Wealth Management Blog

Posts published in May 2018

What’s Your 529 College Savings Strategy?

By JJ Burns

May 29, 2018

As a CFP® professional, one of the most important lessons I’ve learned is that before you can talk savings strategies for your children’s college education, you must be crystal clear on how you are going to pay for it. By taking a hard look at your current financial situation and current family dynamic (including how many children you have), you will gain valuable perspective on how much money you can realistically contribute.

Throughout this exercise, you should be asking yourself the following questions:

  • Do I want to pay, in full, for my child’s college education?
  • Do I want my child to share in some of the expense?
  • Do I want to apply for financial aid?
  • How do I feel about my child having to repay loans?
  • Do I realistically believe my child will get a scholarship?
  • Do I want my child to have unlimited choices, or will their options be limited by their scholarship and financial aid offers?
  • Is there anyone else in our family who wants to help fund my child’s education?
  • What are my views on public versus private universities?
  • What is my opinion of advanced education such as an MBA, law degree, etc. and how will this be funded?

Take a few minutes and write down the answers to these questions as they will create a roadmap for developing a sound long-term college savings plan.  You can then begin working with your CFP® professional to develop a savings strategy to meet your goals.

For example, saving for Harvard College with a 2018-2019 tuition of $46,340 (or $67,580 with room and board) is going to be very different than saving for Binghamton University with a New York State resident tuition of $6,870, or the University of Michigan with a nonresident tuition of $23,975.

For many families, a 529 plan can form the foundation of their college savings strategy because:

  • You can invest in a 529 plan regardless of how much you earn. There is no minimum to get started, so the sooner the better!
  • The account grows tax-free. Distributions are free of federal and most state income taxes when used to pay for qualified education expenses (tuition, books, computers, etc). This is especially advantageous if the account is started when the beneficiary is very young and has ample time to reap the benefits of the tax-free compounded growth. Further, if you have multiple children, the tax-free benefits that are not used by a 529 beneficiary can be transferred to a sibling.

Anyone can own an account for a beneficiary (e.g. relatives or friends) or contribute to a 529 plan. Another bonus? Accounts owned by non-parental relatives/friends will not have an impact on the student’s eligibility to receive financial aid. There’s also the option to change the beneficiary on the account from one eligible family member to another without penalties or taxes. As of 2018, a 529 plan can also cover $10,000 in annual tuition expenses for elementary or secondary public, private, or religious schools. Not all states allow tax-free distributions for K-12 education yet, so check with your state before you make any withdrawals.

For most people who don’t have a plan and don’t consider the many variables that affect them, the biggest issue to be aware of is the penalty. Earnings on distributions not used for education expenses are taxed as ordinary income at the recipient’s federal tax rate and usually incur a 10 percent penalty tax.

For more information and guidance, a CFP® professional can help you clarify your college savings objectives and determine which plan and investment options are best suited to help you meet your goals. 

Statistics Don’t Tell the Real Story of Alzheimer’s Dementia

By JJ Burns

May 7, 2018

Recently, I watched a segment on 60 Minutes that moved me to tears. It was about a couple living with Alzheimer’s, and I’d like to share a few national statistics about this terrible disease:

  • Alzheimer’s is the 6th leading cause of death in the U.S.
  • An estimated 5.7 million Americans of all ages are living with Alzheimer's dementia in 2018
  • 16.1 million Americans provide unpaid care for people with Alzheimer’s or other dementias

While these statistics are powerful, they don’t tell the story of what it’s like to live with the devastating emotional, physical and financial effects of Alzheimer’s. But 60 Minutes did tell that story in heartbreaking detail. For 10 years, Dr. Jon LaPook has been checking in on and interviewing Carol Daly, a woman diagnosed with Alzheimer's, and her caregiver husband, Mike. As you step into their shoes and live the devastating impact the disease is having on each of them, you learn the real costs of Alzheimer’s.

I encourage you to take 12 minutes and watch this piece.

Our role as a trusted advisor to several hundred families is incredibly fulfilling. We’re able to help people clarify, plan for and achieve their most important life goals. Yet it is also filled with many heartbreaking moments, often centered around a change in their health. Of all the issues we help clients with—from unexpected changes in their job, to challenging family dynamics, to divorce—the one that I find to be the most devastating and insidious to a family is either a sudden loss or a diagnosis such as Alzheimer’s.

What most people don’t talk about is the potentially catastrophic financial effects of a life-sentence disease. While the emotional and physical stress is certainly overwhelming, it is the financial stress that often breaks the proverbial camel’s back. People are faced with a dizzying array of choices and decisions that they must make under emotional duress when it’s most difficult to clearly evaluate choices rationally. The costs of care from prescription drugs, to therapies, to care services, to care supplies, to travel and more add up at an alarming rate.

What I believe in my heart, and what most people fail to grasp, is that financial planning and wealth management is so much more than just investment management and how to grow and/or draw income from assets. It is about developing a sound yet flexible plan that addresses both the highs and the lows that life inevitably serves up. As a trusted advisor to my clients, it is incumbent upon me to raise awareness about these issues. And as a client of JJ Burns, you can expect our help in addressing the full range of your financial interests—even those that may not be fun to address.

Client needs are best served by developing a sound wealth management plan. A sound plan is one that lifts the hood and looks at and coordinates all areas of a client’s financial life from living wills, durable powers of attorney, types and rules of medical coverages, insurance policies, taxes and so much more. This is the stage I call “prepare for the worst and hope for the best while living fully.”

I am grateful for the opportunity to serve my clients. I know that in tough times, after immediate family members, we are the ones receiving the next call. As disheartening as it is to hear from a client, “I’ve been diagnosed with Alzheimer’s,” we take great pride in knowing we have been there doing the hard work.

As our client, you will know you are prepared for difficult moments AND you will also know that we are right beside you all the way. That is the power of planning, that is the security of a plan, that is the comfort in having a truly great team.

On behalf of our entire wealth management team at JJ Burns & Company,

James J. Burns, CFP®
CEO/President
JJ Burns & Company