This week on the Grow Money Business podcast we have another mailbag episode. Grant covers four questions from our listeners about Social Security benefits, the future of value investing, distribution strategies for retirement, and saving for your kids’ higher education.
If you have more questions you’d like us to cover, visit growmoneybusiness.com, and drop your questions in the Mailbag section. Grant will answer your questions in a future episode.
Many people I work with realize that they need some kind of life insurance once they start having kids. The purpose of life insurance, of course, is to ensure that everyone in your household can maintain their standard of living if you die prematurely. And as soon as other people start relying on income you haven’t earned yet to live, it’s probably time to consider some coverage.
The problem seems straight forward, but the options are confusing. First, there’s more than one type of life insurance. Whole, variable, universal, and term are the predominant options available. While insurance agents love to sell the first three (because they’re the most profitable to the insurance company, and therefore pay the greatest commissions) term is the least expensive and usually the best fit.
I’ve written in the past about why most people seeking life insurance should steer clear of permanent insurance policies. But what about the second part of the equation: how much do you really need?
There are two predominant ways to figure this out: human life value and a life insurance needs analysis. Today’s post will explore both methods.
Believe it or not, we’re already in “back to school” season. And to continue our recent series of posts on paying for college, today’s covers a question I’m sure will resonate with many readers:
Should you raid your 401k to pay for your kids’ college?
There are a lot of moving parts to this question. First, can you even get money out of your 401k to pay for college costs? Are there early withdrawal penalties for doing so? And aside from the logistics, is it even a good idea to? This post will cover whether it’s possible…and whether you should.
If you’re in a position to put some money away for your childrens’ future college costs, a 529 plan is typically the most popular home for your savings. There are some tax advantages, you could get a deduction on your state’s income taxes, and heck, the accounts were created for college savings. But the knock on 529 plans is that they can be inflexible. Take money out for anything other than qualified educational expenses and you’re probably looking at a 10% penalty on the account’s earnings.
As an alternative, some people prefer to use a Roth IRA for college savings instead. You get great tax benefits, and many people don’t realize that you can withdraw funds before retirement age penalty free if they’re used for qualified educational expenses. So given the limitations of 529 plans, are Roth IRAs really a superior vehicle for college savings?
If you’re a parent, I’m guessing that at some point you’ve freaked out thought about the cost of your child’s future college tuition. College costs are rising about 7% per year here in the U.S., and don’t look to be slowing down any time soon. Most conventional advice we hear about ways to afford college costs has to do with starting to save early, or scouring the earth for potential scholarships. What many of us forget is that we already have saving opportunities build into our tax code, in the form of a college tuition tax credit.