“I’ve never been around a more giving and genuine group of people...Texas A&M is the best-kept secret in America.” -Coach Jimbo Fisher addressing a crowd of over 750 at the @BCAMC Coaches’ Night at Kyle Field.
Traditions Wealth Advisors helped sponsor the event, Coaches' Night, to kick off the 2019 Aggie football season and raise money for student scholarships to TAMU. Gig'em!
We all want what is best for our children and grandchildren. At an early age, we teach them to eat the right foods, we place them in the best preschools, we encourage them in grade school and high school, and we cheer them on when they excel in extracurricular activities.
Put another way, we want our children and grandchildren to succeed in all aspects of life.
As our kids wind their way through high school, most of us want them to attend college. For some, it’s not just about going to a university but being accepted by and graduating from the “right one." Unlike when we were growing up, the pressure today is enormous.
The cost of college has soared. In 1985, the annual tuition, fees, room and board rates charged for full-time undergraduate students at a four-year public university ran $3,859. Thirty years later, the cost had ballooned to $19,189, according to the [[https://nces.ed.gov/fastfacts/display.asp?id=76 National Center for Education Statistics]]. For private schools over the same period: $9,228 to $39,529. That’s a painful hit to the wallet.
Fortunately, there are vehicles that can help ease the burden.
The 529 college savings plan:
One such vehicle is the 529 college savings plan. What is a 529 plan? A 529 plan is sponsored by the state or a state agency. It allows someone to save for college (or kindergarten–12th grade).
Before we jump in, let me say that this is a high-level overview. If you have any questions about college savings or a 529 plan for your son, daughter, or grandchildren, please feel free to reach out to me or my team. We can help get you started and maximize the long-term benefits.
1. Pay for qualified educational expenses. One can use the savings for tuition, books, and education-related expenses at accredited universities, vocational-technical schools, and eligible foreign institutions. Funds accumulated in the plan may go to public, private, and religious schools.
2. Tax advantages abound. While there is no deduction when cash is deposited into a 529 plan, any earnings are not subject to federal taxes, and qualified withdrawals are exempt from taxes.Some states also offer full or partial deductions or credits for 529 contributions.
3. Maintain control of the money. Unlike a UGMA account, in which the child will eventually take control of the accumulated funds, you remain in control of the plan. You make sure it goes toward its intended use.
4. Set it and forget it. Most 529 plans have a “set it and forget it” feature. You make the automated investment, and an outside company manages your investment.
5. Just about anyone can open a 529 plan. Contributions are not limited by the donor’s income. Earn $50,000 per year and you can set up a 529. Earn $50 million per year and you also qualify.
6. There is no maximum annual contribution. Unlike with retirement accounts, the IRS doesn’t specify an annual maximum contribution. There are no age limits on contributions. Total contributions range from $235,000-$520,000 depending on the state. While most account owners won’t run afoul of the rules, there are some specifics we can discuss if you are considering a large, one-time contribution.
7. 529 plans complement FAFSA. A 529 plan helps maximize your ability to pay for college without jeopardizing financial aid. The 529 account is the parent’s asset, much as if you had saved the money under your own name. However, with the 529, you’ll receive tax benefits that wouldn’t accrue if it were in a taxable account under the parent’s name.
While 529s are an excellent vehicle, no plan is perfect. So, let’s look at some potential pitfalls.
1. The plan does not guarantee it will cover the full cost of a four-year college education. However, the earlier you get started, the better. We can provide you with various scenarios, i.e. contribution levels, compounding, inflation, etc.
2. Investment options may be limited. You are not in complete control of the plan. Therefore, it is important to invest in a plan that offers flexibility and low-cost funds.
Do you want an age-based portfolio–one that begins with a more aggressive mixture of stocks versus bonds and gradually shifts to a more conservative mix as your child approaches 18? Or will you choose a static asset allocation? If so, you’ll want to rebalance on a regular basis.
3. You don’t need the savings in your 529 after all. What if Johnny received a full ride to college? It’s a high-class problem, but still, alternatives must be considered.
4. You must time your contributions and withdrawals carefully. Contributions must be made by December 31, though states that offer tax advantages may extend the deadline to April 15. And, make sure that any withdrawals coincide with qualified expenses in that year.
As always, let me emphasize that it’s my job to assist you. We do not subscribe to a one size fits all approach. If you have questions about college savings or 529 plans, we’re just a phone call away at 979-694-9100 or e-mail us at Brien@traditionswealthadvisors.com
Raoul Bascon serves the clients of Traditions Wealth Advisors as the Financial Computing Intern—beginning in May of 2018. In that role, he has verified financial data and produced reports that Brien uses to help illustrate each client’s financial status. He has also helped the firm transition to a new financial software system that will automate much of his role’s functions and provide additional value for our clients.
Raoul received a Bachelor of Science in Mathematics from Texas A&M University in 2017 and is currently enrolled in a Master of Financial Management program, expecting to graduate this May. He completed the Trade, Risk and Investment Program (TRIP) in August 2018, which gave him exposure to the energy industry with two internships (one at an oil company and the other at a financial derivatives firm) and countless hours of interactions with industry professionals. After graduation, he will begin work as an Analyst for Munich RE Trading (the location of his second internship through TRIP), focusing on valuing weather derivatives.
Beyond work, Raoul volunteers with St. Thomas Aquinas and has been involved in a number of student organizations at St. Mary’s Catholic Community and Texas A&M University. He also is engaged to be married on June 29th of this year. After the wedding, Raoul and his bride-to-be, Carolyn, will live in Brenham: the halfway point between his work in The Woodlands and her Master Program for Professional Counseling in Round Rock.
When he’s not driving, studying or working, you can find him playing volleyball, training for a marathon, praying, or enjoying the company of friends.
As a Financial Analyst Intern, Brian served as one of Traditions Wealth Advisors’ financial researchers. His research has centered primarily on macroeconomic and monetary policy topics using econometric methods to separate trends from noise. He is quantitatively driven, thorough, and loves working with data.
Brian is a graduating senior and will be receiving his bachelor's degree in Economics with a minor in Mathematics in May of 2019. Post-graduation, Brian will obtain a master's degree in Applied Mathematics before ultimately pursuing a PhD in Economics. It is his dream to become an economist researching questions surrounding finance, macroeconomics, and monetary policy. He hopes to develop models which allow people to better understand the intersection of these complex topics.
In addition to his work with Traditions Wealth Advisors, Brian is a Research Assistant for two professors in the Department of Economics and a member of the Aggie Investment Club. When he is not in the office or on campus, he is most likely spending time with friends, frequenting a coffee shop, or doing something outdoors.
Financial Computing Intern
Brien Smith CFP
Traditions Wealth Advisors Owner
With Tax Day just behind us, you may have to suffer with friends and family grouching about their taxes. And the new tax plan that went into effect last year make this time of year even more relevant. Our friends across the pond react similarly to their taxes. Which begs the question, who has it worse? We’ll take a look at three nations—the UK, Switzerland and the US—and compare what’s coming out of our paychecks this year.
The United Kingdom implements a fairly aggressive taxing paradigm. While just as nuanced and confusing as the US tax code, the UK code differs in key ways. First, taxes are taxed on a national level— there are no state taxes (although, Scotland has a different marginal tax rate table, but the funds still all funnel into the HMRC, which is the British equivalent of the IRS). Second, the tax applies to different categories of goods, services and holdings. Third, the rates differ as well.
The main points of difference in strata of taxes include a savings tax, which taxes income from savings; employee benefits tax, which taxes the value of benefit an individual receives from a company; value added taxes (VAT), which act as sales tax but applies differently; and National Insurance Contributions (NICs), which supplies the funds for the UK’s National Insurance.
Taxes in Switzerland are very similar to those in the US. Taxes are collected at three levels: confederation, cantons, and communes (loosely equivalent to federal, state and local levels). The key differences in the code include a value added tax, which is similar to the UK’s; a withholding tax, which taxes certain forms of investment income (notably: dividends, interest on loans, lottery payments); and stamp duties, which tax income from trading securities.
Like the United States, the different cantons and communes (states and municipalities) have varying taxing schemes for the citizens of their region. Of note, some cantons do not have property taxes, but all have a wealth tax that is implemented on all real assets.
Suppose the same individual who has a salary of $75,000, living in a house worth $400,000 is calculating his taxes in the US, the UK, and Switzerland. The appropriate exchange rates have been considered. What do the numbers say? Overall, Switzerland seems to have the lowest effective tax rate, making it the least painful place to live from a tax perspective. It is important to note that this analysis only takes into account taxes that relate to salary, normal consumption, and real estate assets. The example does not include taxes on investments for retirement or taxation on corporations, which may heavily differentiate the three countries.
Sarah Buenger, director of financial planning at Traditions Wealth Advisors, will be speaking at this workshop on May 17th. It is a FREE financial and estate planning event for women of ALL ages. Find out more and register here.
April 15, 2019
Client Services and Marketing Director
Whether you plan to stay put or move for retirement, you must answer these questions if you hope to enjoy a high quality of life.
It's fun to dream and enjoy reading lists of the best places to retire. Do not let the pictures and the lists of places flood your mind as to rush into retirement. The questions below insightfully help you determine if any of your dream (retirement) places will work for your retirement.
1. Who will help care for me?
No one wants to burden children or friends. But, in reality, loved ones often must step up when elders need care. So, make things easier for your kids and be realistic when you make a move. Adult children who are holding down jobs and rearing children will be severely burdened if they must travel long distances to help elderly loved ones.
2. Is good medical care nearby?
Living longer usually means living with a chronic disease. About 80 percent of older adults have at least one chronic disease, according to the nonprofit National Council on Aging. And 77 percent of older Americans have two or more (source).
With age, medical tests become more frequent. So do visits to specialists like oncologists, cardiologists, pulmonologists and orthopedists. Managing a chronic condition well — avoiding hospital stays and emergency room visits — requires easy access to care you trust.
The joys of living in a scenic but remote retirement mecca are diminished if you have to drive hundreds of miles — frequently — for expert care. So again, consider not only what you need today but what you’ll need in the future.
3. How safe is this place?
Research crime rates in the area before deciding to relocate there. You’ll find plenty of free tools online. Check data from local law-enforcement agencies. Some departments post their crime data online. Do a web search for words like: “College Station (choose your city) police department crime statistics.”
Look also for maps showing the prevalence of crime by area, and look for local news reports about crime in the city or town.
If you strike out searching online for crime data, call the local law-enforcement agency and ask how to learn about crime in specific neighborhoods. Visit neighborhoods you’ve got your eye on numerous times at various times of the day and evening, as well.
4. How will I get around if I can’t drive?
At some point in their elder years, drivers have to face a hard truth: It may be time to hang up the car keys.
Considering retirement? Contact Brien L. Smith, CFP® at Traditions Wealth Advisors Brien@TraditionsWealthAdvisors.com for questions about retirement or other financial advice you may have.
Source: Marilyn Lewis • December 30, 2018
Brien Smith, owner of Traditions Wealth Advisors, traveled across the pond to the United Kingdom over spring break to celebrate his 40th wedding anniversary to his beautiful bride, Kathy. Read more about this one in a life time trip here.
Brazos Valley Insite Magazine featured Traditions Wealth Advisors in this article about tax deductions and charitable giving. Continue reading here how charitable donations can benefit everyone involved.
Her dream is to 'to serve America and other countries by apprehending criminals using transactional data.' Click on the link to learn more about Marissa.