Chances are your morning routine involved checking the news for the weather and traffic reports to plan your morning commute. You probably looked at your inbox and calendar to think through the workflow of meetings and tasks that are on your plate for the day. It’s likely that you will coordinate plans for this weekend, getting dinner with some friends or catching a game of your favorite sports team.
We often strategically plan every aspect of our daily lives, but what about the bigger picture? Do you have an updated and well-thought-out plan for your finances? A 2013 US Trust survey revealed that over 70% of investors don’t. (1) As an advisor, I see the tragic effects of this negligence often.
WHY DO YOU NEED A FINANCIAL PLAN?
What’s the point of creating strategies and plans for our lives? Because without a plan, we are shooting at a target blindfolded. Do you really want your financial life going astray because you didn’t have goals to aim for?
A financial plan incorporates short-term and long-term goals to transition you from where you are today to where you want to be in the days to come. Having a plan will help you get on track for your retirement so you can focus on today instead of worrying about tomorrow.
A Plan To Increase Wealth
Did you know that while approximately 96% of pre-retirees and 89% of retirees are concerned about their financial future, only 50% meet with a financial advisor to discuss their situation? (2) Meeting with an advisor doesn’t only give you confidence and peace of mind, it provides real results! The data presented in an HSBC study on the future of retirement shows us that those who created a financial plan amassed nearly 250% more retirement savings than those without a plan. (3) Are you convinced yet?
A Plan To Take Care Of The Details
Furthermore, having a comprehensive financial plan means that you have thought through the nitty-gritty details that are often overlooked, such as tax issues, health care, or legacy planning. You may think that financial planning is something you can put off for the future or hold off on until you have more money, but those who plan for their financial future are more prepared for their retirement, and this is true regardless of what you make. (4)
Now that you know why you need a financial plan, what will it look like for you?
YOUR FINANCIAL PLAN
Financial plans can address a myriad of concerns and goals, from college planning to retirement income strategizing. Depending on your needs, your plan may focus on one overarching element or multiple goals you’d like to achieve over time. Whatever you choose to focus on, your financial plan will provide a sense of understanding of where you stand financially and where you need to go in order to meet your goals.
When we sit down to assess your individual needs, here are some questions we will answer:
Take a look at this sample financial plan to get a better idea of what your financial plan could look like.
TAKE THE PLUNGE
Don’t be part of the majority who worries about their financial future, but instead, take the first step to a secure financial future and make a plan. If I told you that just fifteen minutes could make a significant impact on your financial future, would you take the plunge? You can conveniently schedule a complimentary fifteen-minute “Get Acquainted” phone call with me here and check out the stories of three clients we’ve helped! You won’t regret making a plan to set your finances on the right track.
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
Archer Investment Management is pleased to announce the newest additions to our team! As an investment management firm, we are always striving to offer exceptional service and focused, personal attention. Our goal is to have the expertise and experience needed to take care of our clients and help them on their journey towards financial peace. We believe that our new team members will help carry out our mission and leave you with even more confidence that your finances are in good hands!
TRACY COSTELLO, PRACTICE MANAGER
Tracy comes to us with over 20 years of experience working as a practice manager in a law firm, specializing in the areas of trust and foundation administration, domestic and international entity structures, and tax planning and compliance. Tracy is dedicated to guiding clients through the process of evaluating their financial position, setting goals, and implementing plans for financial security. In her free time, you can find Tracy exploring South Austin with her camera.
KELLY GOSIEWSKI, ACCOUNT ADMINISTRATOR
Kelly is our capable and knowledgeable account administrator. She spent 11 years in the U.S. military, and five years working as Director of Administration in the manufacturing industry. She decided to transition to the financial services industry, bringing her experience in operations, accounting, benefits administration, and recordkeeping. She excels at navigating the maze of paperwork required to establish and manage Archer Investment Management’s client accounts. When she’s not taming the paperwork dragon, you can find her involved in community and economic development efforts, serving on tourism and community development committees or volunteering in classes with Junior Achievement with the goal of empowering young people in their own economic success.
At Archer Investment Management, we take pride in developing long-lasting, meaningful client relationships. We offer comprehensive financial strategies for a secure future through a highly tailored and hands-on approach. We believe you will benefit from the passion and expertise Tracy and Kelly bring to our team and we hope you get a chance to welcome them! If you want to experience the difference Archer Investment Management can make in your finances, schedule a free 45-minute introductory phone call today!
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than 18 years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
I like being useful to others. It’s one of the reasons I became a financial advisor. And beyond my career, I am always seeking the opportunity to give back or serve others, especially in the Austin, Texas community that I love and call home.
Last year, one such opportunity to presented itself when I was invited to serve with the Metro Board of the YMCA, which provides direction for all the YMCAs in Central Texas. My initial thought was, “Do I want to serve on the board of a gym?” My free time was limited and I wanted to make sure I was giving back in the best way possible.
HOW THE YMCA HELPS AUSTIN
I soon discovered that I had no idea how much the YMCA actually accomplishes. While I could fill page after page listing all that the YMCA does, instead I’ll highlight a few of their initiatives I think make them stand out as an incredible organization.
They’re building a new full-service, 85-acre campground, Camp Cypress, which will provide families with everything they need, including the tent, food, activities, and fun. Camp Cypress will be an amazing place for Austin families to visit for turn-key camping in nature within just 15 minutes of Austin.
Through Project S.A.F.E., they aim to provide all area pre-k and first graders with education on safety, aquatics, and fitness activity. This is designed to help prevent drowning incidents as well as combat obesity among children. Since its launch in 2009, more than 11,000 children have gone through the program, saving countless lives!
They offer a 12-week LiveSTRONG program and cancer support network. Survivors participate in free or low-cost customized exercise regimens catered to their individual needs from certified fitness instructors. The instructors are all trained in cancer survivorship, post-rehabilitation exercise, and supportive cancer care.
Among the numerous programs they offer for young children, they provide early learning readiness for at-risk toddlers, year-round meals and sports for underprivileged and special needs Austin kids, and more.
I was blown away by how much the YMCA is able to accomplish and how many Austin community members they serve. In the midst of all the YMCA accomplishes every day, I needed to find where I best fit as a volunteer.
FINDING MY PLACE AT THE YMCA
The YMCA’s area of greatest need was on the Board Education and Policy committee, which was certainly a new experience for me since I’m usually quickly ushered to the Finance Committee. However, I was excited for the new experience.
After extensive board development training, I’m already helping this committee break new ground. We’re investigating partnerships with the New Philanthropists and two Univ. Of Texas MBA Fellows to help our boards become more economically and racially inclusive and representative of the vibrant and diverse Austin community.
This project has turned out to be more involved and intricate than I expected. Identifying and cultivating new, high-performing board members and providing them an environment where they feel invited and will thrive alongside the YMCA is going to be a big job.
Despite feeling overwhelmed at times, over these last few months I have been on an unexpected journey as a volunteer that has me accomplishing important things that make me feel like I’m doing my part to make Austin better. I’m a proud Austin resident and I love that I have an opportunity to help my community thrive and serve those in need.
INTERESTED IN HELPING?
I’ve always found asking for donations to be awkward and uncomfortable, but I’ve learned that many of my clients who live in Austin and surrounding communities want to give back just as much as I do.
I encourage you to visit the YMCA of Austin’s website where you can learn about volunteer opportunities. Or, if you’re stretched for time but want to offer support, I have a personal fundraising website for the YMCA Annual Giving Campaign where you can donate a cash gift. Your funds will directly benefit one of the YMCA’s many programs. You can learn more and donate here.
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
At Archer Investment Management, I’ve spent a number of years working closely with families who seek to send their children to college. In the past few decades, tuition costs have skyrocketed. When the average annual tuition for an in-state public college is $24,610, and $49,320 for a private college, planning far in advance is just as essential as it is for retirement, purchasing a home, and other significant financial goals.
I work with a number of families, many of whom are concerned about the nearly $100,000 price tag that comes with a four-year education. I’ve incorporated various services to help families plan for college. Here are three recent client case studies:
CASE STUDY #1: LONG-TERM COLLEGE SAVINGS
There’s never a bad time to start saving for college, and one couple I worked with started when their child was a newborn. This couple had high-paying careers and the means to save early. The husband Brian was a tech executive at Apple and the wife Betsy was a doctor who owned her own practice. They were concerned about their own graduate school debts and wanted to make sure their child didn’t have a burdensome amount of student loan debt as well. Additionally, the couple’s parents were eager to contribute to the college fund for their new grandchild.
Together, we first projected college costs at various public and private schools, with and without graduate school. This allowed us to set a reasonable range of possible future college expenses they would need to cover. We then incorporated these costs into their comprehensive financial plan to see how they impacted their current lifestyle.
From there, we helped them build a budget to see what they could reasonably afford to save. For Brian and Betsy, it meant we also had to assess the best way for them to pay off their own graduate school debts while still being able to enjoy life and afford necessities. When you have multiple other bills, adding in a new savings goal can be tricky and requires careful planning to balance paying off debt while also maintaining liquidity.
Once we evaluated how much they could save each month for their child’s college tuition, we evaluated appropriate college savings vehicles. We also discussed how they can obtain life insurance at a low cost to protect their child financially and ensure her college is funded should the unexpected happen. Beyond college expenses, since Brian and Betsy were starting their saving early, we discussed the potential for saving tax-efficiently for the primary private school costs they expect once their child is in elementary school.
We also looked at opportunities for the grandparents to help. We encouraged one set of grandparents to make direct contributions to the college fund in lieu of physical presents for the child. For the other grandparents, we suggested accelerated gifting strategies. This was designed to work in their favor as they sought to lower their estate valuation to minimize future estate taxes and to take advantage of potential long-term tax-deferred growth.
By proactively tackling future college expenses, we were able to help this couple seamlessly integrate a new financial goal with their other goals and expenses.
CASE STUDY #2: PREPARING FOR APPROACHING COLLEGE COSTS
Often, parents start seriously considering college expenses when their child enters high school, and this case was no exception. This divorced couple shared a daughter Alexa who was a sophomore at a private high school when they realized it was time for college funding planning. They wanted to make sure to allow enough opportunity to implement their strategies before it became time to apply for financial aid through FAFSA.
This couple had a unique situation. They were divorced and had very different incomes, as the husband Eric was a self-employed artistic consultant while the mother Alana worked for a nonprofit. Our first step was to discuss the rules around determining the custodial parent and how it would affect Alexa’s projected financial aid. We also reviewed how a high-income family such as theirs can reduce their out-of-pocket tuition costs.
Next, we identified all the information the family would need to collect to complete their FAFSA paperwork and calculate their EFC (Expected Family Contribution). They already had an idea of what kind of college Alexa would attend: an Ivy League to study Environmental Science, so we knew we needed to project costs for a private college with high tuition costs.
To do this, we reviewed their total expected cost of attendance at the five top schools they were considering. Next, we identified scholarships Alexa may be eligible to apply for at each of these schools. Through this process, we discovered she may be eligible for several significant merit scholarships if she could raise her GPA by just two-tenths of a point by the time she graduated high school. This gave her two years to work on boosting her GPA.
And although this family already had schools in mind, we helped them review several other schools they hadn’t previously considered that may fit Alexa’s goals better and offer them more financial aid. By reviewing these options, it helped the family potentially avoid the costs of transferring schools, changing majors, needless college visits, or attending a school that wouldn’t provide enough financial aid.
In looking at these new schools alongside their desired Ivy Leagues, we projected the various projected graduation debt levels and offered guidance on where they may qualify for more financial aid.
Beyond addressing savings needs and scholarships, we also evaluated student loans. We identified ongoing loans and tax credits they may be eligible for while Alexa is in school, and then estimated her starting salary at graduation (based on major and desired career) and the time required to pay off student loans.
To provide a more visual illustration, we set up a tool for them to track their ongoing student loan debt and repayment schedule as Alexa progresses through college. The system we use combines all of the loans into one place and helps them stay organized. By having this information, the family can more clearly see their projected loan repayment options and timeline.
This family intends on meeting with us again when Alexa is a senior in high school, as we can help them complete their FAFSA form, navigate financial aid roadblocks, complete and file the major forms on their behalf, and determine the fairness of the offers they receive. With this family, we are establishing an ongoing relationship where we can serve as their go-to guide for answers to their college planning questions.
CASE STUDY #3: TACKLING STUDENT LOAN DEBT AFTER COLLEGE
College planning doesn’t necessarily stop when college starts. Many people don’t realize the importance of college planning ahead of time, or simply were unable to do so. This means many must plan to pay off their college expenses after they graduate.
One client we worked with named Aaron was in this very situation. A recent graduate, he had just accepted a good technology job and it was time for him to start paying off his student loans. Like many graduates, he had a significant student debt load. It can be particularly difficult to make the required payments when you’re new to the workforce and just starting your career.
To start, we used our student loan calculator for Aaron. This tool organizes all of the loan information, calculates the loan repayment options, generates a personalized living expense analysis based on the individual’s income, and helps them start their financial future with greater clarity and knowledge.
We first calculated all eight federal loan repayment options and discovered that consolidating and refinancing his loans with a private lender would save him hundreds of dollars each month and allow him to fully pay off his loans within 10 years.
From there, we built a custom financial plan. The first component of this plan was a budget that factored in his expenses, including his car purchase, rent, travel plans, and loan repayment.
Next, we reviewed the best employer-sponsored benefits he was eligible for at his new job. We showed him how a high deductible health insurance plan for a young person can be a substantial long-term savings opportunity. We also looked at his 401(k) options, and found enough low-cost investment options in his plan to build an appropriate portfolio for his long-term retirement savings.
Lastly, we integrated this comprehensive plan online through a program that digitally links all of his student loans, bank accounts, and bills so he can track everything in one place. Aaron loves using the app on his phone so he can track his progress while on the go. In the end, he has greater confidence and visibility into his financial future and how to tackle his bills while embarking on his new tech career.
HELPING YOU
I work with a broad range of clients facing unique needs and circumstances. Whatever the situation, I strive to address them through a proactive process that focuses on understanding your personal situation, addressing your concerns, and creating strategies that help you work toward your goals.
If you’re experiencing a situation similar to one of these case studies or face an entirely different need, I encourage you to reach out to me. I can evaluate your situation and share how I can help. You can easily book an appointment with me online here. I look forward to speaking with you.
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and an MBA, he is a CERTIFIED FINANCIAL PLANNER™ and CFA® charterholder. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
If the thought of sending your child to college is making you sweat, don’t fear! While it is a major endeavor to get all the details in place, from choosing schools, navigating the application process, and planning for the transition, don’t let the worry about how to pay for all of it keep you up at night. In our last post, we provided an overview of the financial aid process and gave you ways to conquer the FAFSA. Now we are going to let you in on even more tips and tricks to maximize the financial aid your child could receive.
1. VERIFY HOUSEHOLD SIZE
The more people in your household, the better aid you will receive. If you have grandparents, nieces, nephews, or other family members living with you and relying on you for more than 50% of their support, you can include them in your household number. If you are expecting another child in the next school year, you can also include your unborn baby in the household size! Finally, if you have children who do not live with you but still rely on you for more than half of their support, they are also considered part of your household.
2. CORRECTLY REPORT YOUR BUSINESS
If you own your own business, be careful not to overvalue it on your application. Not all businesses are treated the same by FAFSA and the valuation could be quite low based on their criteria. For example, if you have small business with 100 or fewer full-time employees, you may not need to report your business at all!
3. CHOOSE WHO FILES
If you are divorced or legally separated, only one parent will file for financial aid. Since it can make a major difference in the aid received, make sure the right parent files. According to FAFSA, the custodial parent is the one who should apply, and that is the parent with whom your child has lived the most for the past 12 months. Ideally, the parent who makes the least money and has the lowest amount of assets is the custodial parent for financial aid purposes.
4. IGNORE COLLEGE LIFE INSURANCE
Many people aren’t even aware of college-oriented life insurance policies, but a salesperson may approach with this option. These policies often have high and unnecessary commissions and fees and have the potential to hurt your aid chances down the road, since utilizing these policies to pay expenses could increase your overall taxable income.
5. WATCH THE MARKETS
If you have a considerable amount of non-retirement investments, make sure you pay attention to the markets and file your aid application on a bad market day. This will lower the value of your assets and give you a chance to receive a better aid offer.
6. UNDERSTAND INCOME CATEGORIES
If your adjusted gross income is less than $50,000 and certain other criteria are met, (1) you do not have to share your non-retirement assets on the FAFSA. If you have found yourself without a job or underemployed, this can be a huge help in getting aid so your child can attend college.
7. STRATEGIZE GRANDPARENT CONTRIBUTIONS
If you are lucky enough to have parents who want to assist your kids with college, make sure you are smart about how you use that money. If a grandparent started a 529 account for their grandchild, that money will count as untaxed income for the student as soon as they take the money as a distribution. That amount could be assessed up to 50% in the aid formulas. Instead, grandparents can transfer ownership to parents where the amount will be assessed at the lower parent rate of 5.64%, or they can take a distribution in the child’s last year of school when the student will no longer be applying for aid.
8. COMPARE OFFERS
When you’ve completed the long, drawn-out application process and financial aid award letters start to roll in from your selected colleges, analyze the numbers. Your expected family contribution (EFC) should be listed on the letter, which will help you compare offers between the schools. If the award is much lower than the EFC suggests it should be, then it’s likely an inferior offer.
GET THE HELP YOU NEED
Applying for financial aid is not a simple process, but don’t let the stress and confusion stop you from making the wisest decisions and strategizing your application answers. Did you know that Archer Investment Management offers services to help you pay for college, including a specific Fafsassist package that will help you navigate financial aid roadblocks, complete and file major forms on your behalf, and help you determine which offer is best? We want to help you send your child to college with the best financial aid situation possible. Click here to schedule a phone call to get started!
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
On Wednesday, December 20, 2017, Congress passed the final version of their new tax bill. Since the campaign trail, President Trump has spoken of sweeping tax reform and this bill entails a number of changes to the U.S. tax code that will impact both corporations and individuals.
Many economists and experts believe this tax bill will provide a short-term boost to the economy, but by how much we don’t know. The Joint Committee on Taxation believes the bill will boost growth the total size of the US GDP by 0.8 percentage points over the first decade, while Goldman Sachs is estimating GDP growth will increase 0.3 percentage points above their baseline over the next two years.
Regardless of how much or how little economic growth we can expect in the coming years, the big question is, what exactly does this bill mean for you and your investments? In a nutshell, it lowers tax rates for individuals and corporations, increases the child tax credit, doubles the standard deduction, and caps or eliminates several deductions. Here’s what we can expect from this bill.
WHAT DOES IT MEAN FOR HOUSEHOLDS?
It’s estimated that around 80% of people will see a tax cut in the first year of the legislation, and the Tax Policy Center estimates that the average person will see a tax cut of $1,610 in 2018. However, the amount will vary based on income bracket. In general, the tax bill favors wealthier Americans, offering more tax breaks the more you earn, with fewer benefits to lower and middle class Americans. The TPC estimates that 65.8% of the total federal tax benefit will go to the top 20% of earners.
As a result of an increased after-tax income, some economists believe this may boost consumer confidence. However, the after-tax income increase may not be enough to see an economic change.
WILL BUSINESSES BENEFIT?
Big businesses will significantly benefit from the tax bill, namely with the federal corporate tax rate dropping from 35% to 21%. Companies will likely see a serious boost in their profits, with JPMorgan estimating that this bill could boost the earnings per share of S&P 500 companies by $10 per share in 2018.
Additionally, some experts estimate that giant companies like Google will save several billion dollars in 2018 due to the new tax code. With these tax cuts, businesses could use these savings to increase wages, pay down debt, invest, or pay for capital expenditures.
HOW MAY THE STOCK MARKET REACT?
Small and mid-cap stocks, consumer staples, telecoms, financials, and industrials pay the highest tax rate, so with the new tax cuts, values of these companies could go up in the short term. Many experts believe that stocks will rise as a result of the news, with the markets already seeing much activity. Experts at JPMorgan believe stocks could even rise 5% after the bill officially passes. However, they also anticipate volatility in the new year.
REMEMBER THE HISTORICAL CONTEXT
It’s important to remember that the stock market is already at an all-time high and values have been increasing for years. This current rally is just months away from being the longest rally in history, close to surpassing the dot-com rally of the 90s. How much higher can stocks go without a major correction? No one knows for sure. But history does tell us that markets do not go up forever and this bull market is no different.
With much uncertainty in the future including global political instability, natural disasters, and a growing federal deficit, it’s important to make sure your portfolio is prepared for temporary and long-term market corrections. Any major unexpected shock to the economy could cause a significant correction in the stock market. Especially for investors approaching or in retirement, now is not the time to gamble on predicted short-term market gains.
WHAT SHOULD YOU DO?
This tax bill is brand new, so there is still much to learn and understand to see how it will impact households and businesses in the near and far future. No one is sure exactly how the economy will behave in the coming months or years. If you are one of our clients, your portfolio has been built with tax reform in mind and we are continually monitoring the markets so we can make appropriate changes if needed. If you have any questions, call or email our office.
If your friends or family are concerned with so many potential swings in the markets, now is a good time for them to review their financial plan to see how their strategies may be impacted by this tax bill and whether or not it’s appropriate to make adjustments. We’re never too busy to help someone you care about, so feel free to put them in touch with our office.
Regardless of whether your child is two or twelve, the thought of college has probably crossed your mind. In the business of life and never-ending financial pressures, it is all too easy to ignore impending college years. But, your child’s education is one of the most important investments you can make, and, with today’s costs, it pays to have a plan in place.
These days, a high school graduate can expect to pay upwards of $200,000 for an undergraduate degree at a top school (1) and over $10,000 each year for in-state tuition alone at a public institution. (2) Thankfully, there are some genius ways you can maximize the financial aid your child receives to pay for their education.
FINANCIAL AID BASICS
Before we get into the tips and tricks to get as much money as possible, let’s look at how financial aid is determined. Here are the five factors that the federal student aid board takes into consideration:
Parental income
Number of children in college simultaneously
Marital status of parents
Assets in your child’s name
Schools on your child’s list
Keep in mind that these factors are not all weighted equally. For example, income has a much greater impact than assets.
Expected Family Contribution
The FAFSA, or Free Application for Federal Student Aid, is the method used to potentially qualify for financial aid at your child’s college of choice. When you fill out this application, you will be asked to provide your financial information, which will then be calculated as your Expected Family Contribution, or ‘EFC’.
There are two types of aid available:
Need-Based Aid: Colleges will offer need-based aid if a student can demonstrate their family has limited resources to provide for their education costs.
Merit-Based Aid: To qualify for merit aid, students must show academic achievement, high test scores, and/or above average talents or accomplishments.
The College Factor
One of the main determinants of financial aid is the college choices on your child’s financial aid application. As an example, state universities rarely give nonresidents need-based financial aid, and many high-end colleges don’t offer merit scholarships to high-income families. For private institutions, much of the aid is in the form of loans, which only leads to a heavy debt load after graduation.
HOW TO CONQUER THE FAFSA
If you have a high-income or plenty of assets, you are not out of luck. Use these five tips to maximize the amount of financial aid your child might receive:
1. Exclude Retirement Accounts
Retirement accounts such as IRAs, 401(k)s, 403(b)s, etc. are exempt from your application. Your best bet to get the most money possible is to save as much as you can in these accounts before the college aid application base years. Also, avoid withdrawing money from retirement accounts in financial aid application years since the funds will be treated as taxable income.
2. File Early
Apply for aid as soon as possible after January 1st. Some schools and states award aid on a first-come-first-served basis until it runs out.
3. Move Assets
Your child’s individual assets will count for 20% for aid purposes, but yours will only count for 5.64%. (3) Take a look at your child’s assets and, if possible, move money out of their name and into yours. This step alone can affect your child’s eligibility by thousands of dollars in aid.
If your children have assets that can’t be moved or that you decide against transferring, make sure you use those assets first when paying for college expenses. This will increase financial aid opportunities in their subsequent college years.
4. Pay Down Debt
Your debt doesn’t affect your financial aid eligibility, but your cash reserves will. Consider using your excess cash to pay off debt, therefore reducing the amount of savings you have to declare on your FAFSA.
5. Double Up On College Enrollment
The more kids you have in college at the same time, the better. Having two children enrolled in college simultaneously can decrease your EFC by 40% – 50%. (4) If your children are close in age, think about delaying college for the eldest so they can overlap.
Hopefully this overview gives you both confidence and peace of mind as you draw closer to your children’s college years. In our next post, we’ll be discussing even more tips to help you become a genius about financial aid so you can both preserve your wealth and protect your children’s financial future. If you want to discuss your options with someone who knows the ins and outs of college planning, schedule a phone call today!
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
When you watched the New Year’s Eve countdown and raised your glass to 2017, did you make any resolutions to put your finances first this year? Finance-related resolutions are the third most popular New Year’s resolution, following self-improvement and weight loss. (1) Millions of people strive to get out of debt, save more, or accomplish a financial milestone, whether that’s purchasing a vacation home or retiring. If you fall into this camp, how did you do? Did your resolution fall to the wayside, as many do?
The good news is that it’s not too late to make some headway on your 2017 goals, but you need to start now. Stores have already rolled out their Christmas displays, so get a jump start on these ten financial actions before you ring in 2018.
1. AMP UP YOUR RETIREMENT SAVINGS
If possible, increase your contribution to your 401(k) by the end of the year to make the most of your retirement savings. For 2017, you can contribute as much as $18,000 (or $24,000 if you are 50 or older). You may also consider contributing to a Roth IRA. For 2017, you can contribute as much as $5,500 (or $6,500 if you are 50 or older). Keep in mind that if your income is over $196,000 and you’re married filing jointly, you won’t be eligible to contribute to a Roth IRA.
2. USE UP YOUR MEDICAL AND DENTAL BENEFITS
Did you have good intentions of taking care of some dental work, blood tests, or other medical procedures? Now’s the time to take advantage of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used up the full amount and anticipate any treatments, make an appointment before December 31st.
3. VERIFY EXPIRING SICK AND VACATION TIME
Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If your sick or vacation time does expire, fit in a last-minute vacation, a staycation, or trips to the doctor to use up these benefits.
4. USE YOUR FLEXIBLE SPENDING ACCOUNT
Like your health insurance benefits, you’ll want to use up your FSA (Flexible Spending Account) dollars by the end of the year. Your benefits won’t carry over and you’ll lose any unspent money in your account. Check the restrictions for your account to see what the money can and cannot be used for.
5. DOUBLE CHECK RMDS
If you’re retired, review your retirement accounts’ required minimum distributions (RMDs). An RMD is the annual payout savers must take from their retirement accounts, including 401(k)s, SIMPLE IRAs, SEP IRAs, and traditional IRAs, when they turn 70½. If you don’t, you may face the steep penalty of 50% of the distribution you should have taken. To calculate your RMD, use one of the IRS worksheets.
6. STAY ON TOP OF CHARITABLE CONTRIBUTIONS
If you made a charitable contribution in 2017, you might be able to lower your total tax bill when you file early next year. It can be especially advantageous if you donated appreciated securities to avoid paying taxes on the gains. Along with your other tax documents, find and organize any receipts you have from your donations to charities, whether it was a cash, securities contribution, or another type of gift.
7. CONSIDER A ROTH CONVERSION
Roth IRAs are attractive because you don’t pay income tax when you withdraw funds in retirement. However, if you’re a high-income earner, you may not be eligible to contribute and, instead, invest in a Traditional IRA. If you have a Traditional IRA, you may have the opportunity to convert to a Roth IRA and save money on taxes in the long run. The deadline to convert to a Roth IRA is December 31st, so if you’ve been considering doing so, or wonder if it’s an appropriate option for you, talk to your financial advisor ASAP.
8. REVIEW YOUR INSURANCE COVERAGES
A lot can happen in a year. As you experience life changes, from the birth of a child to marriage to a new career, it’s important to regularly review your insurance coverages and your designated beneficiaries. Now is the ideal time to review your current insurance policies and make sure they are up-to-date. You might also want to evaluate your need for other types of insurance you may not currently have, such as long term care insurance.
9. SET A BUDGET FOR HOLIDAY SPENDING
Americans will spend nearly $1,000 this year on holiday gifts alone. (2) During such an expensive time of year, a budget is a must to avoid overspending. Break down your spending and allocate a set amount of funds for everything you need this holiday season, including gifts, food, transportation, postage, and gift wrap. Be realistic about what you can afford to spend.
10. GIVE WITHOUT GIFT TAX CONSEQUENCES
It’s never too early to start planning the legacy you want to leave for your loved ones without sharing a good portion of it with Uncle Sam. You may want to consider gifting. Each year, you can gift up to $14,000 to as many people as you wish without those gifts counting against your lifetime exemption of $5 million. If you’ve yet to gift this year or haven’t reached $14,000, consider gifting to your children or grandchildren by December 31st.
Do you need to take any of these steps before the ball drops on New Year’s Eve? I’d love to help you finish the year off strong and set you up for a successful 2018. Click here to schedule a phone call if you want the help of a trusted professional as you follow through on your resolutions.
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
Imagine this: you are nearing retirement and worried about whether your savings will last you through your golden years. Then your neighbor mentions a reverse mortgage. They tell you that you can get cash payments from your home’s equity and live off that money. It sounds like the answer to your problems, but like many financial products out there, it may just be too good to be true.
Before making a rash financial decision, arm yourself with some valuable reverse mortgage information.
REVERSE MORTGAGE BASICS
Here’s a quick primer on reverse mortgages. A reverse mortgage is a type of home equity loan, created specifically for those 62 and older who own their home outright or have small mortgages. Instead of making your normal monthly mortgage payment with the goal of paying off your home, you essentially give the equity you’ve built back to the bank and they pay you monthly, as a lump sum, or as a line of credit.
Reverse mortgages don’t require payments until you sell your house, die, or permanently move out. You are still required to pay property taxes and homeowner’s insurance and your home must be your primary residence. How much you receive through a reverse mortgage will depend on your age, the value of your home, and current loan interest rates.
RISKS
Now that you know the bare minimum about reverse mortgages, let’s look into why you might want to avoid them.
They Aren’t Cheap
You might obtain a reverse mortgage to create some money to live on, but your upfront costs will be hefty, up to 3-5% of the loan amount. (1) This includes an origination fee, appraisal fee, closing costs, and a required mortgage insurance premium.
When you invest your money, compound interest is on your side, but with reverse mortgages it works against you in a major way. The more the bank pays you, the more the interest grows. As its name implies, it’s the reverse of a regular mortgage where your interest payments decrease as you pay off more of the principal. For example, let’s say you have a $100,000 reverse mortgage that you decide to take as a lump sum at a 5% interest rate. After your first year, your loan balance will be $105,116. But after ten years, it will be sitting at $164,701. (2) The interest eats away at your equity, meaning you own less of your home as time goes on.
They Hurt Your Heirs
If you were planning to leave your home as an inheritance for your children or grandchildren, a reverse mortgage will make that impossible. If the interest has racked up enough by the time you die, every penny from the sale of the home could go to the reverse mortgage lender. If your heirs decide to keep the home, they will be responsible for paying off the full value of the loan, even if it’s higher than the sale value of the home.
You Could Outlive Your Mortgage
Just as there is a very real chance you could outlive your retirement savings, you could also outlive your reverse mortgage. What happens when you have borrowed the maximum amount and no longer have money coming in? Other living expenses aside, you will still need to pay for taxes, insurance, and utilities. If you default on those payments, you risk foreclosure. This leaves you with nowhere to live and no money to live on, not something any retiree dreams of.
ALTERNATIVE OPTIONS
It’s not all doom and gloom. If you feel like a reverse mortgage is your only way to fund retirement, here are some other options to consider.
Downsize
If you are willing to make some changes, downsizing your home or moving to a cheaper area could drastically decrease your living expenses and stretch out your retirement savings. When you sell, you capitalize on the equity you’ve built and can stash away the profit to live off of. A smaller home will also have lower maintenance costs, property taxes, and utility bills. You could also rent instead of buying another house and have extra money to invest or spend.
Investigate Other Assets
Even if your retirement savings seem meager, you might be able to maximize what you have by making a few wise decisions. For example, if you work a few years longer and max out your employer-sponsored plan and IRAs, how much would that give you over the long-term? Is there an option to work part-time after retirement? Have you determined the most beneficial time for you to claim your Social Security benefits? Making small tweaks to your financial plan can make a significant difference in the long-term.
Rely On A Professional
A financial advisor has the knowledge and experience to walk you through your worries, reexamine your goals, and provide you with multiple retirement scenarios. A reverse mortgage should be avoided unless you have experienced a financial emergency and no other assets are available for you to tap into. If you want the advice of a professional to help you make the best decisions for your money and find creative ways to reach your goals, click here to schedule a phone call. I would love to help you feel more confident in your financial future.
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
It’s important for all couples in long-term relationships to talk about finances, what they want to accomplish, and how they want to handle certain financial decisions. But it’s even more important for LGBT couples to be proactive with financial considerations because of ever-changing and complex laws. Whether or not you’re married or plan to marry, LGBT couples should address these important financial considerations:
1. RETIREMENT SAVINGS
How LGBT spouses are treated through corporate benefit plans vary by state and company, and they may not always be able to receive Social Security survivor or Medicaid spousal protections, especially in non-recognition states.
It’s important to speak with your HR department to determine if your employer recognizes LGBT partnerships and whether or not you can name your partner as a beneficiary. Additionally, update beneficiary designations on all 401ks, 403bs, IRAs, etc. to make sure your partner receives their proper inheritance.
2. LIFE AND LONG-TERM CARE INSURANCE
Two of the most appropriate ways for LGBT couples to protect each other is with life and long-term care insurance. As LGBT couples may miss out on a number of spousal benefits for which heterosexual couples are eligible, life and long-term care insurance can replace lost earnings, pay for the college educations of children, and cover ongoing custodial expenses to ensure families have enough income to last throughout retirement.
When evaluating your insurance options, you may consider taking out larger policies to make up for potentially lower spousal and tax benefits than heterosexual couples receive. It’s also critical to name your spouse as the beneficiary to ensure he or she receives the policy benefits.
3. HEALTH BENEFITS
LGBT couples may not both be eligible to receive health benefits from their employers. This is another instance where it’s important to have a detailed discussion with your company’s HR department regarding health benefits available to your partner.
Additionally, if a partner in an LGBT relationship falls ill, the other may not be legally allowed to make important health decisions on his or her behalf. This is where an advanced medical directive can help. A medical directive defines your wishes for health care if you become too injured or ill to make decisions for yourself. With a directive, you can ensure your partner is allowed to make decisions for you.
4. ESTATE PLANNING
If you were to die, your closest living relative, such as your spouse, has legal rights to your inheritance. But if your marriage isn’t recognized in your state, that may not be the case. LGBT couples need to make sure they include their partners in their wills to ensure they receive an inheritance.
Beyond creating or updating a will, make sure you acknowledge your partner in other essential documents, including durable powers of attorney, healthcare powers of attorney, letters of intent, living wills, and advanced medical directives. This can help provide your partner with more power when it comes to decision-making should you be unable to make decisions yourself.
You may also consider setting up a trust, especially if you’re concerned that another family member may contest your will. You and your partner could contribute assets to the trust. When one partner dies, the trust likely won’t go through probate and there will be less of an opportunity for anyone to contest it.
NEXT STEPS
It’s unfortunate that LGBT couples face so many additional financial hurdles that can make financial planning complex and overwhelming. But you don’t have to go it alone.
As an advisor who frequently works with LGBT couples, I understand the common questions and concerns you face. I’d be happy to meet with you to discuss your situation and how I may be able to help. You can easily book an appointment with me online here. I look forward to speaking with you.
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
