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Financial Considerations for College Students and Parents

Fri, 01 Nov 2024 18:15:06 GMT

Presented by Marc Aarons, www.ocmoneymanagers.com

If you or someone in your network is a parent of one of the over 18 million students headed off to begin or continue their undergraduate studies this fall, I want to highlight an important aspect that often arises during this time of year: financial considerations for college students.

With tuition more than doubling since the 1960s, it’s essential to plan wisely to ensure a smooth transition in and through the college years. Here are some practical tips and considerations that will help:

Budgeting basics : Encourage your student to create a budget, outlining their expenses (i.e., tuition, books, housing, food, and miscellaneous costs) and adjusting it each year as necessary.
Educate about responsible borrowing : Knowing the implications of student loans and the importance of borrowing responsibly is crucial. Talk honestly and regularly with your student about the long-term impact of student loan debt on financial goals post-graduation.
Explore or revisit financial aid : Securing financial aid isn’t a one-time affair — it’s an ongoing process. Every fall, revisit your student’s financial assistance, from scholarships and grants to student loans. Keep in mind the Free Application for Federal Student Aid (FAFSA) must be completed annually to ensure continued support throughout college.
Understand your tax-advantaged savings plans : If you have a 529 plan or Coverdell Education Savings Account (ESA), ensure you and your student know how to use it. These accounts offer tax benefits and can help offset the burden of tuition and related costs, but distributions must be used for qualifying expenses.
Encourage part-time work : While focusing on academics is essential, encourage your student to consider part-time work or internships to supplement their income and gain work experience.
Take advantage of student discounts and resources : Apple, Verizon, Sam’s Club, and Amazon Prime are just a few of the companies that offer education discounts. You can find a comprehensive list here to help your student maximize these opportunities. Additionally, encourage your student to utilize campus resources such as career services and financial literacy programs.
Plan for post-graduation repayment : Whether graduation is one or four years away, help your student develop a plan for post-graduation loan repayment, considering factors such as income-driven repayment plans, loan consolidation, and strategies for accelerating debt repayment.
Prepare for emergencies : Establishing an emergency fund is crucial to prepare for unexpected expenses that may arise during the college years. Additionally, consider creating essential legal documents such as a power of attorney, a living will, and a HIPAA authorization for your young adult.

I hope these tips provide helpful insights; please feel free to share this email with anyone who may benefit from this information. As always, I’m here to offer personalized guidance and support to help you make sense of this formative time in your student’s life, please don’t hesitate to reach out with any questions or concerns.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

What to Know…529 to Roth Transfer in 2024

Wed, 16 Oct 2024 18:15:06 GMT

Presented by Marc Aarons, www.ocmoneymanagers.com

You may have seen news reports about a change in the financial planning landscape set to impact parents, grandparents, and other family members who want to utilize 529 plans for college savings.

The change is part of the 2022 SECURE Act 2.0 and is effective as of 2024. It allows 529 account beneficiaries to roll over funds from their 529 plan to a Roth IRA. While it’s exciting news, keep in mind that rollovers from 529 plans to Roth IRAs are only permissible if certain criteria are met, including:

Beneficiaries of 529 plans can roll over only $35,000 to Roth IRAs during their lifetime.
Rollovers are subject to Roth IRA annual contribution limits.
Eligible 529 accounts must be more than 15 years old. If the account owner (typically a parent or grandparent) changes the beneficiary, the 15-year clock resets.

Traditionally, families with multiple children transferred unused funds from one 529 account to another to maximize college savings. With the new rule, parents or guardians may want to allow children who don’t exhaust their 529 to use the limited Roth IRA rollover option , potentially kickstarting their child’s retirement or supporting other financial goals.

It gets complicated, however, if one child has completed their education and, before this 2024 change, a parent or guardian renamed the beneficiary so unused funds could be accessed by another college-bound child.

The good news is there is a logistical workaround worth considering. Rather than changing the beneficiary of an account, simply request a rollover of funds to the other child’s existing 529 account. This leaves the original account (and its 15-year lifespan) intact and allows for future transfers between siblings if warranted. Keep in mind you can only do this once every 12 months.

Making a Charitable Contribution

Tue, 24 Sep 2024 18:15:06 GMT

Presented by Marc Aarons, www.ocmoneymanagers.com

Why sell shares when you can gift them? If you have appreciated stocks in your portfolio, you might want to consider donating those shares to charity rather than selling them.

Why, exactly? Donating appreciated securities to a tax-exempt charity may allow you to manage your taxes and benefit the charity. If you have held the stock for more than a year, you may be able to deduct from your taxes the fair market value of the stock in the year that you donate. If the charity is tax-exempt, it may not face capital gains tax on the stock if it sells it in the future.

Keep in mind this article is for informational purposes only. It’s not a replacement for real-life advice. Make sure to consult your tax legal and accounting professional before modifying your gift-giving strategy.

When is donating stock a better choice than gifting cash or just selling the shares? There are several reasons to consider donating highly appreciated stock to a tax-exempt charity. For example, you may own company stock and have the opportunity to donate some shares. There also are potential tax benefits to consider if you donate appreciated securities that you have owned for at least one year.

If you sell shares of appreciated stock from a taxable account and subsequently donate the proceeds from the sale to charity, you may face capital gains tax on any potential gain you realize, which effectively trims the tax benefit of cash donation.

When is donating cash a choice to consider? If you provide the charity with a cash gift, there may be some limitations. Cash gifts are deductible up to 50% of adjusted gross income. As an example, if a donor in the top 37% federal tax bracket gives a 501(c)(3) non-profit organization a gift of $5,000, the net cost can work out to just $3,150 with $1,850 realized in tax savings. A donor may also need to consider possible implications of state taxes in addition to federal.2

If you donate shares of depreciated stock from a taxable account to a charity, you can only deduct their current value, not the value they had when you originally bought them.

Remember the tax rules for charitable donations. If you donate appreciated stock to a charity, you may want to review I.R.S. Publication 526, Charitable Contributions. Double-check to see that the charity has non-profit status under federal tax law, and be sure to record the deduction on a Schedule A that you attach to your 1040.

If your contribution totals $250 or more, the donation(s) must be recorded – that is, the charity needs to give you a written statement describing the donation and its value and whether it is providing you with goods or services in exchange for it. (A bank record or even payroll deduction records can also denote the contribution.)

If your total deduction for all non-cash contributions in a tax year exceeds $500, then complete and attach Form 8283 (Noncash Charitable Contributions) to your 1040 when filing. If you donate more than $5,000 of property to a charity, you will need to provide a letter from a qualified appraiser to the charity (and by extension, the I.R.S.) stating the monetary value of the gift(s).

Gifting cash or securities to an organization is a wonderful opportunity. But keep in mind that tax rules are constantly being adjusted, and there’s a possibility that the current rules may change. Make certain to consult your tax, legal, and accounting professionals before starting a new gifting strategy if you intend to use the gift as a tax deduction.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

1 – Fidelity.com, October 9, 2019

2 – Forbes.com, October 19, 2019

3 – Schwab.com, August 13, 2019

4 – Vanguardblog.com, September 19, 2019

5 – IRS.gov, March 3, 2020

Long-Term Care on the Rise

Fri, 23 Aug 2024 18:15:06 GMT

Presented by Marc Aarons, www.ocmoneymanagers.com

What is long-term care?

Long-term care encompasses a range of services that support aging individuals and help them meet their personal care needs. Common types of long-term care include:

Nursing Homes & Assisted Living Facilities – Facilities for adults who are unable to live fully independently, with varying levels of care available.
Home Care/Personal Care or Home Health Care – Home or personal care includes assistance with personal hygiene, dressing, and feeding. Home health care includes skilled nursing care, speech, physical, or occupational therapy, and home health aide services.
Adult Day Care – Non-residential facilities that support the health, social, and daily living of adults in a staffed, group setting.

How costly is it?

While these services are crucial, costs have been consistently on the rise.

Currently, the median cost for a private room in a nursing home is more than $100,000 a year, and the annual price of just a home health aide is expected to be $69,529 by 2025, with per-person home health care costs expected to rise 9% annually through 2030. For nursing homes, the price is expected to rise 4.5% annually, according to government forecasts.

One of the primary factors driving these cost increases is the balance of supply and demand. With the senior population growing in the U.S., coupled with longer life expectancies and the lingering impacts of the COVID-19 pandemic on labor markets, the demand for such services has significantly increased.

Won’t Medicare cover care like this?

It’s important to note that Medicare typically only covers shorter-term services. In order to manage rising costs while protecting assets, seniors and their families have several options:

Opting for a hybrid life insurance policy or annuity that includes long-term care coverage.
Adding Living Benefits to a life insurance policy, allowing policyholders to access the death benefit in case of long-term care needs or certain health conditions.
Qualifying for Medicaid , depending on asset and income criteria.
Leveraging long-term care insurance , which is coverage for costs associated with long-term care that is not covered by health insurance, Medicare, or Medicaid.
Utilizing personal savings, pensions, and investments to fund long-term care expenses.
Many families employ a combination of these strategies to finance their long-term care, but the best path forward ultimately depends on your situation and preferences. Rest assured, I am here to assist you in exploring the best way to fund long-term care.