Charitable contributions are personally rewarding and also have the potential to be tax-saving opportunities. A donation is a gift, such as cash or property, that is given to a non-profit organization to help them in pursuit of their goals. The donor must receive nothing in return to get the full deduction value for their contribution.

How Does it Work?

Contributions must be claimed as itemized deductions on Schedule A of IRS Form 1040. The limit for cash donations is generally up to 60% of the taxpayer’s adjusted gross income; however, in some cases 20%, 30%, or 50% limits may apply. Deductions are permitted by the IRS for cash and noncash contributions depending on that year’s rules and guidelines which may change, so individuals should stay up to date.

Is it Counted as a Charitable Deduction?

Deductions can only be made for contributions that plan to serve a charitable purpose. The IRS also requires the organization to qualify for tax-exempt status.

What Determines a Qualified Organization?

According to the IRS, qualifying organizations include those that operate for charitable, scientific, literary, religious, or educational pursuits, or to combat child or animal abuse. There is a long list of qualified organization examples that can be found on the official IRS website.

What if I Have Noncash Gifts?

Charitable contributions of goods such as household items and clothes, are acceptable just like artwork and real estate, and must be in good condition so the recipient can use the donation. The deduction amount is based on the item’s fair market value. If the deduction for the noncash gifts is over $500, individuals, corporations, and partnerships must include Form 8283 when they file their tax returns.

Vehicles

Vehicle donations are a bit different. If the fair market value of the vehicle is over $500, taxpayers can deduct the lesser of:

• The vehicle’s fair market value on the date the gift is given, or

• The gross proceeds from the sale of the vehicle by the organization.

However, if the individual sells the vehicle for $500 or less, a taxpayer can deduct the lesser of:

• $500, or

• The vehicle’s fair market value on the date the gift is given.

Capital Gains

Appreciated capital gains are generally limited to 30% of the taxpayer’s AGI if they are made to qualifying organizations and 20% of the AGI for non-qualifying organizations.

What if There is an Economic Benefit Attached to a Donation?

If a donor is given an economic benefit in return for their gift, for example, a calendar, this is called a “quid pro quo” donation. If this is the case, their contribution is limited to the amount of the donation in excess of the fair market value of the calendar. If the fair market value of the calendar is $10 and the contribution is $50, the deductible amount is $40.

Non-Financial Benefits of Purposeful Giving

Not everything is about money. Some of the non-financial aspects of giving include:

Making a difference in people’s lives

• When you give to charity you are providing less fortunate people with a way to make their lives more manageable and less stressful.

Improving your own health

• It may make you feel good, and that can make you happy. According to Northwestern Medicine, happiness is great for your health. It may lower your risk for cardiovascular disease, lower your blood pressure, improve sleep, and numerous other health-related benefits.

Helping to foster a sense of purpose within yourself

• Giving provides some people with a sense of purpose in life. Studies indicate that individuals can fair much better in their lives when they have a purpose.

Helping to build stronger, safer communities

• People can benefit in several ways from charitable giving, such as improving life skills, learning a trade, or some other activity that can give back to the community. This, in turn, can help grow, develop, and inspire a culture of giving within the community.

Consider discussing giving ideas with a financial professional

Charitable giving can be complex and impact you in a variety of ways. To get the most out of your charitable donations, consider consulting a financial professional to ensure you are taking the steps necessary to align with your financial strategies and goals while working to mitigate the risk of financial implications due to uninformed decision-making.

Sources:

Charitable Contribution Deduction: Tax Years 2023 and 2024 (investopedia.com)

Publication 526 (2023), Charitable Contributions | Internal Revenue Service (irs.gov)

What is Form 8283? (thomsonreuters.com)

Charitable contribution deductions | Internal Revenue Service (irs.gov)

How Happiness Impacts Health | Northwestern Medicine

The Health Benefits of Giving | RUSH

Important Disclosures:

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific situation with a qualified tax advisor.

This article was prepared by LPL Marketing Solutions

LPL Tracking # 630183

Finance these days may be overwhelming and stress-inducing. Whether it’s following up on overdue bills or saving for the future, financial woes may cause a domino effect that challenges the calmness you work hard to preserve.

What if you could bring that same zen that flows from your meditation studio into your money matters? Finding financial zen is all about a more balanced, less weighty approach to money that might calm your heart and soul. Here are some suggestions to help you find your financial Zen so that you may enjoy a calmer life with fewer money worries.

Create a Simple Budget

Step one is figuring out where your money is going. The place to start is with a budget. A budget is simply a record of your income and expenditures. List your monthly income and write down everything you spend your money on in a corresponding month – your rent, groceries, utilities, taxi fares, etc – and when you make each expenditure.

With this method, you know exactly where you spend all your money. You may see what areas might be cut back and others with a need to put away more money.

Build an Emergency Fund

Unexpected expenses happen. Stay ahead of the curve by having something in reserve. This helps you feel less stressed when an emergency throws a monkey wrench into your finances. A good rule is to have three to six months’ worth of living expenses in a safe savings account.

Set Realistic Financial Goals

Putting a goal in terms of money could motivate you. Whether your aim is to pay off a debt, save for a vacation, or build a retirement fund, make your goals specific, measurable and doable. Break them down into chunks and reward yourself at each milestone.

Automate Your Savings

One of the simplest money-saving hacks is to automate your savings. Make automatic transfers from your checking balance to your savings account each month so you never see the surplus. By saving automatically, you’ll develop a habit of saving a little here, a little there, until you’re on your way to your goals and extra cash is building up.

Live Below Your Means

The first and most important tenet of financial calm is to live on less than you earn, avoid going into unnecessary debt, and don’t spend every dollar you make. Remember that needs differ from wants, and spending in these two ways is entirely different. But here is the huge payoff. If you live on what you make, you may have plenty left over to save, invest, and enjoy. You’re now on your way to experiencing financial nirvana.

Invest in Your Future

Save regularly for your future, particularly in your retirement accounts – an employer-provided 401(k) or IRA. Take your company’s 401(k) match if you get one. Talk to a financial professional to develop an investment plan designed to pursue your goals along with your risk tolerance.

Educate Yourself

To work on financial zen, develop financial literacy. Learn about personal finance, investing and money management. There’s an abundance of books, podcasts, online courses, and more on these topics. The more you know, the greater your chances of making better financial decisions and reducing stress.

Seek Balance

Financial zen is about finding the middle way. Save and invest for the future, but also enjoy your life today. Strike a balance between spending and saving that allows you to live well and also have something put aside for the future.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

This article was prepared by WriterAccess.

LPL Tracking # 626347

Author: Nina Breen CFP®, RICP®, CPWA®

Wealth Planner

Service Offering at Gatewood Wealth Solutions

INTRODUCTION

At Gatewood Wealth Solutions, we understand that giving back is an essential part of financial planning for many clients. To help clients maximize their philanthropic impact in a convenient and tax-efficient way, we offer Donor-Advised Funds (DAFs) in partnership with the American Endowment Foundation (AEF). This service allows our clients to support the causes they care about, with flexibility and professional guidance.

HOW IT WORKS

1. Establishing the Fund: Clients work with our team to determine an initial amount, allocation, and investment model for their DAF. Once agreed upon, clients choose a name for their fund, typically something personal, like “The [Family Name] Charitable Fund.”

2. Account Setup: We coordinate with AEF to create the DAF account. The client fills out a donor application, which includes the fund name, initial gift amount, and naming successor advisors, usually family members, to continue the fund’s legacy.

3. Funding and Management: Once the account is set up, it can be funded with cash or appreciated securities. Clients can then use AEF’s easy-to-navigate online portal to recommend grants to their favorite charities, with a minimum gift amount of $250 per grant.

4. Gatewood Advisory Strategies: Our Investment Committee will execute the appropriate in-house investment strategy within the DAF, pursuing long-term returns to help clients work toward their charitable giving goals.

WHY CHOOSE A DAF?

• Tax Efficiency: Clients receive an immediate tax deduction on their contributions and can strategically fund charities over time.

• Maximized Deduction Limits: Donors can deduct up to 30% of AGI for long-term appreciated securities and up to 60% of AGI for cash gifts, allowing them to maximize tax benefits while supporting charitable goals.

• Flexibility in Giving: Through AEF, clients have the flexibility to support multiple charities over time without the administrative burden of managing separate gifts.

• Legacy of Giving: Clients can name successors to continue their charitable giving, creating a lasting impact through generations.

FINAL THOUGHTS

Our commitment at Gatewood is to make philanthropy simple, meaningful, and aligned with each client’s broader wealth plan. If you’re interested in learning more about how a DAF could fit into your financial strategy, please reach out to our team.

For more information about Donor Advised Funds (DAF’s) and the American Endowment Fund, (AEF), please visit their website at:

https://www.aefonline.org/donors/ 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal. No strategy assures success or protects against loss. This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor.

LPL Tracking #655148

In today’s unpredictable world, having an emergency fund is not just a financial recommendation – it’s a necessity. The reality of unexpected expenses, whether they come from a medical emergency, sudden unemployment, or urgent home repairs, can create significant financial stress.

An emergency fund acts as a financial safety net, empowering you to manage these unforeseen costs without resorting to high-interest debt options like credit cards or loans.

Building an emergency fund requires a systematic approach, and here’s how you can do it in five practical steps:

1. Decide How Much to Save

The first step in creating an emergency fund is to determine the amount you need to save. A common guideline is to have enough to cover three to six months of living expenses. This figure should include rent, utilities, groceries, and any other regular expenses that would need to be paid even during a period of financial distress. To personalize your fund, consider your job security, the stability of your income, and any dependents who rely on your earnings.

2. Set Your Savings Target

Once you know how much you need to save, the next step is to set a realistic timeline for achieving this goal. Start by reviewing your budget to see how much you can comfortably set aside each month without compromising your daily financial health.

For some, this might be a modest amount, while others might be able to save more aggressively. The key is consistency; even small amounts can grow significantly over time due to the power of compound interest.

3. Choose Where to Keep Your Fund

The ideal location for your emergency fund is somewhere accessible but not too easily spent. High-yield savings accounts are a popular choice because they offer higher interest rates than regular savings accounts, helping your fund grow faster. These accounts also provide liquidity, allowing you to withdraw funds quickly and without penalties in case of an emergency.

4. Open Your Account

With a clear idea of where to keep your emergency fund, the next step is to open an account. Look for banks that offer competitive interest rates and low fees. Online banks often provide higher yields than traditional brick-and-mortar banks. Ensure that any account you choose is insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) for added security.

5. Know When to Use the Fund

Finally, establish clear guidelines for when to use your emergency fund. It should only be used for true emergencies, such as unexpected medical expenses, crucial home repairs, or during a job loss – not for planned expenses or discretionary spending. After an emergency, focus on rebuilding the fund as soon as your financial situation stabilizes.

Financial Planning Matters

Building and maintaining an emergency fund is a fundamental aspect of a sound financial strategy. It provides not just financial confidence, but potentially may lead to less stress, knowing that you are prepared for life’s unexpected events. Start small, be consistent, and watch your safety net grow.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by FMeX.

LPL Tracking #583286

The more assets you have at stake, the bigger the target on your back for cybercrime. This means that managing your financial wealth needs to go beyond traditional security measures. You also need a comprehensive cybersecurity strategy. Here are some risks for high-net-worth individuals and how to manage them.

Understanding the Risks

Phishing and Spear Phishing Attacks

HNWIs may be targeted by personalized messages sent by cybercriminals in an attempt to capture sensitive information. For example, you may receive a message supposedly from a loved one letting you know they’re traveling and had their passport stolen or were arrested and are in jail. They may ask you to wire them money without letting others know.

Ransomware

The term ransomware describes malicious software that may cause your information to become inaccessible unless you pay a fee. Unfortunately, if you fall victim to a ransomware scam, you may lose your data and money. Once you’ve given the criminals money to release your data, they may continue requesting money until you stop responding.

Identity Theft

If criminals have information, like your date of birth, mother’s maiden name, and Social Security number, they may impersonate you easily. Identity theft lets criminals access your bank accounts, investments, and other assets held in accounts that are accessible online. They may then send these assets to offshore accounts, which are more difficult to recover.

Key Cybersecurity Strategies

To manage your wealth and personal information, consider some of the following cybersecurity strategies.

●     Advanced Authentication Methods: Always implement multifactor authentication (MFA) for your financial accounts wherever possible. You might also use biometric authentication methods, like fingerprints or facial recognition.

●     Secure Your Devices: Make sure every smartphone, tablet, and computer has the most current antivirus software installed. Also, enable automatic updates to keep your software and applications up-to-date.

●     Network Security: Set up a virtual private network (VPN) when you go online, especially if you’re connected to public WiFi. Put firewalls and intrusion detection systems in place to manage your home and business networks.

●     Monitor Financial Transactions: Regularly review account statements and transactions, looking for any unusual or unauthorized activity.

By using these practices, you might get ahead of the game when managing the impacts of cybercrime.

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

This article was prepared by WriterAccess.

LPL Tracking # 609848

Small businesses have new reasons to consider the value of financial planning in working towards their business goals. Many owners are “bandonneurs” (a French word for “jack of all trades”) who may successfully wear many hats, but trying a DIY strategy for your financial planning may be a challenge even for the most diligent entrepreneurs.

During National Financial Planning Month, consider why a financial professional might be of value in assisting you with steering your business toward long-term effectiveness.

Experienced Financial Guidance

A financial professional has vast experience in many financial issues to coach you through circumstances, such as how to use money day-to-day, how to manage complex concepts such as cash flow, how to take advantage of tax structures, and much more.

●     Cash Flow Management: Keeping tabs on cash flow may help you to have enough to pay operating expenses, expand into growth opportunities, and prepare to weather an economic crisis.

●     Tax Optimization: Tax laws are complex. Trying to figure them out may be a daunting task. A financial professional along with your tax advisor may help you develop a tax-efficient strategy to manage your taxes and improve your after-tax income.

●     Business Expansion: If you want to expand your product offerings, enter new markets, or grow your staff, a financial professional may help you.

●     Risk Management: Identifying risks may help to mitigate them. A financial professional could identify potential risks. Then, recommend proper insurance coverage and contingency planning to help preserve your business’s longevity.

●     Investment Advice. It’s also important to look for clever investments to grow your business and maintain your presence in the market. Whether it’s buying new equipment or buying the neighboring land for expansion, a financial professional may help you figure out a strategy for improving your return on investment (ROI).

Decision-Making

Running a business could give you tunnel vision. A financial professional operates at a distance, providing helpful support that could enable you to make choices based on data rather than emotion.

Succession and Transition Planning

Another important consideration is succession planning—a plan to hand over your business to the next generation. Another option is to make a plan to sell to a competitor who wants to buy you out. A financial professional may help you prepare a succession plan and consider the benefits and drawbacks of any buyout offers you may receive.

In Closing

Does your business have a financial planning challenge? By partnering with a financial professional, you gain helpful financial planning guidance, investment advice, and support for financial discipline, and you may also enjoy an overall enhancement to your business’s financial management. Financial planning advice is no longer a luxury for business owners—it’s an indispensable tool for navigating the complex financial challenges you face.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by WriterAccess.

LPL Tracking #609848

National Savings Day, celebrated October 12, is a reminder of how important it is to build a solid financial foundation. For High Earners Not Rich Yet (HENRYs), the path to financial security can seem both promising and challenging. Despite earning a high income, many HENRYs find themselves struggling to save due to high living costs, student loans, and lifestyle inflation. Here’s how you can approach your finances with a savings mindset and take your savings one step at a time.

Understanding the HENRY Lifestyle

Most HENRYs are 25 to 45 years old and have a household income of between $100,000 and $250,000 per year. Regardless of their actual income, HENRYs usually feel they are middle-class, not rich. Some are saddled with student debt. Some live in expensive urban areas. Some just want to maintain the lifestyle they earn.

Step 1: Assess Your Financial Situation

First, it’s a good idea to establish a comprehensive financial baseline. Sit down and write out your sources of income, your monthly obligations, your debts, and how much you save each month. A picture of where every dollar goes can be a powerful motivator for taking charge of your finances.

Step 2: Set Clear Savings Goals

When you have a clear long-term goal in mind, this can give you the will to stay the course on your short- and mid-term savings goals.

First, have three to six months’ worth of living expenses saved up in an emergency fund. This money is set aside for you in case something goes wrong.

Next, maximize your contributions to a 401(k) or IRA. This will also allow you to take advantage of any matching contributions from your employer.

Finally, consider those big-ticket items such as purchasing a house – or even a car – and plan to save a hefty down payment rather than having to borrow money at a higher interest rate.

Step 3: Automate Your Savings

The best way to make saving consistent is to automate it. To do this, have set amounts automatically transferred from your checking account into your savings account.

Step 4: Control Lifestyle Inflation

As you make more money, the temptation to spend a proportionate amount grows. Inflation in your lifestyle works against creating a nest egg. Separate needs from wants; carefully research larger expenses and make fewer impulse buys.

Step 5: Invest Wisely

Being able to save is something, but it can fall short of securing your family’s financial future. Investing helps your funds grow beyond the threat of inflation.

A diversified portfolio spread across vehicles like stocks, bonds and real estate will help to mitigate risk. A financial professional can work with you to develop a strategy that aligns with your investment timeline and level of risk aversion.

Step 6: Review and Adjust Regularly

Financial planning is not something you do just once. Your plan needs to evolve on a regular basis so you can continue to meet your goals.

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This article was prepared by WriterAccess.

LPL Tracking #609862

Medicare is complex with many different moving parts involved. First and foremost, it is always beneficial to gain a solid understanding of your options. There are two main types of Medicare:

·       Original Medicare

·       Medicare Advantage (also called Part C)—Medicare Advantage is a Medicare-approved plan from a private company offering a replacement option for Original Medicare for your health and drug coverage.

·       There are also other types of Medicare health plans for interested parties.

Confucious once said, “To know what you know and what you do not know, that is true knowledge.” These are wise words to take to heart, especially when applied to navigating Medicare without being surprised by unexpected pitfalls.

Here are five tips to help you plan and prepare so you do not get caught off guard by the nuances of Medicare.

1.     Be aware of avoidable late fees or delays

Have you ever noticed that one or two couples always arrive late at a dinner party? Some people have a tendency of being late. The same is true when it comes to signing up for Medicare. Generally, if you are age 65 or older and receive Social Security benefits, you will automatically be enrolled in Part A. The nuance here, however, is if you don’t sign up for Part A (if you have to buy Part A, and you don’t when you are first eligible for Medicare) and Part B within your eligibility window, your enrollment could get delayed, and you could be subject to a late enrollment penalty.

2.     Know what is covered and what is not

Not everything is covered by Medicare. Services that aren’t covered by Part A or Part B will have to be paid for by yourself unless:

• You have a Medicare Advantage or Medicare Cost Plan covering the services.

• You have other coverage, such as, Medicaid.

It is critical to understand that Original Medicare doesn’t cover everything. Several of these services that are not covered include:

• Cosmetic surgery.

• Hearing aids and exams to fit them.

• Long-term care.

• Routine physical exams.

• Massage therapy.

• Eye exams (for prescription glasses).

• Covered items or services you get from an opt-out doctor or other provider (unless it is an emergency).

• Most dental care, such as routine cleanings, tooth extractions, fillings, and dentures. Although, in some cases, Original Medicare may cover some dental services related to specific medical procedures, such as organ transplants, cancer-related treatments, or heart valve repair or replacement.

3.     Avoiding HSA and other tax penalties

A health savings account (HSA) is a beneficial tool to have in your financial strategy belt. However, it is helpful to know that you are not eligible to make contributions to an HSA after you have Medicare. Being aware of this can help mitigate the risk of being subject to the “tax penalty.” It would help if you made your last HSA contribution the month before your Part A coverage begins. Pay attention to potential tax penalties for any other aspects of Medicare as well and, reach out to a qualified tax advisor to discuss your specific situation.

4.     Do research on ACOs

An ACO (Accountable Care Organization) consists of a group of hospitals, doctors, and other health care providers that have teamed up voluntarily to coordinate your health care. It is a part of Original Medicare and not a separate plan. ACOs are designed to hold providers accountable for the healthcare of their patients, guiding them through the complex healthcare landscape and working to help them save money by recognizing unnecessary tests and procedures. ACOs are not for everybody and its advisable to discuss the financial implications with your financial professional.

Several advantages and disadvantages of an ACO may include:

Advantages:

• Potentially more efficient coordination of care.

• Improved preventive care.

• Potential cost savings benefits.

Disadvantages

• The possibility of implementation challenges.

• Enlisting the help of providers that aren’t a good fit.

• The potential for misdirected incentives amongst the providers.

• Unexpected expensive or low-quality post-acute care.

5.     There is no shame in asking for help

Part of helping yourself move forward in the pursuit of your goals is seeking the help of a mentor or someone who has more knowledge than you. When it comes to your finances and how programs like Medicare could impact them, consider consulting a financial professional to determine how your decisions might affect your present and future goals and strategies.

Sources:

Medicare and You Handbook 2024

The Pros and Cons of Accountable Care Organizations | Med USA (medusarcm.com)

Top 5 Risks in Accountable Care Organization Models – CPA & Advisory Professional Insights (kaufmanrossin.com)

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

The Medicare website (medicare.gov) can be a valuable resource.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by LPL Marketing Solutions.

LPL Tracking #600255

Do you know who in your business is considered a fiduciary of a company’s 401(k) plan?

Under ERISA guidelines, fiduciaries are anyone with discretionary authority or control over the management of the plan or its assets. This includes individuals with the following roles or titles:

• Plan Sponsors – Commonly the CEO, CFO, or Business Owner

• Plan Administrators – Typically a Benefits Manager, HR Director, or Controller

• Investment Committee Members – Often senior leadership such as Executive Officers or Finance Committee Members

• Trustees of the Plan – Usually Board Members or specially designated Trust Officers

As a fiduciary overseeing your company’s 401(k) or other employer-sponsored retirement plan, you carry significant responsibilities that directly impact the financial wellness of your employees and the compliance of your plan. Ensuring that you follow fiduciary best practices is essential for managing risk, optimizing plan performance, and safeguarding against costly errors or litigation.

With over a decade of experience in plan administration and ERISA compliance, I’ve seen firsthand the complexities and challenges fiduciaries face. Whether it’s making investment decisions, monitoring service providers, or ensuring that you meet regulatory obligations, each decision you make must align with the best interests of your plan participants.

Below is a comprehensive checklist designed to help you stay on track with your fiduciary duties. By following these steps, you can address risk, manage compliance, and provide a high-quality retirement plan for your employees.

Fiduciary Checklist

1. Basic Fiduciary Duties

• Plan Governance: Are you acting in accordance with the documents and instruments governing the plan? 

• Written Procedures: Do you have written procedures for key fiduciary decisions, such as selecting investments or hiring service providers?

• Investment Oversight: Have you established an Investment Policy Statement (IPS) to guide your investment decisions and monitor plan performance?

Your responsibility as a fiduciary means that you must always act in the best interest of your participants and beneficiaries. This includes developing a well-documented, prudent process for decision-making and ensuring that these processes are consistently followed.

2. Investment Oversight

• Responsibility: Do you clearly know who is responsible for making investment decisions within your plan?

• Policy Documentation: Is your IPS updated, and does it outline the plan’s investment processes and requirements?

• Fiduciary Records: Are you documenting all meetings, discussions, and decisions related to plan investments to demonstrate your adherence to a prudent process?

Your 401(k) plan’s investments should not only meet performance benchmarks but should also comply with fiduciary standards. A robust IPS and thorough documentation are critical for protecting both your plan and yourself from future scrutiny.

3. Service Provider Oversight

• Periodic Review: Do you regularly review your service providers to ensure they are meeting their performance standards?

• Fee Review: Have you assessed the reasonableness of service provider fees, and do you document any fee negotiations or conflicts of interest?

• ERISA Compliance: Are you familiar with Section 408(b)(2) of ERISA, which requires you to determine whether plan fees are reasonable in light of the services provided?

Regularly reviewing service providers is crucial for ensuring your plan participants receive the best value and service. Document these reviews thoroughly, as they provide important evidence that you are acting in the best interest of the plan.

4. Fiduciary Liability

• Process Documentation: Are you maintaining a well-documented fiduciary process, including showing that decisions were prudently made and acted upon?

• Legal Counsel: Have you consulted with legal counsel to ensure compliance with ERISA and other retirement plan regulations?

• Liability Management: Have you obtained fiduciary liability insurance to help protect against litigation costs and hired a 3(38) Investment Fiduciary for the plan?

Fiduciary liability is a serious concern. By keeping thorough records, seeking expert advice when necessary, ensuring that you have the appropriate liability insurance, and hiring a 3(38) Investment Fiduciary, you can help mitigate these risks.

5. Plan Administrator Responsibilities

• Compliance Calendar: Do you have a compliance calendar to track key deadlines, such as filing Form 5500 and nondiscrimination testing?

• Plan Documents: Have you reviewed your plan documents to ensure they reflect current practices and recent regulatory updates?

• Benchmarking: Do you periodically benchmark your plan’s fees and services against industry standards to ensure they remain reasonable?

Effective administration is the backbone of a successful retirement plan. Keeping your plan compliant and well-documented helps ensure that you are meeting your fiduciary obligations and protecting both the plan and its participants.

6. Employee Support and Education 

• Participant Communication: Are you providing ongoing communications about the plan’s investment options, features, and any regulatory changes?

• Educational Programs: Do you offer educational meetings or materials to help employees make informed decisions about their retirement savings?

• Automatic Enrollment: Have you implemented automatic enrollment with a qualified default investment alternative (QDIA) to simplify participation for your employees?

A well-designed plan also supports your employees’ financial literacy and encourages participation. Providing educational resources and clear communications helps participants make the most of their retirement savings.

Feeling Overwhelmed by Responsibility?

If you’re uncertain about your fiduciary responsibilities or feel behind on these tasks, you’re not alone. Managing a retirement plan is complex, and mistakes can be costly. At Gatewood Wealth Solutions, we specialize in providing ERISA 3(38) Investment Manager services. A 3(38) Investment Fiduciary takes on the responsibility for plan investments and helps ensure your plan operates in compliance with all regulatory requirements.

As a Certified Plan Fiduciary Advisor (CPFA®) with years of experience in retirement plan management, I can help you navigate these responsibilities and help ensure that your plan is positioned for success. Whether you need assistance with investment oversight, compliance, or participant education, our team is here to support you.

Let’s schedule a time to discuss how we can assist you in managing your plan and protecting your business. Reach out today for a complimentary consultation.

Important Disclosures:

This information was developed as a general guide to educate plan sponsors but is not intended as authoritative guidance or tax or legal advice.  Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.  In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC

The 401(k) plan is an excellent way for HENRYs, high earners not rich yet, to save for retirement. Hitting the maximum contribution limit is a goal many work toward to reap the benefits of this tax-deferred saving strategy fully.

But what happens after you have maxed out your 401(k) contributions? What are your other options for saving for an independent and comfortable retirement? This article provides additional investment strategies for HENRYs seeking to elevate their retirement savings outside their 401(k) plan.

Additional retirement savings strategies

IRAs

One of the most common options when you’ve maxed out your 401(k) is contributing to an Individual Retirement Account (IRA). An IRA offers similar tax benefits to 401(k), where your contributions grow tax-deferred.

Roth IRA

The Roth IRA differs significantly from traditional IRAs and employer-sponsored 401(k)s, which are funded with after-tax dollars. The benefit of a Roth IRA comes at retirement, as you are able to withdraw funds, both contributions and accumulation, without incurring additional taxes, which is beneficial if you anticipate being in a higher tax bracket upon retirement.

To qualify for a Roth IRA, your income must fall within certain limits, which are adjusted annually. HENRYS must talk to a financial professional to determine if they can invest in a Roth IRA based on their income.

Health Savings Account (HSA)

An HSA is another great supplemental retirement saving strategy. These accounts are used with high-deductible health plans, giving individuals the advantage of triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. After age 65, non-medical withdrawals are taxed at the regular income tax rate, turning the HSA into a supplemental retirement income account.

Taxable brokerage account

Investing in a taxable account is another saving strategy when you’ve maxed out your 401(k). Although these accounts don’t offer the same tax benefits as 401(k)s and IRAs, they provide increased flexibility in withdrawal times and without penalties. A balanced mix of stocks, bonds, and mutual funds in brokerage accounts can offer substantial accumulation over time.

Alternative investments

Suppose you have already maxed out your 401(k) and these above savings strategies. In that case, it may be time to consider alternative investment strategies, like buying a rental property or investing in real estate investment trusts (REITs) or private investments.

These alternative investments can provide a steady source of income and potential appreciation. However, HENRYs must conduct due diligence by consulting financial and tax professionals to ensure these strategies are appropriate for your situation as they come with risks.

Maxing out your 401(k) is a significant achievement toward securing an independent financial future. However, several other investment strategies offer tax advantages and asset accumulation potential so you can continue investing toward your retirement savings goal.

Whether you invest in an IRA, HSA, a taxable brokerage account, real estate, or private investments, the key is maintaining a diversified portfolio to spread risk and increase growth and asset accumulation opportunities. Consider enlisting the help of a financial professional to help navigate these decisions in line with your specific circumstances and objectives.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risks including possible loss of principal.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #597501

Sources:

https://www.investopedia.com/ask/answers/111015/can-you-have-both-401k-and-ira.asp#:~:text=Yes%2C%20you%20can%20have%20both%20accounts%20and%20many%20people%20do,and%20IRA%20each%20tax%20year. 

https://www.bankrate.com/retirement/using-your-hsa-as-a-retirement-plan/#:~:text=If%20you’re%20looking%20to,(k)s%20or%20IRAs

Micah Alsobrook, CPFA®, MBA

Retirement Plan Consultant

Introduction

As competition for talent intensifies in 2024, retirement plan benefits like 401(k) plans are increasingly considered a critical part of employee retention strategies. While salaries and other perks may initially attract employees, retirement plans that align with their long-term financial needs can potentially foster loyalty and engagement.

The SECURE 2.0 Act introduces several key updates to 401(k) plans, aiming to expand access to retirement savings and provide more flexibility for a diverse workforce. This article outlines some of these changes and how they could influence employee retention.

1. Automatic Enrollment: Encouraging Early Participation

Under SECURE 2.0, many new 401(k) plans are required to automatically enroll eligible employees at a contribution rate between 3% and 10%. This provision helps employees begin saving for retirement without needing to take action upon eligibility.

Potential Impact on Retention: Research suggests that automatic enrollment increases plan participation. While this feature may demonstrate a company’s commitment to employees’ long-term financial health, the ultimate impact on retention would depend on various factors, including overall benefit packages and job satisfaction.

2. Minimum Distribution Age: Adjusting for Older Workers

The SECURE 2.0 Act increases the required minimum distribution (RMD) age, allowing individuals to delay withdrawals from their retirement accounts. The age increases from 72 to 73 in 2023 and will further rise to 75 by 2033.

Potential Impact on Retention: For older employees who may continue working past traditional retirement age, this provision may offer more flexibility in managing their retirement funds. However, the extent to which this flexibility influences retention may vary based on individual financial circumstances and career goals.

3. Part-Time Employee Eligibility: Expanding Access

Starting in 2025, part-time employees will become eligible to participate in 401(k) plans after two consecutive years of service, down from the previous three-year requirement under the SECURE Act of 2019.

Potential Impact on Retention: Providing access to retirement benefits for part-time employees may encourage participation, but the overall effect on employee retention will likely depend on how these benefits are integrated with other factors such as wage structure and job stability.

4. Emergency Access to Funds

Beginning in 2024, employees will have the option to make penalty-free withdrawals of up to $1,000 annually from their retirement accounts for emergencies. This feature could provide financial relief during difficult times.

Potential Impact on Retention: While this provision may reduce financial stress for employees, its direct influence on retention is uncertain. Offering access to emergency funds may support employees in times of need, but broader financial well-being initiatives and job satisfaction will likely play a larger role in long-term retention.

5. Small Financial Incentives for Participation

The SECURE 2.0 Act allows employers to offer small financial incentives, such as gift cards or bonuses, to encourage employee participation in retirement plans.

Potential Impact on Retention: These incentives could potentially drive greater engagement with retirement savings, though whether they significantly influence retention remains to be seen. Incentives may create short-term interest, but sustained retention may depend on broader organizational culture and benefits.

6. Roth Matching Contributions

Starting in 2024, employers can offer matching contributions to employees’ 401(k) accounts on a Roth (after-tax) basis. Previously, matching contributions were only allowed on a pre-tax basis.

Potential Impact on Retention: Offering Roth matching contributions provides employees with additional tax-planning flexibility. This option may be appealing to certain employees, particularly younger workers, but the overall effect on retention will depend on individual preferences and financial planning strategies.

7. Student Loan Matching Contributions

Beginning in 2024, employers can match employees’ student loan payments with contributions to their 401(k) plans, even if the employee is not directly contributing to the 401(k).

Potential Impact on Retention: This provision may be attractive to employees burdened by student debt, particularly younger employees who might otherwise prioritize debt repayment over retirement savings. While it could be a helpful tool in employee retention efforts, its effectiveness will vary based on individual circumstances and broader compensation strategies.

8. Catch-Up Contributions for High Earners

SECURE 2.0 mandates that employees aged 50 and older who earn more than $145,000 annually must make catch-up contributions on a Roth basis starting in 2024.

Potential Impact on Retention: High earners and older employees may find this change useful for tax planning, but the overall impact on retention is unclear. This provision primarily affects higher-income individuals, and other retirement plan features are likely to play a larger role in retention decisions.

9. Expanded Catch-Up Contributions for Older Workers

Beginning in 2025, employees aged 60 to 63 will be eligible to make larger catch-up contributions to their retirement plans. The limit will increase to the greater of $10,000 or 150% of the regular catch-up contribution amount.

Potential Impact on Retention: This may provide added value for older employees looking to maximize their retirement savings in the final years of their careers. Whether this provision directly influences retention may depend on how employers communicate the benefit and integrate it into broader compensation strategies.

10. Long-Term Care Insurance Funding

Starting in 2024, SECURE 2.0 allows employees to use up to $2,500 annually from their retirement savings to pay for long-term care insurance premiums without incurring a 10% penalty for early withdrawals.

Potential Impact on Retention: This feature addresses a growing concern for older employees and may offer some peace of mind. Its role in retention is likely to be tied to how it complements other retirement planning options and employee support initiatives.

Conclusion: Monitoring the Long-Term Effects

While the provisions introduced by SECURE 2.0 offer new opportunities for both employers and employees, their ultimate impact on employee retention will depend on how they are implemented and communicated within the broader context of total compensation and job satisfaction. Employers seeking to align their 401(k) offerings with retention goals may benefit from ongoing reviews of plan performance and employee feedback.

At Gatewood Wealth Solutions, we specialize in helping employers navigate the evolving landscape of 401(k) plans, including the latest SECURE 2.0 updates. If you have any questions or need guidance on implementing these changes, our team is ready to assist. Feel free to reach out—we’re here to ensure your retirement plan is optimized for both compliance and employee engagement.

Micah Alsobrook, CPFA®, MBA, is a Retirement Plan Consultant at Gatewood Wealth Solutions. He specializes in helping employers optimize their 401(k) plans to reduce liability, improve employee satisfaction, and stay compliant with evolving regulations.

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This material is being provided as a general template for plan sponsor review. Plan sponsors should seek legal guidance in developing a document specific to their plan. In no way does advisor assure that, by using this template, plan sponsor will be in compliance with ERISA regulations.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC

LPL Tracking #626475

Most people looking forward to retirement anticipate years of relaxation and fulfillment after decades of hard work. But the reality of retirement is often far different. For many people, retirement may bring financial stress, uncertainty, and the fear of outliving their savings. It’s crucial to understand the current state of retirement preparedness to secure your own comfortable future.

The Stark Reality of Retirement Preparedness

According to the Economic Policy Institute, nearly half of all working-age families don’t have anything saved in retirement accounts.1 Meanwhile, the median retirement account balance for all working-age families is only $5,000. This isn’t nearly enough to sustain even a modest lifestyle in retirement.

The Social Security Administration also reports that about half of all married couples (and seven in 10 single retirees) receive at least half of their income from Social Security.2 But with more people claiming benefits and fewer workers earning them, the long-term future of these benefits is uncertain. This means that for those without a backup plan, placing all one’s eggs in the Social Security basket can be risky.

Meanwhile, people are living longer than ever. This is a positive trend in the abstract, but it means that retirement savings also need to last longer. Many financial experts recommend planning for 20 to 30 years of retirement; but if you retire at 60 or 65, 20 years may not be enough.

Avoid Becoming a Statistic

Start Saving Early

You can’t overestimate the power of compound interest. The earlier you start saving, the more your money can grow over time. Even small contributions can accumulate significantly over decades as long as you stay consistent.

Maximize Retirement Accounts

Take full advantage of tax-advantaged retirement accounts like 401(k)s and IRAs. Be sure to contribute enough to get any employer match, since this is essentially free money.

Diversify Your Investments

Diversifying your investments can help manage risk and improve returns. Consider a mix of stocks, bonds, and other assets tailored to your risk tolerance and time horizon. As you get closer to your target retirement date, you’ll want to gradually shift to more conservative investments to protect your savings from market volatility.

Create a Retirement Budget:

Estimate your retirement expenses, including housing, healthcare, travel, and leisure. Compare this with your projected income from savings, Social Security, and other sources. Adjust your savings goals and investment strategy as needed to bridge any gaps.

Seek Professional Advice:

A financial professional can provide personalized guidance and help you create a comprehensive retirement plan. This person can assist you with investment strategies and tax planning, and address that you stay on track to meet your goals.

In Closing

Retirement should be a time for you to relax and enjoy time with loved ones, not spend sleepless nights worrying about your finances. While the statistics on retirement preparedness are sobering, taking proactive steps now can help you avoid financial strain. Secure your future today, so you can enjoy the retirement you deserve tomorrow.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #600792

Footnotes:

1 “The State of American Retirement,” Economic Policy Institute, https://www.epi.org/publication/retirement-in-america/

2 ”The Importance of Social Security Benefits to the Income of the Aged Population,” Social Security Administration, https://www.ssa.gov/policy/docs/ssb/v77n2/v77n2p1.html

A 529 is a tax-advantaged savings plan that gives you incentives to save money to pay for college or other higher education expenses. Pursuing your savings goal may mean the difference between a dorm with central air conditioning or experiencing sweltering summers. Here are some points to keep in mind when navigating your 529 plan.

1. Types of 529 Plans

There are two types of 529 plans, which are college savings plans and prepaid tuition plans.

College Savings Plans

These let you save funds in an investment account that has the potential to grow tax-free until you use them for most qualified education expenses incurred when attending a college or university that has accreditation.

Prepaid Tuition Plans

These let you lock in tuition at today’s rates at in-state public universities. Some private and out-of-state colleges also offer guaranteed admission.

2. Tax Advantages

Contributions to a 529 plan enjoy tax-free growth and withdrawals for qualified expenses are also totally tax-free. If your state allows them, tax deductions or credits might be available when you contribute to a 529 plan, so check your state’s rules.

3. Contribution Limits

Incremental post-birth contribution limits vary by state but may be large, up to $300,000 per beneficiary and beyond. Contributions to a 529 plan fall within the annual gift tax exclusion ($18,000 in 2024 per beneficiary)1, and you may make larger contributions (up to $85,000) in a year and elect to treat them as though they were made over five years for lower gift taxes.

4. Investment Options

College savings have a variety of investment mixes, including age-based portfolios that get more conservative when the beneficiary nears college age. Check portfolio performance regularly and adjust as appropriate to the risk tolerance and investment goals.

5. Qualified Expenses

Qualified expenses consist of tuition and fees, course materials (including books, supplies, and equipment), and the expenses of transporting the student to and from the institution. Room and board are qualified expenses if the beneficiary is enrolled at least half-time.

Additionally, K-12 tuition of up to $10,000 a year may be paid at private, public or religiously associated schools. Finally, a 529 account may pay up to $10,000 (over the lifetime of the policy) to repay the designated beneficiary’s or their siblings’ student loans.

6. Changing Beneficiaries

If you have other qualifying family members in mind for the 529 plan, you may make a change to the plan’s beneficiary at any time without penalty. Alternatively, if you want to keep the account open for a future child, you are allowed to change the beneficiary to yourself.

As you know, using any saving vehicle is only valuable as long as you understand how it works. Take the time to read the 529 plan statement and understand your investment options – and then periodically check back to be sure that your plan and investments are still in sync with what works for your needs.

Important Disclosures:

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #600725

Footnotes

1 Gift Tax

https://smartasset.com/estate-planning/gift-tax-explained-2021-exemption-and-rates

Even if you are already retired, it doesn’t mean you should stop trying to grow your savings. Inflation, unexpected medical bills, and changes to your lifestyle or family may result in the need for additional income than you initially anticipated when planning your retirement. While investing is one of the quickest ways to grow your savings, the process may look slightly different when you’re actually actively trying to balance income and savings.

Below are some investment options you might want to consider to make sure your income keeps on growing.

1. CDs

A Certificate of Deposit (CD) is a safe investment tool insured by the FDIC for up to $250,000 and offers a fixed rate of return if held to maturity. To invest in a CD, you would lend your money to a financial institution for a specified period. At the end of the timeframe, you will receive your money back along with interest. While the interest gained is often less than stock investments, it is a great way to safely earn additional money on savings you are not currently using.2

2. Treasury Bills

Treasury bills are another protected investment and are considered one of the safest options in several countries. They are backed by the full faith and credit of the United States, meaning that any funds will be honored no matter the circumstances. The only drawback is if you cash them out before they completely mature, you may lose out on some interest.2

3. High-Yield Savings Accounts

If you have money you would like to earn interest on, but want these funds to be accessible when you need them, then a high-yield savings account may be a smart option. Unlike CDs, you will be able to take out money at any opportunity, and will still earn a high interest rate. In some cases, these accounts will have higher interest rates than CDs.2

4. Fixed Annuities

A fixed annuity only carries a heavy penalty if you withdraw before age 59 1/2. So investing in them in your senior years is a good option. The insurance company that issues them will guarantee the investment, making it safer as long as the company’s financial status is sound. Interest will continue to be paid until your death, which will help you supplement your income.1

5. Money Market Accounts

A money market account is a great way to earn extra on your money without restricting its use. It is a hybrid between a savings and a checking account. It will pay the interest you would get with a savings account, but you will be allowed to access it through checks, debit cards, or both. They are considered safe and FDIC insured, like CDs or savings accounts.1

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

Fixed annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05372230

Footnotes:

1 How Can I Make My Retirement Savings Last?, Forbes, https://www.forbes.com/advisor/retirement/make-retirement-savings-last/

2 8 Safe Investments for Seniors, Yahoo Finance, https://finance.yahoo.com/news/8-safe-investments-seniors-200020846.html

If you’re someone who loves nothing more than spending a relaxing day at the beach, you likely hope your retirement plans will let you spend much more time there. By applying ‘beach day’ lessons toward your investment strategies, you’ll be well on your way toward a sunny, sandy future. Below, we discuss several strategies to make investing feel just as stress-free as a beach vacation.

Managing risk

Bodies of water aren’t without their hazards—rip tides, dangerous aquatic life, and potentially harmful UV rays. There are ways to manage or reduce these risks, but it’s important to remain conscious of them and avoid becoming complacent.

Similarly, when choosing investment strategies and vehicles, you need to know what risks are present and how to mitigate them. There is no such thing as a risk-free investment, but by doing research and talking to a financial professional, you’ll be well-prepared for any potential hazards that might try to sneak up.

Planning and preparing

Before you head to the beach, you need a plan—where to go, where to park, and what to bring to make the most of your day. The same holds true for investing. You need to know what you want to accomplish when you want to achieve it, and what resources you need to take you there. This is another area in which discussing your plans with a financial professional can give valuable insight.

Being flexible and patient

Beach conditions can quickly change with weather and tide patterns. Often, this means you must adapt plans at the last minute. Economic and market conditions can also shift quickly, requiring you to adjust your investment strategy to avoid locking in losses.

The same goes for patience. Whether you’re waiting for the perfect wave or holding onto investments during market fluctuations, patience, and persistence are both keys to success.

Learning from your experiences

Every day at the beach—and every investment—can teach something new. You’ll learn strategies that work and don’t work and when to call it quits on a certain approach. Learning from successes and failures will help improve planning and investing skills over time.

By recognizing the parallels between investing for retirement and spending a day at the beach, you can approach both with a common state of mind: careful planning, risk management, and fun along the way.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by WriterAccess.

Although many teens are loath to admit it, they rely heavily on advice from trusted adults in their lives—especially their parents. As these teens begin moving out and heading to college, it becomes even more important to set them on a good financial path. Below are seven key pieces of advice every college student should hear from their parents.

You Need a Budget

Encourage your child to create a budget to track their income and expenses. Help them understand the importance of living within their means and prioritizing essential expenses like tuition, housing, food, and transportation.

Avoid Consumer Debt

Without a solid budget, it can be easy to fall into the consumer debt trap—paying with plastic just doesn’t have the same impact as handing over hard-earned cash. With rising costs of food, housing, and college tuition, it’s increasingly easier for young people to take on too much debt when striking out on their own.

Discuss the dangers of taking on excessive debt, including student loans, credit card debt, or personal loans. Encourage your child to minimize the amount they have to borrow at a young age. Your child should also explore any available alternatives, like scholarships, grants, part-time work, or community college, to reduce the need for student loans and credit debt.

Build Credit Responsibly

Teach your child about the importance of building and maintaining good credit. The easiest way to do this is by paying all bills on time, keeping any credit card balances low, and avoiding unnecessary debt. If you have good credit, you can add your child as an authorized user on one of your cards to start building their credit history.

Save for the Future

Encourage your child to start saving for their future goals as early as possible. Discuss the benefits of compound interest and the power of regular contributions over time.

Invest in Career Development

Emphasize the value of investing not just in an education but in a lifelong career. The college years are the perfect time for your child to increase their future earning potential and expand the universe of job opportunities. Encourage your child to explore internships, co-op programs, volunteer opportunities, and networking events to gain valuable experience and skills.

Understand Financial Aid

Teach your child how to fill out the Free Application for Federal Student Aid (FAFSA). Filling out the FAFSA accurately and on time will maximize their eligibility for financial aid. You and your child should also understand their financial aid options, including grants, scholarships, work-study programs, and student loans, so you can make the most informed decisions about the cost of attendance.

Protect Personal Information

Teach your child the importance of safeguarding their personal and financial information, especially Social Security numbers, bank account numbers, and passwords. Remind them to be suspicious about being asked to share information online. Your child can also sign up for programs and services that will monitor their accounts for suspicious activity, including identity theft.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by WriterAccess.

LPL Tracking #588335