|
|
|||
 With the cost of sending a child to college growing higher and higher every year, it's more important than ever to begin financial preparations early on. With tax laws becoming increasingly complex, investments that are tax deferred, tax exempt or transferable without tax consequences are smart choices. Structuring your investments ahead of time can dramatically affect the net amount of funds available when they are needed. After determining how much funding you think you'll need, based on the type of school your child may attend, the next step is to develop an investment plan that will enable you to reach this goal. Here are a few of the types of funding options you may wish to consider. Investment/Insurance Products • Universal Life Insurance • 529 College Savings Account • Bright Start® College Savings Plan • Independent College 500-Index • Roth IRAs • Life Insurance Universal Life Insurance The main purpose of Universal life insurance policies is to provide a death benefit, in addition it could also accumulate cash value which grows tax deferred via the accumulation of excess premiums. (Of course this assumes you are able to obtain life insurance). Generally, these accumulated funds may be withdrawn tax-free for your needs. Withdrawals may be subject to surrender charges and could have a permanent effect on the cash value and death benefit and loans may be made against the cash value, although they will reduce the policy's death benefit if not repaid and interest is charged on the loaned amount. The 529 College Savings Account As the cost of sending a child to college grows higher every year, families are looking for smarter funding alternatives. Today, one of the most talked about products in educational funding is the 529 College Savings Account, which offers tax-deferred savings, as well as gift and estate-tax benefits! Like qualified plans, no federal income taxes are paid on earnings until withdrawal. 529 College Savings Accounts offer generous maximum contribution limits, there are no income limitations, and earnings are compounded tax-deferred for as many years as you wish. Then, when it's time for college for the beneficiary, the accumulated earnings can be withdrawn tax-free as long as they are used for qualified higher education expenses. Plus, up to five years of contributions can be combined for a single year for each beneficiary, without gift-tax consequences. Note that no more contributions by that individual can be made for the five years period. If college is a part of your child or grandchild's future, a Matsock & Associates representative can help you choose a 529 College Savings Account which can help you to reach this important goal. The Bright Start® College Savings Plan A Smart Way To Save For College There's never been an opportunity to save like this before—invest as little as $25 or as much as $235,000 for each child. Earnings grow federally tax-deferred until withdrawn to pay for tuition, books, room and board. After December 31, 2001, all qualified withdrawals will be free from federal income taxes. Non-qualified withdrawls are subject to federal income taxes and potentially a 10% penalty on earnings. Call Tom Hennessy at 1-800-733-0434 for more information.) If you've already opened your Bright Start® account with Matsock & Associates, click below to check on your account. www.brightstartsavings.com Independent College 500-Indexed Certificates Of Deposit A relatively new funding vehicle generally offered by savings institutions, the I.C. 500 represents the College Board's index of college inflation, using a survey of 500 independent colleges and universities as its base. The rate of return on an I.C. 500-indexed CD is directly linked to the I.C. index. The Roth IRA In 1997 the Taxpayer Relief Act created a new tax-favored saving vehicle called the Roth IRA that contains some distinct tax advantages. Unlike traditional IRAs, Roth IRAs are not tax-deductible. Contributions are made with after tax dollars, grow tax deferred and withdrawals of funds in certain circumstances (after a five-year holding period or age 59 ½ whichever is longer) are tax free. Qualified distributions from a Roth IRA are not included in a taxpayer's gross income or subject to penalty for early withdrawal. These special circumstances include death or disability, and the purchase of a first home. Expenses for college may also be withdrawn without incurring the 10 percent penalty, although withdrawn earnings would be subject to normal federal income taxes. (Certain income limitations apply to your eligibility for contributing to a Roth) Life Insurance Whichever funding option you choose for your child's college education, there is always the possibility that you could die before fully funding it. Life insurance is a means of replacing the income that you would have saved for this purpose in the event of your death. Because tuition and living costs for higher education are increasing each year, it's a good idea to periodically reevaluate your insurance needs as they relate to college funding. Bonds U.S. government bonds are considered by many to be among the least risky investment options because they are guaranteed by the U.S. government as to the timely payment of principal and interest. Taxes on the interest of Series EE bonds, usually referred to as U.S. savings bonds is deferred until maturity. If the proceeds are used to pay for college, the taxes on accumulated earnings may be eliminated completely for low- and middle-income families. Zero-Coupon Bonds Zero coupon bonds represent the ownership of principal payments on U.S. government notes or bonds. These bonds are purchased at discount and make no periodic interest payments. Instead, they pay face value at the maturity of the bond. Zero-coupon bonds will fluctuate in value and their prices and are subject to more volatility than interest-bearing bonds. Interest is taxable annually as ordinary income. Disclaimer: Registered Representative of Tower Square Securities and Met Life do not offer tax advice. Please consult your tax advisor for such guidance. Insurance and investment products are not FDIC Insured, are not a Condition of Any Bank Service, are not a Deposit Product, offer no bank/affiliate guarantee, offer no guarantee of insurance underwriter performance and may lose value. 529 Plans are state sponsored investment programs. There is no guarantee by the issuing municipality or any government agency. You should consider the potential benefits (if any) that your own state's plan (if available) offers to residents prior to considering another state's plan. There may be tax benefits to plans offered by your resident state. Please note that assets in a 529 Plan could impact the beneficiary's ability to qualify for grants and student loans. Municipal fund securities are sold by offering statement and mutual funds are sold by prospectus. These documents contain important information that you should carefully consider before investing including investment objectives, risks, charges, and expenses. For this and other information, please obtain an offering statement or prospectus from your registered representative for the product you are considering and read it carefully before you invest. Investment return and principal value will fluctuate with changes in market conditions such that shares may be worth more or less than original cost when redeemed. Per IRS Circular 230 Tower Square Securities, Inc. is providing you with the following disclaimer: The information contained in this website is not intended to (and cannot) be used by anyone to avoid IRS penalties. This page supports the promotion and marketing of insurance and securities products. You should seek advice based on your particular circumstances from an independent tax advisor. |
||||