Published: Tue, 19 Jan 2021 17:10:21 +0000
Economic Blog 1/19/2021 Investment-grade credit spreads, the extra yield you get from investment-grade corporate bonds compared to similarly dated US Treasuries, have already tightened to a level you usually only see during the middle of the economic cycle—and that can … Continue reading →
Published: Tue, 19 Jan 2021 16:00:42 +0000
Tuesday, January 19, 2021 Top Story Market Signals Covers It All This week’s Market Signals podcast covers all the latest events impacting markets and the economy: Q4 earnings, a new stimulus proposal, the Democratic blue wave, and President-elect Joe Biden’s … Continue reading →
Published: Fri, 15 Jan 2021 21:12:53 +0000
Market Blog January 15, 2021 Index Performance US and International Equities The major market indexes finished the week lower. In addition, many international markets followed in lockstep with their US counterparts. Emerging markets (MSCI EM Index) outperformed developed international markets … Continue reading →
Published: Fri, 15 Jan 2021 17:00:19 +0000
Economic Blog January 15, 2021 One of the top questions we’ve received recently has been what a blue wave may mean for investments. After the Democrats won the two Senate runoff elections in Georgia, they will now control the White … Continue reading →
Published: Fri, 15 Jan 2021 16:00:02 +0000
Friday, January 15, 2021 Top Story Retail Sales Worse Than Expected Retail sales in the United States declined 0.7% month over month in December, below all but two of the 70 forecasts in Bloomberg’s consensus survey (US Census Bureau). The … Continue reading →
Published: Thu, 14 Jan 2021 17:25:56 +0000
Market Blog January 14, 2021 Heading into 2020, we maintained our preference for growth stocks as we believed that earnings growth would become harder to come by as the economic cycle aged, and their robust earnings growth was greatly appealing. … Continue reading →
Published: Thu, 14 Jan 2021 16:00:27 +0000
Thursday, January 14, 2021 Top Story New Street View Video Sets Positive Tone The stock market has started off 2021 surprisingly well, and LPL Research Chief Market Strategist Ryan Detrick says this bull market is alive and well. “Surprises to … Continue reading →
Published: Wed, 13 Jan 2021 17:00:38 +0000
Economic Blog 1/13/21 Rising COVID-19 cases and concern about the policy environment put a dent in small business optimism in the month of December, the index’s second straight monthly decline. As shown in the LPL Chart of the Day, the … Continue reading →
Published: Wed, 13 Jan 2021 16:00:57 +0000
Wednesday, January 13, 2021 Top Story Consumer prices in line with forecasts Consumer inflation for December, based on the Consumer Price Index (CPI), grew 0.4% month over month, buoyed by higher gasoline prices. Core inflation, excluding food and energy prices, … Continue reading →
Published: Tue, 12 Jan 2021 17:00:41 +0000
Economic Blog 1/12/2021 Treasury yields hit two key levels the first week of 2021. As shown in the LPL Chart of the Day, the 10-year Treasury yield moved above 1% for the first time since March 2020, and the 10-year … Continue reading →
Published: Tue, 12 Jan 2021 16:00:55 +0000
Tuesday, January 12, 2021 Top Story 2021 Policies Update and the Markets In this week’s Market Signals podcast and video, LPL Research talks about 2021 policy updates and the possibilities of higher taxes and more regulation, more stimulus, higher Treasury … Continue reading →
Published: Mon, 11 Jan 2021 16:00:53 +0000
Monday, January 11, 2021 Top Story Stocks open modestly lower as investors reassess risk sentiment. The US dollar traded higher with demand supported by higher Treasury European stocks pulled back from a 10-month high in midday trading as Germany underperforms. … Continue reading →
Published: Fri, 08 Jan 2021 21:00:11 +0000
Market Blog January 8, 2021 Index Performance View enlarged chart. US and International Equities This week, we gained clarity on the makeup of Congress with the Georgia US Senate runoff. Democrats will now have control of both chambers of Congress, … Continue reading →
Published: Fri, 08 Jan 2021 17:00:59 +0000
Economic Blog 1/8/2021 The differences in strength between the stock market and real economy were laid bare this week as the stock market surged to new highs while the jobs market continued to deteriorate and remains well short of its … Continue reading →
Published: Fri, 08 Jan 2021 16:00:05 +0000
Friday, January 8, 2021 Top Story Jobs Growth Turns Negative The US economy lost 140,000 jobs in December, according to the US Bureau of Labor Statistics, missing Bloomberg survey estimates of a 50,000 gain. This represents the first monthly loss … Continue reading →
Published: Thu, 07 Jan 2021 18:19:52 +0000
Markets Blog 1/07/21 2020 was a good year for stock investors despite unprecedented challenges. After being down more than 30% at the March 2020 lows, the S&P 500 Index ended the year with a solid 18.4% total return. Last year … Continue reading →
Published: Thu, 07 Jan 2021 16:23:11 +0000
Thursday, January 7, 2021 Top Story LPL Research Condemns Violence in Washington, DC LPL Research condemns the violent actions at the US Capitol Building on Wednesday and hopes for healing in our nation’s political and societal divides. We fully support … Continue reading →
Published: Wed, 06 Jan 2021 17:00:50 +0000
Market Blog January 6, 2021 Well, we can officially say goodbye to 2020. Although there still will be many challenges in 2021, we do see much better times ahead. Just how amazing was it? “2020 will go down in history … Continue reading →
Published: Wed, 06 Jan 2021 16:00:44 +0000
Wednesday, January 6, 2021 Top Story 2020 in 20 Charts 2020 was a historic year in many ways, which made it hard to highlight just a few charts. So in honor of 2020, we picked 20 charts that show how … Continue reading →
Published: Tue, 05 Jan 2021 18:18:28 +0000
Economic Blog 1/5/2021 US investment-grade bonds had a solid 2020 despite a tumultuous year overall. The broad Bloomberg Barclays US Aggregate Bond Index had a total return of 7.5%—not as strong as 2019’s 8.7% but its fifth-best year in the … Continue reading →
Published: Tue, 05 Jan 2021 15:57:24 +0000
Tuesday, January 5, 2021 Top Story 10 Lessons LPL Research Learned in 2020 LPL Research reviews its top 10 takeaways from 2020, the year-end Santa Claus Rally, and what the markets are saying about the Georgia runoffs in this week’s … Continue reading →
Published: Mon, 04 Jan 2021 17:46:29 +0000
Market Blog View enlarged table. US and International Equities The S&P 500 Index, Dow Jones Industrial, and Nasdaq Composite indexes, continued their November run in December. As noted last month, November was a record-breaking month for equities, thanks to … Continue reading →
Published: Mon, 04 Jan 2021 16:42:25 +0000
Monday, January 4, 2021 Daily Insights Markets start the New Year higher. US markets continue their trek higher following last year’s nine-month rally. Market participants appear optimistic for a better 2021 in the wake of COVID-19 vaccine progress and December’s … Continue reading →
Published: Thu, 31 Dec 2020 21:02:00 +0000
Market Blog 12/31/2020 US and International Equities As we finish out a challenging year this week, Congress passed COVID-19 relief, providing increased unemployment benefits, small business assistance, along with an additional $600 stimulus payment. In addition, Congress is presently in … Continue reading →
Published: Thu, 31 Dec 2020 16:00:51 +0000
Thursday, December 31, 2020 Happy New Year to all from LPL Research! We made it through a very challenging 2020. Have a happy, healthy, and safe 2021. Top Story What a big end of year rally means. The S&P 500 … Continue reading →
Published: Thu, 31 Dec 2020 13:00:51 +0000
Market Blog 12/31/2020 Welcome to the last day of 2020! It has been a devastating year in so many ways, yet for investors it has been quite rewarding. Much of the gains in 2020 have taken place the final two … Continue reading →
Published: Wed, 30 Dec 2020 17:00:47 +0000
Economic Blog 12/30/20 For many economic data series, 2020 has been a roller coaster. Not for housing, however. The onset of the COVID-19 pandemic and social distancing measures jump-started the “nesting” behavioral shift away from urban apartments and into single-family … Continue reading →
Published: Wed, 30 Dec 2020 16:00:31 +0000
Wednesday, December 30, 2020 Top Story Home prices continue to climb. While some industries continue to struggle during the pandemic, housing data in the United States (US) remains a strong point of the US economy. Standard & Poor’s 20-city composite … Continue reading →
Published: Tue, 29 Dec 2020 17:54:05 +0000
Economic Blog 12/29/2020 2020 was an extraordinary year for the Federal Reserve (Fed). The Fed responded swiftly and decisively to the rapidly accelerating financial and economic uncertainty brought on by efforts to contain the COVID-19 pandemic. The current Fed was … Continue reading →
Published: Tue, 29 Dec 2020 16:00:03 +0000
Tuesday, December 29, 2020 Top Story Lessons learned from the Fed in 2020. The Federal Reserve (Fed) will remain in focus for markets in 2021. “Don’t fight the Fed” seems like obvious investor guidance in hindsight, but it didn’t in … Continue reading →
Published: Mon, 28 Dec 2020 16:00:31 +0000
Monday, December 28, 2020 Top Story Solid holiday shopping season. Holiday sales grew 3%, beating forecasts for a 2.4% increase according to MasterCard’s SpendingPulse. Online sales rose 49% year over year. These results were impressive for a recessionary period—the comparable … Continue reading →
Published: Thu, 24 Dec 2020 17:28:26 +0000
Market Blog 12/24/2020 Data is as of 11:15 AM ET View enlarged chart. US and International Equities This week, concerns about a new COVID-19 strain in the United Kingdom along with new lockdown restrictions have weighed on the markets even … Continue reading →
Published: Thu, 24 Dec 2020 16:00:25 +0000
Thursday, December 24, 2020 Top Story Markets Close Early Today The NYSE and NASDAQ will close at 1 p.m. ET today. The bond markets will close at 2 p.m. ET. All markets will be closed Friday, December 25, and will … Continue reading →
Published: Wed, 23 Dec 2020 16:16:32 +0000
Wednesday, December 23, 2020 Top Story Jobless Claims Beat Weekly jobless claims halted their recent skid as 803,000 Americans filed for unemployment insurance according to the US Department of Labor, ahead of Bloomberg consensus estimates of 880,000. Continuing claims also … Continue reading →
Published: Wed, 23 Dec 2020 15:17:21 +0000
Market Blog 12/23/20 “If Santa should fail to call, bears may come to Broad and Wall.” —Yale Hirsh December is widely known as one of the best months of the year for stocks, but most don’t realize that the majority … Continue reading →
Published: Tue, 22 Dec 2020 19:54:06 +0000
Economic Blog 12/22/2020 With concern about inflation rising for some investors, we’ve started to receive questions about Treasury Inflation-Protected Securities, or TIPS. With TIPS, the principal of the bond, the part that’s paid back when the bond matures, is adjusted … Continue reading →
Published: Tue, 22 Dec 2020 19:43:39 +0000
Economic Blog 12/22/2020 Brexit, the United Kingdom’s (UK) withdrawal from the European Union (EU), is making news again as it stumbles toward its apparent conclusion on December 31, 2020. The major sticking point now: fish. The UK officially left the … Continue reading →
Published: Tue, 22 Dec 2020 16:00:35 +0000
Tuesday, December 22, 2020 Top Story Stimulus Bridges to Recovery Recent economic data shows evidence of slowing momentum in the US economy, but the new stimulus package could keep the recovery moving forward. This week’s Market Signals podcast reviews the … Continue reading →
Published: Mon, 21 Dec 2020 16:00:36 +0000
Monday, December 21, 2020 Top Story Stocks Open Lower The S&P 500 Index opened roughly 1.5% lower, while the tech-focused NASDAQ fared better. Stocks are responding to more curbs to contain the spread of COVID-19 and bucking a tailwind created … Continue reading →
Published: Fri, 18 Dec 2020 21:00:40 +0000
Market Blog 12/18/20 View enlarged chart. US and International Equities The major market indexes reversed course from last week to finish this week higher. The tech-laded Nasdaq composite was the bright spot, returning 3% this week. So far, the Nasdaq … 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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