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529 Funds Can Be Used For Off Campus Housing

          Funds in 529 accounts can be withdrawn tax-free for off-campus housing.  But, there are limitations.  First, the college student must be enrolled at least half-time.  You also cannot claim more than the room and board allowance that the college includes in the cost of attendance for federal financial aid purposes.  You should be able to get this figure from the school’s website or financial aid office.  Note, that food and routine utilities also count as long as the total living costs, including rent, fall within the room and board allowance determined by the school.

Untimely Repayment of Plan Loan Creates Income

          Failing to make timely repayments of a plan loan leads to taxable income for a 401(k) participant.  Before going on maternity leave, an employee took a loan from her 401(k) and agreed to pay it back via bi-weekly payroll deductions.  Her employer failed to charge the repayment during her three month leave so she did not make the first six payments when due.  The plan administrator issued a 1099-R reporting the loan balance as a taxable distribution.  Although she fully repaid the loan by the due date, the Tax Court said she defaulted on it because of the late payments and decided that the plan administrator acted correctly.  Frias TC Memo 2017-139.

Want a $1,000,000 Paycheck?
Skip College and Work in a Lumber Yard

          This is the pitch that 84 Lumber makes to the high school senior seeking to avoid college loans.  One of the nations’ largest building supply chains spends millions on ads to drive home its message that learning a trade can be more valuable than earning a college degree.  The company pays manager trainees about $40,000 a year.  Those in charge of top grossing stores can earn $200,000 and in a few cases more than $1,000,000, including bonuses.  Yet, it’s recruiters have had trouble finding qualified takers.

          84 Lumber is in the vanguard of a corporate quest to solve a labor market conundrum; skilled and high paying blue-collar jobs go unfilled, while millions take out loans to pay for degrees of dubious value.  Bloomberg Businessweek 7/3/17.

Some Firms Sweeten 401(K) Plans

          Because some workers are not saving enough, some companies like Microsoft and Host Hotels are boosting contributions to 401(k) plans.  The average company contribution to 401(k) plans rose to an estimated 4.7% of employee salaries in 2016.

          Some companies in certain industries say they need to spend more to retain the best employees and motivate staff.  They also need to ensure that older, relatively expensive workers can afford to retire on time and make way for younger staff.

          This  is  in  response  to what we see as a failure of most people to save.  Wall Street Journal  7/18/17 p. A1.
           If you want to find additional ways to save, call us.

Quote of the Month

          John F. Kennedy referred to Washington D.C. as a place of “Northern charm and Southern efficiency.”  Barrons 7/24/17 p. 31.

We Will Need Workers For Our Economy

          Every 1,000 American women between the ages of 15-44 delivered 122.7 births in 1957.  The rate was 62.9 births in 2014.  Census Bureau.

Lousy Long Term Projections

          In 1935 when FDR proposed the Social Security retirement system, his financial people projected total Social Security expenditures would reach $1.3 billion in 1980, or 45 years into the future.  Actual outlays in 1980 were $149 billion.  His estimate represented less than 1% of the actual expenditures.  Social Security. 

          As always, if you have any questions about these or any other matters, do not hesitate to call us.

          Remember, We’re Here For You!