Good College Strategy: Roll Your Old 401k Into An IRA

One of the most exciting things about what I do is not only show families how to save thousands of dollars on the cost of college, but to show them financial and/or tax strategies that they'll greatly benefit from.

For example, I've had numerous families that have come into my office showing me an old 401k sitting out there with their former employer.  One of the first things I ask is, "How well is the old 401k doing, and do you think you may have to potentially tap into some of those funds for college expenses?"  Almost all families have the same response, "Well, we don't really want to touch our retirement dollars unless we have to."  I couldn't agree with them more. The sad part, however, is that many families have had to tap into their old 401k to help their kids with unforeseen college expenses.

If spending money out of your old 401k is something that could potentially happen to you, then you may want to seriously consider rolling that old 401k into an IRA position.  Doing it is easy!  And, it is NOT a taxable event.  Plus, turning it into an IRA can provide you with more college-friendly options that what an old 401k can afford.  The savings could be significant!

Here's why you may want to seriously consider turning your old 401k into an IRA:

1) First, the Internal Revenue Service is nice enough to allow greater flexibility with an IRA than they do with 401k's!  Believe it or not, the IRS will allow you to pay for you or your children's qualified college expenses with IRA money without having to pay a 10% pre-59 1/2 distribution penalty.  That's huge!!!  With a 401k, you'll have to either take a loan out (up to 50%) and pay the money back with interest within 5 years.  Or, you can take the money out to pay for college expenses and be charged the 10% IRS penalty tax! Remember though, with either plan you'll have to pay taxes on the money received.  But, with an IRA there is NO 10% penalty tax.

2) The IRA also has more flexibility in withdrawing money for other needs as well!  For example, if you lose your job (God forbid!) and you haven't turned 59 1/2 yet, you can still avoid the 10% penalty tax by using an IRS approved strategy.  Your old 401k won't allow you to do that.

3)  IRA's provide many more investment choices and opportunities than do 401k's!  Thus, your earnings potential could be much greater.

4) An IRA also can be a much better estate-planning tool!  One good example is that, if you die, your beneficiaries will have more tax-favored options in receiving those hard-earned dollars than they would with your old 401k.

5) Your old 401k probably has management fees and various charges.  Many IRA's don't have either - thus saving you a lot of money!

6) Most 401k's have greater risk issues than do some IRA's since they are mostly tied to stock market values.  Some IRA's will offer you stock market gains without any downside risk.  In other words, there are some IRA's out there that will contractually grow your money along with the market but will lock your gains in each year.  If the market goes down, you don't lose anything.  Then, when the market goes up, you receive some of the gains.

But, before you throw your old 401k money into any IRA, please give our office a call.  We'll provide you with some great information and options that can provide the most college-favored programs available.  It's free, and there's no obligation!

College Costs Are Soaring!!

Colleges, year by year, are becoming more financially dependent on parents paying for out-of-pocket expenses than ever before! Endowments have taken a big hit, which has left even elite schools, including Harvard and Yale, facing steep cost-cutting. State universities are also facing steep slashes in government funding. All of which means  it will be even harder for colleges to meet demands for financial assistance next time around.

The bottom line...parents and/or student are going to need to find money to pay for college some how!

The current aid crisis only underscores the never-ending problem of soaring tuition costs. As MONEY magazine and many other publications have frequently pointed out, colleges are jacking up tuition costs at twice the rate of inflation; education expenses have far outpaced inflation for more than two decades.

Meanwhile, most families are less prepared than ever to meet those bills. Numerous surveys have shown that few have the cash stashed away to pay the five-figure tuition amounts required by many schools. So expect aid applications to soar again!

If there is ever a time to seek the help of college funding professionals, it is now!

How To Attend College "TUITION FREE!"

Did you know that there are OVER 100 colleges that will allow your student to attend TUITION-FREE?  Harvard is a good example!  If you make less than $60,000 per year but make excellent grades and score high on the ACT/SAT...you may qualify to attend TUITION-FREE!  It's called the "Harvard Initiative."  Another good example is College of the Ozarks!  As a "faith-based" school, it is also called "hard-work U."  Students work on campus instead of paying tuition.  This saves the student gas money and tax dollars, not to mention thousands of dollars in tuition costs!

For more information, call me at 816-739-9894 today!

How To Survive "The College Funding Maze!"

DID YOU KNOW...   COLLEGE COSTS HAVE BECOME THE "2nd LARGEST DEBT" IN AMERICAN SOCIETY TODAY?

Congress has correctly referred to it as "A CRISIS OF MAJOR PROPORTIONS."  As the cost of college continues to skyrocket and the financial aid dollars continue to dwindle, it has become more and more difficult for parents to get some kind of financial assistance. While there is more than $143 billion dollars available, only those parents who can understand the college funding process and use that knowledge to their advantage are going to receive the maximum amount of money possible. It is not uncommon for low income families who have assets in the wrong place to lose out on financial aid. And, it's not uncommon for families who make over $100,000 per year in income to receive some form of financial assistance. The real difference is their understanding of the process and what they need to do to position themselves to double, or even triple, their eligibility for aid.

You see, as more and more students enter college, the financial aid offices of these colleges are being forced to use their limited financial resources to attract the strongest applicants or to save their government-funded resources for the most needy. The strongest applicants and the most needy typically end up winning at the college funding process. However, like I said before, you can have a low income ($25,000 per year) and still NOT receive any assistance. It depends on a lot of things...things most parents aren't aware of.

15 Most Lucrative College Degrees Today!

According to a recent 2009 survey from the National Association of Colleges and Employers (which tracks college graduates and their job offers), the following are 15 of the highest paid areas for new college graduates:

1) Petroleum Engineering - $83,121
2) Chemical Engineering - $64,902
3) Mining Engineering - $64,404
4) Computer Engineering - $61,738
5) Computer Science - $61,407
6) Electrical Engineering - $60,125
7) Mechanical Engineering - $58,766
8) Industrial Engineering - $58,358
9) Systems Engineering - $57,438
10) Engineering Technology - $56,447
11) Actuarial Science - $56,320
12) Aeronautical Engineering - $56,311
13) Agricultural Engineering - $54,352
14) Biomedical Engineering - $54,158
15) Construction Management - $53,199

Of course, not every student earning an engineering degree is going to receive a large paycheck. However, graduates with a technology degree do have an advantage over many other fields.

8 Critical Tips To Securing A Scholarship!

1) Apply only to those scholarships that best fit your profile! Find as many as you can, then weed them out until you can find the 10 best-fit applications.

2) Pay attention to deadlines!

3) Send the application in with a "thank you" cover letter!

4) Provide answers and items to the committee in the order they are listed on the application!

5) Add extra items to your application (if not prohibited). These "extra" items could include any letters of recommendations, a short essay on your career goals, an acceptance letter from a college, and school transcripts.

6) Sell yourself!!! Find every little thing you can to brag about yourself. Get your parents to help you with this.

7) Proof-read all the materials before sending the application in and make sure everything is in a neat order.

8) Submit your application land and other information in a clear plastic folder with a slide-locking binder. Make sure the "thank you" cover letter is on top, followed by the application, followed by the extra informatioin.

Cover Letter For Scholarships

August 17, 2008

John Doe, President
XYZ Scholarship Committee
1234 Expressway Park Rd.
Kansas City, MO 11111

Dear Mr. Doe,

This letter is to introduce myself, (your name) , and my desire to participate in the XYZ scholarship program. I have been accepted to (name of college) for the fall of 2009.

I would like to thank you and the XYZ Scholarship Committee for your interest in helping college bound students with an opportunity for financial assistance through your program. I am enclosing my application form, ACT results, school transcripts, letters of recommendation, and other information you requested.

If you should have any further interest in additional material, I would be more than happy to submit that to you as well. Once again, thank you for all you do on behalf of myself and the students of our great state.

Most Respectfully,

(Your Name)