FINANCIAL FOCUS – What Should You Look for in an Annual Financial Review?

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Given the complexities of the investment world, you might consider working with a financial professional to help you move toward your goals, such as a comfortable retirement. You’ll want to establish good communication with whomever you choose, and you should meet in person at least once a year to discuss your situation. At these annual reviews, you’ll want to cover a variety of topics, including these:

  • Your portfolio’s progress – Obviously, you will want to discuss how well your investments are doing. Of course, you can follow their performance from month to month, or even day to day, by reviewing your investment statements and online information, but at your annual meeting, your financial professional can sum up the past year’s results, highlight areas that have done well or lagged, and show you how closely your portfolio is tracking the results you need to achieve your long-term goals.
  • Your investment mix – Your mix of investments – stocks, bonds, government securities and so on – helps determine your success as an investor. But in looking at the various investments in your portfolio, you’ll want to go beyond individual gains and losses to see if your overall mix is still appropriate for your needs. For example, is the ratio of stocks to bonds still suitable for your risk tolerance? Over time, and sometimes without you taking any action, this ratio can shift, as often happens when stocks appreciate so much that they now take up a larger percentage of your portfolio than you intended – with a correspondingly higher risk level. If these unexpected movements occur, your financial professional may recommend you rebalance your portfolio to align it more closely with your goals and risk tolerance.
  • Changes in your family situation – A lot can happen in a single year. You could have gotten married, divorced or remarried, added a child to your family or moved to a new, more expensive house – the list can go on and on. And some, if not all, of these moves could certainly involve your financial and investment pictures, so it’s important to discuss them with your financial professional.
  • Changes in your goals – Since your last annual review, you may have decided to change some of your long-term goals. Perhaps you no longer want to retire early, or you’ve ruled out that vacation home. In any case, these choices may well affect your investment strategies, so it’s wise to discuss them.
  • Changes in the investment environment – Generally speaking, it’s a good idea to establish a long-term investment strategy based on your individual goals, risk tolerance and time horizon, and stick with this basic strategy regardless of the movements of the financial markets or changes in the economy. Still, this doesn’t mean you should never adjust your portfolio in response to external forces. For instance, if interest rates were to rise steadily over a year’s time, you might want to consider some changes to your fixed-income investments, such as bonds, whose value will be affected by rising rates. In any case, it’s another thing to talk about during your annual review.

These aren’t the only elements you may want to bring up in your yearly review with your financial professional – but they can prove to be quite helpful as you chart your course toward the future.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

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FINANCIAL FOCUS – Keep Your Investment “Ecosystem” Healthy

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April 22 is Earth Day. First observed in 1970, Earth Day has evolved into an international celebration, with nearly 200 countries holding events to support clean air, clean water and other measures to protect our planet. As an investor, what lessons can you learn from this special day?

Consider the following:

  • Avoid “toxic” investment moves. Earth Day events show us how we can help keep toxins out of our land, air and water. And if you want to keep your investment ecosystem healthy, you need to avoid making some toxic moves. For example, don’t chase after hot stocks based on tips you may have heard or read. By the time you learn about these stocks, they may already have cooled off – and they may not even be appropriate for your goals or risk tolerance. Another toxic investment move involves trying to “time” the market – that is, buying investments when they reach low points and selling them at their peaks. It’s a great theory, but almost impossible to turn into reality, because no one can really predict market highs and lows – and your timing efforts, which may involve selling investments that could still help you – may disrupt your long-term strategy.
  • Reduce, reuse, recycle. “Reduce, reuse, recycle” is a motto of the environmental movement. Essentially, it’s encouraging people to add less stuff to their lives and use the things they already have. As an investor, you can benefit from the same advice. Rather than constantly buying and selling investments in hopes of boosting your returns, try to build a portfolio that makes sense for your situation, and stick with your holdings until your needs change. If you’re always trading, you’ll probably rack up fees and taxes, and you may well end up not even boosting your performance. It might not seem exciting to purchase investments and hang on to them for decades, but that’s the formula many successful investors follow, and have followed.
  • Plant “seeds” of opportunity. Another Earth Day lesson deals with the value of planting gardens and trees. When you invest, you also need to look for ways to plant seeds of opportunity. Seek out investments that, like trees, can grow and prosper over time. All investments do carry risk, including the potential loss of principal, but you can help reduce your risk by owning a mix of other, relatively less volatile vehicles, such as corporate bonds and U.S. Treasury securities. (Keep in mind, though, that fixed-rate vehicles are subject to interest-rate risk, which means that if interest rates rise, the value of bonds issued at a lower rate may fall.)
  • Match your money with your values. Earth Day also encourages us to be conscientious consumers. So, when you support local food growers, you are helping, in your own way, to reduce the carbon footprint caused in part by trucks delivering fruits and vegetables over long distances. Similarly, you might choose to include socially responsible investing in your overall strategy by avoiding investments in certain industries you find objectionable, or by seeking out companies that behave in a manner you believe benefits society.

Earth Day is here, and then it’s gone – but by applying some of its key teachings to your investment activities, you may improve your own financial environment.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

FINANCIAL FOCUS – Time for Financial “Spring Cleaning”

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The days are longer and the temperatures are warmer – so it must be spring. For many of us, that means it’s time for some spring cleaning. But why stop with sprucing up your living space? This year, consider extending the “spring cleaning” concept to your financial environment, too.

How can you tidy your finances? Here are some suggestions:

  • “De-clutter” your portfolio. As you go through your home during your spring cleaning rounds, you may notice that you’ve acquired a lot of duplicate objects – do you really need five mops? – or at least some things you can no longer use, like a computer that hasn’t worked since 2010. You can create some valuable space by getting rid of these items. And the same principle can apply to your investment portfolio, because over the years you may well have acquired duplicate investments that aren’t really helping you move toward your goals. You may also own some investments, which, while initially fitting into your overall strategy, no longer do so. You could be better off by selling your “redundant” investments and using the proceeds to purchase new ones that will provide more value.
  • Get organized. During your spring cleaning, one of your key goals may be to get organized. So you might want to rearrange the tools in your garage or establish a new filing system in your home office. Proper organization is also important to investors – and it goes beyond having your brokerage and 401(k) statements in nice neat piles. For example, you may have established IRAs with different financial services companies. By moving them to one provider, you may save some fees and reduce your paperwork, but, more important, you may find that such a move actually helps you better manage your investments. You’ll know exactly where your money is going, and it could be easier to follow a single investment strategy. Also, with all your IRAs in one place, it will be much easier for you to manage the required minimum distributions you must start taking when you turn 70-1/2. (These distributions are not required for Roth IRAs.)
  • Protect your family’s financial future. When cleaning up this spring, you may notice areas of concern around protecting your home – perhaps there’s a crack in your window, or your fence is damaged or part of your chimney is crumbling. Your financial independence – and that of your family – also needs protection. Is your life insurance sufficient to pay for your mortgage, college for your kids and perhaps some retirement funds for your spouse? Do you have disability insurance that can provide you with some income if you become ill or injured and can’t work for a while? Have you considered the high costs of long-term care, such as an extended nursing home stay? A financial professional can help you determine if your insurance coverage is adequate for all these needs.

Consider putting these spring cleaning suggestions to work. They may help you keep your financial house in good shape for all the seasons yet to arrive.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

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FINANCIAL FOCUS – Is a Managed Account Right for You?

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As an investor, you’ll face many decisions over the years. How much should you invest? Where should you put your money? When is it time to sell some investments and use the proceeds to buy others? Some people enjoy making these choices themselves – but not everyone. Consequently, the type of investor you are will influence your thinking about whether to open a managed account.

As its name suggests, a managed account – sometimes known as an “advisory” account – essentially is a portfolio of stocks, bonds and other investments chosen by a professional investment manager who makes the buy and sell decisions. Typically, each managed account has an investment objective based on your goals, and you may have some voice in investment choices – for example, you may be able to request that the manager avoid certain investments. Or, you might still work with a personal financial advisor who can help you identify and quantify your goals, define your risk tolerance, and track changes in your family situation – and who can then use this information to help guide the investment manager’s choices.

Beyond this basic structure, managed accounts can vary greatly in terms of administration, reporting, fees and minimum balance.

So, assuming you meet the requirements for a managed account, should you consider one? There’s really no one right answer for everyone. But three factors to consider are cost, control and confidence.

  • Cost – Different managed accounts may have different payment arrangements. However, it’s common for a money manger to be paid based on a percentage of assets under management. So, if your manager’s fee is 1% and your portfolio contains $100,000, the manager earns $1,000 per year, but if the value of your portfolio rises to $200,000, the manager earns $2,000. Because the manager has a personal stake in the portfolio’s success, this arrangement could work to your advantage. Be aware, though, that other fees may be associated with your account.
  • Control – With any managed account, you will give up some, or perhaps all, of your power to make buy-and-sell decisions. If you have built a large portfolio, and you’re busy with work and family, you may like the idea of delegating these decisions. And, as mentioned above, you can still oversee the “big picture” by either working through a financial advisor or, at the least, having your goals, risk tolerance and investment preferences dictate a money manager’s decisions. But you will have to decide for yourself how comfortable you are in ceding control of your portfolio’s day-to-day transactions.
  • Confidence – It’s essential that you feel confident in a managed account’s ability to help you meet your goals. And the various elements of a managed account may well give you that assurance. For example, some managed accounts include automatic rebalancing of assets, which, among other things, can help you achieve tax efficiency. Other features of a managed account – such as the experience and track record of the manager – also may bolster your confidence.

Ultimately, you’ll need to weigh all factors before deciding whether a managed account is right for you. In any case, it’s an option worth considering.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

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FINANCIAL FOCUS – When Do You Need a Financial Advisor?

If you could accomplish all your financial goals just by putting your paycheck

into the bank every couple of weeks, you wouldn’t need the services of a financial advisor. But life isn’t that simple – and so, at some point, you may realize you need some professional assistance. But when?

Actually, you might benefit from the services of a financial advisor during many life events, including the following:

  • Starting your career – When you’re starting out in your career, you may encounter several questions related to your benefits package. Should you contribute to your 401(k) or other employer-sponsored plan? If so, how much, and where should you invest your money? Are the life and disability insurance policies offered by your employer sufficient for your needs? A financial advisor can help you answer these and other questions you may have.
  • Getting married – When you get married, you’ll have to decide if, and how, you want to combine your finances. Also, you and your spouse may have different attitudes about investing and different tolerances for risk. A financial professional can help you find common ground.
  • Changing jobs – When you switch jobs, what should you do with your old employer’s retirement plan? And how should you invest in the plan offered by your new employer? As was the case when you first began your career, you may find that a financial professional can help you make the right choices.
  • Facing a layoff or buyout – You may never go through a layoff, or take a buyout offer from an employer – but if either of these events happen, you will face some financial decisions. And during such a potentially stressful period, you may be tempted to make some financial moves that won’t be beneficial. A financial advisor can suggest some strategies that may help you keep your investment situation relatively intact until you land your next job.
  • Saving for college – If you have children whom you’d like to send to college someday, you’ll probably want to start putting money away as early as possible. A financial professional can show you the various college-savings vehicles, and help you choose the ones that are most appropriate for your needs.
  • Getting divorced – If you are fortunate, you won’t ever experience a divorce, but, if it does happen, you’ll want to get the professional assistance necessary to ensure fair outcomes for everyone. You’ll obviously need to work with an attorney, but you may find that, in the area of investments, a financial advisor also can be useful.
  • Entering retirement – As you near retirement, your key questions will switch – but not entirely – from putting money in to taking money out. How much can you withdraw each year from your 401(k) and IRA without running the risk of outliving your resources? When should you start taking Social Security? If you were to work a couple of years longer than you had originally intended, how would it affect your withdrawal strategies? Again, a financial advisor can help you with these issues.

As you can see, most important life events will carry some financial concerns. But you don’t have to face these challenges alone – and by getting the help you need, when you need it, you can ease the transition from one stage of life to another.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

FINANCIAL FOCUS – Time to Review Your Investment Strategy for the Year

As the year draws to a close, it’s a good time to review your progress toward your financial goals. But on what areas should you focus your attention?

Of course, you may immediately think about whether your investments have done well. When evaluating the performance of their investments for a given year, many people mistakenly think their portfolios should have done just as well as a common market index, such as the Standard & Poor’s 500. But the S&P 500 is essentially a measure of large-company, domestic stocks, and your portfolio probably doesn’t look like that – nor should it, because it’s important to own an investment mix that aligns with your goals, risk tolerance and return objectives. It’s this return objective that you should evaluate over time – not the return of an arbitrary benchmark that isn’t personalized to your goals and risk tolerance.

Your return objective will likely evolve. If you are starting out in your career, you may need your portfolio to be oriented primarily toward growth, which means it may need to be more heavily weighted toward stocks. But if you are retiring in a few years, you may need a more balanced allocation between stocks and bonds, which can address your needs for growth and income.

So, assuming you have created a long-term investment strategy that has a target rate of return for each year, you can review your progress accordingly. If you matched or exceeded that rate this past year, you’re staying on track, but if your return fell short of your desired target, you may need to make some changes. Before doing so, though, you need to understand just why your return was lower than anticipated.

For example, if you owned some stocks that underperformed due to unusual circumstances – and even events such as Hurricanes Harvey and Irma can affect the stock prices of some companies – you may not need to be overly concerned, especially if the fundamentals of the stocks are still sound. On the other hand, if you own some investments that have underperformed for several years, you may need to consider selling them and using the proceeds to explore new investment opportunities.

Investment performance isn’t the only thing you should consider when looking at your financial picture over this past year. What changed in your life? Did you welcome a new child to your family? If so, you may need to respond by increasing your life insurance coverage or opening a college savings account. Did you or your spouse change jobs? You may now have access to a new employer-sponsored retirement account, such as a 401(k), so you’ll need to decide how much money to put into the various investments within this plan. And one change certainly happened this past year: You moved one year closer to retirement. By itself, this may cause you to re-evaluate how much risk you’re willing to tolerate in your investment portfolio, especially if you are within a few years of your planned retirement.

Whether it is the performance of your portfolio or changes in your life, you will find that you always have some reasons to look back at your investment and financial strategies for one year – and to look ahead at moves you can make for the next.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

FINANCIAL FOCUS – How Can You Share Your Financial “Abundance” With Your Family?

Thanksgiving is almost here. Ideally, this day should be about more than football and the imminent arrival of Black Friday mega-sales. After all, the spirit of the holiday invites us to be grateful for what we have and for the presence of our loved ones.

But it’s important to look beyond just one day in November if you want your family to take part in your “abundance.” If you want to ensure your financial resources eventually are shared in the way you envision, you will need to follow a detailed action plan, including these steps:

  • Identify your assets. If you haven’t done so already, it’s a good idea to take an inventory of all your financial assets – your retirement accounts (401(k) and IRA), other investments, life insurance, real estate, collectibles and other items. Once you know exactly what you have, you can determine how you would like these assets distributed among your loved ones.
  • Get professional help. To ensure your assets go to the right people, you will need to create some legal documents, such as a will and a living trust. The depth and complexity of these instruments will depend a great deal on your individual circumstances, but in any case, you certainly will need to consult with a legal professional because estate planning is not a “do-it-yourself” endeavor. You may also need to work with a tax professional and your financial advisor, as taxes and investments are key components of the legacy you hope to leave.
  • Protect your financial independence. If your own financial resources were to become endangered, you clearly would have less to share with your loved ones, and if your financial independence were jeopardized, the result might be even worse – your adult children might be forced to use their own resources to help support you. Consequently, you will need to protect yourself, and your financial assets, in several ways. For one thing, you may want to work with your legal professional to create a power of attorney, which would enable someone – possibly a grown child – to make financial decisions for you, should you become incapacitated. Also, you may want to guard yourself against the devastating costs of long-term care, such as an extended nursing home stay. Medicare typically pays very little of these expenses, but a financial advisor may be able to suggest techniques or products that can help.
  • Communicate your wishes. Once you have all your plans in place, you’ll want to communicate them to your loved ones. By doing so, you’ll be sparing your loved ones from unpleasant surprises when it’s time to settle your estate. And, second, by making your plans and wishes known to your family well in advance of when any action needs to be taken, you’ll prepare your loved ones for the roles you wish them to assume, such as taking on power of attorney, serving as executor of your estate, and so on. And you’ll also want to make sure your family is acquainted with the legal, tax and financial professionals you’ve chosen to help you with your estate plans.

Thanksgiving comes just once a year. Taking the steps described here can help ensure your family will share in your financial abundance as you intended.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

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FINANCIAL FOCUS – Stampeding Bull Market May Slow Down … So Be Prepared

As you know, we’ve been enjoying a long period of steadily rising stock prices. Of course, this bull market won’t last forever – and when it does start losing steam, you, as an investor, need to be prepared.

Before we look at how you can ready yourself for a new phase in the investment environment, let’s consider some facts about the current situation:

  • Length – This bull market, which began in 2009, is the second-oldest in the past 100 years – and it’s about twice as long as the average bull market.
  • Strength – Since the start of this long rally, the stock market has produced an average annualized gain of 15.5% per year.

While these figures are impressive, they aren’t necessarily predictive – so how much longer can this bull market continue to “stampede”? No one can say for sure, but there’s no mandatory expiration date for bull markets – in fact, they don’t generally die of old age, but typically expire either because of a recession or the bursting of a bubble, such as the “dot.com” bubble of 2000 or the housing bubble of 2007. And right now, most market experts don’t see either event on the near-term horizon.

Still, this doesn’t mean you should necessarily expect an uninterrupted streak of big gains. Some signs point to greater market volatility and lower returns. To navigate this changing landscape, think about these suggestions:

  • Consider rebalancing your portfolio. If appropriate, you may want to rebalance your investment mix to ensure you have a reasonable percentage of stocks – to help provide the growth you need to achieve your goals – and enough fixed-income vehicles, such as bonds, to help reduce your portfolio’s vulnerability to market volatility and potential short-term downturns.
  • Look beyond U.S. borders. At any given time, U.S. stocks may be doing well, while international stocks are slumping – and vice versa. So, when volatility hits the U.S. markets – as it surely will, at some time – you can help reduce the impact on your portfolio if you also own some international equities. Keep in mind, though, that international investments bring some specific risks, such as currency fluctuations and foreign political and economic events.
  • Develop a strategy. You may want to work with a financial professional to identify a strategy to cope with a more turbulent investment atmosphere. Such a strategy can keep you from overreacting to market downturns and possibly even help you capitalize on short-term pullbacks. You could invest systematically by putting the same amount of money in the same investments each month. When prices go up, your investment dollars will buy fewer shares, and when prices drop, you’ll buy more shares. And the more shares you own, the greater your potential for accumulation. However, this strategy, sometimes known as dollar cost averaging, won’t guarantee a profit or protect against all losses, and you need to be willing to keep investing when share prices are declining.

During a raging bull market, it’s not all that hard for anyone to invest successfully. But it becomes more challenging when the inevitable volatility and market downturns appear. Making the moves described above can help you keep moving toward your goals – even when the “bull” has taken a breather.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

FINANCIAL FOCUS – Here’s Your Retirement Countdown

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If you want to enjoy a comfortable retirement lifestyle, you don’t need to have been born rich or even to have earned scads of money during your working years. But you do need to make the right moves at the right time – which means you might want to start a “retirement countdown” well before you draw your final paycheck.

What might such a countdown look like? Here are a few ideas:

  • Ten years before retirement – At this stage of your career, you might be at, or at least near, your peak earning capacity. At the same time, your kids may have grown and left the home, and you might even have paid off your mortgage. All these factors, taken together, may mean that you can afford to “max out” on your IRA and your 401(k) or other employer-sponsored retirement plan. And that’s exactly what you should do, if you can, because these retirement accounts offer tax benefits and the opportunity to spread your dollars around a variety of investments.
  • Five years before retirement – Review your Social Security statement to see how much you can expect to receive each month at various ages. You can typically start collecting benefits as early as 62, but your monthly checks will be significantly larger if you wait until your “full” retirement age, which will likely be 66 (and a few months) or 67. Your payments will be bigger still if you can afford to wait until 70, at which point your benefits reach their ceiling. In any case, you’ll need to weigh several factors – your health, your family history of longevity, your other sources of retirement income – before deciding on when to start taking Social Security.
  • One to three years before retirement – To help increase your income stream during retirement, you may want to convert some – but likely not all – of your growth-oriented investments, such as stocks and stock-based vehicles, into income-producing ones, such as bonds. Keep in mind, though, that even during your retirement years, you’ll still likely need your portfolio to provide you with some growth potential to help keep you ahead of inflation.
  • One year before retirement – Evaluate your retirement income and expenses. It’s particularly important that you assess your health-care costs. Depending on your age at retirement, you may be eligible for Medicare, but you will likely need to pay for some supplemental coverage as well, so you will need to budget for this.

Also, as you get closer to your actual retirement date, you will need to determine an appropriate withdrawal rate for your investments. How much should you take each year from your IRA, 401(k) and other retirement accounts? The answer depends on many factors: the size of these accounts, your retirement lifestyle, your projected longevity, whether you’ve started taking Social Security, whether your spouse is still working, and so on. A financial professional can help you determine an appropriate withdrawal rate.

These aren’t the only steps you need to take before retirement, nor do they need to be taken in the precise order described above. But they can be useful as guidelines for a retirement countdown that can help ease your transition to the next phase of your life.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

marques-young

FINANCIAL FOCUS – Brighten Your Grandchildren’s Financial Future

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Mother’s Day and Father’s Day may get more attention, but National Grandparents Day, observed on Sept. 10, has gained in popularity. If you’re a grandparent, you might expect to receive some nice cards, but if you want to make the day especially meaningful, you may want to consider giving some long-lasting financial gifts to your grandchildren.

What might come to mind first, of course, is helping your grandchildren pay for college. You can choose from several college savings vehicles, but you may be especially interested in a 529 savings plan. With a 529 plan, your earnings accumulate tax free, provided they are used for qualified higher education expenses, such as tuition, books, and room and board. (Keep in mind that 529 plan distributions not used for qualified expenses may be subject to federal and state income taxes and a 10% IRS penalty on the earnings.) You may be eligible for a state income tax incentive for contributing to a 529 plan. Check with your tax advisor regarding these incentives, as well as all tax-related issues pertaining to 529 plans.

One benefit of using a 529 plan is contribution limits are quite generous. Plus, a 529 plan is flexible: If your grandchild decides against college, you can transfer the plan to another beneficiary.

Generally, a 529 plan owned by a grandparent won’t be reported as an asset on the Free Application For Federal Student Aid (FAFSA), but withdrawals from the plan are treated as untaxed income to the beneficiary (i.e., your grandchild) — and that has a big impact on financial aid, a much bigger impact than if the plan was listed as a parental asset. Beginning with the 2017-2018 academic year, however, FAFSA now requires families to report income from two years before the school year starts, rather than income from the prior calendar year. Consequently, it might be beneficial, from a financial aid standpoint, for you, as a grandparent, to start paying for college expenses from a 529 plan in the year in which your grandchild becomes a junior. Contact a financial aid professional about the potential financial aid impact of any gifts you’re considering.

A 529 plan isn’t the only financial gift you could give to your grandchildren. You might also consider giving them shares of stock, possibly held in a custodial account, usually known as an UTMA or UGMA account. One possible drawback: You only control a custodial account until your grandchildren reach the age of majority, at which time they can use the money for whatever they want, whereas distributions from a 529 savings plan must be used for qualified higher education expenses.

Still, your grandchildren might be particularly interested in owning the stocks contained in the custodial account – most young people enjoy owning shares of companies that make familiar products. And to further interest your grandchildren in a lifetime of investing, you may want to show them how a particular stock you’ve owned for decades has grown over time. Naturally, you’ll also want to let them know that stocks can move up and down in the short term, and there are no guarantees of profits – but the long-term growth potential of stocks is still a compelling story.

You’d probably do whatever you could for your grandchildren – and with a smart financial gift, you can make a big difference in their lives.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marques Young
Edward Jones Investments
8001 Centerview Parkway, Suite 112
Cordova, TN 38018
Office: (901) 751-0634
Email: marques.young@edwardjones.com
Member SIPC

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