July 2015

By Heidi Foster

Reducing risk while increasing the potential for return on one’s investment is the goal of every investor and investment adviser. The process is part art and part science. While the art of this process is difficult to explain, the science can be simplified into increasing the diversification of the investments and reducing their correlation.

When most individuals are building their investments, they primarily invest in equity (stock) and fixed income (bond) markets. Investors tend to avoid the most liquid of all markets, currency markets. While investing in currency is often thought to be rather risky, the associated risk might not be much higher than investments in equity if managed.

Returns on currency investments include the potential yield, as well as the appreciation or depreciation of one currency against another. The value of a currency is influenced by many factors, including the associated GDP, debt, balance of trade and interest rates, as well as what role fear is playing in the global economy and the stability or lack thereof the corresponding government.

In recent years, many types of investments that had previously only been accessible to the extremely wealthy or institutions have become available to ordinary investors through exchange trades funds (ETFs) and mutual funds. These relatively newly available markets include commodities, futures and currencies, to name a few.

While investors do gain some exposure to currency markets through foreign bonds or stocks, these investments are becoming increasingly correlated to domestic investments of the same. However, investing directly in foreign currency lacks correlation to either of the traditional investing markets. Currency investments have shown a correlation to commodities and to inflation and thus could potentially be beneficial as an inflation hedge.

Investing in currency is still not a simple process.

While currency mutual funds, ETFs and exchange traded notes, ETNs, do exist, they are generally limited to being paired against the U.S. dollar and might not offer investors the flexibility and control they desire. To gain flexibility and control, investments in currencies are often made through time deposits with a prevailing interest rate applied to the investment, options or forwards.

When investing in currencies, markets tend to move in trends but can change direction quickly. As a result, investors generally look to invest for a week to no more than three months at a time. Since currency investments tend to be short and highly liquid, they might be used as a way for investors to diversify investments in cash. With many investors shortening duration of their fixed-income investments, currency investments might play a role in reducing risk to investment portfolios.

Investing in currencies can be tricky.

Investors should first study them and also find a good adviser with whom to work. If you think that investing in currencies might be beneficial, please discuss the options with your financial adviser.

Heidi Foster, wealth adviser and investment manager with American Wealth Management, can be reached at www.financialhealth.com, 775-332-7000 or heidi@financialhealth.com. Securities offered through Foothill Securities Inc., member FINRA/SIPC. Investment advice offered through American Wealth Management, a registered investment adviser and a separate entity from Foothill Securities Inc

How high will gas prices go this summer? Many analysts think we will pay $5 a gallon for gas this summer — and some think gas will cost much more than that within the next two years. While it has been a welcome relief to see a few cents off each gallon pumped the past few weeks, each person, family and company has to process how their budgets handle the about 50 percent increase that we have seen in unleaded gas in the past year.

Is collusion behind this or simple economics? When President Barack Obama visited Reno in April, he discussed the Justice Department task force that is investigating fraud and manipulation in the oil industry. A number of previous attempts to investigate conspiracy in energy pricing have not turned up any evidence.

One of the biggest influences on oil and gas prices can be found in your wallet: the U.S. dollar.

Commodities are priced in U.S. dollars on the world market; recently we have had a weak dollar. A feeble dollar means we have to pay more to buy foreign oil. It also means foreign currencies are able to buy more of the commodity for the same amount of money.

If foreign nations take advantage of a weak dollar and buy more oil, you’ve got rising global demand. When demand rises, oil prices are poised to rise. Since oil prices are set in U.S. dollars, we feel the impact of price spikes in a way that nations using other currencies might not.

Emerging markets exert another influence on prices. Tremendous economic growth in China, India and other developing nations means they have a sustained demand for oil and gasoline, and it is not declining. Oil and gasoline prices are also subsidized in some emerging-market nations, artificially breeding higher demand.

Factor in recent political unrest in some oil-exporting nations, and you have the core reasons for $4 gas down the street.

One analyst sees potential for a new recession. Craig Johnson, president of the retail forecast firm Customer Growth Partners, noted to CNBC that consumers are spending more than 6 percent of their income on energy costs. He cites that percentage as a “tipping point,” noting that five of the six recessions since 1970 have happened when personal consumption expenditures for energy costs surpassed 6 percent. While rising fuel prices by themselves may not seem like a recession trigger, Johnson also mentioned the simultaneous jump in food prices — they are up 6.5 percent since the end of 2010. He estimates that consumers now spend about 15 percent of their incomes on food and energy prices.

What would bring gas prices down? Well, boycotting the gas stations in your region for a day is not likely to do the trick. Relief might appear as follows: high oil prices often encourage oil producers to increase supply, as they can make even more profit from sustained demand. But, that can lead to a glut — too much supply at prices too high, a circumstance in which prices would be poised to pull back. In fact, Saudi Arabian Oil Minister Ali Naimi recently commented that the world oil market was oversupplied.

Another factor is our own consumer demand. You are hearing stories about people only driving on weekdays, forgoing trips, cycling or taking the bus to work.

Affirming this phenomenon, March credit card data from MasterCard SpendingPulse showed U.S. retail gasoline expenditures down 2.1 percent year-over-year.

Tom Kloza, chief analyst for the Oil Price Information Service, recently shared his belief on NPR that prices will “correct or ease back a little bit and we’ll (see) a driving season where we pay something between $3.25 and $3.75 for gasoline” with moderating demand and a slightly less heated commodities market. Let’s hope he’s right.

Heidi Foster is a wealth adviser and investment manager with American Wealth Management, may be reached at 775-332-7000 or  heidi@financialhealth.com. Securities offered through Foothill Securities Inc., member  FINRA/ SIPC. Investment advice offered through American Wealth Management, a registered investment adviser and separate entity from Foothill Securities Inc. This information should not be construed as investment, tax or legal advice. The author is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

This article written by Heidi Foster appeared in the Reno Gazette Journal in May 2011.

Spring is a great time of year to clean your finances as well as your house! Yes, you can make 2011 the year you alter your financial life for a better future. Let’s look at some simple steps, with the goal of financial freedom in mind.

These are ideas in addition to writing your goals down and setting a budget.

Review your income sources, expenses and debt. How do you earn income? If you earn it from one source, is there effectively a ceiling on it or is there real potential for your income to rise in the next few years? Having income from more than one source is often beneficial.

Now look at your debts and core living expenses, the ones you can’t avoid. Can you pay off, pay down or restructure your debt? Can any core expenses be reduced?

Investing aside, you position yourself to gain ground financially when income rises, debt diminishes and expenses stay (relatively) the same.

Pay your debt first. If you are a business owner or a professional, you may always have some debt. Your ultimate goal should be to build wealth — and you can build wealth and minimize debt at the same time.

Some debt is “good” debt. A debt is good if it brings you a return in excess of the cost. If you buy a rental property and pay a mortgage, it may be considered a good debt because you receive income from the rent payments. Credit cards are simply bad debts.

Test your debts. Weigh the interest rate on each of your debts against your potential income growth rate and the potential investment returns over the term of the debt. If the interest rate on that debt looks like it will outpace your investment returns, you should think about paying that debt down fast.

Paying off your debts, paying down balances and restricting new debts all work toward achieving financial freedom.

Refine an investment strategy. You cannot afford to refrain from investing, even when markets are challenging. You do not retire on the relatively small elective deferrals from each paycheck alone; you retire on the appreciation and interest that those accumulated assets earn over time, plus the power of compounding. Consistent investing, this year and in years to come, has the potential to help you improve your financial life.

Managing your money is the way to financial freedom. Media messages seem to say “succeed and live lavishly.” Or, if you make it financially, then you have earned the freedom to spend it on cars, boats and luxuries.

This is a classic nouveau riche mistake. If you simply accumulate assets that have costs associated with them and do not generate any return, you may see your asset base diminish over time.
These types of assets expose you to risk — inflation risk, market risk, even legal risks. Don’t forget taxes — while not technically a “risk,” they are a threat to your money. The greater your wealth, the more long-range potential you have to accomplish profound things — provided your wealth is directed.

If you want to build more wealth, do not neglect risk management strategies that could be instrumental in retaining it. Your real return (after tax, cost and inflation) matters more than simply your investment return. Real returns will become increasingly more important as inflation and taxes potentially play a larger role.

Request professional guidance. A good financial professional will help educate you about the principles of wealth building. You can draw on that knowledge and guidance.

Heidi Foster is a wealth adviser and investment manager with American Wealth Management, may be reached at 775-332-7000 or heidi@financialhealth.com. Securities offered through Foothill Securities Inc., member FINRA/SIPC. Investment advice offered through American Wealth Management, a registered investment adviser and separate entity from Foothill Securities Inc. This information should not be construed as investment, tax or legal advice. The author is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

This article written by Heidi Foster appeared in the Reno Gazette Journal in April 2011.

Each year at this time, we, as citizens of the U.S. ponder the taxes we pay. “Our tax system is such that for 2010 an estimated 45 percent of American households will pay no income tax with the average taxpayer paying 18 percent,” reports Roberton Williams, a senior fellow at the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution. How do these households manage to pay no income tax?” They take advantage of tax credits such as the earned income credit, the child and child-care credits, the Lifetime Learning credit, for college expenses, and the saver’s credit, which subsidizes retirement saving,” said Williams, adding that “0.3 percent of those with annual incomes above $1 million will manage to avoid federal income tax through elaborate tax planning.”

CHILD-CARE CREDIT, not just for children:

• You might be able to claim the credit if you pay someone to care for your dependent who is younger than 13 or for your spouse or another dependent who is not able to care for himself or herself. The credit can be up to 35 percent of your expenses. To qualify, you must pay these expenses so you can work or look for work.

EARNED INCOME CREDIT:

• This credit allows low to moderate-income working individuals and families to receive a refundable federal income tax credit.
• As with all tax credits, you must file a tax return to take advantage of this credit.

PAYING FOR COLLEGE:

• The Lifetime Learning Credit is based on qualified tuition and related expenses paid for yourself, your spouse or a dependent for which you claim an exemption on your tax return for qualified tuition and related expenses paid in the tax year for an academic period beginning in that year or in the first three months of the following year. An eligible student is enrolled in one or more courses at an eligible educational institution to acquire or improve job skills.
• With higher unemployment, especially in Northern Nevada, this might be the perfect time to sharpen your skills and take advantage of this potential tax credit. Please note this credit phases out depending on your adjusted gross income, or AGI.

RETIREMENT:

• The saver’s credit helps offset a portion of the first $2,000 workers voluntarily contribute to Individual Retirement Arrangements (IRAs) and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.
• If your company offers a retirement program, store as much away as possible. Not only does this save on taxes, many companies also will match a portion of the employees’ allocation.
• Whether your company provides a retirement program, you always can put money into an individual retirement account, or IRA, subject to limitations. The contribution might be tax deductible depending on your AGI, but the investment always can grow tax deferred.

This year, Tax Relief Act of 2010 has created a 2 percent employee payroll tax cut. If you do not ignore the extra money in each paycheck, this can create the perfect opportunity to take advantage of setting some money aside for retirement or take a class to improve your job skills. What are you going to do with this gift from the government?

Heidi Foster is a wealth adviser and investment manager with American Wealth Management, may be reached at 775-332-7000 or heidi@financialhealth.com. Securities offered through Foothill Securities Inc., member FINRA/SIPC. Investment advice offered through American Wealth Management, a registered investment adviser and separate entity from Foothill Securities Inc. This information should not be construed as investment, tax or legal advice. The author is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

Planning financially for retirement might feel overwhelming. For some, that feeling is what keeps them from implementing a plan. If you have yet to start planning for your retirement — make today the day you begin.

1. The earlier you begin the better.
   Time is definitely one of your greatest allies. A person who begins contributing a modest amount to a retirement plan in his or her early 20s could end up on par with someone who contributes much more aggressively but does not start until the mid-30s. Even if you have to start small, start. Whatever amount you can afford to set aside for later, do it — and let it grow. If you don’t have the luxury of starting young, don’t waste time worrying about it. Start now. You’ll never again be younger than you are today.
2. Be smart about what you’ll need.
   While it’s true the general cost of living might be less for those who have retired, don’t forget, there are other costs to consider. Health care costs, for example, might be greater in retirement simply because you’re not as healthy as in your youth. Additionally, you’ll want to take inflation into account. If you plan your retirement based on the cost of living and income of your 30s, when you hit your retirement years, you might find you underestimated your needs.
3. Be smart about how long you’ll need it.
   When Social Security was being developed in the 1930s, a male retiring in the United States was only expected to live a short time in retirement. However, the average life expectancy for U.S. citizens has risen steadily throughout the past 50 years.
4. Take advantage of tax-deferred contributions.
   Sometimes, people determine how much they can afford to contribute to a retirement account based on their net income, rather than their gross income. You might decide you only can afford $100 less per paycheck, net. Nevertheless, remember that many contributions, like those to your 401(k) for example, you make with pre-tax dollars. Thus, you can afford to contribute more from your gross income and only still “miss” $100 from your net income.
5. Take advantage of matching contributions.
   If your employer offers a 401(k) match, take the maximum advantage of it. It’s a very positive domino effect. The more you contribute, the more you earn in matching contributions (up to the maximum allowable amount). Think of it this way — if your employer offers a 50 percent match, then for every $100 you don’t contribute, you’re missing $50 in “free money.” In essence, you’re missing part of your pay. You’re also missing the growth potential of that money as well.
6. Trim the fat.
   Keep track of your spending for one month. At the end of the month, take a careful look at what you spent. Did it all make sense? Was some frivolous? Taking a close look at exactly where your money is going is often the best way to discover areas that need improvement and ways to adjust your spending habits. Add up all the money you feel you spent unnecessarily, then add that amount to your retirement contribution.
7. Get help.
   These retirement tips are intended to help you get started toward, potentially, a more successful retirement. However, they’re just that — a starting point. While it’s important to educate yourself and understand your finances, seeking the assistance of a financial professional might be one of the best moves you make.

Heidi Foster is a wealth adviser and investment manager with American Wealth Management and can be reached at 775-332-7000 or heidi@financialhealth.com. Securities offered through Foothill Securities, Inc. member FINRA/SIPC. Investment advice offered through American Wealth Management, a registered investment advisor and a separate entity from Foothill Securities, Inc. This information should not be construed as investment, tax or legal advice. The author is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

This article written by Heidi Foster appeared in the Reno Gazette Journal in January 2011.

The end of the year is an excellent time to review your finances. What are your financial, business or life priorities for 2011?

Set specific goals you want to accomplish. Think about the consistent investing, saving or budgeting methods you use to realize them. Review what worked well for you in 2010 and what improvements are needed in 2011.

And consider these year-end moves:

1.   Think about adjusting or timing your income and tax deductions.  If you earn a lot of money and have the option of postponing a portion of the taxable income you will make in 2010 until 2011, this decision might bring some tax savings. You might also consider accelerating payment of deductible expenses if you are close to the line on itemized deductions — another way to potentially save money.

2.    Make a charitable gift before New Year’s Day.  If you make a charitable contribution this year, you can claim the deduction on your 2010 return. What a great way to celebrate!

3.   Make December the “13th month.”  Can you make a January mortgage payment in December, or make a lump-sum payment on your mortgage balance? If you have a fixed-rate mortgage, a lump-sum payment can reduce the home loan amount and the total interest paid on the loan by that much more. In a sense, paying down a debt is almost like getting a risk-free return.

4.    Think about putting more in your 401(k) or 403(b).  You can contribute up to $16,500 to these accounts in 2010, with a $5,500 catch-up contribution also allowed if you are age 50 or older. Has your 2010 contribution approached the annual limit? There still is time to put more into your employer-sponsored retirement plan.

5.   Consider a Roth IRA conversion before 2010 ends.  Anyone can convert a traditional IRA to a Roth IRA; there no longer are any income limits in the way. If you pull off a Roth conversion before 2010 ends, you can choose to divide the taxes on the conversion between your 2011 and 2012 federal returns. This nice opportunity won’t be available if you make a Roth conversion in 2011.  There still are MAGI phase-out limits for contributing to Roth IRAs. For 2010, those limits kick in at $167,000 for joint income tax filers and $105,000 for single filers. If your MAGI will exceed those limits, you still have a chance to contribute to a traditional IRA in 2010 and immediately roll it over to a Roth.

6.   If you are retired and older than 70, do not forget the 2010 RMD.  As your IRA custodian has undoubtedly reminded you, the one-year suspension of Required Minimum Distributions has been lifted. Retirees older than 70 must take RMDs from traditional IRAs — and 401(k)s by Dec. 31. Remember, the IRS penalty for failing to take an RMD equals 50 percent of the RMD amount.  If you have turned or will turn 70 at some point in 2010, you can choose to postpone your first IRA RMD until April 1.  The downside of that is you have to take two IRA RMDs next year — you have to make your 2010 tax year withdrawal by April 1, and your 2011 tax year withdrawal by Dec. 31.

7.   Max out your IRA contribution at the start of 2011?  If you can do it, do it early — the sooner you make your contribution, the more interest those assets will earn. Moreover, if you haven’t made your 2010 IRA contribution yet, you still can do so through April 15.  Consult a tax or financial professional before you make any IRA moves. You will want see how it may affect your overall financial picture.

8.   Do not delay — get it done.

Heidi Foster, CFP Wealth Advisor and Investment Manager with American Wealth Management and may be reached at 775-332-7000 or heidi@financialhealth.com. Securities offered through Foothill Securities, Inc. memberFINRA/SIPC. Investment advice offered through American Wealth Management, a registered investment advisor and a separate entity from Foothill Securities, Inc. This information should not be construed as investment, tax or legal advice. The author is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

The following article appeared in the Reno Gazette Journal in December 2010.

In 2010, anyone can make a Roth conversion – and have the option to divide the tax bill on the conversion over 2011 and 2012. To raise revenue, the U.S. government is allowing investors to convert existing IRAs into Roth IRAs. Even with paying current income taxes, this opportunity may still be a “win-win situation” for some investors.

Here’s a big reason to go Roth in 2010: tax-free growth potential and distributions.

Roth IRAs provide the opportunity for:

• Tax-free growth and compounding of those IRA assets
• Tax-free withdrawals of the earnings of that IRA once the account owner is past age 59  and has held the account over 5 years
• Tax-free distributions for heirs from the Roth IRA even over an extended time.

Often, we think of the Roth IRA as a retirement planning vehicle – a vehicle to build wealth across one’s lifetime. Actually, a Roth IRA has the potential to “stretch” and build wealth across generations.

With a Roth IRA, you don’t have to take mandatory annual withdrawals. Those assets can remain in the account and compound tax-free. Instead of drawing down your IRA by the Required Minimum Distribution, or RMD, each year, with a Roth you can just let those assets compound and grow. Think about what an advantage that could prove to be financially.

Some people are wealthy enough that they don’t need the bulk of their IRA assets. You might be one of them. You might want some or all of that money to go to your heirs, and it may frustrate you to have to take mandatory withdrawals from a traditional IRA. If you don’t need all of the IRA assets, you can direct what you don’t withdraw to your heirs. Your heirs won’t have to pay income taxes on the withdrawals from the remaining IRA balance.

You are basically prepaying income taxes for your heirs when you make a Roth IRA conversion. The conversion doesn’t trigger the gift tax, and your heirs won’t owe income tax on withdrawals from the leftover IRA balance.

Further, you might contribute to a Roth IRA after age 70 with no RMDs. If you have earned income, you can keep contributing to a Roth IRA after you reach the age of 70. You can’t do that with a traditional IRA.

If your traditional IRA is worth less now than it was, this might be an opportune time to convert that regular IRA to a Roth. Why?

• Today’s federal tax rates may be lower than in the coming years
• You might find yourself in a higher tax bracket in future years
• Your IRA balance might increase in the next few years.

While you could report half the taxable income resulting from the conversion on your 2011 return and the other half on your 2012 return – certainly a nice break from the federal government – you also have the option of paying it all on your 2010 return (which may actually be the better choice). If you file for an extension, you have until October 2011 to make that federal tax decision.

Keep in mind that the Roth IRA conversion itself is a taxable event. Additionally, the conversation may make your income appear higher if you have a student filling out a financial aid form for school. IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a Conversion from a Traditional IRA to a Roth IRA, or a Re-Characterization of a Roth IRA to a Traditional IRA. Before using such a strategy, consult your tax adviser.

Heidi Foster, CFP Wealth Advisor and Investment Manager with American Wealth Management and may be reached at  775.332.7000 or heidi@financialhealth.com. Securities offered through Foothill Securities, Inc. member FINRA/ SIPC.  Investment advice offered through American Wealth Management, a registered investment advisor and a separate entity from Foothill Securities, Inc. This information should not be construed as investment, tax or legal advice. The author is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional

This article was written by Heidi Foster and appeared in the Reno Gazette Journal in October 2010.

Are you “thinking” about retirement? The earlier you start thinking, planning and investing for the future, the more likely you are to have success and be at peace with your financial situation. Financial success is available to all; one simply must invest his or her resources to achieve it.

Failure to Plan
As early as 1968, co-authors of the book, “Social Security: Perspectives for Reform,” observed: “There is a widespread myopia with respect to retirement needs. Empirical evidence shows that most people fail to save enough to prevent catastrophic drops in post-retirement income. Not only do people fail to plan ahead carefully for retirement, even in the later years of their working life, many remain unaware of impending retirement needs.”

Educational Void
Twenty years later, in 1988, author Venita Vancaspel discussed financial literacy in the U.S. in her book, “Money Dynamics for the 1990s.” She wrote: “There is an educational void in our nation, and unfortunately we are raising a generation of financial illiterates. Even many college graduates cannot figure simple percentages. They are not teaching the one subject that they will need to live well in our free enterprise system – how to manage money. This vacuum is so great that the average couple cannot begin to confront the financial uncertainties and the multitude of choices they face in our complex society.” All stages of life require us to make financial decisions and plan for economic security. No other life stage, however, is likely to create “the financial uncertainties and multitude of choices” as does retirement.

Long-term Responsibility
In 1998, author Robert Stoneman noted in his book, “High Finance, Hard Sell,” that millions of Americans finally were starting to understand that they must take more responsibility for their long-term financial security. He wrote that many individuals were turning to financial planning books, magazines and television programs for money management and investment knowledge.

Stoneman also observed that millions of others were making little headway because of financial illiteracy. One of the biggest challenges facing financial companies was to “persuade consumers to forgo things they could have now on behalf of building wealth and security for their future.”

Inarguably, many individuals today would be in much stronger financial positions had they focused earlier on building future wealth.

A 1991 study by researcher, consultant and President of Money Quotient, Carol Anderson, investigated factors that either enhance or hinder resource management and asset accumulation for retirement planning. Resource management in this context means using our personal resources (time, energy, skills and money) to achieve our goals efficiently and purposefully.

Planning
A surprising result of the study was that the variable “thinking about retirement” proved to be a stronger predictor of pre-retirement resource management than any other variable tested, including whether one was expecting a pension, the level of family income and age.  In addition, “extent of thinking about retirement” proved to be nearly as powerful a predictor of retirement asset accumulation as did family income and was decidedly more influential than education level, occupation level, proximity to retirement and pension expectations.

These findings demonstrate that engaging in reflective and productive thinking about our future retirement can influence our financial planning for it and help to counteract potential negative influences, such as lower income, lower occupation status and lower education levels.  The study also indicates the importance of how cognitive processes – thinking – can influence financial behaviors, motivate planning activities and initiate positive change.

What was written more than 40 years ago remains true today. It is important to spend time now planning for your future.

Heidi Foster, Wealth Advisor and Investment Manager with American Wealth Management and may be reached at 775-332-7000 or heidi@financialhealth.com. Securities offered through Foothill Securities, Inc. member FINRA/SIPC.  Investment advice offered through American Wealth Management, a registered investment advisor and a separate entity from Foothill Securities, Inc. This information should not be construed as investment, tax or legal advice. The author is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

The following article was written by Heidi Foster and appeared in the Reno Gazette Journal in September 2010.

Remember when a college education was reasonably priced? Those days are gone, and that’s why college planning is so important.

From 2001 to 2006, the average tuition and fees at four-year public colleges and universities increased by 35 percent. The average tuition for private colleges increased 32 percent between 1996 and 2006 (according to the College Board).

How soon is too soon?
It never is too soon to begin saving for your child’s education. Many parents start as soon as a child is born. Some begin planning even before children arrive. If you’re planning on having a family someday, start planning now.  If you have a child on the way, start now. If you have an infant, toddler, grade-schooler or teenager, start now. Notice a theme here?

How late is too late?
If your child is already in high school, you may think it’s too late to start saving. Think again. Any pre-planning and saving you can do is better than nothing. If you are in a time crunch to save, start thinking of ways to reduce your monthly expenses and increase your cash flow. Then look at some ways to invest what you’ve saved. There are many options beyond a traditional savings account, such as CDs or money-market accounts.

What about retirement?
While you may feel putting off your retirement for a few years is an acceptable trade-off, you should not have to sacrifice your retirement savings to put your children through college. Remember, student loans are available. While you may not want your child to assume such a financial burden, you always could help repay the loan later. In addition, by having your children be responsible for at least a portion of their college tuition or expenses, they may experience a greater understanding of and appreciation for the value of their education.

You need a break
A tax break, that is. Many higher-education savings vehicles can provide one, such as 529 plans, Coverdell Education Savings Accounts, and certain kinds of tax-exempt bonds. However, as the number of tax-advantaged college savings vehicles have increased, so have the details, rules and fine print pertaining to them. In fact, some of these tax breaks could conflict with one another. Unless you’re willing to spend a great deal of time doing research, it may be wise to speak with a financial professional who can help you sort through these options.

Other alternatives
If money is tight, would your child be willing to complete his or her first two years at a local community college, then move on to a preferred college or university later? The tuition is likely to be much less at a state community college, and you could realize additional savings if your child attends school while living at home. If your child does not wish to start college locally, it may be worthwhile to look into the myriad of scholarships, work-study programs and off-campus jobs that may be available. The guidance office at most schools will have job information available if you inquire.

The simple fact is, the sooner you plan, the better. If you have not begun planning, start now, there is no better time to get the proverbial ball rolling. You may be surprised how a little planning now can make a big difference in the years to come.

Heidi Foster, CFP Wealth Advisor and Investment Manager with American Wealth Management and may be reached at 775.332.7000 or heidi@financialhealth.com.  Securities offered through Foothill Securities, Inc. member FINRA/ SIPC. Investment advice offered through American Wealth Management, a registered investment advisor and a separate entity from Foothill Securities, Inc. This information should not be construed as investment, tax or legal advice. The author is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.