RETIREMENT MADE EASY

How do you want to be remembered when you're gone? Who do you want to bless financially? What organization or individuals are important to you? Legacy planning is the missing piece in retirement plans—and can be a difficult conversation to have. But it's a conversation that must be had and what I'm talking about in this episode of Retirement Made Easy.

You've worked hard for everything that you have. You didn't get it by accident. If you spent your entire life working for everything you have, at least spend some time planning for a positive and beautiful legacy. If you don't, it could be a nightmare for your loved ones.

• [1:44] What do you want your legacy to be?
• [3:24] My grandparent's personal story
• [6:13] Keep your legacy planning fair
• [9:31] A hypothetical scenario
• [11:05] "Bullet-proof" they money you leave
• [13:52] A conversation you need to have

My grandparents would've loved to pay for their six grandsons' college educations. But they didn't have that conversation with their financial planner and the goal was never addressed. The sad part is that they were in a great position to pay for all six educations—they just never had the conversation to put it into place.

Four of the six grandkids came out of college with high student loan debt. The other two didn't complete a college education. That's not to say they didn't leave a legacy. We all learned essential core values from both of them, such as working hard and treating everyone with respect.

People want to be fair to each of their children. They love them all the same and want everyone to be happy. One couple I met paid $20,000 for their two oldest daughter's weddings, but their youngest hadn't married yet. So they wanted to make sure she received $20,000 to cover her wedding if they passed.

I had another client with 3 sons. He paid for the oldest's college education (roughly $50,000) but the other two never attended college. He felt guilty later on in life, so he wanted to give the middle and younger sons a $50,000 lump sum check.

We had a couple with a son and a daughter who had given a small loan to their son. He was never in a position to repay it, so they forgave the loan. But to be fair, they wanted to gift their daughter the same amount.

Keep listening for a hypothetical scenario that can help you think through your own legacy planning.

Many clients want the money they're leaving to their children to be protected from liability lawsuits, creditors, etc. We call it "bullet-proofing." You can even set up a graduated distribution of the money so they don't get a lump sum all at once (if they're not responsible or can't manage the money wisely). You don't want it squandered away, right?

How will your beneficiaries handle what you give them? How will it improve their life? Some people make wise decisions, others have made terrible decisions with the assets that they inherit.

I have a client who has a trust set up with very detailed instructions on how his two sons will receive their inheritance. It can be used to pay off their mortgages or debt that they have but have to be sent directly to the creditor. Lump sums will be paid to them upon their 35th birthday, 40th birthday, and so on.

No one wants to think about a short-lived retirement. But you do want to make sure the pieces of the puzzle go where you want them to. I've seen the worst estate battles where families are fighting in probate court for years. So when they think of their parents, they think of the hell that they had to go through.

If you don't do the proper planning, you end up with a legacy that's not lived out. Financial planners can help you make smart choices now so you make a positive impact on the lives of your family and loved ones. Don't let your legacy planning fall to the wayside.

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Why do some people have a bad experience investing in the US stock market? Why do they lose money? More importantly—how do they lose money? In this episode of Retirement Made Easy, I walk through the decisions that would lead someone to lose money in the stock market—and how to keep that from being you.

• [2:31] What the research about the stock market tells us
• [6:26] Why people have bad experiences investing in the US stock market
• [10:05] BTN research on the S&P 500
• [12:20] How can you lose money in the stock market?

The NYSE is over 200 years old. The S&P 500 was started in 1957. We have a long time period to look back and see how the stock market has performed. Research done by BTN shows that every time the market has gone down, it's come back. Every time it's come back, it's set new record-highs.

So how do so many people lose money? Because fear is a bigger emotion than greed. Many investors are short-sighted and short-term focused. They're more worried about losing money than making money. Peter Lynch was quoted saying, "More money was lost preparing for the next correction or crash than the actual correction or market crash itself." I agree.

An old farmer on his porch was approached by a stranger who asked for a glass of water. The stranger asked how his corn crop was doing. The farmer said, "I didn't plant any." He was afraid of corn blight. The stranger asked how his soybeans were doing. His response: "I didn't plant any of those either." Why not? He was afraid it wouldn't rain.

The farmer didn't plant anything—he just played it safe. That's how a lot of people invest in the stock market. They're so worried about losing temporarily than the long-term growth potential. We know the down days are coming, but investing in the stock market is a marathon—not a sprint.

Investing involves subjective decision-making. It involves personal feelings, opinions, and emotions. An investor is swayed by headlines, news articles, and numerous things thrown their way. They make decisions based on these variables. You might see headlines "Market hits an all-time high." Your opinion may be "If it's at its high, I have to wait for it to go back down before buying in." But what if it continues to climb? You missed your chance.

You're making long-term investment decisions based on short-term attitudes, feelings, or opinions based on the current news or events. Successful investors make decisions based on long-term goals and plans. Failed investors base their decisions on short-term news.

If you had invested in the S&P 500 index (that represents 80% of the US stock market), 40 of the last 50 years were positive. 80% of the time, you would've made money. The average annual return was 10.9% from 1971–2020. It's remarkable. For someone who's been investing for quite a while, your investments should have grown. The BTN research showed that the last of the last 18 years, 16 were positive. So how are people losing money in the stock market?

20% of the last 50 years, the market was down. The concept of loss-aversion has proven that the pain of losing money is psychologically twice as powerful as the euphoria of gaining money. It's why many people choose not to take the risk in the first place.

Or—when there is a correction—they feel the pain and they abandon ship. They can't handle it anymore and sell at the exact wrong time. It's like trying to sell your house when the market is down. People give in to emotion, panic and get scared, and worry things will only get worse.

People are looking for certainty in a time of uncertainty, which is the wrong thing to do. You have to put blinders on to all the noise that's out there. Take a deep breath and focus on your long-term goals and why you're investing in the first place.

• BTN Research

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Should you change your investment strategy now that Joe Biden is president-elect? Should you move your investments into a different asset class? Will the stock market tank with Biden in office? 2020 left a bad taste in everyone's mouth and now many are worried about how 2021 will look with Joe Biden in office. In this episode of Retirement Made Easy, I share what I think you should or shouldn't do. If you're concerned about your future, give this one a listen!

• [1:40] Will Joe Biden's presidency impact your investments?
• [5:26] Adjust your tax strategy—not your investment strategy
• [8:20] The Allianz Women, Power, and Money Study
• [12:37] The goal for Retirement Made Easy in 2021
• [13:48] Dare to go after your retirement dreams

Some articles are saying to move all of your investments to gold because Biden is going to tank the company. Other articles are being shared about how the stock market has performed with specific presidents in office. A Forbes article that's going around from September 2020—A Biden Victory And Split Congress Is Best For Stocks, But Here's What Would Kill Markets After Election Night—is faulty. The research is comparing apples to oranges. How so?

It doesn't compare an equal number of years with Republicans as president and Democrats as president. The sample size isn't anywhere close. The stock market did well when Bill Clinton, Ronald Reagan, and Donald Trump were in office. We can't say investments will be better based on a Democrat or Republican being in office. There is no crystal ball to time the markets.

What do I recommend you do? How can you adjust something—that isn't your investments—to prepare for a Biden presidency? Listen to find out!

The Allianz Women, Power, and Money Study asked women to share their feelings and concerns about their retirement. 49% of women in the study were worried that they'd run out of money and resources. It's why you need to find a trusted financial advisor to walk you to and through retirement.

I have a new client who lost her husband right after the Covid-19 pandemic hit. Her husband handled all of their finances and investments, which left her in the dark when he passed. She was worried sick she couldn't sustain herself. My job was to teach her the ins and outs of a retirement plan to get her through the next 30 years.

Everyone has different aspirations for their future retirement. We are all limited by the resources that we have. So you have to plan your dream retirement on the resources available to you. A great financial advisor can help you make your money last as long as you do.

Don't get caught up in the headlines. There is so much negativity in the news. You have to put blinders on and focus on the long-term. Don't lose sight of your dreams and goals because Biden will be in office in January. Your investments are meant to stand for years and decades.

I want to use this podcast to be a valuable resource to listeners. So moving forward in 2021, I will do a Q&A episode once a month. If you have questions, I encourage you to go to RetirementMadeEasyPodcast.com and submit a question. I'll respond to you privately and with your permission will answer in the podcast as well.

• The Allianz Women, Power, and Money Study
• Forbes Article about Biden Victory and Stock Market

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What is a retirement plan? What should a well-written retirement plan do for you? What 5 questions should it answer? Can you adjust a retirement plan? In this episode of Retirement Made Easy, I talk about the importance of planning ahead for retirement. The sooner you have a retirement plan in place, the better. Listen to find out why it's so important!

• [0:22] The importance of planning ahead
• [2:26] The two best books on retirement
• [4:52] What is a retirement plan?
• [8:26] Adjustments you can make leading to retirement
• [9:33] The 5 questions a retirement plan answers

Many people want to know if they're on track for retirement. A retirement plan looks at where you are currently with the resources that you have. It will make assumptions and project your future retirement. Your retirement plan will help you determine if there are changes you need to make or if it's smooth sailing ahead. The sooner you can get a retirement plan completed, the better. If you wait until the last minute, a financial planner might find gaps in your plan—that could've been filled years before.

It breaks my heart when people are excited about retirement, only to find out that they can't afford the retirement that they had dreamed of. I find myself thinking, "I wish they had come to me years ago." No one wants to hear that they have to live on less or delay retirement. Doing your retirement plan earlier (5+ years early) allows for adjustments to be made leading up to retirement.

What adjustments could be made to your retirement plan that could change the trajectory of your retirement? We could max out your HSA or could increase your contributions to your 401k. We could come up with a strategy to pay off your house prior to retirement. We could adjust the risk you're taking with your investments. There are endless adjustments that can be made to your retirement plan—when you have the time. On the doorstep of retirement is NOT that time.

1. Are you on track to meet your retirement goals? If you're behind, you have to pick up the pace and make some changes. If we adjust your goals, we can work to help you retire on time.
2. How much will you be able to live on in retirement? The answer to this question depends on how much money you want to live on in retirement. If you could live on $500 a month, many people could retire today. If you need $5,000–$10,000 a month you need a retirement plan to answer that question.
3. How long will your money last? No one wants to outlive their resources. Many Americans are afraid they'll run out of money. Your retirement plan can help you determine how long your money will last. Unfortunately, many people work longer than they should because of that fear.
4. What rate of return do you need your money to make? Knowing this is extremely important. Let's say your plan told us that you need a 2% rate of return for 30–40 years. But what if I presented a plan to your sibling that said they needed a 9% annual return for 30–40 years to retire successfully? Wouldn't you want the first plan? That would tell you that you don't need the same risk to have a positive outcome.
5. When can you retire? Is it 6 months from now? Is it age 65? Or 70? Your plan will use conservative assumptions to answer this question. It's not set in stone. If the plan says you can retire at 65, it's based on today's information. As the years go on and you get closer to retirement, you'll want to reevaluate where you're at and revise your plan. Your retirement plan is clay that can be remolded.

Contractors don't build a house without a plan. They would never operate without a blueprint—the outcome that they're looking for. It needs to be the same for retirement. Listen to the whole episode for more information!

• The New Retirementality by Mitch Anthony
• Simple Wealth, Inevitable Wealth by Nick Murray

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People say that you spend 30% less in retirement—but is that true? What do you need to budget for retirement? In this episode of Retirement Made Easy, I look at data from my many clients throughout the US to help YOU get a clearer picture of your budget for retirement. If you're questioning where your budget needs to be, don't miss this one!

• [2:05] How to create a budget for retirement
• [7:12] Chapman University Survey of American Fears
• [8:34] What will you spend in retirement?
• [9:53] What expenses will change?

The rule of thumb says you'll spend 30% less in retirement than when you were working. My advice? Do not operate on a rule of thumb. Instead, operate based on your own goals. I believe everyone is a snowflake. Everyone's families, financial situations, and goals are different. Some retirees want to golf every day of the week. Others don't even like golfing. So what do you do to determine an accurate budget for retirement?

One thing you can do is look at the year leading up to retirement to see what you're spending and the lifestyle you're accustomed to. Look at your take-home pay. What is your net monthly income? You want the same lifestyle you're accustomed to, right? If you're used to living on $6,000 a month, wouldn't you want to continue that? But we take it a step further.

You need to ask what expenses will exist in retirement that didn't exist prior. Increasing costs of health insurance might be an expense you need to account for. If you want to travel more, that costs more. If you want to eat out more, you have to account for that. I have one client that has an expensive hobby: flying planes. These people will spend more in retirement than they did working!

The hard truth is that $6,000 a month may not be enough to afford the retirement you're envisioning. So you need to question: What does the ideal retirement look like for you?

I was at a presentation where the speaker asked the audience, "Are you highly confident that your retirement income will always be enough to sustain your lifestyle? Or are you at all concerned that at some point you'll begin to run out of money?" Most of the audience was worried they'd outlive their money.

Chapman University conducts a yearly survey of Americans and their greatest fears. The fourth greatest fear on the list in 2018 was not having enough money for the future. Becoming financially destitute is a terrible situation to be in because you lose all control, independence, and dignity. That's why planning ahead is so important. You can't overspend in the early years. No one knows how long they will live or what the future holds—so you must plan as wisely as you can.

The bottom line is that you do need to put together a budget. Where is your money going? Start with your biggest expenses. What is your mortgage? What will your health insurance cost? Go down the list through everything you can think of. Overestimate expenses whenever possible. Then, look at a 12-month average. That will give you a good idea of what the next year will be like.

From there, break up your expenses into fixed expenses and discretionary expenses. Discretionary expenses are the extra things in life, like going out to a movie or a new restaurant—splurging. Fixed expenses are food, utilities, housing—the things you absolutely need to survive. Then you have to ask the question: What expenses will change?

You may have a goal to pay off your house before you retire. Doing this does remove your biggest expense and allows you to live on less. What other expenses might not exist in retirement? Will your gas expenses go down? Can you stop paying for dry-cleaning?

Start with your fixed expenses and add in discretionary expenses. That gives you an idea of what retirement may cost. Can you afford to retire based on the resources that you have? Do you have a pension? Retirement accounts? Make sure you have a firm understanding of what your retirement income will look like. You need enough to meet your desired expenses. If you're preparing for retirement, make sure to listen to the whole episode for the full discussion!

• Chapman University Survey of American Fears
• EveryDollar app

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The bucket strategy is a popular way to plan for retirement. Now only is it popular, but it's an easy-to-understand approach that works. Everyone wants to retire and be able to live comfortably, but many people don't realize that it takes some planning to do that. Social security and pensions aren't enough to sustain your lifestyle. So what is the strategy? How does it help you reach your retirement goals? Listen to this episode of Retirement Made Easy to find out!

• [1:33] The retirement bucket strategy
• [3:20] Bucket #1: Your rainy-day fund
• [5:42] Bucket #1B: Upcoming expenses
• [6:57] Bucket #2: a 4% withdrawal
• [12:10] Bucket #3: Leftover money

The purpose of bucket #1 is to be your rainy-day fund—AKA your emergency fund. This is for the unexpected circumstances that life throws your way. It might be a new furnace, A/C, or new tires on your car. We recommend that anyone in retirement should have 6–12 months of living expenses saved. If your current monthly expenses are around $5,000, you'd want at least $30,000 in bucket #1 for your emergency fund.

This isn't something you invest but simply hold in an account at your bank. These days, you won't earn much interest on your emergency fund. But if you're looking for the best bang for your buck, BankRate.com can help you weigh your options.

Also always recommend something I call bucket #1B for "upcoming expenses." For upcoming expenses, set aside a "sinking fund" where money is earmarked for upcoming expenses. After all, you don't want to deplete your emergency fund to buy a new car. You might need to pay for dental work. Or you could be paying for a wedding or vacation. They are all near-term expenses that you need to plan for.

You have to look at retirement as a cashflow issue. Let's assume you're collecting a pension and social security. Perhaps you have a $2,000 a month deficit that you need to draw from your retirement accounts to sustain a comfortable lifestyle. We've already established that you can't live just on social security or your pension.

That's why we recommend earmarking funds to bucket #2 where you can withdraw 4% a month. So if you need $2,000 a month, you need to fill up bucket #2 with $600,000. A 4% withdrawal from this bucket produces the income you need to live in. You can invest your retirement accounts however you and your advisor decide—but it needs to be producing a monthly income for you. What might not be a good idea to invest bucket #2 in? Listen to hear my thoughts!

Bucket #3 is crucial to your retirement plan. This bucket should be invested for growth. The money you're living on in bucket #2 may not be enough to sustain the lifestyle you want in retirement. Why? Because the cost of living will go up every year. An extra $2,000 a month may not always be enough. You may need to dip into bucket #3. You need more growth in this bucket than the cost of living increases per year.

Medical expenses will rise. The price of a flight or hotel room will increase. 30 years ago—in1990—a stamp was $0.25. In 2020 it's $0.55. According to this article, a gallon of gas was $0.79. Now it's $2 a gallon. A Big Mac at McDonald's was just over $3. In 2018 they were $5.99. Now they're over $6.

The bottom line? You need to understand how your money is invested. This bucket strategy works well and makes sense. It allows you to diversify your risk. The beauty of the bucket strategy is that it divides the money out based on your goals and needs. Listen to the whole episode to learn more!

• USPS
• Bankrate
• Article: 1990s Prices

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What are the insurance options for anyone who wants to retire early? What's the difference between long-term care and hybrid long-term care? Why would I never recommend a Medicaid Irrevocable Annuity Trust? These are just a few of the many questions I answer in this special Q&A episode of the Retirement Made Easy podcast. Be sure to listen!

• [0:52] Rapid-fire questions & answers
• [2:41] Insurance options for those retiring early
• [4:39] Should you invest in Whole Life Insurance?
• [6:00] The difference between regular and hybrid long-term care
• [9:00] How often should you meet with a financial advisor?
• [10:51] Why I'd never recommend a Medicaid irrevocable trust
• [15:51] Can you live off of social security benefits alone?
• [19:23] Should old be a portion of your investment portfolio?

The #1 reason people wait to retire until 65 is because health insurance is so expensive. But if you do want to retire early, what are your options? One option is to work until you're 63 ½ and jump on COBRA for 18–36 months—but it's insanely expensive. Another strategy is to meet with health insurance specialists to look over options available in the marketplace ("Obamacare"). Lastly, you can look at private health insurance options. Check this out before you announce your retirement.

If you should ever need long-term care, this type of policy pays a promised monthly amount of money toward that care. People dislike it because you can pay for the policy for years and may never use or need the coverage. That money is just gone. It's like paying for homeowners insurance when your house never burns down. But it does afford you peace of mind if something were to happen.

Hybrid long-term care policies are usually combined with a life insurance component. If you did pay for the policy and never needed long-term care, there is a death benefit component. So when you pass away, your beneficiary will receive the life insurance payout (a tax-free death benefit). If you never use the care, someone will still benefit from it. Many people prefer these policies, but the one caveat is they tend to cost more.

How often should you meet with a financial advisor? Listen to hear my thoughts on this question!

Some elder law attorneys recommend locking your money into a Medicaid Irrevocable Annuity Trust. Why? It moves money out of your estate, so instead of paying for your own long-term care, you force Medicaid to.

It's essentially trying to hide the money from medicare so you can qualify for Medicaid. Your care would be paid for from social security and pensions. Then Medicaid steps in to make up the difference. Your children or family would inherit the trust. I do not morally or ethically support this practice nor would I ever recommend it.

Can you combine inherited IRA's? Listen to hear my answer.

Some people can live on their social security benefits, but it depends on your lifestyle. If you're accustomed to more than the bare minimum, you need to supplement that income.

My social security statement says "Social security benefits are not intended to be your only source of income when you retire. On average, social security will replace about 40% of your annual pre-retirement earnings, You will need other savings, investments, pensions, or retirement accounts to live comfortably when you retire."

They tell you this up front. The 60% needs to come from somewhere else. As long as you plan for that ahead of time, you'll be just fine. Someone I know looks at social security as a bonus income for retirement—not what will carry you through it.

Should old be a portion of your investment portfolio? Listen to the whole episode for my thoughts on the rest of the questions!

• Example Social Security Statement

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In this special throwback episode, I'm going to highlight a fan-favorite episode of the Retirement Made Easy Podcast, episode #7—The Worst Retirement Plan EVER. I talk about the worst retirement plan I've EVER seen, go over the six mistakes that were made, and cover what you should do instead. Don't miss this replay—you might catch something you missed the first time.

Why are large companies (like Amazon) getting tax breaks while the common man doesn't? What about the wealthy—should those making more than $400,000 need to pay more in taxes? We are in a low tax environment right now and some people are upset by it. They say that corporations aren't paying their "Fair Share" in taxes. But what happens if they do have to pay more in taxes? In this episode of Retirement Made Easy, I walk through what it could look like if corporate taxes and taxes on the wealthy were increased. The results won't be what you think!

• [2:14] Increasing corporate taxes
• [7:00] Increase in gas taxes
• [8:57] Increasing taxes on the wealthy
• [11:55] The goal is higher stock prices
• [13:20] Increasing taxes: the bottom line

Many people believe corporate taxes should be much higher. When companies like Amazon or Walmart are taxed low, they're incentivized to hire more people and grow their business. If you give companies an incentive, they improve the overall health of communities.

If someone in management finds out the next year's taxes will double, they have to take action. They want the stock price to continue to grow. They want to improve shareholder value. They want to continue to pay dividends. That is where their allegiance lies.

So what is the first thing they do when corporate tax rates double? They raise the prices on the goods or services that they sell to all of your consumers. If Walmart doubles its prices, who's paying for the increase in taxes? You & I.

Let's just assume Walmart increases its prices by 10% (and that we shop there). Your grocery bill goes up 10% on average. You got a 1% raise at your job. It probably didn't help you much, right? You're 9% behind. If you increase corporate taxes on big companies, they'll also be less inclined to hire new people. People don't think about the ramifications of these increases in taxes. How does an increase in taxes on gas impact you? Keep listening to find out!

What happens when you increase taxes on the wealthy? Many people who make this much money per year own a business. Let's just assume the person in my example owns an electrical company. If you tax them more, he or she might just increase the price of their electrical services that they charge customers. They may be less inclined to hire new people for their business. No one wants to take home less money, right?

It's natural to have a response to offset that cost. Most people aren't going to do more work or add on more projects to an empty plate. They'll start by increasing the price of their product or service. That means that middle-class families will pay more and have less money to work with in their budget.

A company's success in the stock market comes back to its earnings. The more money they make and the better their earnings, the better their stock does. The price should hypothetically continue to rise as earnings rise. The more they make, the better the stock price will do. If we raise taxes, they will react by increasing their prices to keep their earnings and stock prices rising.

Increasing taxes on corporations and the wealthy doesn't mean there's less money to be paid by those who make under $400,000. It's not "them versus us." It's not a fixed number of taxes that get paid to the IRS. The middle class and lower-income families are still paying the same amount. Most of us spend money at these corporations and small businesses.

An increase in taxes to "level the playing field" will hurt the lower and middle-class income brackets—not help them.

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In February of 2020, the student loan crisis hit a record $1.6 trillion. It's not uncommon to talk to college graduates who have thousands of dollars in debt. Many pre-retirees would like to help pay for or fund their grandchildren's education. It's personally on the top of my list. I believe college education is a gift that can never be taken away.

How do you help save money for your children's or grandchildren's college education? What's the best way? One of the best ways to save money for college is with a 529 plan. In this episode of Retirement Made Easy, I answer some commonly asked questions about 529 plans.

>>>>>>>>>>>>>>>

• [2:55] What if my child doesn't go to college?
• [7:51] What are the benefits of a 529 plan?
• [12:20] How the SECURE Act changed the game
• [14:35] How you could invest the money in the 529
• [16:49] How much is enough to save?

The most common objection I hear to funding a 529 College Savings plan? What if they choose not to go to college? Is that money lost? No—here are your options:

• Option #1: Change the beneficiary to another child. If your son goes into the military and doesn't need the 529 plan, you can change the beneficiary to his sibling.
• Option #2: Change the beneficiary to a blood relative. If there's not a sibling that could use the funds, you can look at a blood relative (i.e. a cousin).
• Option #3: Withdraw the funds. If there are no other blood relatives that could use the funds, you can withdraw the funds. You'll likely be hit with a 10% penalty and you will be taxed on the capital gains. But the money is not lost.

With that being said, this rarely happens in my experience. Plus, if the beneficiary wants to take a class or get a certification at some point, this money can be used toward that as well.

529 plans used to be only college savings accounts. A couple of years ago, the rules were changed. Now, a 529 can also be used for K–12 private schools. But most people use them for college savings. If you live in a state that offers a state tax deduction for the money you contribute, that's helpful from a tax standpoint.

Secondly, the account owner maintains control of the funds in the account. The beneficiary doesn't have control over the account or any say in how it's invested. You get to make sure the money is used for its intended purpose and not wasted.

The next big advantage? The money you contribute is allowed to be invested. When the money is withdrawn and used for qualified educational expenses, it can be withdrawn tax-free without penalty. How did the SECURE Act (passed in 2019) extend the power of 529s? How did it change their use? Listen to learn more!

If the child in question is 17, I would be inclined to invest the money conservatively. There's a short amount of time before he or she needs the money. If college is only a couple of years away, it may not be the best idea to invest aggressively.

But if your granddaughter is 2—you have 16 years for the funds to grow tax-free. You can invest it aggressively through those 16 years. As you get closer to her 18th birthday, you can adjust the risk that you're taking in the 529. As the owner of the account, you're in charge of how those funds are invested. Have a backup owner on the plan (i.e. spouse) if something happens to you.

How much should you save for a college education? It depends on your child's or grandchild's goals and where they want to be educated. In most cases, you can't save enough. One year of tuition at Vanderbilt is $73,000. That's the direction this country is headed—and why we are facing a student loan crisis. It's difficult to overfund an education.

I had one client who was very generous and wanted to help his grandchildren with their college education. He knew he could fund a 529, but he wanted them to put some effort into earning it. So he told his oldest granddaughter that he'd give her $100 for every scholarship she applied for.

After months and months, she applied for 40 different scholarships. So he wrote her a check for $4,000 to use for college. At the end of the day—out of the 40 she applied for—she got awarded 6 of the scholarships. They amounted to $12,000 in scholarships. She got $16,000 in total. What a great way to make your kids or grandkids put some effort in!

For all of the details on 529 plans and investing in your child or grandchild's future education, listen to the whole episode!

• The Secure Act

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