CameronDowning

How do you best save for your child’s college education?
Steal this 3-step process I use with my clients --

Question 1️⃣: In which of these three buckets do you fall?

✅You want to pay for 100% of Billy’s education.
✅You want to pay for a portion of Billy’s education.
✅You want Billy to pay for his own education.

No right or wrong here. Every family has different values and priorities.

Question 2️⃣: If you want to help pay for Billy’s education, how much free cash flow do you have for that goal (while also funding your own retirement and other financial goals)?

✅"Let’s create a budget together so you’ll know where all your money is going."
✅Budget is completed. I ask, “Does this please you?”
✅We make budget adjustments, if needed, together. Prioritize what to do with excess cash flow.

Question 3️⃣: What college savings vehicle makes the most sense for your family? Here are your top three choices:

✅College Savings 529 Plan
✅Prepaid (in FL)
✅Family Trust

🪙Bonus: if Billy is still early in his highschool years, now is the best time to talk to you about money-saving strategies for FAFSA applications. Don't count out private universities! We can potentially save you tens of thousands of dollars with a quick phone conversation.

💰"Will I get taxed when I receive an inheritance?"

‼️Generally, no! But what are the exceptions?

✖️If you inherit a Traditional IRA or 401k, subsequent withdrawals from these accounts are subject to ordinary income taxes.

✖️If you inherit stocks, bonds, or real estate and then sell them, you may owe capital gains tax on any appreciation above the asset’s value on the date of the decedent’s death (known as a “stepped-up basis”).

✖️Residents in Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania may face state-level inheritance taxes, which depend on the relationship to the deceased.

✖️There is no federal inheritance tax, but the federal estate tax may apply to very large estates (over $15 million for 2026).

👱♂️👩Receipt of an inheritance is the perfect time to establish, or revise, your family’s financial plan.

🏃You've changed jobs, but you left your old 401k behind.

🏋️You're OK, if you're rebalancing periodically.

😞But most won’t do this.

😬In fact, it’s been over 2 years since you've logged in.

🔄You're gonna smash that password reset button.

This is a sign you either

⌚(a.) Don't have time to manage your 401k

or

😎(b.) Don’t feel confident enough to manage your 401k.

It is also true that the definition of insanity

Is doing the same thing over and over again and expecting different results.

But that doesn't matter. It's all in the past. You move forward.

The only thing that matters now is how you answer the question --

𝘞𝘩𝘢𝘵 𝘢𝘳𝘦 𝘺𝘰𝘶 𝘨𝘰𝘯𝘯𝘢 𝘥𝘰 𝘢𝘣𝘰𝘶𝘵 𝘪𝘵?

How to avoid the dreaded 25% IRS penalty on your retirement accounts:

Many don’t know about this harsh penalty until it’s too late.

I spoke with a pre-retiree this week who received a letter warning them of exactly this.

He read me the letter -- “If I don’t distribute money out of my 401k account

The IRS will impose a 25% penalty.”

He is correct!

But …

This penalty only applies after he leaves his employer.

AND he does not distribute a specified amount of funds by his

Required Beginning Date.

By age 73, the IRS requires you to distribute money out of your retirement accounts.

(These are called Required Minimum Distributions)

Exposing those dollars to ordinary income taxation.

But as long as he keeps working, the IRS cannot force him to take this money out.

His Traditional IRAs, however, are subject to different rules.

Regardless of his work situation, the IRS will require him to distribute out

Required Minimum Distributions from his Traditional IRAs by age 73,

Or else he will owe a whopping 25% of the amount he was supposed to have distributed out,

As a penalty to the IRS!

So plan accordingly.