Personal Finance and Investing » Savings/Debt

529 Education Savings Plan – Investing For Your College Degree

admin — Sat, 04 Sep 2010 12:16:27 +0000

Do you know that investing in a 529 education savings plan is one of the best ways to afford your child’s college education costs? Currently the most used financial option by parents, these college savings plans are more than just for studies. What about additional college education costs that your child may need to cover when he’s in college and of course let’s not forget the college tuition fees themselves. For those who do not invest in 529 savings plans there are alternatives so whatever decision you make in investing in child’s education, there are no right or wrong answers.

Why do parents go for college savings plans more than anything else? Because it’s an investment that will usually grow faster than the inflation rate and with a minimum monthly payment your child can have access to a large sum of money when they go to college thanks to you. How early you should start? The earlier the better because the earlier you start the less you have to invest a month in order to send your child to college. School is not only about learning but it’s also about having fun so it may not come as a surprise but the funds will not only go to school.

Like everybody else students do need to get entertained sometimes so the money invested in 529 plans may pay for education but it will also be used for other purchases. More important than entertainment, if your child lives on campus, there is the rent to consider, the food, the utility bills and other expenses related to the cost of living. So it’s important that whatever money is invested in a 529 savings plan takes care of your child’s additional expenses. The main use of the college savings plan is to pay college tuition.

The most expensive part of going to college is paying for college tuition fees of course. Varying from a few thousand dollars to almost $20,000, college costs are usually a big factor as to why some students will study two years instead of four. Another factor is whether they will go to private schools or public schools. It’s important to make the decisions beforehand so you can see if your child has funds and if they don’t, how much will they need in order to graduate from college. Some of you may not have enough time to invest in a college savings plan which is why there are quick financial alternatives for those in need.

Maybe faster than savings plan, there is one catch which is the money does not belong to you. A college loan is money that you borrowed which means you will have at least one creditor to who you owe a debt. Although you can get a huge amount of money in a short period of time, you have to pay it back with interest and the longer it takes you to pay it back to more it will cost you in interest. But if you are good with money management then loaning money will not be a problem for you.

Planning for a child’s college education is extremely important since college costs have been known to be rising much faster than inflation rate of the country. If you want to be able to compete with that inflation you must start early and investing in a 529 education saving plan when a child is still young will give you a big head start over the rising cost of college. Don’t leave your child’s college education to faith, your child believes in you so let’s keep it that way.

Debt Consolidation Mortgage Loan

admin — Sat, 04 Sep 2010 04:06:09 +0000

A debt consolidation mortgage loan is a type of loan that homeowners can take using their home as collateral. The money can be used to pay off all of the homeowner’s outstanding debt.

When you have a great amount of debt, and cannot see your way out of it, a debt consolidation loan can assist you in many ways, one of the greatest being that you can lower the interest rates that you are paying on each individual debt that you have.

Credit card interest rates are notorious for being outrageously high. If you have more than one credit card, then your debt is increased by the number of cards that you have.

This type of loan takes all of your debt, interest and all, and consolidates it into one payment. The only payment that you will have is the loan payment itself. You may think that this payment is going to be exorbitant; and it may be a little on the high side, however it will not be nearly as much as the payments you would be making if you did not take the loan out to begin with.

There are many benefits to a debt consolidation mortgage loan.

Lower interest rates – loans interest rates are lower than credit card interest rates

Tax Deduction – the interest that you pay on this type of loan is tax deductible

These are just a few of the benefits to using a debt consolidation mortgage loan. There are many others benefits.

It is important that you make your payments on time every month because it is reported to the credit agency and will affect your credit score significantly.

If you are interested in obtaining a mortgage loan, it is important that you understand every aspect of the contract you will be signing. Your home is at stake, take the time to ask questions and understand the answers completely.

The California 529 College Savings Plan

admin — Fri, 03 Sep 2010 23:50:07 +0000

The inflation rate of college education has always been a source of great anxiety and tension. This problem was partially resolved with the introduction of new education laws. These laws were introduced as a part of the Educational Plan of 2002, under Section 529 of the Internal Revenue Code. This is actually an amended law of the Educational Savings Plan of 1996. Leaving aside only a few states, you will find that this plan has been implemented in most of the states of U.S.

In California, it is also known as the California 529 College Savings Plan. The 529 college plan is much better than the Coverdell Education Savings Accounts. This plan has flexibility and many options to save on taxes. The percentage of tax incurred upon the saved amount – if withdrawn without expending on the purposes of education – is low. So you can always receive a good percentage of the money back on the saved amount.

The specific laws and the type of plans implemented (there are two different type plans) depend mostly on the enacted legislation of each state that administers them. Each state has been given the freedom to impose their own set of applicable laws, rules, and regulations, as long as they keep all the basic federal laws intact.

One of the more basic precepts of the 529 laws expresses the idea that the savings account can be contributed to by any person besides parents; like grandparents, relatives, or even parent’s friends. And in California, you’ll find both types of 529 plans; the Prepaid Plan and the Savings Plan. Among these, the more popular for Californians is the Savings Plan, which even has a growth provision that compensates for market inflation. The tax deduction scheme applicable to 529 laws in California is per the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). This legislation has provided income tax relief for Californians.

So, you’ll be able to implement a very safe, flexible savings scheme – with complete power of attorney to yourself – when participating in either type of these plans. And if you compare prices and benefits of the 529 laws between other states, you’ll find that the typical Californian enjoys more flexibility and tax benefits than any other.

Some Benefits Of The 529 California College Savings Plan

1) You have choice: you can choose which type of plan to implement; the prepaid or the savings plan. Most states don’t prefer either one, and allow for both.

2) Some plans are state sponsored and some are privately sponsored. So, you’ll find that the better mutual fund companies, insurances companies and even some banks will have their own programs for these educational savings plans. However, always keep in mind that all these specific programs are still subject to certain underlying laws, pursuant to Section 529 of the IRC. Some colleges even administer their own plans, where you can open an account and/or carry on with the savings scheme.

3) You have sole authority over the money — unlike previous educational programs, where the funds were deposited directly into the beneficiary’s account and were therefore subjected to misuse.

4) Under this scheme of investing, the earnings from the savings are exempted from tax by the California Franchise Tax Board. So the distributions/contributions towards these funds are non-taxable, issued under certain conditions.

5) A minimum tax is levied on the total amount after maturity; that is, once the child starts into their college days. The actual tax is attached to the beneficiary’s Tax ID number. The exact amount and/or percentage of tax imposed on the funds depend on the tax laws and rules for that specific fiscal year’s budget.

6) You can invest in a fund to a maximum of $60,000 for individuals and $120,000 for couples in any given year — without paying any gift taxes. In other words, the gifted amount is tax-exempt. This is a pretty strict ruling here though, as the rule states that in the next five years, you cannot gift any more money to the beneficiary. Any gifts or contributions exceeding these amounts per each individual/couple will be taxed as per the California state tax rules.

Precautions while signing up for a new account
Some of the privately sponsored savings accounts have hidden charges, like; maintenance charges, program management fees, and other expenses attached to the underlying savings. These charges can be quite high in plans run by mutual fund companies, banks, or colleges. So you must read all the terms and conditions and fully understand these private plans before opening an account.

529 Plan Rating Helps Make Better Investments

admin — Tue, 31 Aug 2010 07:50:01 +0000

The 529 plans, though already very popular, are too new to make any definite practical revelations yet. Some financial agencies are pursuing their progress and trying to come up with some 529 plan ratings, made on a state-wise basis, but we must take them with a pinch of salt.

Anyways, the 529 plan rating providers have come up with ideas on how better savings can be made on the plans. The 529 plan is a tax-advantaged savings or prepaid scheme for college education. Parents, or any other family adult, can make an account with these plans for children and then pass on the amounts to pay for the child’s college education. Already the 529 plan ratings show the significant benefits of these schemes over traditional plans like Coverdell. With a 529 plan anyone can make the investment, the account can be closed or the amount can be withdrawn with minimum penalty, the account is transferable from one beneficiary to another, and there is a good deal of tax savings. These are the prime benefits that are making the 529 plans popular.

Here are the tips on savings that are provided by people who make the 529 plan ratings:-

Plan for gift exemption – A 529 plan, which is to the tune of $60,000 a year, is equivalent to five equal annual gifts made to the beneficiary. That means, if the account holder makes no other gifts to the beneficiary in the span of these five years, then the amount invested in the 529 plan will remain free from gift tax. The best benefit here is that the total gift exemption of the accountholder towards the child will not diminish.

Plan for saving withdrawal penalties – Withdrawal penalties come into the picture in many situations with 529 plans. One of this situation is when the account holder withdraws the funds from the investment plan for a reason other than paying for the tuition fees of the beneficiary. This can happen if the beneficiary does not attend college, or if he or she gets a scholarship that pays for the tuition fees. Money withdrawn for reasons other than paying for tuition fees is called as unqualified withdrawal. Such unqualified withdrawals will attract income tax and a 10% penalty on the amount withdrawn. However, with a 529 plan, these penalties can be avoided by the simple act of transferring the benefit from one beneficiary to another. So, if the original beneficiary does not want the investment for paying tuition fees, you can pass it on to another relative, and keep enjoying all the tax benefits.

Plan for saving tax – Account holders of 529 state plans can direct the benefits to their own accounts, to the accounts of the beneficiaries, or even directly to some educational institution. There is good choice here. Hence, the account holder can decide which of these options will have to pay the least tax. If the beneficiary’s marginal tax rate is lower, the benefits can be passed on to the account of the beneficiary.

RESP – Register Education Savings Plan Woes

admin — Mon, 30 Aug 2010 05:21:15 +0000

The RESP Group plans account for a third of the $18 billion that Canadian parents have socked away for their kids’ post-secondary schooling since the federal government created the RESP program in 1998. They are run by organizations that manage the RESP assets on behalf of parents, with names like the Canadian Scholarship Trust Foundation, USC and Heritage Education Funds.

The catch: the pooled plans, which have had a reputation for aggressive marketing campaigns, including ads in hospitals and dentists’ offices, come with long lists of fees and complicated rules. The plans are now the subject of a growing wave of complaints from parents and scrutiny by regulators The group plans typically include significant barriers for those who want to stop contributing, including a sharp reduction in the final payout from the plan toward a child’s post-secondary education.

Parents may transfer their RESP to another dealer, such as a bank, but most group plans will first deduct all the profits made on the parents’ contributions, which can grow to a substantial sum over the years. Those who want out also typically have to pay other fees, like an enrollment fee that often amounts to hundreds or thousands of dollars, a “depository” fee, and a transfer charge. The pooled RESPs are also facing a lot of other scrutiny. Another examination of the sector has been going on, this one by the Canadian Securities Administrators, which represents all the provincial securities regulators. The earlier review concluded with a damning report that revealed a litany of serious shortcomings, including: poor oversight of salespeople, who did not disclose fees properly and passed themselves off as working for a nonprofit organization when they actually worked for commissions; deceptive marketing material that falsely suggested government regulators had endorsed the plans; inflated rates of return that relied on “creative calculations to make the returns appear higher”; and lax record-keeping.

Even after the reforms, however, the grumbling from parents did not go away. At the Financial Consumer Agency of Canada, an Ottawa government regulatory agency that investigates complaints against federally regulated financial institutions, spokesman John Kane said a growing number of Canadians are calling to complain about RESP dealers of all stripes. The issues most commonly raised are the usual sore spots involving the group plans: fees and problems with accessing funds in a plan. (Self-directed RESPs typically involve minimal or no fees and impose no restrictions of their own on getting to the funds, apart from those of the federal RESP program.)

According to the Ontario Securities Commission these are what you would have to expect if you are considering a Group RESP. Investment decisions are made for you. Contributions are made according to a set schedule, which is determined when you open the plan. If you miss a contribution to the plan, your account may go into default and your plan may be terminated. If you are allow to stay in the plan, you may have to pay extra fees and interest on the missed payment. The interest owing can grow over time to an amount that is difficult to pay. Fees you are expected to pay:

• Enrollment fees (Usually 1st year contribution is eaten up by this fee, and up to 50% of 2nd year until fees are all paid)
• Administration fees
• Investment management fees
• Depository fees
• Trustee fees

Because fees are deducted from the early contributions, this will decrease the earning power of the investment. These plans have more restrictions than other types of plans on how much and how often you can make withdrawals. i.e If your child decides to go to summer school to fast track, you may not be allowed to withdraw any of the funds to pay for summer school.

Now the good news is that there are plans, self directed plans through banks and mutual fund dealers where you have control of the contribution amount, the type of investment and most important of all,the funds being available when needed. This being said, your child will receive the government grants and none of that will go to pay fees. Most mutual funds do have a fee, a fee that is diminished until it is zero after seven years. Think about it, your child’s RESP will be there longer than seven years therefore no fees!

What does this mean to you as the consumer? Read the prospectus and ask questions!

Debt Consolidation Online – Is It Smart To Consolidate Your Debt?

admin — Sun, 29 Aug 2010 18:07:04 +0000

With a multitude of bills piling up, debt consolidation can appear to be an easy way out. Claims of reduced rates and one payment convenience can seduce just about anyone. But before you commit to such a plan, make sure that you have weighed the pros and cons to make certain that you
will actually save money in the end.

Is Debt Consolidation Always A Good Deal?

Debt consolidation rolls your short term debt, such as credit cards accounts or bills, into one loan. The idea is to reduce your interest payments, helping your monthly payments go farther and eliminate your debt faster. But you have to be careful, because a lower monthly payment or interest rate doesn’t always mean you are saving money.

Time is your enemy with debt consolidation loans. The longer your loan period, the more you will pay in interest charges. For example, $20,000 in credit card debt at 15% for 5 years will cost $8,547.91 in interest. Consolidate that debt into a 30 year home equity loan at 6% and interest charges soar to $23,167.72.

Other Reasons To Consolidate Debt

But saving money isn’t the only reason to consolidate debt. Reducing your monthly payments through consolidation can help you get through a job loss or health crisis. Taking a look at the previous example, the monthly payment on the credit card debt at 15% would be $475.80. Convert that to a 30 year loan, and the monthly payment drops to $119.91 – a difference of $355.89.

The Elements Of A Good Debt Consolidation Loan

To see a savings with a debt consolidation loan, make sure you find a low interest, short term loan. Home equity loans with 5 to 15 year terms offer reasonable rates with few fees. But if you only have a few thousand in debt, opening a new credit card account with 0% on transfers would be a better option. Before signing with any lender though, make sure you do some comparison shopping to ensure you are getting the best available financing.

With more room in your budget, work to make additional principal payments to save on future interest charges. You will also want to check out your credit report and possibly close some accounts to improve your credit score. Just remember to keep your longest held accounts open since
a long credit record improves your score.

Best Rated Debt Consolidation Loan Company – Reliable Debit Consolidation Provider

admin — Sat, 28 Aug 2010 06:12:55 +0000

Are you thinking in a debt consolidation loan? You and several borrowers nationwide are considering a debit consolidation loan as a viable alternative in order to get their finance back in line. However, what is the best rated debt consolidation company? Certainly there are more than few aspects to be reviewed before make a decision.

Then, how do I know if a debt consolidation company is worth working with aside of being checked at the Better Business Bureau and being legitimate and certificated? Well, some aspects you should be checking on a debit consolidation agency before signing with them up are as follows;

- Trusted, Reliable And Reputable

A company recommended by credit organizations and even better, by past clients is a good election, there is no wrong decision working with a trusted, reliable and reputable debt consolidator.

- Fixed Rules And Regulation

The existence of fixed rules and regulations on paper and within the offer document is a very good sign.

- No Fees For Registration And Advise

Services asking for fees registration or advise, plus higher interest rates because of your credit score should not be on your best rated consolidation provider list.

- Fraudulent Companies

Usually companies offering extremely fast consolidation loans are not trusted, review every aspect of terms and conditions before apply with them.

Last but not least, remember that specialized advise is always recommendable, by working with a seasoned credit debt counselor you will get the most of a debt consolidation program, this kind of expertise usually pays by itself.

Debt Consolidation Home Loan – Life After Debt

admin — Thu, 26 Aug 2010 23:29:05 +0000

A debt consolidation home loan is one of the many options available to those overwhelmed by mounting debt problems. It is understandable that after what has happened to the economy lately, many people find themselves deep in debt problems. What’s more, their monthly income simply cannot cover the amount they need for the loans each month. This kind of financial problem has caused thousands of Americans extreme stress and it often leads to further unintentional accumulating debt.

There are different solutions available to people in this situation. If you are one of them, a debt consolidation home loan is one that you might want to look into. If you have a not so impressive credit score, securing this kind of loan against your home is the best way for you to acquire a low interest and APR (annual percentage rate). You use the equity you get from your home to pay off all your existing debts. Then you are left with only your home mortgage to deal with.

Ideally, the amount you would want to loan from a debt consolidation home loan is an amount that would be enough to pay off all existing loans and other mortgages. This way you get to pay off all your debt regardless of how many different creditors you owe money to. When applying for this loan, you have to make certain that the interest your creditor will give you is much lower than the interest rates of your existing loans and mortgages. In this manner, not only will you be conveniently paying just one loan at a time, you will be paying considerably less on your monthly loan payments.

There are many advantages and benefits of a debt consolidation home loan. The first obvious one, of course, is that you get to avail of a lower interest rate as compared to the interest rates you are paying to your different existing loans. This loan will help you significantly pay off all your debts slowly but surely.

Most importantly, with a debt consolidation home loan, you can make a considerable improvement on your credit rating. Or at least you can prevent it from further deterioration. Unlike a credit settlement or declaring bankruptcy, this kind of loan will not affect your credit score adversely. As long as you get to pay the minimum, or better yet over the minimum requirement each month, then you are well on your way to acquiring a better financial report in the near future.

A debt consolidation home loan is probably the best method to give yourself a new slate in your financial life as long as you manage it wisely. Once approved, this loan will immediately take off the pressure of being harassed by numerous creditors. You will finally get to sleep better at night. More so, you will be dealing with only one loan that is significantly more affordable. Once managed properly, then you will be debt-free in no time at all. With this kind of loan, there definitely is “life after debt”

Debt Consolidation Calculator – Starts Countdown To Eliminate Debt

admin — Wed, 25 Aug 2010 13:34:10 +0000

Debt consolidation calculator helps you in finding out which debt consolidation plan works best for you. You need to consolidate debt when it becomes unmanageable and you find it difficult to make even minimum monthly payments. The interest structure used by different lenders differ too much. That is why it becomes difficult to get a clear picture of your current outstanding and combined monthly installment without using these calculators.

Where To Get

Now, the very first question that comes to mind is that from where you can get a debt consolidation calculator. Well, getting such a calculator is not a difficult task at all. Most of the debt consolidation companies offer this service on their websites. You need to input relevant information such as all existing loans, applicable interest rates and your current earnings besides some other facts also.

Once you key in these details, debt consolidation calculator comes up with the most suitable solution to your problem. These companies can also provide you guidance if you are not in a position to decide what is the best way out to get out of debt. So, the electronic calculators help you by suggesting best method and human brains at these companies help you how to implement these plans.

Use With Caution

Debt consolidation calculator displays how much money you will have to pay every month after you merge all your loans in a newer loan. By keying in different repayment periods in appropriate fields, you get to know the most suitable loan term. However, it is not advisable to solely depend on these calculators. It is always better to take into account the view of experts before the countdown to eliminate debt begins.

The Florida 529 College Savings Plan

admin — Tue, 24 Aug 2010 19:16:37 +0000

The Florida 529 plan is a state-run college savings plan of the state of Florida. There are two versions of this plan here – the Florida College Investment Plan and the Florida Prepaid College Plan. This article provides information on the basic features of these two Florida 529 plans.

The Florida College Investment Plan

The Florida College Investment Plan is a savings plan that allows the accountholder to make an educational investment plan up to the tune of $341,000 for a single beneficiary from all Florida accounts. Installments are allowed for the investment, where accountholders must make an initial contribution of at least $250 and then manage the later installments as they wish. However, the amount must not go below $25 in a month.

This plan has three kinds of investment options:

1. Static Investment Options – There are four portfolios in these plans – the US equity, balanced, fixed income and money market.

2. Age-based Investment Options – This contains five age bands within the fixed income and the US equity portfolios. The beneficiary has to be allocated to one of these five age bands.

3. Underlying Investments – Here investments can be made in privately managed portfolios such as the US Trust Company, Northern Trust Investments, State Board of Administration, Trusco Capital Management and Deutsche Asset Management.

The person investing in the plan, i.e. the accountholder, is free to direct the benefits of this Florida 529 plan in his or her own name, or in the name of the beneficiary, or in the name of a particular educational institution. The name of the beneficiary can be transferred at any time.

The Florida Prepaid College Plan

The Florida Prepaid College Board runs this prepaid program. Account holders can make a plan as soon as the kids are born. A contract for a child below one year would range from $3,511 for two years at community college to about $35,740 for four years at the university. People can purchase credit hours for their children’s future education. These packages are in the form of 120 credit hours for a four year university plan, 60 credit hours for a two year community college plan and a combined plan of 60 hours for both community college and university.

The account holder can direct the benefits to public universities in Florida, or to a regionally accredited nonprofit institution. The payments are done in a lump sum amount or in 55 installments that must end in October one year prior to that of seeking admission in college.