A Rule Change Allows Grandparents To Give More To A 529

Do you have a young child in your life that you want to save college money for? In honor of 5/29 day, it’s a great time to think about putting money aside for your grandchild’s and child’s future education. Also, great news, theres a new rule change that may be beneficial to you and your grandchild! With rising inflation, we don’t know what the price of tuition will be when your young grandchildren are finally old enough for college, so, now is a great time to begin looking into contributing to a 529 savings plan. 

So, for those of you who don’t know, 529 plans are a type of investment vehicle that allows you and encourages you to save for your child or grandchild’s higher education using tax incentives, such as such as tax-free earnings and withdrawals for qualified educational expenses. Depending on the state in which you reside, choosing your state’s 529 plan may offer a tax deduction; however, consult with your CPA or financial advisor to see if the deduction outweighs the investment options and fees versus an out-of-state plan. 

You can think of a 529 account like a traditional IRA or 401(k)account, where the growth compounds tax deferred as long as its used properly. In addition, parents and guardians have the potential of earning more by investing instead of leaving the money in a traditional bank account.

In fact, for you grandparents out there, there was a recent change to the financial aid rule allowing you to contribute to a 529 savings plan without penalizing or interfering with your grandchild’s eligibility for financial aid. This eligibility has long been issue for many individuals, so starting in the 2024-25 school year, children will no longer have lessened eligibility for financial aid while also having a grandparent 529. “The fear that a grandparent helping their grandchild by using their own 529 plan would interfere with them getting financial aid, that worry is gone now with the new rules,” said Stuart Siegel, president of college financial-aid service FAFSAssist.

A 529 plan is a great idea for parents and grandparents who place importance on a college education and want to save money when making financial contributions. Also, given the new rule change, if you are a grandparent, you now have the opportunity to contribute even more dollars towards college education. The benefits seem so advantageous! So, even if you think your grandchildren have many years until they are off to college, it’s never too early to start thinking about saving for it.  For more information on 529s, check out the IRS website here. If you have any questions about setting up a 529 plan, please reach out to us at info@shermanwealth.com or schedule a 30-minute complimentary intro-call here -we are here to help!


A Look At Market Volatility Thus Far In 2022

What a wild start to the year it’s been with inflation surging, the Russia-Ukraine war, and the Federal Reserve rising interest rates. When the world and country faces economic events such as these, the markets, just like the consumer, digest and respond. So, let’s take a look at how some of these economic events have impacted not only the consumer, but the stock market as well.

As you probably already know, inflation has skyrocketed this year, having a large impact on the cost of living and pretty much everything, as you can see in the YoY CPI report charted below.

As we’ve watched inflation take off, we’ve been thinking a great deal about the consumer and what they have been seeing and feeling. Have you been spending more recently? If so, what areas are you spending more money on? Have higher gas prices impacted your interest in travel? The chart below shows consumer sentiment near all time lows, really depicting the effects that inflationary prices are having on individuals’ financial picture.

Are rising prices beginning to alter the way you spend your money? If so, we are here to help, so let us know if you would like for us to revisit your budget and financial plan during this time. 

For those of you who have been investing in the stock market, you may be feeling a sense of anxiety as the market has been extremely volatile in response to earnings season, rising interest rates, inflation, and more.

However, we want to show a zoomed out picture of stock market returns and pullbacks over time. At Sherman Wealth, we always emphasize the importance of time in the market instead of timing the market. As you can see in the J.P. Morgan slide on the right, time is your best friend. Try to remember to stay calm and think about your reason for investing in the first place along with your time horizon. If you are a long-term investor saving for retirement, take a close look at the overall returns and drawbacks overtime, as you have many years ahead of you for your money to grow. 

We know the past few months have weighed heavily on the economy; however, we urge you to stay calm. If you have any questions about the current market environment or your own specific financial portfolio, please let us know and we are happy to help. Email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here.  

The Return Of Beers with Brad

After a two and a half year hiatus due to COVID-19, we were extremely excited to be back to host Beers with Brad on May 19th, 2022. It was great to gather with local centers of influence, peers, friends, and clients to discuss all the economic data we have been seeing and the market has been digesting. Not only did the event provide an open space for individuals to ask their own personal finance questions, but it was a great opportunity to network with local professionals and enjoy some beers.

For those of you who may own a small business and would like us to host a Beers with Brad for your employees to provide them the opportunity to learn about financial literacy and ask questions they may have about personal finance or their benefits at work, please email us at info@shermanwealth.com or schedule a complimentary intro call here to learn more. Due to the great outcome and positive feedback, we will be hosting another Beers with Brad on July 14th, 2022 At Launch Workplaces (9841 Washingtonian Blvd #200 Gaithersburg, MD 20878). Please rsvp to the link following or email ashley@shermanwealth.com. https://www.eventbrite.com/e/beers-with-brad-july-14-2022-tickets-347954359857 to RSVP.

When Should You Give Inheritance Money to Your Kids?

When it comes to gifting and giving money, especially to family members, people are oftentimes confused on when is the right time to pass over their inheritance. Should an inheritance be strictly given after one’s death? Should it be used while one is still alive?  Let’s take a look at some of these questions.

Of course, every family is different, in terms of how they want to be remembered, but there are some things that every family should think about when passing on wealth. Many articles recently have been stating that individuals believe they will need an inheritance to maintain their level of wealth and living when they grow older. A Merrill Edge survey revealed that “a third of “mass affluent” Americans from Gen Z to baby boomers with investible assets of at most $250,000 are waiting on inheritances to achieve financial stability.” It’s interesting to see that so many individuals are relying on such wealth as part of their financial future. It will be interesting to see how the current market conditions impact the ability for individuals to continue to pass down wealth. Next, let’s take a look at when family members should think about passing down their inheritance to their heirs. 

Give Now or Later?

Giving now rather than later is the preferred approach for many financially comfortable people these days. According to a 2019 Merrill study, Leaving a Legacy: A Lasting Gift to Loved Ones, 65% of Americans 55 and older say it’s better to pass on at least part of their estate while they are still alive.

While every family person has a different financial situation and circumstance, if deciding whether to gift your money earlier or later, here are some questions to ask yourself. 

Are You Over-Giving?

Before you give to your children or family members, make sure you are not sacrificing your own personal financial situation. Oftentimes, family members give too much to their children and don’t save enough for their own lifetime. 

Some of your children may prefer to wait for their inheritance, while others could benefit greatly from having the assets today. Before making that decision, make sure to communicate with your family members to make sure everyone is comfortable with the situation at hand. We recently recorded a podcast episode with David Pearl discussing money and financial traditions, explaining how to pass down money values and concepts. 

Where the U.S Tax Code Comes In

For those who are interested in contributing to the education of heir children or grandchildren, 529 plans may be a great place to start. 529 plans allows you to slowly contribute and save for your children’s education that they can use later in life. Remember you can give up to $15,000 tax-free without it going against your gift exemption.

While this situation varies from person to person, it’s important to plan out your inheritance and set a will in place so that your hard-earned money is shared amongst your loved ones. Planning early and asking yourself these questions is a great strategy to help you make the right decisions when it comes to your inheritance. If you have any questions about your personal financial situation and what makes the most sense for you and your family, please email us at info@shermanwealth.com. 

How Do You Feel About Investing During Extreme Market Volatility

Given the extremely volatile current market environment, how are you feeling about your investments and your overall financial stability? We know that this is a uncomfortable and difficult time for many people, as they are watching their hard-earned savings and investments plunge; however, we are here to discuss the long-term nature of investing and the importance of looking at the bigger picture. Tune into our audio recording below for our thoughts about these intense market swings and the importance of long-term investing.

As discussed in our recording and further shown in the chart below, it is quite valuable to stay invested in the stock market for the long term, despite market crashes and corrections.  We know that headlines in the news and day-to-day fluctuations can be scary and induce anxiety, but keep in mind your initial goals for investing and your time horizon. If you are a long-term investor, try not to get too caught up in the day-to-day volatility, and rather the bigger picture and longer timeline. Although we do not know the direction the stock market will take in the future, as the chart depicts, time in the market instead of trying to time the market seems to be the better choice.

For those of you who are feeling stressed or worried about your investment portfolio, now is a prudent time to meet with a financial professional to discuss your risk tolerance, asset allocation, and specific finances. If you have any questions for us, we are here to help in any way we can.  To reach our team, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here.

Ep. 86 Launch Financial-How Rising Rates Will Impact Your Home-Buying Process

Overview: Join us for a very speicial episode of Launch Financial this week as we are joined with recurring guest, Jody Eichenblatt. On this week’s episode we are going to continue our discussion of rising interest rates and get Jody’s professional opinion on how these hikes will ultimately impact the consumer and the home-buying process. Tune in for a great episode! 

A little about Jody, Jody Eichenblatt (NMLSR# 181198) is a Senior Mortgage Consultant with over 18 years of experience in the mortgage industry holding a license in Virginia, Maryland, the District of Columbia and Florida.  Jody’s professional service is founded on delivering the best possible customer experience for his clients and partners.

Whether you are a first time homebuyer or seasoned refinancer Jody understands that each transaction is unique and special and treats it as such.  Listening to his clients objectives and clearly communicating all of the available options is what makes Jody a success.

Jody graduated from the University of Maryland Robert H Smith School of Business with a MBA, and a BS in Marketing and Logistics.   In his free time Jody enjoys running, hiking, biking, traveling and most of all spending time with his wife Kim, son Ryan daughter Taylor and mini Aussiedoodle Teddy. For questions about the episode, email info@shermanwealth.com. 

Check out this episode!