Paying for College While Saving Your Retirement

Clear View Wealth Advisors, LLC.TO BE USED SOLELY IN CONJUNCTION WITH THE PROFESSIONAL ADVICE AND COUNSEL OF A QUALIFIED FINANCIAL ADVISOR

Clear View Wealth Advisors, LLC.

CONGRATULATIONS!

You have at least one student going to college.

You obviously have:

a.) Smart Kids

b.) Motivated Them

c.) A Willingness to Invest in your kids

d.) A Success Problem

Money Coach Road Map Series

Paying Less for College: Debunking Financial Aid Myths and Saving

Your Retirement

Presented by Steve Stanganelli, CFP®

aka Spencer’s Dad

They Grow Up Fast!


Clear View Wealth Advisors, LLC.

There are two very different prices for college — one for the informed “buyer” and one for the uninformed

“buyer.”

Which price will you pay?


Top PARENT CONCERNS in order of importance1. Fear parent death before children are grown

2. Saving for retirement

3. Job security

4. Saving and paying for college

College Costs Keep Going UP!!

2010 Annual Average Costs:*

1. Public University - $16,000

2. Private College - $37,000

*College Board – Trends in College Pricing 2010

Current Problem


Two VERY EMOTIONAL NEEDS competing for the same limited resources

Will parents be able to accomplish BOTH?

The College Funding /Retirement Savings Dilemma


• High School Graduate: $21,079

• Bachelor’s degree: $40,166

• Master’s degree: $51,509

*U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement

Median Income by Educational Attainment of the Population 18 Years and Over

The economic benefit of a college education


Concept 1:

College is a retirement problem

Concept 2:

Saving ON College is Different than Saving FOR College


Assumes:

5% annual college inflation

*8% return on investments on lump sum amount

Assumes:

5% annual college inflation

*8% return on investments on lump sum amount

For one child!

Years till retirement

Hypothetical Four-year

public college cost

$55,000


private college cost

$138,000


elite private college cost

$207,000

15 $175,000* $438,000* $657,000*

20

How much can paying for college effect retirement savings?

Too depressing!

The retirement problem – every dollar going toward college can’t go toward

retirement

This is a hypothetical situation and not representative of any specific situation. Your results will vary


THE GOOD NEWS: • College planning is NOT just saving FOR college

• College planning includes saving ON the cost of college.

When it comes to college planning there is no one size fits all solution.

It's all about knowing the ins and outs

of a very complex topic and how to

apply the secrets of college planning

and funding to your circumstances

so that you don't pay one dollar more

for college than absolutely

necessary.

Secrets to reducing the high cost of college


College financial planningBegins at birth and continues through senior year in high school

Timeline

College admissions and financial aid process Begins junior year in high school and extends throughout college years

Strategic College Planning

l l l l l l l l l l l l l l l l l l l l l l

Tactical Planning

0 1 2 … 17 18Age of child

By becoming informed at each step along the way, you’ll have the potential to achieve a much better outcome..

Saving ON the cost of college

Birth >>> Middle School >>> High School >>> College

Kudos to You for Taking the First Steps

Balancing College Planning Periods: Saving, Spending & Recovery


Expected Family Contribution (EFC) – The portion of your income and assets that you will be expected to contribute toward college costs.

How is EFC determined? – FAFSA (most public) / Profile (many private). Based on time period from January of the student's junior year in high school to December of their senior year. This is known as the Base Year.

Financial Need = Cost of Attendance – Expected Family Contribution

Leverage other strategies

Leverage financial aid enhancing strategies

EFC FAFSA / PROFILE

Foundation for effective college planning


Understanding Financial Aid – Basics

Federal Methodology (FM) Institutional Methodology (IM)

Uses FAFSA Uses FAFSA & CSS Profile

Student Assets Assessed @ 20% Student Assets Assessed @ 25%

Student Income Assessed @ 50% with $3,000 Allowance

Student Income Assessed @ 50% with No Allowance

Parent Assets Assessed at 5.6% with Exemption Allowance Depending on Age

Parent Assets Assessed at 5% with Lower Exemption Allowance Based on Family Size

Parent Income Assessed Between 22% to 47%

Parent Income Assessed Between 22% and 47%

Does NOT Assess Family-Owned Farms or Businesses with < 100 FT Employees

Assesses Farm and Business Equity

Does NOT Assess Home Equity DOES Assess Home Equity


Financial Aid Formulas are INCOME Driven and Not Asset Driven

Understanding Financial Aid

It’s Key To Understand the Financial Aid Strength & History of Each School


EFC = $15,000

Formula:

Financial Need = Cost of Attendance - EFC

College Cost of Attendance EFC Financial Need

1. James Madison $21,000* $15,000 $3,988

2. Georgetown $54,000* $15,000 $38,880

*Source – College Board 2011

For financial aid candidates:

Your EFC is the primary determinant for your out-of-pocket college costs, NOT the cost of the college!

Don’t eliminate consideration of schools with higher “sticker prices!”

Example of financial aid eligibility


Sources for:

• Estimating EFC before hand. How much will you be expected to pay?

a. Finaid.org

b. CollegeBoard.org

For the “Do it Yourselfer”

• Strategies for increasing financial aid eligibility

a. Book: “Paying for College Without Going Broke”

b. Website: Finaid.org

• Resources for Finding Scholarships

a. Websites: FastWeb.com, CollegeBoard.com, Petersons.com, ScholarshipCoach.com, ScholarshipExperts.com, CollegeCashPros.com


Cheap

Options

• School merit-based scholarships• School need-based financial aid• Grants - Pell

• College Savings• Other loans: Private/PLUS/Home Equity• Third party – grandparents, relatives

• Subsidized loans – Stafford, Perkins

Source

Free

Gap

Planning for financial aid

Strategies that increase financial aid eligibility will

reduce out-of-pocket college costs, the gap and need for

debt financing


Planning for Financial Aid

Requires an understanding of:

1. Forms required by the school (FAFSA, Profile) and the information required

2. How the EFC is determined

3. Prudent planning strategies to increase financial aid eligibility

Need to know:

• What TO DO – can save you $$• What NOT TO DO – can cost you $$

Effective planning for financial aid occurs before filing FAFSA/Profile – NOT AFTER! Don’t enter into the process BLINDLY!

Analogy – Effective tax planning occurs before tax forms are filed, not after.


What NOT TO DO: The less you know, the more you pay

Fact: Gifting money to financial aid candidate will reduce financial aid eligibility

Result: Save the family $$$ in financial aid lost!

Example: Grandparents gift $10,000 to grandchild for college, may cost the family as much as $7,000 in financial aid!

Lack of knowledge results in lost financial aid

Strategy: Wait until after college to gift – help pay off student loans. No lost financial aid.


Knowing WHAT TO DO – the more you know, the less you pay

Facts: Family income of $57,000. Assessable assets of $200,000

Strategy - Reduce AGI below $50,000 by contributing to retirement accounts

Result - Family qualifies for “Simplified EFC.”* Assets of $200,000 are not included in financial aid formula and family qualifies for significantly more financial aid. * Note: Assumes filing a 1040EZ or 1040A

May save parents $$ over four years!

What will savings on college costs AND increased retirement account contributions mean for retirement income and quality of life?



13 Strategies for Increasing Need-Based Aid:

Controlling or Changing the Position of Assets

Some Examples: -

• Don’t Hold Assets in Your Child’s Name

• Maximize Non-Assessable Assets: IRAs, SEP IRAs, Roth IRAs, 403bs,

401ks, Annuities, Cash Value Life Insurance

• Don’t Overestimate the Value or Your Home, Other Real Estate or Business

• Restructure Your Debts (Ex. Refinance Credit Cards to Lower Home Equity)

• Pay Off Debts or Make Needed Purchases = Show Less Cash



12 Cost-Cutting Strategies for Every Family

Regardless of Financial Need Status

Some Examples: - • Take Tests for College Credit

• Advanced Placement (AP) Tests (see www.CollegeBoard.com)• College Level Examination Program (CLEP)• Proprietary Self-Study Option: DSST (see www.getcollegecredit.com)• International Baccalaureate (IB) (see www.ibo.org)

• Go to a Local State School for A Degree or Transfer Credits • Use the Hope and Lifetime Learning Tax Credits (see www.IRS.gov )• Pursue Private Scholarships like Kiwanis, Rotary or Free Resources• Pursue Merit Scholarships (see www.Petersons,com)

• NOTE: Private schools offer more than public (Ivies do not offer)

http://www.collegeboard.com/

http://www.getcollegecredit.com/

http://www.ibo.org/

http://www.irs.gov/

http://www.petersons,com/


Options

• School merit-based scholarships

• Savings strategies

• Cash flow strategies

• Income and asset planning strategies

• Strategies for business owners

• Strategies for grandparents

• Tax credit strategies

• Gifting strategies

• Loan strategies

Source

Free

Gap

Planning for high income late starters

The cumulative effect of implementing and coordinating

the right strategies can be significant savings on out-of-

pocket college costs


Facts: Parents income too high to qualify for education tax credit. Limited benefit from personal exemption. Plan to liquidate appreciated assets to pay for college OR “write a check.”

Effect: Parents will pay capital gains (can increase real cost of college), no benefit from tax credit. If paid with after tax income, the real cost of college is twice the “sticker price”.

Better Strategy: Gift appreciated assets to child to help pay college costs. Child fulfills requirement for tax independence during college years and qualifies for education credits. Child pays NO tax due to deductions

Better Results: • Parents maintain control of asset until senior year of H.S.

• Increased cash flow – don’t use after-tax income

• Student qualifies for education tax credit

• Tax savings

• Parents – on capital gains = $$$

• Student - education tax credits – as much as $2,500/year based on 2010 maximum credit.

Example


Goals:

1. Return exceeds college inflation

2. Tax-deferred growth

3. Tax-favored access for college

4. Favorable for financial aid

5. Can be used for college AND retirement

6. Tax-favored access for retirement

Consider savings and funding vehicles that meet the following objectives.

1. Funds for college

2. Savings for retirement

3. Minimal impact on monthly cash-flow

4. Appropriate for college AND retirement - flexibility

Savings and Funding Strategies


VEHICLE

Rate of Return

Tax Deferred Growh

Tax Favored Access for

College

Favorable for financial Aid

Use for College AND Retirement

Tax Favored Access for Retirement

Coverdell Education Savings 3Cash

529 Savings Plan

Roth IRA

Traditional IRA

Retirement AccountsEE Bonds

Zero Coupon Bonds

Municipal Bonds

Growth Stocks

Fixed Annuities

Wow, So many options, but which is the

right one for my family?

Stocks

CESAEE Bonds

529

Comparison of Options – how do they rate?


Comparison of Options – how do they rate?

9 Ways to Save FOR College – Systematic Savings Options to Use

Some Examples: - Each has advantages and disadvantages

Option Pros Cons

Roth IRA Accessed Penalty Free Earnings May Be Counted as Income for EFC

529 College Savings Plan

Growth Tax-Deferred & Withdrawals Tax Free

Assessable Asset for Financial Aid

CollegeSure CDs Low Risk / FDIC Insured Assessable Asset for Financial Aid

UTMA / UGMA Taxed at Child’s Rate for first $1800 generated

Subject to “Kiddie Tax” if account generate > $1800/year

Retirement Plan at Work Tax-deferred / Loan possible

Distributions fully taxable


The Process and the Challenges

Tactical Planning - college admissions and financial aid process

Apply for financial aid

Identify prospective schools and apply

Strategies for covering shortfalls

Choose school and accept award

Receive and analyze financial aid awards

Lack of knowledge or mistakes may cost your family thousands of dollars:

• Choosing the wrong school or curriculum

• Financial aid

• Loan strategies

The process is overwhelming for many families


Offers parents with college-bound juniors or seniors:

• Personal coaching

• Hands-on support

• Targeted, strategic and tactical guidance throughout the college admissions and financial aid process

Goals:

Best college fit for student

Save money on college costs

A plan for the family that yields confidence

The Solution – College Cash Pros A hands on college admissions and financial aid service


1. Go it alone – To achieve a best outcome requires

• Time

• Effort

• Expertise

• Patience

2. Help and support from qualified experts

Families have two choices:


The Results: An action plan that helps you to better accomplish your goals:

1) Help pay for your child’s education

2) Reduce the cost of college

3) Save more for your retirement

How we help you and the results

Expertise + Experience + Personal Help can yield a better outcome for family

How College Cash Pros from Clear View can help

Diagnose your specific situation

Prescribe appropriate remedies – college planning and funding strategies

Find the Best College at the Right Price


Achieving the best outcome

College financial planning – newborn through senior year in high school

Timeline

College admissions and financial aid process Begins junior year in high school and extends throughout college years

College Planning

l l l l l l l l l l l l l l l l l l l l l l

Client Care Center

0 1 2 … 17 18Age of child

Help you work toward a best outcome

1. Lowest out-of-pocket costs for family

2. Best college fit for student

BEST COLLEGE at the RIGHT PRICE … without you going broke or busting your retirement nest egg


The COSTS of waiting - procrastination:

1. Available cost reducing strategies decrease over time

2. Available savings and funding strategies decrease over time

3. Cost of borrowing may increase – increased debt and interest rates

4. Reduced parent resources

5. Less available for retirement savings

6. Increased stress and frustration

7. Procrastination and a lack of knowledge can cost you significantly more on your college costs

Whether you “do it yourself” or team up with experts

“You can pay me now, or pay me later”Legendary marketing slogan


The KEY CONCEPTS Cheat Sheet:

1. Paying for college is as much a retirement problem as anything else.

2. There are 3 college planning time periods: Saving, Spending & Recovery. Without balance among all three, there will be pressure in one or more of the other two periods.

3. College is expensive but still worth it – especially if you can lower your out of pocket cost or reduce your cash flow pressure

4. College inflation is running about twice the level of regular CPI

5. There are only 4 ways to effectively pay for college: Save, Pay-As-You-Go, Borrow or Let Someone Else Pay

6. Four types of Financial Aid Available: Need-Based, Merit-Based, Discounted Tuition and/or Negotiated Rate

7. Your Expected Family Contribution (EFC) determines what you need to pay. Knowing how to calculate this number is KEY to Financing. BEWARE the College & Parent Financial Aid GAP!

8. Procrastination and a lack of knowledge can cost you significantly more on your college costs

Review of Key Concepts


Clear View Wealth Advisors, LLC TO BE USED SOLELY IN CONJUNCTION WITH THE PROFESSIONAL ADVICE AND COUNSEL OF A QUALIFIED FINANCIAL ADVISOR

Clear View Wealth Advisors, LLC, A registered investment advisor.

Informed or Uninformed __

You Have a Choice

__

Which type of buyer of a college education will

you choose to be?


ABC Company TO BE USED SOLELY IN CONJUNCTION WITH THE PROFESSIONAL ADVICE AND COUNSEL OF A QUALIFIED FINANCIAL ADVISOR

Securities and advisory services offered through LPL Financial, A registered investment advisor. Member FINRA/SIPC

Informed or Uninformed – Which

buyer of a college education will you

choose to be?

Uninformed buyer!


1. Visit www.ClearViewWealthAdvisors.com

2. Select

Next Steps – CLICK & CALL

3. Complete “Data Form”

• You’ll receive an initial assessment

• Arrange for your free assessment phone call – 978-388-0020

We’ll Help Show You The Money

More Info at the Clear View website or blog: www.MoneyLinkPro.Wordpress.com

http://www.clearviewwealthadvisors.com/

http://www.moneylinkpro.wordpress.com/

http://www.clearviewwealthadvisors.com/

Paying for College While Saving Your Retirement

Documents

Transcript of Paying for College While Saving Your Retirement