still are a few programs that allow for only 5% down. To find out options that are best for you and to hear about whole sale priced properties not offered on MLS, give us a call.