May 2017

How Grandparents May Benefit From College Funding

With the increase of student loan debt over the past 10 years, more grandparents are taking on the role of college funding. In fact, a Fidelity survey in 2014 found that 72 percent of grandparents feel it’s important to help out in this regard.1

Many retirees walk a tightrope between wanting to make gifts to help family members yet still ensure they’ll have enough assets to last throughout retirement — including any unexpected expenses. For those who’d like to contribute toward college expenses, the 529 College Savings plan offers quite a few benefits for grandparents. Here are some of the benefits to consider:2

  • You can contribute up to $70,000 ($140,000 from a married couple) in one year, per recipient, if you elect to treat the contribution as made over a five-year period for gift-tax purposes.
  • Some state plans allow the account owner to claim contributions as a state income tax deduction.
  • The account owner retains control of the assets, so the money can be accessed if needed for an emergency. It’s important to note that investment gains would be subject to a 10 percent penalty for withdrawals that are not spent toward qualified education expenses. You also would be subject to income tax on those gains.
  • If the intended grandchild doesn’t use the 529 money, the beneficiary can be changed to another relative. You even can use the money for your own qualifying continuing education.
  • The 529 isn’t a savings account; the money is invested for growth opportunity.
  • The 529 plan makes a good repository for required minimum contributions (RMD) from retirement plans.
The content provided in this newsletter is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney. All investments are subject to risk, including the potential loss of principal.
1 Saving For College. “Grandparents.” 2017. Accessed March 10, 2017.
2 Kathryn Flynn. Saving For College. “Eight Reasons Why Grandparents Love 529 Plans.” July 16, 2015. Accessed March 10, 2017.

Prospects for Growth in 2017

Some researchers believe the U.S. economy has a healthy outlook: The GDP growth rate is in the ideal 2 percent to 3 percent range, unemployment continues to abate and inflation remains in check.1

The U.S. Bureau of Labor Statistics expects 88 percent of all occupations will experience growth by 2020, with the biggest increases coming in health care, personal care and construction. It also predicts that jobs requiring a master’s degree will grow the fastest.2

Aside from the potential of lower taxes, more jobs and infrastructure spending, the U.S. economy has another reason for optimism: American manufacturing, industrial production and trade sectors appear to be emerging from their recession. Economists anticipate that industrial sector growth will continue throughout 2017.3

Furthermore, consumer and chief executive officer confidence levels have improved considerably since the November U.S. election. The current expectation for more fiscal stimulus is expected to translate into greater spending and stronger economic growth.4

In periods of positive economic news such as this, people sometimes get caught up in “the good times” – planning vacations and finding other ways to spend newly acquired discretionary income. As financial professionals, we want to help you create a long-term financial strategy now, so that you feel confident in your financial future.

Clearly, no one knows where the market will go in 2017, but according to investment analysts at Charles Schwab, income growth may be poised to continue in the immediate future. Technology, health care and financial sectors are among those that could outperform in 2017.5 One reason is that the U.S. is entering an era of deregulation. President Trump has already started to roll back regulations put in place during the Obama administration, which issued more than 3,750 final rules and regulations during its eight-year tenure.6

If you find yourself with some extra funds you would like to put away for retirement, call us for assistance on allocating them to your financial plan.

Content prepared by Kara Stefan Communications
1 Kmberly Amadeo. The Balance. March 15, 2017. “US Economic Outlook: For 2017 and Beyond.” Accessed March 21, 2017.
2 Ibid.
3 Rick Rieder. BlackRock. Jan. 13, 2017. “2 Reasons the U.S. economy Should Fare Better in 2017.” Accessed March 21, 2017.
4 Ibid.
5 Brad Sorenson. Charles Schwab. March 16, 2017. “Schwab Sector Views: How Should Investors Look at Health Care Now?” Accessed March 21, 2017.
6 Alejandro Chafuen. Forbes. Jan. 3, 2017. “The U.S. Economy In 2017: Welcome Higher Growth.” Accessed March 22, 2017.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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