Saving for college has some new changes. There are new changes to pre-paid tuition plans and 529 plans, two popular vehicles Americans use to save for and pay for college.The biggest changes are those that pertain to the “kiddie tax.” Effective in 2006, the new law calls for the “kiddie tax” to remain in effect until a child turns 18. Previously, unearned income attributable to children age 14 and older was usually taxed at the child’s tax rate. The new tax law, however, raises the age to 18 effective January 1, 2006.This change affects parents and grandparents who were using or continue to use custodial accounts such as UTMAs (Uniform Transfer to Minors Act) or UGMAs (Uniform Gift to Minors Act) for college savings instead of 529 college savings plans. Right now trust assets for children are factored in determining whether the child is eligible for financial aid. Assets in UGMA and UTMA accounts become the child’s at the assets in UGMA and UTMA accounts become the child’s at the age of maturity, which varies by state.The new law makes 529 plans a more attractive for families saving for college. In a 529 plan, contributions will grow tax-free and withdrawals are tax-free through 2010 as long as they are used for qualified education expenses. These monies are controlled by the grantor until the beneficiary reaches the age of majority.

 

Americans are spending with plastic at a staggering rate. Consumer credit-card debt has almost tripled over the last two decades—from $238 billion in 1989 to $800 billion in 2005, according to an analysis of Federal Reserve Board data by Demos, a national research and consumer advocacy group. The average American family now owes more than $9,000 in credit debt.  In addition, credit companies are mailing out a record 6 billion credit-card offers last year (according to Mail Monitor, a market research group.)            The increase of consumer debt has been the result of several things; mainly an increase in the cost of living and a stagnation of real (inflation adjusted) wages. A consumer group called Center for American Progress suggests that costs for food, energy, and housing and other costs have been rising at an unprecedented rate. Along with increasing costs are the tantalizing credit offers which appear in the mail. Lenders are becoming predatory with their advertising extending credit to practically everyone.  They knowingly extend credit to those who they know will have a struggle to pay the debts off. This allows the company to make far more in interest charges. The result of this has been a dramatic increase in bankruptcy. Consumer bankruptcy filings continue to increase, with Chapter 7 liquidation filings rising 54% in the second quarter compared to the previous three months. Consumer bankruptcies had plunged following the passage of a tough new bankruptcy law last year. By the second quarter, however, the pace of filings had picked up to 2,200 to 2,300 new filings per business day, more than four times the level in November 2005 after the bankruptcy law went into effect.
            These trends are not good and threaten the health of the general economy. The solutions to these problems are complex but achievable. Individuals need to do all in their power to increase income, decrease expenses, and protect themselves with appropriate insurance, and of course avoid debt like the plague.
 

We speak constantly about gettting out of debt. Owning a home outright with no debt whatsoever. So why would anyone want to get involved with a reverse mortgage? The first step is to understand what a reverse mortgage is.

A reverse mortgage requires a lender to pay you in installments. These payments can be used for immediate cashflow purposes such as retirement income. The amount of money a person can take out depends on the home’s appraised value, the amount of equity in the home, and a persons age. If you are older, and have more equity in your property, you can then take out more money.

A reverse mortgage does not require a person to make payments to the lender. The individual maintains title. Payments such as taxes and other expenses related to homeownership need to made by the homeowner. The money extracted from the home will need to be repaid upon the death of the homeowner. A person must be age 62 to qualify. The home cannot have any existing large liens on the property.

There are some benefits and drawbacks to using a reverse mortgage. The benefits include immediate tax free income, which do not affect other retirement benefits such as social security or other programs. The cash flow can be like a guaranteed annuity to provide income for the remainder of a person’s life. The money can be used for anything and there are no financial requirements to be made.

The negative aspects must be evaluated as well. The reverse mortgage can be very expensive as interest compounds and increases the amount to be paid back. This is not a good option for someone looking to move. The equity in your home will be used up which leaves nothing for any survivors.

A reverse mortgage should only be considered if all other retirement solutions have been exhausted. This means not having sufficient assets in place to pay for living and other expenses.

Is a reverse mortgage in your plans? I’d appreciate your feedback.

There’s no doubt age bias is alive and well in some American workplaces, but older job seekers can generally sidestep it by applying to companies which say they embrace this segment of the labor pool.

• A law office in Virginia seeking assistant case managers, whom it will train.
• A supply company in Maryland looking for an accountant.
• A real estate firm near Chicago needing a part-time financial consultant.
• An engineering firm in Indiana seeking HVAC engineers.
• A small investment firm looking for a mail clerk.
• A Seattle law firm needing customer-service help.

• Retail sales, 736,000 new jobs
• Registered nurses, 703,000
• Postsecondary teachers, 524,000
• Customer service representatives, 471,000
• Janitors, 440,000
• Waiters and waitresses, 376,000
• Food preparation and serving, 367,000
• Home health aides, 350,000
• Nursing aides, 325,000
• General and operations managers, 308,000