Financial Planning

Way back in 2008, I wrote this piece and was surprised at the positive responses that I received from clients. Keeping with tradition, I have added some new items near the end, especially focusing on couples, but have kept the fundamental framework the same because the basics really never change. So here we go again for our 10th straight year!

As the cost of college education continues to rise, more and more students utilize financing to fund their education. In fact, student loan debt has increased from $0.2 trillion in 2003 to more than $1.2 trillion in 2015. The financing options available can be very overwhelming for students and parents alike.
The Georgia General Assembly in 2008 passed into law the Georgia QEE Credit Program to allow Georgians more control over how their education dollars are spent. The law created Student Scholarship Organizations (SSOs) , which permit Georgians the ability to direct their state income tax dollars to a general scholarship fund at a school of their choice. The SSOs then use these contributions to award scholarships for students in grades K-12, allowing them to attend private schools.
Roth IRAs have been very popular since their debut in 1998. Unlike Traditional IRAs, Roth IRAs do not provide an immediate tax deduction for contributions, but earnings grow tax deferred and qualified distributions are tax free. Which plan is better to fund is heavily dependent on individual circumstances, but many investors have jumped on the Roth train regardless of the mathematics to lock in tax-free income at retirement.
RMDs are distributions from qualified retirement accounts and IRAs that all taxpayers must begin taking once they reach 70 ½ years of age. The government allows taxpayers the ability to take a deduction and defer taxation of growth on their retirement plans; taxation does not occur until monies are withdrawn. Therefore, the only way to force the taxation is to force the withdrawal.
Albert Einstein is famously quoted as having said that compound interest is “the most powerful force in the universe” and that “the hardest thing in the world to understand is the income tax.” Whether he actually made these statements may be debatable but it does not detract from their accuracy.
Do you wish your cash could constantly earn the highest available return without having to shop around each month? Well, life just became a little easier for you.
From the outset of Social Security it was, and has been, designed as a safety-net program; a program to ensure that everyone has some income in their later years. Social Security, and the solvency thereof, has made many people anxious about what to expect when they reach that magic age. It is highly anticipated that the Social Security “trust fund” will be fully depleted around 2033...
“Never go into debt.” “Take 120 minus your age to determine how much should be in stocks, with the rest in bonds.” “You should have 10 times your annual income in term life insurance.” We are constantly bombarded with financial tips, rules of thumb, and seemingly thoroughly researched advice. Whether it comes from the radio, friends and family, the television, magazines, the internet, or straight from a financial company, it is wise to consider if this advice makes sense in your particular situation.
Way back in 2008, I wrote this piece and was surprised at the positive responses that I received from clients. Keeping with tradition, I have added a few new items for 2016 but have kept the fundamental framework the same because the basics really never change. So here we go again for our 9th straight year!

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