Some of the biggest challenges many face when it comes to education are financial. Luckily, a 529 college saving plan can help. And they’re not just for college anymore – added to the tuition eligibility are K-12, private and religious schools. These funds can also be used for four and two-year colleges, trade schools, graduate programs, and some international institutions.

A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. State tax treatment of 529 plans is only one factor to consider prior to committing to a savings plan. Also, consider the fees and expenses associated with the particular plan. Whether a state tax deduction is available will depend on your state of residence. State tax laws and treatment may vary. State tax laws may be different from federal tax laws. Earnings on non-qualified distributions will be subject to income tax and a 10% federal penalty tax.

Here’s a list of 529 qualified educational expenses:

Educational Strategy

To take advantage of the 529 distribution for educational costs, you must submit your request for the funds during the same calendar year. If you request cash during the academic year, you may end up owing taxes as a non-qualified withdrawal.

  • Higher Education – Post-secondary students (after high school) are eligible to participate in the federal student aid program administered by the U.S Department of Education and qualify for the use of 529 funds.
  • Vocational or Trade School – Culinary students can draw from their 529 accounts to pay expenses related to culinary institute courses. The institution must participate in the U.S Department of Education for federal student aid.
  • Early Education – K-12 schools, public, private, and religious institutions can now use 529 plan distributions up to $10,000 per student for tuition.

Lifestyle and School Supplies

Learning how best to use your 529 distributions while establishing a manageable budget for qualified and non-qualified purchases can be tricky. Here are some tips to keep in mind.

  • Housing – Campus housing can be paid through 529 distributions, including college room and board fees. Off-campus housing rentals qualify up to the same cost of the room and board on campus.
  • Books and Supplies – paper, pens, and textbooks required by the specific course are qualified expenses. Schools set the budget limit for books and supplies.
  • Needs and Services – Special needs equipment and services qualify for 529 distribution. Students using equipment for mobility may be eligible for 529 distribution purchases.

Depending on the circumstances, other modes of transportation may also apply.

Welcoming Technology

Finally, many don’t realize that computers and some electronics are included on the list of qualified education expenses. Keep in mind that these items must be required as part of the students’ study programs to qualify.

  • Personal Computer – Computers must be used primarily by the student during any of the years the student is enrolled at the eligible educational institution.
  • Software – software may qualify as a 529 distribution expense, but only if it’s used by the student and required by a class. For example, technical engineering or design classes may involve computerized assignments.
  • Internet – Lastly, under certain circumstances, internet services can be paid for using 529 funds. Check with your internet service provider (ISP) for more details.

The above tips are sure to help get you started, but make sure to check with the school as well as chat with your financial professional to learn more. As mentioned earlier, each state and school may have different restrictions on using 529 funds. If you are unsure about anything, your plan sponsor may be able to provide some guidance.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Market Updates

  • The current U.S. economy is doing well with unemployment at a 50 to 60-year low and strong consumer spending. Manufacturing numbers are stagnant, supply-chain issues are freeing up and gas prices remain in a neutral price range.
  • However, consumer trepidation toward the stock market has caused continued stock market contraction. Despite a stable economy, U.S. consumers remain cautious and are taking a more conservative approach. Assumptions are that the Federal Reserve may continue to raise interest rates, perpetuating decreased bond valuation.
  • Continued volatility in the stock market is headlining media and political news.
  • Our research partners continue to push back timeline expectations for an economic recession, now anticipating a market swing in late 2023.
  • Money Markets and CDs continue to have high interest rates, and fixed annuity products have very slow processing times due to an influx in banking business. If you have concerns about this, please give us a call or come visit to discuss. We are always available to help you assess fees and terms for any financial product(s) you may be considering.
  • Unfortunately, we anticipate rising gas prices over the summer—up to $4-$4.50. Take these increases into consideration when creating your summer budget!

Ask Triangle Questions

Q: Why are gas prices predicted to rise again this summer?

A: The Organization of the Petroleum Exporting Countries (OPEC), which supplies our gas, will decrease production in an effort to keep gas prices above the $80-$90 price point. This is due to a few factors: China re-opening and the increase in both competition and travel during summer months.

Q: What can be expected as far as the depth of a potential recession?

A: We expect the recession to be shallow, but it may also last for a longer time period. Despite contractions that began 12 months ago, the economy has remained resilient, so we don’t anticipate a recession as deep as the one we experienced in 2008.

Q: Can you explain a Charles Schwab stock report?

A: There are different ways to analyze a stock’s value, including tactical analysis and fundamental analysis.

Tactical analysis is not something our team does, but some of our research partners, like First Trust, provide it. Tactical analysis looks at data and algorithms, also referred to as algorithmic trading, which is similar to day trading with buy and sell triggers.

Fundamental analysis, the method Charles Schwab stock reports utilize, is a comprehensive look at anything that can affect a stock’s value. Fundamental analysis considers Beta (relative volatility compared to the Stock Market), dividends, price performance earnings, price history and the financial health of a company.

– A Beta of one means that the stock has similar volatility to the market index (e.g. a Beta of less than one in the S&P 500 equates to the stock being less volatile than the market index.) A low Beta is ideal when combined with a high dividend.
– Price performance is how the fund has performed and how it compares to its peers.

At Triangle Financial Services, we tend to enjoy mutual funds versus individual stocks because there is less volatility. We use fundamental analysis because we are always looking at the big picture for our clients—both short- and long-term goals. We are invested in the long-term outlook of your future, so we‘re unwilling to gamble with your hard-earned money and financial goals.

Sources

Friday April 7th Ask Triangle: ETFs and Mutual Funds

Securities and Advisory Services offered through Harbour Investments, Inc. Member SIPC & FINRA.
Past performance doesn’t guarantee future results.

As a parent, you of course want to give your child the best opportunity for success, and for many, attending the “right” university or college is that opportunity. Unfortunately, being accepted to the college of one’s choice may not be as easy as it once was. Additionally, the earlier you consider how you expect to pay for college costs, the better. Today, the average college graduate owes $37,172 in debt, while the average salary for a recent graduate is $50,944.1,2

Preparing for college means setting goals, staying focused, and tackling a few key milestones along the way — starting in the first year of high school.

Freshman Year

Before the school year begins, you and your child should have at least a handful of colleges picked out. A lot can change during high school, so remaining flexible, but focused on your shared goals, is crucial. It may be helpful to meet with your child’s guidance counselor or homeroom teacher for any advice they may have. You may want to encourage your child to choose challenging classes as they navigate high school. Many universities look for students who push themselves when it comes to learning. However, a balance between difficult coursework and excellent grades is important. Keeping an eye on grades should be a priority for you and your child as well.

Sophomore Year

During their sophomore year, some students may have the opportunity to take a practice SAT. Even though they won’t be required to take the actual SAT for roughly a year, a practice exam is a good way to get a feel for what the test entails.

Sophomore year is also a good time to explore extracurricular activities. Colleges are looking for the well-rounded student, so encouraging your child to explore their passions now may help their application later. Summer may also be a good time for sophomores to get a part-time job, secure an internship, or travel abroad to help bolster their experiences.

Junior Year

Your child’s junior year is all about standardized testing. Every October, third-year high-school students are able to take the Preliminary SAT (PSAT), also known as the National Merit Scholarship Qualifying Test (NMSQT). Even if they won’t need to take the SAT for college, taking the PSAT/NMSQT is required for many scholarships, such as the National Merit Scholarship.3

Top colleges look for applicants who are future leaders. Encourage your child to take a leadership role in an extracurricular activity. This doesn’t mean they have to be a drum major or captain of the football team. Leading may involve helping an organization with fundraising, marketing, or community outreach.

In the spring of their junior year, your child will want to take the SAT or ACT. An early test date may allow time for repeating tests their senior year, if necessary. No matter how many times your child takes the test, most colleges will only look at the best score.

Senior Year

For many students, senior year is the most exciting time of high school. Seniors will finally begin to reap the benefits of their efforts during the last three years. Once you and your child have firmly decided on which schools apply, make sure you keep on top of deadlines. Applying early can increase your student’s chance of acceptance.

Now is also the time to apply for scholarships. Consulting your child’s guidance counselor can help you continue to identify scholarships within reach. Billions in free federal grant money goes unclaimed each year, simply because students fail to fill out the free application. Make sure your child has submitted their FAFSA (Free Application for Federal Student Aid) to avoid missing out on any financial assistance available.4

Finally, talk to your child about living away from home. Help make sure they know how to manage money wisely and pay bills on time. You may also want to talk to them about social pressures some college freshmen face for the first time when they move away from home.

For many people, college sets the stage for life. Making sure your children have options when it comes to choosing a university can help shape their future. Work with them today to make goals and develop habits that will help ensure their success.

1. Forbes.com, 2020
2. TheBalance.com, 2020
3. PrincetonReview.com, 2021
4. SavingForCollege.com, 2020

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2023 FMG Suite.

Have you ever had one of those months? The water heater stops heating, the dishwasher stops washing, and your family ends up on a first-name basis with the nurse at urgent care. Then, as you’re driving to work, you see smoke coming from under your hood.

Bad things happen to the best of us, and sometimes it seems like they come in waves. That’s when an emergency cash fund can come in handy.

One survey found that nearly 25% of Americans have no emergency savings. Another survey found that 40% of Americans said they wouldn’t be able to comfortably handle an unexpected $1,000 expense.1,2

How Much Money?

How large should an emergency fund be? There is no “one-size-fits-all” answer. The ideal amount may depend on your financial situation and lifestyle. For example, if you own a home or have dependents, you may be more likely to face financial emergencies. And if a job loss affects your income, you may need emergency funds for months.

Coming Up with Cash

If saving several months of income seems unreasonable, don’t despair. Start with a more modest goal, such as saving $1,000, and build your savings a bit at a time. Consider setting up automatic monthly transfers into the fund.

Once your savings begin to build, you may be tempted to use the money in the account for something other than an emergency. Try to avoid that. Instead, budget and prepare separately for bigger expenses you know are coming.

Where Do I Put It?

Many people open traditional savings accounts to hold emergency funds. They typically offer modest rates of return.

The Federal Deposit Insurance Corporation (FDIC) insures bank accounts for up to $250,000 per depositor, per institution, in principal and interest.3

Others turn to money market accounts or money market funds in emergencies. While money market accounts are savings accounts, money market funds are considered low-risk securities. Money market funds are not backed by any government institution, which means they can lose money. Depending on your particular goals and the amount you have saved, some combination of lower-risk investments may be your best choice.

Money held in money market funds is not insured or guaranteed by the FDIC or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund.4

Money market mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

The only thing you can know about unexpected expenses is that they’re coming. Having an emergency fund may help to alleviate stress and worry that can come with them. If you lack emergency savings now, consider taking steps to create a cushion for the future.


 

  1. MarketWatch.com, 2020
  2. Bankrate.com, 2021
  3. FDIC.gov, 2022
  4. Investopedia.com, 2021

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2023 FMG Suite.

When considering a subject to write about, I decided to ask one of my old college roommates what financial topic she wishes she’d known more about as a younger professional. Her response: Why should I make consistent, small contributions to a 401k – or other retirement account? And how does it build up over time?

What my friend was referring to is called the power of compounding. You may be more familiar with compound interest in terms of debt – if you don’t pay off your balance within a pre-determined term, most debtors start charging interest on the unpaid balance, and your total amount owed increases with time – yikes!

When it comes to savings, the power of compounding looks instead like positive growth – which means the amount of money in your account increases resulting from re-investing dividends and interest over time. It’s tempting, especially for young adults or lower-salaried professionals, to wait to invest until you feel like you have “more money,” but is that wise?

Let’s take a look at how small investments over time compare to waiting for more “cushion” in income.

Meet three fictional characters – Mary, Max and Carter. At age 25, they have just started their first “adult” jobs in Des Moines and are each renting an apartment while paying off student loans. All three young professionals have access to an employer-sponsored retirement plan at work that they can contribute to (and may have an employer match.)

Mary decided to save in her employer-sponsored retirement account and figures she can afford to put $5,000 into this account every year. Her investment averages a return of 7% per year, and she continues to save $5,000 each year for 10 years. Mary then decides to change jobs, and her new employer does not offer a company sponsored retirement plan. Now that her investments aren’t automatically scheduled through work, she forgets to set up a savings plan and leaves the $50,000 invested in that original account. When she retires at age 65, she checks her account and is surprised to see it has grown to $562,683!

As a recent graduate, Max decided to focus on paying off those pesky student loans first and hold off on retirement savings for ten years because he just didn’t have the cashflow. After celebrating his loan payoff, Max decides to invest $5,000 per year into a retirement plan. He sets it up and forgets about it. He doesn’t miss the money since he had been paying off his student loans until then, and he never makes changes to his contributions over the years. He also has an investment that averages 7% a year. When Max is set to retire at 65, he checks his account statement to see that his account is worth $505,365.

Carter, on the other hand, decides to start saving $5,000 a year right away like Mary, but he never quit. When Carter retires at age 65, he is excited to see that his investments had grown to $1,068, 048. Carter had only invested 10 more years than Max for a total of $50,000 more, but because of the power of compounding, Carter’s account was worth twice of Max’s.

total amount invested account value at 65
mary (saved for 10 years and stopped) $50,000 $562,683
max (waited 10 years, then saved for 30 years) $150,000 $505,365
carter (saved for 40 years) $200,000 $1,068,048

Even if you can’t afford to save much now, having more time for your investment of any amount to compound will be more beneficial than holding off to save. Even though Max saved three times more than Mary, his account was still worth $57,000 less than her account was at age 65 because he waited to start saving.

The moral of this fictional story? Save early and save often. Establishing a healthy habit of saving into a compounding account early is beneficial in several ways — not only can you reach your long-term financial goals, but even if (when?) life throws you a curve ball and you need to pause your savings plan, your saved investment continues to work for you.

Lindsey Taylor, MFM
Financial Advisor

Securities and Advisory Services offered through Harbour Investments, Inc. Member SIPC & FINRA.

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