Wow, what a harrowing swing we have seen in the stock and bond markets of late. Asset allocation, which reduces the downside risk of investing, provided no safety in the July to August market correction. All major equity indices were down at least 10% from their earlier market peaks. Why? We are seeing a realization of some of the fears that were first showing up in theory in February 2007.
Education planning has become even more crucial to many families over the past few years, mainly because the cost of a good education has grown dramatically faster than the overall rate of inflation. Some experts predict that, if your child is born today, you may need more than a quarter million dollars in savings to pay for tuition and living expenses at a quality college or university. The right education planning can put the burden of paying for your child’s education on your portfolio without forcing you to take on extra jobs or go deep into debt.College savings plans are a key element to education planning. Not long ago, many states established “529 plans.” These savings portfolios operate similarly to a retirement plan, but the proceeds can be used for education expenses, like tuition and books with recent legislation making earnings tax free.
Recent changes to the federal tax codes can be confusing, even to some experienced estate planning professionals. While the threshold for estate taxes rises over the next few years, it will fall again – to one million dollars – at the beginning of 2011. Although pundits predict that the current political climate in Washington will not lead to a repeal of the estate tax anytime soon, the right estate planning can help you reduce your estate tax legally and ethically.Unfortunately, too many fly-by-night operations claim to be able to save you money on estate planning with “proven strategies” and “home kits” that often run afoul of IRS regulations. Even well-meaning sons and daughters with power of attorney over an ailing parent’s estate can make uninformed mistakes that can add severe penalties to an already huge estate tax bill.
