For the first time in a number of years, I recently traveled outside of
the United States. As much as I enjoyed my brief trip, I was nonetheless
thrilled to return and once again walk on American soil. Being gone for
just a few days really opened my eyes as to how truly fortunate we all
are to live in this country.
As a nation, we certainly have our share of problems and issues. But at
the end of the day, in my humble opinion, it’s still the best place to
live in the world. And much of what we tend to take for granted was paid
for with the lives of members of our great military.
Lately, there have been numerous reports that the Veterans
Administration is not delivering the care that our nation’s veterans
need and deserve. It appears to me that the problems have very little to
do with a lack of funding. Instead, I believe it’s the layers and
layers of bureaucracy that military personnel and their families have to
wrestle with before they can even get an appointment, let alone receive
the appropriate care.
Pondering this situation got me to thinking about the military from a
financial perspective; specifically benefits. Established in 1930, the
purpose of the U.S. Department of Veterans Affairs is to provide patient
care and federal benefits to veterans and their dependents.
A noble objective, but the Department of Veterans Affairs is, after all,
a bureaucracy. The good news is that they have a toll free number:
800-827-1000. I mention this because I sense that many families don’t
realize that their aging loved ones may be eligible for supplemental
benefits.
For example, a low-income widow of a WWII veteran whose late husband
served at least 90 days of active duty could be eligible for a pension
as high as $625 per month. To qualify, he or she had to have served at
least one of those days during a period of war.
In other words, if you have a veteran friend or loved one who needs
care, I urge you to buckle up and begin going through the Veterans
Administration forms. Even if you believe there is only a remote
possibility they are eligible for benefits. You have nothing to lose
and, potentially, much to gain.
The other financial aspect of war I’d like to mention is the cost. Wars
are far more expensive than you might think. For example, most history
books show the cost of the war in Viet Nam as $140 billion. However,
many believe when factoring in benefits to Veterans and their survivors,
the true cost exceeds $350 billion.
I recently came across an article that said there is still one survivor
from the Civil War receiving benefits. From the Spanish American War of
1898, there are 16 people receiving benefits, and more than 4,000 from
World War I.
I say good for them and thanks to everyone that served in all of our
country’s wars. I’d also like to remind family members to make certain
veterans receive all the care and benefits they deserve. As much as I
disdain bureaucracy, fighting bureaucratic red tape is a small price to
pay to help veterans and their families receive everything to which they
are entitled.
Tuesday, May 27, 2014
Tuesday, May 20, 2014
Newly wed means new challenges to face
The warm weather has finally arrived. Once again, baseball and soccer
fields will be surrounded by mini vans filled with youngsters eager to
participate with their teammates.
Spring is also the time when young adults get dressed up to attend their high school’s prom, followed by the pomp and circumstance of high school graduation.
Then comes college, and four years later, an auditorium or stadium full of young adults eager to go out and face the world. As they sit there and listen to the encouraging and inspirational words of their commencement speaker, they’re hopeful that they can live up to his or her words.
Unfortunately, it may not be easy. Because the road they must travel is going to be far different from the road my generation and I had to navigate. Things have changed dramatically over the last few decades, and they will continue to do so.
Take my journey, for example. I no longer have a minivan. I no longer receive phone calls asking me if I’m willing to chaperone for a high school event or field trip. And, thankfully, I am finished writing checks for college tuition. As spring turns into summer, I am officially at that stage of life that I like to call professional wedding attendee.
For the past few years, it seems like I was at a wedding reception almost every weekend. Today, I’m excited to share with my readers that the next wedding I will be attending is one that my wife and I are hosting. My middle son is tying the knot with a lovely young lady.
From a financial perspective, as with so many other things in life, the cost of getting married is far more than I had imagined. But, that’s not really surprising.
Looking back, every big-ticket item along my life’s journey cost more than I thought. Who ever dreamed a new car would cost more than $20,000 or that it would be common for a new home to exceed $200,000? Who ever imagined that someone could graduate from college with a burden of student loan debts of more than $100,000?
But the reality is everything in the world today is expensive. A question that I frequently like to ask at our retirement education programs is, “Who paid more for their last car than they paid for the first house?” Not surprisingly, there ‘s a chuckle and a lot of hands are raised indicating that that is indeed accurate.
Today, all adults tying the knot are facing incredible financial hurdles in their future. It’s an expensive world that I believe will become even more expensive in the years ahead. Not only will they face rising costs for big-ticket items, like housing and education, but I believe other significant burdens are also being put onto the shoulders of our young adults.
For example, there’s been a steady shift from corporate retirement programs to individual saving accounts. More and more of the cost of health care has shifted onto the family. And, of course, it seems like Uncle Sam’s insatiable appetite for taxes has no limits.
It’s exciting to see all these young couples getting married. I hope they realize just how expensive their journey together will be.
And that they plan accordingly for what’s to come.
Spring is also the time when young adults get dressed up to attend their high school’s prom, followed by the pomp and circumstance of high school graduation.
Then comes college, and four years later, an auditorium or stadium full of young adults eager to go out and face the world. As they sit there and listen to the encouraging and inspirational words of their commencement speaker, they’re hopeful that they can live up to his or her words.
Unfortunately, it may not be easy. Because the road they must travel is going to be far different from the road my generation and I had to navigate. Things have changed dramatically over the last few decades, and they will continue to do so.
Take my journey, for example. I no longer have a minivan. I no longer receive phone calls asking me if I’m willing to chaperone for a high school event or field trip. And, thankfully, I am finished writing checks for college tuition. As spring turns into summer, I am officially at that stage of life that I like to call professional wedding attendee.
For the past few years, it seems like I was at a wedding reception almost every weekend. Today, I’m excited to share with my readers that the next wedding I will be attending is one that my wife and I are hosting. My middle son is tying the knot with a lovely young lady.
From a financial perspective, as with so many other things in life, the cost of getting married is far more than I had imagined. But, that’s not really surprising.
Looking back, every big-ticket item along my life’s journey cost more than I thought. Who ever dreamed a new car would cost more than $20,000 or that it would be common for a new home to exceed $200,000? Who ever imagined that someone could graduate from college with a burden of student loan debts of more than $100,000?
But the reality is everything in the world today is expensive. A question that I frequently like to ask at our retirement education programs is, “Who paid more for their last car than they paid for the first house?” Not surprisingly, there ‘s a chuckle and a lot of hands are raised indicating that that is indeed accurate.
Today, all adults tying the knot are facing incredible financial hurdles in their future. It’s an expensive world that I believe will become even more expensive in the years ahead. Not only will they face rising costs for big-ticket items, like housing and education, but I believe other significant burdens are also being put onto the shoulders of our young adults.
For example, there’s been a steady shift from corporate retirement programs to individual saving accounts. More and more of the cost of health care has shifted onto the family. And, of course, it seems like Uncle Sam’s insatiable appetite for taxes has no limits.
It’s exciting to see all these young couples getting married. I hope they realize just how expensive their journey together will be.
And that they plan accordingly for what’s to come.
Monday, May 12, 2014
When the going gets tough, talk to Mom
Over the course of a lifetime, we all face various challenges. In the
recent economic meltdown that our nation has slowly been crawling out
of, we lost an incredible 8.8 million jobs.
This resulted in economic mayhem and personal stress in households throughout the nation. Many mortgage payments went unpaid. And as they lost their jobs or were forced to retire sooner than expected, many felt that the deck was stacked against them. The fact that millions of others were out of the job market was little consolation.
Prior to the recession, the participation rate was already declining due to such factors as globalization, technological advances and changing demographics. As the recession hit, the loss of jobs accelerated.
Only now have we reached the point of recovering the jobs that were lost during the great recession. But we still need significantly more jobs to get the economy to the point where we can say it’s humming along.
But right now, stagnant is a better description of the economy. Our GDP is currently growing at the anemic rate of less than 2.5 percent. The average age of cars on the road is a shocking 12 years. Many experts have referred to this as a jobless recovery.
Why can’t the economy seem to gain any traction? There are many reasons. Without getting too political, reckless government spending and constant Washington bickering play a large role.
Unfortunately, we still have plenty to worry about. Last year, the major sources of economic worry were internal issues like the debt ceiling and budget deal. Now the concern seems to be geopolitical with the possible re-emergence of the Cold War.
I bring these things up because, once again, investors need iron stomachs to climb the wall of worry. Emotions need to be kept on the sidelines. For most investors, in spite of all the worries and concerns, the last two years were pretty rewarding. I have no crystal ball, but I remain optimistic about the future.
I was recently at a conference with some of the best and brightest financial and economic experts you could ever meet. But the one person I most enjoyed hearing was not in the personal finance business. Rather, it was a former athlete now in the entertainment business.
Yes, I had the good fortune to meet former Super Bowl quarterback Terry Bradshaw, now an NFL analyst. Obviously, winning multiple Super Bowls brings a certain amount of fame. But as he pointed out, enjoying the journey and staying on top is the key. Even though he was a famous athlete, like households everywhere, he had severe issues and setbacks, including financial. But his desire to rebound both mentally and financially is what impressed me the most.
As is usually the case, it was his parents who provided constant support throughout all the ups and downs. He described himself as a mama’s boy. And why not? It seems that no matter how many ups and downs we have in life, whether it’s in sports, business or our personal lives, the support and unconditional love we receive from our moms is a given.
I would like to thank my mom and all the mothers everywhere who stand by their sons regardless of life’s circumstances. Simply stated, Happy Mother’s Day.
This resulted in economic mayhem and personal stress in households throughout the nation. Many mortgage payments went unpaid. And as they lost their jobs or were forced to retire sooner than expected, many felt that the deck was stacked against them. The fact that millions of others were out of the job market was little consolation.
Prior to the recession, the participation rate was already declining due to such factors as globalization, technological advances and changing demographics. As the recession hit, the loss of jobs accelerated.
Only now have we reached the point of recovering the jobs that were lost during the great recession. But we still need significantly more jobs to get the economy to the point where we can say it’s humming along.
But right now, stagnant is a better description of the economy. Our GDP is currently growing at the anemic rate of less than 2.5 percent. The average age of cars on the road is a shocking 12 years. Many experts have referred to this as a jobless recovery.
Why can’t the economy seem to gain any traction? There are many reasons. Without getting too political, reckless government spending and constant Washington bickering play a large role.
Unfortunately, we still have plenty to worry about. Last year, the major sources of economic worry were internal issues like the debt ceiling and budget deal. Now the concern seems to be geopolitical with the possible re-emergence of the Cold War.
I bring these things up because, once again, investors need iron stomachs to climb the wall of worry. Emotions need to be kept on the sidelines. For most investors, in spite of all the worries and concerns, the last two years were pretty rewarding. I have no crystal ball, but I remain optimistic about the future.
I was recently at a conference with some of the best and brightest financial and economic experts you could ever meet. But the one person I most enjoyed hearing was not in the personal finance business. Rather, it was a former athlete now in the entertainment business.
Yes, I had the good fortune to meet former Super Bowl quarterback Terry Bradshaw, now an NFL analyst. Obviously, winning multiple Super Bowls brings a certain amount of fame. But as he pointed out, enjoying the journey and staying on top is the key. Even though he was a famous athlete, like households everywhere, he had severe issues and setbacks, including financial. But his desire to rebound both mentally and financially is what impressed me the most.
As is usually the case, it was his parents who provided constant support throughout all the ups and downs. He described himself as a mama’s boy. And why not? It seems that no matter how many ups and downs we have in life, whether it’s in sports, business or our personal lives, the support and unconditional love we receive from our moms is a given.
I would like to thank my mom and all the mothers everywhere who stand by their sons regardless of life’s circumstances. Simply stated, Happy Mother’s Day.
Monday, May 5, 2014
Want to keep up with technology? Ask your grandkids
Over the years I have been very fortunate to meet and pick the brains of
some of the best and brightest financial advisers, economists and
financial analysts from all over our country.
I was recently at an educational workshop listening to and taking notes from various presenters. While they may have disagreed on various investment and economic projections, they all agreed emphatically that the world is changing. And I was astonished to realize how rapidly it’s changing.
One speaker pointed out that this is the first time in American history that the elderly are looking to the youth for information. I am a perfect example in that when a son or daughter-in-law comes to visit, it seems I’m constantly asking them to resolve or fix a technical issue on a phone or a computer.
The point is that, while it may be a technological issue for me, it’s basic knowledge for the youth of our nation. For example, my wife recently reminded me that while she was visiting our grandkids, our almost 3-year-old grandson asked her if she brought her iPad. What is often a puzzle for adults is the norm for the youth.
One presenter, Scott Klososky, mentioned that in today’s world telephones are not really phones. He actually referred to them as outboard brains, and I have to admit, I think he’s right on the money.
We’re entering an era where people are trying to find the balance between humanity and technology. Picture a family of four sitting at the dinner table, each of them staring at their smart phones and not interacting with one another. That is a scene that’s out of balance.
On the other hand, a family not utilizing technology is likely to have difficulty climbing the economic ladder. Finding the right blend between the use of technology and social skills is a challenge that lies ahead for many.
Technology is changing the landscape throughout the entire world. In years past, cities and malls were full of record stores. Technology companies like Apple changed the way we purchase and play our music. Kindles and iPads changed the way we read books. These technologies are great, but there are losers as well. Consider the demise of Borders Books and the recent closings of several Barnes & Noble stores.
I’d like to remind readers that just 14 years ago Kodak had one of its most profitable years. At the time, they had many patents in hand for the upcoming change in technology. Unfortunately, they didn’t make adjustments fast enough and went through bankruptcy. Kodak was not alone. There are numerous firms that no longer exist, primarily because they failed to utilize technology. But all is not doom and gloom because technological upstarts such as Facebook and Instagram have taken their place. These companies not only know how to embrace technology, but also how to touch the human side of us all.
Clearly, the world is changing at the speed of light. What people my age need to learn and embrace is simply what the younger generations already know. It’s the norm for them.
Although some companies may lose, I believe technology will ultimately improve our lifestyles and the way we function every day. And, of course, new technology will offer numerous investment opportunities.
I was recently at an educational workshop listening to and taking notes from various presenters. While they may have disagreed on various investment and economic projections, they all agreed emphatically that the world is changing. And I was astonished to realize how rapidly it’s changing.
One speaker pointed out that this is the first time in American history that the elderly are looking to the youth for information. I am a perfect example in that when a son or daughter-in-law comes to visit, it seems I’m constantly asking them to resolve or fix a technical issue on a phone or a computer.
The point is that, while it may be a technological issue for me, it’s basic knowledge for the youth of our nation. For example, my wife recently reminded me that while she was visiting our grandkids, our almost 3-year-old grandson asked her if she brought her iPad. What is often a puzzle for adults is the norm for the youth.
One presenter, Scott Klososky, mentioned that in today’s world telephones are not really phones. He actually referred to them as outboard brains, and I have to admit, I think he’s right on the money.
We’re entering an era where people are trying to find the balance between humanity and technology. Picture a family of four sitting at the dinner table, each of them staring at their smart phones and not interacting with one another. That is a scene that’s out of balance.
On the other hand, a family not utilizing technology is likely to have difficulty climbing the economic ladder. Finding the right blend between the use of technology and social skills is a challenge that lies ahead for many.
Technology is changing the landscape throughout the entire world. In years past, cities and malls were full of record stores. Technology companies like Apple changed the way we purchase and play our music. Kindles and iPads changed the way we read books. These technologies are great, but there are losers as well. Consider the demise of Borders Books and the recent closings of several Barnes & Noble stores.
I’d like to remind readers that just 14 years ago Kodak had one of its most profitable years. At the time, they had many patents in hand for the upcoming change in technology. Unfortunately, they didn’t make adjustments fast enough and went through bankruptcy. Kodak was not alone. There are numerous firms that no longer exist, primarily because they failed to utilize technology. But all is not doom and gloom because technological upstarts such as Facebook and Instagram have taken their place. These companies not only know how to embrace technology, but also how to touch the human side of us all.
Clearly, the world is changing at the speed of light. What people my age need to learn and embrace is simply what the younger generations already know. It’s the norm for them.
Although some companies may lose, I believe technology will ultimately improve our lifestyles and the way we function every day. And, of course, new technology will offer numerous investment opportunities.
Monday, April 28, 2014
Personal observations on a high-tech world
In the late 1970s, just before we were married, my wife and I purchased
our first home. At that point in my life, I didn’t have a lot of
household items to bring to the marriage. In fact, I didn’t even own a
single piece of furniture.
To the best of my recollection, my entire contribution to the new home all fit into my small car. One trip across town was all I needed to move. You could say the house was vintage. It had a built-in milk chute and a large, gas-gravity furnace that used to burn coal. With its large, octopus-like arms reaching out in all directions, it dominated the basement.
Upstairs, the thermostat was very simplistic. If you wanted more heat, you turned the knob to the right; if you wanted less, you turned it to the left. Our television had a rabbit-ear antenna for controlling the reception and we changed channels manually, not remotely. The VCR? Well, we were still saving to buy one.
As our family grew, so did the houses and the technology within them. Today, with all the boys grown up and on their own, we decided to move again. With just the two of us, it just made sense to get smaller and simpler. Well, the new place is definitely smaller, but I’d hardly call it simpler.
I remember when telephones were just for talking. Today, they’re essentially mini computers. I’m still amazed that I can control the volume on my television with my phone. And instead of having speakers and audio equipment around the house, we have a remarkable device called a sound bar. It not only provides incredible sound on the television, it can also play all the music on my wife’s phone.
Our high-efficiency furnace takes up only a small portion of the basement compared to the old octopus. My new thermostat looks like something from NASA. It tells the outdoor temperature, the indoor temperature and humidity and even gives a seven-day forecast. And, of course, I can control it with my phone.
Throughout my lifetime, technological advances have amazed me. To an extent, they’ve also confused me. That’s why I had “technicians” tutor me on how to use the television, sound system and thermostat. Yes, it was a little embarrassing to have to contact a technician in order to adjust the household humidity.
Now, when I buy a new computer or software program, I educate myself. In today’s high-tech world, almost everyone needs some sort of help or self-education to understand these incredible new products. I believe the days of just selling a product like a television without tech service and ongoing education are numbered. People are making careers out of servicing high-tech equipment and educating the users.
The world is certainly more complex, but the benefits are well worth the time to learn how to operate a television, furnace or, for that matter, any other household item.
It’s easy to overlook how fast technology is changing our personal lives. I noticed how it improved things at the office and in the financial world. But my recent move really made me aware how much it has changed our day-to-day living at home. We’ve come a long way from milkman delivery and newspapers on the porch.
To the best of my recollection, my entire contribution to the new home all fit into my small car. One trip across town was all I needed to move. You could say the house was vintage. It had a built-in milk chute and a large, gas-gravity furnace that used to burn coal. With its large, octopus-like arms reaching out in all directions, it dominated the basement.
Upstairs, the thermostat was very simplistic. If you wanted more heat, you turned the knob to the right; if you wanted less, you turned it to the left. Our television had a rabbit-ear antenna for controlling the reception and we changed channels manually, not remotely. The VCR? Well, we were still saving to buy one.
As our family grew, so did the houses and the technology within them. Today, with all the boys grown up and on their own, we decided to move again. With just the two of us, it just made sense to get smaller and simpler. Well, the new place is definitely smaller, but I’d hardly call it simpler.
I remember when telephones were just for talking. Today, they’re essentially mini computers. I’m still amazed that I can control the volume on my television with my phone. And instead of having speakers and audio equipment around the house, we have a remarkable device called a sound bar. It not only provides incredible sound on the television, it can also play all the music on my wife’s phone.
Our high-efficiency furnace takes up only a small portion of the basement compared to the old octopus. My new thermostat looks like something from NASA. It tells the outdoor temperature, the indoor temperature and humidity and even gives a seven-day forecast. And, of course, I can control it with my phone.
Throughout my lifetime, technological advances have amazed me. To an extent, they’ve also confused me. That’s why I had “technicians” tutor me on how to use the television, sound system and thermostat. Yes, it was a little embarrassing to have to contact a technician in order to adjust the household humidity.
Now, when I buy a new computer or software program, I educate myself. In today’s high-tech world, almost everyone needs some sort of help or self-education to understand these incredible new products. I believe the days of just selling a product like a television without tech service and ongoing education are numbered. People are making careers out of servicing high-tech equipment and educating the users.
The world is certainly more complex, but the benefits are well worth the time to learn how to operate a television, furnace or, for that matter, any other household item.
It’s easy to overlook how fast technology is changing our personal lives. I noticed how it improved things at the office and in the financial world. But my recent move really made me aware how much it has changed our day-to-day living at home. We’ve come a long way from milkman delivery and newspapers on the porch.
Monday, April 21, 2014
There’s more to a purchase than the price
We just experienced a winter that most of us thought would never end.
Many of us kept looking at the calendar, wondering how in the world the
Tigers would ever play their scheduled home opener in such wild,
winter-like weather. Then suddenly, like magic, on the day of the
opener, it actually felt like spring. And the Tigers pulled off a win
with a walk-off hit.
Once again, evidence of spring is everywhere in southeast Michigan. Hammers are pounding at construction sites; orange barrels are lining the roads; and people are coming out of hibernation and into shops and restaurants and onto bike trails.
It’s good to see the activity and the optimism returning to our area. I believe it’s truly warranted, but in spite of the optimism, I want to share some words of caution.
Baseball has a designated hitter. In the investment arena, I have often shared with my clients that I’m their designated worrier. When things are going well with investments, as they have the last two years, I worry that the trend will soon end.
When we go through difficult investment periods and tough economic times, I worry about getting everyone through the turbulence.
In baseball, a designated hitter is successful if he gets on base three out of 10 at bats. But, as an investment adviser, if you’re only successful one-third of the time, you’d be seeking another career.
I recently stumbled across the 15th annual automotive study by A.T. Kearney. The study pointed out that over 41 percent of Americans are in need of non-prime financing options. That’s an increase of 15 million from the 2008-09 economic downturn.
What this means is that a large number of people shopping for a new car or new home are considered to be high-risk borrowers. Generally, this translates into a higher borrowing rate, which often leads to a higher payment or an extended payment period.
As you house hunt or shop for a new car, be sure to keep the math in mind, especially if you previously had some credit issues. For example, consider what might happen when you walk into a car dealership.
To keep the monthly payments low, the dealership might recommend that you take a 60-month loan instead of a 48-month loan. It might sound good at the time, but what happens three years into the loan when you owe more money on the car than it’s worth? Suddenly you’re upside down on the loan.
The same caution is in order when shopping for a home. Just think back to all the people that got into financial trouble when the rate on their adjustable rate home loan increased. Suddenly they were looking at an unaffordable house payment.
I’m not trying to be a spreader of doom and gloom. Rather, I just want to make sure my readers arm themselves with financial awareness. That means you have to look beyond the showroom price and calculate the entire cost of what you’re considering to buy. That includes taxes, borrowing costs and ancillary costs such as insurance.
It’s vital that you only purchase big-ticket items with the confidence you can survive a difficult economic cycle. Spring is finally here. Don’t let the bright sunshine blind your financial eyes.
Once again, evidence of spring is everywhere in southeast Michigan. Hammers are pounding at construction sites; orange barrels are lining the roads; and people are coming out of hibernation and into shops and restaurants and onto bike trails.
It’s good to see the activity and the optimism returning to our area. I believe it’s truly warranted, but in spite of the optimism, I want to share some words of caution.
Baseball has a designated hitter. In the investment arena, I have often shared with my clients that I’m their designated worrier. When things are going well with investments, as they have the last two years, I worry that the trend will soon end.
When we go through difficult investment periods and tough economic times, I worry about getting everyone through the turbulence.
In baseball, a designated hitter is successful if he gets on base three out of 10 at bats. But, as an investment adviser, if you’re only successful one-third of the time, you’d be seeking another career.
I recently stumbled across the 15th annual automotive study by A.T. Kearney. The study pointed out that over 41 percent of Americans are in need of non-prime financing options. That’s an increase of 15 million from the 2008-09 economic downturn.
What this means is that a large number of people shopping for a new car or new home are considered to be high-risk borrowers. Generally, this translates into a higher borrowing rate, which often leads to a higher payment or an extended payment period.
As you house hunt or shop for a new car, be sure to keep the math in mind, especially if you previously had some credit issues. For example, consider what might happen when you walk into a car dealership.
To keep the monthly payments low, the dealership might recommend that you take a 60-month loan instead of a 48-month loan. It might sound good at the time, but what happens three years into the loan when you owe more money on the car than it’s worth? Suddenly you’re upside down on the loan.
The same caution is in order when shopping for a home. Just think back to all the people that got into financial trouble when the rate on their adjustable rate home loan increased. Suddenly they were looking at an unaffordable house payment.
I’m not trying to be a spreader of doom and gloom. Rather, I just want to make sure my readers arm themselves with financial awareness. That means you have to look beyond the showroom price and calculate the entire cost of what you’re considering to buy. That includes taxes, borrowing costs and ancillary costs such as insurance.
It’s vital that you only purchase big-ticket items with the confidence you can survive a difficult economic cycle. Spring is finally here. Don’t let the bright sunshine blind your financial eyes.
Monday, April 14, 2014
Help your grandchildren invest in education
It was wonderful to see both Michigan State University and the
University of Michigan basketball teams reach the Elite Eight. Although
neither was crowned the NCAA champion, I thought both were teams we
could be proud of.
Both have coaches that are great leaders and teachers, and it certainly appeared that all the players were classy student athletes. So much so that I feel compelled to talk about education.
I believe the best investment young persons can make is in themselves. Improving one’s knowledge and marketability in a competitive world is essential not only for getting ahead, but also for financial survival.
I recently came across some information from the financial firm John Hancock that I thought was worth sharing. According to “The College Board, Trends in College Pricing 2013,” four years of public, in-state college costs an average of $75,000. That’s a lot, and based on experience, I believe, it’s a bit low.
The John Hancock study also determined the source of the money that funded college expenses. Student income and savings covered just 11 percent of the tab, while parent income and savings covered 27 percent. Grants, scholarships, friends and relatives accounted for another 35 percent.
So, what was the source of the remaining 27 percent? Unfortunately, it was borrowed. Parent borrowing accounted for 9 percent and student borrowing an unbelievable 18 percent.
We’ve all read about students graduating with horrendous debt on their shoulders. A whopping 26 percent of graduates leave college with debt burdens ranging from $25, 000 to $100,000.
That’s why I want to remind all the parents and grandparents out there that there’s something you can do. You can save for your grandchildren’s education. And if you’re wondering how you can go about it, I’d like to make a suggestion.
I believe one of the best ways to help provide for a grandchild’s education is with a 529 college savings account. Simply stated, a 529 plan is a tax-advantaged investment vehicle established to encourage saving for the higher education of a designated individual.
Funds grow tax-free as they accumulate, and if the multitude of government guidelines is followed, the dollars earmarked for education are withdrawn tax-free. There are numerous ways the dollars can be invested, and as with any investment, there is an element of risk.
A small drawback is that 5.6 percent of the funds in a 529 plan count against the federal formula for determining the amount of financial aid available to the designee.
I say small because the grandparents can negate that factor. That’s because if the account holder of a 529 program is a grandparent of the student, the assets in the 529 plan are not counted against the amount of financial aid.
In other words, grandma or grandpa control the assets and it does not harm the grandchild’s ability to qualify for financial aid. What’s more, if little Johnny or Jenny doesn’t attend college, or chooses to party against your wishes during spring break, you are not obligated to pay their tuition.
The best-case scenario is that you’ve helped a loved one compete in a competitive world. And the worst case is that the investment comes back to you. With some tax liability, of course. The bottom line is that you are in control.
Both have coaches that are great leaders and teachers, and it certainly appeared that all the players were classy student athletes. So much so that I feel compelled to talk about education.
I believe the best investment young persons can make is in themselves. Improving one’s knowledge and marketability in a competitive world is essential not only for getting ahead, but also for financial survival.
I recently came across some information from the financial firm John Hancock that I thought was worth sharing. According to “The College Board, Trends in College Pricing 2013,” four years of public, in-state college costs an average of $75,000. That’s a lot, and based on experience, I believe, it’s a bit low.
The John Hancock study also determined the source of the money that funded college expenses. Student income and savings covered just 11 percent of the tab, while parent income and savings covered 27 percent. Grants, scholarships, friends and relatives accounted for another 35 percent.
So, what was the source of the remaining 27 percent? Unfortunately, it was borrowed. Parent borrowing accounted for 9 percent and student borrowing an unbelievable 18 percent.
We’ve all read about students graduating with horrendous debt on their shoulders. A whopping 26 percent of graduates leave college with debt burdens ranging from $25, 000 to $100,000.
That’s why I want to remind all the parents and grandparents out there that there’s something you can do. You can save for your grandchildren’s education. And if you’re wondering how you can go about it, I’d like to make a suggestion.
I believe one of the best ways to help provide for a grandchild’s education is with a 529 college savings account. Simply stated, a 529 plan is a tax-advantaged investment vehicle established to encourage saving for the higher education of a designated individual.
Funds grow tax-free as they accumulate, and if the multitude of government guidelines is followed, the dollars earmarked for education are withdrawn tax-free. There are numerous ways the dollars can be invested, and as with any investment, there is an element of risk.
A small drawback is that 5.6 percent of the funds in a 529 plan count against the federal formula for determining the amount of financial aid available to the designee.
I say small because the grandparents can negate that factor. That’s because if the account holder of a 529 program is a grandparent of the student, the assets in the 529 plan are not counted against the amount of financial aid.
In other words, grandma or grandpa control the assets and it does not harm the grandchild’s ability to qualify for financial aid. What’s more, if little Johnny or Jenny doesn’t attend college, or chooses to party against your wishes during spring break, you are not obligated to pay their tuition.
The best-case scenario is that you’ve helped a loved one compete in a competitive world. And the worst case is that the investment comes back to you. With some tax liability, of course. The bottom line is that you are in control.
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