A recent article in The Wall Street Journal advised readers to “beware rule changes on Coverdells.”  Coverdells Education Savings Account, in case you’re not familiar with them, are investments that offer tax-free growth and withdrawals, as long as the money is use for qualified educational expenses.  They were once known as education IRAs, and sometimes they’re still referred to that way, although the money that goes into them is not deductible from taxable income. 

If you’re a parent who already owns a Coverdell, the article continued, you should be aware that there is good news – you can invest as much as $4,000 until April 15^th, since the money deposited before April 15^th counts towards the previous year’s (2009) limit.  And, there’s bad news.   Unless Congress extends the current benefit, starting next year withdrawals that are used to pay for expenses from kindergarten to 12^th grade will no longer be tax free.

That doesn’t mean that Coverdells are bad investments, of course.  They’re still a good way to save for and finance education in the United States.  Even with their limitations, such as the fact that beneficiaries must be under age 18 when the money is contributed, and that the money can’t be refunded to the person who started the account, they’re still better than doing nothing.

But there is one savings vehicle allows you to tax-free growth and withdrawals without those limitations.  Imagine being able to contribute what you wanted, when you wanted, without any limits.  Imagine being able to use the funds for any level of education, for any member of your family – even yourself!  Imagine the funds not all being needed, and the overage being returned to you, the person who created and funded the account.   Imagine even being able to pass the funds along to your heirs in the event of your death. 

By now you’ve probably figured out what savings vehicle I’m talking about.  It’s whole life insurance, of course.  And not only can it help you to save towards and fund your children’s educations.  You can use the money for any other purpose you choose as well.  Many types of life insurance policies have loan provisions that allow you not only have tax-free growth of your capital, but also to borrow tax free against the balance of your account.  For education, or for whatever other purpose you choose.

Life insurance is the only savings vehicle that I know of with so many uses – including the most important: making sure that in the event of your death, your family’s financial needs are completely taken care of.

With tuition costs rising dramatically over the past 20 years, it’s no wonder that financially savvy parents have started saving more money more quickly, just to make sure there’s enough to put the kids through college when the time comes.  And 529 college savings plans have been promoted as the number one way to set that money aside and watch it grow.

According to Financial Research Corporation, $15.5 billion when into 529 plans it 2006, and $15.2 billion in 2007.  But when the market collapsed, many investors began to shy away from 529 plans, often at the recommendation of their financial advisors.  In 2008, the contributions fell to $5.2 billion, and in 2009 so far, the number is just $4.8 billion.

That’s still a lot of money, but like what’s happening with the stock market in general, many Americans are looking for ways to grow their college funds more securely and with greater flexibility – even if that means losing the tax advantages the 529 plans provide.  In order to get the tax benefit the 529 college savings plans provide, you have to use the funds for qualified higher education expenses.  If your child doesn’t go to college, you’ll pay taxes and penalties on the gains.

If you’re reconsidering what to do with your college savings money, call (866) 972-3262 to speak with college savings specialist.  There are many other investment choices that can help you to be prepared when your children head for higher education.  As someone who truly believes in proper risk management and multiple uses of money, I recommend you take a look at these college savings option.  They offer tremendous flexibility and guaranteed returns and might be just the solution you’re looking for. 

Let me hear from you, parents.  What are you doing with your college savings money these days?

On July 1, 2009, the interest rates on variable federal Stafford and PLUS Loans dropped to the lowest rates in the history of the federal student loan program. These new rates apply only to loans issued on or after July 1, 1998 and before July 1, 2006. The Department of Education sets the rates once each year based on the most recent three-month Treasury bill auction held in May.

The new interest rate on Stafford Loans in repayment status is 2.48%, down from 4.21%. The interest rate on in-school, grace, or deferment status Stafford Loans is 1.88%, down from 3.61%. And the new interest rate on PLUS Loans is 3.28%, down from 5.01%. These rates are in effect through June 30, 2010.

Borrowers with variable-rate federal student loans can lock in the current applicable rate on their loans by consolidating them. The interest rate on a consolidation loan is a fixed rate that is equal to the weighted average of the current applicable interest rates on the loans being consolidated, rounded up to the nearest 1/8th of a point. Borrowers can only consolidate once, so if they’ve done so previously, they won’t be able to take advantage of the new low rates. Also, private student loans can’t be included in a federal consolidation loan. Borrowers who have graduated from school and are eligible to consolidate their loans should go through the Federal Direct Loan Consolidation program at www.loanconsolidation.ed.gov.

For borrowers with Stafford or PLUS Loans issued on or after July 1, 2006, the loans will have a fixed interest rate for the life of the loan. For unsubsidized Stafford Loans, the rate is 6.8%, and for PLUS Loans, the rate is 8.5%. For subsidized Stafford Loans, the interest rate will be reduced as follows over the next few years:

• 5.6% for loans first disbursed on or after July 1, 2009, and before July 1, 2010
• 4.5% for loans first disbursed on or after July 1, 2010, and before July 1, 2011
• 3.4% for loans first disbursed on or after July 1, 2011, and before July 1, 2012

The American Opportunity credit applies to the first four years of undergraduate education. In 2009, it is worth a maximum of $2,500. It is calculated as 100 percent of the first $2,000 of your child’s annual tuition and related expenses, plus 25 percent of the next $2,000 of such expenses. One final point: To qualify for the credit, your child must be attending college on at least a half-time basis.

The Lifetime Learning credit is worth a maximum of $2,000 per year. It is calculated as 20 percent of the first $10,000 of your child’s annual tuition and related expenses. Unlike the American Opportunity credit, the Lifetime Learning credit is available even if your child is enrolled on less than a half-time basis.

If you are eligible to take the credits, remember that you cannot claim both credits in the same year. As a result, you will need to determine which credit offers you the most benefit in a given year. In this analysis, you must consider an important distinction between the two credits. The American Opportunity credit can be taken for more than one child in a given year, provided each child qualifies independently. For example, if you have two children in college, one a freshman and the other a sophomore, you can take a $5,000 credit on your tax return. By contrast, the Lifetime Learning credit is limited to $2,000 per tax return, even if you have multiple children who would qualify independently in the same year.

Higher-education experts say the Obama administration has proposed the broadest overhaul of federal college aid programs in decades. But for all the focus on the size of the budget, it has been hard to tell just what this means for students and their families. A detail article by The New York Times:

http://www.nytimes.com/2009/03/11/your-money/student-loans/loanprimer.html

BeamaLife’s mission is to educate the fellow Americans on life insurance, term life insurance, whole life insurance, college savings, retirement savings, disability insurance and long term care insurance.

Since the main purpose of life insurance is to protect against financial loss when someone dies, it’s not required to purchase life insurance on child as there will be no loss of income.  Although your child’s death would be a tragedy, it would probably not affect your family much financially unless he or she was earning a substantial amount of income for the family.

However, there are a few reasons why you might purchase children life insurance, you might buy life insurance on your young child so you can take advantage of the rates, which are lower for healthy children than for adults. Purchasing a policy while your child is healthy can also guarantee that your child will be protected throughout adulthood, even if he or she becomes ill, works in a hazardous occupation, engages in dangerous activities, or becomes uninsurable for other reasons.

Some parents also buy life insurance for children to cover the time period when they are paying for their children to attend college or graduate school. If a child dies during this period, the death benefit can be used to help pay off college debt. Finally, if you can afford to buy permanent policy like whole life insurance for your child then it will be the best gift you can ever give to your child.

Between the recession and the rising cost of college, more families than ever are filing the FAFSA (Free Application for Federal Student Aid) this year, their first step toward Pell grants, Stafford loans, Perkins loans, work-study programs and much state aid. As of Feb. 15, the Department of Education had already received 2,213,408 forms, 20 percent more than at this time last year. It’s become clearer that we need to save for college whatever we can before we look for financial assistance. Getting financial aid and completing FAFSA is very frustrating and tedious process. New York Times has published very interesting article about the difficulty of FAFSA.

http://www.nytimes.com/2009/02/22/education/22fafsa.html

Please visit BeamaLife.com to learn more about college savings, 529 college savings plan and how much you have to save for college fund.

Your late start means you’ve missed most of the best opportunities to grow the money you have for college savings plan. With only few years until your child starts college, you’ll need to refine the college selection process, accumulate enough of a down payment for the early college bills, and establish a college savings plan for the later college years. Here are some constructive steps you can take.

First, help your child investigate schools that provide a good value. Some less expensive state universities and second-tier private colleges may offer better programs than their more expensive private counterparts. Think creatively. Your child could attend a nearby school and live at home for a year or two to save money on room and board. He or she could attend a community college for two years and then transfer to a private four-year college. Or, your child could consider cooperative education, where semesters of academic work alternate with semesters of paid work. If your finances are severely limited, your child might consider taking a year off before starting college.

Second, learn all you can about financial aid. Conduct a dry run through the federal government’s financial aid application to determine whether your child is likely to qualify for college financial aid, and, if so, for how much. For financial aid references, ask a librarian or your child’s high school guidance counselor, or conduct a search on the Internet. When you’ve zeroed in on a few colleges, examine their financial aid statistics. For example, what percentages of students receive financial aid? What percentage of the average package consists of loans? What percentage of a student’s financial need is generally met? Does the college offer merit scholarships?

Third, start investigating potential scholarships. There are a number of websites where your child can type in his or her interests, abilities, and goals to obtain a list of relevant scholarships. However, outside scholarships generally make up only a small portion of a student’s overall aid package, so it’s very important that this search be made in addition to, not in place of, the quest for federal and college-sponsored financial aid.

Fourth, examine any current financial resources that you can draw on for the early college bills. Do you have savings accounts, stocks, mutual funds, or whole life insurance? Can you pay a portion of the tuition bills from current income? Can you increase the family income by getting a second job or having a previously stay-at-home spouse return to the work force? If you’re still short, you’ll need to investigate a personal loan, a home equity loan, or the federally sponsored.

Please call (866) 972 -3262 to speak with college savings expert or complete this college savings proposal request from now.

When we think or talk about insurance, we typically relate it with a cost or treat it as an expense. This is true for health insurance, homeowner’s insurance, car insurance, or even term insurance. And most of us try to minimize our expenses, and we should. The common thought process flows as follows: If I buy term insurance, I will minimize my cost. However, there are several other factors that you need to consider to calculate the true cost of term insurance. For example, the opportunity cost of premiums and the compounding tax consequences for your other savings and investments.

Most people feel that they need insurance before age 65, not after, when their kids are out of college, their home is paid for, and they have enough in the bank for retirement. So they buy 20- or 30-year term insurance to cover them until they feel they no longer have financial obligations. This seems logical—until you understand the living benefits of life insurance.

The concept of buying term insurance until age 65 is called the “survivorship need,” which is one very compelling reason behind purchasing insurance. But there are other important purposes for life insurance, such as covering federal and state estate tax if you fall into the estate-tax bracket. Even if you do not fall into the estate-tax bracket, insurance can be a tremendous savings vehicle through the cash value build-up inside the policy. For example, whole life insurance (one type of permanent insurance), when purchased from a solid insurance company, has an internal rate of return of 5% on average over the long term. Additionally, by law, an insurance contract is tax-deferred, so you are not paying any taxes on that growth. And under the current tax law, you can take out a distribution from a permanent policy by way of a loan that is also not taxed.* This savings adds an additional 2% to 2.5% onto your rate of return. Lastly, the opportunity cost and monetary savings of the term insurance premiums that you did not pay adds another 2% to 2.5%, so your total annual rate of return is around 10%. Furthermore, this 10% is achieved while avoiding stock market volatility, and if you should pass away prematurely, you are passing on all of the death benefits to your beneficiaries without any income tax or estate tax burden (if your policy is structured in the right manner). There are very few investment vehicles that will provide this kind return. One final aspect of permanent insurance is that the cash value or account value accumulations inside the policy are protected from many kinds of creditors in most states.*

BeamaLife.com is an industry-recognized website offering such counsel along with the best whole life insurance rates. Please call (866) 972-3262 to speak with our whole life insurance specialists or complete a whole life insurance quote request now!

In summary, if your current lifestyle does not allow you to spend the additional dollars on whole life insurance, you should buy term insurance to cover the survivorship risk. However, if you are putting money away at the end of the month in some type of savings or investment vehicle that is making less than 8–9%, it is definitely worthwhile to consider a permanent policy, specifically a whole life insurance policy.

*The information contained in this post is provided with the understanding that it is not intended to be interpreted as specific legal or tax advice. Neither BeamaLife nor any of its employees or specialists are authorized to give legal or tax advice.