The Viagra College Fund Phenomenon

Mary Beth Franklin (contributing editor for investmentnews.com) published an interesting piece recently. In it, she describes a Social Security benefit strategy which she titles The Viagra College Fund.

This college fund strategy applies to retirement age fathers with children who are still minors. These children can be your natural children, adopted children or dependent stepchildren.

The first step of the strategy is for you to reach the official retirement age. Once you hit full retirement age, your earnings cap is removed and you can continue to work without lowering your benefits. You are also allowed to postpone filing, electing to suspend your Social Security benefits instead.

If you have a child who is a minor, your suspension will automatically trigger a monthly payment for your dependent. This payment is worth 50% of the full retirement benefit you would receive.

To further improve the situation, the payments received by your dependent do … Read More

529 Plans: Invest for Anyone

529 plans allow people to save for college and the costs of higher education. In MN this is called the “Minnesota College Savings Plan”. This flexible plan allows any U.S. citizen over 18 years of age to open an account on behalf of a beneficiary.

There are numerous benefits that go along with the College Savings Plan. There are no federal or state tax deductions for contributions to the fund. However, all of the account earnings are considered “tax-free investment income”, meaning they are not subject to federal or state income tax.

Any distributions for qualifying higher education expenses (including tuition, books or supplies are also tax free. Room and board is also permitted as an education expense if the student is enrolled more than half-time. If a non-qualifying distribution is made, the earnings are taxable at the state income tax rate for your tax bracket. Furthermore, federal law assigns a … Read More

Parents: Get the 4-1-1 on the 529 College Savings Plan

Have a child who’s headed off to college in the future? It’s never too early to start planning how you’re going to cover the rising costs of higher education. A 529 savings plan can help you save for your child’s (or other dependent’s) college tuition. The rules differ by state (you can look up your state here), but the basics are the same: you make regular contributions to an investment and then withdraw from that pool of money to pay for college-related expenses.

The good news: your withdrawals are tax-free, meaning you won’t be subject to any taxes each time you take out money to pay for a qualified expense.

The bad news: not all college-related costs are considered qualified expenses.

So before your child heads off to earn his first degree, you’ll want to do some homework yourself. Using 529 money to pay for the wrong kinds of expenses … Read More