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February, 2010:

The Downside of Prepaid Tuition

When planning to save for future college expenses, you may run across several options – including insurance policies, savings bonds, retirement accounts and specific education accounts, such as Coverdell Education Savings and Section 529 plans. Among the options for Section 529 plans are two types of account:  savings and prepaid tuition.  Following is a brief explanation of the two types of account. Savings-Type 529 Plan The savings type of 529 plan works much like an IRA or 401(k): contributions are made and the amounts contributed to the plan are allocated among various sorts of investment options, mostly mutual funds or derivatives of mutual funds.  Over time, assuming that you’ve made appropriate allocation choices and the investments grow, the balance of the account will in turn grow, increasing the amount of funds available to pay for college expenses.  Growth in the account is tax-free when used for qualified higher education expenses […]

A Little-Known Social Security Spousal Benefit Option

Most everyone is familiar with the concept of Social Security Spousal Benefits – if not, click this link for a complete explanation. In this article, we’ll be discussing an option that is available to all married recipients of Social Security retirement benefits – but you might not have thought of it.  For most all married couples, it makes the most sense for the spouse with the higher wage base – that is, the spouse that has earned the most money throughout his or her working career – to delay receiving Social Security retirement benefits as long as possible. As described in the article about credits for delaying Social Security benefits, each year that you delay receiving your Social Security retirement benefit past your full retirement age (FRA) can result in up to an 8% increase in your benefit amount.  When delaying like this, it often also makes sense for the […]

Coming Soon: No Change For the Financial Services Consumer If FatCats Get Their Way

We talked about this issue of the accountability standards for financial professionals some time ago (click here to get the background).  Unfortunately, it seems that the big money and best interests of the large brokerages, banks, and insurance companies is turning the tide against the proposed fiduciary standard for all financial professionals. The fiduciary standard has long been sought after by consumer advocates, as the great majority of financial professionals are held to a much lower standard of care – one that often leaves the consumer of financial services exposed to higher costs and a low likelihood of advice being in his or her best interests.  Last year, proposals were offered in Congress to require the fiduciary standard of all regulated financial professionals – which is a step in the right direction. However, intense lobbying efforts by the fatcats, the heavyweights of the financial services industry (think banks, brokerages, and […]

Understanding the 2010 Estate Tax Repeal

The start of a new year often signals a time for change–especially when it comes to taxes, and 2010 has brought some major changes. As of January 1, the federal estate and generation-skipping transfer (GST) taxes are repealed, and the step-up in basis rule is modified for 2010. While it’s possible (and some believe very likely) that Congress will reinstate these taxes, until that time, it’s important to understand these significant federal tax law changes and how they might affect you. Federal estate tax repeal In 2009, the top estate tax rate was 45%, and estates received an exclusion of $3.5 million, (meaning that up to $3.5 million of assets were exempt from estate tax). However, as part of the tax cuts initiated in 2001, the estate tax is repealed for 2010 but is scheduled to return in 2011, albeit with a reduced $1 million exclusion and an increased top […]