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October 26, 2016 Article 2 min read
What should you save for first — your kids’ college education, or your own retirement? The answer may surprise you.

Most people go with “education,” and I can see why — after all, there’s less time to save. But the correct answer is actually your retirement.

Why? Because there are tools available to fund a college education, but nothing can compensate for a shortfall in retirement savings.

Here are a few other questions I often get from clients looking to accumulate and preserve wealth.

  1. How can I keep track of priorities and avoid conflicts?
    A plan that takes a holistic view of your financial picture and long-term goals is the best approach:
    • Assess your needed rate of return and risk tolerance.
      Will you benefit most from conserving existing wealth, or do you need to take additional risk to achieve greater growth?
    • Plan for a long, happy retirement.
      Longer lifespans mean you’re likely to have decades to enjoy the fruits of your labor.
    • Adopt a long-term perspective.
      Rapid moves in and out of investments is a losing proposition. Remember, time in the market beats timing the market.
  2. Do I need an estate plan? 
    Yes! Estate plans reflect, in writing, exactly what you want to happen with your accounts, assets, and personal items after your passing. Creating a well-thought-out plan will greatly benefit your loved ones who survive you as well as allow your estate to bypass the probate process, which can be expensive and lengthy. At a minimum, your plan should include a will, revocable living trust, and financial and medical powers of attorney. You may also want to consider a professional trustee that can take responsibility for the myriad of technical details and help to preserve family harmony.

    For those who have plans in place, make sure they’re up to date. Estate tax law changes over time, as do your preferences, so it’s important to make sure the language in your plan is current. This same advice applies to aging parents, too!
  3. What's the best way to plan for education expenses?
    The best place to save for college is often your state’s 529 plan, allowing for tax deductions as well as tax-free growth. However, any money that goes into these plans must be used for education purposes, so it’s important to consider the amount of funding that’s truly needed to avoid incurring taxes and penalties on non-qualified withdrawals of excess contributions.
  4. Are there steps I can take the reduce my tax burden?
    Yes! These are often the years where you’re in your highest tax bracket, so it’s important to pay close attention to your tax situation and be as efficient as you can. Look for available deductions, review your tax-deferred and tax-exempt savings options, be cognizant of capital gains (especially short term), and employ strategies such as tax loss harvesting. Look to have your financial advisor work in partnership with your tax preparer to help you implement these strategies and plan for the upcoming tax year.
  5. Can I contact you with additional questions?
    Anytime. I'm happy to help.