First, in most instances, money can be taken out tax-free from both a 529 and Roth.  That won’t be the case with a 529, however, if money is used for “non college-related” expenses, like a trip or a car for Junior.  With a Roth, you can take out your contributions, for any purpose, without tax or penalty.  Advantage Roth.  But for the earnings in a Roth, the sand starts shifting, particularly if the account owner is under the age of 59 1/2.

If you start taking money out and you’re under 59 1/2, all earnings will be taxable (until you become 59 1/2).  So, if you had contributed, say, $50,000 to your Roth in 18 years, and good markets had pushed the account up to $125,000, you’d be able to take out the $50,000 tax-free, but that $75,000 in growth would all be taxable, no matter what you used the money for.  If the same amounts had gone into a 529, it would all be available for college…           tax-free.  Advantage 529.   How about this next factoid on financial aid to push your foot deeper into the sand:  the effects of a 529 or Roth on financial aid.

According to http://www.savingsforcollege.com, “a 529 account owned by a parent for a dependent student is reported on the federal financial aid application (FAFSA) as a parental asset (emphasis added). Parental assets are assessed at a maximum 5.64% rate in determining the student’s Expected Family Contribution (EFC).”   So, the fact that you’ve been a good dooby and saved for college will mean you won’t be eligible for quite as much financial aid, and that’s probably fair.  But with a Roth, it’s worse.  Not only could the Roth distributions all be taxable, but whatever you withdraw must be included in next year’s FAFSA application, again reducing Junior’s eligibility for financial aid.  And using money from a grandparent’s Roth?  That’s even worse, potentially reducing aid eligibility by more than 12%. 

It could me my Midwestern roots, but when it comes to saving for college, I vote for the straightforward approach.  Use a 529 to save for college, and keep your Roth earmarked for retirement.  Good luck. Until next time, here’s to good planning!

I’d recommend you take a look at the questions beforehand, if possible, so you don’t think your brain is already fried.  There’s something about having your online account “suspended” that’s somewhat humiliating.  Once you’re 60, you’ll start getting paper statements again.  Goodie. 

That’s not the only change the SSA is making.  The agency is now requiring all benefit payments be done electronically in an effort to cut down their costs and be more “green”.  Going green and saving money.  They go hand-in-hand.  Go set up your secure online access.  Your Social Security benefit will be an important part of your retirement plan!  Until next time, here’s to good planning!

For large employer health plans, the new law requires 85% of each policyholder’s premium to be spent on patient care…things like hospital stays, doctor’s visits, gym memberships, etc… rather than paying for marketing and administrative costs.  (For small employers, insurers must spend 80%.)  And if the health insurers don’t hit those percentages, they’ve got to rebate some premium dollars back to whomever paid the bill.   According to the Kaiser Family Foundation, the biggest chunk of the rebates…$426 Million…will go to roughly 3.5 million people who purchased their own health insurance coverage.   The average rebate will be just under $130.  The insurers may issue checks or give a credit toward future premiums.

The total $1.3 billion price tag comes from data provided by the companies to the National Association of Insurance Commissioners.  I would bet many insurance companies are counting on the Affordable Care Act  being tossed out on its ear by the U.S. Supreme Court this summer.  If so, that’ll most likely put the kabash on any rebates.  So, stay tuned.  Until next time, here’s to good planning!

Not long before May 4, 2008, Fidelity filed a Registration Statement Under the Securities Act of 1933 with the Securities and Exchange Commission for Class K shares of one of its mutual funds.  The fund “fees and expenses that may be incurred when you buy, hold, or sell Class K shares of the fund”…were listed as being .41%.  That’s quite reasonable, in my opinion.  Yet, when I looked at my client’s letter regarding K Shares, the expenses for this same fund were dropping to .46%.  The previous expenses had been .60%.  That’s quite a drop.  Yet, after Googling “K shares”, I find an article (effective 1/10/09) about how Fidelity announced new K Shares expenses for five funds in the Indiana University Retirement Plan.  Out in the Hoosier State, the same K Share expenses were dropping to .61%…down from a whopping .73%. 

So, to review:  Verizon 401(k) expenses for this popular and famous fun (for New York and New England employees) are at .46% and university employees in Indiana are paying .61%.  That may not sound like much, but expenses add up.  Higher expenses mean lower account balances for participants.  For a $50,000 account, that .15 difference in expenses would add up to a $1,500 difference in the account balance, assuming the $50,000 remained static for 20 years.  But you get my point.   Why are the Midwesterners paying more?  And how many OTHER 401(k) plans are paying higher fees?  I can assure you the fund in question isn’t what it was back in the ’80s under the direction of Peter Lynch.

There ARE new rules coming to 401(k) fees very soon.  I urge you to pay attention to the fees that you’re paying and don’t be shy about expressing your displeasure to your employer if the fees you’re paying are more than, say, .65%.  If your employer hears from enough people, that may be enough to get a better 401(k) plan in place for you and your co-workers.  It’s your money.  Keep an eye on it!  Until next time, here’s to good planning!

Mobile coupons.  You can use your smart phone to get coupons while you’re shopping.  You just have to download a free coupon app… http://www.CouponSherpa.com comes to mind… and then you can search for discounts in the store.  Some stores offer discounts of up to 40% for mobile coupons.  Now you’re talking

Catalina coupons.  I see these every week at the supermarket.  They’re the coupons that get spit out for you as you’re paying for your groceries.  Sometimes, the coupons are for items you actually use.  I’ve seen coupons that have savings in the range of 50 cents to $2.  These add up

Receipt coupons.  Take a look at your receipt.  There may very well be a coupon on it underneath the list of items you just purchased.  It’s also a good idea to make sure you weren’t overcharged for anything which, sadly, does happen

Magazines.  Under those flashy magazine covers may lurk coupons that can save you a bundle.  So, after you’ve read the article about how Brad Pitt finally proposed to Angela, flip through the pages quickly and see if there’s anything of interest

Status discounts.  Moving into the 60’s gets one thinking about the possibility of senior discounts.  But you may belong to some other group to whom restaurants, hotels and retailers tip their hat.  Don’t be afraid to ask.  It’ll help you more than the retailer

Preferred customer offers.  I love these.  These are the little cards that you swipe at the check-out counter when you buy stuff.  I’ve got one to the local hardware store, two neighborhood drug stores, and two major supermarkets.  Oh, also four sporting goods stores and an office supply store.  I use them often and get notified of special sales and product discounts

So, don’t leave dough on the table (unless it’s in your living room).  Good luck out there in the jungle.  Until next time, here’s to good planning!

Track your spending.  If you’re buying a big Starbucks coffee every morning, you need to start making your coffee at home.  All of us are wasting money on things every month.  You only have to look at your credit card statements to confirm it.  Write down what you’re spending and then trim the fluff

Change your spending habits.  Once you know how much you’re spending, then you need to focus on what you buying.  It’s not that you have to do without everything…it’s about not flushing money down the toilet so you’ll have those dollars down the road.  Retirement.  College.  A big trip.  Think about all the good that will come from changing your habits

Give yourself an allowance.   Hey, it worked when you were a kid, or at least I hope it did.  If you were one of those kids who always ran out of allowance before the week was over, then your habits go way back and it’s even more important you get your finances under control.   Take out cash at the beginning of each week and make it last.  Leave your credit and debit cards at home

How much is in your pocket or purse?  If you always know exactly how much money you’ve got on you, then that will help you stick to your budget and spending goals.  This is a big one

Stop impulse spending.  Who hasn’t done this?  I know I have.  But I also know I’ve had times when I regretted spending money on a particular item and then felt bad about doing so.  If there’s something you really need…as opposed to something you want…then let 24 hours go by before buying it.  It’ll be a money cool down period.  This will work

Eating out can kill you.  Literally and financially.  First, who knows what ingredients are used to cook your favorite meal.  It may not be very healthy.  Having an appetizer instead of a entree will save you money.  Scanning the menu may help you kill two birds with one stone so to speak.  You can do this.  Your financial security down the road may depend on it.  Good luck on your taxes.  Until next timere, here’s to good planning!

There are steps you can focus on (without too much pain) that will help you get yourself on track.  Try some of these:

Have an emergency fund.  Three to six months of expenses should do it.  This way, you won’t have to use a credit card if you have a crisis

Set a financial goal.  If you want to accumulate a certain amount for retirement by a specific age, determine how much you can save every month and what rate of return that’s realistic.  There are calculators on my web site that can help you

Don’t be afraid of risk.  Women are often too conservative in their investing, so their accounts don’t grow over time like they could.  If you live a long life, the chances are good that you’ll run out of money.  Don’t go there

It’s never too late.  It makes no difference what age you start taking control of your finances and savings.  The past is over.  You’ve got to plan for the future.  Start now

There are other ideas on my web site if you’d like more information.  And, always feel free to contact me if you have questions or would like a second opinion about something.  Good luck on your 2011 taxes!  Until next time, here’s to good planning!

In 2005, when real estate was booming everywhere, Willow’s parents bought a bigger house and her mom became a real estate agent.  Life was pretty good.  But when it all came crashing down, in 2008, a lot of her neighbors lost their homes to foreclosure.  She would tag along with her mom looking at homes with investors and got the idea at one of them that she could sell the items left inside the home and start saving money.  (Here’s a teenager who doesn’t care about Xboxes or doing drugs.)  The investor appreciated the help clearing out the place, so Willow started her quest to sell these items on Craigslist and eBay including other things she’d find at antique auctions (where she’d catch a ride with a parent or grandparent).  Who doesn’t like a good deal?

When her mom came across a short sale (where the home’s value is less than the mortgage), Willow suggested that she and her mom go in together.  The price was $12,000 and Willow just happened to have $6,000 already saved up.   You can’t own real estate if you aren’t at least 18 years of age.  Mom thought this was a fine idea and the rest is herstory!  With the help of her family, the place got cleaned up and renovated and now Willow is renting it to a young couple for $700/mo.   This youngster, who reminds me of Tatum O’Neal as a teenager, is on her way to taking control of her life and financial future.  How cool is that?  It took most of us years to get to this point.   http://www.huffingtonpost.com/2012/03/12/14-year-old-willow-tufano-buys-florida-home_n_1340452.html

So, the next time somebody tells you a goal is not achievable, or you don’t have the moxie to pull it off, think of Willow Tufano down in Port Charlotte, Florida.  You go girl!  Until next time, here’s to good planning!

This time of year, filing income taxes seems to lead the procrastinators’ pack.  Most Americans wait until the last week to pull everything together and then have a great feeling of relief once it’s all done.  You know you’ve got to do it.  You know you’ll feel better when you’ve filed.  So, what’s the problem?   I guess it’s human nature.  We don’t want to think about it.   Like putting together a monthly budget…or not spending more than we take in every month…or cutting up that damn credit card(s)…or doing any estate planning because, well, we’re not going to die.  Uh huh.

Try The Procrastinator’s Ten Minute Rule.  If there’s something you hate doing or don’t even want to think about doing, just do it for ten minutes.  Just ten minutes will get you over the hard part:  getting started.  You may find yourself still plugging away after 20 minutes.  See, that wasn’t so bad!  So, pull out that budget form (let me know if you need one) or your list of beneficiaries, or those account statements.  It is important to get your financial house in order.  National Procrastination Week is the perfect time to start!  Until next time, here’s to good planning!

When a return isn’t filed, federal law allows taxpayers three years to claim a refund for any particular tax year.  (Seems to me it should be five since it’s our money and everybody’s got a lot of stuff on their plate, especially in these tough economic times.)  There is also no penalty for filing a late return that qualifies for a refund.   But if that three-year window expires, the amount you’re owed goes directly to the U.S. Treasury.  While I’m a proponent of everyone paying their fair share in taxes, particularly the ultra wealthy, I doubt that most of us little people can afford to disregard money that we’re entitled to.  You just have to file the return.   Call the IRS (now) at 800-829-3676) to get a 2008 form mailed to you or you can download it at http://www.IRS.gov.   In Massachusetts, there are 23,900 taxpayers who failed to file, averaging a $699 refund.   If you’re not in the Bay State, here’s a link showing how many knuckleheads there are in your state: http://www.irs.gov/newsroom/article/0,,id=254725,00.html     Good luck.  Until next time, here’s to good planning!