How to Cover the Rising Cost of College

By
Zach Swaffer, CFP®
February 27, 2020
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One of the most common questions I receive is how to most efficiently save for education expenses. And I understand why – it’s a daunting prospect! The cost of college continues to rise, and student loan debt can plague you for decades following graduation. There is also a growing realization that college is not for everybody. How do you prepare for an expense that might not actually occur? However, it doesn’t have to be such an intimidating process. In fact, there are several effective strategies you can deploy to efficiently – and effectively – save for your child’s education expenses.

First, you need to determine how much you’ll need to save. Do you plan to cover the whole cost of school or just a portion (for instance: undergrad only, or will you cover grad school expenses for your child(ren)? Once you’ve set a number, your financial planner can assist in calculating a monthly savings rate required to work toward that goal.

The next step is deciding what type of savings account(s) to use. There are different accounts that are specifically designed to save for college, for example: 529 plans and Coverdell Education Savings Accounts. Below are some of the reasons why a 529 Plan and/or investment accounts may be a better solution.

A 529 plan allows you to contribute to an account on behalf of a named beneficiary (in this case, your child). Because the government wants to reward saving for educational expenses, contributions to 529 plans receive preferential tax treatment and are able to grow tax-deferred. You can use the money in the account to pay for qualified educational expenses, tax-free. Contributions to these accounts are also typically deductible on state tax returns. The drawback to a 529 is that the money must be used for qualified education expenses – or you will face tax penalties.

An individual/joint investment account is an account owned by yourself or jointly by you and your significant other. Money invested in this type of account does not receive preferential tax treatment; however, your money can be withdrawn for any reason without tax penalties.

Given the shifting trends in higher education, it is my belief that a combination of 529 plan contributions and individual/joint account contributions will help to save for college education. This form of education planning allows for flexibility; for instance, if your child(ren) decide(s) against traditional higher education, you won’t have to pay tax penalties on all of your education savings, as a portion of that savings is held in an individual/joint account with no restriction on how the assets are used.

While education planning is important it is only one component of a full financial plan. If you would like to talk more about education planning and its impact on your personal financial plan please contact me at zach.swaffer@trilogyfs.com

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what is appropriate for you, consult a qualified professional.

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By
Mike Loo, MBA
July 20, 2018

Over the course of hundreds of conversations with clients, I’ve found that quite a few them have wrestled with the idea of whether they should go back to school for an advanced degree. As their advisor, I am commonly asked if returning to school would be financially beneficial. The risk/return analysis is not always cut-and-dried in this situation. Investing X amount of dollars in a degree program does not always result in an equal or higher return in the future.

The True Value Of Education

Education is about more than just the money. After a recent conversation with a client, I had the realization that while I don’t need an MBA for my job as a financial advisor, the MBA experience itself shaped and molded me to become the advisor I am today. While I did take numerous finance classes to enhance my knowledge and quantitative skills, the greatest value I gained from earning an MBA came from improving qualitative skills, such as working with people, networking, effective communication, and time management. These are skills that I use daily in my current role.

Every experience we go through, especially those that push us out of our comfort zone and require plenty of work and time, leads to personal growth. Had I not gone through the MBA program at USC’s Marshall School of Business, I might not have developed the work ethic required to succeed as a financial advisor, and I could have ended up on a completely different career path altogether.

My Pre-MBA Self

Before entering the MBA program, I had a passion for the financial services industry, but like most college grads, I wasn’t sure how that would translate into a career. I didn’t have a clear direction for my future. I was interested in becoming an advisor but knew that it would be fairly tough to advise people on what to do with their finances when I hadn’t gone through many life experiences myself.

I had always loved the idea of making money and becoming more efficient with what I had, but I was young and dumb (and willing to admit that)! I fell into the cultural mindset of wanting to work typical business hours, earn a large salary, and enjoy life. In essence, I wanted the rewards but didn’t want to do the work involved to achieve those rewards. In my naive way of thinking, an MBA seemed to be the simplest path to achieve this end result. I can tell you that I was so wrong in this assumption!

What I Gained from My MBA

Networking Skills: USC is known for networking. Everything I heard about business school prior to attending was that the most important takeaway from the experience is to network, network, network. Unfortunately, my pre-MBA self was uncomfortable talking with people I didn’t know. I didn’t like to take the initiative to introduce myself and sometimes avoided conversing with people unless I was introduced first. As time went on and I experienced the pressure of competing against my peers and other highly qualified candidates for the same jobs, I was forced to rise to the challenge and become comfortable with being uncomfortable.

This skill alone has helped me immensely in my career when it comes to collaborating with a client’s other professionals, such as an estate attorney or CPA. In order to do a thorough job for a client, it’s often necessary to work with their other professionals to make sure we’re on the same page. In many cases, I’ve reached out to a client’s CPA to make sure they had my contact information so that if questions arise about the client’s investments, they call me rather than my client.

This skill has also helped me in reaching out to client referrals or prospective clients because I’ve found that people often want help with their financial planning, but they might not tell others or take the first step.

Effective Time And Task Management: During my time at USC, multitasking became the norm. If I wanted to effectively balance school, attend recruiting events, revise my resume, participate in mock job interviews, network for potential jobs, and somehow find time for a personal life, I had to become better with time management.

My job today is multi-faceted and includes juggling many tasks, such as answering client questions, servicing and monitoring their accounts, staying on top of changes in the industry, and dealing with changes life throws my clients’ way. Knowing that I was able to handle my heavy load in the past gives me confidence that I can prioritize my work today. Most importantly, I’ve come to realize that with all of these moving parts, it’s impossible to be rigid in only working business hours (again, something I aspired to when I was young and dumb), because not everyone is available from 8 am to 5 pm. Instead, I’ve become flexible with my schedule and instituted taking a day off during the week so that I can occasionally meet with clients on the weekend or do a phone call later in the evenings.

Is An Advanced Degree Right For You?

In my case, obtaining an advanced degree was one of my best decisions. It’s difficult to imagine doing anything else with my life and I am fortunate that I went down this path. If you or someone you know is trying to make this decision, I would love to give you some insight and help you look at the situation from an objective perspective. Or, if you would like to network and see if we could work together, call my office at (949) 221-8105 x 2128, or email me at michael.loo@lpl.com. I’d love to see you thriving in your life!

By
David McDonough
February 22, 2021

Preparation for retirement is extremely important, and it extends well beyond finances. In addition to knowing how you’re going to fund it, you also need to know what your time will look like when you say you’re done with being a wage earner. With this new lifestyle, you not only need to determine how to fill up the hours in the day, but you also need to determine what your new purpose is. This can be a pretty significant task, which becomes even more complicated when you add another person to the equation. That’s why you need to work on your retirement compatibility with your partner way before you stop working.

Retirement Compatibility is a tricky thing. Statistics show that half of the couples disagree on their retirement age —and a third don’t see eye-to-eye about their expected lifestyle in retirement[i]. This is troubling as there are a lot of logistics you need to determine in this new chapter of your life. Will you be retiring at the same time? Typically, only 1 in 10 couples retire together[ii]. If you and your partner are planning on retiring at different times, you may want to look into how this change affects your health insurance. You may also want to consider re-establishing household roles. Equally important, you will need to find common ground on your retirement budget as it will require commitment from both parties.

Oftentimes, the difficulties in transitioning from a wage-earner to a retiree can go beyond the logistics. Some experience a period of depression as they look for a new purpose in life. As tempting as it may be, that new purpose shouldn’t be your partner. If you don’t plan correctly, you will suffer from what I call too much togetherness. This can be a very real strain on relationships. Instead, look at your life as being divided into “You Time, Me Time, and We Time.” To aid in this transition, you may want to try winding down your career gradually in order to practice retirement. This can prove to be a benefit to both yourself as you experiment with this new stage in your life and your employer as you stay on to train and mentor your replacement.

Start working on your retirement compatibility with your partner with regular financial date nights. Start discussing how you envision that new chapter in your life. What type of lifestyle do you want to live? Will there be a lot of dinners out with friends or home-cooked meals watching your favorite television show? Will you be traveling or developing a new passion? Will you work part-time or volunteer? Communication is key. Share your plans with your partner so that the two of you stay on the same page and prevent incorrect assumptions from being made.

Retirement, a lifestyle of six Saturdays and one Sunday, can be either a wonderful time or a stressful transition, depending on your planning. Make sure you and your partner’s planning extends beyond finances to ensure a smooth and joyous new chapter in your lives.

[i] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/couples-retirement-fact-sheet.pdf

[ii] https://assets.aarp.org/rgcenter/general/retired_spouses.pdf

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what is appropriate for you, consult a qualified professional.

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