Shortcut to Super College Savings Plan

For parents looking to plan a college education, here are three numbers that will make the task much easier:…5… 2… 9!

We’re talking about 529 college saving plans, which are named for the IRS tax code that created them. With a 529, you can save for college tax-free, as long as the money is used for higher-education expenses. Despite the tremendous tax advantage, 529 plans are still under utilized — only 25% of parents saving for college are putting money in a 529, according to a recent survey by lender Sallie Mae.

College Savings Plan 529

Calculator: How much will college really cost?

Why are families missing out on 529s? Well, chalk it up to confusion. Nearly every state has its own plan, and some operate more than one, so shopping around can be daunting. You can invest in nearly any state’s 529, not just your own. Much like a 401(k), each 529 presents you with a wide array of investment choices to sort through. Still, you can quickly drill down to the right choice for you — just follow these five steps:

1. Check out your state’s tax breaks. First determine what tax benefits your state offers — most states let you claim a deduction for contributions to a 529. Go to SavingForCollege.com to look up each state’s tax breaks for the respective 529 plans. If you live in a state with no income tax, or one that doesn’t offer a tax deduction, you’re free to look elsewhere. You can also shop around if you live in one of the six states that allow you to deduct contributions to any state’s 529 plan.
2. Assess your state’s plans. If your state offers tax breaks, you could be better off investing at home, especially if the deductions are generous. There are exceptions to that rule. When the local 529 offers poorly performing funds or charges high costs — say, more than 0.5% — you may do better by going elsewhere. For those planning to invest for young children, you may be able to start out with your in-state plan and later roll over your money to a better plan elsewhere. Some 14 states allow you to move your funds to an out-of-state 529 without penalty as long as you stay invested for a few years.
3. Keep your costs down. For many years 529s levied higher fees than retail brokerages did for comparable offerings, which took a big bite out of returns. But competition is finally pushing down costs.
4. Consider if the option of an age-based fund is right for you The simplest choice for many can be an age-based portfolio, which is similar to a retirement target-date fund: You get immediate diversification and the asset mix shifts to become more conservative as your child nears college. That automatic feature is especially helpful for 529s, since you can generally make only one investment change a year. Just be sure you’re comfortable with the asset mix, since some age-based portfolios are more risky than others — an aggressive fund for a 10-year-old might have 70% in stocks, while a conservative choice might hold less than 30%.
5. Protect your portfolio. When you’re one or two years away from paying that first tuition bill, you may want to shift out of the age-based fund to even safer assets. Just make sure they really are safe. Generally speaking, 529s offer many low-risk options, such as a high-quality short-term bond fund, which is likely to hold up relatively well if rates rise. You can look up the average maturity and credit quality of the mutual fund at Morningstar.com. Many 529s also offer stable value funds, which are backed by an insurance company and hold a steady net asset value — they pay a yield equivalent to a short-term bond fund. And some plans, like Ohio’s “CollegeAdvantage 529”, let you invest in bank CDs. You can’t get safer than that.

In the end, the most powerful aspect of any well planned investment is time.
The sooner you get started the more you’ll have in the end!

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

The information herein contained does not constitute tax or legal advice. Any decisions or actions should not be made without first consulting a CPA or attorney.

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.

Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm. Securities offered through an affiliate, Spire Securities, LLC. Member FINRA/SIPC

Women Empowered Toward Investment Success

Women now comprise nearly half of the U.S. workforce, and they now earn a higher percentage of the bachelor’s and master’s degrees compared to men. So how come women’s average retirement plan balances are just 60 percent of men’s average balances?  No, it’s not because there was just a great shoe sale!

Take Control of Your Finances

CONTRIBUTING FACTORS

Several factors may play into women having lower average retirement plan balances:

• Lower average salaries In 2010, the Bureau of Labor Statistics reported that the earnings ratio of women to men was 81 percent. Lower wages may translate to lower contribution and match rates.
• Tendency to select more conservative investments Generally speaking, conservative investments may result in lower long-term returns.
• Employment breaks Not only do women take time off for maternity leave, they may take additional time away for child rearing, as well as the care of elderly parents. Most who take time off for care-giving duties do not continue to contribute to any kind of retirement plan.

Combine the above factors with the fact that women usually live longer than men and, as a result, need an even bigger nest egg, and it’s not surprising that only 24 percent of women are very confident they will have enough money to take care of basic expenses in retirement.

HELP YOURSELF

There are several steps women may take to help themselves live comfortably through retirement:

• Get an idea of how much you may need in retirement If you don’t know, don’t feel bad. Only 40 percent of women (and 45 percent of men) have ever tried to calculate how much they will need to have saved by the time they retire. Try the Retirement Calculator at Fidelity.com  to gain some perspective.
• Pay yourself first Stash cash into your retirement plan — even before saving for your children’s college education (Loans may be available for college, but not retirement). You may feel that’s selfish, but one of the best gifts you can give your children is to secure your own retirement to avoid being a financial burden upon them in the future.
• Learn about saving and investing Usually the more you know, the less scary it is. A good place to start is right here. Go to the Blogs tab on our website at CompassAMG.com  for information on many financial topics, from budgeting  and investing to estate planning
• Explore when to claim Social Security Nearly 60 percent of the people receiving Social Security benefits are women. Although Social Security was never intended to cover all your retirement needs, it may be an important aspect of your retirement. If you are married, there are several scenarios to explore to coordinate you and your spouse’s benefits. For most people, delaying claiming Social Security beyond your full retirement age equals approximately 8% more per year in benefits. (This increased benefit for delaying stops at age 70.) On the Social Security Web site is a Retirement Estimator, which will help you get immediate and personalized retirement benefit estimates. Sign up for My Social Security and view your personal information.

YOU GO, GIRL

Empower your future! Explore, learn and put to work these ideas to close the retirement gap. Begin now to make your future financially secure.  A good strategy and plan will leave a lot more dough around for the magic of martinis & Manolos!! Start today!

This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

Written by Steven M. DiGregorio, President, Compass Asset Management Group, LLC.   Compass Asset Management Group, LLC is an affiliate of Spire Wealth Management, LLC.

Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm.
Securities offered through an affiliate Spire Securities, LLC.
Member FINRA/SIPC.