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Author: 38ISERE Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8108  
Subject: College Investment Strategy?? Date: 11/10/2001 12:27 AM
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Greetings -

I've been looking at annuities to accomplish a specific goal and have a strategy that I'm thinking of pursuing. Your gracious (even if tough-to-swallow) feedback would be greatly appreciated.

At 55-1/2, I've just received $150K that I've put in a mm while I decide how to invest it. I've no loans (house, consumer debt, nada) and have maxed out on IRA and SEP-IRA. We've already put the last child's college costs aside (he's a HS senior), though an older child may want to do grad school.

As our income in <$30K, we'd expected to qualify for financial aid, BUT that $150K will be counted as an asset to be included in the formula for "expected family contribution" UNLESS it's in an approved retirement vehicle.

PROPOSED STRATEGY:
1. Keep $25K liquid against older child's potential first year attendance at grad school;
2. Place $125 K in annuity for our own retirement. I would initially put the funds in a fixed (guaranteed minimum) interest (fee free)account. When I feel comfortable that the market has stabilized (not timing the bottom, but seeking a comfort level against my expectation that the market will see further declines in the next 6-9 months), I'll switch the funds to a low management-cost S&P-500 or Russell-3000 index-clone sub-account.
3. I do not need these funds for any forseeable expense and can wait until I'm 59-1/2. When I'm 59-1/2, I can re-evaluate my situation to decide if {1} I want a lump sum payout to invest where the future income/growth can qualify as capital gains or {2} wish to keep the annuity.
4. I examined at least a dozen annuity offerings; focused on Vanguard and TIAA-CREF; and have tentatively selected TIAA-CREF. TIAA-CREF advertises no commissioned agents, no withdrawal charges, no transfer fees, no sales charges, no contract fees and low expenses ($0 with fixed account; 0.37% with Russell-3000 clone). TIAA-CREF insurance death benefit guarantees my heirs the greater of (a) invested capital or (b) current value.

COMMENTS SOUGHT
I hate it when novices such as myself toss around the phrase "due diligence" as if it were a magic incantation, but I have tied to examine this situation carefully.
Nonetheless, I invite any & all comments that might point out fallacies in my logic amd/or anuuity evaluation.

Thanking you all. 38ISERE cccnyinc@twcny.rr.com
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Author: ibforms One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4515 of 8108
Subject: Re: College Investment Strategy?? Date: 11/10/2001 5:39 AM
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>At 55-1/2, I've just received $150K that I've put in a mm while I decide how to invest it. I've no loans (house, consumer debt, nada) and have maxed out on IRA and SEP-IRA. We've already put the last child's college costs aside (he's a HS senior), though an older child may want to do grad school.

>As our income in <$30K, we'd expected to qualify for financial aid, BUT that $150K will be counted as an asset to be included in the formula for "expected family contribution" UNLESS it's in an approved retirement vehicle.

>PROPOSED STRATEGY:
1. Keep $25K liquid against older child's potential first year attendance at grad school;

How about the older child becoming an employee instead of being your dependent? If you are part of a SEP-IRA, you are probably in charge of the compensation of employees, right? Starting in 2002, up to $5,250 for grad school can be a non-taxable employee tuition benefit.

How about the remaining $20k for the first year going to a 529 plan? When qualified distributions come out, they won't be taxable to the older child.

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Author: uphilldeb Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4516 of 8108
Subject: Re: College Investment Strategy?? Date: 11/10/2001 5:41 PM
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Original question: At 55-1/2, I've just received $150K that I've put in a mm while I decide how to invest it. I've no loans (house, consumer debt, nada) and have maxed out on IRA and SEP-IRA. We've already put the last child's college costs aside (he's a HS senior), though an older child may want to do grad school.

As our income in <$30K, we'd expected to qualify for financial aid, BUT that $150K will be counted as an asset to be included in the formula for "expected family contribution" UNLESS it's in an approved retirement vehicle.


PROPOSED STRATEGY by ibforms:
1. Keep $25K liquid against older child's potential first year attendance at grad school;

How about the older child becoming an employee instead of being your dependent? If you are part of a SEP-IRA, you are probably in charge of the compensation of employees, right? Starting in 2002, up to $5,250 for grad school can be a non-taxable employee tuition benefit.

How about the remaining $20k for the first year going to a 529 plan? When qualified distributions come out, they won't be taxable to the older child.


Don't mean to butt in, but I was over here looking for some answers myself. Anyway, here is an excellent article that may be of some use, "Maximizing Your Aid Eligibility by FinAid":

http://www.finaid.org/fafsa/maximize.phtml

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Author: NellieD Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4518 of 8108
Subject: Re: College Investment Strategy?? Date: 11/11/2001 4:00 PM
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As our income in <$30K, we'd expected to qualify for financial aid, BUT that $150K will be counted as an asset to be included in the formula for "expected family contribution" UNLESS it's in an approved retirement vehicle.

It's difficult to tell how your proposed strategy will affect your own retirement and taxes. The amount of money you can save or spend in taxes, annuity fees and investment income on this sum of money is far greater than the amount of money your child might receive in financial aid.
I would make maximizing your own retirement funds while minimizing your own tax liability your first and foremost concern. Planning for financial aid when you are within 10 years of retirement is not a good strategy. Plan for your retirement first. You and/or your child will always be eligible for unsubsidized loans if you find yourself short at any particular time during his education.

Hope this helps.
NellieD





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