Alternative Thoughts on Education Funding

The world changed with the discovery of a hidden stairway in Egypt’s Valley of the Kings in 1922. Tomb raiders plundered the pharaohs’ tombs for centuries. And extensive excavations by archaeologists in the late 1800’s uncovered what they thought were any remaining secrets. However, British archaeologist Howard Carter and his team unsealed the door to King Tutankhamun’s tomb. The Boy King, his treasures, and new discoveries about Egyptian life were found largely undisturbed. This wealth remained hidden and overlooked for over 3,000 years. Tut’s father had been unpopular and Egyptians wiped history clean of Akhenaten’s legacy, and the boy king’s reign fell to obscurity. Tomb raiders overlooked Tut – in their books, he never existed.

Solutions to life’s mysteries often require persistence, new thinking, and a little luck.

The incoming class of 2018 anxiously awaits their letters of acceptance. College education is important for educating, preparing and re-tooling our workforce. It provides professional, personal and social benefits as skills are developed and networks are created linking people, talents and opportunities. And it enhances lifetime earnings potential. I’ll share alternative thoughts about college planning – “college” might be community college, vocational school, four-year college or graduate and professional degrees.

Should education funding take priority to retirement funding?

  1. It’s important to start early – time value of money – but savings can be “lumpy.” Young adults may be focused on paying off student loans and building reserves, shift to home acquisition and family, and finally, focus on retirement funding. If that’s the progression, then recognize the potential conflicting tendencies of “being safer because I’m not 30 anymore” (looking backwards) versus “need to stay growth-oriented to fund a three or four-decade timeframe” (looking ahead).
  2. Ironic situations can arise when life intersects with financial advice. One family sets limits on what they will fund such as X dollars or four years of in-state tuition. Should they feel guilty about saying “no” to their kid’s #1 school choice, or that the kid takes out student loans? Or consider retirees who preserve their retirement assets (don’t spend it) and pass it on to heirs who may become wealthier than they.

How active is the student involved in the planning process? It’s helpful to have both parents and students involved in conversations about the implications of college decisions. Issues include what’s the college choice priority – academic fit versus affordability? Who is primarily responsible for funding – parent versus student? And how school/career ready is the student – GPA, career or major, and drive?

What costs are being considered?

  1. Financially, you have tuition and fees (averages range $10k for in-state, $26k out-of-state, and $35k annually for private). There’s also room and board, books/computers/supplies, and personal/transportation.
  2. How long is school? Two-year program, four or more? What about potential over-enrolled public colleges where it may take more than four years to get the necessary courses versus private schools who say, ”We’ll get your kid out on time?”
  3. Opportunity costs? Consider a student entering the workforce with a technical or vocational degree at potentially less cost, debt and time than a four-year college graduate taking a position different than his major. Or alumni networks or specialty programs at various institutions.
  4. Weight of debt? Recent statistics show about $1.5 trillion of student debt (exceeds credit cards by $620 billion). Average 2016 graduate had $37k of debt. Graduate and professional students were higher – MBA $42k, law $140k and medical $162k. Debt service means less money to buy cars, make house payments, etc. and it gets more expensive as interest rates rise. A 2% rise in interest rates extends the payoff period ($37k of debt at 6%) by 2.6 years or increases the monthly payment 27%.

Planning involves working multiple dimensions simultaneously, not unlike the search for treasure. Good luck.

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Roth IRA Conversions Might be a Smart Move for 2018

The world’s best winter Olympic athletes meet in PyeongChang. Alpine skiers Vonn, Shiffrin, Ligety, Nyman and their teammates have a job which is basically to get from the starting gate to the finish line with a few obstacles to navigate in between. They face conditions they cannot control – weather, visibility, and snow to name a few. However, they can focus on the things they can control including the line or track they’ll take. And we’ll root them on their way to hopefully gold and joy.

Managing personal finances, and life, have similarities. We’re trying to get to where we want to be, with life’s surprises helping or hindering our progress. Either way, we adapt and adjust course and tactics. One area of change currently is tax reform (Note:  there are plenty of other commentators talking about shifts in investments). Tax rates have been reduced. What if Congress hikes future tax rates? Thus, Roth IRA conversions might be a smart conversation with your CPA and financial advisor.

There are two types of IRAs – traditional versus Roth IRAs.  Generally, the decision to contribute currently ($5,500, or $6,500 if you’re 50 or older) to either a Roth or traditional IRA is largely based on current versus future expected tax brackets. If future brackets are higher, then consider a Roth, and if lower, then consider the other.  In traditional IRAs, you may get a tax deduction up front for the contribution, the monies grow tax deferred, and future retirement withdrawals are taxable as ordinary income (Note: non-deductible contributions may be non-taxable). Roth IRAs are treated the opposite. You contribute money on an after-tax basis, monies grow tax deferred, and generally, if withdrawn during retirement, those retirement checks are non-taxable.

To summarize, Roth IRAs are generally better for people who are in low or relatively lower tax brackets while they’re saving versus when they later retire. (Please note, taxes are complex, I’m oversimplifying this for discussion purposes, and you should seek expert tax advice from your CPA relevant to your specific situation).

But wait, there’s one more thing – are you earning too much money that would prohibit you from making a Roth IRA contribution? For 2018, the phase out for Roth IRA contributions is MAGI between $189,000 and $199,000 for married, and $120,000 to $135,000 for single.

However, regardless of your income level, you may be eligible to convert a traditional IRA account to a Roth IRA. Consider the expected differential between current and future tax brackets as previously discussed. The conversion will trigger taxation of the IRA amount. If you convert a $100,000 IRA, then you’ll have an additional $100,000 of taxable income. In essence, you’re making a long-term bet for higher income tax rates and buying out Uncle Sam early.

There are two things about Tax Reform relevant to Roth IRA conversions. First is the elimination of the “do over” option after 2017 – you formerly could change your mind and “undo” a Roth IRA conversion as late as October 15th of the following year.  Second, the tax brackets are lower under Tax Reform. If you are high income and are considering Roth IRA conversion, the amount may have been taxed at rates ranging from 28% to 39.6% – under Tax Reform, it might “only” be taxed at 24% to 38.5%. And consider future tax policy. If nothing is done, the old tax brackets return in 2026. And if, the US deficit widens due to insufficient revenue (taxes) or higher expenses (more services, higher interest expense on government debt, etc.), what’s the bet for higher tax rates?

This is one more planning “what if” to consider – a window of potentially lower income tax rates.  But save  yourself, and your CPA,  the bother if you’re one of the fortunate savers  who will be passing wealth on to your heirs. If that’s the case, why are you paying taxes for your kids’ inheritance?

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The Silk Road and Planning for Federal Employees

Beasts carried and merchants traded silk, porcelain, gold, spice and gunpowder along a 4,000 mile corridor between China and Greece for almost 2,000 years. It was called the Silk Road, and started about 200 BC when wealthy Romans sought soft and shimmering silk, and Chinese nobles wanted a special breed of horses that symbolized the sports car of their day.  The overland routes were valuable not only for the exchange of goods and luxuries between East and West, but also for the trade of philosophy, culture, religion and technology that helped shape the world.

The Silk Road had two unique features. First, it is not a single road, but rather a series of strategically located and connected trading posts, marketplaces and routes. It was a web similar to woven silk threads. Second, the flow could be interrupted due to weather, natural disasters, politics and marauding raiders to name a few. And it’s a good metaphor for one’s journey through life – there are multiple paths to the top of the mountain, and there’s likely to be numerous detours along the way.

Households across America pay close attention to their finances for New Year’s Resolutions and gearing up for income tax preparation. Others focus on planning summer vacation. Here are some issues Federal employees face as they consider employee benefit decisions. If you are not a Federal employee, consider reading on because we’re covering retirement and health planning issues.

Retirement benefits – Components may include Basic Annuity (FERS and CSRS), Thrift Savings Plan (TSP), and Social Security. (Note:  FERS and TSP are similar to PERS and 401k plans). The annuity benefit is based on your length of service and “high-3” average salary, reduced for survivor benefits, and subject to cost of living adjustments.

Retirement benefits from TSP are based on the account value – similar to 401k plans. Think of “fives” regarding TSP. First, consider contributing at least five percent to get matching contributions which are often five percent. (You may need to contribute more based on your situation). You get a huge return (100 percent here) on your contributions and ten percent of your pay goes to savings. Second, it’s simple investment menu – five index funds and five lifecycle funds. It’s a cheap way to invest – low management fees with index funds.  And you can contribute on a pre-tax or Roth option – the later may be better for those in a low tax bracket.

There are a couple of quirks to TSP such as (1) limited diversification – invest elsewhere if you want gold, real estate, small caps, etc.; (2) consider the other side to the “cheapest is best” rant – a bad (or poorly timed) investment, albeit cheap, is still a bad investment; and (3) limited withdrawal/distribution options – TSP encourages participants to transfer money in, but getting out is another issue.

Health benefits – The Feds have mass and offer a broad benefit and insurance program. I’ll cover three areas. Take a look at HSA (health savings) and FSA (flexible spending) to help cover out-of-pocket eligible healthcare costs on a tax-advantaged basis. Read the fine print of each. Second, review your life insurance needs and the group life program. Three reasons for insurance include income replacement, debt payoff, and estate taxes. The first two decrease over time, and few people have estate tax issues. And third, consider long-term care at  We’re not going to get out of this world alive and consider potential LTC costs of four to eight thousand bucks a month for up to four years. Note:  The second spouse can sell the house, but who is the first spouse needing LTC?

Some experts say the three biggest threats to a successful retirement include inflation, taxes and down markets. Only three? Consider the path being more like the Silk Road. The journey can be great, and the road bumpy, so let’s plan for it. Good luck.

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A Healthier 2018 – Six Questions

Old Chinese proverb goes “I hear and I forget; I see and I remember; I do and I understand.” Knowledge was passed by the ancients to their children often by stories and demonstration. Formal schools later emerged in China about 3,000 years ago. However, they were established for the nobles, the masses could only dream, and education was key to achieving coveted positions in civil service. Power, status and wealth accompanied those positions.

Studies were multi-disciplined and students who mastered the Six Arts were recognized for having achieved a state of perfection. The arts included Confucianism, music, archery, charioteering, calligraphy and mathematics.

The education system evolved. Mao’s Cultural Revolution in the 60’s was the most radical and controversial. He pressed elimination of the “Four Olds” – ideas, customs, culture and habits. Society stagnated for a decade.  Teachers and intellectuals were persecuted, books destroyed and schools shut down. Academic and scientific institutions would later recover, however, the impacts persist.

“Six Questions to Help Determine Your Financial Health” by Annamaria Lusardi was a popular wealth management article in the WSJ for 2017. It summarized the National Financial Capability Study on financial literacy. Average American scored 3.2 out of 6 questions. Below is the latest test and some relevant life issues.

Why is financial literacy vital to your success? If you had a magic wand and your retirement was guaranteed, you’ll face other financial decisions and possible reboots in your life. Family, job and business changes, and not getting out of this world alive are just a few. Life is complex and requires a variety of skills and resources. Here we go – see how you do.

  1. Suppose you have $100 in savings earning 2% a year. After five years, how much would you have? More than $102, exactly $102, less than $102, or don’t know. This illustrates time value of money, comparing investment options, and verify how much you should have in your account.
  2. Imagine the interest rate on your savings is 1% annually while inflation is 2%. After one year, would the money in your account buy you more than it does today, the same, less or don’t know? Inflation is a hidden menace. How “safe” is a safe return?
  3. If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same, or there is no relationship. Interesting rebalancing dilemma facing investors today – do you reposition stock gains in long-term bonds? How much money do you lend at low current rates?
  4. 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest cost over life of the loan will be less. True, false, or don’t know? Debt reduction is high priority. Refinancing thoughts: (a) shorten the loan by paying more on your mortgage and save refinance costs, plus you can revert to the lower payment in tough times, and (b) check the new tax law for deductibility of mortgage interest. Are you overpaying for a car? “It only costs $100 a month” to bump up $5,000 to a $25,000 loan (5-year); and better credit score saves about $2,500 ($20,000 loan at 4% vs 8%).
  5. Buying a single company stock usually provides a safer return than a stock mutual fund. True, false, or don’t know? People may prefer stocks vs boring mutual funds or ETFs. Some are very successful (diligent and disciplined) stock investors. Remember, animals herd on the savanna – safety in numbers.
  6. Suppose you owe $1,000 at 20% interest annually. If you pay nothing, how many years will it take for the debt to double? Less than 2 years, 2 to 4, 5 to 9, or 10 or more. Make payments on time. “Rule of 72” relates the number of years for principal to double at a specified return. Divide the return (or number of years) into 72. $100 bill is worth half in 24 years at 3% inflation. Portfolio doubles in 10 years if earning 7.2% a year.

How’d you do? Answers are A, C, B, A, B, B. And another proverb says, “Walking ten thousand miles beats reading ten thousand books.” Experience and seeing the world are also great teachers. Good luck.

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Financial Planning – A Historical Summary and Insights for the Future

Cultures have different traditions in greeting the New Year. However, there are some similarities. Make noise – firecrackers routed the forces of darkness in China, Thais fired guns to frighten off demons, and Swiss pounded drums. Eat lucky foods – Spanish ate twelve lucky grapes at midnight, rice means prosperity in India, and eating ring-shaped food signals “coming full circle” and good fortune. Give a gift – Romans passed coins, Persians exchanged eggs as signs of fertility, and you kiss the person you hope to be kissing for a long time.

The New Year is also a time to reflect on the past and plan for the future.  So I share with you a history of the financial planning profession and some future trends. It has and continues to evolve and adapt as life and the environment change.

The industry is relatively young emerging in the 1960’s. However, the concepts of personal financial planning had its roots a hundred years prior with the Morrill Act of 1862 and the rise of land grant universities. The US government promoted agricultural and industrial studies and States were each offered 30,000 acres of land to either sell or used to develop colleges. Some of the first were Michigan State and Iowa State. Home economics departments emerged, first directed at the farm household and later expanded.

Financial planning as we know it today was born in December 1969 when thirteen financial services industry leaders gathered to discuss the creation of a new profession. The first CFP graduates were in 1973. Over the years, three main organizations would emerge – a membership association (FPA) and an education and enforcement arm (CFP Board), and one who was focused on fee-only advice (NAPFA). These organizations promote the planning industry, maintain and enforce high standards of practice, and support initiatives holding planners to a fiduciary standard. There are approximately 170,000 CFPs worldwide, and numerous CFP Board Registered colleges.

The industry has had a bumpy ride over time. The 70’s were marked by a double dip recession, a 15-year bear market (ending in ’82), OPEC lead oil shocks, double digit inflation, resignations of President and VP, end of Vietnam War, IRA accounts, and ERISA signed into law. It was largely product-driven (tax shelters, annuities and real estate partnerships) because of runaway inflation, high interest and tax rates, and few were interested in the stock market. The 80’s were marked by Reagan and Volker breaking the back of inflation (18 – 20% money market rates and 14-16% mortgages), tax reform, 401k’s which changed the way we’d save and invest for retirement, a rising stock market, Alan Greenspan, and Black Monday.  The 90’s started with Gulf War I, recession, drop in real estate prices, tech bubble, then record stock market highs. And during this time, financial planning turned more to a needs or goals based approach.

But what is on the horizon as we look ahead? Here are a couple financial planning trends:

Better aging – What if more people lived longer with active lifestyles? How might that change investment, saving and spending, health and wellness, and career and lifestyle decisions?

Evolving women demographics – Studies forecast an increased control of wealth by women. US population is shifting to women. Women live longer and graduation rates outpace the men. And gray divorce is a growing trend. How can we attract more women into the financial planning industry, and the industry itself better serve the needs of women?

Advancements in technology – The pace of change continues to accelerate. Similar to the trend of driverless cars, will investors be successful with automated investment solutions (robo advisors) or better served by humans in the cockpit? Which planning technology do you adopt and master? Are you fast (innovating and adapting) or slow (keep your values and filter out the noise)?

In closing, may the words from Poor Richard’s Almanac ring true with you – “Be at war with your vices, at peace with your neighbors, and let every New Year find you a better man.”

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3 Mistakes with 529 Plans to Avoid

Across America, some 20 million college students return to campus. Some prepare for their future, others intend to change it. And an interesting trend is emerging – tuition costs are growing at a slower rate.  According to the College Board, tuition grew an average of about 6% annually from 1990 through last year. That’s double the rate of inflation. However, this year the Labor Department estimates tuition costs have risen just under 2%. Factors include supply (more colleges), demand (less students going back to school with a healthy job market), and demographic shifts (declining birth rates). And more private schools are discounting their sticker prices – NACUBO reports that freshman are receiving higher price breaks on tuition via scholarships and grants.

Nevertheless, funding education costs has significant impact. The average cost for a four year private college is about $27,500. You’re either writing big checks – $66,000 annually 18 years from now if you have a newborn and 5 percent inflation – or graduate with student loans that compete with other financial goals – building cash reserves, buying a home and saving for retirement. Or the smarter ones start saving money early – saving $790 monthly for that newborn assuming a 5 percent return.

You have options on how to save and invest that $790. Each has its trade-offs. One popular way is via 529 plans. This article will address some of the mistakes to avoid with 529 plans. First, however, a refresher.

What are 529 plans? They help save for college and other post-secondary training on a tax-advantaged basis. There are two main types including “prepaid tuition plans” and “savings plans” and my focus will be on savings plans.  The key advantage is that withdrawals of earnings (you invested X and account has grown in value) might be tax free if funds are used for “qualified education expenses” or QEE’s.

Mistake # 1 – Using “Pre-paid plans” only

Prepaid plans are losing popularity. First, tuition might be only a third of the total college expense. What are you doing to fund other costs including room and board, transportation, and others? Second, they have their limitations. What if you buy prepaid for University A, but your kid prefers U of B? What if B tuition exceeds A? Will you support his or her enrollment in B and how make up the cost difference?

Mistake #2 – Withdraw too much

You cannot use 529 plans like an ATM. Withdrawals must be for QEE’s. Ineligible withdrawals are subject to tax consequences – earnings may be taxable and 10% penalty. QEEs are generally for the school’s published “estimated costs” – tuition and fees, room and board, books, supplies and equipment. Issues arise when students live off campus (and costs exceed on campus rent and meal plans), forget to adjust for scholarships and tax credits, and fail to report school refunds. Students are advised to keep record of their expenses and segregate purchases – lunchmeat and PBR on separate bills!

Mistake #3 – Overfunding

What if there’s left over money because they came in under budget (funded for four years and they were done in two)? The owner of the 529 plan generally doesn’t lose the money, however he or she may lose the tax benefits. You may change the beneficiary (you name a grandchild after your kid graduates), or you use the funds for your qualifying secondary education expenses. And if you’ve run out of beneficiaries, you can always make an ineligible withdrawal and pay the taxes and penalty.

You have options with education funding, and each may be subject to special rules. Know where the lines are, stay inside of them, and consult your advisors and especially your CPA. Tax issues can be complicated, and I like you hate to get a letter from the IRS. Good luck!

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Retiring Sooner

The Transcontinental Railroad brought thousands of settlers westward. In 1879, people began eyeing a dusty region known as the “Unassigned Lands.” The early group of supporters and promoters were known as “Boomers.” Farmers and ranchers sought new virgin territory to apply their advanced ranching and agriculture techniques and transform the arid and treeless landscape. Some began to survey, plant crops and even built homes on the yet-to-be-opened land. And a decade later, President Harrison finally declared that the region would be opened.

Cannons boomed precisely at noon on April 22, 1889, and the race was on. 50,000 land hungry settlers were eager to stake their claim for 160 acres of free land. However, there were some cheaters who illegally staked claims early. They were known as “Sooners.“ Together, the Boomers and Sooners became known as the Eighty-Niners. And regardless if the settlor was toeing the start line at high noon, or well beyond it hiding in the brush ready to claim his or her slice of heaven as the riders approached, those who would persevere in the new frontier likely possessed two characteristics – well prepared and full of grit.

What is your expected retirement date? Age 65 or 67 or whatever your full retirement age per Social Security? Later? Alternatively, when would you like to make work optional and retire earlier? Maybe you’re evaluating an early buyout, you’re tired, or expecting an inheritance. What are some of the implications of early retirement?

Fixed income sources may be lower. Common sources include Social Security, pensions, and annuity-like income. They’re considered fixed because payouts are generally consistent. However, payouts will be lower due to longer periods of payment and/or less benefit earnings.

Social Security benefits are generally determined by your Average Indexed Monthly Earnings (AIME) over 35 years. Generally, the longer you work, the higher your AIME and your accrued benefit. However, once you retire, you cease accruing additional benefits. The reduction in SS benefit at 62 is roughly 25 to 29% versus full retirement age, and the spouse’s benefit is 30 to 34% lower. Visit for more information.

Let’s take Nevada PERS as a pension example. This benefit also is driven by your covered service – the longer you work (2.5% or 2.67% per year) and the greater the compensation (high 3-year compensation), then the greater the retirement benefit. Your retirement benefit may be reduced 10% if you retire 4 years early (4 times 2.5%). However, additional reductions may occur based on your age (with 5 years of service you can retire at 65, 10 years at age 60 and 30 years at any age), and the spousal benefit you chose. Other pension plans have similar provisions (STRS, FERS, etc.).

Annuity payouts – Say there’s $100,000 in an annuity with two scenarios (a) 10-year payout, or (b) 30-year payout. Which scenario will have the higher payout? The first one. The longer the money must “stretch,” the lower the payout.

It’s scary to switch from a saver to a spender. You’ve been hard-wired to save for decades, and it can be difficult to withdraw more than the account earnings. But consider a shift in your thinking. Instead of being like tens of millions of Americans who compulsively check their account balances, think of your savings as your personal pension (and prudently invest like one).

  • Retirement paycheck for lifetime
  • A periodic raise to keep pace with rising living costs
  • Have a cushion for the “just in case”
  • And the final check you write bounces (or reduce your paychecks to leave the desired amount at the end)

Any retirement takes preparation and grit. Early retirement might take a little more work – increase savings, adjust lifestyle, and plug cash flow gaps. And if you’re afraid to quit early, that’s ok too. A friend told why he continued to work … “I’m afraid if I get off the horse, it’ll be difficult to get back on.” He was talking about the speed of change, technological advancements, and the need for continual learning. Good luck.

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College and Career Readiness – New Hope on the Horizon

Rich Dad, Poor Dad author Robert Kiyosaki says “Financial freedom is available to those who learn about it and work for it.” A significant part of employee financial security comes from five benefit areas. However, first you’ve got to set a career path. This article centers on college and career readiness trends for high school graduates and a brief summary on funding methods, including the new Nevada Promise Scholarship which starts next year.

Some employees seek financial stability. Others want the opportunity to climb the income ladder. Successful businesses focus efforts internally on employee development and retention. And benefits can provide both – security/stability and growth. They include retirement savings, work/life balance, resources to enhance financial literacy, safety nets for “the unexpected” (insurance, wellness plans, etc.), and programs that increase employee marketability and growth.

But first you prepare for the job market by putting things in your favor. The US Bureau of Labor Statistics reports that 3.1 million youth graduated from high school last year. About 70% enrolled in college. Components of both segments worked – those that went to college (38%) and those that didn’t (72%) – however, the unemployment rate for those not enrolled in college was twice as high.

Where are the college-bound headed? The College Savings Foundation (CSF) is a non-profit helping American families save for higher education.  In their most recent CSF Youth Survey, graduating high school seniors were heading to public college 44%, community college 25%, private college 18%, and vocational school 8%.

Primary considerations?  Generation Z’s (aka Post-Millennials) are those born in 1995 or later. They deserve great attention because they comprise a quarter of the US population, contribute about $44 billion to the US economy, and are projected to comprise one-third of our population by 2020. They’re generally financially careful and debt adverse. Key factors regarding college decisions included “Costs” (79%) and “Career Paths” (69%) per CSF Survey. 54 percent are choosing public college, and 20 percent opt for community college. Nearly half consider vocational and career school the same as they think about public or private college. And a little more than half plan to live at home while attending college.

How are they funding school? Sallie Mae’s 10th survey of parents and students shows parents saving less and students borrowing more.  Both are related – the gap from less available savings and income is being filled by debt.  Here’s how the average American family financed college for 2016-2017 per their study: Scholarship and grants 35% (largest share in ten years), parent income and savings 23% (down 6%), student loans (up 6%), student income and savings 11%, parent loans 8% and relatives and friends 4%. Those who borrowed also spent more for college – those without loans spent an average of $17,356 for 2016-2017, and those with loans spent a total of $31,082 (about $13.6k borrowed).

What needs work? Nine of ten parents surveyed expected college costs since their kid was in pre-school. However, less than half (42 percent) had a plan to pay them.

Free Community College passes in Nevada? The Nevada Promise Scholarship was recently signed into law. Eligible students may be able to attend participating community colleges tuition free for up to three years beginning in 2018. The $3.5 million program is a last-dollar program meaning it’s designed to pay remaining registration and mandatory fees not meet by other gift aid (Pell Grant, Millennium, etc.). Nevada students leave about $14 million in federal aid on the table because students fail to apply for it. Contact your community college for more details, including the application requirements and deadlines.

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2 Areas That Will Make You Revisit Your Retirement Plan

The USS Enterprise stood as a formidable power and deterrent for half a century. She’s almost four football fields in length, has a flight deck that spans four and a half acres and weighed 94,000 tons. The “Big E” sailed a million nautical miles and played a role in major world events from Cuban Missile Crisis, to wars in Iraq and Afghanistan. She even did a cameo in Top Gun. However, she was the oldest active combat vessel in the fleet and readied for retirement in 2012. And she still sits today awaiting her fate of sink, scrap or save.
What’s holding up retirement of the world’s largest aircraft carrier? First is the issue of safely defueling and capping eight nuclear reactors. Budgetary issues arose. And others recommended she be saved – converted to a museum, or remodeled and placed into reserve. Hence, the Navy put on the brakes and studies alternatives.
So what’s holding you up in revisiting your retirement plans? Possibly it’s eyes on Washington watching four key issues. The year started with high hopes from sweeping policy changes – tax overhaul, healthcare reform, infrastructure spending and deregulation. However, as political dysfunctions continue, there are concerns that the anticipated policy changes could be scaled back, if they even happen at all.
However, life continues, we don’t get any younger, and there will be decisions to make often in the haze of uncertainty. Every day brings us closer to retirement, packing up our troubles and sending them to college or vocational training, and the next opportunity or life transition. Here are two actionable areas for your consideration.
How comfortable are you with your retirement spending budget? Cost of funding your future lifestyle is a core element in retirement planning. A big fear is the risk of outliving your wealth. However, MIT AgeLab reminds us of other risks, including inability to access big and little things in life. Don’t overlook something as mundane as “Transportation” in your budget. It plays important roles.

• Part of the glue that holds together many of life’s activities.
• Second largest cost in retirement – Tops for those aged 65-74 include housing                        (32%), transportation (17%), and food and healthcare (tied at 12%).
• Technology extends driving age – smart headlights, emergency response systems,                  etc.
• Alternative transportation modes when keys are “turned in” include friends and                    family, public transportation, van services, Uber and Lyft, etc. They can help reduce              depression and decreased activity level from loss of driving privileges.

Twenty year olds can get a jump on saving and for better future options. IRAs or Roths are convenient places to start. Both offer tax advantages and the details can be found in IRS Publication 590-A and B. I’ll focus on the powers of time value of money and compounding.
Advantages of starting early – It’s cheaper! You’ll be a millionaire (almost) by saving the current IRA limit of $5,500 for forty years (from age 25 to 65) and average a 6% annual return. The actual accumulation is about $902,000. If you delay saving by ten or twenty years (start at age 35 or 45), then your savings need to increase to about $10,800 and $23,000 respectively (2x or 4x original savings rate).
Small increases can have big results. For each $100 additional savings monthly for forty years starting at 25, your accumulated wealth at 65 grows by about $200,000.
And check out the website It’s written by young people, for young people, and discusses a wide range of topics. Recent headlines online read “5 Mistakes I made after college graduation (and what I learned from each)” and “Exactly how you can save $10k this year on a $40k salary.” Note: of course there’s a wide range of cost of living throughout different parts of the country. Key points include (a) making saving a priority, and (b)you’ve got to be more serious about your money than anyone else on the planet – even your financial advisor. Good luck.
Brian M Loy, CFA, CFP         Reno Gazette Journal         July 16, 2017



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Use Your $1.5 Million Wisely

Whaling played an enormous role in American life for almost 200 years. Over two thirds of the world’s 900 whaling ships sailed from American ports and making many East Coast ports rich including New Bedford, Massachusetts and Nantucket. Whale oil lit American homes and streets. Baleen helped shape American culture from umbrellas and buggy whips to corsets. Industries grew including ship building, coppering, sail making, blacksmithing and more. And fortunately for the whales, petroleum oil was discovered in Titusville, Pennsylvania in 1859.

It was also a tough and dangerous life for whalemen. The great ships roamed the Atlantic and Pacific seas. “Thar she blows!” The crews manned their 25-foot whale boats, gave chase with harpoons and lances, and towed their prize back to the ship for butchering and processing. And the process continued until the ships were full.

Ships needed supplies to feed, water and mend her crew and replace lost gear. A voyage would last up to four years. And a well-supplied and captained crew went a long ways to making for a successful trip and avoiding mutiny.

We too need to be well stocked for our financial voyages. The challenge is to support a 30-year retirement with a 40-year career. Headwinds commonly include longevity, inflation, the occasional market correction, health setbacks, raising a family, and others. And accelerants may include “windfalls” such as side gigs, entrepreneurial successes, and inheritances. So here are two related thoughts.

Lifetime earnings versus spending – Some people say “You can always earn more income, but you never get more time” encouraging reckless financial behavior such as living for today and not planning for the future. However, lifetime earnings are generally fixed and most people have 40 years to accumulate (age 25 to 65). (Some people have much greater flexibility in earning power… just humor me for this example). Ignoring inflation for a moment, Average Joe earns $35,000 a year, or $1.4 million over 40 years. The average college graduate earns $46,000, or $1.8 million lifetime. $70,000 a year is $2.8 million lifetime. And $200,000 a year is $3.6 million lifetime. So whether its $1.4 million, or $3.6 or whatever, that’s it… that’s all we have to work with. Use it wisely. Consider that the average “close to retirement” family has $163,000 in savings (Economic Policy Institute) – that’s only 13% of Average Joe’s lifetime savings (not a good saver and/or investor).

However, consider your lifetime spending for 60 years from age 25 to 85. First, you have significant control over it. And second, it generally exceeds your lifetime income. But don’t panic. Planning helps fill the “gap” by pension benefits (Social Security) and savings (401k, rentals, etc.).  It helps define your required savings rate.

Starting or shifting careers – Congratulations to you graduates. Some are planning to attend college in the fall. However, not everyone is meant for (or needs) a four year degree. And for those I encourage trade school to provide you greater career opportunities. First, there are many good paying jobs available. One example is our housing market where the demand for new homes exceeds new housing starts – slow permits are one issue, and another is the lack of skilled construction workers. Second, some skilled jobs pay more than college graduates. Go to and search the highest growth job areas and median salaries –medical assistant $32k, electrician $53k, computer system analyst $87k, software designer $100k, heavy truck driver $41k, RN $68k, sales reps (excluding technical) $57k. Third, trade school is often less expensive than four year college ($98k for moderate in-state and $197k for moderate private per College Board).

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