College Funding – Paying for Your Child’s Education

The potential to earn a decent living is greatly enhanced by earning a bachelors degree or higher. Those who have it will most likely flourish and those who don’t…

To attend an in-state public college for the 2012-13 academic year, the average overall cost (or “sticker price”) for students who don’t receive any financial aid rose 3.8% to a record $22,261, according to a October 2012 college board report. Tuition accounted for about half of that increase. Public university tuition and fees alone rose 4.8% to $8,655. In addition, higher dorm, cafeteria, books and other expenses added significantly to the overall increase.

Over the years college tuition costs have grown to new heights.

While about two-thirds of full-time students receive grants or federal tax breaks, many are likely to have to foot more of the bill themselves.

What parent wouldn’t want to see “PAID IN FULL” stamped across their child’s college tuition bill? An insurance professional can help you plan for your child’s education expenses.

College costs are on the rise and are expected to continue climbing. For instance, for a baby born today, the costs will be more than three times current rates when they enroll in college.1

Life Insurance Can be Key
Life insurance can be vital in helping fund your child’s education – whether you’re there or not. Life insurance offers certain tax advantages. In the event of your death, your family can choose to use the income tax-free death benefit to pay education costs. And with some types of life insurance, you can take loans against your policy without tax penalties.2

Be sure to take into account these additional features that may be available with certain types of life insurance:

• Guaranteed cash value, so you know a certain amount of money is available
• Access to your money, so you can use it for tuition and other educational expenses
• Premium waivers due to disability 3

Does Insurance Count as an Asset on Financial Aid?
Cash-value life insurance does not affect federal financial aid eligibility.
Financial aid is available for students who demonstrate financial need in the form of federal Pell grants. Qualifications for financial aid depend not only on household income, but financial assets as well. The U.S. Department of Education considers most cash, savings and investments as assets, but insurance policies typically have no influence on financial aid eligibility.

Insurance policies do not count as assets for federal financial aid purposes even if they carry cash value. While term life insurance, health insurance and other insurance policies usually have no cash value, many whole life insurance policies gain value over time. Policy-owners gain cash value in these types of insurance policies, but regardless of the ‘cash-in’ value of a permanent life insurance plan, insurance policies are not countable assets with regard to federal financial aid.

Considering Term vs. Permanent Insurance
If you simply need to pay for your child’s college expenses in the event of your unexpected death, consider term life insurance. Choose the length of time you need coverage and the amount of death benefit you need.

Talk with your AIPS financial representative about how you may be able to use permanent life insurance to help with college expenses. You may be able to take withdrawals or loans against the policy’s cash value, which can continue to grow tax-deferred.

1 U.S. Bureau of Labor Statistics and FinAid.org

2 Assumes the contract qualifies as life insurance under section 7702 of the Internal Revenue Code (IRC) and is not a modified endowment contract (MEC) under section 7702A. Most distributions are taxed on a first-in/first-out basis as long as the contract meets non-MEC definitions under section 7702A. Loans and partial withdrawals from a MEC will generally be taxable and, if taken prior to age 59½, may be subject to a 10% tax penalty.

3 Disability waiver of premium qualification is not guaranteed and is subject to availability by carrier. The waiver of premium rider may be included in any life insurance policy you choose to purchase. It simply states that in the event you become disabled while you own your policy…as long as you are disabled for a minimum of 6 months…the life insurance company will waive your premiums for as long as your disability continues or in some cases to age 65.

Feel welcome to contact us for a complimentary review of your personal situation. AIPS does not provide legal or tax advice, please consult your tax and legal advisors regarding your individual situation.

Posted by Troy Barrow, LUTCF – Troy is an independent Agent practicing professionally for six years and is the owner of Arlington Insurance Planning Services, licensed in the States of New York and New Jersey. You may contact Troy at 646 580-5189 or tbarrow@aipsny.com.

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Data and information is provided for informational purposes only, and is not intended for solicitation or trading purposes. Please consult your tax and legal advisors regarding your individual situation.

Posted by Troy Barrow, LUTCF – Troy is an independent Agent practicing professionally for six years and is the owner of Arlington Insurance Planning Services, licensed in the States of New York and New Jersey. You may contact Troy at 646 580-5189 or tbarrow@aipsny.com.

Protecting Your Assets During Challenging Business Times

If you’re like many small business owners, it may not feel like much of a recovery, at least yet. Actually, this could still be the most dangerous time for businesses, with resources cut to the bone and few reserves remaining in the emergency root cellar. All the more reason to cinch that belt one notch tighter, plan for the future, and take steps to protect your assets, during the lean times that may remain while the recovery picks up momentum.

Now is the time to develop a four-step strategy that brings your business through the next few months and positions it for growth as the economy strengthens.

1. Protect Your Customer Base

Your customers are vital assets. They provide the cash to make everything else happen. Take steps to keep them.

Start with some creative, short-term marketing to keep cash flowing for the next several months. First of all, advertise, so your customers know you’re still there. Call or write preferred customers (and today they’re all preferred customers) to thank them for past business and remind them that you’re still there for them. Invite them to drop by for a cup of coffee. Consider short-term price reductions. No business owner likes to discount products or services, but if one of your customers is looking to lower expenses, it may be better to offer a reduction yourself than find out that he or she went elsewhere.

2. Protect Your Employee

Do what it takes to retain quality employees, your greatest business assets. They’ve stayed with you this long: don’t let them slip away now.

First, do not cut pay or benefits. They’ll think your ship is sinking and they may jump. Instead, consider expanding your benefit package. No, you don’t need to do it right now. Instead, look at future benefits. Now may be an ideal time to explore 401(k) or other qualified plan options. Do your homework today. Then, if you like, defer the actual implementation until later in the year. This strategy gives your employees a vision for the future. Plus, it boosts their faith that there will be a future.

Also, now is the time to consider a benefit designed to retain select key employees by utilizing a form of deferred compensation known as “golden handcuffs.” The concept is simple: Using a written agreement, select employees agree to remain with your company until retirement or some other specified period of time. In exchange, they are promised additional compensation to be paid at a later date. (Or, if they die prematurely, their family is promised a life insurance benefit.) This can be a valuable way to retain top performers.

 3. Protect Your Business Infrastructure and Long-term Plans

Draft or update your buy-sell agreement for the eventual transfer of your company at your own retirement or death. Also, look at key executive insurance to help protect your company from loss if a valued employee should die prematurely.

4. Protect Your Company’s and Your Family’s Investment in You

While it’s not polite to brag, you are your business’s greatest business asset, the linchpin that holds everything together. So, protect yourself. Review your company’s life insurance program. That way, if something happens to you, your business and your family will be financially protected.

Data and information is provided for informational purposes only, and is not intended for solicitation or trading purposes. Please consult your tax and legal advisors regarding your individual situation.

 

Posted by Troy Barrow, LUTCF – Troy is an independent Agent practicing professionally for six years and is the owner of Arlington Insurance Planning Services, licensed in the States of New York and New Jersey. You may contact Troy at 646 580-5189 or tbarrow@aipsny.com.

What’s more important, Time? or Timing?

         Why Is Time So Important When it Comes to Saving?

 A $1 million nest egg by age 65 — it’s a nice thought, but such a nest egg will not happen magically. Accumulating assets for retirement takes time and discipline. What are the keys to retirement security? First, it’s important to understand that your savings accumulation success  depends on having a firm financial foundation in place, so in addition to accumulating assets you should have plans in place to protect or replace funds due to advents of risk, like disability or even loss of life. 

Most successful retirement funds are built by making regular payments over time. Simply put, the sooner you begin to save for future financial needs, the better.

 Can You Afford Not to Save?

Time can be one of your most powerful accumulation allies. To illustrate this point, consider the following hypothetical example. Your objective is to accumulate $1 million for retirement by age 65. If you are 25, you will need to make at the beginning of each year an annual contribution of about $6,100, assuming a 6% return. That’s about $500 per month. However, if you wait until age 45, you will need to save over $25,000 a year or approximately $2,100 per month to reach your goal. (This is a hypothetical illustration and is not intended to project the future performance of any particular product.) Although this example is basic, it proves a valuable point: postponing saving until later in the game will force you to dramatically increase your saving habits. This is a difficult task, even for the most disciplined people.

 Where Do You Begin Building a Retirement Portfolio?

Pay yourself first. If you do not currently participate, the first place to begin accumulating savings for retirement is your employer-sponsored qualified retirement plan (401(k), 403(b), etc.). Utilizing your employer-sponsored qualified retirement plan presents a tremendous opportunity for you to get a jump on retirement. Some employers will match employee contributions on a dollar-for-dollar basis, while others may contribute a smaller percentage. Either way, taking advantage of the current tax deductions and the ongoing tax-deferred compounding of earnings makes smart investment sense.

 You can also invest up to $5,500¹ in an IRA in 2013. If you’re 50 or older, that amount is $6,500 for 2013. If you do not currently participate in your employer’s qualified retirement plan and if you meet certain income limits, your contributions to a traditional IRA are usually fully tax deductible. This deduction will reduce your taxable income and your current income tax bill. Alternatively, the Roth IRA may be the right choice for your retirement funding. Some advantages of a Roth IRA include:

 • Tax-free accumulation and an entirely tax-free distribution, provided that five years have passed since the first year in which a contribution was made, and you are over the age of 59 ½

• Eligibility for contributions at a higher earned income level compared to traditional IRAs

• No mandatory withdrawals during your lifetime

• The ability to continue making contributions after age 70 ½ if you’re still earning income

• IRS penalty-free withdrawals in a variety of circumstances (same with traditional IRA)

• The ability to contribute to the Roth IRA even if you already participate in an employer-sponsored plan

 If you do participate in your employer’s qualified retirement plan, your deduction for your IRA contribution may be reduced or eliminated depending on your annual adjusted gross income. Even if your contributions are not deductible, you should still consider making a yearly contribution because the money earned in the account compounds tax-deferred.

Typically, withdrawals of earnings will occur in retirement, when you will probably be in a lower tax bracket. Depending on the type of IRA, withdrawals may be taxable and, if you are under age 59 ½, may be subject to a 10% tax penalty.

 How Do I Start Funding for Retirement?

Consult your advisor or if you’re in NY or NJ, find and contact us if you don’t currently have one and make the first step towards your future financial security.

 

Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is provided for informational purposes only, and is not intended for solicitation or trading purposes. Please consult your tax and legal advisors regarding your individual situation.

 

Posted by Troy Barrow, LUTCF – Troy is an independent Agent practicing professionally for six years and is the owner of Arlington Insurance Planning Services, licensed in the States of New York and New Jersey. You may contact Troy at 646 580-5189 or tbarrow@aipsny.com.

Health Care Reform

Healthcare reform: Find out what you need to know on new taxes, elimination of deductions, and fees: http://t.co/sAo0GrObgd

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