A 529 Plan Might not be Your Best Option for College Savings…

The cost of education has gotten so extraordinarily high in the past few decades that the amount of capital parents need to regularly commit to a 529 account is not realistic. The average cost of in-state tuition for public universities has increased by 212% over the past 20 years, with the current average being $11,171 a semester ($89,368 over 4 years). This is well outpacing inflation, which has only increased by 50%, according to the U.S. Bureau of Labor Statistics. Attempting to save for your child’s future education expenses through a 529 could cause a huge distortion in your savings pattern, and likely won’t be as effective as you would have hoped.

The Future of Higher Education

The good news is that the higher education system is likely to change in the future, becoming less expensive and more accessible. With the recent change of administration in Washington, the likelihood of a student loan forgiveness program and/or a free college for all type program to emerge has increased. Some notable components of “The Biden Plan for Education Beyond High School” include providing 2 years of community college tuition-free, making public colleges and universities tuition-free for all students with a family income below $125,000, and cutting payments on income-driven student loan repayment programs in half. There are already plenty states that offer some of their resident’s tuition-free community college including Arkansas, California, Delaware, Hawaii, Indiana, Kentucky, Maryland, Minnesota, Missouri, Montana, New York, Nevada, Oklahoma, Oregon, Rhode Island, Tennessee, and Washington.

Even if the Biden administration does not manage to push a free college plan through, the institutions themselves could become outmoded, in favor of cheaper and more convenient options. During this COVID-era, the public has adapted to going to school online. There’s already plenty low-cost online certifications and training programs out there that are gaining popularity.

College Savings Options

The exponential increase in the cost of education is simply unsustainable, making tying up financial assets in a 529 risky. When it is time for your children to actually receive that money, a different system may be out there that will cover the cost of education. If you have already put a ton of money into a 529 account, and it turns out your child doesn’t need it all, you’ll unfortunately have to pay a penalty to get that money out. Any earnings in your 529 account will also be subject to ordinary income tax rates.

However, just assuming that you child’s education cost will be covered and not saving properly is a dangerous thought. In order to avoid having to stress over paying for college, and having your child suffer the burden that is student loan debt, here are some of our savings recommendations:

  • Life Insurance
    • With each premium payment you make on a permanent life insurance policy, a portion goes into the death benefit and another is placed into a cash value account. The longer you own the policy, the larger the cash value portion will be, and the smaller amount of your death benefit.
    • Life insurance offers more flexibility than a 529 plan. You have the ability to access the cash value for any reason. With a 529 plan, you will typically be taxed an additional 10% on any non-college related withdrawals.
    • A life insurance policy has several tax advantages: interest earned on the cash value grows tax deferred, withdrawals made up to the total amount paid in policy premiums are tax-free, and any amount taken as a loan from your cash value, is made tax free.
    • Cash value is not included in financial aid calculations, while money put into a 529 plan is considered a parental asset.
    • The biggest disadvantage here is the cost of premiums and annual fees. Also keep in mind that cash withdrawals and unpaid loans reduce the value of your death benefit.
  • Traditional Brokerage Accounts
    • Brokerage accounts are great for saving and growing money over several years.
    • Brokerage accounts are more flexible than 529 plans because you can withdraw money at any time and won’t be penalized for it.
    • You have the flexibility to invest in just about whatever you want, and however much money you want.
    • You will often be taxed at lower capital gains rates.
    • The disadvantage here is the lack of tax breaks compared to a 529 plan when the money is used for education.

If you are looking to save for your child’s future education expenses, we recommend doing so through a life insurance policy or a traditional brokerage account. Both offer more flexibility than a 529 plan if your child decides not to attend college, doesn’t end up needing all the money due to scholarships, or if the cost of higher education is lowered by the time they graduate.

We would love to help you and your family build a secure and debt-free future. If you have any questions about saving for college or investing, don’t hesitate to call us at (614) 408-0004.

Sources: https://yourfinancialadvocate.blubrry.net/2021/02/26/episode-11-hey-whats-on-your-mind/






Will Social Security Still Be Available When You Retire?

There is no doubt that Social Security has been paying out more benefits than it’s receiving in contributions for the past several years. As the baby-boom generation phases into retirement, this problem will only continue to grow. The government’s official position is that it has enough money saved to continue paying out benefits as usual until 2035. After that, the future of Social Security is unknown. Many Americans are worried if they will ever be able to retire without their Social Security benefits. The good news is that the system is too large of a social contract for the government to just let fail, and they have a few options to close the gap in income. The Social Security structure will not change for people who are currently in their 60s, nearing retirement, and getting close to receiving some of their Social Security benefits in the near future. However, a few years down the line, things may change.

The Future of Social Security

For those who are in their mid-fifties right now, the “finish line” of retirement may not be as close as you think. While 67 is currently considered the full retirement age, when people can start receiving their full Social Security benefits, this will likely be pushed back to around 70. This is not a new solution. The government has been extending the full retirement age based on birth year. Depending on when you were born, you are qualified to receive your full benefits anywhere between 66 and 67 years old.

If you’re in your 40s or 50s now, you will likely not receive your full benefits even though you’re paying into the system now. Young Baby Boomers and Gen-Xers should expect to see a cut in benefits of around 30%, and possibly even more for younger generations.

As the deficit in Social Security increases, the administration may use one, or likely both, of these strategies, to keep the program alive.

The Social Security Free Retirement Plan

The most reasonable thing you can do during this time while the fate of Social Security remains unknown is to prepare for the worst and hope for the best. You might want to start pacing yourself a little bit differently, knowing that you may have to retire later than previously thought. By no means should you plan on Social Security benefits being a primary income throughout your retirement. These benefits barely cover living expenses for current retirees. View Social Security benefits as a bonus to the investments you already have in place, and as something to cover certain discretionary expenses. There are many effective ways to save for long-term healthcare and retirement, so you won’t need to worry about Social Security benefits.

Although the 401(k) is a popular retirement savings option for many Americans, having money tied up in one might actually count against you in the future. A 401(k) forces you to pool all your savings energy into one spot, leaving it vulnerable to increased income taxes in the future. We recommend investing in a Roth IRA, with allows you to pay taxes on the money you put into it now, in order to withdraw it tax-free later. It is the best option for those who can afford to spend a little bit more now to fully benefit from their saved retirement income later.

We would love to help you construct your ideal retirement plan. If you have any questions about the current retirement situation in America, don’t hesitate to contact us and schedule a consultation. Give us a call at (614) 408-0004.

Sources: https://yourfinancialadvocate.blubrry.net/2021/02/26/episode-11-hey-whats-on-your-mind/


How COVID-19 Has Impacted Retirement Confidence

The Transamerica Center for Retirement Studies recently conducted an online survey of more than 6,000 people in the U.S. and found that many are feeling financially vulnerable.

Americans are feeling a distinct lack of confidence, particularly when it comes to retirement. Whether employed or unemployed, the survey found that 23% of workers are no longer certain they can retire comfortably following the coronavirus pandemic.

Not unsurprisingly, the insecurity was highest for baby boomers, born between 1946 and 1964, who are closest to retirement—32% said their confidence in their ability to retire has gone down due to COVID-19. Meanwhile, 25% of Generation X, those born between 1964 and 1978, said their retirement confidence has declined, and 20% of millennials, people born between 1979 and 2000, said the same.

The research also uncovered the average amount that each generation has put away in savings toward their retirement years. While millennials have a median of $23,000 saved in all household retirement accounts, Gen Xers had a median of $64,000, and boomers $144,000.

The study found that survey respondents also had some money saved to use toward emergencies. Millennials had a median of $3,000 set aside, while Gen Xers had $5,000 and boomers had $15,000 in emergency funds.

Despite having some emergency money, around 22% of survey respondents said they have taken or plan to take a loan or withdrawal from a 401(k) or other workplace retirement savings account to pay for living expenses like their mortgage, rent or food during the pandemic. Millennials were most likely to take such withdrawals, at 33%, compared to 15% of Gen Xers and 10% of baby boomers.

In part, this may be because recently-enacted legislation, the CARES Act, allows those impacted by the coronavirus to withdraw funds from 401(k)s up to $100,000 without the 10% IRS penalty for withdrawals for people under the age of 59-1/2.

Keep in mind that even though there is no 10% IRS penalty for withdrawals from workplace retirement plans, income taxes will still be due on the money withdrawn, which can be paid to the IRS over a period of three years if needed. Or the withdrawn money can be returned to the plan over three years with no taxes due per the CARES Act.

It’s important for people considering withdrawing money from their retirement accounts to remember a couple of things. One, the CARES Act doesn’t actually mandate that a workplace retirement plan has to allow hardship withdrawals for those impacted by coronavirus—it is up to each individual plan administrator whether or not they will allow withdrawals.

Two, the rules about who will qualify for these withdrawals if allowed by the plan are: being diagnosed with COVID-19, having a spouse or dependent diagnosed with COVID-19, or experiencing a layoff, furlough, reduction in hours, or inability to work due to COVID-19 or lack of childcare because of COVID-19.

Experts remind people that those taking withdrawals need to follow all rules, or they will have to pay income taxes on the money withdrawn and owe the 10% penalty.

If you have any questions about the current retirement situation in America and what you can do now to protect yourself and your retirement savings, please contact us for a complimentary consultation.

Retirement planning is one of our focus areas, and we are here to help you as well as your family members and friends.

Contact DuPont Wealth Solutions at (614) 408-0004.


5 Things You Need to Know About The Secure Act

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE) became effective Jan. 1, 2020, and many people have questions about it.

Here are the top five things consumers should know.

1. 72 is the new 70½

The SECURE Act raises the age at which retirees must begin taking Required Minimum Distributions from the awkward age of 70-1/2 to an even age 72, allowing for a couple more years of growth before RMDs kick in. NOTE: Anyone who reached age 70-1/2 in 2019 or before is subject to the old rules.

2. You can keep making contributions to traditional IRAs

The act repeals the age limitation for making contributions to traditional IRAs, as long as you have earned income. Previously, the maximum age for traditional IRA contributions was set at 70-1/2 (this was the only type of retirement account which had an age limitation). Now, those working into their 70s and beyond can continue contributing to their traditional IRAs, even if they’re simultaneously required to begin drawing them down.

3. The stretch IRA is dead

While existing “stretch IRAs” are grandfathered in and still follow the old tax rules, stretch IRAs are unlikely to be used by financial and estate planners in the future because their tax advantages have been drastically reduced.

Prior to the new law, stretch IRAs were primarily used for estate planning because they allowed a family to extend distributions over future generations—while the IRA itself continued to grow tax free. The person inheriting an IRA was required to take RMDs based on their life expectancy, which meant that a very young beneficiary could stretch out their distributions potentially over their lifetime.

Now beneficiaries must draw down the entire account within 10 years of inheriting it, possibly throwing them into a higher tax bracket. (They can take the money out in any year or years they like, as long as the account is empty by 10 years of the date of death of the original account owner.)

The new 10-year rule also applies to inherited Roth IRAs.

You may want to review your plan if you have stretch IRAs set up for your family, because any IRA inherited as of January 1, 2020 is subject to the new rules. Trusts you may have put in place to take advantage of stretch IRA rules probably won’t ameliorate taxes anymore either.

Keep in mind that the act does provide for a whole class of exceptions who aren’t subject to this 10-year rule; for them, the old distribution rules still apply. These beneficiaries (referred to as “Eligible Designated Beneficiaries”) are:

  • Spouses
  • Disabled beneficiaries
  • Chronically ill beneficiaries
  • Individuals who are not more than 10 years younger than the decedent
  • Certain minor children (of the original retirement account owner), but only until they reach the age of majority. NOTE: At this time, minor children would appear to be ineligible for similar treatment if a retirement account is inherited from a non-parent, such as a grandparent.

This new law is clearly designed to raise taxes. According to the Congressional Research Service, the lid put on the Stretch IRA strategy by the new law has the potential to generate about $15.7 billion in tax revenue over the next 10 years!

4. The Roth got more attractive

Because contributions to Roth IRAs are made on an after-tax basis, a Roth account owner is not subject to Required Minimum Distributions at any age. An owner can leave their Roth to grow until their death, leave it to their spouse, who can then allow it to grow until they die. The second spouse can leave it to their children, who can then allow it to continue to accumulate tax-free for another 10 years, although they will now have to empty the account by the 10-year mark.

In terms of estate planning, Roth IRAs typically do not cause a taxable event when distributions are taken by a beneficiary.

Low individual tax rates by historical standards and a pending reversion in 2026 to the higher income tax brackets/rates that preceded the Tax Cuts and Jobs Act (TCJA) of 2017 can make this an opportune time for Roth conversions for those over age 59-1/2. These can benefit you, your spouse and heirs by strategically moving taxable retirement funds into tax-free Roth retirement accounts. The most common strategy for Roth conversions is ‘bracket-topping,’ where you convert enough to go to the edge of your tax bracket.

Keep in mind that these conversions need to be planned and done carefully, as they can no longer be reversed.

Remember, any account can be set up as a Roth – including CDs, government bonds, mutual funds, ETFs, stocks, annuities—almost any type of investment available.

5. Other non-retirement related provision highlights:

  • You can use $5,000 of qualified money for childbirth or adoptions
  • 529 plan-approved “Qualified Higher Education Expenses” now include expenses for Apprenticeship Programs—including fees, books, supplies and required equipment—provided the program is registered with the Department of Labor
  • 529 plans can also be used for “Qualified Education Loan Repayments” to pay the principal and/or interest of qualified education loans limited to a lifetime amount of $10,000, retroactive to the beginning of 2019
  • The Kiddie Tax rules changed by the Tax Cuts and Jobs Act (TCJA) of 2017 have been reversed, (and can be reversed for the 2018 tax year as well)
  • The AGI (Adjusted Gross Income) “hurdle rate” to deduct qualified medical expenses remains lower at 7.5% of AGI for 2019 and 2020.
  • The following tax benefits for individuals are reinstated retroactively to 2018, and made effective onlythrough 2020 at this time:
    • The exclusion from gross income for the discharge of certain qualified principal residence indebtedness
    • Mortgage insurance premium deduction
    • Deduction for qualified tuition and related expenses

There are even more provisions of the SECURE Act designed to make it easier for small business owners to offer retirement plans to employees, as well as add annuities to their plans.

 Call us if you have questions. You can reach DuPont Wealth Solutions in Dublin, Ohio by calling (614) 408-0004.











Does Your Retirement Plan Include Inflation Risk?

Inflation may not always be top of mind when you think about planning for retirement. Of course, you will likely consider your current expenses, but you need to account for what the costs of those expenses could be over time.

None of us can predict the future, but we can plan. Inflation diminishes purchasing power over the years and increases the costs of services that retirees and pre-retirees need. Given that more Americans are living longer, it can pay dividends to include inflation risk in your overall planning.

The other issue we have to contend with when it comes to inflation is that we may be lulled into a false sense of security since government measures of inflation have been very low in recent years. In addition, safer investments like money market funds, CDs and government bonds generally yield less than the cost of goods and services that many of us need. This makes it difficult for our safe money investments to keep pace with our expenses.

Lower government inflation measures also have an impact on Social Security benefits. Among the features of Social Security is that benefits are generally adjusted each year for inflation in what is known as a cost-of-living adjustment, or COLA. In October, the Social Security Administration announced a 1.6% COLA that takes effect in December for some beneficiaries and by January for most.

The average benefit increase for retired workers with the recently announced COLA is estimated to be $24 to $1,503 per month. Married couples both receiving benefits will see a $40 increase, on average, to a monthly payment of $2,531. The cost-of-living adjustment for 2020 is lower than that of 2019, which was 2.8%, and 2018, which was 2.0%.

Getting the most out of your Social Security benefit is extremely important for your retirement and it’s nice to have a feature that steps up with inflation. However, adjustments tracking official government statistics likely won’t cover the higher expenses you will face throughout retirement, so planning is important.

Health Care and Medical Cost Inflation

Then there is health care, among the biggest costs you may encounter in retirement and even now if you are still working and saving for retirement. Medical cost inflation is real and it can negatively impact your savings if you don’t have a way to offset it.

The Centers for Medicare & Medicaid Services (CMS) estimated earlier this year that health expenditures are projected to increase 4.8% overall in 2019, up from 4.4% growth in 2018.

For those still working and covered by an employer’s plan, costs are outpacing wages and inflation. Since 2009, the Kaiser Family Foundation says average family premiums have increased 54% and workers’ contributions have increased 71%, several times more quickly than wages (26%) and inflation (20%).

If you are already enrolled in Medicare and have been incurring out-of-pocket expenses then you know the impact of what higher drug costs or services that Medicare doesn’t cover can do to your monthly budget. We often cite figures from Fidelity Investments, estimating that a 65-year old couple retiring in 2019 can expect to spend $285,000 in today’s dollars for health care and medical expenses throughout retirement. The figure doesn’t include long-term care.

Once you have an idea of what your expenses are, we can get started now on developing or updating your plan to account for inflation. The other thing to keep in mind is that while inflation has been low in the past decade, it is best to plan using higher long-term averages.

There are several ways we can address inflation risk, depending on your situation. Strategies and options could include how your investments are positioned over time and guaranteed income solutions that adjust periodically to keep pace with inflation. You will want to meet with us, too, for a plan to cover long-term care as these costs can be a significant financial risk. Now is also a good time to contact us to discuss Medicare because the current open enrollment period runs through December 7 if you want to make changes or switch plans.

Let us know how we can help!

Contact Dupont Wealth Solutions in Dublin, Ohio at (614) 408-0004.


“Social Security Announces 1.6 Percent Benefit Increase for 2020,” October 10, 2019. Social Security Administration. Retrieved from: https://www.ssa.gov/news/press/releases/2019/#10-2019-1

“National Health Expenditure Projections 2018-2027,” February 2019. Centers for Medicare & Medicaid Services. Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ForecastSummary.pdf

“Benchmark Employer Survey Finds Average Family Premiums Now Top $20,000,” September 25, 2019. Kaiser Family Foundation. Retrieved from: https://www.kff.org/health-costs/press-release/benchmark-employer-survey-finds-average-family-premiums-now-top-20000/

“How to plan for rising health care costs,” April 1, 2019. Fidelity Investments. Retrieved from: https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

How a Furlough (or Layoff) Affects Your Finances…and Retirement

A furlough is an unpaid leave of absence. You don’t report to work, you don’t get paid, and you may lose some of your benefits. Getting fired or laid off is different because it is permanent; whereas, being furloughed means your employer wants you back as soon as things get back to normal, typically at the same position and income level as before the furlough. Here are six things you should know:

1. Filing for unemployment

Whether furloughed or laid off, you should file for unemployment as soon as possible because the CARES Act adds to the amount your state provides weekly, but only through July 31. For instance, the average benefit among the 50 states is $215 per week—the CARES Act adds an additional $600 per week through the end of July. Self-employed, independent contractors and gig economy workers, who typically are not allowed to file for unemployment, can also apply. Learn more here.

2. Healthcare insurance

If you are furloughed, you may still be able to keep your healthcare insurance. Be sure to check with your employer about how to arrange to pay your contribution amount, if any. If you are laid off, you can continue benefits through COBRA, or you may find a cheaper option through the exchange http://healthcare.gov website—if your state has chosen to open up enrollment due to the pandemic.

3. Bills and debts

There is a provision for mortgage forbearance if you have a single-family residence mortgage loan backed by the federal government, and renters can avoid eviction for more than 120 days if their landlord has a government loan on the property rented. Learn more here. Student loans held by the federal government will not require payment and will not accrue interest through September 30.

In any case, it is recommended that you call creditors to discuss your situation. Ask them what they have to offer people who are experiencing a temporary reduction in income, and take notes and ask about any fees, additional interest, and whether they report any postponed payments to credit bureaus.

4. 401(k) or similar retirement plan – contributions

If you are furloughed, your 401(k) accounts should remain in place, but your contributions and matching contributions won’t happen during the furlough unless your employer chooses to make a discretionary contribution. If you are not yet fully vested, there is a scenario that could happen if you are furloughed for an extended amount of time or ultimately laid off. If an employer terminates 20% or more of its workforce, a “partial plan termination” could be triggered, in which case the IRS could decide that all affected employees would become 100% vested.

If you are let go, you can leave your money in the company’s 401(k) plan if you have more than $5,000 in it, although you can’t add additional money to the account. If you have $5,000 or less, your employer has the option of removing you and distributing the funds, so be sure to ask what they intend to do. See some of your other options below.

5. 401(k) – loans

If you are furloughed, or laid off but leaving your 401(k) with the company, you may be able to take a loan or withdrawal from your 401(k) due to the coronavirus outbreak, depending upon your company plan rules—be sure to check with your plan administrator.

If so, the CARES Act allows up to $100,000 to be taken without penalty, although you will have to either repay the money or pay taxes on the amount withdrawn over the next three years. NOTE: You can do this even if you are under the age of 59-1/2, there will be no 10% penalty, and there will be no mandated 20% withheld by the 401(k) administrator for taxes. In order to meet the eligibility provisions of the CARES Act, you, your spouse or dependent/s must have contracted COVID-19, or must have experienced adverse financial consequences as a result of quarantine, furlough, lack of childcare or closed or reduced hours of business.

If you already have an outstanding 401(k) loan, your repayments will stop while you are furloughed, since those are typically held out from your paycheck. Ask your employer about how you can make repayments or get the loan repayments suspended temporarily.

Taking 401(k) loans or cashing out should be a last option for most people since it can jeopardize your retirement nest egg and your future. After the 2008 financial crisis, most people who stayed in the market experienced financial recovery from their losses.

6. 401(k) – rollovers

If you are laid off, you do have the option of rolling over your 401(k) money into your own self-directed IRA account. This offers many options, since an IRA can be a mutual fund, annuity, ETF, CD or almost any other type of financial instrument.

You need to choose between a tax-deferred traditional IRA, or pay taxes on the money you roll over and start a Roth IRA. With a traditional IRA, you will have to begin withdrawing a certain amount out every year starting at age 72 and pay ordinary income taxes on the money withdrawn. (These are called Required Minimum Distributions (RMDs)—which are not due in 2020 per the CARES Act.)

With a Roth IRA, you pay taxes up front. You don’t have to withdraw money during retirement, but if you do, it is usually tax- and penalty-free after you’ve owned the account for five years. Your kids can inherit the money tax-free as well.

It’s usually best to work with a financial advisor who can outline some of the tax ramifications, rules and timing requirements so you don’t miss any rollover deadlines or get hit with any penalties or taxes you weren’t expecting. They can fill you in on other options, such as, if you are age 59-1/2 and still working, you may be able to do an “in-service rollover” with part of your 401(k), moving that portion into your own IRA, potentially helping you avoid market risk as you get closer to retirement.

If you have any questions, please call us. You can reach DuPont Wealth Solutions in Dublin, Ohio at (614) 408-0004.

This article is provided for informational purposes only, and is not intended to provide any financial, legal or tax advice. Before making any financial decisions, you are strongly advised to consult with proper legal or tax professionals to determine any tax or other potential consequences you might encounter related to your specific situation.