DUCATION UNDING GOALS MARCH 13, PREPARED FOR: John and Jane Doe 123 Main St Honolulu, HI phone:

Transcription

1 PREPARED FOR: John and Jane Doe 123 Main St Honolulu, HI phone: PRESENTED BY: Curtis A Whitaker Whitaker Financial Consulting cwhitaker@saxonysecurities.com, phone: DUCATION UNDING GOALS MARCH 13, 2019 PLEASE READ THIS DISCLOSURE CAREFULLY. This information may help you analyze your financial planning needs. It is based on information and assumptions provided by you regarding your goals, expectations and financial situation. This service shall not infer that company assumes any fiduciary duties. In addition, such service should not be relied upon as the only source of information. This information is supplied from sources we believe tobe reliable but we can not guarantee its accuracy. Hypothetical illustrations may provide historical or current performance information. Past performance does not guarantee nor indicate future results. SECURITIES OFFERED THROUGH SAXONY SECURITIES, INC. MEMBER FINRA, SIPC. ADVISORY SERVICES OFFERED THROUGH SAXONY CAPITAL MANAGEMENT, LLC. AN SEC REGISTERED INVESTMENT ADVISOR.

2 Introduction THE VALUE OF A COLLEGE EDUCATION According to The College Board's annual report, Trends in College Pricing 2014, median annual income for bachelor's degree recipients is 60 percent higher than median income for those with only a high school diploma. Over a lifetime that difference exceeds $1,000,000. While a college education can be expensive, it is clearly an investment that will pay off in the long run. COLLEGE IS EXPENSIVE Inflation: The U.S. Department of Education estimates that slightly more than one-quarter of fulltime undergraduate students live on campus. According to The College Board, the average in-state tuition costs for were $9,970 and $34,740 per year for four-year public and private universities, respectively. That represents a 3.1% increase over the prior year. Other Costs: Room and board charges averaged $10,800 for public and $12,210 for private universities. These are real costs that should be looked at carefully when preparing to set aside funds for college. THE COSTS ARE INCREASING College tuition and fees in the United States experienced an average annual inflation rate of 8.7% over the past 20 years, according to Department of Labor statistics. THE SOONER YOU SAVE, THE BETTER Often times, because it seems far off in the future, little thought is given as to how to save and plan financially for a college education. However, it is much easier to save while the child is growing up and pay for college from our savings than to attempt to pay for college as the expenses are incurred, out of income. In addition, advance planning can often provide significant income tax benefits which may not be available if you postpone saving. PAGE 2---

3 Input And Assumptions YOUR CURRENT SITUATION Accumulation planning makes your goals specific and tries to fund them using the most cost effective method of saving and taxation of income available to you. If you have a plan, your long-term goals are much more likely to be met. By looking at the numbers, future plans become more real and significant cost savings methods may be found to save you money. Significant tax savings may also be available through proper planning. You have indicated the following goals, objectives and assumptions: DEPENDENT FUNDING INFORMATION NAME AGE SCHOOL CURRENT ANNUAL COST AMOUNT SET ASIDE (TAXABLE) AMOUNT SET ASIDE (529) % YOU PAY STARTING AGE Child 1 9 UH Manoa $12,000 $0 $7,000 50% 18 5 Child 2 6 HPU $23,000 $0 $7,000 50% 18 5 YEARS NEEDED Marginal Tax Rate (Combined fed and state) 25% College Cost Inflation Rate 2% Annual Increase in Contributions 0% Before-Tax Investment Return 6% IMPACT OF INFLATION As you can see in the table below, there is a dramatic difference between what college would cost today, and what it may cost in the future. NAME COLLEGE COSTS WITHOUT INFLATION COLLEGE COSTS AT 2% INFLATION FIRST YEAR COST CUMULATIVE COST FIRST YEAR COST CUMULATIVE COST Child 1 $6,000 $30,000 $7,171 $37,689 Child 2 $11,500 $57,500 $14,585 $76,659 COLLEGE COSTS WITHOUT INFLATION $87,500 COLLEGE COSTS AT 2% INFLATION $114,348 PAGE 3---

4 Detailed Costs SUMMARY OF COSTS The following chart and table illustrate the estimated annual inflation-adjusted cost of your education funding goals. Year Child 1 Child 2 Total , , , , , , ,609 7, , ,762 14, , ,958 15, , , , , , , , PAGE 4---

5 Results And Recommendations RESULTS AND RECOMMENDATIONS There are several savings and investment strategies that can help you accrue money for college, lowering the total cost of your funding goals. The sooner you begin to accumulate assets for your goals, the less your "out-of-pocket" cost will be. Below are some savings ideas that may help you better prepare for the task of funding your children's college educations. THE CHOICE IS YOURS Pay As You Go-The most expensive way to pay for your dependent needs is to simply wait for the bills to start rolling in, then paying them out-of-pocket. $114,348 Save Annually (Taxable Account)-By setting aside funds each year beginning now you can take advantage of earning interest, saving you money in the long run. $4,037* Save Annually (Tax Advantaged)-In addition to setting aside funds on an annual basis you may want to consider saving into a tax-advantaged account such as a Section 529 plan. $3,458* Invest a Lump Sum (Taxable Account)-You can further reduce the cost of paying for your dependent goals by setting aside a lump sum today. $49,225 Invest a Lump Sum (Tax Advantaged)-The least expensive means of paying for your dependent goals is to save a lump sum in a tax advantaged account. $38,281 DEPENDENT NAME PAY AS YOU GO SAVE ANNUALLY INVEST A LUMP SUM TODAY TAXABLE SAVING TAX-ADVANTAGED 529 PLAN TAXABLE SAVING TAX-ADVANTAGED 529 PLAN Child 1 37,689 1,401 1,195 15,723 12,308 Child 2 76,659 2,636 2,263 33,501 25,973 TOTAL 114,348 4,037 3,458 49,225 38,281 * The annual savings amounts vary from year to year based on your estimated funding needs. See tables on the following page for a breakdown of the estimated annual savings amounts. These projections are hypothetical. This information is meant to provide you with a general idea about your retirement income needs. The results given are for illustrative purposes only and do not represent the actual performance of any current or future investment. Rates of return will vary over time, especially for long-term investments. PAGE 5---

6 Details of Annual Alternatives DETAILS OF ANNUAL SAVINGS ALTERNATIVES TAXABLE TAX-ADVANTAGED 529 PLAN Year 1 14,000 4, ,849 14,000 3, ,048 18, ,849 4, ,030 23,916 18,506 3, ,318 23, ,916 4, ,258 29,212 23,282 3, ,604 28, ,212 4, ,496 34,745 28,345 3, ,908 33, ,745 4, ,745 40,528 33,712 3, ,230 39, ,528 4, ,005 46,571 39,401 3, ,572 45, ,571 4, ,277 52,886 45,431 3, ,933 51, ,886 4, ,562 59,485 51,823 3, ,317 58, ,485 4, ,858 66,381 58,598 3, ,723 65, ,381 4,037 3,585 3,007 69,840 65,780 3,458 3,585 3,939 69, ,840 4,037 7,314 2,995 69,559 69,592 3,458 7,314 3,944 69, ,559 4,037 7,460 2,976 69,112 69,681 3,458 7,460 3,941 69, ,112 4,037 14,902 2,621 60,869 69,620 3,458 14,902 3,491 61, ,869 4,037 22,638 1,902 44,171 61,667 3,458 22,638 2,549 45, ,171 4,037 19,132 1,308 30,384 45,037 3,458 19,132 1,762 31, ,384 2,636 15, ,332 31,125 2,263 15,477 1,075 18, ,332 2,636 15, ,415 18,985 2,263 15, , ,415 2,636 8, ,788 2,263 8, These projections are hypothetical. This information is meant to provide you with a general idea about your retirement income needs. The results given are for illustrative purposes only and do not represent the actual performance of any current or future investment. Rates of return will vary over time, especially for long-term investments. PAGE 6---

7 Details of Lump Sum Alternatives DETAILS OF LUMP SUM ALTERNATIVES TAXABLE TAX-ADVANTAGED 529 PLAN Year 1 14,000 49, ,845 66,070 14,000 38, ,137 55, , ,973 69,043 55, ,325 58, , ,107 72,150 58, ,525 62, , ,247 75,397 62, ,736 66, , ,393 78,790 66, ,960 69, , ,546 82,335 69, ,198 74, , ,705 86,040 74, ,450 78, , ,872 89,912 78, ,717 83, , ,046 93,958 83, ,000 88, , ,585 4,067 94,440 88, ,585 5,084 89, , ,314 3,921 91,046 89, ,314 4,951 87, , ,460 3,761 87,347 87, ,460 4,800 84, , ,902 3,260 75,706 84, ,902 4,194 74, , ,638 2,388 55,455 74, ,638 3,087 54, , ,132 1,635 37,958 54, ,132 2,125 37, , ,477 1,012 23,492 37, ,477 1,324 23, , , ,051 23, , , , , , , These projections are hypothetical. This information is meant to provide you with a general idea about your retirement income needs. The results given are for illustrative purposes only and do not represent the actual performance of any current or future investment. Rates of return will vary over time, especially for long-term investments. PAGE 7---