With the holidays here and a newborn baby girl in our home I have begun to answer questions from family about what our little girl could need for Christmas. I tend to live on the minimal side so my initial response is almost always “Thanks, but she really doesn’t need anything.” Au contraire, my wife informs me… Apparently there is a veritable laundry list of things we absolutely must have for our little girl, most of which I’ve never even heard of!
All joking aside, one of the best possible gifts you might think of giving is opening or contributing to a state-sponsored Section 529 College Savings Plan. These plans can be opened by anyone, contributions to the plan may be deductible from your state income tax return (hint: in Colorado they are!), and growth is tax free- so long as you use it to pay for qualified higher education expenses.
With the annual cost of many in-state, public schools now exceeding $20,000 a year, if you do plan on helping with a child’s education (be they your own or a family member’s) it pays to start saving now. After all, assuming 6% growth in education costs, that $20,000/year price tag in 2013 will become over $57,000/year by 2031.
Contact us if you’re interested in learning more about the tax advantages and options available to you with a Section 529 plan.
The Prior Month
The S&P 500 climbed ever higher in November, rising another 2.8%. Newsflow was light as earnings season concluded and the Fed stayed quiet. The “Obama-care” roll-out debacle has posed, and should continue to be, little worry to the markets. Worldwide politics were also calm- even the U.S. and Iran found reason to hold hands and take smiley photographs- at least for now.
December is the best month in terms of up-month frequency, posting positive returns 75% of the time. With the positive seasonality and the fabled “Santa Claus Rally” hopefully on the way, investors are looking forward to a positive end of the year.
Bare in mind Congress is working on a budget deal with a supposed December 13th deadline. Failure to reach an agreement could result in yet another government shutdown come January. Still, while a small pullback is possible at any time, we see no reason to be overly concerned, at least until 2014.
“Always see both sides to every trade” is a maxim that will serve an investor well over the course of a lifetime. Keep in mind that for each and every trade that occurs there is both a buyer and a seller. If you are buyer, ask yourself why someone else is so willing to sell their shares to you at the price you are placing the order? Perhaps they think the company’s prospects are dimming (or getting better)? Are they better informed than you to be able to speculate on this? Or perhaps they just need to sell something to pay for their daughter’s wedding. Either way, always take a moment to stop and ask yourself this very important question before every trade.
Circus superstition has it that you should always enter the ring with your right foot first.
Calendar of Events
This month we wanted to thank a Denver-Boulder based non-profit, Trips for Kids, for a great charity event a few weeks ago. Trips for Kids aims to build healthy, confident children by teaching them the joys of cycling. Often these children come from inner-city or impoverished parts of town where access to bikes may be limited or non-existent. Flatirons Asset Management and Chrome Asset Management were proud to take part in their first annual Bicycle Benefit on November 7. Together with others, we were able to raise over $45,000!
Lastly, a special tax-related note as the year-end approaches- If you have a Flexible Spending Account (FSA) through your employer, you may be thinking you have to “use it or lose it” by the end of December. However, a recent change by the U.S. Treasury Department means this may no longer be true. Contact your employer if you have money in your account still and don’t have a good reason to use it by December 31, 2013. Up to $500 may now be eligible to be “rolled over” into 2014.
Have a great December,
Steve Zakelj, CFP®
IRS Circular 230 Notice: Pursuant to requirements related to practice before the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.