Chuck + Brynne Burkhalter:: Financial Workshop for New Families

At our last meeting, we had the privilege of  hearing sage financial advice from Chuck & Brynne Burhalter. Besides "crunching the numbers" by day, Chuck participates in the financial ministry at UPC while Brynne offers day-to-day wisdom of what it means to plan, save, and get all your ducks in a row for your family without your head spinning too much.

Below, you'll find the major points they covered and important financial areas to consider.

{Click on underlined headings for links to resources.}

"The Numbers"

• Average cost to raise a child for 18 years: $242,000 - $344,000
• Average cost to raise an infant for the first two years: $25,000
• Average yearly total college costs for public four-year in-state university: $18,400
• Projected yearly total college costs in 18 years (assuming 4% increases): $37,300

Legal documents:
• Last will and testament
• Guardianship
• Living will / Healthcare directive
• Durable Power of Attorney (for financial considerations) / Executor of estate
• Review and update beneficiary designations (for secondary beneficiaries)

Insurance:
• Life insurance policies for parents
• Long-term disability (do not confuse with long-term care insurance)
• Add child(ren) to healthcare plans
• May want to consider umbrella insurance if you have significant assets

Childcare option & considerations:
• Nanny – household employee
• Au pair – household employee
• Childcare center / home-based business (Tax credit if both spouses working)
• Costs continue – Kindergarten and beyond

 Research employer benefits:
 • Maternity / paternity policies
• Sick leave / backup care / counseling services available / legal service plans
• Flexible work schedule going forward
• Flexible Spending Accounts (Dependent care and Health care)

 Tax benefits to understand:
• Dependent deduction
• Child tax credit
• Dependent care credit
• Increase in earned income tax credit eligibility
• Recommend purchasing or using tax software (free online for certain income levels)

College savings plans

• 529 Savings Account
• Similar to a ROTH IRA, post-tax dollars are invested in a state plan
• All withdrawals for qualified education expenses are tax-exempt from federal income tax.
• Investment options, performance and expense ratios depend on the fund administrator.
• Considered the parent’s asset (important when applying for financial aid see “Top strategies to maximize aid eligibility for student” below)
• Beneficiary can be changed.
• High contribution limits.
• Withdrawn earnings subject to federal tax and 10% penalty if not used for qualified education expenses.

• 529 Prepaid Tuition
• WA GET is a prepaid tuition plan. 
• Pre-purchase tuition at rates (generally plus a premium) today for tuition in the future.
• Performance is often based on tuition inflation.
• Some states offer state tax benefits (withdrawals exempt from income tax, deductions for resident contributions to their state plan) – n/a in WA.
• May have age / grade limit for beneficiary
• Considered the parent’s asset (important when applying for financial aid see “Top
  strategies to maximize aid eligibility for student” below)

• Coverdell Education Savings Account (ESA)
• $2k annual per-child contribution limit. 
• Potentially greater flexibility in investment options.
• Tax-free treatment for college, elementary, and secondary schools. 
• ESA assets are not revocable (unlike 529 plans). Unspent funds remaining in the account when your child reaches age 30 subject to federal tax and a 10% tax penalty.
• Beneficiary can be changed to another family member below age 30 without triggering tax or penalty.

College saving strategies:

• Save money in the parent's name, not the child's name.
• For financial aid purposes, a child is expected to pay a greater percent of their assets towards their college education than a parent is expected to pay. Thus, a student may qualify for more financial aid if the savings is in the parent’s name.
• Save for your retirement first. They don’t offer retirement loans, but they do offer student loans.
• Save anything you can and save now, to take advantage of the power of compounding returns. Don’t let the large costs of a college education discourage you from saving. Start with $25 or $50/month.
• Remember you don’t need to have the whole amount saved before your child enters college. You’ll be able to supplement some with current income or student loans.
• Don't be intimidated by the high cost of college so that you don't know where to start--start somewhere! Just start!

Other Resources:
http://collegeanswer.com (sponsored by Sallie Mae)
http://www.finaid.org/savings/
http://savingforcollege.com
http://nolo.com

If you have any questions or are interested in meeting with someone about your finances, consider UPC's Financial Counseling. Volunteer financial counselors will  help you address a wide range of personal finance topics from a biblical perspective. Meetings with individuals and couples are confidential and professional. Contact Sue, 206.524.7301 x131

Chuck + Brynne Burkhalter

brynne_burkhalter@yahoo.com

cburkhalterjr@yahoo.com