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May 2018 Moms
lincbeesmom
member
Savings Accounts
lincbeesmom
member
I was talking to DH about wanting a certain amount saved by the time he is 50.
Do you have a goal in mind for your savings account?
What steps are you taking to reach your goal?
If you have student loans, would you pay that off THEN work on savings? Do both simultaneously or work on saving first?
Do you have a goal in mind for your savings account?
What steps are you taking to reach your goal?
If you have student loans, would you pay that off THEN work on savings? Do both simultaneously or work on saving first?
Re: Savings Accounts
Our running goal is to always have at least 6 months worth of expenses in savings, just in case. We also put 10% per paycheck into DH's 401K and our tax refunds get put into IRA's. I also only work seasonally but that job pays our house payments for the year so we have a separate savings account that holds all of that and depletes until I go back to work.
I have student loans that we are paying on plus a car payment and a credit card (for household improvements) that we are all working on paying off. I budget every month to pay a specific amount to each along with a specific amount to savings. Then, if there is "extra" after all the bills are paid and payments made, the extra goes towards whichever debt has the highest interest rate in the goal of getting it paid off faster. Once something is paid off we snowball it and take what we had been paying per month towards the now paid off debt and put it towards the next highest interest rate. I also did a balance transfer for my credit card and got 0% interest on it in order to get it paid off faster which has helped significantly.
I don't know if this helps but it's how we manage and so far it has worked fairly well. :-)
We go both have a good retirement plan through work, each have an additional TSA, and have a 529 started for DS.
We don’t have any credit card debt and both our cars are paid off so that’s why I’m asking about saving! Only thing we’ve been slacking on is our student loan debt. I owe about $30k and dh owes about 11k. We just can’t swing $600 a month in student loan payment right now.
@lincbeesmom every little bit counts. Even if you set up a pre authorized contribution of say $50/mo it builds. It gains interest. And it's small enough you might not even notice it being "gone" from your regular funds. Do you have TFSAs (tax free savings accounts) in the US? I'm Canadian so forgive my ignorance on your options. But they are great to contribute to savings without getting taxed if you pull money out for whatever you need it for, unlike locking it into a term account/GIC. There's an annual deposit limit but you can add on year after year.
I am interested in the college savings account for the kiddos. Does anyone who has done research want to share their thoughts?
We did ours ours through our insurance person. He knew a lot about them and they beat way to set it up. It was actually better for us to serit up in another state because of something to do with the contribution or withdrawal regulations in CA.
I mean HIS ASS IS GOING TO COLLEGE but I’m not going to be one of those moms that won’t let him follow his dreams if he wants to be a traveling musician or something.
So when DS was born what we immediately did with ours is have it deposited into my savings but transfered monthly into a government matched RESP (set up by our Financial Advisor) so essentially we are on track to have about $67k in there by the time DS turns 18. If he chooses not to go to college/University we can actually use it for any other child too.
Edit: there is a withdrawal fee if it's not used for education but I can't recall what it is.
Here are the highlights:
Changing the beneficiary: Changing the Beneficiary An Account Owner may change the Beneficiary of the CollegeAmerica Account at any time. To avoid treatment of the change as a withdrawal, the new Beneficiary must be a Member of the Family of the previous Beneficiary. The Account Owner must complete a Beneficiary change form indicating the relationship of the new Beneficiary to the previous Beneficiary. A Beneficiary change may be denied or limited if it causes one or more Qualified Tuition Program accounts administered by Virginia529 for the same Beneficiary to exceed the $500,000 maximum contribution limit.
Withdrawals in general
Only the Account Owner may request withdrawals from an Account. The Account Owner may use the funds in the Account for any purpose and may make withdrawals at any time. Generally, each withdrawal from an Account comprises two pro rata components: (1) a return of principal and (2) earnings. The return of principal portion of any withdrawal, whether Qualified or Non-Qualified, is not taxable. As explained in more detail below, the earnings portion of a withdrawal may be subject to taxation, and possibly penalties, depending upon whether the withdrawal is Qualified or Non-Qualified. The Account Owner or the Beneficiary is responsible for determining whether a withdrawal is Qualified or Non-Qualified and whether a penalty applies.
Qualified Withdrawals If the Account Owner withdraws funds to pay for Qualified Higher Education Expenses of the Beneficiary, the withdrawal will be Qualified. The earnings on Qualified Withdrawals used to pay Qualified Higher Education Expenses are free from federal income tax and are not subject to a 10% federal tax penalty. The earnings on a withdrawal made as a result of the Beneficiary’s death, disability or receipt of a scholarship (to the extent of the scholarship award) will be subject to federal income tax. However, the earnings will not be subject to the 10% federal tax penalty.
Qualified Higher Education Expenses
Qualified Higher Education Expenses are expenses that are incurred by a Beneficiary attending an Eligible Educational Institution. Generally, these expenses include:
• tuition;
• all mandatory fees;
• textbooks, supplies and required equipment;
• room and board during any academic period during which the Beneficiary is enrolled at least half-time in a degree, certificate or other program that leads to a recognized educational credential awarded by an Eligible Educational Institution;
• special needs services for a special needs Beneficiary; and
• computer or peripheral equipment, computer software or internet access and related services used primarily by the Beneficiary during the time enrolled at the Eligible Educational Institution.
To be considered Qualified Higher Education Expenses, room and board costs may not exceed the following amounts:
• on-campus: actual invoice amount for room and board; or
• off-campus: up to the applicable room and board portion of the Cost of Attendance as determined by the Eligible Educational Institution.
Recontribution of Refunded Amounts
If a Beneficiary receives a refund of any Qualified Higher Education Expenses from an Eligible Educational Institution, any withdrawals from the Account used to pay such refunded expenses will be considered a Qualified Withdrawal if the refunded amount is recontributed to the Account or another Qualified Tuition Program not later than 60 days after the date of such refund.
Non-Qualified Withdrawals
Those withdrawals that are not Qualified Withdrawals are Non-Qualified Withdrawals. Any earnings on Non-Qualified Withdrawals are subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. The Account Owner or the Beneficiary is responsible for determining whether a withdrawal is Non-Qualified, making the appropriate filings with the IRS and paying the 10% federal tax penalty on earnings.
Losses on investments
If you have an investment loss in your CollegeAmerica Account, you can take the loss as a deduction on your income tax return but only when all amounts from that Account and any Invest529 and CollegeWealth accounts that you maintain for the same Beneficiary have been withdrawn and the total withdrawals are less than the total contributions made. You can claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit.
We each have retirement plans. Mine is not so big since I only started this career at 33. We have a savings account and I'm going by September we'll have enough to cover the ridiculous cost of a full time nanny in ny for a year. We really need to start savings for each kid though.
Our only debt are DH's grad school loans and our mortgage.