Is Refinancing Always the “Best” Option?

Although refinancing may be a great way to lower your interest rate, consolidate multiple loans into one simple payment, or extend your loan term and lower your monthly obligation, there are some situations in which refinancing may be a bad idea.

For example, if you hope to obtain loan forgiveness under the Public Service Loan Forgiveness (PSLF) program, refinancing from a federal loan to a private loan could leave you ineligible. Consider all your options before choosing to refinance.

Does Autopay Come With Benefits?

Setting up automatic payments for your loans can sometimes lower your interest rate or eliminate other fees or charges. Check with your servicer to see whether they offer any autopay benefits.

Should You Avoid Capitalized Interest?

When you capitalize interest, it’s added to your loan balance, which means you’re paying interest on top of interest. For non-subsidized federal loans and many private loans, interest accrues while you’re in school or in forbearance. Paying this interest (even if you don’t touch the principal balance) may lower the amount you might pay for interest later.

Can You Be Penalized For Making Extra Payments?

Most student loan servicers won’t penalize you for making more than the minimum payment or paying off your loans early. However, some servicers may use any extra payments to advance the due date for your next payment, which won’t necessarily help you pay down your principal balance any faster. To ensure that extra payments lower your loan balance, instruct your servicer to apply these payments to your principal, not next month’s payment. Also, be sure to check with your servicer to ensure there aren’t any penalties for prepayment or early loan payoff.

To pay down your student loan more quickly, you may opt to make payments biweekly instead of monthly, pay an extra lump sum each month, or — for those paid weekly or biweekly — apply the occasional “extra” monthly paychecks toward your loan balance.

Have questions about your student loan repayment strategy? Our team can help advise based on what works for you. Set up a meeting with a Choice Wealth advisor today.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by WriterAccess.

LPL Tracking #1-05374528

The post Which Student Loan Repayment Strategy Is Appropriate for You? appeared first on Choice Bank.

1. Start Saving Early

The best way to ensure you have enough funds for your children’s college education is to start saving as early as possible. Thinking about college expenses when your children are still young may seem unusual. However, the earlier you start, the more time you have to save and plan. Even small contributions can add up over time and make a significant difference in covering the cost of college. Here are some education savings strategies to consider:

529 Plans
529 plans are tax-advantaged savings plans designed to save and pay for college. There are two types:

• Education Savings Plans – Education savings plans grow tax-deferred, and withdrawals are tax-free when the monies are used for qualified education expenses.
• Prepaid Tuition Plans – Prepaid tuition plans allow the account owner to pay today’s tuition rates for future attendance at a college or university.

Coverdell Education Savings Account
A Coverdell Education Savings Account, also known as an ESA, is a tax-deferred account where earnings and distributions are tax-free as long as the funds are used for educational purposes.

2. Cut Unnecessary Expenses

Look at your current monthly expenses and identify areas to cut back. It could be as simple as eating out less, canceling unused subscriptions, or finding more budget-friendly entertainment options. You can free up extra cash for your children’s college fund by cutting unnecessary expenses.

3. Create a Budget

Creating a detailed monthly budget can help you track your spending and identify areas where you can save. Ensure you include all your expenses, including groceries, utility bills, and other necessary expenditures. Stick to your budget and find ways to save even more each month.

4. Consider a side hustle

In addition to cutting expenses, you can also look for ways to increase your income. Consider taking on a part-time job or picking up a side hustle. Many people have found extra income by freelancing, selling items online, or providing tutoring or pet-sitting services. The extra income can go a long way in supplementing your children’s college fund.

5. Explore Financial Aid Options

Feel free to explore all available financial aid options. Your children can apply for numerous scholarships, grants, and loans to help cover their college expenses. Many schools also offer work-study programs that allow students to earn money while studying.

6. Involve Your Children

It’s essential to involve your children in the conversation about college expenses. Let them know the realities of the costs and the importance of planning and saving, and encourage them to research and apply for scholarships and grants to help mitigate their financial burden.

7. Consider Alternative Pathways

Lastly, it’s essential to remember that there may be better options than a traditional four-year college for your children. Consider alternative pathways such as trade or vocational schools that offer specialized training and qualifications that may lead to well-paying jobs.

In conclusion, paying for your children’s college education can seem daunting, but it is achievable with planning and changes to your spending habits. By starting early, cutting unnecessary expenses, creating a budget, and exploring financial aid options, you can alleviate some of the financial burdens of college. Remember to involve your children and consider alternative pathways if necessary. With these tips, you can help set your children up for a productive and independent future.

If you’d like to discuss plans for paying for college, we would love to meet with you!

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which college plan(s) may be appropriate for you, consult your financial professional.

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #552474

Sources:

https://www.investopedia.com/terms/1/529plan.asp

The post How Will My Children Pay for College? 7 Tips to Help You Plan, Save, and Pay appeared first on Choice Bank.

1. Apply Early

One of the essential FAFSA rules is still the same: Apply as early as possible. Applying early helps schools consider you for the allocations of aid. Many schools and states have limited resources. Those who apply first have a better chance of receiving grants, scholarships, and other aid types given on a first-come, first-served basis.

The FAFSA submittal process opens on October 1st of each year. Mark this date on your calendar. Even though the form is simpler, getting it done early may reduce your stress when applying.

2. Take Advantage of the Expanded Pell Grant Eligibility

One of the Simplification Act’s biggest changes is its expansion of need-based Pell Grant eligibility. This means more students from low- and middle-income families may qualify. Pell Grants are especially valuable because, unlike loans, they don’t have to be repaid.

When you fill out the FAFSA, make sure to include accurate financial information. Don’t be afraid to report high debts or low income. Under the new rules, families that earn less than certain income thresholds may automatically qualify for the greatest possible award.

3. The Student Aid Index Replaces the Expected Family Contribution

The Simplification Act trades the expected family contribution (EFC) formula for one called the Student Aid Index (SAI). The SAI calculation is designed to be more transparent and better reflect a family’s true financial need. The SAI no longer penalizes students for simultaneously having multiple siblings in college, which is one major shift from the old formula.

4. Be Aware of New Financial Aid Exclusions

The Simplification Act added several new exclusions for specific types of income. These include benefits through federal assistance programs like Medicaid and Social Security. This means if your family qualifies for assistance through one of these programs, the benefits won’t count against you for student financial aid purposes. This may make it easier to figure out what aid you might be qualified to receive.

5. Seek Professional Guidance

While the FAFSA is simpler than it was before, the financial aid process may still be overwhelming. If you’re not sure how the Simplification Act’s changes affect your financial aid eligibility, seek professional advice. School financial aid offices and financial professionals who are familiar with student aid may help you navigate the application process and clarify the changes under the new law.

Finally, some states and schools may have their own forms or deadlines. Working with an expert may help you make sure you don’t miss any important dates or opportunities when it comes to receiving student financial aid for college.

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #643908

The post 5 Tips to Help Students with FAFSA’s New Simplification Act appeared first on Choice Bank.

You Need a Budget

Encourage your child to create a budget to track their income and expenses. Help them understand the importance of living within their means and prioritizing essential expenses like tuition, housing, food, and transportation.

Avoid Consumer Debt

Without a solid budget, it can be easy to fall into the consumer debt trap—paying with plastic just doesn’t have the same impact as handing over hard-earned cash. With rising costs of food, housing, and college tuition, it’s increasingly easier for young people to take on too much debt when striking out on their own.

Discuss the dangers of taking on excessive debt, including student loans, credit card debt, or personal loans. Encourage your child to minimize the amount they have to borrow at a young age. Your child should also explore any available alternatives, like scholarships, grants, part-time work, or community college, to reduce the need for student loans and credit debt.

Build Credit Responsibly

Teach your child about the importance of building and maintaining good credit. The easiest way to do this is by paying all bills on time, keeping any credit card balances low, and avoiding unnecessary debt. If you have good credit, you can add your child as an authorized user on one of your cards to start building their credit history.

Save for the Future

Encourage your child to start saving for their future goals as early as possible. Discuss the benefits of compound interest and the power of regular contributions over time.

Invest in Career Development

Emphasize the value of investing not just in an education but in a lifelong career. The college years are the perfect time for your child to increase their future earning potential and expand the universe of job opportunities. Encourage your child to explore internships, co-op programs, volunteer opportunities, and networking events to gain valuable experience and skills.

Understand Financial Aid

Teach your child how to fill out the Free Application for Federal Student Aid (FAFSA). Filling out the FAFSA accurately and on time will maximize their eligibility for financial aid. You and your child should also understand their financial aid options, including grants, scholarships, work-study programs, and student loans, so you can make the most informed decisions about the cost of attendance.

Protect Personal Information

Teach your child the importance of safeguarding their personal and financial information, especially Social Security numbers, bank account numbers, and passwords. Remind them to be suspicious about being asked to share information online. Your child can also sign up for programs and services that will monitor their accounts for suspicious activity, including identity theft.

Empower your child’s financial journey by starting a conversation with a financial professional today. Guide them toward smart money management, from budgeting to building credit. Together, you can pave the way for a secure financial future.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by WriterAccess.

LPL Tracking #588335

The post From Piggy Banks to Bank Accounts: Parental Financial Advice for College-Bound Students appeared first on Choice Bank.

Before their children leave for college, parents must engage in estate planning measures to help provide legal protection for their children and potentially save their estate from future legal challenges. This article examines vital documents parents must include in their estate plans before their child’s first year of college.

Healthcare Proxy

A Healthcare Proxy, often called a Healthcare Power of Attorney, is a crucial estate planning document. Suppose the parents were to become incapable due to illness or accident. In that case, this legal document allows a designated person (typically the other parent or trusted adult) to make medical decisions on their behalf. Without a healthcare proxy in place, their college-age child may need to go through legal channels to be allowed to make vital healthcare decisions for incapacitated parents, resulting in delays during a potentially critical time.

Durable Power of Attorney/Financial Power of Attorney

Next is the Durable Power of Attorney (POA), also known as a Financial Power of Attorney. This legal document gives a designated person control over someone else’s financial and legal affairs if they cannot manage it themselves. These financial affairs typically involve paying bills, managing bank accounts, signing tax returns, etc. A financial POA can allow their college-age student to intervene and manage these matters seamlessly without any legal roadblocks, should the need arise.

Advance Directives

While it may seem morbid to consider, it’s important to discuss medical and end-of-life care even with college-age children. Advance directives contain instructions about the kind of medical treatments one would like if they cannot express their wishes. This legal document helps to avoid unnecessary suffering, mitigate confusion and disputes about treatment choices, and respect an individual’s autonomy when receiving care.

Last Will

Having a will is not just about distributing your assets after your death; it includes a range of aspects that can significantly influence the lives of your college-age children. Here are some reasons why parents should consider a last will.

1. Financial Preservation
   The first crucial reason to have a will is for financial preservation. Parents are often the primary providers for their college-age children. If something were to happen to the parents without a will, the distribution of their assets could become complicated and prolonged, leaving the children in a difficult financial situation. While this situation is typically considered for minors, it can also be relevant for young adults who are not yet fully self-sufficient and unable to pay for college or living expenses.
2. Uphold Parental Wishes and Values
   Secondly, having a will can help uphold the parents’ specific wishes and values. Clear instructions can help eliminate any potential disagreements or misunderstandings about intent. A will can establish an educational trust, enforce responsible financial behavior, and even give direction about personal belongings and mementos.
3. Teach the Importance of Planning
   Last, creating a will can teach your college-age children an important life lesson about the importance of future planning. By involving them in this process, they can get firsthand experience about how to manage their affairs when they become independent.

In conclusion, ensuring legal safeguards should be on every parent’s checklist and part of their estate plan before their children leave for college. Consulting with financial and legal professionals specializing in estate planning can provide comprehensive guidance on appropriately including your college-age children. Remember, proper planning today ensures financial independence for tomorrow.

We would love to meet with you about your estate planning

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #588887

Sources:

https://www.findlaw.com/forms/resources/estate-planning/reasons-estate-planning-is-important.html

https://www.investopedia.com/articles/pf/07/estate_plan_checklist.asp

The post Kids Heading Off to College? Don’t Forget About These Estate Planning Must-Dos appeared first on Choice Bank.

Understanding 529 Plans

A 529 Plan is a tax-advantaged savings plan specifically designed to encourage saving for future education costs. Named after Section 529 of the Internal Revenue Code, these plans offer two primary types: Prepaid Tuition Plans and Education Savings Plans.

Prepaid Tuition Plans allow account holders to purchase credits at participating colleges and universities at current prices for future tuition and fees. This type of plan is beneficial in hedging against inflation in educational costs. Education Savings Plans, on the other hand, allow for investment in various assets, such as mutual funds and exchange-traded funds (ETFs).

These investments grow tax-free, and withdrawals are also tax-free when used for qualified education expenses, which now include K-12 tuition up to $10,000 per year, in addition to post-secondary education costs.

The advantages of a 529 Plan are manifold. Contributions to a 529 Plan grow tax-deferred, and withdrawals for qualified education expenses are free from federal income tax. Many states also offer tax deductions or credits for contributions to 529 Plans. Furthermore, the account holder retains control over the funds, including the flexibility to change the beneficiary to another family member if the original beneficiary chooses not to pursue higher education or receives a scholarship.

529 Plans as Estate Planning Tools

529 Plans are not just beneficial for immediate educational expenses; they also serve as effective estate planning tools. One of the unique features of these plans is their ability to accept large lump-sum contributions without incurring gift taxes. The IRS allows individuals to make five years’ worth of gifts in a single year, up to $90,000 per donor, $180,000 for married couples. per beneficiary, as of 2024, without triggering gift taxes. This “superfunding” provision makes 529 Plans an attractive option for grandparents who wish to reduce their taxable estate while contributing significantly to their grandchildren’s education.

By leveraging 529 Plans in estate planning, families may address how their wealth can benefit future generations in a meaningful way. Contributions to 529 Plans are considered completed gifts to the beneficiary, which removes the assets from the contributor’s taxable estate. This strategy not only provides substantial tax benefits but also promotes a legacy of educational achievement and financial responsibility within the family.

Addressing Rising College Costs

The escalating cost of college education is a growing concern for many families. According to the College Board, the average annual cost of tuition and fees at a private four-year university was over $38,000 for the 2023-2024 academic year, with public in-state universities costing nearly $11,000. These figures do not account for additional expenses such as room and board, books, and supplies, which can significantly increase the overall financial burden.

A 529 Plan can work towards alleviating these concerns by allowing families to save and invest specifically for education expenses. The compound growth within a 529 Plan can result in substantial savings over time. For example, if a family starts saving $250 per month when their child is born, with an average annual return of 6%, they could accumulate over $100,000 by the time the child turns 18. This substantial sum can make a significant dent in college expenses, reducing the need for student loans and the associated debt burden.

Moreover, many 529 Plans offer age-based investment options that automatically adjust the asset allocation as the beneficiary approaches college age. These options typically become more conservative as the enrollment date nears, preserving the accumulated savings from market volatility.

Planning Matters

As a tax-advantaged savings vehicle, a 529 Plan not only helps offset the rising costs of college but also provides strategic advantages in estate planning. By investing in a 529 Plan, parents and grandparents can support their loved ones’ educational goals, mitigate their taxable estate, and help foster a legacy of financial confidence and academic achievement.

We would love to help you with your financial plan and any questions you may have about 529 Plans. Meet with a financial professional today!

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

This article was prepared by FMeX.

LPL Tracking #586034

The post 529 Plans: An Investment in Education and Legacy appeared first on Choice Bank.

But for those seeking an additional tax deduction on their tax return, there are specific tax credits students, and their parents may qualify for. However, many tax credits come with rules, so you must work with your tax and financial professional to determine which applies to your situation. Here are the tax credits you may qualify for in 2023 or the future, pending no changes in IRS education expenses deduction rules:

1. The American Opportunity Tax Credit (AOTC)

This tax credit is for single tax filers with an income less than $80,000 (phase out is $80-$90,000) and for married couples filing jointly with a combined income of less than $160,000 (phase out is $160-$180,000). There are other specifics to this tax credit:

• Students must attend college at least half-time.
• The same student can claim the tax credit for up to four years.
• The student must be an undergraduate and not have completed all four college years.

Here’s how the credit works:

Eligible taxpayers (the student, parent, or spouse) can claim the credit for 100% of the first $2000 spent on qualified education expenses. Tuition, fees, and textbooks are qualified expenses; room and board, meals, insurance, etc., are not.

Eligible taxpayers can claim 25% of the next $2000 for up to a maximum of $2500 for each qualifying student. If the credit amount exceeds the tax you owe for the year, you’ll get a refund of up to 40% of the remaining amount ($1000) for each qualifying student.

2. The Lifetime Learning Credit (LCC)

This credit is available to the student and is up to $2000 per tax return, regardless of if they are an undergraduate or graduate student. Also, they can claim the tax credit if attending part-time or full-time, which can be claimed for unlimited years, so long as they’re still attending college. Income limits to apply to this credit:

The LLC phases out for single incomes of $59,000 to $69,000 or married taxpayers filing jointly with a combined income of $118,000 to $138,000.

The AOTC and the Lifetime Learning Credit are mutually exclusive, so you can only claim one of the same student’s expenses within the same tax year.

3. Earned Income Tax Credit (EITC)

The EITC isn’t exclusive to education but can be used for education expenses. Note that this credit is available to lower-income earners, so consult your tax professional to determine if you qualify based on income. Here are other things to note about this tax credit:

• If the student is listed as a dependent on someone else’s tax return, they can’t qualify.
• Qualification for the EITC depends on income, number of dependents, and marital status.
• Recent graduates with lower income and no dependents may qualify.

4. Tax Credits for Scholarships, Grants, or Fellowships

If the student attends an eligible educational institution and receives a scholarship, grant, or fellowship, the award amount is not considered income for tax purposes. However, to receive the tax benefit, the award must be used for qualified education-related expenses such as:

• Tuition and fees
• Books and supplies
• Equipment required to meet a class requirement or obtain a degree

It’s important to know that any awards that exceed the qualified education-related expenses amount will be considered taxable income.

5. Student Loan Interest Deduction

Student loan interest may be deductible regardless of whether you itemize when filing your taxes. However, how much you can deduct depends on your modified adjusted gross income, with the maximum deduction being $2500. Single filers with a modified adjusted gross income between $70,000 and $85,000 and joint filers with a modified adjusted gross income between $145,000 and $175,000 should visit their tax professional to see if they can take this deduction.

Married couples filing separately and those listed as someone’s dependent on a tax return are not eligible for this deduction.

Claiming a tax credit or deduction can help reduce the cost of education but ensure that you qualify by visiting your financial and tax professionals before filing your taxes.

Choice Wealth can help you navigate tax breaks and more. We’d love to hear from you!

Meet our Team

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #1-05375334

Sources:

https://www.savingforcollege.com/article/college-tax-credits-for-parents-and-students

https://www.kiplinger.com/slideshow/taxes/t054-s001-tax-deductions-and-credits-to-help-pay-for-college/index.html

The post Smart Savings: 5 Tax Breaks for College Students and Parents appeared first on Choice Bank.

As your children travel this long and never-dull road from infancy to adulthood, you try to protect them. You want to make sure that they are financially secure, but meeting expenses can be challenging. Fortunately, you can take steps to prepare for the financial challenges you face.

Reassess your budget

As your family grows, you may need to make changes to your budget. Many living expenses may increase, including grocery, clothing, transportation, healthcare, insurance, and housing costs. You may also need to account for new expenses, such as child care, or adjust your budget to account for a decrease in your income if you decide to become a stay-at-home parent. Your budget may also need to expand to include new financial goals, such as saving for college or buying a home.

Making sure that your budget reflects your new financial priorities can help you stay on track.

Review your life insurance coverage

What would happen to your children if something happened to you? Life insurance is an effective way to protect your family from the uncertainty of premature death. It can help ensure that a preselected amount of money will be on hand to replace your income and help your family members — your children and your spouse — maintain their standard of living.

With life insurance, you can select an amount that will help your family meet living expenses, pay the mortgage, and even provide a college fund for your children. Best of all, life insurance proceeds are generally not taxable as income. Keep in mind, though, that the cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance.

Consider purchasing disability income insurance

If you become disabled and unable to work, disability income insurance can pay benefits — a specific percentage of your income — so you can continue meeting your financial obligations until you are back on your feet.

What about Social Security? If you do become permanently and totally disabled and are unable to do work of any kind, you may be eligible for benefits, but qualifying isn’t easy. For more flexible and comprehensive protection, consider buying disability income insurance.

Keep saving for retirement

Many well-intentioned parents put saving for retirement on hold while they save for their children’s college education. But if you do so, you’re potentially sacrificing your own financial well-being. If you postpone saving for retirement, you might miss out on years of tax-deferred growth, and it may be hard to catch up later.

Ideally, you’ll want to save regularly for both goals, but if you have limited funds, prioritize saving for retirement. Your child may receive financial aid to pay for college, but there’s no such option for you.

Start building a college fund now

According to the College Board report, Trends in College Pricing and Student Aid 2021, for the 2021 – 2022 school year, the average cost for one year at a four-year public college is $27,330 (for in-state students), while the average cost for one year at a four-year private college is $55,880 (the total cost of attendance includes tuition and fees, room and board, books and supplies, transportation, and other miscellaneous costs). Even if those numbers don’t go up (and they are expected to continue increasing), that would come to $109,320 for a four-year degree at a public college, and $223,200 at a private university. Oh, and don’t forget graduate school.

College costs may seem daunting, especially if you’re still paying off your own college loans, but you have about 18 years before your newborn will be a college freshman. By starting today, you can help your children become debt-free college grads. The secret is to save a little each month, take advantage of compounding, and have a sum waiting for you when your child is ready for college.

The following chart shows how much money might be available for college when your child turns 18 if you save a certain amount each month.

Child's Age Now	$100/month	$200/month	$300/month	$400/month
Newborn	$38,735	$77,471	$116,208	$154,941
4	$26,231	$52,462	$78,693	$104,924
8	$16,388	$32,776	$49,164	$65,552
10	$12,283	$24,566	$36,849	$49,132
14	$5,410	$10,820	$16,230	$21,640
16	$2,543	$5,086	$7,629	$10,172

This table assumes an after-tax return of 6%, compounded monthly. This is a hypothetical example and is not intended to reflect the actual performance of any investment. All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal professional.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by Broadridge.

LPL Tracking #1-05111518

The post The Joys and Financial Challenges of Parenthood appeared first on Choice Bank.

What Are Qualified Expenses?

Generally, 529 funds are tax-free when spent on qualified expenses, such as tuition, books, fees, and room and board. However, understanding what constitutes an eligible expense is sometimes challenging. Here are some things to know about qualified expenses:

• Books, supplies, and equipment are qualified; however, laptops and other tech devices are qualified expenses only if required for enrollment or attendance at a school.
• Airfare or driving expenses to and from college are not qualified expenses.
• Health insurance is not a qualified expense.

Room and board, including off-campus housing, is a qualified expense. However, it is capped at the room and board amount your college estimates in its total cost of attendance. This rule means that if your college publishes its cost of attendance as including $10,000 in room and board, but you have an off-campus apartment that costs $2,000 per month, you may only be able to use your 529 withdrawal to pay for $10,000 of your rent.

What Happens if Your Child Gets a Scholarship?

Getting a full-tuition scholarship may create a challenge. You may need to change what to do with the 529 funds earmarked to pay for college tuition. Fortunately, several options allow a 529 custodian to avoid paying penalty fees on the 529 funds.

• Withdrawal of the scholarship amount from the 529 account is penalty-free but not tax-free.
• The 529 funds may pay for the student’s postgraduate education.
• The 529 funds may pay for qualified expenses of grandchildren, other children, or other family members. The beneficiaries of a 529 account may change at any time. As long as the withdrawn funds pay for qualified expenses, they remain tax-free.

When Should Funds Be Withdrawn?

It is important to note that any 529 withdrawals must pay qualified expenses incurred in the same year. Taking out funds on December 20 and spending them on January 2 might result in a penalty, even if the payment is qualified. Schedule withdrawals carefully to avoid problems and ensure that you spend the money on a qualified expense during the calendar year you make each withdrawal.

Another strategy worth considering is that 529 accounts held by grandparents are not a parental asset and the funds withdrawn are counted as the student’s income. This distinction means that waiting until the last couple of years of college to use the grandparent’s 529 funds may help the expected family contribution remain lower during the first few years of college.

Sources

https://www.collegechoicedirect.com/home/frequently-asked-questions.html

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05255895

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Moreover, college tuition costs keep increasing on a yearly basis, although the pace of the increase has slowed in recent years. While 10% annual increases were common in the 1980s and early 1990s, The College Board projects smaller yearly increases as we progress further into the 21st century. Still, with the average cost at private colleges exceeding $31,000 per year, the projected four-year cost at a private college for today’s newborn is staggering.

These numbers can easily overwhelm you, especially if you are already juggling other financial concerns. However, the sooner you start saving, the better. The longer you delay, the more difficult it may be to reach your funding goal. Even if you can only afford to begin putting away a small sum, saving on a regular basis may pay off in the long run.

• Personal savings are especially important as a source of college funds since it’s the one area over which you have the most control. While other sources of education funding are also available, it helps to understand what to expect before counting on them.
• Financial Aid. This usually comes in the form of loans, and may not cover the total college costs. Even if your child qualifies for financial aid based on need, there is no guarantee your chosen college will have sufficient funds to help all who fit that category.
• Scholarships. Many scholarships — both large and small — exist, yet there is no way to predict whether your child will qualify for one, or receive one even if he or she is eligible. Scholarship opportunities are available locally, statewide, and nationwide.
• Coverdell Education Savings Account. This education savings vehicle allows nondeductible annual contributions of up to $2,000 per child under the age of 18. Contributions enjoy tax-deferred accumulation and can be withdrawn tax-free if used for education expenses. Certain income eligibility limits apply. In addition, income taxes and a 10% income tax penalty may apply for nonqualified distributions.
• Tax Credits. The American Opportunity Credit gives families a maximum tuition credit of $2,500 per year per student for the first four years of post-secondary education — 100% of the first $2,000 of tuition, and 25% of expenses in excess of $2,000. The Lifetime Learning Credit gives a 20% credit toward the first $10,000 of qualified education expenses (tuition and/or other educational expenses incurred to learn or improve job skills). This credit is available to college juniors and seniors, graduate students, and working Americans. Using one of these credits offsets the use of the other.
• State-Sponsored 529 Savings Programs. Many states are beginning to adopt 529 plans, which are named for the section of the Internal Revenue Code (IRC) under which they are established. Although many details of these plans vary by state, they generally come in two forms: Prepaid tuition programs allow participants to “lock-in” tuition rates at eligible state colleges or universities with a lump-sum investment or monthly installment payments. The contract value may also be applied to private or out-of-state schools (although possibly not at full value, depending on the state). Savings programs allow contributions to vary and can be applied at any accredited institution of higher education nationwide.
  Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship fund, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax-free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
• Personal Loans. These are usually easily available, although with interest charges they may prove costly over the long run. Personal loans may also require payments to begin and interest to start accruing immediately.
• Future Personal Income. If you haven’t managed to set aside funds by the time your child is ready for college, how will you fund an entire college education out of your income while he or she is attending school? This may prove difficult, especially if you will be nearing retirement age at the same time.

With uncertainty surrounding all funding options except savings, it’s important to consider personal savings when planning your college funding program. Put time on your side—start your child’s education fund now!

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Liberty Publishing, Inc.

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