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The RFG Weekly Wealth Report

January 25, 2016
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Investors breathed a sigh of relief last week when U.S. stock markets recovered from a tumble toward bear market territory with the grace of a Cirque du Soleil performer. Many stock markets around the world finished the week with gains, although national indices in Europe and the United States fared better, generally, than those in Asia.

BloombergBusiness reported global stocks experienced their biggest gains in more than three years, while safe haven markets, including Treasuries, retreated. Stocks moved higher on speculation the European Central Bank (ECB) will expand stimulus measures, the U.S. Federal Reserve may revise its rate hike intentions, and Japan and Asia also may take steps to support their markets. According to the Financial Times:

"Sentiment turned in part because of dovish comments on Thursday from Mario Draghi, president of the European Central Bank, which many in the market viewed as signaling that further stimulus measures could be unveiled in March... The slide in U.S. equity markets and strengthening of the U.S. dollar have rapidly unraveled investor expectations that the Fed will be able to lift rates four times this year, as the central bank seeks to normalize policy. Instead, traders put the odds on just one rate rise this year."

A late-week rally in oil prices also helped push stock markets higher. The Financial Times reported crude oil hit a 12-year low midweek and then bounced more than 18 percent. While improving oil prices proved heartening to investors, Barron's pointed out prices have dropped because supply expanded ahead of demand. With growth in China slowing, it may take some time for supply and demand to balance.

IT'S COLLEGE TIME! WHAT WILL THE MONEY IN A 529 COLLEGE SAVINGS PLAN COVER? If you have a child or grandchild who will be heading to college soon, and you have set up and contributed to a 529 College Savings Plan, it's almost time to tap into those funds.

The reason many people start tucking money aside in college savings plans when their children are young is any earnings grow tax-deferred in 529 plan accounts, and are federally tax-free (and often state tax-free) when withdrawn, as long as they're used for qualified education expenses for a designated beneficiary. Qualified expenses include tuition, fees, books, and room and board.

Recently, Congress passed legislation that made computers, Internet access, printers, scanners, education-related software (no games), and other peripheral equipment qualified expenses. Computers were qualified expenses previously, as long as the college required computers for attendance. Now, they qualify even if the school does not require them.

According to Kiplinger's, 529 plan savings can be used for room and board even if the account beneficiary lives off campus, as long as he or she is attending college at least half-time. While you don't have to document expenses for 529 plan administrators, it's a good idea to keep a record of all education-related expenses.

529 plans are a smart way to save and invest for college. Contributions may be state tax-free, and there is no limit to the amount you can contribute annually, according to SavingforCollege.com, but there are tax-related nuances to understand. During 2015, a parent or grandparent could contribute up to $14,000 per child or grandchild and qualify for annual gift tax exclusion ($28,000 if a spouse contributes, too.) If you prefer, you can make a lump-sum contribution of up to $70,000 per beneficiary, and spread it over five years for gift tax purposes.

Please keep in mind, prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.  Non-qualified withdrawals may result in federal income tax and a 10% federal tax penalty on earnings.

Please feel free to contact us if you would like to learn more about this college savings plan for your children or grandchildren.

 

Quote of the Week

'Common sense is not so common.'

--Voltaire, French writer, historian, and philosopher

 

Golf Tip of the Week

Bend the Ball with Your Body

If you find yourself close enough to an obstacle that you need to curve the ball around it, a good setup is critical to get out of trouble and cut your stroke count.

Start by pointing your feet, knees, and shoulders where you want the ball to start. Typically, this will be pointing slightly away from the obstacle.

Then, aim your clubface toward your ball target - where you want the ball to land.

Finally, swing along the line of your body and watch the ball curve around the obstacle and (hopefully) end up at the target. Don't try and aim the ball with your arms; instead, use the line of your body to guide the swing.

 

Financial Question of the Week

How should I react to stock market volatility?

We recommend reacting calmly and without panic in response to short-term stock market volatility. We believe investors should have an adequate understanding of investment risks and take a long-term approach to their investments.

In light of market volatility, we may take advantage of rebalancing opportunities, but it is important to keep your long-term goals in mind.

If you have friends or family members who are unsettled by swings in the market, we would be happy to speak with them about strategies they can use to protect their portfolios in uncertain times.