Teach Your Children to Save for College

Being part of the college planning process can be very educational for children, as it presents them with valuable financial lessons for the future. Children can earn money, learn about sources of financial aid, and take other steps that may relieve their parents of some of the responsibility of college planning.

Get an Early Start
Most children don't make plans for their higher education until they are well into high school, but the foundation for saving and planning for college can take place much earlier. Many financial experts believe the best time to introduce children to college planning is when they are in the sixth, seventh, or eighth grade.

You may also want to encourage your children to begin thinking about the career they would like to pursue, which is likely to influence their choice of college, as well as to establish a savings account that could be earmarked for education expenses. In addition, you can teach basic lessons about investing and other money management issues.

Take It to a Higher Gear in High School
By the time they reach high school, many students are mature enough to plan for college at a deeper level, including the following:

• Learning about college costs – Students may gain a deeper appreciation of their family's financial sacrifices when they realize how expensive college costs. They can learn about these expenses from a number of sources, including the College Board (collegeboard.com) and the U.S. Department of Education (ed.gov).
• Researching scholarships – There are numerous website with information about sources of financial aid. For example, fastweb.com and finaid.org contain search engines with data about thousands of scholarships with varying eligibility criteria. In addition, fafsa.ed.gov provides an overview of federal student aid programs. Also, local libraries and high school guidance offices may have information about state-sponsored aid programs and scholarships sponsored by local organizations.
• Earning money – High school students can set aside a portion of their wages from part-time or summer jobs for higher education expenses. Also, students may be able to obtain jobs that build on career interests as a way of solidifying their future plans.

You and your future college student may be able to think of more ideas that could add value to your family's efforts to save for a college education. Getting your promising scholar involved in the process – financially and otherwise – could ultimately be a pivotal lesson in responsibility that impacts his or her later success in life.

Jeffrey Thatcher is a CERTIFIED FINANCIAL PLANNER ™ and Director of HVFCU Financial Services, the investment division at Hudson Valley Federal Credit Union.

Securities offered through LPL Financial, member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates.

Not NCUA Insured

No Credit Union Guarantee

May Lose Value

Hudson Valley Federal Credit Union and HVFCU Financial Services are not registered broker/dealers and are not affiliated with LPL Financial. This material was prepared for Jeff Thatcher’s use.

© 2012 S&P Capital IQ Financial Communications. All rights reserved.

Women, Wealth and Legacy Planning

Whether nurturing the values of children, fulfilling charitable goals, or making investment decisions that affect their own as well as their beneficiaries’ financial security, women play a central role in establishing and preserving family wealth. Women need to be involved, informed and comfortable with their role as guardians of family wealth.  Active participation in wealth management can strengthen women’s commitment to protect and grow their assets with the goal of leaving a legacy for their children, their community, and beyond.

Best Practices in Legacy Planning

The following strategies may help assure the smooth transfer of both your measurable wealth and your values surrounding wealth to the next generation:

           

Education leads to confidence.

Attaining financial security for you and your beneficiaries typically requires you to accept responsibility for the management of your investment assets. Whether you are single, married, or a surviving widow, it is in your best interest to receive as much education as possible about wealth planning, investments, and related matters. Even if you are not directly responsible for making important financial decisions, it is vital to have knowledge in these areas in order to communicate effectively with professional advisors charged with these duties.

Professionals offer objective, qualified services.

Relying on professional advice as opposed to family and friends is extremely important when making decisions affecting the accumulation, preservation, and distribution of wealth. What should you expect from a qualified professional? A good wealth advisor – or a team with other professionals, such as attorneys and accountants – should offer guidance and services in most areas of wealth management, including estate planning, retirement planning, insurance needs assessment, and college planning. On a more personal note, a wealth advisor should work closely with you to:

·         Identify areas requiring special assistance, such as creating trusts

·         Minimize taxes and planning costs

·         Develop and implement a personalized wealth management plan

·         Review your plan periodically and suggest changes needed

Children should learn about the responsibilities of wealth.

Wealth is a gift that opens doors of opportunity not only for you, but also for your children, their children, and generations to come. Yet wealth can be a weighty responsibility that takes time to manage, maintain, and preserve. If you are a parent, you are no doubt concerned about the effects of wealth on your children’s values and how the “money” lessons you pass on them will resonate as they mature in adulthood.

Family values should be held in the same high regard as family wealth.

Family values – those traits, behavioral patterns, beliefs, goals, and morals that are shared by members of a family group – define a family’s character as much as dollar signs measure a family’s wealth. By holding shared values in high regard and setting an example of commitment to financial responsibility, philanthropy, and volunteerism for the younger generation, you will enrich your family’s legacy for generations to come.

A Woman’s Worth

As stewards of the family legacy, women are in a unique and influential position. They are holders of great wealth as well as keepers of the family’s moral and philanthropic vision. There are many financial, accounting, legal, and business tools to assist women in implementing a plan of action. Contact a financial advisor for guidance in mapping out a legacy planning strategy unique to your situation.

Jeffrey Thatcher is a CERTIFIED FINANCIAL PLANNER ™ and Director of HVFCU Financial Services, the investment division at Hudson Valley Federal Credit Union.

Securities offered through LPL Financial, member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates.

Not NCUA Insured

No Credit Union Guarantee

May Lose Value

Hudson Valley Federal Credit Union and HVFCU Financial Services are not registered broker/dealers and are not affiliated with LPL Financial. This material was prepared for Jeff Thatcher’s use.

© 2012 S&P Capital IQ Financial Communications. All rights reserved.

           

Risks to Your Retirement Future

As Americans live longer, the task of managing money after retirement gets more complex. A retiree in his or her mid-60s typically has a different risk profile than an individual approaching 90. It may be helpful to look at various types of risk from the vantage point of how they affect retirees at different life stages. Here are four key risks to consider.

Risk 1: Investment Risk 

Balancing risk and return takes on a different meaning for individuals as they age. A negative rate of return during the early years of retirement could leave an individual with a significantly smaller nest egg when compared with negative returns later in the retirement life cycle. Your financial advisor can help you craft an investment mix with the goal of smoothing out returns over the long term and increasing the chances that your assets will last throughout your lifetime.

Risk 2: Longevity Risk

Withdrawing too much from a portfolio during the early years of retirement may heighten the chance of depleting your assets during your later years. For this reason, many financial advisors recommend limiting annual withdrawals to 5% or less of a portfolio's value, adjusted for inflation, to make assets last as long as possible.

Risk 3: Inflation Risk

Because younger retirees typically are planning for a time horizon of 20 years or more, it is important that their portfolios include a source of growth that is likely to exceed inflation over the long term. To complement this potential growth, many retirees rely on more conservative investments that may generate income and help to balance risk and potential return.

Risk 4: Health Care Risk

It is not unusual for medical costs to increase as retiree’s age, and it may be prudent to plan for these costs before the need is immediate. Pre-retirees and younger retirees may want to explore options for medical insurance that supplements Medicare, as well as long-term care insurance, to reduce the possibility of dipping into personal assets to finance illness or accident-related expenses. Also, remember that those who retire before age 65 need to find an alternate source of medical insurance prior to becoming eligible for Medicare.

Reviewing these and other challenges associated with retirement planning with your financial advisor may increase your confidence that you have considered all scenarios. While it may not be possible to prepare for every situation, planning ahead may help you cope with financial issues that come your way.

Jeffrey Thatcher is a CERTIFIED FINANCIAL PLANNER ™ and Director of HVFCU Financial Services, the investment division at Hudson Valley Federal Credit Union.

Securities offered through LPL Financial, member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates.

Not NCUA Insured

No Credit Union Guarantee

May Lose Value

Hudson Valley Federal Credit Union and HVFCU Financial Services are not registered broker/dealers and are not affiliated with LPL Financial. This material was prepared for Jeff Thatcher’s use.

© 2012 S&P Capital IQ Financial Communications. All rights reserved.

Tax Smart Investing Tips

Savvy investors have long realized that what their investments earn after taxes is what really counts. After factoring in federal income and capital gains taxes, the alternative minimum tax (AMT), and potential state and local taxes, your investment returns in any given year may be reduced by 40% or more. Luckily, there are tools and tactics to help you manage taxes and your investments. Here are four tips to help you become a more tax-savvy investor.

Tip #1: Invest in Tax-Deferred and Tax-Free Accounts
Tax-deferred investments include company-sponsored retirement savings accounts such as traditional 401(k) and 403(b) plans and traditional individual retirement accounts (IRAs). In some cases, contributions to these accounts may be made on a pretax basis or may be tax deductible. More important, investment earnings compound tax deferred until withdrawal, typically in retirement, when you may be in a lower tax bracket. Contributions to Roth IRAs and Roth 401(k) savings plans are not deductible. Earnings that accumulate in Roth accounts can be withdrawn tax free if you are over age 59 1/2, have held the account for at least five years, and meet the requirements for a qualified distribution.

Tip #2: Manage Investments for Tax Efficiency
Tax-managed investment accounts are managed in ways that can help reduce their taxable distributions. Your investment professional can employ a combination of tactics, such as minimizing portfolio turnover, investing in stocks that do not pay dividends and selectively selling stocks that have become less attractive at a loss to counterbalance taxable gains elsewhere in the portfolio. In years when returns on the broader market are flat or negative, investors tend to become more aware of capital gains generated by portfolio turnover, since the resulting tax liability can offset any gain or exacerbate a negative return on the investment.

Tip #3: Put Losses to Work
At times, you may be able to use losses in your investment portfolio to help offset realized gains. It's a good idea to evaluate your holdings periodically to assess whether an investment still offers the long-term potential you anticipated when you purchased it. Your realized losses in a given tax year must first be used to offset realized capital gains. If you have "leftover" losses, you can offset up to $3,000 against ordinary income. Any remainder can be carried forward to offset gains or income in future years.

Tip #4: Keep Good Records

Keep records of purchases, sales, distributions, and dividend reinvestments so that you can properly calculate the basis of shares you own and choose the most preferential tax treatment for shares you sell.  

Keeping an eye on how taxes can affect your investments is one of the easiest ways to help enhance your returns over time. For more information about the tax aspects of investing, consult your tax professional.

Source/Disclaimer:

The information in this article is not intended to be tax advice and should not be treated as such. You should consult with your tax advisor to discuss your personal situation before making any decisions.

© 2012 S&P Capital IQ Financial Communications. All rights reserved.

Jeffrey Thatcher is a CERTIFIED FINANCIAL PLANNER ™ and director of HVFCU Financial Services, the investment division of Hudson Valley Federal Credit Union, which is based in Poughkeepsie, NY.

Securities and advisory services offered through LPL Financial, a registered investement advisor. Member FINRA/SIPC. Insurance products offered through LPL financial or its licensed affiliates. Hudson Valley Federal Credit Union and HVFCU Financial Services are not registered broker/dealers and are not affiliated with LPL Financial.

Not NCUA Insured

No Credit Union Guarantee

May Lose Value

The Benefits of an IRA

Have you forgotten your IRA? If you don't have one, should it be part of your overall investment plan? Here are some compelling reasons why an IRA can help you plan for your future.
 
1.   Tax deferral: Traditional IRAs allow your investment earnings to grow tax deferred until withdrawn, typically at retirement. For 2012, the maximum contribution is $5,000, but for those aged 50 and over, the limit is $6,000.

2.   Deductibility: If you are a single taxpayer who doesn't participate in an employer-sponsored plan and you earn less than an amount set each year by the IRS, you can deduct your contributions to a traditional IRA off your income taxes. Note that Roth IRA contributions are not deductible.

3.   Investment flexibility: IRAs typically give investors access to a wider range of investment options than workplace-sponsored plans such as a 401(k). Depending on the financial institution you use to open your account, you can invest in a broad array of mutual funds, ETFs, individual stocks and bonds, CDs, annuities, even commodities and real estate.

4.   Convertibility: Traditional IRA holders can convert to a Roth IRA to enjoy additional benefits below, but before you decide to make a switch, be sure to investigate the tax consequences of such a move.
 
5.   Portability: If you have assets in an employer-sponsored plan and you leave your job, you can easily roll over those assets into an IRA. Rolling over your assets can make sense particularly if you change jobs frequently and don't want to devote too much time to coordinating and tracking your accounts.


Additional Benefits of Roth IRAs

• Qualified tax-free withdrawals: Since Roth IRAs are funded with after-tax dollars, your withdrawals aretax free, as long as you have held the account for at least five years and are over age 59 1/2.

• No RMDs: Unlike traditional IRAs, Roth IRAs are not subject to required minimum distributions (RMDs) once the accountholder reaches age 70 1/2.

Contact your financial professional to discuss a strategy for your IRA or to see if investing in an IRA makes sense for you. Withdrawals made prior to age 59 ½ are subject to 10% IRS penalty tax. (In the case of a Roth, it must be held five years as well.) Gains from tax-deferred investments are taxable as ordinary income upon withdrawal.

© 2012 S&P Capital IQ Financial Communications. All rights reserved.

Jeffrey Thatcher is a CERTIFIED FINANCIAL PLANNER ™ and director of HVFCU Financial Services, the investment division of Hudson Valley Federal Credit Union, which is based in Poughkeepsie, NY.

Securities and advisory services offered through LPL Financial, a registered investement advisor. Member FINRA/SIPC. Insurance products offered through LPL financial or its licensed affiliates. Hudson Valley Federal Credit Union and HVFCU Financial Services are not registered broker/dealers and are not affiliated with LPL Financial.

Not NCUA Insured

No Credit Union Guarantee

May Lose Value