Winning in Retirement

Children and Grandchildren: Legacy

• Akers Financial Group

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Brian Akers and Jeff Akers, both certified financial planners, discuss strategies for funding children and grandchildren's education through 529 plans. They highlight the benefits of starting early, contributing $19,000 annually per beneficiary, and leveraging state tax deductions, such as Maryland's $2,500 deduction. They explain the flexibility of 529 plans, including using funds for K-12 education, private school, and trade schools, and the option to convert unused funds into Roth IRAs. They also address the importance of financial aid considerations and the potential for using 529 funds to pay off student loans. The discussion emphasizes the need for comprehensive financial planning to ensure educational and retirement goals are met.

Unknown:

The following is a pre recorded Show. Welcome to winning in retirement with your host, BRIAN AKERS, Certified Financial Planner, professional and founder of AKERS Financial Group now helping you win in your retirement. Here's BRIAN AKERS,

BRIAN AKERS:

welcome to winning in retirement. I'm BRIAN AKERS, president and founder of AKERS Financial Group here with me today is certified financial planner practitioner. Jeff AKERS, good morning, Jeff, good morning. Brian, very glad to have you here on the show. Jeff AKERS, yes, he has the same last name, but we have come from different parts of the family. He's my cousin. Our fathers are brothers, and I write my name on the door. And we share a grandmother and grandfather. We do.

Jeff Akers:

We share a whole side of the family that's crazy funny how that works.

BRIAN AKERS:

And for almost 25 years, we've shared the same career as financial advisors and and basically, over time, Jeff has become the right hand man or the Jeff AKERS, the Vice President of AKERS Financial Group. So today's topic. The reason we bring Jeff in is because he's steady, you know? He just gives good information. Now, the show today is called children and grandchildren legacy. Yes, we're gonna talk about how to help your minor children, minor grandchildren. We're not gonna talk into too many things on the legacy side. We're generally gonna talk about education funding, how to put money away. You know, every time of the year when may 29 comes up, I love covering the topic five to nine, and there

Jeff Akers:

may actually be some new things that have come along that you haven't heard about. So we'll touch on those early

BRIAN AKERS:

sure try to now our perspective, Brian and Jeff's perspective, Jeff has one child in college. Currently I do. I have two kids that are out of college. Brian's already done with this for his kids, so I'm on the freedom track, and he doesn't have grandkids yet, right? So I'm in that, basically the phase where you keep your own money for the first time in your life, which is a wonderful economic phase for those that are still dredging through of got to get them through high school, getting them through college, and then you'll see that that bright light, which is more of a science, shining light, not a train. I'm looking forward to it, right? So the idea is this, we have a perspective to teach you things we wish we did, yeah, things we did yeah, things we advise our clients. We'll tell stories about clients and what they did, how it worked out right, how it didn't work out right? We have a few things to tell you, and we have a lot to go over, so hold on tight to the steering wheel. If you're driving, make sure you pay attention wherever you're at. We do appreciate you listening to our show today. Eyes on the road. Yeah, if you're on lawn tractor, that's good. I like that. That's a good option. Eyes on the grass, but wherever you are. So if you're in a car with your own kids and you're talking about college, my first concept is this, you need to work out a deal with your kids about college, whatever age they are, motivate them to college or to trade or to a career or to what they fits them well right through the process of talking about it, right? I like the idea of a, if you go to college, I want to support you, and then you pick how much percentage, like a third, two thirds, a little bit, not at all, right, you're I like making the child have responsibility for a piece of it, so that they are invested in the college life. They have skin in the game. We know many stories of those who weren't invested and their their grade level. Let's say that way

Jeff Akers:

they went to college for fun, not for an education, correct?

BRIAN AKERS:

So Jeff AKERS, BRIAN AKERS, are Virginia Tech graduates. Yes, we went to there. We know. We can tell you about people at this that school, they were serious, and the ones that were not. Yes, we know all them. Many times, the serious ones had money in the game. Yes,

Jeff Akers:

they had to. They were working to support their way through school, or they had saved their own money to go to school, but they worked for it

BRIAN AKERS:

now over the years, five to nine as an IRS tax law five to nine, which allows people to actually save money that will grow tax free, if used for college, for trade school, for post secondary education, a bunch of things, right? Just

Jeff Akers:

has to be something accredited or recognized. So most trade schools and colleges and stuff, they're going to qualify

BRIAN AKERS:

and other

Jeff Akers:

other type of short term training also, right, right, right. There's all kinds of, how about room and board? It does cover room and board up to, like, what limit? There's not really a limit for college expense. It's qualified education expenses, and the list is kind of expanded over the years. But if you think about tuition, that's kind of obvious, books that seems kind of obvious, room and board, it covers that. It has never covered, like transportation, like if you commuted to school, you can't use it to pay your mileage or anything like that. But it covers the big education expense. Yes. So the

BRIAN AKERS:

plan was all designed to cover after high school, and over the years, they've made a bunch of changes, especially in the last couple of years. And some of those changes are, you can use it for kindergarten through

Jeff Akers:

12th grade, right? Yeah, that. What do they call that? Well, not just elementary school, but you could use it for private school, yeah, like I said, K through 12 up to $10,000 a year

BRIAN AKERS:

at 10,000 per kid. So if you have a 529 plan, so the title of the accounts of 529 that money, that account would have an owner, which would be the parent or grandparent. And when you set that up, you want to have a successor owner. Right now, it's not joint. You can't make them joint, but you need a successor owner to take over in case one passes away, right? And then you have a beneficiary, and that's the kid, yes. And so each kid, each account that's set up, each kid that has an account, now it's not per account, it's just by the kid. They can do 10,000 for private school, right? And then they can do money for college, up to the expenses they they spend. And there's really no upper limits for real expenses, right?

Jeff Akers:

Because depending on where they go to college, it will be significantly more than$10,000 in a year when

BRIAN AKERS:

the kids go to college. You need to take the money out of the five to nine plans during the years you're spending it, right? Because what's going to happen is the school is going to send 1098 tuition, and then the the 1090, 9q q is the qualified tuition withdrawal out of five to nine has to offset, right? And some of the reasons you got to do this so, like, if they go to college, and then after college, oh, I'm gonna reimburse myself for the college after you won't have those expenses there in those those taxable years, right? And then all sudden, you're gonna pay tax on the growth and

Jeff Akers:

a penalty. And what's the penalty? Jeff, 10% because it's not an education expense when it's the year after you had the expense. Yeah. So

BRIAN AKERS:

you got to be proactively using the funds, depending on how well you saved, how much money is put away, you got to use it. Use it often. Try to use the whole fund. Unless you have some other goals. This show is going to cover all these choices you have with five to nine points. Yeah, so far we've only done one. So these are parents and grandparents. Can set these up, yes, so And typically, if you have an account, you can make a beneficiary of anybody that's a relative of yours,

Jeff Akers:

right? You can name a beneficiary, and sometimes you pick the beneficiary, the child you're expecting would go to college, and maybe they're really smart, and they're going to get all kinds of scholarships and not need any money, right? Well, you can change the beneficiary, and it's pretty expansive. Who you can change that beneficiary to and use it for someone else. You can go

BRIAN AKERS:

to the parent, to go back to school. It could go to others assistant, go to my favorite cousin. It could, yeah, I'd love it. Oh, wait, I'm done with school. No. I mean, Jennifer will get it. She love it. It said my favorite cousin. Then you sued yourself. And I just mentioned it

Unknown:

at me, just just, just a

BRIAN AKERS:

teacher. Yeah, all right, here in Maryland, there's a Maryland five to nine plan. Maryland 529 plan has a custodian. The custodian is 00, price. This, this Maryland five to nine plan is an investment plan. It is not the prepaid plan through the state of Maryland,

Jeff Akers:

right? The Maryland College Savings Plan, when you go on their site, it'll ask you college savings or prepaid, right? College savings is the one we're talking about.

BRIAN AKERS:

So the so through t re price, that is the only account as a Maryland, as a resident of Maryland, where, when you put money in, you get a deduction. So, how does that deduction work? Jeff,

Jeff Akers:

well, you contribute up to $2,500 and you can deduct that $2,500 from your state tax return, your state income.

BRIAN AKERS:

All right, so if, if I gave money to a daughter, then that's 2500 if my wife gives can also get 2500 right? That'd be 5000 we could take off our joint tax return right per owner, per beneficiary. So we have two kids, we could do 10,000 Yep. And if you have four kids, how many? Oh, gosh, 20, 20,000

Unknown:

whatever you said, throwing a number at me, how about

BRIAN AKERS:

19 Kids and Counting? How many could

Unknown:

the five two nights, 19 kids, one parent and two grandparents now,

BRIAN AKERS:

all right, the age limit on contributions for five to nine plans?

Jeff Akers:

Oh, there's, there's not really an age limit to make contributions. And that's a five to nine. It's

BRIAN AKERS:

amazing. The reason we don't want to do it is, if you don't use it properly, what happens is you end up getting that penalty, a 10% penalty for not doing it right.

Jeff Akers:

Yeah. The whole purpose is to use money, tax free for education. So Maryland

BRIAN AKERS:

529 has a really good site there on the site, you can go in there, you sign up the account on your own. It's a directly through T row price. There's like no commission on it's a no load fund. They make T row price makes money managing inside. You have investment choices. You have ones where they target date fund. You. Right? We don't like target dates, but the target date fund you the other ones are, get to pick your investments inside, right? You

Jeff Akers:

can pick, at least in the broad sense. You can pick international or domestic, or there's, it's not like a fixed

BRIAN AKERS:

there's a money market, US Treasury portfolio. So I generally tell people before they get to high school, be aggressive with it, right? Invest that money every month. Get started once they have a social security number, grow that money as again, to ninth, 10th, 11th grade. You want to start putting that money into cash. You want to be at least a year ahead of distribution and cash. And it's your price. It's a money market you put in. That's the one safe place to have there. It's kind of similar

Jeff Akers:

to our conversation with retirees, and the money they're going to use in retirement, in this case, they're going to use it for education, absolutely.

BRIAN AKERS:

So the idea is this, Maryland 529 is for Marylanders to get a deduction. If you Max the deductions and want to save more money. There's plans all around the United States

Jeff Akers:

well. And in Maryland, you can do 2500 per year, but if you put 5000 in one year, you can deduct 2500 this year and then carry over the other 2500 to next year. There

BRIAN AKERS:

are so many strategies when it comes to this. We're just starting right. So there's a lot of things to pay attention to, but the main idea is this, for children and grandchildren, you want to build a legacy, an education legacy, to get them educated so they can do okay on their own. That education might be a trade. Trades are making a lot of money nowadays, and there's some money needed if they're didn't tie into an employer that's going to pay it, they might have to pay the money up front to get the education they need to be successful in different trades too, right?

Jeff Akers:

And the trade schools tend to be less expensive than the college or university, and usually

BRIAN AKERS:

they stay at home. They don't get the room and board costs, which is a terrible cost we'll talk about later. So AKERS Financial Group, when you work with one of our team of advisors, what's happens is, we talk about your situation, your fingerprint. What's crazy is this, part of this is the education of your children and sometimes your grandchildren. How you want to try to help AKERS financial we're local. We're independent. We don't report to a big company on all and Wall Street. We report to you. We do have offices in Forest Hill and Lutherville, clients all around this region, around mid Atlantic region, also around the country and even a few around the world. It's so easy to begin winning in retirement. Just give us a call and schedule your meeting with one of our team of advisors. Call 833 win, retire. That's 830 3w. I n, r, e, t, I R, E, we'll give you a call on Monday to schedule a free in person meeting. Go to AKERS financial group.com or call us at 833-946-7384, to start planning for your retirement. Now, if you invested in a 529, but then don't need it. What do you do? We'll talk about this when we return in a moment

Unknown:

you're listening to a pre recorded show, welcome back to winning in retirement. Call 833, win retire now to schedule a visit with Brian and his team and begin winning in retirement once again. Here's BRIAN AKERS, welcome

BRIAN AKERS:

back to winning in retirement. I'm BRIAN AKERS. I'm president, and founder of AKERS Financial Group. Jeff AKERS is my age, co host with me today. We are both certified financial planners with AKERS Financial Group. I keep mentioning that there's a whole lot of AKERS on our websites, AKERS financial group.com, and what else is AKERS, AKERS, a k e r

Jeff Akers:

s, that's right spell it correctly. A k e r s, not like the land, yeah.

BRIAN AKERS:

But AKERS comes from the land and like 1600s I think far enough back the name it came from. We don't know for sure, but All right, so the show is called winning in retirement. Part of winning in retirement is answering all the other financial concerns and things in life. And so a lot of times you think about your children, your grandchildren, about the legacy you want to leave them. And part of that legacy thought is you want to help with their education, especially with your children. Want to get them off to a good foot and make sure they're get set up in life. And what happens is this, that many, many people will save money and build up money. And what happens is this important topic for the second quarter is, if you invested in a five to nine but don't need it, what do you do? We'll talk about that

Jeff Akers:

right now. Yeah, that sounds kind of, uh, important, yeah.

BRIAN AKERS:

Like you're you said earlier in first quarter that, what if they get a scholarship and then that pays for See, they did really well and got all the money. What do you do with that money? That's there, yeah,

Jeff Akers:

they got a free ride. There's, there's a lot of things that could happen. There's also the option that the when they're a child, you're thinking, oh yeah, college, college, college, and then they get into their high school years and you're like, not suited for college. That's not going to happen. We're never going to spend all

BRIAN AKERS:

this I had the opposite happen, where the kids and grand the parents use the parent example, they're like, I'm not sure if this kid's going to college. And I said, Well, we could do a little bit of money every month. I I like the idea of taking small bites off a college bill by saving a little bit of time every month and paying the money first, throwing it to the future for that child. Now, worst case scenario, if you just pull it out the. Buy a car, there is tax, tax and a 10% penalty for a house or a car or anything else that's

Jeff Akers:

that's on the gain. So if you put in $1,000 and accrued a 5000 that $4,000 difference is taxed and penalty,

BRIAN AKERS:

right? And so what happens is that I'm not everyone liked that idea, right? And so it likes a penalty. So one of the rules that came out with the secure 2.0 law or rules, is that they have created this idea that if you have leftover money from a long time, five to nine plan at least 15 years. So if you've had it 15 years, then for the beneficiary, you could do something special for them. Yes, you can. And you can basically use that tax free money it was grown for college and change it to a tax free retirement account called a Roth IRA for that beneficiary. So one case I have is grandparents funded money for the grandkids. Okay, they got very excited when they were born. Super fund it with a lot of money over funded it, and so we're trying to come up with ways to spend it. Because got the one we're talking about went to college for a year or two. What was weird is his father actually works at a college, so he got free.

Jeff Akers:

No, go to the expensive college. Please go. We got money

BRIAN AKERS:

for you. Then, then, then, after two years, I don't really like this. I want to, I'm gonna make a lot of money on being a trade, and which is wonderful, right? And so we didn't wanna spend any of that money. And then the question would be is, do we give it to the other nieces and nephews, brothers and sisters? Or can we give it to this one child? And one answer is, we can give 35,000 of it over time per year based on their own financial situations, right? And the Roth limit for that year, right? So, so right away, as he, as he decides not to go back to college, he's making some money. We have a meeting once a year. We talk about how much money he's making. Does he still qualify to do Roth IRA? And then we move $7,000 out of the 529 to the Roth into

Jeff Akers:

the Roth IRA. So$7,000 up to that limit of$35,000 so with the current contribution limits on the Roth IRA, it's going to take five years to move the 35,000

BRIAN AKERS:

and that 35,000 has not been indexed to inflation yet with the law right, it's just a simple thing at the moment. So right now, if you don't need the money, that's one of the options, pretty much the only option we have for tax free, yeah, the other thing, if someone say they're out of school, they have the five to nine plan, and then they they also have a student loan. Uh huh. So what happens there?

Jeff Akers:

Well, you can actually take money from the five to nine to pay your student loan down up to $10,000 Sure. Now it's $10,000 over your lifetime. It's not $10,000 per year. All

BRIAN AKERS:

right. So, so why would a kid, somebody with a 529, plan, have need a student alone? Well, the answer is, the kid doesn't control the five to nine. So sometimes the kids so, hey, go get as much loans as you can. You're gonna be paying those, right? If you do a good job, we'll help you out. Help you out. If you don't, you're gonna be stuck, right? So these, the negotiations like I started the show with, are very important. If you want to expect something. You got to basically explain to them what. You got to basically go over what you want to anticipate later for it. Yeah, you have to work for it, and that really helps people be successful now. So the idea is this, so we are trying to save money for kids or grandchildren. This is a legacy of education. It's a way of helping them for money long term. Yes, if we have too much money in there, it can cover College, post graduate school, as far as you need, right?

Jeff Akers:

That that kind of education? I actually had a situation where parents had over funded 529, and the mom, she wanted to go back to school, get a master's degree, so she actually changed the beneficiary on one of the accounts, yep, and she used that money to go to school herself. Very

BRIAN AKERS:

true. The idea is, let's say you have a nephew, has a loan. You can pull money out of your kids five to nine, put it in there, five to nine, right? Change beneficiary, then give them 10,000 bucks that way, right? And

Jeff Akers:

then they can use that to pay off their

BRIAN AKERS:

loan. The reason you go through all that paperwork is to keep it tax free, right? Tax Free. Tax Free is the only reason to do five to nine plans tax

Jeff Akers:

free and well, it used to be that education was the college education at that was the only reason that has changed a little bit with the ability to put money into Roth, right? Because when I'm talking to a parent or a grandparent of a newborn, and I say, okay, you can put this money into a 529, if they don't go to school or they don't need the money, it's not lost. It used to be that it was kind of lost at that point, but now it can go into their Roth. Roth IRA, and basically you've been saving for their retirement from the moment they were born, which is just wonderful growth opportunity in there. Yeah,

BRIAN AKERS:

the other other things that happens when I hear Jeff talk about Roth, I talk about, well, when can a kid have a Roth IRA? And I'm constantly telling parents, they have to have a job, right? You have to have earned income. Whenever that is 14, 1516, right? They show a w2 then you can do a Roth IRA, up to them their earnings limit, up to

Jeff Akers:

the amount they made. So if they made $5,000 in a year, they could contribute 5000

BRIAN AKERS:

to a Roth. They made 495 they put 495 limit. 7000 is the most can go in. But there's those are called custodial Roths, because under 18 cannot have an account on their own, right? So custodian is the custodian being a parent or grand mom or dad over top of the Roth, right? These are all ideas. There's things out there. What happens is this. So in financial planning, we talk about you and your financial fingerprint, who you are, what you want to accomplish with your money, and then we tell you ideas and concepts that can help make this happen,

Jeff Akers:

right? Sometimes, you know, parents grandparents, that that first grandchild comes and, like the example you gave before, just super excited, and so they want to go kind of not well, not crazy, but the first grandchild does tend to generate a little craziness, but we can talk to them about different ways. A 529, is a way to help the child. There are other ways to help a child, like a UTMA or something like that, where you can give money for the child's benefit that maybe has different rules and suits what you want to have happen. I've had more and more grandparents in particular say, Well, I don't really want to do something that's limited to just education, I want to do something so that one day they could use it to buy a house or use it for a wedding or whatever. And so we talk about other options to use, besides 529 as well, to create that legacy for the grandkids. And very true,

BRIAN AKERS:

this whole quarter has been about if you invested in a five to nine and you don't need it. What do you do? Correct? All right, so one case I had, they came in and both their kids are done school, money still sitting in there, and they don't want to pay the tax anywhere. And so I said, Well, relatives. And so they moved it to a niece's account, okay? And the reason they did that is they're waiting for grandkids, so they could pivot it back and they'll move it back when the grandkid comes. I'm not kidding you. That's what that's how it occurred. Now, the law, the rules have changed, where the parents can put it back in their name, actually, right? Which is unusual, but that can be done, right? So the idea of five to nine plans. Is it something to think about? It's not just for school anymore. It could be part of the planning, part of the savings plan, the idea of tax free growth, if it's called Qualified Use, it makes it a very nice idea. It's also a way to help people, help family members. If you want to find ways to do this, we're allowed to give money a year. You're allowed to give 19,000 per year per person into these plans right now. You might not want to put it all in the Maryland five to nine, because you you might get too much deduction. You might want different investment choices. And so there's lots of plans out there. Yep, if you go to brokers or investment people, what they'll probably do is not put you through the Maryland 529 plans, because they don't get paid when you go through the Maryland 529 right? Because it's a no load, no upfront commission type thing, right? And what happens is they'll sell their brokerage five to nine or whatever. And the thing is that you might want to say is, I'd really like the deduction, right? A $2,500 deduction on state of Maryland basic taxes, now that the tax law changed, is about $190 off your taxes. If you put 2500 in, it's not off your federal tax, just off your Maryland tax. That's the advantage of the Maryland tier. Maryland tour, price sponsored 529 plan. Is that right?

Jeff Akers:

And it doesn't. I know it doesn't sound like a whole lot of money, but it's almost 200 bucks that's yours. Instead of the states, just for doing a simple 10,000

BRIAN AKERS:

in you got almost 800 off just a night knocking it's another crap tax credit to help benefits. Just take advantage of it. If you're listening from other states, every state has their own rules. There's a website called Saving for college.com that I love to go to, and I'm just trying to figure things out based on state by state, because we do have clients. I was dealing with an Ohio plan the other day. Oh, boy. All right, so we've been we've been talking about five to nine plans, and what happens is that your thoughts and our thoughts need to merge together through financial planning. We enjoy figuring it out. It's sort of like a puzzle, like a game, to try to help people get to college, help them pay for it, help them understand how it works and fits what's the best, best options on the financial side, so that they can do the very best with the money that they have. Have. So planning for college is part of planning period, and that planning the retirement plan, all this comes together. We recommend a free meeting with one of our team of advisors to talk about winning in retirement, where we begin with your situation, your goals. So just give us a call 833, win retire, or go to our website, at AKERS financial group.com, and find out how to get started right there. Grandparents, do you do love their children? How can they save for their education? We'll talk more about that in a minute. You're

Unknown:

listening to a pre recorded Show. Welcome back to winning in retirement. Call 833, win retire now to schedule a visit with Brian and his team and begin winning in retirement once again. Here's BRIAN AKERS, welcome

BRIAN AKERS:

back to winning in retirement. BRIAN AKERS, here with me today is Jeff AKERS, you're both certified financial planner practitioners from AKERS Financial Group. Today we're talking about children and grandchildren and legacy, education legacy and what we can do with different options on five, two, nines and education funding, we've gotten ourselves to the second half. Jeff, you ready for this? I

Jeff Akers:

think I am. And just to be clear, grandparents love their grandchildren a lot.

BRIAN AKERS:

Yes, they do sometimes so much so they ignore their children.

Jeff Akers:

Wait a minute, does that personal experience?

BRIAN AKERS:

Oh, that's like, it's Christmas, good. I have one present. No, my parents never did that to me, but it felt like it sometimes. You know,

Jeff Akers:

grandparents do love their grandkids. I know that you're looking forward to that day,

BRIAN AKERS:

someday. So are you someday. The future is always bright. Currently, a grand dog trying to talk. Try not to spoil the grand dog. That's about it, all right. So grandparents do love their grandkids. That's very true. And they'll do pretty much anything for them. Sometimes they'll do everything the parents tell them not to do, yep, you know, give them chocolate, all the things sugar, stay up late. Whatever the rules are, they go counter on us. But the idea is that when a grandparent saves for college, that's not a bad thing,

Jeff Akers:

right? That's helping that is helping their kids, because now the grandkids, part of their college at least, is paid for,

BRIAN AKERS:

and sometimes the grandparents like to do it in secret. Sometimes,

Jeff Akers:

yeah, they don't tell their kids or the grandkids that they put money aside for them. They don't want it to be a surprise,

BRIAN AKERS:

right? And then sometimes that causes the over funding, because the parents were saving because that was their responsibility. And then they say, Oh, here's a $60,000 account we built up over the

Jeff Akers:

years that you can never use. Can

BRIAN AKERS:

I tell off the wall story? You go right ahead. One of my favorite TV show financial shows, was Love Boat. Really, I'm not kidding. Love Boat. Love Boat. There's a show that they didn't have a 529 then, no, not five to nine, but this late, this lady and her husband go on their retirement cruise, and as they get ready to go to sleep, she pulls out this piece of paper and says, I've saved all this money for us to enjoy during our retirement years. And it's like and she didn't tell her husband she had saved invested this money. I think that's a great thing, even as a kid, I thought, Oh, that's really nice. The husband goes ballistic on her, because he could have used the money earlier in life. He he wish he knew about. He is mad at her, so the whole Love Boat thing was to solve the problem, and then he changes his mind and understands the thoughtfulness of saving and the growth and how wonderful it was, ultimately, earlier, right? All those comments, all shows about that, which pretty funny for a Love Boat Show, right? But generally, the concept of hiding it from your loved ones is that as loving as you think it is, as much as you think. So the college planning, we've had some issues when you don't tell the kids that you're saving of over funding if everyone's a saver in the family, because it does run in the family, sometimes savers and savers and more savers. So the idea is this, if you want to save for college, then we can, grandparents can own it, and grandparents can have the grandchild, the parents can own it, and the grandparents can fund the grandchild. Fund fund it through the kids account that they set up for the grandkid, right, right? All kinds of choices, right? It's

Jeff Akers:

it. That's why you need to come sit down and talk to us, because there's so much that we can't make clear on the radio. We need to talk about your situation. We're trying

BRIAN AKERS:

our best crystal now, the grandfather comes in and sees us and says, I ain't funding the education. That's the parents responsibility. Okay, that's one kind of that's not quite the voice I heard, but that's my version today, and because I want to help them with a car, with a house, and I want to be able to give it to them

Jeff Akers:

when they need it, whenever they need it, for whatever they need. And so we

BRIAN AKERS:

say, the options are, you keep the money and you give it whenever you need, whenever you

Jeff Akers:

want to. That's why I'm a beneficiary on it or something, right? The only reason

BRIAN AKERS:

you would consider other ways a tight. Billing or setting up accounts, would be any type of tax advantage investing, right? So what are some ideas there? Well,

Jeff Akers:

one is something that I mentioned earlier, called a UTMA. It's a unified trust for Minors Act. It's under the child's social security number, so there is tax reporting. But kids, you know, until they start working, they don't have much income, so there's not going to be any tax. At the age of 21 that money becomes the child's money. So the grandparent who put the money in might still be around. They might still be the custodian for the account, but at that point, once the child turns 21 the grandparents out of the picture. It's the child's money, and they can do whatever they want. It could be the house that you wanted them to get, or it could be the motorcycle that you really wish they didn't get. All

BRIAN AKERS:

they got to do is show up to the investment account and with a driver's license and look, I'm 21 give me my money. Yeah, let me cash that thing in. Now you TMA, you've in Maryland, not Maryland, uniform transfer to Minors Act. And there was the old UGMA, right, which was 18 years old. They got freedom. 21 is UTMA, which we like that a lot, right?

Jeff Akers:

Grandparents usually like that one better, too. Because

BRIAN AKERS:

now the sad part some grandparents, when the kids in 21 don't tell them, I've seen that happen, and the problem is that that's an IRS problem, because that kid is responsible for the taxes on that account, because you set up the account and their social security number, and they could be 26 and they haven't reported it yet, and all sudden, like they get these IRS notices on dividends and interest. So you got to be careful how you invest

Jeff Akers:

it. That's where the secret giving isn't so good. You need to absolutely make sure they know. And

BRIAN AKERS:

so imagine that you, you have saved well, and you want to have help your children and grandchildren with a legacy. Now that legacy is tied to your beliefs, to what you believe strongly in, and your money can help with this. If it's for education from kindergarten to 1212, it could be funding it directly, right? It could also be, it could be funding the school directly doesn't count as a gift, right? You could pay directly to colleges. Doesn't count as gifts. You can pay the whole thing and not not a gift,

Jeff Akers:

right? You're just paying their tuition or the room or board or whatever. So you could do something like

BRIAN AKERS:

that. You could save in a Roth IRA for yourself, and you'll be in your 60s or 70s, and the grandkids are time to go to college. You pull it out your Roth tax free to you, and you just send the money in. That could be an option, right? That's a way to do it. You keep total control that way.

Jeff Akers:

Control is one of those interesting things that some people really like to keep control. Right

BRIAN AKERS:

now in Maryland, there's an estate tax issue if you're over $5 million so five, over $5 million clients. What we do is something called annual gifting, and even a super, super gifting, where in a five to nine plan, you can super fund it with five years of gifting all at once, right?

Jeff Akers:

So $19,000 times 590, 5000 There you go. Brian even did the math. Look at that.

BRIAN AKERS:

That's ready for that one can't do English. I got math down there. All right. So we have this, the super gifting you put money in there, and that's a 529, gift, and they could pay tuition straight in, especially if we're trying to bring the estate underneath that limit, if there's one, one grandparent left type thing,

Jeff Akers:

right? So you don't have a gift tax issue or a gifting issue, and you've covered their college expenses that way. That's absolutely it's a good way to

BRIAN AKERS:

go. The hardest thing to tell people about college is that the tuition at the school is cheaper than sending them to college. When you send someone away to college, the room and board and all that can equal to or cost more than the tuition. Yeah,

Jeff Akers:

I was talking to someone a couple years ago who was an administrator to college, and they were saying that they require freshmen to live on campus, because that is how the college makes its money. Wow, is by the people living on campus, paying that room and board.

BRIAN AKERS:

So it was the colleges, the ones that are staying in business, because there's lots of colleges, especially in the northeast, that are closing the doors because they have lots of real estate, lots of building, lots of maintenance, a lot of heavy costs day to day to run right. There's a lot of expense. So they got to have certain numbers of kids in the dorms, and so if the numbers are tight, they start changing the rules like that,

Jeff Akers:

right, and start requiring things to keep people on campus, right? So if you're

BRIAN AKERS:

trying to go to college and make it more affordable, paying your own way to make it more affordable, online has been a great way to do it. Now five to nine plans. You could put money in a five to nine, put it in the Maryland 529 use the money market, take the deduction, and then pay your tuition out of there, right?

Jeff Akers:

You can do the 529 contribution this year. Take the money out this year to pay tuition, and you get the deduction.

BRIAN AKERS:

Yeah. So if you're paying your own way, I think five two nines are still a good way to use it. And under the mailing 529 plan, there's a money market there right now, you can use 10,000 or less if it's going to be for high school or private. School and any kindergartner on up right, or any special type of, any type of teaching that's tied to

Jeff Akers:

that right, anything education before college,

BRIAN AKERS:

stuff summer camps, is a gray area. I don't believe it normally counts. Yeah,

Jeff Akers:

I haven't seen that count yet. Yeah, the but when they

BRIAN AKERS:

get to college, all of a sudden, college, they do add lots of fees, a lot of expenses, and got to buy a computer, got to do this, gotta do that. And it's that's a lot of money. And what's nice is, when there is money set aside to use it, the hard part is that's not everyone's life. The reality is, people want to go to school, but they got to figure it out, right? They go in debt. Some go heavily in debt, and then they get out of college, and they got to pay the debt off. What do they do? One idea is get money, 10,000 in, get deductions, and then use that to pay off at least a little bit of the loan, at least part of it. How you choose your job, maybe your job through public service, you can have a 10 years of working there, and they'll forgive your loan if you'd made basic payments for 10 years. We've done that for physicians, nurses and other even teachers can qualify in that case. And there

Jeff Akers:

might even be jobs out there where you work for them for a while and they say, okay, as a benefit, we're going to pay off some of your student debt.

BRIAN AKERS:

I've seen some of the forgiveness not work, because people got in a hurry to re to consolidate their loans after college, and they moved it away from the loans that could be forgiven, right? I'm not gonna get too deep into how that all works, but there's a lot of little things going on now. There's lots of information out there. This quarter, we were talking about, grandparents love their grandkids. We joke a little bit about it, but they do, and they want to put that money to help them long term. They don't want to spoil them to where they become rotten. They want to help them until they succeed. It would be a good idea. I

Jeff Akers:

think some of them do want to spoil them to become rotten just to get even with their kids. That's

BRIAN AKERS:

not a fair game. That's breaking the rules.

Jeff Akers:

That's the joy of grandparents. It can sugar up the grandkids and then leave.

BRIAN AKERS:

They say that. That's it. You get the grandkid a give them back. You don't take them home with you, right? And then the there is jokes where you want to take the grandkid right back to the grandparents. So the thing is this children, grandparents and grandchildren, and they're trying to help with legacy parents, all these people thinking about these minors, how to help them. I think it's a wonderful gift, a wonderful thing they'll think about and to go through in your financial planning. That is all part of building your solid financial plan. You can do these things when you have your retirement all set up and where you know you're okay, because retirement, we want retirement to be stress free, where you decide how to use each and every bit of your time, where you can have time to think about, how can I help that grandkid? What can I do? That's a retirement of your own choice. That's what we want to help you with. We want you to win in your retirement. So go ahead and give us a call at 833 win retire. That's 830, 3w, I n, r, e, t, I R, E, and we'll give you a call back on Monday to schedule a free in person meeting with one of our team of advisors. Or you can go to our website, AKERS financial group.com, and sign up right there. Put the fun into college funding. We will explain in a moment you're listening

Unknown:

to a pre recorded Show. Welcome back to winning in retirement. Call 833, win retire now to schedule a visit with Brian and his team and begin winning in retirement once again. Here's BRIAN AKERS,

BRIAN AKERS:

welcome back to winning in retirement. I'm BRIAN AKERS. Here with me today is Jeff AKERS. We've been talking about children and grandchildren, about legacy and legacy planning. You can always go to our website, at AKERS financial group.com, under the radio podcast, and check us out right there. You can see your past shows right through our website. Or you can go to any podcast site. Winning in retirement will be right there for you to listen to. Now, the reason you do that is to find out more about us, find out more about what we're teaching and educating and also implementing with our clients. So it's a good place to get started as you check us out AKERS Financial Group and get to know our team of advisors. Started to co host with me as we work through each and every time we do the radio show. So Jeff AKERS here doing the show the children and and grandchildren legacy is the talk the topic, talking mainly about education planning and a heart for giving towards the kids and grandkids, education and ways of doing that. Yep. And so this fourth quarter, we're going to put the fun into college funding.

Jeff Akers:

Okay, and you say it that way, fun into fun. Ding, yeah, that way you get fun twice. Yeah, you

BRIAN AKERS:

know it's still spending money. It is, it is

Jeff Akers:

you're spending money, but for a good purpose. Yeah,

BRIAN AKERS:

absolutely. So the idea here is this fun. The college funding. When should you start planning for college? Jeff, just general, in

Jeff Akers:

general, as early as possible. Yeah. So for

BRIAN AKERS:

my case, I just set a little bit of money aside every month as early as I could, until five to nine for the first child, let it grow, right, and then let the second one grow, and then I did the math. I like timelining life and planning life. I have two kids, two years apart, so there's two years in my brain, double the cost, double tuition years. So I wanted to make sure I had at least five to nine to fund the double years. Okay, so that we could work work through the other years, through creative planning, and work out the bookends and with everything else, you know, just the concept of planning. So I like doing that with everybody. It's like, Well, tell me about your history. Sometimes people say, why we had a kid every four years. So once one gets dumb, they got the next one. I said, as long as they take four years, you're good.

Jeff Akers:

They were college planning before they even started having kids.

BRIAN AKERS:

But the problem there is that they keep going. Sometimes you're

Jeff Akers:

going to pay for college for 16 years or right?

BRIAN AKERS:

And like we start to show off about the celebration of when you're done paying the final tuition, oh, yeah, it's a great day because you actually have money in your own pocket for a while. It gets to stay. Yeah, that's a great time of life there. I don't encourage people to wait till the kids are done college before you start saving for retirement, right? Any and all goals are achieved best by letting your money work for you, by starting early and often putting money aside. Now, not everyone has money to start. Sometimes we're in a negative hole of debt or whatever, and you got to get your way out of that hole, and then you can set money aside for longer term goals, right, all kinds of options and

Jeff Akers:

that that can be hard, but sometimes it's a it's about building positive habits, good habits. So

BRIAN AKERS:

the idea of having fun with college funding is to make sure that when you step off the college campus or out of trade school, you don't have this big bill that looks like a mortgage, right, that it's already on your budget, and you you're sort of overwhelmed with debt before you even get the first job,

Jeff Akers:

right? You're paying for education 10 years after you've graduated. So the concepts

BRIAN AKERS:

is, you got to plan your college. Plan your college, where you need to go, why you're going to college, what's the purpose? What's the education choice online? Is there? What's the best options to help me get the ultimate job, then we want right? So

Jeff Akers:

for the child going to college, you've got to have a plan. For the parents of the child. You've got to talk to your child to develop a plan together. And then there's the part of the grandparents helping the child. And that's kind of like the bonus help. I'd call it, where the grandparent, they've taken care of their retirement, they've got what they need, and they need, and they want to help the grandchild get through college, and that, that's a great gift. Sometimes

BRIAN AKERS:

we have family meetings. I had a case where the grandmother passed away. The grandfather really wanted to do right with the money, and so we had this, the kids come in, and then we had a family talk about giving money for college and make sure and keeping the families equal, and how to do it, and do they want us to fund it? And that whole conversation of, if we fund this, is that okay, right? And does that fit your plan? Do you need it for any private school while they're younger? What's going on in your life? So we try to build the plan around all that,

Jeff Akers:

right? Is this going to help you, or is it just going to be kind of a waste

BRIAN AKERS:

now, and financial aid purposes, if grandparents own the 529, that used to actually hurt sometimes, yes, it could, and but that doesn't happen anymore. They change that rule Absolutely, really. And so what that means? So what used to happen was, if you took money out of a grandparents five to nine, where the grandparents own it for the kid, right, they would count the withdraw as the kids money, income for the kid, right? And so they count it as a high level on the financial aid, right, which is the worst thing when you're applying for financial so the general advice was, grandparents, five to nine money, wait till later in college to use it. Hey, the last year if you, if you're getting financial aid, you don't touch that money right until you have to. And it does. It's not reportable until you withdraw right now. It's the opposite. It's gonna be reportable, like at the at the general level, five to nine level, like 5.8 roughly around that number. Okay,

Jeff Akers:

so whether it's the parent or the grandparent that's the owner,

BRIAN AKERS:

yeah. And then the withdrawals worked itself out through there. Okay, now financial aid, you have to understand that each school has their own systems, their own process. There's federal financial aid and there's a school financial aid you need as they're picking colleges, junior, senior year or even earlier. You got to talk to a financial aid office, no matter what kind of money you make, to see what you need to do to qualify the right way. And

Jeff Akers:

what you just said is the money that's owned by the grandparents in the 529 plan counts as an asset on the parents level. So you want to tell your kids that you've got it if you're doing

BRIAN AKERS:

it. Yeah. Sure it all works out. Now, as you work through the 529 planning and the idea of saving the money for the college, one of the things that you got to think about is getting ready financially for the application. That's a whole nother set of financial planning. That's not the topic for the day of getting qualified for that, but generally, the assets you hold retirement houses, things are insurance based all don't count in financial aid, but money in the bank, liquid accounts, things that are joint, things that you can get access to. There's only so much of that that doesn't count. The rest counts as liquid money to pay college. Yeah. And so even if you don't have a lot of income, if you have a lot of assets, you could have an issue where you don't, can't get financial aid,

Jeff Akers:

possibly. But the grandparents that secret account that we talked about before, well, you can't keep it secret. So

BRIAN AKERS:

what a financial planner does, financial planner is going to talk about your situation, the kid's situation, and see what could be the best way to help them, whatever their college choice may be. Sometimes college choice can be a very expensive choice. Oh, yeah, and then you got to really address this. Sometimes it's a choice of, hey, and it's Community College is pretty decent on price, and I get the major I want, I'm gonna start there and pay out of cash. Then I don't have to pay two years of a four year school, right?

Jeff Akers:

And that's a that can be a very wise decision for kids coming out of high school.

BRIAN AKERS:

So generally, today we talked about 529 plan. We talked about, here in Maryland, there's a Maryland 529

Jeff Akers:

plan, right? The college savings plan? Yeah, that's the one that we want explain that again. So college savings is where you're putting money aside and you're gonna use for college. There is a prepaid college plan where you're pre paying for college. That's not what we're talking about. We're talking about saving money to use for college,

BRIAN AKERS:

right? And so that money for use for college, if you do not use it for college, What's the punishment? Well,

Jeff Akers:

the punishment, if you take it out for something other than education expenses, is tax and penalty on the gain in there. But we do have some options now that we didn't have years ago, like putting that money into a Roth IRA for the beneficiary of the account with no tax, no penalty. So that's a great legacy. We

BRIAN AKERS:

had a case where the kid did so well that they got a job about their junior year, and then that that employer offered to pay the whole tuition the senior year, and we had 20 some 1000 bucks left over. Hello, Roth. Ira, well, you would think, except for the kid says, Hey, I they offered me a full time job. I want to buy a house, so give me the money. So we had to put the money in the kid's name so the parents wouldn't have to pay the tax. Okay? So he did that, and then the money got to the kids on the kids ID number as the owner, the kid paid the tax, and then the kid took it out, paid a penalty to fund, help fund the house.

Jeff Akers:

Okay, well, that was his choice, and if the parents will stay with that, it's like, freedom,

BRIAN AKERS:

you know, right? A penalty doesn't hurt when it's not your dollar, right? Parents, it's like, I work for that money, and that's getting penalized. Well, the hard part is, you plan the best you can in every situation. You plan with all the rules the way things are and the way life should work out, and you do your planning, then plans have to pivot plans. The reason you have to have an advisor that's ongoing, that meets with you and talks with you and make sure what's going on in your life once a year, twice a year, four times, depends on what's going on, right? So you can plan all these things out and get this money ready for when it's needed most,

Jeff Akers:

right? So you might come in with, I've got money that I want to go towards my grandchild. You talk to an advisor, and we tell you the different options, what happens today, what the potential things are down the road, and you can make a smart decision then,

BRIAN AKERS:

yeah, I want to close the show with a basic story about this. A couple when they met with me the first time, they were young, the kids were young, and the wife, or the mom, her best friend, passed away and gave money towards her, and she didn't want the money, okay? And so I went and explained some ideas. And one idea was, let's use that lady's money to fund your kids college. Okay? And they're real young, pre kindergarten or younger, put the money in there. The money has grown, and now the kids are finishing up school, and that money from that inheritance, its mom didn't want the money because it's her friend. She took her mom's her friend's legacy to then fund the college, and it's just enough money to get them through college. Wow, it's pretty amazing. I mean, it doesn't cover every fee, but real close. But it's just a situation where money that was set aside, we put it for a purpose and invested long term, and the end result is it fulfilled a wonderful thing in her kids life. So it's like a bonus to the savings of that money, right? A special legacy for her kids, yeah. So that's a legacy of friends, but our show is going to talk about children and grand grandparents and the legacy of education for kids, which. Try to give you some ideas and some thoughts. The key idea is this, talk with a financial advisor. Hey, talk with AKERS Financial Group, with one of our team of advisors, and get to know us and help you with winning in retirement and winning in your financial planning. Yep, that would be really good. All right, so we thank you very much. Jeff, good job.

Jeff Akers:

Yeah, yeah, yeah. Thank you. Thank you very much. You're

BRIAN AKERS:

welcome. I think just my pleasure. All right, today we did cover children and grandchildren, the legacy, the education planning. We do look forward to meeting with you. We want you to win in your retirement by taking advantage of the opportunity to begin planning with us at AKERS Financial Group to schedule a free meeting with one of our team of advisors. Go to our website at akersfinance group.com, scroll to the schedule meeting section and let us know you'd like to schedule your free meeting right there. That's AKERS financial group.com or you can call us at 833 when retire. That's 830 3w, I n, r, e, t, I R, E, we'll call you on Monday to schedule your free in person meeting with one of our team of advisors. Start planning for your retirement now. Go to AKERS financial group.com or call us at 833-946-7384, thank you for listening. I'm BRIAN AKERS from AKERS Financial Group, and we want you to be winning in retirement. You've

Unknown:

been listening to winning in retirement with your host. BRIAN AKERS of AKERS Financial Group. AKERS Financial Group offers securities through our kidios capital and SIPC and FINRA member firm. Advisory services are provided through arcadios wealth AKERS Financial Group and arcadios do not share any common ownership. Neither arcadios nor AKERS Financial Group provides tax or legal advice. Advice given on winning in retirement is general in nature, and one should seek further advice from their financial advisor, broker, attorney andor tax accountant before investing, be sure to read each prospectus carefully to understand all the risks associated with each investment. Examples and scenarios shared are meant to be for illustrative purposes only. Past performance is not indicative of future results.