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    Joshua and Laura Meier Newport Beach Trust and Estate Planning Attorneys Focused on Helping Families with Young Kids
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    Category Archives: 401k

    Striking a Balance Between Funding Your Retirement and Your Child’s Education

    Many parents perceive a conflict between funding a child’s college education and building their own retirement nest egg. The conflict usually arises from the lack of financial resources to do both while funding daily living expenses, so parents become stuck between priorities and usually wind up doing nothing at all.

    One of the things Meier Law Firm can help you do is sort out your priorities in a way that supports your family for the long-term. With that in mind, here are some guidelines on striking a balance between saving for your retirement and your child’s education:

    Build an emergency fund first. This should be 3-6 months of living expenses that you have saved to fall back on in an emergency. If you don’t have it, you will likely be forced to raid your 401(k) or other retirement account, spending more for penalties and taxes to cover the cost of the emergency.

    Saving for college or retirement?Save for your retirement or build a business to fund your retirement second. It is difficult for many parents to accept that they may not be able to fully fund a child’s college education, but consider the alternative. You aren’t being “selfless” if you spend what you should have saved for retirement or to create a business to fund your retirement on a child’s education, and then run out of money right when your kids are having their own families and trying to save for their own retirement. Then you will be financially dependent on them – just what you (and they) don’t want. There’s a reason there are loans for education but not for retirement.

    Save for your kids’ college education last. Only after you have funded your emergency stash and your own retirement accounts (or built a business to fund your retirement) should you funnel cash to a child’s education fund. If you invest in a 529 college savings plan, the earnings grow tax-free. Also, other people in your child’s life — like grandparents and generous aunts and uncles — can contribute as much as $14,000 per year (annual gift tax exclusion) to a child’s 529 plan.

    If you would like to learn more about strategies for getting your financial future in balance, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for an Achieve Your Dreams Planning Session, but because this planning is so important, we’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call your Newport Beach trust and estate planning attorneys at Meier Law Firm today at 949.718.0420 and mention this article.

    Small Business Owner Retirement Perspectives

    Small business owners, by and large, have a hard time thinking beyond their business. It is a significant part of their very lives. If you are a small business owner, now may be the time to start thinking of your business as its own retirement vehicle, at least according to a recent guest columnist over at Forbes.

    For retirement planning, a business owner typically has to take out of the business what would otherwise be capital for growth. You’re taking it out to put into a tax advantaged plan like a 401k, hoping it will grow there enough to make up for the taxes to be paid later. In addition, you are doing so in the belief that you’ll be in a lower tax bracket when you call upon those funds later on. But what are the returns on that account? It may be that a properly capitalized company will give far greater returns.

    According to the Forbes article, a small business owner has to exist in a couple capacities, and the self that is an “individual” cannot be eclipsed by the self that is the “business owner,” nor the other way around. Ideally, perhaps, they can work in a synergy.

    It is a risky strategy, especially for those nearing retirement, but it may be worth looking into the original article’s numbers.

    For more information on building your small business or planning your retirement, visit Meier Law Firm today.

    Laura K. Meier, Esq.

    Reference: Forbes (January 25, 2012) “Fund Your Business Before You Stuff  Retirement Accounts

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