Archive for the ‘College Planning’ Category
College Money
Posted by admin | Filed under College Planning
Don’t let your children’s college education create a retirement problem.
Remember, you don’t want them coming back home, do you?
A lot of families make the mistake of thinking that college scholarships or college grants are not for them because they earn too much money.
According to Social Security Administration estimates, only 4% of the highest income earners in the country, business owners, doctors, lawyers, and the like will be financially independent when they reach age 65.
This means that even the most highly paid people don’t have enough money for college tuition or retirement.
Here is what a recent New York Times article said, “Despite being members of one the best educated, most affluent generations ever, many of the baby boomers are not saving nearly enough for their children’s education.”
Everyone wants to send their children to the best schools possible, prestigious private schools if possible.
It costs an average of $23,000 to send your child to a private college according to the College Board. Multiply that by four years and multiply that by the number of children you have and then ask yourself how many people do you know that have $92,000 college money set aside for each child.
You may have a portion of this money to spend on your child’s college education and you may not NOW qualify for financial aid, but there is a way where you can structure your finances to reduce or eliminate your out of pocket college expenses and increase the chances of getting financial aid.
College financial aid formulas work in a way that where your money is, can count against you receiving financial aid, but if it’s invested somewhere else, you will qualify for financial aid based on needs.
A lot of people put their money in their children’s names, this is one of the worst thing you can do.
After perusing government documents, plans, and forms, we’ve discovered there are only two places that you put money and still qualify for federal and state financial aid. As you might of guessed, Insurance and Annuities.
Now annuities get a bad rap, sometimes deservedly so, but most of the time annuities are a great vehicle to shelter your money from taxes, or at least defer them, in the case of non-qualified money.
Some people are also under the mistaken impression that annuities must be annuitized. In fact only 4% of annuities are ever annuitized.
This makes annuities a tax advantaged product. You may be able to get 5.5% for a CD at your local bank, but if you’re in the 28% tax-bracket, your real after tax gain is 3.96% (5.5 x .72(the inverse of .28)). If a tax deferred annuity can make you 4.75%, your ahead of the game.
Insurance is also misunderstood, however, properly structured, investment grade insurance products can be an excellent place for your money to grow.
Douglas Andrew a Financial Consultant in his book “Missed Fortune” explains in detail some of the concepts that can be used. I strongly urge to read this book or if you prefer a little less reading than 512 pages, try the condensed version “Missed Fortune 101″
The book “Missed Fortune 101” by Douglas Andrew is definitely a different way of viewing things, and I highly recommend you read it. There are mixed reviews on it, but I suggest you read it and decide for yourself. You can also look over the Missed Fortune 101 part of this website.
