Over the past few weeks I have been asked (and pitched) the idea of whether cash-value life insurance makes sense as a vehicle for saving and paying for college. By cash-value life insurance, I am including whole life, variable life, universal life and variable universal life policies. First, in almost all cases, it does not. The very few cases where it may make sense will be covered shortly. Here are some reasons why a 529 college savings plan is better than cash-value life insurance. 529 plans have very high contribution amounts. Depending on your state, the total amount you can contribute to your 529 plan is very high, and the annual contribution amounts are high as well. From a federal tax perspective, you are allowed to contribute up to $14,000 annually without incurring gift tax consequences. This amount doubles to $28,000 annually if you’re married and elect to split the […]
coverdell accounts
How To Save (and Pay) for College
Saving for college is a priority among many parents. Often we are asked about the right savings vehicle for college education. There are a few that parents can choose from between Coverdell ESAs, prepaid tuition and 529 college savings savings plans. We’ll discuss the 529 plan here. The 529 plan is essentially a college savings vehicle very similar to an IRA or an employer-sponsored plan. Depending on the state you live in your state may have a 529 plan that will have access to stock and bond mutual funds and or a pre-determined mix that will invest the money and allocate it for you depending on your risk tolerance or your time horizon upon entering college. Many states such as Illinois well even offer a state tax deduction for any contributions that you make up to a certain dollar limit. The beauty of 529 savings plans is that there is no […]
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Have a HEART
Yes, I am organizing this writing around Valentine’s Day as a clever way to introduce a benefit military service members and their families can take advantage of as well as tie it into the title itself. The Heroes Earnings Assistance and Relief Tax Act or HEART Act provides service members and their families with certain pension and tax benefits while living or in the event of the service member’s death. According to http://myarmybenefits.us.army.mil/ these are some of the benefits that can be taken advantage of due to the HEART ACT: Accelerated vesting in the retirement plan (but not any imputed additional benefit accruals for the period of military service) Additional life insurance benefits Other survivor’s benefits depending on the benefits of the employer Employers also have the choice of treating the disabled or deceased service member as if they had returned to work the day before the disability or death occurred. […]
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Education Expense Tax Tips
One way to help ease the bite of the cost of a college education is to use all available tax rules to your advantage. There are several items you can use, including 529 plans, Coverdell ESAs, and various credits for tuition and fee payments. The IRS recently released their Summertime Tax Tip 2013-19: Back-to-School Tax Tips for Students and Parents, providing a valuable overview of a couple of important credits and deductions. The actual text of the Tip follows: Back-to-School Tax Tips for Students and Parents Going to college can be a stressful time for students and parents. The IRS offers these tips about education tax benefits that can help offset some college costs and maybe relieve some of that stress. American Opportunity Tax Credit. This credit can be up to $2,500 per eligible student. The AOTC is available for the first four years of post secondary education. Forty percent of […]
Sterling Raskie, MSFS, CFP®, ChFC®
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