THE Talk 2.0

I had a conversation the other day with an acquaintance that reminded me that we are not getting any younger. This gentleman was sharing his experience caring for his grandmother in her later years. In the course of conversation, he remarked that despite the decline in her health and mental acuity, she never felt herself to be old. “In her mind,” he said, “she was still the young woman who joined the Army at the tail end of WWII. She would at times tell me that when she looked in the mirror, she didn’t recognize herself. She’d say, ‘who’s that old woman?’” I think many people of an advanced age would perhaps agree that, while getting older certainly can have some physical signs to accompany it, one doesn’t necessarily nor automatically feel old. I certainly don’t feel my age.

Many of today’s seniors are still very independent, both in body and in mind. The mindset that “I can always take care of myself” can make them reluctant to openly discuss their affairs—particularly their financial affairs—with their adult children. It isn’t an easy mental shift to think about needing assistance with anything, especially after so many years of being independent. Unfortunately, too many boomers are in denial about their own aging, or simply fail to plan for the eventualities that will come. At some point, issues of living to an advanced age will have to be addressed, and too many families struggle with managing a crisis that could have been averted.  When that happens, sub-optimal solutions become the norm.

Senior adulthood is simply another stage of life and can be filled with growth and opportunity. To take full advantage requires that we continue to envision and plan for our future. A book I recommend on the subject is The Other Talk: A Boomer’s Guide to Talking with Your Family About the Rest of Your Life.  It is based on the recollection of the often difficult first talk that we had, or didn’t, with our teenager about sex.

Now that the teenager is well into adulthood and we Boomers are moving into seniorhood, it’s time for The 2.0 Talk. I encourage every boomer to have the conversation with their adult children. While financial planning is an important topic when talking about the rest of your life, it is impacted by so many other questions: where to live, how to manage health concerns, and end of life wishes, just to name a few.  Whether you have a plan in place or haven’t yet given much thought to doing so, simply sitting down with your family and talking through your vision and purpose has its own rewards. It can very well lead to deeper, more meaningful, relationships between generations. The how and when and what will differ from family to family, and it might be awkward for some, not so for others. It probably isn’t the most natural after-dinner conversation, but setting aside time with loved ones and mustering the courage to do this is important. It is almost assured that it  becomes more urgent as time goes by.

The Other Talk doesn’t have to be a serious or morbid conversation, or even a long, detailed one. Just starting can make a difference and can open the room for other conversations. Being open to each other’s perspectives can be a step toward a fruitful discussion. You may not want to start off talking about what everyone will inherit when you are gone.  We have some discussion starters if you need them. You could start by sharing this blog post.

By the way, it is much easier when the parent initiates the conversation.  But the child can easily start the discussion with something like, “Hey mom, how do you want to be remembered when you’re no longer around?”

Scroll down and leave a comment on where you are on the topic and the questions that arise after you have read this post.

Overcoming the High Cost of Education

Exams happen in Real life.

There is much talk these days about the failure of higher education. While it is true that simply graduating with a degree does not guarantee a successful career or certain financial future, most people agree that advanced training or education is an important aspect of career preparedness. As parents and grandparents, we all want the best for our children and grandchildren. But we all know they can have dreams and interests that, admittedly, often concern or befuddle us. Furthermore, high tuition costs, as well as the increasing burden of student loan debt and a changing economy can create much anxiety around the prospect of attending college. Much of the stress can be relieved through proper planning.

Today, college planning involves more than simply opening a 529 account as soon as possible after the child is born. That’s only one side of the equation—the resource side.  Today, planners and parents also need to map out costs. To reduce the cost of college, there are three important timeframes to consider: 1. Planning to reduce costs before ever getting to college; 2. Continuing to manage costs while attending college; and 3. Repaying student loans while anticipating lifestyle changes after college. Effective planning of costs starts from the time the student is a freshman in high school. The plan should cover the time until all student loans are paid off.  A complete analysis reveals the impact that additional borrowing would have on the overall costs of the education. But there are other important factors that can affect the true cost of education during and after college.

College choice is arguably one of the most critical decisions that a young person will ever face. Most people agree that financial consideration should probably not be the deciding factor for choosing a college, but it certainly should be one of the factors. Frank Hanna in his book, What Your Money Means and How to Use it Well, sets out criteria for determining if attendance at a particular school is a “genuine need” or simply a “beneficial good.”  The book is worth reading for any money decision, but he speaks eloquently to this one.

Higher education is big business today. It is always a good idea to realize that colleges compete for talent and many are willing to put money behind attracting the student that fits their need.

More often today, the cost of college is determined by how long it takes to get a degree. One of the most sure-fire ways to reduce the cost of attendance is to graduate on time, or early. Careful planning of curriculum is essential. Even starting college with significant credit toward graduation is possible today by taking college credit courses while still in high school.

Every family should prepare a Free Application for Federal Student Aid (FAFSA) when their child is a senior in high school, and each year they’re in college. This is true whether they expect to need additional financial assistance or not. Parents should always gain an understanding of the Expected Family Contribution (EFC) before the college search gets underway. There are actually two formulas: the Federal method and the Institutional Method.  Which one to use depends on which is accepted by a particular college. A good EFC calculator can be found at the website of The College Board. Click here to go there.

It is also recommended that a student take the Federal Direct Stafford Loan each year while an undergraduate. It is not needs-based.  If not needed to pay for undergraduate education, setting the money aside could help pay for any post-graduate education expenses. It can also help improve a student’s loan repayment and forgiveness options after graduation. But loans should not be taken without a plan as to how they will be repaid. That often means running projections for ten years, or longer, into the graduate’s career.

Colleges and universities have well-defined requirements for graduation depending on the major. Know what is considered full-time and how many credits a student can take in a semester without additional costs, and how many credits are needed to graduate on time. Students often go with the flow without much thought to how their course load can help them after graduation. Look at course catalogs and major requirements beforehand. Often courses can be used to extend learning and acquire important skills even though they may be from different academic departments or even different universities, while still fulfilling necessary credit requirements.

For many, it is tough to know what they want to do when they grow up. I know some retirees who still aren’t sure. It is important to do some research into your child’s proposed career field. But in our highly specialized world, it is also important to examine other potential opportunities available to him or her, given their interests and strengths. Understanding not just which, but where certain jobs may be in demand, and if there is a wage ceiling in the career or industry, can provide a picture of the costs of living after college, and the impact on student loan payoff. You don’t have to be afraid of debt, or the costs associated with going to college. It is possible to create a strategy for success that will help your family navigate the stress, excitement, and high emotion of college planning.  The stakes for failing to plan are high and rising.  Begin now.


Being Smart about Doing Good

As the holiday season approaches, our mailboxes are filled with ad campaigns, catalogs, and appeals from charitable causes of every stripe. As the saying goes, ‘tis the season for giving, and there are many worthy causes working to create positive change in the world through our generosity.

Even if you regularly give throughout the year, as we move into December and year-end giving, you may not know that you could be missing out on an important provision of the tax code while making an impact through your investments. This is especially true in a year like we have had in the stock market. Rather than making outright cash donations, giving away appreciated assets can be more advantageous. When you give away a stock or other security with a long-term gain, you get to deduct the full fair market value of the asset, potentially eliminating capital gains tax from the sale of the asset. By donating an asset, the charity receives the full value, you get the deduction, and the capital gains tax on that security’s appreciation goes away, forever.

There’s another secret to wise giving: a donor-advised fund. These are accounts that help you to time your deduction for maximum tax benefit. They can even be used to turn your sporadic acts of giving into a philanthropic legacy. These are especially attractive if you expect your tax rate to be lower in the future than it is this year. You get a tax deduction for the gift in the year that the funds are transferred into the account, even if the funds remain invested and are actually given to your favorite charity sometime in the future.

You may contribute appreciated securities, stocks, or non-liquid appreciated private assets, and real estate to a donor-advised fund. Just as the name implies, you decide which charities ultimately receive the contributions, and in what amount. Grants paid out to selected charities can be deferred, while contributions or transfers of assets made into your charitable account can continue to grow as the balance is invested or re-invested over time.

These two tools can be combined. Donate an appreciated stock to a donor-advised fund. It is important to establish a strategy to structure your assets and plan your contributions and giving to help ensure you and your chosen charities are getting the most benefit. You may even be able to pass on your passion for giving to the next generation through a family legacy account, or incorporate the use of donor-advised funds into your estate planning strategy, leaving a legacy that continues to make an impact beyond your lifetime. Some parents set up these accounts to teach philanthropy to their children and grandchildren.

There is still time to make a year-end contribution, but you need to act soon as the processing deadline is rapidly approaching. It is important to keep in mind that different assets may take longer to process than others, and so may have earlier deadlines. If you are interested in setting up a donor-advised fund and would like more information, contact one of our advisors to discuss your options.