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529 Education Savings Plan Updates

529 Education Savings Plan UpdatesIn July, the Internal Revenue Service (IRS) and Department of the Treasury announced new regulations related to recent tax law changes that affect 529 plans. The 529 education savings plan updates have to do with k-12 education and rollovers to Achieving a Better Life Experience (ABLE) accounts.

The 2017 Tax Cuts and Jobs Act (TCJA) allows distributions from 529  plans to be used to pay up to a total of $10,000 of tuition per beneficiary (regardless of the number of contributing plans) each year at an elementary or secondary (k-12) public, private or religious school of the beneficiary’s choosing.

Another TCJA change allows funds to be rolled over from a designated beneficiary’s 529 plan to an ABLE account for the same beneficiary or a family member. ABLE accounts are tax-favored accounts for certain people who become disabled before age 26, designed to enable these people and their families to save and pay for disability-related expenses. The regulations would provide that rollovers from 529 plans, together with any contributions made to the ABLE account cannot exceed the annual ABLE contribution limit ($15,000 for 2018).

To learn more about the changes, visit the IRS official website.

To learn more about 529 plans and how they can help beneficiaries, as well as those who contribute funds, click on our article below.

Grandparents Can Help Pay Grandchildren’s Education

By |September 10th, 2018|College Planning, Current Affairs, Taxes|

Exponential Growth of ETFs

Patrick Eng addresses the exponential growth of ETFs.

The advent of Exchange Traded Funds (ETFs) took place a little more than 25 years ago with the creation of the SPDR S&P 500 Trust (SPY) in January 1993.  Yet, ETFs remained an obscure and little noticed trading vehicle for many years before it was embraced as a widely accepted investment choice by retail investors. An emphasis on passive investing and low-cost investment products in the past 10 years has driven the exponential growth of ETFs.

In the early 2000s, there was less than $100 billion in assets under management in ETF form. Today, that figure approaches $5 trillion. By comparison, the mutual fund industry now has about $19 trillion in assets, according to Investment Company Institute.

ETFs trade like stocks and are primarily passive investments that endeavor to replicate the performance of an index. In the case of the SPY, it is the S&P 500 index with 500 stocks bundled into a trust that trades on the exchange as if it was just one stock. ETFs are generally more tax-efficient than stocks, because they tend not to distribute a lot of capital gains and passive tracking of an index usually doesn’t require frequent trading.

There is plenty of room for the ETF market to continue to grow. In fact, ETFs have eclipsed the hedge fund market, which grew to $3.22 trillion globally in 2018, according to a report by Hedge Fund Research. Projections by BlackRock estimate ETF assets will grow to $12 trillion in the next five years.

As a potential investor in ETFs, knowing what resources you currently have and what resources you still need to reach a specific financial planning goal is critical. Picking the investment product that will help you reach that goal is the last step in the process – a step with which your advisor can assist.

Along with mutual funds and hedge funds, ETFs are investment vehicles that may help you get where you want to go.

By |August 27th, 2018|Investing|

Risks to Being Risk Averse

David Davodi explains the risks to being risk averseWhile waiting at a favorite Greek restaurant recently, I struck up a conversation with two other young men in line. We started talking about investing, and both said the stock market terrifies them.  As teenagers during the 2008 financial crises, they had witnessed their parents’ losses. As young adults today, they don’t want to lose their own money. Many young adults share their aversion to investing, according to a recent CNBC report by Sean Carter. Unfortunately, there can be financial risks to being risk averse.

Only 37 percent of Americans 35 years of age and younger invest in the stock market, according to Carter, compared to 61 percent of those older than 35. Having such little exposure to stocks at a young age can be detrimental to one’s financial future. Saving in “safer” vehicles does not always bring the growth needed to maintain the quality of life you will want or need in retirement.

While there are risks associated with investing in stocks, there also are proven strategies which help mitigate that risk. The market only does one of three things every day – go up, go down or stay the same. Investors who employ asset allocation with a diverse group of investments and maintain a long-term investment horizon typically see their investments grow over time. Having a proper financial plan also reduces stress and helps you decipher how much risk you should be taking.

It is our duty as parents, relatives and friends to help educate the young adults in our lives. Taking the time to have such conversations can be the positive impact they need to become financially successful.

By |August 13th, 2018|Current Affairs, Investing|

Make Your Legacy Tangible

make your legacy tangibleEstate planning is about much more than the tangible elements of life insurance and trusts, or investment accounts and wills. That’s because your money and possessions are not the only representations of your life. What about your beliefs and wisdom, your personal experiences and family stories? These are your legacy. They are the most valuable assets you can pass on to your loved ones and community. So, how do you make your legacy tangible?

“The challenge with character and intellectual assets is giving them the same kind of physicality that financial assets are given,” explains Laura Roser, author of Your Meaning Legacy. “Legacy vehicles are the physical structures that enable you to pass on your non-financial assets.”

One simple way to pass on your legacy is to write a heartfelt letter. You can also create short videos or audio recordings in which you share family traditions, memories and other stories. For those feeling especially ambitious, it has become easier than ever to create biographies, memoirs and other specialty books.

Regardless of how simple or elaborate you choose to be, you’ll want to include these items in your estate plan along with instructions for how they are to be shared and preserved. Remember, too, you don’t have to wait until your death to share them.

Sharing your life stories today can benefit you and your family in multiple ways. For example, a 2006 study from Emory University shows that children who know and understand their family’s history exhibit strong self-esteem and a belief that they can influence events and outcomes in their lives. Additional benefits, according to Roser, include decreasing depression in older adults, connecting with family, and increasing the likelihood of a successful wealth transfer.

Charitable giving can also include a legacy letter, video or other vehicle that shares personal wisdom and values. Your thoughts and insights will make the gift all the more meaningful to the recipient. A college student who benefits from your scholarship will also benefit from knowing why you gave. Nonprofit employees will appreciate knowing funds to continue their work came from someone with shared beliefs and values.

Just like the drafting of important financial papers, documenting your non-financial assets should be done before it becomes urgent or too late. Why not start right now?

Ideas to Help Make Your Legacy Tangible

  • Pick a photo from your past and write a description of what was happening, how you felt when it was taken.
  • Record a two-minute video about your wedding day, the day your child was born or a family tradition.
  • Create a “Top 10” list (of things for which you are grateful, of mistakes you’ve made and learned from, or of actions you believe create a well-lived life).
  • Write a letter to your family telling them you love them and what you consider to be their greatest gifts.
By |July 30th, 2018|Books, Client Stories, Estate Planning|