Topic
Retirement and College Savings 101
Date
Attendees
Presenter: Sara Glakas, Black Barn Financial
Other Attendees:
Discussion Notes
- Investing: looking toward the future
- looking to reach a long term goal: most common long term goals are retirement and child college expenses
- Retirement
- Social Security: about 40% of average worker income
- TRS (defined benefit plan): # yrs of service x 2.3% x average of highest salary years
- 403b or 457 (voluntary, defined contribution plan): save money today, let it grow, use the money to the pay bills in the future
- Retirement Savings Options:
- Traditional: pre-tax (don't pay tax today, but pay tax when you get the money out later)
- Roth: contributions are in post-tax (you have already paid your taxes) and all the growth comes out tax free as well
- 457: No 10% penalty if you pull the money out early (there is a 10% penalty if you pull money out of a 403b
- Options for paying for College:
- Income
- Student Loans
- 529 plans or Coverdell ESA plans
- College Savings
- 529: MUST be used to educational benefits better to have an account for each kid; can change the beneficiary
- each state sponsors a 529
- main benefit of going with the 529 in your state: tax breaks on state taxes (Texas does not have state tax, so you can go anywhere)
- Vanguard: Nevada ($3000 to start but take out least amount of fees)
- 529: MUST be used to educational benefits better to have an account for each kid; can change the beneficiary
- How to know if you can trust a financial advisor/planner:
- Questions to ask financial advisor:
- How are you getting paid? (if they are getting paid by the customer, that is a good sign. If they are getting paid on commission for selling financial products, they may not be giving you advice that is tailored to you/may have an alternative agenda)
- Fiduciary versus suitability: Are you a fiduciary? (essentially, are you giving me advice based on MY best interest as opposed to the best thing for someone that is in my age bracket generally)
- Questions to ask financial advisor:
- Roth IRA: all you need is earned money and you can set up a Roth for your kid (so start saving as soon as they start earning some money, even if its mowing lawns!)
- If you need the money in 5 years, do not be in stocks!
Action items