“Because Life is too short to drink mediocre wine.”
970-226-8662
2201 S. College Ave • Fort Collins • Next to Whole Foods
Please check out our website www.wilburstotalbeverage.com Featured Specials Thursday through Sunday
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011 3
Life Planning
Life Planning Guide is a publication produced by the Loveland Reporter-Herald.
features
For advertising information, contact:
Pop Quiz: Test your financial savvy Page 5
Linda Story, advertising director: 970-635-3614 Jump-start your savings: 10 tips to save what you need to
Plan of Action: A financial plan for every stage of life
Page 7
Page 10
Saving: doing a 5K is more difficult than it looks .................................... pg. 4 Retirement living: should you stay or go .................................................. pg. 5 How to live within your means .................................................................. pg. 8 Saving for college education: here are your options............................. pg. 13 An estate plan: why you need one ........................................................ pg. 14
For editorial information, contact: Jade Cody, special sections editor: 970-635-3656 jcody@reporter-herald.com Jennifer Lehman, special sections reporter: 970-635-3684 jlehman@reporter-herald.com
Welcome to Loveland,
Dr. Sheila Copple Board-certified internal medicine physician Sheila A. Copple, D.O., has joined Medical Clinic at Centerra in Loveland. Her special interests include: “I am looking forward to building long-lasting relationships with adult patients and providing quality, individualized care.� – Dr. Sheila A. Copple
970.392.4752.
! 2500 Rocky Mountain Ave. Loveland, CO 80538 pvhs.org/clinics
4
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011
ThinkStock photo
pop quiz: test your
financial savvy Procrastination is one of the main ways the average Joe and Jane get in trouble with their finances. Break the bad habit — starting now. Answer these basic questions and see how you rate.
1
2
3
According to actuarial charts, how many years can you expect to live?
At what age is a worker born between 1943 and 1954 eligible for full social security benefits? a. 62 b. 64 c. 66 d. 68
What percent of a retiree’s income will be spent on healthcare, on average? a. 5 percent b. 10 percent c. 15 percent d. 20 percent
4
Income taxes go away after a worker retires. True or false?
5 How many years, on average, will a U.S. citizen spend in retirement? a. 10 b. 15 c. 20 d. 25
8 Insurance is a way of: a. saving for a rainy day b. preventing unplanned events c. handling risk d. all of the above
6 True or False: If you die without a will, your surviving spouse will be granted all or most of your assets.
7
What percent of early baby boomers, age 56 to 62, are expected to run out of money to cover basic retirement living expenses? a. 17 percent b. 23 percent
9 Your credit score is: a. a snapshot of your credit risk b. an objective measurement used by lenders c. available to you on request d. all of the above
10 You can improve your credit rating by: a. correcting inaccurate information as soon as possible b. disputing negative information c. correcting only the worst report d. asking that negative information not be included in your credit report
A HOW DO YOU RATE? 10 correct: Warren Buffet is your new best friend. 9 correct: Close ... but we are not playing horseshoes. 8 or less correct: It's time to do some homework.
c. 42 percent d. 47 percent
1. The U.S. Social Security Administration estimates that a man reaching age 65 today can expect to live, on average, until age 83. A woman turning age 65 today can expect to live until age 85. To calculate your expected lifespan, go to: www.ssa.gov/planners/life expectancy.htm. 2. C: 66 years old. 3. D: 20 percent. 4. False. Pre-tax money a worker contributed to a retirement plan is subject to income taxes when it’s withdrawn during retirement years. 5. C: 20 years. 6. False. Every U.S. state has unique laws governing who will own the property. To calculate the outcome in your state, go to www.mystatewill.com. 7. D: 47 percent. 8. C: Handling risk. 9. D: All of the above. 10. A: Correcting inaccurate information as soon as possible.
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011 5
retirement living: stay or As they near retirement, it's the question all boomers are asking
go
many of whom migrated to warm-weather destinations. Stories of older relatives and friends who fell ill far away from loved ones or become lonely after the excitement of a BARBARA BALLINGE new destination dimmed that CTW FEATURES dream of retirement. In addition, the boomer generation — those born between 1946 and s more baby boomers reach their 60s and start 1964 — is highly diverse and no single solution appeals to to ponder retirement, them all, said Carol Orsborn, many begin to debate where they should spend their golden author and co-founder of Fleishman-Hillard’s boomer-foyears. cused practice, FH Boom. Highly educated and active, The prime destinations seem boomers aren’t following in the footsteps of their parents, to be communities close to
A
home with residents who vary in age — where boomers can continue to feel young and maintain friendships — and downtown urban centers, where they can make do with less space and fewer cars, all while staying close to hospitals, a host of restaurants, shops and cultural events. Here are nine questions experts suggest boomers ask themselves to make the smartest, happiest move:
1. WHAT ARE YOUR GOALS?
ThinkStock photo
2. ARE YOU UP FOR THE UPHEAVAL? Redecorating, remodeling and moving all require time, money and patience, and typically add to stress levels.
Before you focus on the type of house you seek, think about 3. ARE YOU READY TO CUT your big-picture goal, whether THE UMBILICAL CORD? it’s to be closer to your chilPeople become attached to dren and grandchildren or even I See BOOMER/Page 6 farther away.
Manage your expense and ease financial burdens
Tired of Low Rates of Return on Your Investments?
Your home is likely one of the most important investments you’ve made. If you are a homeowner, and at least 62 years of age, who either owns your home outright or could refinance your remaining mortgage with your reverse mortgage proceeds, a reverse mortgage loan from Wells Fargo Home Mortgage may serve as a financial resource to help you:
Can’t sleep at night worrying what the market will do next? We’ll show how you can maximize your returns by earning an 8% fixed rate secured by local real estate, hassle-free!
• Meet your daily and monthly expenses • Remodel or repair your home • Cover your health care expenses • Consolidate your credit card debt
Call me at 970-203-5667 or visit www.bhpifixedrate.com to set up a one-on-one meeting to discuss the details. It’s FREE, no strings attached and you will be glad you did.
Refinance your existing mortgage to a reverse mortgage, without the monthly mortgage payments of a traditional mortgage1 Call a Wells Fargo reverse mortgage consultant today.
Black Horse Property Investments, LLC We are a local company helping local people.
1. Borrower must pay off the existing mortgage balance with the reverse mortgage or own the home free and clear. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. ©2011 Wells Fargo Bank, N.A. all rights reserved. 1000942 -01/11
Orville Hahn, 970-203-5667
09-323667
Please read carefully and consider all investment objectives, risks and associated costs or expenses before investing. Real Estate investments are not guaranteed and not suitable for all investors.
LP-323637
Shelley Bayne Sales Manager Phone: 970-613-9779 x:1008 Cell: 303-476-1253 2695 Rocky Mountain Ave #280 Loveland, CO 80538
6
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011
BOOMER From Page 5
their homes, Meyer said. “Are you really ready to leave?” she asked.
4. WILL YOU CONTINUE TO HAVE A GOOD SUPPORT SYSTEM WHERE YOU ARE OR WHERE YOU GO? It may be your children or a good network of friends, but you need to know that you have people you can rely on, said Ann A. Fishman, president of Generational-Targeted Marketing Corp. Even if you move to be closer to children, realize they may not always stay there.
health and not just pipe dreams, Somers said. They also need to be sure their setting offers the right amenities. For those not sure, Somers has them answer questions, talk about possibilities, and put down responses on paper.
7. WHEN IS YOUR DECISION GOING TO BE MADE? Determine a timetable rather than put it off indefinitely.
8. CAN YOU AFFORD YOUR DECISION?
5. WILL YOU BE WITH LIKE-MINDED FOLKS?
Too many boomers don’t know how much money they need to age, Fishman said. They need to take into account state Boomers are social and like to be surand estate taxes and the cost of daily livrounded by a people of varied ages, said Fishman. One solution for some boomers ing, including housing, health care and is to share a condo or house. Smart devel- entertainment costs, she said. You also opment companies are building communi- have to take into account any possible income changes. ties targeted at homeowners with likeminded interests, Overly said.
6. WHAT TYPE OF HOUSE AND COMMUNITY MAKES THE MOST SENSE? Boomers need to carefully weigh their housing choice and what level of services they want, based on realistic factors such as
9. HAVE YOU TRIED OUT YOUR DECISION? It’s hard to test-drive a decision without owning a home, but The North Carolina Center for Creative Retirement, part of the University of North Carolina at Asheville, offers seminars and a Creative Retirement Exploration Weekend program. Many communities may offer similar programs.
You always said you would never be caught dead wearing that suit again... Preparing to arrange your service ahead of time could eliminate this. Making final arrangements for a loved one isn’t easy. Th That’s why compassion goes into everything we do. Call us for prearrangement ideas!
• Traditional Services • Cremation Services • Prearragement Planning David & Jennifer Viegut
1616 N. Lincoln Ave. • Loveland
679-4669
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011 7
10
ThinkStock photos
tips to jump-start your savings
There doesn’t seem to be any bailout money for regular folks. Are you saving enough? CTW FEATURES
Rule of thumb: Everyone should have six months’ worth of living expenses tucked away in savings. Reality: Few folks do, and the proverbial “rainy day” looms. Remedy: Start setting aside money today. Here are 10 ways to save before you get soaked. Tip No.
1
STICK TO A BUDGET
“Budgeting is the No. 1 surefire way to save money,” said Ethan Ewing, president of Bills.com, San Mateo, Calif. Set specific goals, such as lowering grocery bills, and budget accordingly. Tip No.
2
Tip No.
CARRY CASH
People who count out bills instead of paying with debit or credit tend to spend less and make fewer unplanned purchases.
3 OPTIMIZE YOUR CELL PHONE PLAN “I like Billshrink.com, where you can find better credit cards and cell phone plans to suit your individual needs,” said Ramit Sethi, author and founder of iwillteach youtoberich.com, San Francisco.
Tip No.
4
BUY A LA CARTE
It may be cheaper to cancel subscriptions and memberships and pay as you go instead. In a study of three fitness clubs, people overestimate how much they’ll use their gym membership by over 70 percent, Sethi said. Members who chose a monthly fee of around $70 attended an average of 4.3 times per month. That comes out to more than $17 per visit, whereas a day pass only cost $10.
Tip No.
5
Tip No.
REDEEM REWARD POINTS
If your credit card offers them, check your statement to see how many you have and then go to the rewards website to convert them into cash or gift cards. Tip No.
6
FIND SPECIAL OFFERS
Any time you make a purchase from a major retailer, check out your credit card and car insurance websites for deals.
SELL STUFF
Auction or sell unneeded items or hold a yard sale. Tip No.
9
SOCK AWAY CASH
When you receive extra cash — such as a tax return, bonus, birthday gift or proceeds from your yard sale — save it. Tip No.
Tip No.
7
8
NEGOTIATE CAR INSURANCE
Once a year, compare different providers’ rates. Even if you stay with the same company, you likely can save money by adjusting your deductible; unloading unnecessary services.
INATE 10 TEEMLIMPTAT ION If you’re easily tempted to buy on impulse, click on the “unsubscribe” link at the bottom of retailer e-mails.
8
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011
living
within your
means JENNIFER LEHMAN SPECIAL SECTIONS REPORTER
Y
our credit cards are maxed out or close to it. Available cash is used to pay the credit card bill so you can purchase groceries or other necessities. Credit cards are the only way to pay for the unexpected, like major car repairs. After expenses, there is no extra cash. This circle of debt, relying on credit cards and having nothing to add to a slush fund, let alone retirement savings, are the more obvious signs that an indi-
vidual or family is living beyond their financial means, said Darla Schmidt, financial counselor at the Loveland office of the Credit Consumer Counseling Service of Northern Colorado and Southern Wyoming.
“It’s not about
depravation,
it’s about taking
control.
— Darla Schmidt, financial counselor
Schmidt offers some tips and insight on living affordably:
THE BARE BONES Establish the minimum flow of income expected each month, the bare bones, Schmidt said. Do not include overtime hours or any other variable income in those calculations. This base income will be the starting point for understanding what you can afford.
TRACK EXPENSES “If you don’t know what’s going out,
Plan today and spare your loved ones from expense and decisions at an emotionally stressful time. • Upright monuments, flat markers and personal plantings are allowed. • The Cemetery Offi Office ce is located at 1702 N. Cleveland Avenue • Office Office hours are 8am-5pm, Monday-Friday. Please call for an appointment: 970-962-2430 • Space available for traditional casket burials, cremation spaces and columbarium niches
Loveland Burial Park & Lakeside Cemetery information online at: www.CityofLoveland.org LP-323329
....
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011 9
START CUTTING From minimum monthly income and expense numbers you can make informed spending adjustments. Prioritize the necessities like mortgage payments, utilities, insurance, food, car payments, etc. Look at extras you can reduce or cut completely and other ways to save. For example: •Downgrade the cable plan • Consider getting rid of the telephone land line • Set the thermostat for 65 degrees and dress up and down as needed • Choose a hairstyle that is easy to care for reducing expenses on hair products and salon visits • Find inexpensive leisure and entertainment like nearby hikes, free concerts, museum exhibits and literary events • Bring your lunch to work. • Combine errands to save on time and gas • Have friends over for potlucks instead of eating at restaurants • Cut the coupons. Look for the Reporter-Herald coupon book on the first Wednesday of every month. Coupons to national and local establishments are interspersed in the paper weekly. • Buy used items instead of new when possible
BIG ITEM CUTS
RESOURCES
Each situation is different but individuals or families may decide more dramatic lifestyle adjustments are necessary like finding a cheaper place to live, renting out a room or getting a roommate, or getting a second job, Schmidt said. “Easier said than done in these days and times,” she said.
Credit Consumer Counseling Service of Northern Colorado and Southern Wyoming: Services include financial counseling, financial workshops and debt management assistance. 970-229-0695 or go to www.cccsnc.org Habitat for Humanity of Loveland: Hosts a calendar of events including classes on dealing with credit, financial health and money management. 970-669-9769 or go to www.lovelandhabitatforhumanity.org
SMART CUTS AND STAYING HAPPY Some expenses, like internet, can be at least $30 a month, but may be essential if a family member is looking for a job, Schmidt said. The web is also an additional resource for coupons and discounts — as long as coupons are used effectively and not for items you wouldn’t buy otherwise. However, if that is a necessary cut, patrons can access the internet at public libraries. Don’t deprive yourself of everything because it will make you cranky and you still have to live, Schmidt said. Eat out less or consider cutting back on extras like drinks or appetizers, and see a matinee instead of an evening film and pay half the price. “It’s not about depravation, it’s about taking control, Schmidt said, “And you really have to look around and see what is important to you and that sometimes means you have to make difficult choices.” Savings are important because you cannot always depend on credit cards to get you through, Schmidt said. If possible, cut down on credit card use and when the tax refund comes around, try and add some of it to savings, Schmidt said. Consider getting advice and assistance from a non-profit on saving money and creating a debt-management plan to tackle credit card and other debt, Schmidt said.
LP-323869
WORKING TOGETHER FOR YOUR FINANCIAL FUTURE Johnny Rothones Financial Advisor .
265 G East 29th St Loveland, CO 80538 970-669-7276
www.edwardjones.com
Member CIPF Member SIPC
Andrew Stone, Atty. at Law
663-2121
2725 Rocky Mountain Ave., #320 Loveland, CO 80538 www.stonelawllc.com
EXPERIENCE + KNOWLEDGE + CONCERN + THOUGHTFULNESS = RESULTS
! PROBATE & ESTATE ADMINISTRATION ! MEDICAID PLANNING ! ESTATE PLANNING ! WILLS & TRUSTS ! TAX PLANNING ! ELDER LAW
LP-323214
you can’t make adjustments,” Schmidt said. You don’t have to do it for the rest of your life, but tracking every dollar spent — whether credit, debit or cash — for a month or two puts accurate numbers to expenses guessed on in the past, like gas and groceries. “Those are the things you assume you know, but maybe you don’t,” she said. Schmidt recommends breaking up expenditures into categories like entertainment, gas, utilities and groceries.
10
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011
PLAN of action
Encourage a
teen to find a part-time job, and share your views on money matters and what you’ve learned about
saving and spending.
TANIESHA ROBINSON CTW FEATURES
Good financial habits start early. The very best last well into old age. For those somewhere in the middle and still trying to figure it all out, there’s help. No matter what stage of life, a person can always take steps to improve his or her finances. Here are tips on what family members need to think about and plan for at all stages of life, from childhood to retirement.
CHILDREN
TEENS
COLLEGE STUDENTS
NEWLYWEDS
If little ones start to learn the basics of money management as they grow, perhaps they can avoid the debt and exuberant spending habits that plague many adults. It’s important to teach children that every dollar they receive is not a dollar they can spend, said Manisha Thakor, personal finance expert for women and author of “Get Financially Naked,” (Adams Media, 2009). Kids should learn to divide allowances into three buckets: one for savings, one for charity and one for spending. Thakor recommends parents help children allocate 10 percent for savings, 10 percent for charity and 80 percent for spending. Help kids learn to save: Fiddle with the online allowance calculator at www.threejars.com to come up with a weekly sum that’s reasonable, based on the age of the child and the parent’s own experience.
As kids approach their teenage years, they can start to grasp the truth in the old adage “money doesn’t grow on trees.” Thakor tells teens to think about how many hours they would have to work to earn enough to buy an item they want. This way, they begin to understand how much labor really goes into an iPod or Xbox purchase. Encourage a teen to find a part-time job, and share your views on money matters and what you’ve learned about saving and spending. Required reading: Jean Chatzky, awardwinning financial journalist, wrote “Not Your Parents’ Money Book: Making, Saving and Spending Your Own Money,” (Simon & Schuster, 2010) to help start teens on a path to financial success.
The average collegeage credit card holder carries a balance of more than $3,000, according to Sallie Mae. Fortunately for frisky, young credit users, credit card reform measures that started rolling out in 2010 make it more difficult to overload on credit and debt, requiring anyone under age 21 to show proof of income or get parents to cosign in order to get a credit card. College students shouldn’t avoid credit cards completely, however. A student should get one credit card in his or her name; monitor his credit record at the three major agencies; and pay off the bill every month. Used responsibly, a credit card can help young adults build a strong credit profile.
A new couple’s main financial goal should be to build a solid foundation that includes an emergency fund to cover three to six months of living expenses, Thakor said. However, this should happen only after each partner pays down any debts they may have accumulated before marriage. Thakor urges newlyweds to conduct financial check-ins on all assets at least semi-annually. Couples should save 20 percent of their income, Thakor said. Investment smarts: If your employer offers a tax sheltered savings plan, such as a 401(k), sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy.
Used responsibly, a credit card can help young adults build a
strong credit profile.
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011 11 MARRIED WITH A FAMILY
IN YOUR 30s AND EARLY 40s
Once the storks start dropping baby bundles at the doorstep, it’s time to think about life insurance. Whole life insurance is expensive and unnecessary in Thakor’s opinion. She suggests acquiring term life insurance instead, which provides coverage for a set time period — usually five to 30 years — at a fixed rate. Keep retirement saving in mind, despite the focus on children. You can put $5,000 a year into an Individual Retirement Account (IRA) and delay paying taxes on investment earnings until retirement age. If you don’t have a retirement plan (or are in a plan and earn less than a certain amount), you can also take a tax deduction for your IRA contributions. College planning: The College Savings Plan calculator at the financial education website www.mind yourfinances.com, can help families develop or finetune a college savings plan, factoring in number and ages of children in the family. Click on “Financial Tools.”
“The challenge as you enter into these years is to avoid lifestyle creep,” Thakor said. “It’s very easy to start living beyond your means. The more you earn, sometimes the more you spend.” This presents a big problem for savings for a couple’s retirement and their children’s college education. Thakor has noted another dangerous trend in this age bracket: risky investments. An investment portfolio at this age should be a low-cost, highquality mix of stocks, bonds and mutual funds that grows conservatively over time, she said. Start early. Make retirement saving a priority. Devise a plan, stick to it and set goals. Grab a quick estimate of your retirement needs using the “Ballpark Estimate” tool at www.choose tosave.org.
“It’s very easy to start living beyond your means. The more you earn, sometimes the more you spend.”
IN YOUR 50s
IN YOUR 60s
IN YOUR 70s, 80s AND BEYOND
“Fifty is the time of preparation and a time of opportunity,” said Julie Jason, author of “The AARP Retirement Survival Guide: How to Make Smart Financial Decisions in Good Times and Bad,” (Sterling, 2009). Make catchup contributions, an extra amount those over 50 can add to 401(k) and other retirement accounts. At age 59 1 /2 you will no longer be hit with tax penalties on withdrawals from retirement accounts, but leaving money means more time for it to grow. Imagine you’re retiring on Monday and need to calculate how long your funds will last. Jason said this scenario forces people to look at their expenses, savings and income sources outside of work. “If you do the analysis, you can adjust your savings and investing,” she said. Get Going. Are you on track financially for a comfortable retirement? The Financial Planning Assoc. offers an interactive Financial Roadmap tool to help highlight areas where you need to improve: Go to www.fpa forfinancialplan ning.org and click on “Financial Roadmap” under Tools & Resources.
The minimum age to receive Social Security benefits is age is 62, but delaying to a later year will mean a bigger monthly benefit. Generally, government-sponsored Medicare health insurance is available to those age 65 and older. At 66, those born between 1943 and 1954 are eligible for full Social Security benefits. Jason said that those at age 65 must realize that they’re targets for every ambitious financial advisor. “Put on a skeptics hat,” she said. Retirees should interview professionals to make sure they have prior experience with retirement accounts and clients in similar financial situations. Making decisions for a $100,000 account is very different from making decisions for a million-dollar account, Jason said. Learn what your estimated social security benefit will be at retirement by using the retirement estimator at www.ssa.gov/estimator or call 1-800772-1213.
“Now is the time to review assumptions and make adjustments to your cash flow and to your investments,” Jason said. At the outset of retirement, people assume that healthcare will be their greatest expense. It turns out that the largest expense is most often taxes. Plan to begin taking minimum withdrawals from most retirement accounts by 701/2 or you may be charged a penalty. Healthcare and legacy planning should come into the picture around age 85, Jason said. Long-term care for husbands and wives should be determined. “At a certain point you have to bring in your spouse and see if you’re in sync with each other,” Jason said. She reminds retirees to include the desire to leave an inheritance in their planning.
— Manisha Thakor, personal finance expert for women and author of “Get Financially Naked”
“At a certain point you have to bring in your spouse and see if you’re in sync with each other.” — Julie Jason, author of “The AARP Retirement Survival Guide: How to Make Smart Financial Decisions in Good Times and Bad”
12
....
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011
Y our lifestyle re-designed! You get to decide on:
paint | carpet | cabinets and more
Once you move in, you have to decide when to: travel | make new friends | join a class | start a new hobby At Good Samaritan Society – Loveland Village, senior living means designing the lifestyle you want, and the choices are endless. Call (970) 625-5465 today for more information on our new designer apartments! (SS MHP[OZ VY ILSPLMZ HYL ^LSJVTL . LP-323837
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011 13
Saving for College UGMA/UTMA (AKA THE TRUST FUND)
Popular plans for building college funds JENNIFER LEHMAN SPECIAL SECTIONS REPORTER
C
ollege tuition is continually on the rise making planning and saving for college expenses early in a child’s life more important than ever. “Usually after you have kids, you want to get started as soon as you can so you have lots of time for the funds to grow before they need it, said Natalie Shamley, Registered Representative with Investors of America at Home State Bank in Loveland. “College is expensive and only going to get more expensive,” she said. “It’s almost inevitable in today’s society that you want your kids to go to school,” said Tyler Rusch, financial advisor, also with Investors of America at Home State Bank, adding that statistics show college graduates make significantly higher earnings than high school graduates in their lifetimes.
EDUCATION INVESTMENT PLANS If families start saving for college early, investment plans geared towards education or the benefit of a minor, likely make the most sense and certain plans offer significant tax benefits. Other ways to save for college include putting money in a CD or taxable savings account. Here is a basic run-down on the most common education investment strategies provided by Shamley and Rusch, to get you started:
ThinkStock photo
A 529 PLAN A 529 plan is an education savings fund designed to encourage people to save money for college with it’s tax advantages. Benefits: • In Colorado, contributions are tax deductible • Withdrawals for qualified expenses are free from federal tax • Funds qualify for community college, undergrad, graduate school, professional and technical training expenses • No income limitations • No age deadline for use • Owner maintains control of funds • Owner can change beneficiary Limitations: •Contribution for any one beneficiary caps at $350,000 •Use for non-qualifying educational expenses results in 10 percent tax penalty on withdrawn amount
THE COVERDELL EDUCATION SAVINGS ACCOUNT Formally known as the Education IRA, this plan has similarities to a 529 and may be a good choice for families wanting to save for private elementary and high school education in addition to college. Benefits: •Funds grow tax free • Withdrawals for qualified expenses free from federal tax •Funds qualify for education expenses from kindergarten through graduate school • Owner can change beneficiary before previous beneficiary hits majority age of 18 Limitations: •Contributions cap at $2,000 a year • Contribution limits for high-income earners • Funds need to be used by age 30 • Penalties if used for nonqualifying expenses and if not used by age limit
“College is expensive and only going to get
more expensive.” — Natalie Shamley, Investors of America at Home State Bank in Loveland.
Unlike the previous two plans, UGMA/UTMAs are not focused exclusively on education, offering far less in tax benefits but greater flexibility in asset use and contribution amounts. Benefits: • No contribution caps • No income limitations • Can be used for any expense benefiting the child Limitations: • Federal tax benefits on asset growth depend on earning amounts and age of the beneficiary • No state tax deduction • No beneficiary changes permitted
THINGS TO KEEP IN MIND It can be easy to get overwhelmed at the cost of college, especially for parents who are working to invest for more than one child, Shamley said, but saving anything is better than saving nothing. Getting a college savings plan rolling doesn’t require a lot of cash. While investment plans vary widely, minimums are generally low when you start, Rusch said. Typically, account owners have an option of beginning with a lump sum of $250 or committing to an investment of $50 a month. As with all investments, there is some level of risk in mutual funds used in education investing plans. The key to dealing with potential investment losses is to make investments more conservative as the withdrawal date nears, Rusch said. “The closer we are getting to using it, the less risk we want to take with it,” Rusch said. Some 529s automatically move towards more conservative investments as the closer the beneficiary is to using it for school, Rusch said.
14
Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 February 20, 2011
ThinkStock photo
an estate plan who, me?
DAWN KLINGENSMITH CTW FEATURES
P
eople tend to delay or avoid estate planning as though drafting a will might somehow hasten their demise. But thought of another way, estate planning actually prolongs one’s presence among the living. An estate plan allows for calling shots from the grave. The value of property at the time of its owner’s death is an estate. Estate planning begins by taking inventory of assets, including investments, retirement savings, insurance policies, real estate and business interests, and then deciding to whom these assets should go. Individuals also must decide who should handle financial and medical affairs if they are incapacitated and ask if they’ll
serve as financial and health care powers of attorney, respectively. It’s smart to work with a qualified lawyer to create the legal documents that govern the process of protecting the estate and passing along assets as planned.
A WILL The centerpiece of a comprehensive estate plan is a will. The reason a will is important, regardless of net worth, is so assets go to the right people, says Alexandra Armstrong, certified financial planner. Die without one, and in most cases each state applies its standard formula to decide who gets what, without regard to wishes or the needs of heirs. A will is also the best place to name guardians of children. Standard forms are available for the simplest of situations.
401k plans, have designated A letter of instruction to sur- beneficiaries apart from what it says in someone’s will. Review vivors includes bequests not and amend these accounts pespecified in the will, including sentimentally valuable posses- riodically — along with a will, sions. Here’s where to commu- pension plans and life insurance policies — especially if nicate to family members the type of memorial service want- marital status changes. ed, including “in lieu of flowers” specifications and wishes to be cremated or buried.
A LETTER OF INSTRUCTION
A LIVING WILL A living will or advance medical directive spells out wishes regarding life support or medical intervention and care. For someone in a coma who does not want to be kept alive on life support, a living will spells that out. A health care proxy names a person to carry out those wishes. A lawyer can create this document.
POWER OF ATTORNEY LP-323215
A durable power of attorney names a person to act on an individual’s behalf in all financial matters: investing money, signing checks, selling real estate. Keep a signed copy at home and give a copy to the person designated.
A TRUST
During these challenging times, we - like our customers - are making it through on our own. Bank of Colorado hasn’t taken any government assistance. No spin, just an independent, family-owned, locally managed business. Distinctively different. LOVELAND Distinctively Colorado. 4848 Thompson Parkway Suite 100 970.663.7600 bankofcolorado.com
In some cases, individuals decide to create a trust, which puts conditions on how and when assets will be distributed. Trusts are designed to achieve different goals. Often, they allow the wealthier among us to reduce estate taxes. They can also be used to hold money for underage children; provide care for disabled children; or equalize inheritances. Keep in mind that retirement accounts such as IRA and
Get Organized
Assemble and store these documents in a bank safe deposit box and/or a fireproof safe to which a trusted individual besides your spouse has access. • Will, trust agreements and letter of instruction • Contact information for advisers including attorney, accountant, financial planner and stockbroker • Powers of attorney (financial, health care) • List of retirement, bank and brokerage accounts with PINs • Investment documents • Life insurance policies • Health and long-term care insurance policies • Social security and pension information, and military discharge papers (if benefits transfer to survivors) • Marriage certificate • Funeral prearrangements and cemetery plot deed • Real property documents, such as deeds • Titles and extended warranties to cars, boats, etc. • Safe combinations • List of stored or loaned valuables
Saving Money Has Never Been So Easy! Simply go to reporter-herald.com and click on the Sweetheart Deal of the Day to sign up for savings of 50% or more every day.
201 E. Fifth St., Loveland, CO 80537 970-669-5050 • www.reporterherald.com