Category Archives: Investing

What is a 529 Plan?

2 Replies
What is a 529 plan?

I have two of the greatest nieces on the planet. The oldest is in 8th grade, and the youngest is in 5th grade. I know they’re still pretty young, but recently I started talking to my brother about their future education plans. When I asked him if they had a 529 plan that I could contribute money towards their education, he had no clue what I was talking about.

So even though I don’t have any kids of my own, many allied health professionals are parents and have families of their own. Many employers provide benefits such as health insurance and individual retirement accounts, but 529 plans are often not a part of that package. From the moment our child is conceived, many people are planning how they will pay for their education!

What is a 529 Plan?

What exactly is this magical, mystical plan that can be used for educational purposes? A 529 plan is a state-sponsored education savings plan that can be used toward education expenses for the account beneficiary.1

So whether you’re a parent, a grandparent, or an aunt/uncle, you can create an account and make the beneficiary for whoever you choose. As the account owner, you control all the investment decisions.

For example, I am the one who created 529 accounts for both of my nieces. I make the decision on how the funds are allocated in the account. If other family members want to contribute, I provide them a gift code that they use to gift money that goes directly into their accounts. But as the account owner, I have the control over the account.

What Counts as Education Expenses?

Qualified expenses are not just for tuition. Beneficiaries can also use money from their 529 plan to go towards books and supplies, computers and internet access, and room and board.2

Money for tuition can also go towards online courses and trade schools as well. But make sure that you are attending an eligible institution for this to count. 529 plan money can cover the costs of mandatory books and supplies. Also, your 529 plan can cover on campus boarding and off campus rent.

Benefits/Limitations of a 529 Plan

529 plans are great because since the money going in it post-tax, the money will continue to grow tax-deferred. Because 529 plans are investments, they won’t lose their value over time, unlike keeping this money in a high yield savings account. Plus, distributions will be tax-free as long as they are used to pay for qualified education expenses.3

There are limits to how much you can contribute. Contribution limits depend on the state’s plan but are typically more than $235,000. The federal gift tax exclusion allows a contributor to give up to $15,000 per year per beneficiary, or $30,000 if you’re giving as a married couple.1

What if my child does not attend college?

This money is not necessarily only for college. Maybe the beneficiary decides to attend trade school, or do an apprenticeship. They can use this money towards this as well. Or maybe they want to wait a few years before going to college. The money in the 529 plan can wait until they are ready.

If the beneficiary decides not to attend college, you can easily change the beneficiary to their sibling, or another family member who is planning on attending college. They don’t even need to be a child! Anyone, at any age, can be a beneficiary.1

Conclusion

This blog post is just a brief overview of 529 plans. If you are interested in getting started, I would recommend checking out Saving for College. This website covers 529 plan ratings and rankings, how to save for college, student loans, and more!

If you’re looking for other ways to build your emergency fund and grow your wealth, check out these blog posts:

Note: I am not a certified financial advisor/planner or a certified financial analyst or a CPA or an accountant or a lawyer. Remember, I am an allied health professional, just like you!This website/blog is for entertainment and educational purposes only. Please consult with your financial advisor(s) regarding your personal finance, investment, and tax matters. 

  1. https://www.edwardjones.com/us-en/investment-services/account-options/what-529-plan
  2. https://www.savingforcollege.com/article/what-you-can-pay-for-with-a-529-plan
  3. https://www.savingforcollege.com/article/my-child-turned-18-can-i-still-claim-a-529-state-tax-benefit

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What is a Roth IRA?

5 Replies
updated September 14, 2022
Let your money grow, in a Roth IRA!

I love the start of a new year. It’s my time to write goals for the year, and get a fresh start. One of my favorite things to do every year… is max out my Roth IRA!

What is a Roth IRA?

A Roth IRA is a type of individualized retirement account where you contribute your post-tax dollars. The money you contribute to your Roth IRA is not tax-deductible. But once you start withdrawing funds, the money is tax free.

This differs from a traditional IRA, in that the money you contribute is pre-tax dollars. This allows you to get a tax deduction on your contribution. However, when you withdraw the money from this account during retirement, you will have to pay income tax on these withdrawals.

A Roth IRA is also different from a 401(k), in that employers offer this type of retirement plan to their employees, potentially with a percentage match, and the contributions are withdrawn from the employee’s paycheck pre-tax.

@firedupforalliedhealth

Learn more about Roth IRAs, and contribute to your retirement TODAY! #firedupforalliedhealth #personalfinance #rothira #retirement

♬ Hi’ilawe – Jake Shimabukuro

Benefits of a Roth IRA

A bonus to a Roth IRA is that you can withdraw your contributions at any point in time, tax- and penalty-free, so long as you withdraw ONLY what you have put it.

Once you hit 59.5 years old, and you have held this Roth IRA for at least 5 years, then you can start withdrawing the account earnings (returns that the account has generated).

There are other conditions as well that I won’t go into (as they can get confusing), but know that basically you can withdraw before 59.5 years old so long as you only withdraw what you put in.

Limitations of a Roth IRA

There are some limitations to a Roth IRA for the year 2022. First off, if you are single and make more than $144,000, or married filing jointly and make more than $214,000, then you can’t contribute to a Roth IRA.

There are also limits for how much you can contribute. Investopedia’s article, “What is a Roth IRA? Guide to Getting Started,” lays out the contributions for the year. In 2022, you can contribute up to $6,000. However, if you are 50 and older, you can contribute up to $7,000.

According to White Coat Investor’s article, “The 2023 Retirement Plan Contribution Limits,” these contributions will increase to $6,500, and $7,500 if you’re 50 and older!

@firedupforalliedhealth

Roth IRAs part 2! #firedupforalliedhealth #personalfinance #invest #rothira #retirement

♬ Kawika – Jake Shimabukuro

Why is this a good option?

A Roth IRA is a great choice if your employer doesn’t have a retirement plan option. It is also a good option if you’re self-employed and want your own retirement account.

Also, if you think your taxes will be higher in retirement compared to now, Roth IRAs are a great choice, as when you start to spend these funds they will be withdrawn tax free.

Investing your Roth IRA

You set up a Roth IRA – congrats! But that’s not all… you still have to choose your investments!

The financial firm you choose will help you open the account, but ultimately it’s up to you do decide where you invest your money.

@firedupforalliedhealth

Roth IRAs part 3! #firedupforalliedhealth #rothira #invest #investing #retirement #vanguard #vtsax #vti

♬ original sound – firedupforalliedhealth

I personally like to choose Low Cost Index Funds. Index funds are a great way to diversify your portfolio, without putting too much effort into it. And let’s be real, as an allied health professional, you’re way too busy to worry about where to invest your money!

I use Vanguard, because I like to invest in VTSAX and VTI, so it makes it easier for me to invest my money all in one place under one account.

Most brokerage firms, banks, and investments companies, both brick-and-mortar and online, offer a Roth IRA and Low Cost Index Funds. I would recommend looking into a Roth IRA with a bank or investment company that you already use, to make it easier on yourself.

If you want to learn more about investing, or if you want mentoring in your finances, let’s work together to help you on your personal finance journey! Click here to sign up for your FREE 20 minute consult.

Like what you read? Check out some of my other blog posts!

Note: I am not a certified financial advisor/planner or a certified financial analyst or a CPA or an accountant or a lawyer. Remember, I am an allied health professional, just like you! This website/blog is for entertainment and educational purposes only. Please consult with your financial advisor(s) regarding your personal finance, investment, and tax matters. 

Thanks for reading my blog! I use affiliate links to keep this blog and its content free for you, so I would be so grateful for your support by clicking below!

  • Student Loan Planner works with you to help customize a plan to most efficiently pay off your student debt! Click here to book your free consult today!
  • Trusted HouseSitters is our favorite way to find free lodging through vacation pet sitting. Click here to learn how you can become a pet sitter, or request a house sit!
  • DankLite is the premier manufacturer of hemp & CBD-related products. Click here to see their line of amazing products!
  • Tello is a more affordable cell phone company that can help you create your very own Custom Plan. Combine minutes, texts & 4G data as you want. No contracts or fees, only the flexibility to upgrade or downgrade your plan anytime. Click here to get started with Tello today!

What are Low Cost Index Funds?

7 Replies
updated September 26, 2022

As allied health professionals, we are BUSY, amirite? We don’t have time to sit at a desk all day and day trade!

And let’s be real, if you’re not in that realm (and even if you’re in that realm – cue the distain from those people lol), it’s a HUGE gamble.

Actually, most professional investors tend to not even keep up with the market in the long term. So since we can’t control the market, let’s focus on what we can control, which are the fees! And this is done by investing in index funds.

What are Index Funds?

Index funds are mutual funds or exchange-traded funds (ETFs) that are designed to track the performance of stock market (or bond market) indices such as Dow Jones, NASDAQ, and the S&P 500.1 So instead of hand-selecting the stocks you hold, the fund’s manager buys all (or a representative sample) of the stocks or bonds in the index it tracks.

Index funds are a form of passive investing. It puts emphases on diversifying your portfolio, and with low portfolio trading activity. This allows the risk adverse (aka, me) to let their money grow with enough return to meet their financial goals.1 It allows you to pay low fees and brings diversification of a few asset classes. The end goal is that you hold onto this for the long term.

Index funds allows you to not worry about spending your precious time researching different stocks. You don’t have to pick and choose which ones you think will do well. For me, I prefer to invest as passively as possible. And this is because I’d rather spend time doing other things that I enjoy more. This is why index funds work for me!

What Is The Most Popular Index Fund?

The most popular fund that JL Collins in his book, A Simple Plan to Wealth, advocates for is the Vanguard Total Stock Market Index Fund (VTSAX).

It is designed to provide investors with exposure to the entire U.S. equity market. This includes small-, mid-, and large-cap growth and value stocks.

Because of this broad diversification, it is a great way to diversify your portfolio in one easy fund. And you can automate putting money into it monthly, so you never have to think about it!

How Are Index Funds Fees So Low?

When John Bogle founded the investment management company Vanguard in 1975, he wanted to make investing easy and accessible to the common folk (aka, you and I). Bogle wanted to return net profits to its shareholders in the form of lower costs. So he did so by creating index funds, which eliminate sales commissions and minimizing operating expenses.1

The average Vanguard mutual fund and ETF (exchange-traded fund) expense ratio is about 83% less than the industry average – 0.09%, while the industry average is around 0.54% . This means that over time, as your money grows, this low expense ratio is saving you thousands of dollars!

I like these odds! 🙂

Warren Buffet even stated that, “A low-cost fund is the most sensible equity investment for the great majority of investors… By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals.”3

As a know-nothing investor, I think I’ll be taking my advice from the legendary investor Warren Buffet on investing in index funds!

Which Index Fund Do I Choose?

So I can’t tell you what to invest in (see my disclaimer below). We personally have selected Vanguard as our primary, and we took that advice from not only JL Collins, but from ChooseFI and Invest Like A Boss.

Other companies such as Fidelity have their own index funds as well, but do your own research and see what would work best for you personally. I have only highlighted Vanguard because that’s what I currently invest in and what I know the most about.

Like what you read? Check out some of my other most clicked blog posts!

If you want to learn more about investing in low cost index funds, or if you want mentoring in your finances, let’s work together to help you on your personal finance journey! Click here to sign up for your FREE 20 minute consult.

Resources:

  1. Vicki Robin, Your Money or Your Life, Revised edition (New York, NY: Penguin Books, 2018)
  2. John C. Bogle, The Little Book of Common Sense Investing: The Only Way To Guarantee Your Fair Share of Stock Marker Returns, 2nd edition (Hoboken, NJ: Wiley, 2017)

Note: I am not a certified financial advisor/planner or a certified financial analyst or a CPA or an accountant or a lawyer. Remember, I am an allied health professional, just like you! This website/blog is for entertainment and educational purposes only. Please consult with your financial advisor(s) regarding your personal finance, investment, and tax matters. 

Thanks for reading my blog! I use affiliate links to keep this blog and its content free for you, so I would be so grateful for your support by clicking below!

  • Student Loan Planner works with you to help customize a plan to most efficiently pay off your student debt! Click here to book your free consult today!
  • Trusted HouseSitters is our favorite way to find free lodging through vacation pet sitting. Click here to learn how you can become a pet sitter, or request a house sit!
  • DankLite is the premier manufacturer of hemp & CBD-related products. Click here to see their line of amazing products!
  • Tello is a more affordable cell phone company that can help you create your very own Custom Plan. Combine minutes, texts & 4G data as you want. No contracts or fees, only the flexibility to upgrade or downgrade your plan anytime. Click here to get started with Tello today!