Massive amounts of money (app. $41 billion) are declared unclaimed and ready for cash-strapped state governments to absorb!
Did you move several times? Have you found all the accounts your deceased parents ever held? Did you ever cash out that mutual fund you opened as a kid? You may be pleasantly surprised by going to missingmoney.com, the website for the National Association of Unclaimed Property Administrators.
Stocks, bonds, bank accounts, insurance policies all fall under unclaimed or abandoned property. States use the cash and investment earnings as general revenue. These funds have become so critical to state budgets that recent changes result in your losing your assets even faster:
1. Seven years, the time in which you had to claim your property, has now been reduced to five and in some states three years!!
2. The definition of abandoned property (the return of undeliverable mail) has been changed to lack of contact. Even if you have been receiving statements your property is considered lost if you have not contacted the financial institution for a certain period of time!
Contact means:
1. calling - speaking with a rep - automated lines Do Not count.
2. emailing
3. returning a proxy ballot
4. written correspondence.
Direct deposit, direct withdrawal, payroll deduction or reinvesting dividends Do Not count as contact!
Financial institutions typically ask for updated personal information every three years or so. Even if nothing has changed, make sure you respond. If you have not had contact with a company for some time, make the effort to verify or update your present address and phone number.
Be $ Smart - stay in touch with all your financial institutions to demonstrate you have not abandoned your accounts.
Saturday, October 1, 2016
Happiness Quotient
You may have heard of the term wealth effect - it is the idea that when the value of stock portfolios, IRA's, 401k"s, rises due to escalating stock prices, investors feel more comfortable about their wealth, allowing them to spend more.
We now have the happiness quotient as determined by studies in the UK where a group of social scientists measured the "happiness" of bank clients through multiple surveys. They found that overall wealth was not the factor. What produced a true sense of happiness and well-being was the amount of available cash in personal checking or savings accounts.
Invested money or a pension felt either abstract or inaccessible whereas their large ATM balance evoked a sense of security and importance.
The thought of surplus cash not invested as losing value (due to inflation, lack of growth) misses the human psychology element. The premise is how you maximize your well-being over maximizing your financial benefit.
Ways to increase your happiness:
1. build your savings i.e. your emergency fund,
2. save for vacations before you take them,
3. live within your means (aka spend less than you make),
4. buy experiences not things,
5. give money to causes that feed your spirit.
Be $ Smart: Enlarge your cash buffer to increase your sense of personal power, security and happiness.
We now have the happiness quotient as determined by studies in the UK where a group of social scientists measured the "happiness" of bank clients through multiple surveys. They found that overall wealth was not the factor. What produced a true sense of happiness and well-being was the amount of available cash in personal checking or savings accounts.
Invested money or a pension felt either abstract or inaccessible whereas their large ATM balance evoked a sense of security and importance.
The thought of surplus cash not invested as losing value (due to inflation, lack of growth) misses the human psychology element. The premise is how you maximize your well-being over maximizing your financial benefit.
Ways to increase your happiness:
1. build your savings i.e. your emergency fund,
2. save for vacations before you take them,
3. live within your means (aka spend less than you make),
4. buy experiences not things,
5. give money to causes that feed your spirit.
Be $ Smart: Enlarge your cash buffer to increase your sense of personal power, security and happiness.
Out of touch...
Once upon a time at the end of the work week, men and women would stand at the payroll window and receive an envelope of cash as payment for the hours they worked at any given job.
Some would go out and celebrate, some go shopping and some would go home where they would parcel out the cash into a series of envelopes: food, rent, doctor, gas & electric, telephone, emergency, vacation. One wouldn't dare touch the rent money! If there were any money left over, it was spent on fun.
We have lost touch with money.
Direct deposit of paychecks, credit cards, wire transfers, etc. all have removed us from the physical touch of money. We're not sure how much we make nor are we sure of what we spend. Money has become ethereal and elusive.
Try these two exercises to put you more in touch:
The next time you plan to eat out, take only the amount of money you intend to spend that evening. NO CREDIT CARDS - $35, $65, $100 As you order be aware of the cost of each item and factor in the tip. Can you "afford" another glass of wine, a second dessert or a cappuccino? With your credit card you wouldn't have a second thought and often spend more than you intend.
For two weeks track your ATM withdrawals.
On the back of each ATM receipt write down every purchase you make with that withdrawal - to the dollar! You might find you are suddenly aware of how you spend your money.
Once you get back in touch then you can make wise $ decisions.
Some would go out and celebrate, some go shopping and some would go home where they would parcel out the cash into a series of envelopes: food, rent, doctor, gas & electric, telephone, emergency, vacation. One wouldn't dare touch the rent money! If there were any money left over, it was spent on fun.
We have lost touch with money.
Direct deposit of paychecks, credit cards, wire transfers, etc. all have removed us from the physical touch of money. We're not sure how much we make nor are we sure of what we spend. Money has become ethereal and elusive.
Try these two exercises to put you more in touch:
The next time you plan to eat out, take only the amount of money you intend to spend that evening. NO CREDIT CARDS - $35, $65, $100 As you order be aware of the cost of each item and factor in the tip. Can you "afford" another glass of wine, a second dessert or a cappuccino? With your credit card you wouldn't have a second thought and often spend more than you intend.
For two weeks track your ATM withdrawals.
On the back of each ATM receipt write down every purchase you make with that withdrawal - to the dollar! You might find you are suddenly aware of how you spend your money.
Once you get back in touch then you can make wise $ decisions.
Thursday, August 11, 2016
Easing Money Anxiety
The word "money" carries many connotations:
power, freedom, evil, fear, uncertainty, anxiety, depending on one's relationship with it.
It would be a great advantage for money to bring more positive reactions like freedom, opportunity, excitement, brotherly love, kindness.
How can you make that happen? How can you change your relationship with money? Find a really good financial adviser.
Yes, I know you can read and attempt to do it yourself. I've learned the hard way that even using YouTube videos, I still need a plumber, electrician and car mechanic. My reading and learning helps me understand the situation better but I have no intention of making that my profession. Research and comprehension keep me from being ripped-off or led astray.
A true financial adviser plays a sacred role and exercises a societal obligation to help people cope with money anxiety as stated in a recent article of Investment News.
Your adviser should be able to extract fact from fiction:
- are your fears or concerns about money well founded?
- are your goals realistic?
- are your values reflected in your investments?
- are you clear about where you are today and where you want to be in 5 years, 10 years, retirement?
A Robo adviser cannot feel your emotions or understand the cycles of life to help you make good decisions over your lifetime.
A true adviser honors your values, respects your worries and concerns and helps you accomplish your goals. And, they bring expertise to the table; the expertise that many years of study, client interaction, fluctuating markets built their experience and wisdom.
Good financial advisers are out there; you just have to search for them.
Be $ Smart - take the time to find the financial adviser who's right for you to relieve your money anxiety!
power, freedom, evil, fear, uncertainty, anxiety, depending on one's relationship with it.
It would be a great advantage for money to bring more positive reactions like freedom, opportunity, excitement, brotherly love, kindness.
How can you make that happen? How can you change your relationship with money? Find a really good financial adviser.
Yes, I know you can read and attempt to do it yourself. I've learned the hard way that even using YouTube videos, I still need a plumber, electrician and car mechanic. My reading and learning helps me understand the situation better but I have no intention of making that my profession. Research and comprehension keep me from being ripped-off or led astray.
A true financial adviser plays a sacred role and exercises a societal obligation to help people cope with money anxiety as stated in a recent article of Investment News.
Your adviser should be able to extract fact from fiction:
- are your fears or concerns about money well founded?
- are your goals realistic?
- are your values reflected in your investments?
- are you clear about where you are today and where you want to be in 5 years, 10 years, retirement?
A Robo adviser cannot feel your emotions or understand the cycles of life to help you make good decisions over your lifetime.
A true adviser honors your values, respects your worries and concerns and helps you accomplish your goals. And, they bring expertise to the table; the expertise that many years of study, client interaction, fluctuating markets built their experience and wisdom.
Good financial advisers are out there; you just have to search for them.
Be $ Smart - take the time to find the financial adviser who's right for you to relieve your money anxiety!
Critical Life Task: Planning for a Spouse's Death
In a recent issue of Research Magazine, Ellen Uzelac listed all the mistakes she and her husband made in planning for each other's passing. She thought they had covered everything until he was no longer around to help her. In listing her tips, she refers to a recent book "Moving Forward on Your Own: A Financial Guidebook for Widows" by Kathleen Rehl.
1. Carve out time to discuss your financials and end-of-life wishes. Rehl suggests couples spend one hour a week, over a glass of wine or a cup of tea, to talk about such things as wills, beneficiary designations, why things are invested the way they are, legacy issues, and health care directives. She calls it “active loving.”
2. Create a repository for passwords and other need-to-know information. Whether you and your spouse record everything in a three-ring binder or on a thumb drive, just do it and keep it in a secure place. The document should include account numbers, information for key contacts, online passwords, security codes and PIN numbers along with the location of items such as birth and marriage certificates, divorce papers, vehicle titles, mortgage documents, life insurance policies, retirement plans and stock certificates. Prepare an inventory of what's stored in any safe deposit box and identify where the keys are kept. Update passwords, security codes and PINs on an ongoing basis.
3. Get to know your financial advisor. Industry research indicates 70% of widows fire their financial advisor — in large measure because they never bothered to develop a relationship.
As Kelly A. Shikany, a certified financial planner with Lakeside Wealth Management in Chesterton, Indiana, affiliated with First Allied Securities, notes: “I can't tell you how many times I have a meeting scheduled and the wife decides she's getting her nails done. There's an element of trust with the spouse: ‘Oh, he’ll fill me in and we’ll talk about it later.’ It's so important to get these women comfortable with money, comfortable coming to meetings. You don't need to add money to the grieving process. You don't want your first experience with an advisor to be: ‘I’m sorry for your loss. Let's talk about changing titles on the accounts.’ It's really a time to settle and find strength from family, friends and community before you need to push through this stuff. And you can do that with a trusted advisor.”
4. Make sure your accounts are titled properly. Jointly held accounts tend to be the gold standard. Merrill Lynch advisor Mary McDougall, based in St. Paul, Minnesota, favors JTWROS, or joint tenants with right of survivorship — a vehicle that allows the surviving spouse to inherit the contents of an account without triggering a gift tax. Brokerage and bank accounts should be held jointly so that they can't be frozen during probate. And McDougall says it's a good idea to have any household account — utility, telephone, TV — held in both names so that when a death does occur, the surviving spouse is on record as an existing customer.
5. Consolidate accounts. Multiple small-value accounts are hard to manage and sometimes even overlooked, according to Avani Ramnani, director of financial planning and wealth management at Francis Financial in New York City. People often start IRAs at different banks at different points in life or leave 401(k) accounts with past employers. It's best to park everything in one place. “Planning for financial clarity is always a good idea,” says Ramnani. “Doing so makes things efficient and easier to handle.”
6. Familiarize yourself with probate and how it works in your state. Probate can be easy or expensive and onerous, as it famously is in Florida and California. “Some states are such a nightmare that everyone plans to avoid it,” says Lisa Hutter, senior director of wealth planning for Wells Fargo Private Bank in Austin, Texas. “And even if you are in a probate-friendly state, when you have a will you still have to file the paperwork, transfer assets, change titles on everything.” And all those records are open to the public. Because assets are frozen during probate — a process that can linger for months or years — Hutter suggests that each spouse have enough cash on hand to pay expenses for 24 months.
To avoid probate, Hutter recommends placing assets in a revocable living trust. Such assets are not subject to probate. She adds that a two-page will can direct any assets not held in the trust to be held there at death, thereby bypassing probate altogether. (Note: Jurisdiction also matters when it comes to the nation's nine community property states. Make sure you are mindful of how that can impact end-of-life planning.)
7. Check beneficiary designations and how things are titled. It's a good practice to make sure beneficiary designations and titles align with your will, your trust, your wishes. “This is a really important door to open and examine. Lots of folks will go to a lawyer, update their documents and think they’re done. Unfortunately, that's not always the case,” says Kathy Muldoon, senior vice president of Dallas-based Carter Financial Management, an affiliate of Raymond James Financial Services. She suggests getting a “letter of instruction” from an attorney, essentially a guide to beneficiary language and titling. “This is really important, especially if there's any complexity at all: a second family, a family business, an angry family member,” she adds. “Pick your topic. If there's any quirk at all, and every family has one, it's not worth taking the risk.”
Even if you’re certain you know how things are titled or designated, check anyway. “We’ve seen ex-spouses named, charities clients don't like anymore, or kids who’ve died. Little was in line with today's wishes. So verify everything,” advises Mike Tylavsky, managing director of Tylavsky & Lombardo, a Wells Fargo Advisors’ group in Pensacola, Florida. “You’d be amazed. They think it's titled one way, but when you go to verify, it's different.”
8. After a death, give yourself structure and space. The financial fallout that follows the death of a spouse can be numbing. Muldoon, a financial planner for 15 years when her husband died suddenly, talks about the “overwhelmingness” of the financials — and that along with her kids, the household, going to work, and dealing with friends and family. “It's almost like you’ve got a knapsack on your back full of bricks and you can't lighten the load,” she says. What helped Muldoon, and others she has advised, was to set aside a half-day twice a week to initiate an activity involving the unwinding of financials. “It contains it. It puts a structure around it. And it gives you permission not to work on those things on the other days.”
9. Maintain one joint bank account. It's surprising how many checks payable to a deceased spouse filter in over time: a stock dividend, a rewards refund from a credit card, the proceeds of a class action suit, the balance of a bank account following probate. Wynne Whitman, an estate planning attorney with Schenck, Price, Smith & King in Florham Park, New Jersey, says: “By all means, keep a joint bank account open for one to two years. So when that refund from Time magazine comes, you’ll be able to deposit it.” Also, don't close your spouse's credit card until you understand what bill paying may be tied to it through auto-pay options.
10. Consider your Social Security choices. A widow has various options when it comes to Social Security claiming strategies because she can claim under her own work record or as a surviving spouse. “This is something you want to get right because Social Security is under no obligation to tell you how to maximize your benefit,” notes Jennifer Murray, a certified financial planner with Stonebridge Financial Advisors in Morristown, New Jersey.
Women can claim the widow's benefit as early as age 60 although there is an income cap attached to it. One popular strategy is to take the surviving spouse's benefit at 60 and then claim your own work record at 70. The good news here is that your own benefit continues to grow at 8% a year until age 70, when it tops out.
11. Understand your expenses. Many women are surprised at how much they spend. As Murray says: “I’ve never met a client who says ‘Oh my god, I can't believe I only spent that.’” She suggests using a one-page spreadsheet to track expenses — a process, she says, that can lead to a lot of self-discovery. Murray met with a young widow recently whose husband had prepared a spreadsheet for her in advance that included all of the need-to-know information. He had even researched her Social Security options. “She came into the office and said: ‘I’m starting with this. Can you help me understand it?’ Do as much as you can ahead of time,” Murray advises. “You’ll be so much better off.”
1. Carve out time to discuss your financials and end-of-life wishes. Rehl suggests couples spend one hour a week, over a glass of wine or a cup of tea, to talk about such things as wills, beneficiary designations, why things are invested the way they are, legacy issues, and health care directives. She calls it “active loving.”
2. Create a repository for passwords and other need-to-know information. Whether you and your spouse record everything in a three-ring binder or on a thumb drive, just do it and keep it in a secure place. The document should include account numbers, information for key contacts, online passwords, security codes and PIN numbers along with the location of items such as birth and marriage certificates, divorce papers, vehicle titles, mortgage documents, life insurance policies, retirement plans and stock certificates. Prepare an inventory of what's stored in any safe deposit box and identify where the keys are kept. Update passwords, security codes and PINs on an ongoing basis.
3. Get to know your financial advisor. Industry research indicates 70% of widows fire their financial advisor — in large measure because they never bothered to develop a relationship.
As Kelly A. Shikany, a certified financial planner with Lakeside Wealth Management in Chesterton, Indiana, affiliated with First Allied Securities, notes: “I can't tell you how many times I have a meeting scheduled and the wife decides she's getting her nails done. There's an element of trust with the spouse: ‘Oh, he’ll fill me in and we’ll talk about it later.’ It's so important to get these women comfortable with money, comfortable coming to meetings. You don't need to add money to the grieving process. You don't want your first experience with an advisor to be: ‘I’m sorry for your loss. Let's talk about changing titles on the accounts.’ It's really a time to settle and find strength from family, friends and community before you need to push through this stuff. And you can do that with a trusted advisor.”
4. Make sure your accounts are titled properly. Jointly held accounts tend to be the gold standard. Merrill Lynch advisor Mary McDougall, based in St. Paul, Minnesota, favors JTWROS, or joint tenants with right of survivorship — a vehicle that allows the surviving spouse to inherit the contents of an account without triggering a gift tax. Brokerage and bank accounts should be held jointly so that they can't be frozen during probate. And McDougall says it's a good idea to have any household account — utility, telephone, TV — held in both names so that when a death does occur, the surviving spouse is on record as an existing customer.
5. Consolidate accounts. Multiple small-value accounts are hard to manage and sometimes even overlooked, according to Avani Ramnani, director of financial planning and wealth management at Francis Financial in New York City. People often start IRAs at different banks at different points in life or leave 401(k) accounts with past employers. It's best to park everything in one place. “Planning for financial clarity is always a good idea,” says Ramnani. “Doing so makes things efficient and easier to handle.”
6. Familiarize yourself with probate and how it works in your state. Probate can be easy or expensive and onerous, as it famously is in Florida and California. “Some states are such a nightmare that everyone plans to avoid it,” says Lisa Hutter, senior director of wealth planning for Wells Fargo Private Bank in Austin, Texas. “And even if you are in a probate-friendly state, when you have a will you still have to file the paperwork, transfer assets, change titles on everything.” And all those records are open to the public. Because assets are frozen during probate — a process that can linger for months or years — Hutter suggests that each spouse have enough cash on hand to pay expenses for 24 months.
To avoid probate, Hutter recommends placing assets in a revocable living trust. Such assets are not subject to probate. She adds that a two-page will can direct any assets not held in the trust to be held there at death, thereby bypassing probate altogether. (Note: Jurisdiction also matters when it comes to the nation's nine community property states. Make sure you are mindful of how that can impact end-of-life planning.)
7. Check beneficiary designations and how things are titled. It's a good practice to make sure beneficiary designations and titles align with your will, your trust, your wishes. “This is a really important door to open and examine. Lots of folks will go to a lawyer, update their documents and think they’re done. Unfortunately, that's not always the case,” says Kathy Muldoon, senior vice president of Dallas-based Carter Financial Management, an affiliate of Raymond James Financial Services. She suggests getting a “letter of instruction” from an attorney, essentially a guide to beneficiary language and titling. “This is really important, especially if there's any complexity at all: a second family, a family business, an angry family member,” she adds. “Pick your topic. If there's any quirk at all, and every family has one, it's not worth taking the risk.”
Even if you’re certain you know how things are titled or designated, check anyway. “We’ve seen ex-spouses named, charities clients don't like anymore, or kids who’ve died. Little was in line with today's wishes. So verify everything,” advises Mike Tylavsky, managing director of Tylavsky & Lombardo, a Wells Fargo Advisors’ group in Pensacola, Florida. “You’d be amazed. They think it's titled one way, but when you go to verify, it's different.”
8. After a death, give yourself structure and space. The financial fallout that follows the death of a spouse can be numbing. Muldoon, a financial planner for 15 years when her husband died suddenly, talks about the “overwhelmingness” of the financials — and that along with her kids, the household, going to work, and dealing with friends and family. “It's almost like you’ve got a knapsack on your back full of bricks and you can't lighten the load,” she says. What helped Muldoon, and others she has advised, was to set aside a half-day twice a week to initiate an activity involving the unwinding of financials. “It contains it. It puts a structure around it. And it gives you permission not to work on those things on the other days.”
9. Maintain one joint bank account. It's surprising how many checks payable to a deceased spouse filter in over time: a stock dividend, a rewards refund from a credit card, the proceeds of a class action suit, the balance of a bank account following probate. Wynne Whitman, an estate planning attorney with Schenck, Price, Smith & King in Florham Park, New Jersey, says: “By all means, keep a joint bank account open for one to two years. So when that refund from Time magazine comes, you’ll be able to deposit it.” Also, don't close your spouse's credit card until you understand what bill paying may be tied to it through auto-pay options.
10. Consider your Social Security choices. A widow has various options when it comes to Social Security claiming strategies because she can claim under her own work record or as a surviving spouse. “This is something you want to get right because Social Security is under no obligation to tell you how to maximize your benefit,” notes Jennifer Murray, a certified financial planner with Stonebridge Financial Advisors in Morristown, New Jersey.
Women can claim the widow's benefit as early as age 60 although there is an income cap attached to it. One popular strategy is to take the surviving spouse's benefit at 60 and then claim your own work record at 70. The good news here is that your own benefit continues to grow at 8% a year until age 70, when it tops out.
11. Understand your expenses. Many women are surprised at how much they spend. As Murray says: “I’ve never met a client who says ‘Oh my god, I can't believe I only spent that.’” She suggests using a one-page spreadsheet to track expenses — a process, she says, that can lead to a lot of self-discovery. Murray met with a young widow recently whose husband had prepared a spreadsheet for her in advance that included all of the need-to-know information. He had even researched her Social Security options. “She came into the office and said: ‘I’m starting with this. Can you help me understand it?’ Do as much as you can ahead of time,” Murray advises. “You’ll be so much better off.”
Important Topics to Cover as You Approach Retirement
There are many topics to cover before and during retirement. Sometimes the tricky ones may be neglected or ignored by your financial adviser. Here are a few to bring to the table:
1. Social Security - Claiming social security at 62 might not be the best deal for you. There are several claiming strategies which may put many more thousands of dollars in your pocket over your lifetime. Ask your financial adviser how these strategies may benefit you.
2. Required Minimum Distribution - RMD starts when you turn 70 1/2 for your tax-qualified accounts. The first year can be tricky with the possibility of two payments in one year. Find out the rules so you don't pay more taxes than necessary or be penalized if you forget to take the distribution.
3. Smart tax-planning - Your financial adviser cannot give you tax information (unless he/she is licensed to do so) but they can tell you what type of accounts you hold and how distributions may be taxed. Ask your tax adviser for guidance on the best withdrawal methods in retirement to keep taxes as low as possible.
4. Pension replacement - Today many people do not have pensions. Your adviser can recommend ways to set up a lifetime stream of income along side your social security benefits. Most likely he/she will suggest an income annuity, fixed annuity or immediate annuity. Be wary and shop around as annuities come in many sizes and colors!
5. Professional Help - maybe you've taken a few courses and read some books about retirement planning. You may want to do it yourself to feel in control or to avoid fees. Just like everything else, know when to ask for help and seek a professional. There may be a few critical parts you missed or need tweaking. Find a fee-only adviser to give you a second, unbiased opinion. The advice may prove invaluable.
Be $ Smart - prepare for retirement with good planning and advice.
1. Social Security - Claiming social security at 62 might not be the best deal for you. There are several claiming strategies which may put many more thousands of dollars in your pocket over your lifetime. Ask your financial adviser how these strategies may benefit you.
2. Required Minimum Distribution - RMD starts when you turn 70 1/2 for your tax-qualified accounts. The first year can be tricky with the possibility of two payments in one year. Find out the rules so you don't pay more taxes than necessary or be penalized if you forget to take the distribution.
3. Smart tax-planning - Your financial adviser cannot give you tax information (unless he/she is licensed to do so) but they can tell you what type of accounts you hold and how distributions may be taxed. Ask your tax adviser for guidance on the best withdrawal methods in retirement to keep taxes as low as possible.
4. Pension replacement - Today many people do not have pensions. Your adviser can recommend ways to set up a lifetime stream of income along side your social security benefits. Most likely he/she will suggest an income annuity, fixed annuity or immediate annuity. Be wary and shop around as annuities come in many sizes and colors!
5. Professional Help - maybe you've taken a few courses and read some books about retirement planning. You may want to do it yourself to feel in control or to avoid fees. Just like everything else, know when to ask for help and seek a professional. There may be a few critical parts you missed or need tweaking. Find a fee-only adviser to give you a second, unbiased opinion. The advice may prove invaluable.
Be $ Smart - prepare for retirement with good planning and advice.
Saturday, July 9, 2016
The Family Contract - Managing Expectations
The cost of higher education has pushed many folks to work past normal retirement age to finance their children's education. Either through home equity line of credit or co-signing for loans parents mortgage their retirement for the sake of their children
After the 2008 financial crisis where many graduates could not find employment, they naturally moved home. Even when they found a job, the "rent free" lifestyle persisted. The additional cost of food, utilities, cell phone, car insurance thwarts retirement plans and savings. Young people do not realize the parental sacrifice unless someone enlightens them.
Sharing a home includes sharing responsibilities. Putting those responsibilities in writing clarifies the situation for everyone. Some parents might have the means to continue supporting their children but is it really fair? Earning, saving, spending are all financial realities of life. Denying children those lessons helps no one, hence The Family Contract.
List the expectations AND the consequences.
Put it in writing and have all parties sign.
For example:
Son/daughter may live at home until June, 2017. During that period he/she will:
1. occupy one bedroom and use one bathroom, keep them neat and clean them (scrub/dust/vacuum) once every two weeks.
2. grocery shop once every two weeks to purchase favorite foods, replace essentials (milk, coffee, eggs, laundry detergent) and pay for such items.
3. refill the gas tank when borrowing the family car.
4. pay their own car insurance (if applicable).
5. do their own laundry.
6. assist with house upkeep (e.g. mow lawn, take out trash, walk the dog, etc.)
7. pay $200 a week to cover utilities and other household expenses.
Parent(s) will:
1. pay utilities and mortgage/ rent.
2. provide heat, hot water and A/C.
3. provide simple meals
4. make car available for occasional use (could be specific days/times).
Consequences should also be specific such as:
1. loss of car privileges,
2. an increase in weekly "rent",
3. finding another place to live.
If you feel uncomfortable charging "rent" realize your child must allow for rent in their future budget. You are not helping him/her live independently by providing a cushion. If charging rent truly bothers you, put the weekly money in a savings account and give the money to them after they move out.
Yes, they are your children. Yes, you love them. Your goal is to raise healthy, social, independent, responsible human beings. A Family Contract facilitates respect and growth for all concerned.
Be $ Smart - Make your children welcome but not so comfortable to jeopardize their future or your retirement.
After the 2008 financial crisis where many graduates could not find employment, they naturally moved home. Even when they found a job, the "rent free" lifestyle persisted. The additional cost of food, utilities, cell phone, car insurance thwarts retirement plans and savings. Young people do not realize the parental sacrifice unless someone enlightens them.
Sharing a home includes sharing responsibilities. Putting those responsibilities in writing clarifies the situation for everyone. Some parents might have the means to continue supporting their children but is it really fair? Earning, saving, spending are all financial realities of life. Denying children those lessons helps no one, hence The Family Contract.
List the expectations AND the consequences.
Put it in writing and have all parties sign.
For example:
Son/daughter may live at home until June, 2017. During that period he/she will:
1. occupy one bedroom and use one bathroom, keep them neat and clean them (scrub/dust/vacuum) once every two weeks.
2. grocery shop once every two weeks to purchase favorite foods, replace essentials (milk, coffee, eggs, laundry detergent) and pay for such items.
3. refill the gas tank when borrowing the family car.
4. pay their own car insurance (if applicable).
5. do their own laundry.
6. assist with house upkeep (e.g. mow lawn, take out trash, walk the dog, etc.)
7. pay $200 a week to cover utilities and other household expenses.
Parent(s) will:
1. pay utilities and mortgage/ rent.
2. provide heat, hot water and A/C.
3. provide simple meals
4. make car available for occasional use (could be specific days/times).
Consequences should also be specific such as:
1. loss of car privileges,
2. an increase in weekly "rent",
3. finding another place to live.
If you feel uncomfortable charging "rent" realize your child must allow for rent in their future budget. You are not helping him/her live independently by providing a cushion. If charging rent truly bothers you, put the weekly money in a savings account and give the money to them after they move out.
Yes, they are your children. Yes, you love them. Your goal is to raise healthy, social, independent, responsible human beings. A Family Contract facilitates respect and growth for all concerned.
Be $ Smart - Make your children welcome but not so comfortable to jeopardize their future or your retirement.
Take Advantage of Your HSA
Health Savings Accounts are becoming more popular. They are usually part of a high deductible plan and are different from flex-spending.
They are triple-tax-advantaged where you pay no state or federal income tax on the money as it is deducted from your pay before taxes are calculated or
1. Contributions you make to a HSA are tax-deductible,
2. Contributions made by your employer are tax-free,
3. Interest accrued in the HSA is also tax-free,
and the accounts are “portable” meaning they stay with you even if you change jobs or leave the workforce.
Unlike flex-spending which must be used up annually (up to $500) or you lose it, HSA money can be carried forward indefinitely. This makes an HSA account another form of savings to use in retirement where healthcare can be a major expense.
Tax-free distributions from your HSA are made upon presenting receipts for qualifying health expenses like deductibles and co-pays. If you are able to cover these expenses out of pocket, you may hold on to the receipts and get a tax benefit in future years. Meantime, your money in the HSA grows tax-free.
Over time, If you are healthy and hardly draw from your HSA you could amass a sizable amount of money in your HSA to be used for future health expenses. There is no time limit on your receipts!
Be $ Smart - Save as much as you can in your HSA to take advantage of the triple tax exemptions. Use every tax break Uncle Sam offers. It leaves more money in your pocket!
They are triple-tax-advantaged where you pay no state or federal income tax on the money as it is deducted from your pay before taxes are calculated or
1. Contributions you make to a HSA are tax-deductible,
2. Contributions made by your employer are tax-free,
3. Interest accrued in the HSA is also tax-free,
and the accounts are “portable” meaning they stay with you even if you change jobs or leave the workforce.
Unlike flex-spending which must be used up annually (up to $500) or you lose it, HSA money can be carried forward indefinitely. This makes an HSA account another form of savings to use in retirement where healthcare can be a major expense.
Tax-free distributions from your HSA are made upon presenting receipts for qualifying health expenses like deductibles and co-pays. If you are able to cover these expenses out of pocket, you may hold on to the receipts and get a tax benefit in future years. Meantime, your money in the HSA grows tax-free.
Over time, If you are healthy and hardly draw from your HSA you could amass a sizable amount of money in your HSA to be used for future health expenses. There is no time limit on your receipts!
Be $ Smart - Save as much as you can in your HSA to take advantage of the triple tax exemptions. Use every tax break Uncle Sam offers. It leaves more money in your pocket!
Building Wealth
Wealth is not how much you make.
Wealth is how much you have accumulated. Big difference!
We have often talked about the various aspects of building wealth. Today I'll list some of those aspects so you may choose one or two for focus.
How to build wealth starting with THE MOST IMPORTANT:
!. Pay yourself first. Automatic savings, automatic 401k contributions, automatic 529 contributions all give you the advantage of not having to think about it. Build your emergency fund first; without a cushion all your wealth could dissolve with the first crisis.
2. Reduce and eliminate debt. Debt is the antithesis of wealth. It drains you emotionally and physically. Double up on your payments when you can. Or better yet, don't build up debt by using your credit cards wisely and paying them off in full each month.
3. Take full advantage of matching contributions in your 401k or 403b. Employer contributions are free money!
4. Create a plan for spending a windfall like an inheritance or tax return. This is not play money. This is not recurring money like your pay check. It happens rarely. Use it wisely. Plan to spend 10% for fun and use the balance to pay down credit cards, loans or your mortgage.
5. Know what you owe and what you own by creating a Net Worth statement at least once a year. You know your making progress when you compare the numbers year to year and see the growth: Debt (liabilities) diminishing, Assets growing.
6. Create a long-term strategy to build your wealth starting with measurable, attainable, short-term goals like building your emergency fund and paying off credit cards. Then add where you want to be in 5, 10 and 20 years.
7. Get professional help. If you are unsure about saving, investing or debt reduction take a course, read a book, hire a money coach. Your future is too precious to entrust to amateurs.
Be $ Smart - pick one, work to complete it in the next three months. Then pick another to keep you moving forward. You will be so proud of yourself!
Wealth is how much you have accumulated. Big difference!
We have often talked about the various aspects of building wealth. Today I'll list some of those aspects so you may choose one or two for focus.
How to build wealth starting with THE MOST IMPORTANT:
!. Pay yourself first. Automatic savings, automatic 401k contributions, automatic 529 contributions all give you the advantage of not having to think about it. Build your emergency fund first; without a cushion all your wealth could dissolve with the first crisis.
2. Reduce and eliminate debt. Debt is the antithesis of wealth. It drains you emotionally and physically. Double up on your payments when you can. Or better yet, don't build up debt by using your credit cards wisely and paying them off in full each month.
3. Take full advantage of matching contributions in your 401k or 403b. Employer contributions are free money!
4. Create a plan for spending a windfall like an inheritance or tax return. This is not play money. This is not recurring money like your pay check. It happens rarely. Use it wisely. Plan to spend 10% for fun and use the balance to pay down credit cards, loans or your mortgage.
5. Know what you owe and what you own by creating a Net Worth statement at least once a year. You know your making progress when you compare the numbers year to year and see the growth: Debt (liabilities) diminishing, Assets growing.
6. Create a long-term strategy to build your wealth starting with measurable, attainable, short-term goals like building your emergency fund and paying off credit cards. Then add where you want to be in 5, 10 and 20 years.
7. Get professional help. If you are unsure about saving, investing or debt reduction take a course, read a book, hire a money coach. Your future is too precious to entrust to amateurs.
Be $ Smart - pick one, work to complete it in the next three months. Then pick another to keep you moving forward. You will be so proud of yourself!
Friday, February 26, 2016
Creating an Investment Strategy - Part 3
Over the past few weeks we listed the components for creating a strategy; now is the time to actually write one. The purpose is to keep us on track to build wealth and attain our financial goals and dreams.
It can be as simple or complex as you need it to be. It's YOUR road map.
You may revise it as life moves along.
Below, is an example I found on the Internet. It is very simple and will give you an idea of how to construct yours. Start simply, you may always add to it, and most importantly, PUT IT IN WRITING. It will be your guide to the future. Without a map, who knows where you may land!
If you need some help, feel free to send me an email.
Be $ Smart - Review the previous steps to create your own investment strategy to build wealth and ensure a financially secure future.
Sample Investment Strategy
OBJECTIVE:
Save $1,000,000 for retirement, adjusted for inflation.
CONSTRAINTS:
30 year horizon.
Moderate tolerance for market volatility and loss, no tolerance for nontraditional risk.
Current portfolio value, $50,000.
Monthly net income of $4,000, monthly expenses of $3,000.
Consider the effect of taxes on returns.
SAVING OR SPENDING TARGET:
Willing to contribute $5,000 in the first year.
Intention to raise the contribution by $500 per year to a maximum of $10,000 annually.
ASSET ALLOCATION TARGET:
70% allocated to diversified stock funds, 30% allocated to diversified bond funds.
Allocation to foreign investments as appropriate.
REBALANCING METHODOLOGY:
Rebalance annually.
MONITORING AND EVALUATION:
Periodically evaluate current portfolio value relative to savings target, return expectations, and long-term objective.
Adjust as needed.
It can be as simple or complex as you need it to be. It's YOUR road map.
You may revise it as life moves along.
Below, is an example I found on the Internet. It is very simple and will give you an idea of how to construct yours. Start simply, you may always add to it, and most importantly, PUT IT IN WRITING. It will be your guide to the future. Without a map, who knows where you may land!
If you need some help, feel free to send me an email.
Be $ Smart - Review the previous steps to create your own investment strategy to build wealth and ensure a financially secure future.
Sample Investment Strategy
OBJECTIVE:
Save $1,000,000 for retirement, adjusted for inflation.
CONSTRAINTS:
30 year horizon.
Moderate tolerance for market volatility and loss, no tolerance for nontraditional risk.
Current portfolio value, $50,000.
Monthly net income of $4,000, monthly expenses of $3,000.
Consider the effect of taxes on returns.
SAVING OR SPENDING TARGET:
Willing to contribute $5,000 in the first year.
Intention to raise the contribution by $500 per year to a maximum of $10,000 annually.
ASSET ALLOCATION TARGET:
70% allocated to diversified stock funds, 30% allocated to diversified bond funds.
Allocation to foreign investments as appropriate.
REBALANCING METHODOLOGY:
Rebalance annually.
MONITORING AND EVALUATION:
Periodically evaluate current portfolio value relative to savings target, return expectations, and long-term objective.
Adjust as needed.
Creating an Investment Strategy - Part 2
Last week we took the initial steps in developing an investment strategy. Did you write them down? Putting things in writing (goals, promises, commitments) adds a dimension, a connection to the universe that helps propel you forward.
As you build your strategy here are some steps to follow:
1. State your investment goals and objectives clearly.
(some goals might be retirement, new home, kids education, second home, world travel, build wealth.)
2. Determine your time horizon.
(next year, in five years, 10 years? Time helps gauge the amount of risk.)
For multiple goals you may have multiple time frames.
3. Describe your return expectations.
(low risk = low return, high risk brings higher potential for both gain/loss.)
4. Detail the level of risk you are willing to take.
(I call this the "sleep factor" - how much money must I keep absolutely safe in order to sleep at night. Set that money aside in safe investments: CD's, U.S. Treasuries, stable value funds, and invest the rest accordingly.)
5. Assess your liquidity needs.
(how much cash must you be able to get at any given time.)
This keeps you from selling investments at the wrong time.
6. Decide who will monitor your portfolio?
(you, a broker, a money manager?)
7. Include a schedule for rebalancing your asset allocation ( mixture of stocks, bonds, cash, alternatives) - quarterly, annually?
Each component will grow at a different rate; rebalancing brings them back to your original proportions.
Be $ Smart - follow the steps, write them down, create your strategy, build your wealth.
Next time we will view a sample investment strategy.
As you build your strategy here are some steps to follow:
1. State your investment goals and objectives clearly.
(some goals might be retirement, new home, kids education, second home, world travel, build wealth.)
2. Determine your time horizon.
(next year, in five years, 10 years? Time helps gauge the amount of risk.)
For multiple goals you may have multiple time frames.
3. Describe your return expectations.
(low risk = low return, high risk brings higher potential for both gain/loss.)
4. Detail the level of risk you are willing to take.
(I call this the "sleep factor" - how much money must I keep absolutely safe in order to sleep at night. Set that money aside in safe investments: CD's, U.S. Treasuries, stable value funds, and invest the rest accordingly.)
5. Assess your liquidity needs.
(how much cash must you be able to get at any given time.)
This keeps you from selling investments at the wrong time.
6. Decide who will monitor your portfolio?
(you, a broker, a money manager?)
7. Include a schedule for rebalancing your asset allocation ( mixture of stocks, bonds, cash, alternatives) - quarterly, annually?
Each component will grow at a different rate; rebalancing brings them back to your original proportions.
Be $ Smart - follow the steps, write them down, create your strategy, build your wealth.
Next time we will view a sample investment strategy.
Creating an Investment Strategy - Part 1
When I wrote about market volatility last week, I mentioned "sticking with your investment strategy". Most folks never heard of an investment strategy and many financial advisers have neglected to develop one with their clients.
Let's review what is involved in building that strategy.
An Investment Strategy is your written statement that lists measurable goals and hopefully, shows repeatable results:
1. You must be able to assess and state your tolerance for risk (how much money you are willing to lose for potential gain?).
2. Determine your rules for buying and selling (both stocks and bonds).
Will it be decided by a certain percentage up or down? Will it be a target price? Having a rule removes emotion and allows you to act decisively.
3. Make provision for transaction costs( both commissions and fees).
Will you pay a fee for AUM (assets under management - anywhere from 1% to 2.75%) or will you pay straight commission for each buy/sell transaction? Or will you use a wrap fee that includes all?
4. Decide your preference for passive index funds (which may minimize taxes) or actively managed funds.
Passive funds pick a benchmark and rarely change the holdings whereas an actively managed fund has a manager or team who buys and sells at their discretion towards a stated objective.
5. Choose a Benchmark for comparison and measurement.
In order to measure the performance of your portfolio you must have something to measure it against. You may choose the S&P 500, the top 500 U.S. companies, the Dow Jones Industrial Average, the top 30 domestic companies or some other way to compare and measure how well or poorly your portfolio is performing.
Be $ Smart - with a written Investment Strategy you create the playbook to manage volatile markets.
Let me know if you need help writing your Investment Strategy. I'd be happy to offer guidance. Part 2 next week.
Let's review what is involved in building that strategy.
An Investment Strategy is your written statement that lists measurable goals and hopefully, shows repeatable results:
1. You must be able to assess and state your tolerance for risk (how much money you are willing to lose for potential gain?).
2. Determine your rules for buying and selling (both stocks and bonds).
Will it be decided by a certain percentage up or down? Will it be a target price? Having a rule removes emotion and allows you to act decisively.
3. Make provision for transaction costs( both commissions and fees).
Will you pay a fee for AUM (assets under management - anywhere from 1% to 2.75%) or will you pay straight commission for each buy/sell transaction? Or will you use a wrap fee that includes all?
4. Decide your preference for passive index funds (which may minimize taxes) or actively managed funds.
Passive funds pick a benchmark and rarely change the holdings whereas an actively managed fund has a manager or team who buys and sells at their discretion towards a stated objective.
5. Choose a Benchmark for comparison and measurement.
In order to measure the performance of your portfolio you must have something to measure it against. You may choose the S&P 500, the top 500 U.S. companies, the Dow Jones Industrial Average, the top 30 domestic companies or some other way to compare and measure how well or poorly your portfolio is performing.
Be $ Smart - with a written Investment Strategy you create the playbook to manage volatile markets.
Let me know if you need help writing your Investment Strategy. I'd be happy to offer guidance. Part 2 next week.
Monday, January 25, 2016
Riding the Roller Coaster
I have never been a fan of roller coasters; I consider them torture. Yet my older son can spend an entire day riding them - the higher, twistier, upside-down/inside-out, the better! But even he is not enjoying the volatile ride the markets have been taking these past few weeks and months.
Some folks view roller coasters as frightening.
Some find them exhilarating. How do you react to market volatility?
I will assume you have some money invested in the stock/bond/commodity markets. Maybe you have a 401k through work, an IRA or a 529 plan that holds a variety of funds.
Hold on tight, close your eyes, go for the ride!
1. DO NOT, repeat Do Not watch the TV constantly monitoring the daily market moves. We all know TV sensationalizes events.
2. Do Not check your accounts hourly, daily or weekly. This breeds dread, confusion and despair. Reviewing quarterly reports will suffice.
3. Take advantage of the opportunity to buy low if this is part of your investment strategy to increase certain positions. Yes, stocks may go a bit lower but they are way down from frothy highs. Remember "buy low, sell high".
4. Reassess your risk tolerance. Have you been anxious, upset and losing sleep these past few weeks? Perhaps you thought you could handle more risk. Or maybe you are closer to retirement or buying a house and feel the need to be more protective of your money. Give yourself some time before reallocating.
5. Hopefully you have an investment strategy, If so, stick with it. If not, now is not the time to implement one.
A good investment strategy will help you ride out the peaks and valleys of the market and provide guidance in achieving your financial goals.
In times like these it is helpful to remember, in order to generate the type of long-term returns that create wealth, you must accept a certain amount of risk. With that risk comes volatility. The key is not to take steps to avoid the risk altogether, but to manage the risk where possible.
Be $ Smart - Imagine the market as a living, breathing organism. It cannot inhale or exhale indefinitely. Have a plan to take advantage of market moves.
Some folks view roller coasters as frightening.
Some find them exhilarating. How do you react to market volatility?
I will assume you have some money invested in the stock/bond/commodity markets. Maybe you have a 401k through work, an IRA or a 529 plan that holds a variety of funds.
Hold on tight, close your eyes, go for the ride!
1. DO NOT, repeat Do Not watch the TV constantly monitoring the daily market moves. We all know TV sensationalizes events.
2. Do Not check your accounts hourly, daily or weekly. This breeds dread, confusion and despair. Reviewing quarterly reports will suffice.
3. Take advantage of the opportunity to buy low if this is part of your investment strategy to increase certain positions. Yes, stocks may go a bit lower but they are way down from frothy highs. Remember "buy low, sell high".
4. Reassess your risk tolerance. Have you been anxious, upset and losing sleep these past few weeks? Perhaps you thought you could handle more risk. Or maybe you are closer to retirement or buying a house and feel the need to be more protective of your money. Give yourself some time before reallocating.
5. Hopefully you have an investment strategy, If so, stick with it. If not, now is not the time to implement one.
A good investment strategy will help you ride out the peaks and valleys of the market and provide guidance in achieving your financial goals.
In times like these it is helpful to remember, in order to generate the type of long-term returns that create wealth, you must accept a certain amount of risk. With that risk comes volatility. The key is not to take steps to avoid the risk altogether, but to manage the risk where possible.
Be $ Smart - Imagine the market as a living, breathing organism. It cannot inhale or exhale indefinitely. Have a plan to take advantage of market moves.
Thursday, January 21, 2016
With the New Year Comes a New Set of Numbers
Every January brings updates from the IRS and Social Security. It helps to know those numbers relative to your cash flow and tax situation. I'll mention a few for you to consider:
Social Security cost of living increase for 2016............$0
The government deemed there was no inflation in 2015, so no increase in monthly payouts.
Kiddie tax amount (children under 19 and dependent full time students under .............................................$1,050
This pertains to investment income not earned income.
Social Security earning base.......................$118,000
You must earn over $118,000 before your employer stops deducting SS taxes.
Social Security earnings limit......................$15,720
Maximum earned income under Normal Retirement Age 66.
Annual Gift Exclusion...............................$14,000
You may gift $14,000 to any number of individuals and not pay a gift tax.
401(k), SEP, TSA maximum contribution...............$18,000
Catch up for those over 50...........................$1,000
Make sure you contact HR to increase your contribution to reach the max. Contributions may lower your taxable income for the year.
Contribution limit for IRA's........................$5,500
Catch up for those over 50 .........................$1,000
If you turn 50 any time during 2016, you may contribute $6,500 max.
If you can't contribute the maximum, contribute something!
Health Savings Account contribution:
Single.....................................................$3,350
Family.....................................................$6,750
Catch up for those over 50 .........................$1,000
Since you are not required to spend down an HSA at the end of each year, this is a good way to grow retirement savings.
These are just a few numbers that may have meaning for you. Consult your tax person to determine which apply to you and to learn additional tax ways reduce your tax bill.
Be $ Smart - Take advantage of all opportunities to save on taxes, especially those that grow tax-deferred.
Social Security cost of living increase for 2016............$0
The government deemed there was no inflation in 2015, so no increase in monthly payouts.
Kiddie tax amount (children under 19 and dependent full time students under .............................................$1,050
This pertains to investment income not earned income.
Social Security earning base.......................$118,000
You must earn over $118,000 before your employer stops deducting SS taxes.
Social Security earnings limit......................$15,720
Maximum earned income under Normal Retirement Age 66.
Annual Gift Exclusion...............................$14,000
You may gift $14,000 to any number of individuals and not pay a gift tax.
401(k), SEP, TSA maximum contribution...............$18,000
Catch up for those over 50...........................$1,000
Make sure you contact HR to increase your contribution to reach the max. Contributions may lower your taxable income for the year.
Contribution limit for IRA's........................$5,500
Catch up for those over 50 .........................$1,000
If you turn 50 any time during 2016, you may contribute $6,500 max.
If you can't contribute the maximum, contribute something!
Health Savings Account contribution:
Single.....................................................$3,350
Family.....................................................$6,750
Catch up for those over 50 .........................$1,000
Since you are not required to spend down an HSA at the end of each year, this is a good way to grow retirement savings.
These are just a few numbers that may have meaning for you. Consult your tax person to determine which apply to you and to learn additional tax ways reduce your tax bill.
Be $ Smart - Take advantage of all opportunities to save on taxes, especially those that grow tax-deferred.
Be Aware of the Kiddie Tax
Did you know that account earnings for minors - children under 18 - may have tax consequences known as the Kiddie Tax? (Full time students up to age 24 may qualify.)
In 1986 the IRS passed the Kiddie Tax to prevent adults from stashing money in their children's accounts to take advantage of the lower tax rate applied to children's earnings.
Children's unearned income - dividends, interest and capital gains - under $1050 (for 2016) is tax free. The next $1050 of unearned income pays a very low rate but any unearned income over $2100 gets taxed at the parents' rate!
The rule applies to taxable investment income not to earned income from a job. Owning stocks that don't pay dividends or tax-exempt municipal bonds, avoids this issue.
If you plan to fund an education account for a niece, nephew, grandchild or friend, a 529 plan will grow tax-deferred and money distributed tax-free for higher education. Funding an UGMA (unified gift to minors account) has the potential of producing taxable income. Plan to have a conversation with the youngster's parents beforehand to determine which account would be suitable.
Be $ Smart - Consult your tax adviser to learn if your child's accounts may be subject to the Kiddie Tax.
In 1986 the IRS passed the Kiddie Tax to prevent adults from stashing money in their children's accounts to take advantage of the lower tax rate applied to children's earnings.
Children's unearned income - dividends, interest and capital gains - under $1050 (for 2016) is tax free. The next $1050 of unearned income pays a very low rate but any unearned income over $2100 gets taxed at the parents' rate!
The rule applies to taxable investment income not to earned income from a job. Owning stocks that don't pay dividends or tax-exempt municipal bonds, avoids this issue.
If you plan to fund an education account for a niece, nephew, grandchild or friend, a 529 plan will grow tax-deferred and money distributed tax-free for higher education. Funding an UGMA (unified gift to minors account) has the potential of producing taxable income. Plan to have a conversation with the youngster's parents beforehand to determine which account would be suitable.
Be $ Smart - Consult your tax adviser to learn if your child's accounts may be subject to the Kiddie Tax.
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