Welcome, again, to our Jump-Start Your Financial Plan chat series. We're opening the floor early for questions. Leave one if you'd like, and don't forget to join us back here Thursday, August 15, from 1 to 3 p.m. ET.
Hello, this is Lon Jefferies, CFP with Net Worth Advisory Group in Salt Lake City, Utah, signing in. Thanks for joining us.
Hi Lon, great to see you again!
Let's give everyone another minute to get logged in.
Welcome back to this August edition of Jump-Start Your Financial Plan with NAPFA. We have a great panel of expert NAPFA advisers on hand to answer your burning money questions: Matthew Illian, Martha Kapouch, Phil Hogg, Ara Oghoorian, Deb Frazier, and Lon Jefferies.
Hi, Phil Hogg here as well. I am a CERTIFIED FINANCIAL PLANNER (TM) with Hogg-Murnighan Financial Planning, LLC and hope to answer many of your questions today.
Greetings, Matthew Illian, CFP, with Marotta Wealth Management from Richmond, Virginia but working remotely from Dalton, Georgia today. Glad to be with you.
Happy Thursday! It's great to have you all here.
Let's jump in with a question from SimpleSteve:
Hi Martha! We just took our first question from Steve, below.
Sweet! Happy to have you here Steve.
Steve, first and foremost, keep in mind that children can always get loans for schooling, but no one will give you a loan for retirement. Consequently, retirement planning should come first. What savings vehicle are you using these education accounts? (529, coverdell, etc)
Steve, I actually prefer adding to the 529 plan over zero coupon treasuries. There is a high degree of interest rate risk with those. I agree with Lon, retirement comes first.
Hi SimpleSteve. You appear to have a good start with your Retirement Plans. Keep up the good work with your retirement savings and make sure you stay on track. Once you have established that the contributions and growth of your retirement funds will be adequate throughout your retirement, then saving for your child's education in a 529 Plan would probably be a better choice.
I agree with Deb. The tax advantages of the 529 plan are very appealing. Additionally, it is a good bet that the 529 plan offers a range of investments enabling you to create a diversified portfolio of low cost options that you can match to your investment time horizon.
Our clients typically don't use Coverdell accounts because of the funding limitations and Virginia (and many other states) offers state tax credits for 529 contributions.
Matt is correct. I generally favor 529s over Coverdell because you can only contribute up to $2,000 in a Coverdell each year, and most likely they aren't as cost efficient as a 529 plan.
Thanks for joining us, John. We'll get to your question next!
we don't recommend Coverdell accounts as well, mostly due to contribution limits. NC also has a tax credit for state 529. We sometimes advocate an UGMA for those clients that may need to spend some of the money on private high school, etc
Steve, as far as I know, the balance of a Coverdell account must be withdrawn once the student reaches age 30. Can anyone else confirm that?
What a great conversation you started, Steve. Now, let's take a question from John.
Also, I would be surprised if your continuing education site was also a "qualifying institution" since this is mostly made up of colleges, universities and technical schools.
Sounds like you are on the right track John. I'm guessing you are exploring tax-advantaged investment vehicles like Roth accounts, IRAs, 401(k)s, etc. How can we help?
Hmm, maybe he had to step away.
John You should first consider the tax advantages offered in your Employer plans. You should participate at least to fully benefits from any match. Roth IRA's are a great option.
Could you try submitting it again John? It never made it through.
Hi John. You sound like a super saver, good for you! Your long-term strategic plan should include specifics about your goals such as, when do you plan to retire and how much will you need from your retirement savings each month to sustain your retirement standard of living. From there, you can better determine what investments are right for you in order to achieve your financial goals.
We also got this question from Twitter, how appropriate that Deb mentioned UGMAs: