NEWSLETTER: 1ST QUARTER 2014

March 4, 2014 8:14 pm Published by Leave your thoughts

Many of you have asked: “What happened to my newsletters?”

The truth is not that I’ve gotten lazy or that I have run out of things to say. As my practice has grown I find I have less time to write. My commentary on the housing, equities and bond markets and the state of the economy, after all, was simply a synopsis of what I had read elsewhere. I plan to do a better job of identifying the most prescient articles I run across and posting them on LinkedIn and Facebook. One problem is that many of you have not yet “liked” the Tax Busters Facebook Page and so you are not getting my posts. Go like my Facebook page!

No Market for Old Men!

All my previous newsletters are posted on my website. If you glance through those again, you will find that most of my commentary proved correct and events unfolded primarily as expected. My one single incorrect prediction is that I was consistently early on my expectation of rising interest rates. That expectation has now unfolded and with the improving job market I expect interest rates will continue to rise in an up and down, stop and go pattern over the months ahead. Will this lead to a collapse of the housing, bond and equity markets? There is no doubt it will lead to greater volatility in these markets as they sell off in anticipation and then gradually digest the rising rates. Although I continue to anticipate a slowly growing recovery, the real truth is that no one knows when the next major downturn will happen. Most markets have reached new highs so this is “no market for old men!” Make sure you follow the adage of subtracting your age from 100 and make sure the resulting number amounts to no more than the total of your investments in bond and equity related investments. If you need ideas on where you might want to safely invest the rest, give me a call and we’ll meet with an investment advisor. There are good investment alternatives that guarantee your principal and also offer good opportunities for growth!

The ABC’s of financial aid for students and their parents!

Mr. A & Mr. B live in the same sub-division, earn the same income, have the same investments, and both have seniors in high school. Mr. A attended our FAFSA seminar, then decided to cut his losses in the market; used the proceeds to pay down his mortgage; hired his wife to clean up his office; and had his daughter take out her college savings and give it to gramps for safe keeping.

Who gets more financial aid and why?

The ABC’s for Seniors and their parents: Mr. A learned that based on his wife’s age, (younger parent) his family has an asset protection allowance of only $41,300 and that his Expected Family Contribution or EFC would rise by 4.08 cents on each dollar of savings over this amount. He also learned that for a family of four with one going to college his income protection allowance was only $25,200. Every dollar of income (less certain allowances) over his income of $50,000 would raise his EFC by 34 cents / dollar. The $9,000 of losses he took when he sold the bulk of his stock portfolio lowered his EFC by $1,020 each year for three years, and the $120,000 stock sale proceeds he used to pay down his mortgage reduced his EFC by $3,211. Because C, Mr. A’s wife, otherwise did not work, Mr. A, a self-employed realtor, paid his wife $10,000 to help him in his business. Net effect on joint taxable income: zero. Net FAFSA savings: another $1,224 because he learned that families with two working parents receive an extra $3,600 of Employment Expense Allowance. The $7,000 that Mr. A’s daughter D cashed out of her bank and gave to gramps for save-keeping lowered the family’s EFC by another $1,400. Overall, Mr. A’s family may be eligible for $6,855 more financial aid each year than Mr. B who didn’t come to our seminar. Moral: Take control of the financial aid process. Don’t be a Mr. B!

Portrait of Gerald Knight

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