Interest Rates – Annuity

How a Little Planning can go a Long Way

Steve Garcia — Sat, 22 Oct 2016 13:51:04 +0000

What types of options do I have when it comes to saving for my children's college education, which is best and why?

While the cost of college continues to increase at a torrid pace, there are ways to prepare for one of the biggest expenditures in your lifetime. With appropriate planning, disciplined savings and thoughtful conversations with your child you can significantly improve your chances for success.

Power of Starting Early & Saving Often

Just as the case with any savings goal, the sooner you start and the more disciplined your approach to saving the better off you are. The power of compounding cannot be overstated when looking at an 18 year time horizon. As an example we've created the table below to highlight the power of compounding and the difference in total savings when someone starts saving $1,000, $500 or $250 a month at the birth of their child vs. their 5^th birthday using a tax-deferred vehicle.

Savings Amount	Savings Beginning at Child's Birth	Savings Beginning on Child's 5th Birthday	Difference in Final Account Balance
$1,000 per month	$349,345.16	$219,171.86	+ $130,173.30
$500 per month	$174,672.58	$109,585.93	+ $65,086.65
$250 per month	$87,336.29	$54,792.97	+ $35,543.32

Assuming a 5% annual return you could have approximately $130,000 more in savings when the child turns 18, while only contributing $60,000 extra dollars by starting at birth vs. age 5 (when saving $1,000 per month). As you can see, before worrying about the actual cost or which school your child will attend, the most important action you can take is to simply begin saving sooner than later.

Impact of Inflation on the Cost of Education

Just as the power of compounding can dramatically affect the amount of your savings, so too can inflation affect the cost of a college education. Recent research suggests that college tuition could continue to increase anywhere between 6% – 7% over the next several years. This is nearly three times the current rate of inflation for the majority of consumer products and services.

Balancing the cost of raising a family, saving for your own retirement and saving for your children's college education can be daunting tasks, but all of these should be considered.

Using our Financial Planning software "NaviPlan", we have created the table below to highlight the dramatic impact inflation can have on the cost of secondary education over the next 18 years. Using current tuition figures (room & board included) for a PA resident and a 6% rate of inflation, we were able to highlight the projected cost for the following four well-known schools at different cost levels.

School	Current Annual Cost	Projected Cost in 18 Years
West Chester University	$17,589	$219,627
Penn State University	$28,434	$355,045
Ohio State University	$39,031	$487,366
University of Pennsylvania	$63,526	$793,226

The Most Common Investment Mistakes

Steve Garcia — Fri, 04 Mar 2016 13:34:51 +0000

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In today’s video we discuss some of the common investment mistakes made by novice investors and how having a financial advisor would have helped to mitigate these mistakes.

Some examples discussed in the video are cases where someone buys an investment without having a strategy to sell the investment. Or, a strategy is in place, but when the moment to sell arrives the investor “moves the goal posts”, or becomes emotionally caught up in the investment and is unable to make the correct decision. Additionally, novice investors don’t always consider the tax consequences of buying and selling investments.

Is Your Financial Advisor On Your Side?

Steve Garcia — Mon, 25 Jan 2016 13:31:34 +0000

Many investors seek help in managing investments, but the quality and type of help they seek can vary dramatically depending on one small little detail — who’s paying your adviser? In turn, that begs the question… is your adviser on your side of the table?

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It’s important to understand the nature of the relationship between you, your adviser, and the investments he/she recommends.

Advisers come in three blanket varieties.

Fiduciary Advisers: These are advisers that work solely on behalf of the client. This means simply that they accept no payment from any investment or investment company. Their only loyalty is to the client.
Brokers: Brokers are simply paid to “broker” a transaction between two parties. They are often paid by both parties to do this. Since they essentially represent both parties in a transaction they actually don’t have any loyalty to one or the other.
Agents: Agents are just the opposite from fiduciary advisers. They work solely on behalf of the institution, such as a bank or insurance company. Their loyalty by definition is to their employer, whose products they must represent. If this person sounds like a salesman, it’s because they are.