by Ruckertax | May 9, 2014 | Frequently Asked Questions, Parenting |
TABLE OF CONTENTS When should I start saving for my child’s education? How much will my child’s college education cost? How should I invest my child’s college fund? What is the American Opportunity Tax Credit? What is the “kiddie tax”? What is an Education IRA and who is eligible for one? If you have insufficient savings for your child’s education, what should you do? What types of grants are available for college? What types of loans are available for college? How can I increase the amount of financial aid my child is entitled to? How can I save taxes on college savings? WHEN SHOULD I START SAVING FOR MY CHILD’S EDUCATION? This depends on how much you think your children’s education will cost. The best way is to start saving before they are born. The sooner you begin the less money you will have to put away each year. Example: Suppose you have one child, age six months, and you estimate that you’ll need $120,000 to finance his college education 18 years from now. If you start putting away money immediately, you’ll need to save $3,500 per year for 18 years (assuming an after-tax return of 7 percent). On the other hand, if you put off saving until the child is six years old, you’ll have to save almost double that amount every year for twelve years. Another advantage of starting early is that you’ll have more flexibility when it comes to the type of investment you’ll use. You’ll be able to put at least part of your money in equities, which, although riskier in the short-run, are better able...
by Ruckertax | May 9, 2014 | Frequently Asked Questions, Parenting |
TABLE OF CONTENTS How much will it cost me to raise a child? What costs can I expect during the first year? How much will I spend on my child during ages one through six? How much will I spend on my child during ages six through twelve? How much will I spend on my child during ages thirteen through eighteen? How can I teach my kids good financial skills? HOW MUCH WILL IT COST ME TO RAISE A CHILD? We can’t tell you exactly what your child will cost, but we can provide you with estimates. Knowing what to expect will allow you to plan for the future. Here is a breakdown of the items you’ll need, and an estimate of their costs. Note: These estimates are for a first child. Bear in mind that second or third children will cost less than the first, since you will already have purchased many of the items you need. Typically parents with 3 or more children spend 22 percent less per child than those with just two children. Government estimates say that a middle income family in 2012, defined as having an annual income between $60,640 and $105, 000, will spend a total of $241,080 to raise a child to age 17. This figure represents a 2.5 percent increase from 2011 and does not include expenses incurred beyond the age of 18. If you include the cost of college, whether public or private, that cost goes up significantly. And, families that earn more generally can expect to spend more on their children. According to the USDA report, Expenditures on Children by Families,...
by Ruckertax | May 9, 2014 | Frequently Asked Questions, Life Insurance |
TABLE OF CONTENTS How do insurance companies classify individuals for rate purposes? What questions should I ask my life insurance agent? What should I watch out for when buying life insurance? How do I compare the cost of several insurance policies? Do I really need life insurance? How much life insurance should I buy? What type of life insurance should I buy? Should kids have life insurance? How do I balance life insurance with my other investments? HOW DO INSURANCE COMPANIES CLASSIFY INDIVIDUALS FOR RATE PURPOSES? Premiums vary among insurance companies so it’s a good idea to comparison shop in order to get the best premium. It’s also helpful to understand how premiums are calculated by insurers. Here’s a quick look at how this works. Insurance companies place individuals into four risk groups: preferred, standard, substandard, or uninsurable. A terminal illness at the time you apply for insurance will render you uninsurable. Having some type of chronic illness will place you in the substandard category. People with conditions such as diabetes or heart disease can be insured, but will pay higher premiums. If you have a high risk job or hobby, you will be considered substandard, a high risk. The premiums charged will be commensurate with the category you are placed in. Thus, a standard risk will pay an average premium for similarly situated insurers. Tip: One company’s category for you may not be the same as another company’s category, so it still pays to shop for insurance with other companies even though one may have labeled you “substandard.” Tip: Once an insurance company approves you for coverage, you cannot be...
by Ruckertax | May 9, 2014 | Frequently Asked Questions, Marriage |
TABLE OF CONTENTS Legal Rights: What are the major differences between married and unmarried couples? What estate and financial planning steps are particularly important for unmarried couples? Do married couples need life insurance? If you change your name after marriage, who should be notified? Do I need to update my will when I get married? What are the tax implications of marriage? How can married couples hold property? LEGAL RIGHTS: WHAT ARE THE MAJOR DIFFERENCES BETWEEN MARRIED AND UNMARRIED COUPLES? When it comes to legal rights and being married vs. unmarried, there are several major issues to consider. Specifically, unmarried couples do not: Automatically inherit each others’ property. Married couples who do not have a will have their state intestacy laws to back them up; the surviving spouse will inherit at least a fraction of the deceased spouse’s property under the law. Have the right to speak for each other in a medical crisis. If your life partner loses consciousness or capacity, someone will have to make the decision whether to go ahead with a medical procedure. That person should be you. But unless you have taken care of some legal paperwork, you may not have the right to do so. Have the right to manage each others’ finances in a crisis. A husband and wife who have jointly owned assets will generally be affected less by this problem than an unmarried couple. WHAT ESTATE AND FINANCIAL PLANNING STEPS ARE PARTICULARLY IMPORTANT FOR UNMARRIED COUPLES? The following steps are particularly important for couples who are not married: Prepare a will. If both partners make out wills, the chances are that...
