Ask HTM - Helping Family Regain Financial Footing, Mobile Home Upgrades, & Tax Loss Harvesting For Everyone #751
Nov 20, 2023
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Topics discussed in this episode include tax loss harvesting, taking out a HELOC on a mobile home, helping a family member regain financial footing, and opening a 529 account at a local credit union.
Consider opening a direct-sold 529 plan with low fees to maximize savings for your child's college education.
Research and compare different direct-sold plan options, considering state tax advantages and scholarship opportunities.
Avoid using a HELOC to tap into home equity and instead save up for a down payment to minimize costs and avoid high interest rates.
Deep dives
Consider direct-sold plans for 529 accounts
When opening a 529 account for a child's college fund, it is recommended to consider direct-sold plans. These plans have fewer fees compared to advisor-sold plans and can save you money over time. Morningstar found that the average gap in fees between direct-sold and advisor-sold plans is around 0.6%, with direct-sold plans typically being even lower cost. By choosing direct-sold plans, you can maximize your savings and ensure that more of your contributions go towards your child's education.
Research different direct-sold plan options
Before opening a 529 account, it is important to research and compare different direct-sold plan options. Each state offers its own set of direct-sold plans, and some plans may offer additional benefits, such as state tax advantages or scholarship opportunities. Websites like Savingforcollege.com can provide comprehensive information and tools to help you compare different plans and choose the best option for your needs.
Consider 529 prepaid tuition plans
In addition to traditional 529 savings plans, you may also consider 529 prepaid tuition plans. These plans allow you to prepay for future college tuition at today's rates, potentially saving you money on future tuition costs. However, it is important to carefully review the terms and conditions of prepaid tuition plans, as they may have limitations on eligible institutions and residency requirements. Consulting with a financial advisor can also provide valuable guidance in determining the right type of 529 plan for your specific situation.
Tapping Home Equity with a HELOC: A Risky Move
The podcast discusses the risks associated with using a Home Equity Line of Credit (HELOC) to tap into home equity. The hosts advise against taking this approach due to the current high interest rates, which can have a significant impact on borrowers. They suggest that instead of relying on debt, it is better to follow a more conservative ladder approach and save up enough cash for a down payment. By saving 20% for a down payment, borrowers can avoid additional costs like PMI and have a smaller principal balance, which is especially crucial given the higher interest rates in the current financial climate.
Using a 529 Plan to Save for College
In this episode, the hosts discuss the benefits and considerations of using a 529 plan to save for college. They mention the importance of opening a direct-sold plan with low fees, such as those offered by states like Georgia and Utah. They also highlight the advantage of having a state income tax benefit, if applicable. The hosts recommend choosing investment options within the plan based on the child's age and risk tolerance. They emphasize the benefits of dollar-cost averaging and avoiding higher fees associated with advisor-sold plans. Overall, they encourage starting early and regularly contributing to a 529 plan to secure funds for future college expenses.
We’re kicking off the week by answering your listener questions! And if you have a question that you’d like for us to answer on the show, we’d love for you to submit your own via HowToMoney.com/ask , send us your voice memo. Regardless of how random or bizarre you might think it is, we want to hear it!
1 - Is tax loss harvesting more trouble than it’s worth or am I missing something?
2 - Should I take out a HELOC on my mobile home that has experienced a tremendous amount of growth in equity?
3 - How can I help a family member who has struggled with medical debt to regain their financial footing?
4 - Is opening a 529 account at my local credit union a good idea?
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