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THE villager | Friday, April 1, 2016
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How can you cover your child’s future college costs? Saving early (and often) may be the key for most families. Here are some college savings vehicles to consider. 529 plans. Offered by states and some educational institutions, these plans let you save up to $14,000 per year for your child’s college costs without having to file an IRS gift tax return. A married couple can contribute up to $28,000 per year. (An individual or couple’s annual contribution to the plan cannot exceed the IRS yearly gift tax exclusion.) These plans commonly offer you options to try and grow your college savings through equity investments. You can even participate in 529 plans offered by other states, which may be advantageous if your student wants to go to college in another part of the country.1,2 While contributions to a 529 plan are not tax-deductible, 529 plan earnings are exempt from federal tax and generally exempt from state tax when withdrawn, as long as they are used to pay for qualified education expenses of the plan beneficiary. If your child doesn’t want to go to college, you can change the beneficiary to another child in your family. You can even roll over distributions from a 529 plan into another 529 plan established for the same beneficiary (or for another family member) without tax consequences.1 Grandparents can start a 529 plan, or other college savings vehicle, just as parents can; the earlier, the better. In fact, anyone can set up a 529 plan on behalf of anyone. You can even establish one for yourself.1 529 plans have been improved for 2016 with two additional features. One, you can now use 529 plan dollars to pay for computer hardware, software, and computer-related technology, as long as such purchases are qualified higher education expenses. Two, you can now reinvest any 529 plan distribution refunded to you by an eligible educational institution, as long as it goes back into the same 529 plan account. You have a 60-day period to do this from when you receive the refund.3 If you have a 529 plan and received such a refund at any time during January 1-December 18, 2015, you had until Tuesday, February 16, 2016 to put that money back into your 529 plan. If you met that deadline, the distribution will not be seen as a non-qualified one by the IRS (i.e., fully taxable plus a 10% penalty).3 Coverdell ESAs. Single filers with adjusted gross income (AGI) of $95,000 or less and joint filers with AGI of $190,000 or less can pour up to $2,000 annually into these tax-advantaged accounts. While the annual contribution ceiling is much lower than that of a 529 plan, Coverdell ESAs have perks that 529 plans lack. Money saved and invested in a Coverdell ESA can be used for college or K-12 education expenses. Coverdell ESAs offer a broader variety of investment options compared to many 529 plans, and plan fees are also commonly lower.4 Contributions to Coverdell ESAs aren’t tax-deductible, but the account enjoys tax-deferred growth and withdrawals are tax-free so long as they are used for qualified education expenses. Contributions may be made until the account beneficiary turns 18. The money must be withdrawn when the beneficiary turns 30 (there is a 30-day grace period), or taxes and penalties will be incurred. Money from a Coverdell ESA may even be rolled over tax-free into a 529 plan (but 529 plan money may not be rolled over into a Coverdell ESA).2,4 UGMA & UTMA accounts. These all-purpose savings and investment accounts are often used to save for college. When you put money in the account, you are making an irrevocable gift to your child. You manage the account assets.
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When your child reaches the “age of majority” (usually 18 or 21, as defined by state UGMA or UTMA law), he or she can use the money to pay for college. However, once that age is reached, that child can also use the money to pay for anything else.5 Cash value life insurance. If you have a “cash-rich” permanent life insurance policy, you can take a loan from (or even cash out) the policy to meet college costs. The principal portions of these loans are tax-exempt in most instances. Should you fail to repay the loan balance, the policy’s death benefit will be lower, however.6 Did you know that the value of a life insurance policy is not factored into a student’s financial aid calculation? That stands in contrast to 529 plan funds, which are categorized as a parental asset even if the child owns the plan.6 Imagine your child graduating from college debt-free. With the right kind of college planning, that may happen. Talk to a financial advisor today about these savings methods and others.
Chris Perme may be reached at 330-527-9301 or cperme@financialguide.com www.permefinancialgroup. com. Christopher Perme is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. (www.SIPC.org) Supervisory Office: 2012 West 25th Street, Suite 900 Cleveland, OH 44113. 216621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies.
Citations 1 - irs.gov/uac/529-Plans:-Questions-and-Answers [8/24/15] 2 - time.com/money/3149426/college-savings-esa-529-differences-financial-aid/ [8/21/14] 3 - figuide.com/new-benefits-for-529-plans.html [1/13/16] 4 - time.com/money/4102891/coverdell-529-education-college-savings-account/ [11/9/15] 5 - f r a n k l i nt e m ple t o n .c o m /i nve s t o r/ p r o d u c t s /go a l s /e d u c a t io n / u g m a - u t m a accounts?role=investor [2/3/16] 6 - investopedia.com/articles/personal-finance/102915/life-insurance-vs-529.asp [10/29/15]
2. SIX WEEKS - In the last 29 trading days since bottoming on Thursday 2/11/16, the S&P 500 has gained +11.6% (total return) through last Thursday 3/24/16 (the stock market was closed on Friday 3/25/16), a result that exceeds the index’s trailing 50-year (1966-2015) average annual return of +9.7% (source: BTN Research). 3. FEW STOCKS, LARGE IMPACT - The 5 largest stocks in the S&P 500 made up 11% of the total stock market capitalization of the index as of 2/29/16. Thus, 1% of the stocks in the index (i.e., 5 out of 500) represented 11% of the total value of the index. The S&P 500 is a market-cap weighted index (source: S&P). 4. APRIL ROCKS - The S&P 500 has averaged a gain of +1.88% (total return) during the month of April over the last 25 years (i.e., 1991-2015), ranking April as the best performing month during that period. The month of October (up +1.85% on average) is the # 2 performing month. The month of August (down 0.57% on average) has been the worst performing month (source: BTN Research). 5. NEEDED HELP - In the last 10 years (2006-2015), 518 banks have failed in the USA and have required a bailout from the Federal Deposit Insurance Corporation. Over the same decade, just 17 life insurance companies have failed and were taken over by a state insurance department (source: FDIC, NOLHGA).
Notes from the vineyard Amanda Conkol | Columnist
I recently had the chance to go back to Walt Disney World to check out the Flower and Garden Festival at EPCOT. I have read many reviews and blogs discussing the festival but I never expected so much! EPCOT is my favorite park to visit as there are 11 countries that make up the World Showcase. Each country has a selection of food, wines, beers and sometimes some specialty drinks which can be enjoyed during any visit to the park. If you ever get the chance to attend Flower and Garden festival, I highly recommend it! Not only is it a great way to escape the Cleveland weather but the landscaping and vibrant colors are amazing. Be sure to pick up your passport as you arrive in EPCOT to track all of the topiaries and special features along the way. Not only is this a fun way to keep track of which countries you visited it’s a great planning guide so you can plan your day out. The best part about the festival though is anywhere from 8 – 10 additional food and beverage stands are added to the Showcase for your tasting experience. We were able to sample additional wines from the US, Italy, France, Japan and China! Along with some additional beers were offered it took us two days to try everything we wanted. The best part about this festival though was the chance to try drinks that I would normally not try, like a Key Lime Sparkling Wine. I didn’t know what to expect but the bartender told me I would be pleasantly surprised. Not being a Key Lime Pie fan I thought for sure this wine would be super sweet and undrinkable but surprisingly it was light and refreshing and not overpowering with the key lime flavor. If you are wine (or garden) lover, this is a festival you must attend! Amanda is the Co-Owner of Candlelight Winery located at 11325 Center Road, Garrettsville. For more information on the winery, please visit www. candlelightwinery.com.
“This Is How We Roll”
Ask The Librarian
Barb Deakins | Columnist
Lauren Sanchez continued her good bowling with a nice 600 series; Lauren rolled games of 198, 210, and 192. The following week she kept at it with a nice 234 game. Billy Potteiger rolled games of 194, 190, and 177, for a nice 561 set. Isaac Trickett was 67 pins over average with his 175 game. Taylor Cressman’s 152 game was 55 pins over average. Other nice games were rolled by Gary Pirrung, 177 (44 over), Olivia Gullatta, 110 (38 over), Sarah Reakes, 125 (38 over), Sarah Almashy, 132 (35 over), Hunter Turnbaugh, 112 (34 over), Brent Sanderson, 162 (33 over), Dominic White, 130 (33 over), Ericq Williams, 167 (32 over), Mia Gullatta, 94 (32 over), and Gage Vetrano, 126 (29 over). In the 9:00 Trio, Ryleigh Gough tore up the lanes with games of 160, 156, and 169, for a 485 series, her best ever. Lydia Stahl rolled games of 106, 78, and 100, for a 284 series, 110 pins over her average of 58. Brooke Collins was 54 pins over average with her 163 game. Sara Barker’s 147 game was 50 pins over her average. Other good games: Alex Gage, 169 (43 over), Emily Linamen, 156 (39 over), and Damian Tourville, 134 (33 over). Collin McGurer had the top scores in the Scholastic League with a 243 game and 658 series. Tyler Lippert rolled games of 222 and 210 on her way to a nice 578 series. Other good games: Jaret Doraski, 227, Brandon Nicholas, 202, Lucas Titschinger, 187, Courtney Cressman, 181, and Nate Pitsinger, 178.
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1. BELOW - With just 4 trading days remaining in the 1st quarter 2016, the S&P 500 has gained +0.1% YTD (total return). The average 1st quarter gain for the index in the last 25 years (i.e., 1991-2015) has been +2.1%. The S&P 500 consists of stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).
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College Funding Options You can plan to meet the costs through a variety of methods Provided By Chris Perme | Columnist
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Mallory Duriak | Columnist
“Why do the buzzards come to Hinckley?” Spring officially began on March 20, but it unofficially began on March 15 in Hinckley with the annual return of the buzzards (technically known as turkey vultures) to Hinckley Reservation. According to the Hinckley Chamber of Commerce, the buzzards’ return was first pointed out by patrolman Walter Nawalaniec in 1957. He had been noticing them for six years, and his predecessor on the force had seen them fly in every March 15 for twenty-five years prior. Nawalaniec related the story to a Cleveland Press reporter and a local historian in February of 1957. The buzzards came back that year and every year since. Why do they come to roost in Hinckley? No one’s sure. In a post on the Cleveland Metroparks blog [http:// bit.ly/1VNDXdv], Foster Brown put forth two possible reasons. According to the first, more likely theory, Hinckley’s river, lake, ledges, and tall trees make it an ideal habitat for the buzzards, with nearby woodlands and farms providing a source of food. The second has the ring of legend to it. As the story goes, an enormous hunt in 1818 resulted in a pile of hundreds of animal carcasses, a veritable buzzard feast. Every year since then, the buzzards have come back in the hopes of finding more food set out for them. For more information, check out Bruce G. Peterjohn’s “The Birds of Ohio” or Bill Thompson III’s “Ohio Bird Watching,” both available at the Newton Falls Public Library. For answers to your questions, visit the Newton Falls Public Library, 204 S. Canal Street, Newton Falls or phone 330-872-1282. For information about all the free library programs or hours, visit our website at www. newtonfalls.org or our Facebook page, www.facebook. com/NewtonFallsLibrary.
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6. STUDENT DEBT - 43 million Americans have some level of student debt from attending college (source: Federal Reserve Bank of New York). 7. THE COST OF BUSINESS - The breakeven oil price for Saudi Arabian oil producers is $7 a barrel. The breakeven oil price for Russian oil producers is $46 a barrel (source: Deutsche Bank).
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Christopher A. Perme is a registered representative of and offers securities, investment advisory and financial planning services for MML Investors Services, LLC. Member SIPC Supervisory Office, 2012 West 25th Street, Suite 900 Cleveland, OH 44113. 216-621-5680. Perme Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. CRN201708-195303
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