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The Balance

The newsletter that isn't terrible

"Hey Sarah!"

Sarah Around Town is going on hiatus for a bit. In it's place "Hey Sarah!"

In this new feature I'll share some of the more interesting questions I've answered or problems I've solved lately.

This month's question: "Hey Sarah, how much should I save in a 529 plan?"

This client has ambitious goals for a young child and there is a real risk of over-funding the 529 plan. We needed to look at more than one scenario to zero in on a savings goal. The analysis included:

  • Public vs. private college
  • Public in-state vs. public out-of-state
  • Different tuition inflation rates for each college type
  • Saving over time vs. saving a lump sum

To help the client make an informed choice I developed funding scenarios for public in-state college, public out-of-state college, and private college. Each of those scenarios included a projected cost, a recommended annual savings amount and a recommended lump sum saving amount.

I recommended that they fund their 529 with a goal of covering four years of in-state public college. The recommended savings rate is more achievable and this limits the risk of over-funding.

The client is likely to have enough cash flow to cover the difference between in-state public college and the higher costs for private or out-ofstate public college.

Lastly, I recommended a lump sum contribution because it would allow them to benefit more from compounding over time.

Wealth Management 101

A guide to 401(k): Learn All the Basics

May 2023

If you work full-time and aren’t self-employed, there is a good chance that you have access to a 401(k) plan. There is also a good chance that you
don’t understand the plan well.

A 401(k) plan is a powerful tool for building wealth. Understanding it will help you make informed decisions about using this tool in your wealthbuilding efforts.

In this article, I’ll teach you the basics. I’ll use plain language as well as outline potential steps you can take to make the most of this benefit.

continue reading...

Foxy Finances

There are three ways money can kind its way into your 401(k).

If you aren't making salary deferrals, you might be leaving matching and profit share money on the table.

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