Mistakes are Expensive: A New Generation Embraces Financial Planning at the Mid-Stage

Financial planning has evolved beyond investing assets. The old model limited comprehensive planning to a wealthy few with high levels of manageable assets. For many people, their first engagement with a financial advisor was when they needed to create a retirement income plan.

The new fee-only model allows financial advisors with experience and knowledge to assist across the landscape of financial life. And a new generation with very different goals is taking advantage of all the elements to create plans that work for them.

Retire early, create “work optional,” or work part-time
Save for kids’ college
Enjoy life now – and save for the future
Invest in a second home or rental property

This generation has created high income and realizes they do not have to wait another 20 or 30 years to have the lifestyle they truly want. They understand that financial planning is all about tools, tactics, and strategies that can be deployed in tandem to help them keep more of what they make and actively grow their wealth.

It’s about understanding the options, making the right choices for a highly individual path forward, and solving problems.

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Financial Fitness – Mid-Year 2022 Check-In

Summer will officially be here soon, but before kids get out of school and all the vacation planning you did begins to come to fruition, it can be a good idea to take stock of your financial picture and make updates where necessary. Below are a few things you should consider to keep your plan in shape. We’ve organized them by life stage, from having small kids to being closer to retirement. We’ve also included charitable giving, as that happens at every stage.

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Saving for College: 529 Plans vs. Everything Else

If you’re a parent or a grandparent, chances are that at some point you’ve woken up in a cold sweat thinking about college tuition costs. College tuition is rising 6-7% every single year, and given the astronomical amount of student debt that current grads are facing, it’s enough to make you shiver.

As you may know, my wife and I now have a beautiful baby boy at home. As I write this he’s about six months old. And given that I’m a total financial nerd, I’ve been spending some time recently thinking about how best to save for his college tuition costs. Popular opinion will tell you that 529 plans are by default the best choice for this purpose. But since to date all my posts on college costs have to do with student loans, I figured it was high time to cover the “other” end of the equation: saving for college before incurring any debt.

So today we’ll review the most common types of college savings accounts, and try to determine whether 529 plans are really your best choice. As you compare and contrast college savings vehicles on your own, be sure to incorporate how financial aid plays into the equation. Financial aid is awarded based on both you and your kids’ income and assets. Savings in some types of the accounts we’ll cover are included on the FAFSA (Free Application for Federal Student Aid) form, while others are excluded.

Students that have more assets to their own name won’t end up receiving as much financial aid as those who don’t. Every school operates a little differently, but if they think your kid is independently wealthy rest assured they won’t receive any financial aid. Your income and assets count as well, just to a far lesser degree.

Here’s the rundown.

529 Plans

529 accounts have been around for quite a while, but became really popular after the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The EGTRRA of 2001 expanded the tax benefits from the account, by exempting qualified distributions from income tax.

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Adventures in Estate Planning: The Educational Trust Fund

Helping loved ones finance the cost of education is a wonderful & long lasting gift. But when you build this type of gift into your estate planning aspirations, the more traditional vehicles can be limiting in many ways.

529 plans and Coverdell ESAs are two of the most popular options, but the accounts can be rigid and limiting. If your objectives are more unique, say you want to help multiple beneficiaries or include other requirements for access, you’ll need a more customized solution.

Enter the educational trust fund. Educational trust funds give you complete control over how your gift is to be managed and distributed. If your gifting strategy is even marginally complex, an educational trust fund might be your best option.

How They Work

When contributing to the 529 or Coverdell account of a loved one, you’re faced with numerous and rigid restrictions. There are contribution limits, there are limitations on what the funds can be used for, and there are restrictions on portability and who may use the funds. They provide a great way to save for college on a tax advantaged basis, but there’s not much room to customize.

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