College expenses are rising at an annual rate of 5 – 7%, making it increasingly difficult for the average American family to afford many of these high-priced institutions. College savings plans are a great way to begin saving for your child’s college expenses, and setting up a plan can be done in as little as 90 seconds.

College savings funds such as 529 Plans and Coverdell Education Savings Accounts (CESA) provide a tax-free advantage on earnings generated by the funds, and are among the best choices for families looking to invest for college expenses. Additional college savings programs can be explored at websites such as www.collegesavings.org.

Allocating funds on a monthly basis is the best way to build a college savings plan. And with automatic fund transfers available for most investment plans, there is little to do once the fund is set up but to sit back and watch it grow. Calculate the amount of available monthly funds that can currently be used towards a college savings plan. As you pay off outstanding debts, or experience other positive changes in your monthly income, plan on using the money you previously saved towards these debts each month to increase the amount being placed into the college savings plan.

Once you have your decided on your monthly allocation, the type of fund you wish to set up, and the financial institution you want to manage your fund, actually creating the account can be quite simple. It involves filling out a detailed application, paying the enrollment fee (if applicable), and transferring your first investment contribution.

Giving your children the gift of an unlimited future is not strictly for the very wealthy. With a little determination, discipline, and planning, you can easily set up an effective college savings plan to ensure your child gets their turn to wear that cap and gown on graduation day.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

Traditionally, life insurance has been viewed as a safety net in the event the family breadwinner dies. To be sure, life insurance in the pre-retirement years can help cover the needs of your survivors, which may include replacing lost income and funding education costs or other financial goals. Yet for those near or in retirement, the need to replace income may become less pressing, while the desire to preserve and protect wealth for retirement needs and pass wealth efficiently to the next generation gains greater importance. There are a variety of innovative insurance solutions that can help meet your needs and also provide a way to help you achieve some of life’s extras, including taking steps to ensure a family legacy.

Keep your legacy intact with life insurance solutions

You may not realize it, but retirement plan income from an inheritance may trigger a tax bill for your heirs that can significantly eat into the amount you leave behind. If you should die, the distributions your beneficiaries take from certain retirement assets such as Traditional IRAs, 401(k)s, non-qualified annuities, and non-qualified deferred compensation is considered Income in Respect of Decedent (IRD) and subject to income tax.  The tax on IRD assets is in addition to estate taxation and thus can result in double taxation. Unlike estate taxes, these taxes are typically paid by the beneficiary and not by the estate. Additional taxable income from an inheritance can cause a host of potential income tax problems, from bumping the beneficiary into a higher tax bracket, to phasing out personal exemptions and itemized deductions and erasing certain tax credits.

One way to make up for the IRD tax bite is to take out a life insurance policy with a value equivalent to the anticipated tax bill. With beneficiary proceeds that are generally exempt from estate and income taxation, the life insurance policy can help replace the amount of your legacy that is lost due to income taxation on IRD assets.

Diversify with a variation on traditional life insurance

A traditional life insurance policy provides an income-tax free benefit, often with limited growth opportunity and flexibility. There are other life insurance options that offer the potential for growth and an income-tax free benefit. These options also build “cash value” and have the added benefit of flexibility to access cash for unforeseen events. These policies can contain fixed rate investments, or provide access to a range of variable rate investments.

For example, Variable Universal Life (VUL) is a type of policy that offers the opportunity to build cash values. A VUL policy can add diversification to your retirement portfolio. As a form of permanent life insurance, VUL provides financial protection against unexpected events. Because the cash value within the policy can be invested in separate accounts, a VUL introduces investment diversification. A VUL also offers some flexibility regarding taxes. You can use after-tax dollars to pay premiums in the VUL now for the potential to accumulate cash value tax-deferred and  receive tax-free supplemental income during retirement. Your financial advisor and tax professional can help you determine whether a VUL would benefit your circumstances.

Ask questions and explore protection options with a financial advisor

Take time to review your financial plan with a qualified financial advisor to help assess whether a life insurance product can help you achieve your financial goals in retirement. To determine what kind of policy would best suit your needs, and the amount of the policy, ask yourself:

• How much of your present living expenses will remain after death?
• Will survivor Social Security benefits offset these expenses?
• Will your tax rate change?
• Will the investment risk tolerance of your surviving spouse change?
• What is the life expectancy of the survivor?

An important consideration when purchasing life insurance is cost. Most policy premiums increase with the policyholder’s age, and variable products may have other flexible premium options that affect their cash value. Review your cash flow to ensure you will have sufficient funds to pay your premiums for the duration of the policy. Your life insurance needs will fluctuate over the course of your lifetime as your needs, goals and circumstances change and should be reviewed annually.

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This information is being provided only as a general source of information and is not intended to be used as a primary basis for investment decisions, nor should it be construed as advice designed to meet the particular needs of an individual investor. Please seek the advice of your advisor regarding your particular financial concerns.

Neither Ameriprise Financial nor its affiliates may provide tax or legal advice. Consult with your tax advisor or attorney regarding specific tax issues.

Variable life insurance is a complex investment vehicle that is subject to market risk, including the potential loss of principal invested. Before you invest, be sure to ask your financial advisor about the variable life insurance policy’s features, benefits, risks and fees, and whether the variable life insurance is appropriate for you, based on your financial situation and objectives.

Financial planning services and investments offered through Ameriprise Financial Services, Inc. Member FINRA & SIPC.

To build financial trust or credit you need to understand how the credit puzzle fits together. The creditor, the one loaning you the money, looks at most or all of these pieces before granting credit to you. Therefore knowing all the pieces before you start to use credit will be the key to becoming credit savvy.

Income is money that you are earning or the allowance you are given now. When you are extended credit, the creditor needs to determine if you have the financial capability to meet the loan payment schedule. The amount of income needed for a loan depends on the amount and type of the loan. For example if you are borrowing money for a house most creditors will require that your monthly payments not exceed 35% to 50% of your take-home income.

For credit purposes, character is measured by how you pay previous loans or debts. This information is available by way of a credit report. There are three major consumer credit reporting companies in the United States: Equifax, Experian and Trans Union. Creditors report the payment history of their loans to these credit-reporting companies. The credit reporting firms also collect information about other debts you may have. If you have your car repossessed, your homes foreclosed, bounced checks or file a bankruptcy then this information is also reported in the credit report. The information in your credit report is generally kept on file for two to ten years.

Stability is an estimate of how much your financial situation may change during the term of the loan. If your employment is unsteady or unlikely to continue, then the creditor may have concerns about your ability to meet loan payments. If your expenses will be increasing or your debts are expected to grow in the near future, then the creditor may also have concerns about your ability to meet loan payments.

Debts are how much money you currently owe other creditors. This includes credit cards, car loans, home loans, school loans, and all other loans. If you have lots of other loans or a high amount of outstanding debts then a creditor may have concerns. Most creditors have debt guidelines for different types of loans.

For example if your total current credit card debt exceeds 20% total income then you may be considered to have a maximum amount of credit card debt. For a home loan the maximum amount of debt could be as high as 200% to 300% of your total income.

Assets are how much money or value you have on hand. Assets include cash in the bank, savings accounts, certificates of deposit, bonds, stocks, etc. Assets also include cars, motorcycles, a house, or other valuable stuff. Creditors consider assets a safety net for a loan. In some cases creditors will require a certain asset to be listed as security for a loan. This is almost always true for car and home loans. However if a creditor determines you have sufficient assets to fall back on, then they feel more comfortable making a loan.

Expenses are the total of the bills you pay monthly or regularly. Expenses include regular costs for food, rooming, electricity, water, sewer, insurance, tuition, books, car gas, etc. Creditors need to be sure you have enough money left over each month after your expenses to make your loan payments.

While most of us try to identify as many possible write-offs on our taxes that we possibly can each year, there are many qualified write-offs that are often overlooked. Recognize these obscure write-offs and get ready to optimize your next tax return:

• Job Seekers: Expenses related to job seeking can be a legitimate deduction on your taxes. Qualified expenses include phone calls, unemployment agency fees, resume preparation costs, travel and transportation fees, and career counseling services.
• Teachers: Any classroom related expenses such as books, computer equipment (including software and services), supplies, and other materials used in the classroom are legitimate deductions. Save your receipts!
• Home Office: If your home has a space solely dedicated to use as a home office, depreciations in home office equipment, computer expenses (if solely used for business purposes), and even the percentage of heat and electricity used by your home office are qualified deductions.
• Charitable Contributions: Any donation you make to a legally recognized charity is tax deductible, as long as it meets IRS standards. Double check charitable organizations to which you have donated to ensure they qualify.
• Military Personnel: Active military personnel qualify for many legitimate deductions regarding travel, uniforms, and educational expenses. Check with your tax professional to see which write-offs you can claim.
• First Time Home Buyer: As a first time home buyer, expenses such as property taxes and mortgage interest are legitimate deductions on your tax return.
• Energy Efficiency: Tax credits for using energy efficient appliances and heating systems are deductible in addition to alternative energy systems such as solar panels, wind turbines, and residential fuel cells. Energy saving home improvements such as insulation, lighting, windows, and roofs also qualify.

Identifying and claiming these additional tax write-offs positions the educated taxpayer for a greater return come April. Make sure you are claiming every possible deduction and limit the amount of money you shell out to Uncle Sam.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

Effectively managing outstanding debt is the first step on the road to financial freedom. You’ve set yourself a budget, you’ve stuck with the plan, and you’ll soon be debt free. Now what? Take what you’ve learned and begin working towards a richer future.

Follow these six steps and you will soon be well on your way to easy street:

1.  Know Your Situation: Take the time to understand exactly where you are at financially. What is your total income? What are your debts? How much is left over after you pay bills? Using a spreadsheet or other type of software tool to map these numbers out in a “Personal Finance Sheet” makes it much simpler to identify how much you need for monthly expenses, and how much you can afford to put away for future investments or savings.
2. Set Goals for Your Future: Clearly define both your short- and long-term goals. Want to pay buy a $25,000 car in the next two years? How about retiring by 55 with $1 million in savings? The key here is to capture your goals somewhere and refer back to them periodically. Keep in mind that any goals you set should be realistic, specific, measurable, set within a certain timeframe, and actionable.
3. Explore Alternatives: No one is saying you need to continue down the financial path you are currently on, so what’s the harm in taking a look at alternative routes? When exploring your options you can choose to do one of four different things; stay the course, expand your strategy, modify your strategy, or adopt an entirely new strategy.
4. Evaluate: Now that you’ve identified the alternative strategies, evaluate the feasibility of each one and how it fits into your personal finance plan. The important thing here is to identify which options you can believe in and work towards.
5. Act: Now that you have your strategy mapped out it’s time to act. Begin by implementing the first actions identified in your goals, and go from there. If you find you cannot act on your chosen strategy for financial or other reasons, it may be time to take a step back and reevaluate the situation.
6. Measure: In order to know where you are at with your goals and to make projections for the future, you need to know how your financial strategy is working. Failure to measure your results frequently can cause you to lose sight of the goals you set up at the beginning of your planning.

Keeping a keen eye to the future through the use of these six steps will ultimately lead you to greater financial security. With a little work on your part, you can soon be living the good life — golf clubs and Cadillacs.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

Now that you have your financial problems well in hand and are nearly to the point of being debt free, it is a good time to begin thinking about your financial future. You have made sacrifices, changed your lifestyle, and allotted a significant portion of your monthly income to settling your outstanding credit card debts. With the lessons you have learned, and your new ability to budget and save on a monthly basis, you can begin structuring a retirement plan to guarantee financial independence into your golden years.

One great way to begin saving towards retirement is to set up a Roth IRA personal retirement account. Roth IRAs (or Individual Retirement Accounts) allow you to set aside after-tax income up to a specified amount each year. Earnings on the account are tax-free, and tax-free withdrawals may be made after age 59 and a half. Funds are used in much the same way as traditional investment programs, and can either be managed by your selected investment manager, or managed personally, whichever suits your individual needs.

 Setting up a Roth IRA account is fairly simple and straightforward. The first step in the process is to identify exactly where you should open your account. Many financial institutions offer IRAs, each with its own strengths and weaknesses. It’s important to search for a company that suits your needs. Questions to keep in mind when researching IRA offerings include the following:

•  Is there a minimum initial investment? Minimum contributions?
• What sorts of fees are assessed to the account?
• Does the company offer automatic contributions?
• What investment options are available? Can you invest in stocks? Mutual funds? Real estate?
• How reputable is the provider?

 If you already work with a financial advisor, they can assist you in selecting an appropriate financial institution to work with. A good starting point is the three leading American investment institutions — T. Rowe Price, Fidelity, and Vanguard. These large investment firms have more investment options than smaller institutions, and can support both aggressive and conservative investment plans.

 Actually setting up the Roth IRA account involves little more than filling out a detailed application (similar to a credit card application). You will need your social security number, banking information, and funds to cover an enrollment fee and initial investment into the account. Automatic fund transfers can also be selected to automatically transfer funds from your bank accounts into the Roth IRA each month, making investment that much easier.

 The only thing to do now is to sit back and watch your investment grow.  

 This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.