Published: Wed, 05 Aug 2020 15:58:23 +0000
Market Blog This isn’t like any recession we’ve ever seen, as it was sparked by a horrible pandemic and happened because people were told to stay inside. The impact was the worst contraction in gross domestic product (GDP) last quarter … Continue reading →
Published: Wed, 05 Aug 2020 15:26:10 +0000
DAILY INSIGHTS Stocks opened higher. US stock markets opened in the green, with the Nasdaq reaching its 30th new record high of 2020. Investors are focusing on positive earnings reports, developments on the COVID-19 relief bill, vaccine progress, and jobs … Continue reading →
Published: Tue, 04 Aug 2020 15:57:52 +0000
Economic Blog The 10-year Treasury yield is historically low, so low that it could climb a full 1% before the end of the year and still be the lowest year-end yield on record, with room to spare. Historically low rates … Continue reading →
Published: Tue, 04 Aug 2020 14:58:57 +0000
DAILY INSIGHTS Stocks opened slightly lower. The S&P 500 Index is down slightly in early trading on a quiet day for economic data. Tuesday, market participants will focus on stimulus talks in Washington, United States and China tensions, earnings season, … Continue reading →
Published: Mon, 03 Aug 2020 15:58:17 +0000
Market Blog 2020 has been historic and devastating in many ways, from the fastest bear market ever, to one of the greatest stock market recoveries ever. Not to mention a historic drop in the economy in the second quarter, with … Continue reading →
Published: Mon, 03 Aug 2020 14:58:40 +0000
DAILY INSIGHTS Stocks start the week on a positive note. The S&P 500 Index is set to open higher this morning to kick off August, a month that historically has been one of its weakest, after a strong 5.5% gain … Continue reading →
Published: Fri, 31 Jul 2020 20:01:15 +0000
Market Blog Index Performance S&P 500 Index: 1.7% Dow Jones Industrial Average: -.2% Nasdaq Composite: 3.7% Equities This week was another mixed week for the markets, as large cap growth earnings powered tech behemoths and the Nasdaq to more than … Continue reading →
Published: Fri, 31 Jul 2020 15:57:58 +0000
Market Blog Apple, Microsoft, Amazon, Google, and Facebook. These five stocks have helped spawn a number of acronyms as they try to capture the rise of mega-cap tech stocks that have led the market higher for much of the past … Continue reading →
Published: Fri, 31 Jul 2020 14:58:13 +0000
DAILY INSIGHTS Tech stocks fuel gains to end week. The S&P 500 Index is marginally higher in early trading, as large cap growth stocks fuel gains in the technology, consumer discretionary, and communication services sectors. Asian markets were mostly lower, … Continue reading →
Published: Thu, 30 Jul 2020 17:45:13 +0000
Economic Blog The best thing we can say about today’s US gross domestic product (GDP) report for the second quarter is that it’s behind us. GDP contracted at a 32.9% annualized rate during the quarter, the largest decline on record. … Continue reading →
Published: Thu, 30 Jul 2020 15:58:17 +0000
Economic Blog The Federal Reserve (Fed) completed its latest two-day policy meeting Wednesday, July 29, and the primary message coming from the world’s most important central bank was a continued commitment to supporting the economy as long as it’s needed—and … Continue reading →
Published: Thu, 30 Jul 2020 14:59:52 +0000
DAILY INSIGHTS Stocks opened lower on big news day. Futures were already lower ahead of the historic gross domestic product (GDP) report and jobless claims data and those data points didn’t change the picture much. Asian markets were modestly lower … Continue reading →
Published: Wed, 29 Jul 2020 15:56:41 +0000
Market Blog “An object in motion tends to remain in motion along a straight line unless acted upon by an outside force.” Sir Isaac Newton Last September, we noted that gold had many structural reasons to soar. Well, soar it … Continue reading →
Published: Wed, 29 Jul 2020 15:03:11 +0000
DAILY INSIGHTS Markets showing resilience. After finishing near their lowest trading levels Tuesday, US markets opened higher this morning. Investors are gauging the wide differences between Republicans and Democrats on the next fiscal stimulus package given the present economic climate. … Continue reading →
Published: Tue, 28 Jul 2020 15:57:37 +0000
Economic Blog After carving out the first part of a “V-shaped” recovery, the US economy has leveled off somewhat in response to the latest wave of COVID-19 infections. In this week’s Weekly Market Commentary: Stalling Economic Recovery May Slow Stock … Continue reading →
Published: Tue, 28 Jul 2020 15:00:09 +0000
DAILY INSIGHTS S&P 500 slightly lower with stimulus, virus in focus. The S&P 500 Index is slightly lower early today as market participants continue to assess stimulus progress, COVID-19 case growth, and earnings. The S&P 500 climbed 0.7% Monday as … Continue reading →
Published: Mon, 27 Jul 2020 15:57:36 +0000
Market Blog “That’s not a knife … that’s a knife!” Paul Hogan in Crocodile Dundee There is growing talk that growth stocks and specifically technology stocks are in a bubble. But as Paul Hogan showed is in the classic 1986 … Continue reading →
Published: Mon, 27 Jul 2020 14:57:53 +0000
DAILY INSIGHTS Stocks opened higher. After ending last week on a down note and seeing its three-week win streak snapped, the S&P 500 Index is in the green in early trading this morning. Markets are awaiting the release of the … Continue reading →
Published: Fri, 24 Jul 2020 20:02:13 +0000
Market Blog Index Performance S&P 500 Index: -0.3% Dow Jones Industrial Average: -0.8% Nasdaq Composite: -1.3% Equities Large cap US equities pulled back modestly this week, as technology-oriented stocks paused for the second consecutive week. The Nasdaq fell more than … Continue reading →
Published: Fri, 24 Jul 2020 15:58:22 +0000
Leading economic indicators continued to rebound in June, albeit at a slightly slower pace than in May. Yesterday, The Conference Board released its June report detailing the latest reading for its Leading Economic Index (LEI), a composite of data series … Continue reading →
Published: Fri, 24 Jul 2020 14:59:02 +0000
DAILY INSIGHTS Down again. US stocks opened lower following Thursday’s broad weakness. Caution is in the air, as China retaliated by shutting down the US consulate in Chengdu. Asian markets were down significantly on the news. European markets are firmly … Continue reading →
Published: Thu, 23 Jul 2020 16:00:01 +0000
Economic Blog The US dollar was remarkably strong during the first quarter of 2020, benefitting from the flight to safety and rallying to nearly a 10% year-to-date gain at the stock market’s low point on March 23. However, as equity … Continue reading →
Published: Thu, 23 Jul 2020 14:59:17 +0000
DAILY INSIGHTS Stocks opened little changed. The S&P 500 Index is trying for its sixth straight positive session as mostly well-received earnings results and optimism that the next big stimulus package out of Washington, DC, will soon be secured are … Continue reading →
Published: Wed, 22 Jul 2020 17:57:47 +0000
Market Blog LPL Research released our Midyear Outlook 2020 last week, discussing the path of the eventual economic and market recovery. What makes this year so incredible is, as of July 21, the S&P 500 Index moved positive for the … Continue reading →
Published: Wed, 22 Jul 2020 14:59:15 +0000
DAILY INSIGHTS Mixed markets. US stocks opened mixed, as Tuesday the S&P 500 Index moved to its highest level since February. Caution is in the air as the United States ordered China to close its consulate in Houston, fueling potential … Continue reading →
Published: Tue, 21 Jul 2020 15:58:12 +0000
Economic Blog While the 10-year Treasury yield has traded in a narrow range since early April, the equivalent real yield, represented by the yield on 10-year Treasury inflation-protected securities (TIPS), has continued to fall and could go lower. Real yields … Continue reading →
Published: Tue, 21 Jul 2020 15:02:04 +0000
DAILY INSIGHTS Stimulus, vaccine optimism supporting gains in global stocks. Most major international indexes extended Monday’s US gains overnight as investors digest Europe’s approximately $850 billion fiscal stimulus package and continued positive news on vaccine progress. Tech-related stocks led yesterday’s … Continue reading →
Published: Mon, 20 Jul 2020 14:57:05 +0000
DAILY INSIGHTS US stocks opened little changed. The S&P 500 Index, which ended last week fractionally shy of positive territory year to date, will try to continue its three-week win streak as markets focus on flattening the COVID-19 curve, vaccine … Continue reading →
Published: Fri, 17 Jul 2020 20:01:35 +0000
Market Blog Index Performance S&P 500 Index: 1.3 % Dow Jones Industrial Average: 2.3 % Nasdaq Composite: -1.1 % Equities US equities delivered modest gains this week, with indexes representing both the midcap and small cap spaces faring best. Both the S&P … Continue reading →
Published: Fri, 17 Jul 2020 16:00:25 +0000
Economic Blog Retail sales data for June was reported on Thursday, handily beating expectations for the second consecutive month. As shown in the LPL Chart of the Day, June saw a 7.5% increase month over month, compared with Bloomberg’s consensus … Continue reading →
Published: Fri, 17 Jul 2020 14:56:45 +0000
DAILY INSIGHTS Stocks steady heading into weekend. US stocks are near flat in early trading, as investors continue to digest earnings, including a poorly received report from Netflix, which is down nearly 10%. Major US indexes are tracking toward modest … Continue reading →
Published: Thu, 16 Jul 2020 15:59:45 +0000
Economic Blog The gradual reopening of the US economy has started to lift Main Street sentiment from depressed levels, according to the Federal Reserve’s (Fed) Beige Book. Despite growing concerns about rising COVID-19 cases in several pockets of the country, … Continue reading →
Published: Thu, 16 Jul 2020 15:58:41 +0000
DAILY INSIGHTS US stocks opened lower. Markets are giving back some of Wednesday’s rally this morning following losses in China overnight and amid ongoing concerns about COVID-19 hotspots. In the United States, markets will watch earnings reports, retail sales, and … Continue reading →
Published: Wed, 15 Jul 2020 15:57:51 +0000
Economic Blog We check in again today on some of the real-time economic data that LPL Research is monitoring to provide insight into how the latest increase in COVID-19 cases and the rollback of certain reopening measures are affecting the … Continue reading →
Published: Wed, 15 Jul 2020 14:56:03 +0000
DAILY INSIGHTS US markets rallying on positive vaccine buzz. The S&P 500 Index is set to add to Tuesday’s solid gains after positive early-phase trial results for Moderna’s COVID-19 vaccine took some of the sting out of the recent surge … Continue reading →
Published: Wed, 15 Jul 2020 14:27:21 +0000
Market Blog Based on the latest polling data, there’s growing consensus that former Vice President Joe Biden potentially may win the election and Democrats possibly may sweep Congress. Some might think this could be a negative for stocks, as a … Continue reading →
Published: Tue, 14 Jul 2020 19:32:32 +0000
Economic Blog After pulling back in the first quarter of 2020, flows into bond mutual funds and exchange-traded funds (ETFs) dominated stocks in the second quarter. As shown in the LPL Chart of the Day, the second quarter is consistent … Continue reading →
Published: Tue, 14 Jul 2020 14:59:09 +0000
DAILY INSIGHTS US stocks look to rebound from Monday’s up and down day. US markets are near flat early as market participants weigh the significance of the economy likely turning the corner over the second half of the year against … Continue reading →
Published: Mon, 13 Jul 2020 16:47:24 +0000
Market Blog Here at the midpoint of 2020, we recognize that’s it’s been a very challenging year so far in the United States and around the world. Our team is here to help you navigate this environment. LPL Research’s Midyear … Continue reading →
Published: Mon, 13 Jul 2020 15:01:30 +0000
DAILY INSIGHTS U.S. stocks opened higher. US stocks continue to shrug off rising COVID-19 cases as markets focus on the strength in stay-at-home stocks (mostly technology), optimism around virus treatments, and Americans’ will to avoid locking down again. The S&P … Continue reading →
The best savings vehicles offer special tax advantages if the funds are used to pay for college. Tax-advantaged strategies are important because over time, you can potentially accumulate more money with a tax-advantaged investment compared to a taxable investment. Ideally, though, you'll want to choose a savings vehicle that offers you the best combination of tax advantages, financial aid benefits, and flexibility, while meeting your overall investment needs.
Since their creation in 1996, 529 plans have become to college savings what 401(k) plans are to retirement savings--an indispensable tool for helping you amass money for your child's or grandchild's college education. That's because 529 plans offer a unique combination of benefits unmatched in the college savings world.
There are two types of 529 plans--college savings plans and prepaid tuition plans. Though each is governed under Section 529 of the Internal Revenue Code (hence the name "529" plans), college savings plans and prepaid tuition plans are very different college savings vehicles. There are typically fees associated with opening and maintaining each type of account.
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about specific 529 plans is available in each issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits. As with other investments, there are generally fees and expenses associated with participation in a 529 savings plan. There is also the risk that the investments may lose money or not perform well enough to cover college costs as anticipated.
A 529 college savings plan is a tax-advantaged college savings vehicle that lets you save money for college in an individual investment account. Some plans let you enroll directly, while others require that you go through a financial professional. The details of college savings plans vary by state, but the basics are the same. You'll need to fill out an application, where you'll name a beneficiary and select one or more of the plan's investment portfolios to which your contributions will be allocated. Also, you'll typically be required to make an initial minimum contribution, which must be in cash.
529 college savings plans offer a unique combination of features that no other college savings vehicle can match:
But college savings plans have some drawbacks too. You relinquish some control of your money. Returns aren't guaranteed—the risk is based on the investment portfolios you've chosen, and your account may gain or lose money.
Prepaid tuition plans are distant cousins to college savings plans—their federal tax treatment is the same, but just about everything else is different. A prepaid tuition plan is a tax-advantaged college savings vehicle that lets you pay tuition expenses at participating colleges at today's prices for use in the future. Prepaid tuition plans can be run either by states or colleges. For state-run plans, you prepay tuition at one or more state colleges; for college-run plans, you prepay tuition at the participating college(s).
As with 529 college savings plans, you'll need to fill out an application and name a beneficiary. But instead of choosing an investment portfolio, you purchase an amount of tuition credits or units (which you can then do again periodically), subject to plan rules and limits. Typically, the tuition credits or units are guaranteed to be worth a certain amount of tuition in the future, no matter how much college costs may increase between now and then. As such, prepaid tuition plans provide some measure of security over rising college prices.
Prepaid tuition plans have some limitations, though, compared to college savings plans. One major drawback is that your child is generally limited to your own state's prepaid tuition plan, and then your child is limited to the colleges that participate in that plan. If your child attends a different college, prepaid plans differ on how much money you'll get back. Also, some prepaid plans have been forced to reduce benefits after enrollment due to investment returns that have not kept pace with the plan's offered benefits. Even with these limitations, some college investors appreciate the peace of mind that comes with not worrying about college inflation each year by locking in college costs today.
A Coverdell education savings account (Coverdell ESA) is a tax-advantaged education savings vehicle that lets you save money for college, as well as for elementary and secondary school (K-12) at public, private, or religious schools. Here's how it works:
Unfortunately, not everyone can open a Coverdell ESA--your ability to contribute depends on your income. To make a full contribution, single filers must have a modified adjusted gross income (MAGI) of less than $95,000, and joint filers must have a MAGI of less than $190,000. And with an annual maximum contribution limit of $2,000, a Coverdell ESA probably can't go it alone in meeting today's college costs.
Before 529 plans and Coverdell ESAs, there were custodial accounts. A custodial account allows your child to hold assets--under the watchful eye of a designated custodian--that he or she ordinarily wouldn't be allowed to hold in his or her own name. The assets can then be used to pay for college or anything else that benefits your child (e.g., summer camp, braces, hockey lessons, a computer). Here's how a custodial account works:
A custodial account provides the opportunity for some tax savings, but the kiddie tax sharply reduces the overall effectiveness of custodial accounts as a tax-advantaged college savings strategy. And there are other drawbacks. All gifts to a custodial account are irrevocable. Also, when your child reaches the age of majority (as defined by state law, typically 18 or 21), the account terminates and your child gains full control of all the assets in the account. Some children may not be able to handle this responsibility, or might decide not to spend the money for college.
Series EE and Series I bonds are types of savings bonds issued by the federal government that offer a special tax benefit for college savers. The bonds can be easily purchased from most neighborhood banks and savings institutions, or directly from the federal government. They are available in face values ranging from $50 to $10,000. You may purchase the bond in electronic form at face value or in paper form at half its face value.
If the bond is used to pay qualified education expenses and you meet income limits (as well as a few other minor requirements), the bond's earnings are exempt from federal income tax. The bond's earnings are always exempt from state and local tax.
The bonds are backed by the full faith and credit of the federal government, so they are a relatively safe investment. They offer a modest yield, and Series I bonds offer an added measure of protection against inflation by paying you both a fixed interest rate for the life of the bond (like a Series EE bond) and a variable interest rate that's adjusted twice a year for inflation. However, there is a limit on the amount of bonds you can buy in one year, as well as a minimum waiting period before you can redeem the bonds, with a penalty for early redemption.
Ask your tax professional or go to www.irs.gov to find the adjusted gross income that married couples or individuals must have at the time bonds are redeemed to be able to exclude bond interest from federal income tax.
Your college saving decisions can impact the financial aid process. Come financial aid time, your family's income and assets are run through a formula at both the federal level and the college (institutional) level to determine how much money your family should be expected to contribute to college costs before you receive any financial aid. This number is referred to as the expected family contribution, or EFC.
In the federal calculation, your child's assets are treated differently than your assets. Your child must contribute 20 percent of his or her assets each year, while you must contribute 5.6 percent of your assets.
For example, $10,000 in your child's bank account would equal an expected contribution of $2,000 from your child ($10,000 x 0.20), but the same $10,000 in your bank account would equal an expected $560 contribution from you ($10,000 x 0.056).
Under the federal rules, an UTMA/UGMA custodial account is classified as a student asset. By contrast, 529 plans and Coverdell ESAs are considered parental assets if the parent is the account owner or for student-owned or UTMA/UGMA-owned 529 accounts (accounts owned by grandparents aren't counted as a parent asset). And distributions (withdrawals) from 529 plans and Coverdell ESAs that are used to pay the beneficiary's qualified education expenses are not counted as parent or student income on the federal government's aid form, which means that the money is not counted again when it's withdrawn (however, money withdrawn from a 529 account is counted as student income if the grandparent is the account owner). Other investments you may own in your name, such as mutual funds, stocks, U.S. savings bonds (e.g., Series EE and Series I), certificates of deposit, and real estate, are also classified as parental assets.
Regarding institutional aid, colleges are generally a bit stricter than the federal government in assessing a family's assets and their ability to pay college costs. Most use a standard financial aid application that considers assets the federal government does not, for example, home equity. Typically, though, colleges treat 529 plans, Coverdell accounts, and UTMA/UGMA custodial accounts the same as the federal government, with the caveat that money withdrawn from 529 plans and Coverdell accounts might be counted again as available income.
Contact a VyStar Investment Services Financial Advisor today by phone (904) 908-2495 or email VISMarketing@vystarcu.org.
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