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A few  topics that are worth reading:



Saving for your kids’ and grandkids’ college education and make higher education affordable:


With the rising cost of higher education, every parent should start saving for their kids college education.  Even the grandparents can now start saving for your grandkids.  State of Maryland do provide tax incentives to parents and grandparents for saving for college education.


State of Maryland offers two plans:


a. Maryland Prepaid College Trust which locks in future tuition cost at today’s prices.

b. The Maryland College Investment plan which is managed by T. Rowe Price.  T Rowe Price does not charge you commissions and/or enrollment fee.   In 2012, The Maryland College Investment plan was one of the four funds that were assigned a gold star by Morning Star.




The College Savings Plan of Maryland can be started by a parent or a grandparent for a beneficiary.  Your grandkid does not have to be a resident of Maryland for a grandparent to open and contribute to the plan.  Contributions up to $2,500 can be deducted for Maryland Income Tax either by the contributor or the beneficiary depending on the plan you chose.

Funds distributed for eligible college expenses are exempt for federal and Maryland State income tax.  Even the earnings on these funds are tax free when used for eligible college expenses.  Funds can now be used for public, private or technical colleges in the United States as well as selected foreign colleges.  It can be for a two year or a four year degree.  Payments can be as low as $25 per month.


As like any other investment, before making your final decision, it is prudent to consult your accountant who is aware of your financial situation.


Saving for your old age:


Retirement is expensive as 60% of your pre-retirement earnings thru salary have stopped when you need 75% of your pre-retirement income to maintain the same pre-retirement life style.  As a rule of thumb you should not retire unless your social security income kicks in.  However, social security income will replace only 45% of your pre-retirement income.  The rest of the income should come from other sources.  Most of these sources will be thru the savings that you have built during your pre-retirement career.  It’s never too early or late to start saving for your retirement.   However, enough thought should be given to the different options that you might have based on your retirement goals.  They may include:

Employer supported retirement savings plan:


Your employment may offer a defined benefit plan and/or defined contribution plan.  Under defined benefit plan, you employer will provide you with a specific monthly amount at retirement.   The plan is fully funded by the employer.  The defined contribution plan does not guarantee a specific amount.  Instead, you and/or your employer contribute to the plan.  The y amount at retirement depends on your contribution and how well the investments perform.  Sometimes, your employer will add to your account by matching a certain percentage of your contribution.  401(k) plan is one kind of plan that they over.  They even provide matching contribution towards your plan even though.  If your employer kicks in matching contribution, take the maximum advantage by enrolling and contributing the maximum amount so that your monthly retirement savings is doubled.  As your share of the contribution comes off your paycheck, its will be automatic and no further action is required from your end.  Your contribution to a qualified retirement plan is pre-tax dollars.  Therefore, your annual taxable income is less which means that you pay less income tax.



Learn about your retirement plan:

Ask your employer about

1. the type of retirement plan that they offer - they might offer more than one

2. What will happen if you change jobs – can the plan come with you

3. Are there any eligible benefits from your spouse’s plan

4. Ask for periodic statements to find out what your plan is worth


Don’t touch your retirement:


You started your retirement plan for a reason and therefore there are consequences if you withdrawn from the plan before you are eligible.  Uncle Sam will impose a 10% penalty for early withdrawal and it will be added to your gross income for the year.  If you are a first time home buyer, money used for medical conditions or for college education, the 10% penalty is waived.  Always bear in mind that it will be hard to replace the withdrawn funds, so it is prudent to take a loan against the plan in extenuating circumstances.


Put money Into an Individual Retirement Account:


You can also contribute to an Individual Retirement Account (IRA).  There are two kinds of individual retirement account – Traditional and Roth IRA.  Traditional is funded by pre-tax dollars and Roth is by after-tax dollars.  The income generated in Roth IRA is not taxable.  Both can be withdrawn only after the contributor reaches 59 ½ years old without incurring a 10% penalty.  In 2013, the maximum amount an individual can contribute is $5,500.  You can also contribute a lesser amount.   However, there are restrictions as who will qualify based on your employer provided retirement plan.


Planning for retirement should never be overlooked.  Its never too late or too early to start your retirement planning.  It is always a good idea to have a financial planner or advisor to discuss and brainstorm your financial goals.  Also, periodically meet with your financial advisor him to ensure that you retirement goals are still on track.