Choosing Your State of Domicile

Choosing Your State of Domicile

Presented by Jared Daniel by Wealth Guardian Group

What is it?

Your domicile is the state where you maintain your legal residence. Domicile is determined by intent, rather than by the length of time you spend in a state. You may establish a state as your domicile the first moment you occupy property there, provided your intent is to return there if you go away. You have only one domicile, although you may have more than one home.

                                   

Example(s):   Fred, who lives in New Mexico, takes a new job in Arizona. He establishes a temporary residence there until the end of the school year when his wife and children will join him. Although he maintains homes in both Arizona and New Mexico, he decides to keep New Mexico as his state of domicile until his family relocates to join him, after which he'll call Arizona his state of domicile.

                                               

Your domicile is not formally registered anywhere, but if you want to change it, you should be prepared to convince the authorities of any state which may be negatively affected by your change of intent.

                                   

Example(s):   Frank changes his state of domicile from Massachusetts, a state with income taxes, to New Hampshire, a state without income taxes. He prepares to convince the Massachusetts Department of Revenue, if called upon, that he's made a legitimate change of domicile by renting a home in New Hampshire, getting a driver's license and registering his car there, and also registering to vote there.

                                               

Definitions

                  

·         Domicile, also called your "state of legal residence"--your true, fixed, and permanent home. It is the place to which you intend to return if you're away.

Example(s):   Jane relocates from Atlanta to Boston to attend graduate school. She intends to return to Atlanta when her education is complete. Georgia is her state of domicile. Even if Jane remains in Boston for many years earning several advanced degrees, Georgia is her state of domicile for the entire period as long as she intends to return there.  Suppose, while living in Boston, Jane decides she won't return to Atlanta but would like to make Vermont her state of domicile. She would have to travel to Vermont and have the appropriate mental intent while physically present there.

                                               

·         Residence--The place where you actually live. This, by itself, has little or no legal significance.

·         Statutory residence--The place where you live and where you're required to pay state income taxes. In some states, if you're physically present for a certain period of time, you're liable for income taxes in that state.

Tip:     If you're a statutory resident of one state and claim another state as your domicile, your state of domicile may require you to file a tax return there as well.

                                               

Why is your domicile important?

                   

Your domicile is important because it affects the following:

                                   

·         Your liability for state income taxes               

·         Your eligibility for certain state benefits, such as in-state tuition rates at public colleges and universities, disability benefits, and Medicaid benefits

·         The jurisdiction where your will is probated

Determining your domicile

In general

You must meet the following requirements to claim a state as your domicile:

                                   

·         You must be physically present in the state, although you don't have to be present for any particular length of time. In theory, only a few minutes would suffice. In practice, however, if your residency status is ever challenged in court, you might need to prove that you were in the state for several months

·         You must intend to make that state your permanent home.

If you're a naturalized citizen, your domicile is usually the state where you became a citizen, unless you marry a citizen domiciled in another state.

                                   

Tip:     There is one exception to the physical presence requirement. If you marry a person domiciled in another state, you may be able to claim your spouse's state of domicile as your own, even if you've never set foot there.

                                               

Proving intent

                            

It isn't necessary to do any of the following in order to claim a state as your domicile. However, you might want to do some or all of them to prove that you intend to make that state your domicile:

·         Own property                                     

·         Open bank accounts            

·         Register to vote          

·         Obtain a driver's license                    

·         Establish ties to the local community

Specific purposes

                             

If your state of domicile is important to you for specific reasons, such as state income tax, the effect of state property laws, or state tuition rates, you may want to consult an attorney. The specific facts regarding your domicile that you will need to establish may vary depending upon the benefit that you are seeking.

                                   

Changing your domicile

                   

There are only two requirements to change your domicile: (1) you must be physically present in that state, and (2) you must intend to make it your permanent home. In order to prove your intent, you may also want to take some or all of the actions mentioned above. The most important point to remember when claiming a state as your domicile is that you should be consistent. Inconsistency is the single biggest mistake you can make regarding domicile.      

Example(s):   Melissa chooses Oregon as her state of domicile. She doesn't keep her California driver's license or vote in New Mexico, where she has a second home.

                                   

Domicile and community property

                   

You may own community property and income or separate property and income depending on your state of domicile. If you and your spouse have different domiciles, you must examine the laws of each domicile to determine if you own community property and income or separate property and income. If you move in or out of a community property state during the year, you may or may not have community property and income. You must take into account the factors noted previously in determining your domicile.

                                   

Tax considerations

Your income may be taxed in two states

                            

Your income may be taxed in your state of domicile or the state where you earned it, or both.     

You may need to file part-year returns

                   

If both your present and former states of domicile tax income and if you move on any day other than the first of January, you'll have to file part-year returns in both states.

                                   

Your choice of domicile can affect state death taxes

                            

At your death, if your state of domicile is unclear and more than one choice is available, your personal representative should take into account the affect of domicile on state death taxes. State tax laws vary with different exemption amounts, tax rates, etc. A wise choice of domicile may minimize your state death tax liability.

                                   

Jared Daniel may be reached at www.WealthGuardianGroup.com or our Facebook page.

IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Transitioning Into Retirement

Transitioning into Retirement

Presented by Jared Daniel of Wealth Guardian Group

The retirement "zone"

If you're considering retirement within the next five years or so, you're in the retirement "zone." This is a critical time period during which you'll be faced with a number of important choices, and the decisions you make can have long-lasting consequences. It's a period of transition: a shift from a mindset that's focused on accumulating assets for retirement to one that's focused on distributing wealth and drawing down resources. It can be confusing and chaotic, but it doesn't have to be. The key is to understand the underlying issues, and to recognize the long-term effects of the decisions you make today.

Tip:     If you've recently retired, you're also in the retirement zone. You'll want to evaluate your financial situation in light of the decisions that you've already made, and consider adjusting your overall plan to reflect your current expectations and circumstances.

Are you ready to retire?

The first question that you should ask yourself is: "Am I ready to retire?" For many, the question isn't as easy to answer as it might seem. That's because it needs to be considered on two levels. The first, and probably the most obvious, is the financial side. Can you afford to retire? More specifically, can you afford the retirement you want? On another level, though, the question relates to the emotional issues surrounding retirement--how prepared are you for this new phase of your life? Consider both the financial and emotional aspects of retirement carefully; retiring before you're ready can put a strain on the best-devised retirement plan.

Tip:     There's not always a "right" time to retire. There can be, though, a wrong time to retire. If you're not emotionally ready to retire, it may not make sense to do so simply because you've reached age 62 (or 65, or 70). In fact, postponing retirement can pay dividends on the financial side of the equation. Similarly, if you're emotionally ready to retire, but come up short financially, consider whether your plans for retirement are realistic. Evaluate how much of a difference postponing retirement could make, and then weigh your options.

Transitioning into retirement: Financial issues

Start with the basics:

·         If you do not already have a projection of the annual income you'll need in retirement, spend the time now to develop one. Factor in anticipated costs relating to basic needs, housing, health care, and long-term care. If you plan to travel in retirement, estimate a corresponding annual dollar amount. If you're financially responsible for other family members, or plan to make monetary gifts, you'll want to include these commitments in your calculations. Be as specific as you can. If it's been more than a year since you've done this exercise, revisit your numbers. Consider and account for inflation.

·         Estimate the income that you'll be able to rely on from Social Security and any benefits from a traditional employer pension, and compare the result with your projected retirement income need. The difference may need to be funded through your personal savings.

·         Take stock of your personal savings. Are your personal savings sufficient to provide you with the annual income that you'll need?When will you retire? The age at which you retire can have an enormous impact on your overall retirement income situation, so you'll want to make sure you've considered your decision from every angle. Why does the timing of your retirement make such a difference? The earlier you retire, the sooner you need to start drawing on your retirement savings. You're also giving up what could be prime earning years, when you could be making substantial additions to your retirement savings. That combination, even for just a few years, can make a tremendous difference.

Other factors to consider:

·         The longer the retirement period that you need to plan for, the greater the potential that inflation will eat away at your purchasing power. That means the earlier you retire, the more important it is to account for inflation in your overall plan.

·         You can begin receiving Social Security retirement benefits as early as age 62. However, your benefit may be as much as 20 to 30 percent less than if you waited until full retirement age (65 to 67, depending on the year you were born). Weigh your options, and choose the start date that makes the most sense for your individual financial circumstances.

·         If you're covered by a traditional employer pension plan, check to make sure it won't be negatively affected by your early retirement. Because the greatest accrual of benefits generally occurs during the final years of employment, it's possible that early retirement could effectively reduce the benefits you receive. Make sure that you understand how the plan calculates benefits and any payout options under the plan.

·         If you plan to start using your 401(k) or traditional IRA savings before you turn 59½ (55 in the case of distributions from a 401(k) plan after you terminate employment), you may have to pay a 10 percent early distribution penalty tax in addition to any regular income taxes (with some exceptions, this includes payments made due to disability). Consider as well the order in which you'll tap your personal savings during retirement. For example, you might consider withdrawing from tax-advantaged accounts like IRAs and 401(k)s last. If you postpone retirement beyond age 70½, you'll need to begin taking required minimum distributions from any traditional IRAs and employer-sponsored retirement plans (other than your current employer's retirement plan), even if you do not need the funds.

·         You're not eligible for Medicare until you turn 65. Unless you'll be eligible for retiree health benefits through your employer (or have coverage through your spouse's plan), or you take another job that offers health insurance, you'll need to calculate the cost of paying for insurance or health care out-of-pocket, at least until you can receive Medicare coverage.

Transitioning into retirement: Non-financial issues

When it comes to retirement, it's easy to focus on the financial aspects of your decision to the exclusion of all other issues. After all, we've spent much of our lives saving for retirement, and for many of us, the retirement lifestyle we hope to enjoy depends primarily on the wealth that we've accumulated during our working years. But, there are a number of non-financial issues and concerns that are just as important.

Fundamentally, your retirement income plan is just a means to an end: having the ability to do the things you want to do in retirement, for as long as you want to do them. But that presupposes that you know what it is you want to do in retirement. Many of us have never thought beyond the vague notion we've held during most of our working lives: that retirement--if properly planned for--will be something of an extended vacation, a reward for a lifetime of hard work. Retirement may be just that … for the first few weeks or months. The fact is, though, that your job likely demanded your attention for a majority of your waking hours. No longer having that job leaves you with a lot of free time to fill. Just as you have a financial plan when it comes to your retirement, you should consider the type of lifestyle you want and expect from retirement as well.

What do you want to do in retirement? Do you intend to travel? Pursue a hobby? Give some real thought to how you're going to spend a typical week, and consider actually writing down a hypothetical schedule. If you haven't already, consider:

·         Volunteering your time--You can provide a valuable service to the community, while sharing your unique skills and interests. Hospitals, community centers, day-care centers, and tutoring programs are just a few of the places where you could make a difference.

·         Going to school--Retirement can be the perfect time to pursue a degree, advance your knowledge in your current field or in a new field, or just take classes that interest you. In fact, many institutions offer special rates and programs for retirees.

·         Starting a new career or business--Retirement can be the perfect opportunity to try something different. If you've ever dreamed of starting your own business, now may be your chance.

Having concrete plans can also help overcome problems commonly experienced by those who transition into retirement without thinking ahead:

·         Loss of identity--Many people identify themselves by their professions. Affirmation and self-worth may have come from the success that you've had in your career, and giving up that career can be disconcerting on a number of levels.

·         Loss of structure--Your job provides a certain structure to your life. You may also have work relationships that are important to you. Without something to fill the void, you may find yourself needing to address unmet emotional needs.

·         Fear of mortality--Rather than a "new beginning," some see the "beginning of the end." This can be exacerbated by the mental shift that accompanies the transition from accumulating assets to drawing down wealth.

·         Marital discord--If you're married, consider whether your spouse is as ready as you are for you to retire. Does he or she share your ideas of how you want to spend your retirement? Many married couples find the first few years of retirement a period of rough transition. If you haven't discussed your plans with your spouse, you should do so; think through what the repercussions will be--both positive and negative--on your roles and relationship.

Working in retirement

Many individuals choose to work in retirement for both financial and non-financial reasons. The obvious advantage of working during retirement is that you'll be earning money and relying less on your retirement savings--leaving more to potentially grow for the future, and helping your savings last longer. But many retirees also work for personal fulfillment--to stay mentally and physically active, to enjoy the social benefits of working, or to try their hand at something new. If you are thinking of working during your retirement, you'll want to make sure that you understand how your continued employment will affect other aspects of your retirement. For example:

·         If you continue to work, will you have access to affordable health care through your employer? If so, this could be an incredibly valuable benefit.

·         Will working in retirement allow you to delay receiving Social Security retirement benefits? If so, your annual benefit when you begin receiving benefits may be higher.

·         If you'll be receiving Social Security benefits while working, how will your work income affect the amount of Social Security benefits that you receive? Additional earnings can increase benefits in future years. However, for years before you reach full retirement age, $1 in benefits will generally be withheld for every $2 you earn over the annual earnings limit ($15,720 in 2015). Special rules apply in the year that you reach full retirement age.

Tip:     Some employer pension plan programs allow for "phased retirement." These programs allow you to continue to work on a part-time basis while accessing all or part of your pension benefit. Federal law encourages these phased retirement programs by allowing pension plans to start paying benefits once you reach age 62, even if you're still working and haven't yet reached the plan's normal retirement age.

Caution:         Many people who count on working in retirement find that health problems or job loss prevents them from doing so. When making your retirement plans, it may be wise to consider a fallback plan in case everything doesn't go as you excpect.

Jared Daniel may be reached at www.WealthGuardianGroup.com or our Facebook page.

IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Determining Your Retirement Income Needs

Determining Your Retirement Income Needs

Presented by Jared Daniel of Wealth Guardian Group

What is it?

Determining your retirement income needs is a process that helps you identify your retirement planning needs based on your desired standard of living and the resources you'll have available. Today, you can typically no longer rely on Social Security benefits and a company pension check to fulfill all your retirement income needs. Social Security benefits will probably satisfy only a fraction of your overall retirement income needs, and generous company pensions have largely been replaced in many cases with employer-sponsored retirement plans that are funded largely with employee dollars. A successful and rewarding retirement requires you to plan ahead in order to help ensure that you have sufficient retirement income to last you for your entire retirement. Determining your retirement income needs requires a discussion of the various stages of retirement planning, including preretirement, the transition into retirement, and retirement.

Preretirement

Your retirement is sometime in the future--maybe 10 years, maybe 30 years down the road. If so, you've got a little breathing room. The single biggest mistake that you can make right now is to put off thinking about your retirement. The more time you have, the more you can hope to accomplish, so the sooner you start, the better off you should be. You've got a lot to think about. There are many factors to consider, including your expected sources of retirement income, your retirement income needs, and how you can use those sources of retirement income to fulfill your retirement income needs.

The transition into retirement

If retirement is right around the corner, you've got some important decisions to make. If you haven't done so, spend some time forming a good picture of your retirement financial position. To the best of your ability, estimate your retirement income and expenses as discussed in preretirement. As retirement approaches, though, you have to consider the impact of when you retire. Early retirement and delayed retirement, through choice or necessity, can raise certain issues you'll want to understand.

Retirement

When you retire, there are still some retirement issues that you may need to consider. These include the effect of working during your retirement, and the impact of other sources of income on your Social Security benefits. Also, required minimum distributions from your IRA or employer-sponsored retirement plan may be an issue.

Jared Daniel may be reached at www.WealthGuardianGroup.com or our Facebook page.

IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Saving for College and Retirement

Saving for College and Retirement

Presented by Jared Daniel of Wealth Guardian Group

What is it?

These days it's not uncommon for parents to postpone starting a family until both spouses are settled in their marriage and careers, often well into their 30s and 40s. Though this financial security can be an advantage, it can also present a dilemma--the need to save for college and retirement at the same time.

The prevailing wisdom has parents saving for both goals at the same time. The reason is that older parents can't afford to put off saving for retirement until the college years are over, because to do so means missing out on years of tax-deferred growth. Moreover, because generous corporate pensions (and lifetime job security) are now the exception rather than the rule, employees must take greater responsibility for funding their own retirements.

First, determine your monetary needs

The first step is to determine your projected monetary needs, both for retirement and college. This analysis will reveal whether you are on a savings course to meet both goals, or whether some modifications will be necessary.

You've come up short: what are your options?

You've run the numbers on both your anticipated retirement and college expenses, and you've come up short. The numbers say you won't be able to afford to educate your children and retire with the lifestyle you expected based on your current earnings. Now what? It's time to sit down and make some tough decisions about your expectations and, ultimately, how to compromise.

The following options can help you in that effort. Some parents may need to combine more than one strategy to meet their goals.

Defer retirement

Staying in the workforce longer is one way of meeting your retirement and education goals. The longer you wait to dip into your retirement funds, the longer the money will last.

Reduce standard of living now or in retirement

You may be able to adjust your spending habits now in order to have more money later. Consider making a written budget to track your monthly income and expenses. If your monetary needs have fallen far short of the mark, you will need to make a bigger spending adjustment than you would with a lesser shortfall. The following are some suggested changes:

·         Move to a less-expensive home or apartment

·         Sell your second car and carpool whenever possible

·         Reduce your entertainment budget (e.g., bring your lunch to work, eat out once a month instead of every week, rent movies instead of going to the cinema)

·         Get books and magazines from the library instead of the bookstore

·         Cancel any club memberships (e.g., golf club, health club)

·         Set a limit on birthday and holiday gifts for family members

·         Forgo expensive vacations

·         Shop for clothes in the off-season, when they're likely to be on sale

·         Buy used furniture and used big-ticket items

·         Limit your child's extracurricular activities, like music lessons or hockey camp

If you're unable or unwilling to lower your standard of living now, perhaps you can lower it in retirement. This may mean revising your expectations about a luxurious, vacation-filled retirement. The key is to recognize the difference between the things you want and the things you need. The following are a few suggestions to help reduce your standard of living in retirement:

·          

·         Reduce your housing expectations

·         Cut back on travel plans

·         Own a less-expensive automobile

·         Lower household expenses

Note: There's a difference between reducing your standard of living in retirement and drastically reducing your standard of living in retirement. Most professionals discourage the use of retirement funds for your child's education if paying college bills will leave you high and dry in your retirement years.

Work part-time during retirement

About 25 percent of retirees work part-time. You may find that the extra income enables you to enjoy the kind of retirement you had anticipated.

Increase earnings (i.e., spouse returns to work)

Increasing earnings may be another way to meet both your education and retirement goals. The usual scenario is that a stay-at-home spouse returns to the workforce. This has the benefit of increasing the family's earnings so there's more money available to save for education and/or retirement. However, there are drawbacks. The additional income may push the family into a higher tax bracket, and incidental expenses like day care and commuting costs may eat into your overall take-home pay.

In addition to a spouse returning to work, one spouse may decide to increase his or her hours at work, take another job with better compensation, or moonlight at a second job. Factors to consider here include the expectation of increased job pressure, less availability for child rearing and household management, the amount of extra income, the opportunity for advancement, and job security. Another way to create extra income is for a spouse to turn a hobby into a business.

Be more aggressive in investments

Your analysis has shown that your current savings (and the accompanying investment vehicles) will leave you short of your education and retirement goals. One option is to try to earn a greater rate of return on your savings. This may mean choosing more aggressive investments (e.g., growth stocks) over more conservative investments (e.g., bonds, certificates of deposit, savings accounts). This strategy works best the more years you have until retirement.

Caution:         The more aggressive the investment, the greater the risk of loss of your principal. This strategy isn't for people who shudder at the slightest downturn in the stock market. If you'll have trouble sleeping at night, you probably shouldn't take on greater risk in your investment portfolio.

Reduce education goal

One of the realities parents may have to face is that they can't afford to fund 100 percent (or 75 percent, or 50 percent, as the case may be) of their child's college education. This is often an emotional issue. Parents naturally want the best for their children. For many parents, this translates into sending them to (and paying for) college (especially in cases where one or both parents didn't have such an opportunity).

You may have dreamed that your child would go to a prestigious Ivy League school. Well, with a year's cost at such a school hovering at the $40,000 mark, maybe you need to lower your expectations. That small liberal arts college or the big state school may challenge your child just as much and at a far lower cost. Remember, there are loans available for college, but none for retirement.

Children pay more and/or assume more responsibility for loans

With college costs continuing to increase at a rate faster than most family incomes, and with perhaps more than one child in the family picture, chances are that more responsibility will fall on your child to help fund college costs. This money can come from part-time jobs or gifts, though the majority of your child's contribution is likely to come from student loans.

Though student loans can be a financial burden in the early years, when graduates are just starting out in their careers, many loan providers offer flexible repayment options in anticipation of this common situation. In addition, if your child meets certain income limits, he or she can deduct the interest paid on qualified student loans.

When children take out student loans, parents can always decide to help financially rather than mortgaging their house before college. Students who take out student loans to pay for college may have a more vested interest in their education than students who receive help from their parents.

Other ways to lower cost of college

In addition to reducing your education goal and having your child pay a portion of college costs, there are other ways to lower the cost of college. For example, your child can choose a college with an accelerated program that allows students to graduate in three years instead of four. Likewise, your child may choose to attend a community college for two years and then transfer to a four-year private institution. The diploma will reflect the four-year college, but your pocketbook won't.

How do you decide what strategy is best for you?

This decision must be made on a case-by-case basis. What works for one family may not work for another family. In some cases, more than one strategy will be necessary to deal with the demands of educating children and retiring successfully. Factors influencing your decision may include the following:

·         The amount of your financial need

·         Your current income and assets and any expectation of significant future income (e.g., a bonus at work, exercise of stock options, an inheritance)

·         The number of years you have until retirement

·         Your willingness to reduce your standard of living (now or in the future) for the sake of your children

·         The number of children in your family who plan on attending college

·         The academic, athletic, or other notable skills of your child that may raise the possibility of a college scholarship

Can retirement accounts be used to save for college?

Yes. But should you? Probably not. Many financial advisors recommend against dipping into your retirement account to pay college expenses as a preferred strategy. But if you must, there are some tax breaks available.

It's now possible to withdraw money from either a traditional IRA or Roth IRA before age 59½ to pay college expenses without incurring the 10 percent early withdrawal penalty that normally applies to such withdrawals. However, any distributions of earnings and deductible contributions from a traditional IRA and any nonqualified distributions of earnings from a Roth IRA may be included in your income for the year, which may push you into a higher tax bracket.

Tip:     This college exception to the 10 percent early withdrawal penalty is a good reason to funnel your child's income from a part-time job into an IRA.

Unfortunately, there's no similar college exception for employer-sponsored retirement plans, such as a 401(k) plan. So, if you're under age 59½, you'll pay a 10 percent early withdrawal penalty on any withdrawals. As with an IRA, any withdrawals are added into your income for the year, which may push you into a higher tax bracket. Nevertheless, saving in a 401(k) plan can be an attractive option for some parents because the company may match employee contributions and because most employer plans allow you to borrow against your contributions (and possibly earnings) before age 59½ without penalty.

Tip:     Some parents who have built a college fund within their 401(k) accounts, but who are not yet 59½ when the kids are in college, take out what's called a bridge loan (such as a home equity loan) to pay their child's college bills. A bridge loan is a source of funds that tides you over until it's more economical to tap your retirement account. Although you pay interest on a bridge loan, it may still cost less than what your 401(k) funds can earn. Then, when you turn 59½, you can start tapping your 401(k) plan to pay off the bridge loan with no early withdrawal penalty.

A benefit of using retirement accounts to save for college is that the federal government doesn't consider the value of your retirement accounts in awarding financial aid (the federal formula also excludes annuities, cash value life insurance, and home equity from consideration). However, most private colleges do consider the value of your retirement accounts in deciding which students are the most deserving of campus-based aid.

Jared Daniel may be reached at www.WealthGuardianGroup.com or our Facebook page.
IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.