New England Capital Financial Advisors, LLC

As college students end their winter break and head back for spring semester, I thought it would be a good time to review some college planning basics.

I tell clients there’s no “magic bullet” for accomplishing the college savings goal. Paying for college for your children usually incorporates several strategies including:

• Saving money in a college fund
• Scholarships and Grants
• Loans by parents and/or students
• Re-directing current income from parents or students during the college years.

In most cases, the best vehicle to save for college is 529 savings accounts. 529 refers to the section of the Internal Revenue Service code which allows for tax preferential treatment of college savings accounts. 529 plans are typically owned by the parent with the child as beneficiary.

As many of you are aware, we had sweeping Federal tax law changes for the first time in 30 years that will have both positive and negative effects on many of you.  Please note that these changes are not uncommon and usually do happen every 30 years, with the last two coming in 1981 under President Reagan and before that, in 1945 under President Truman.

In this article we will discuss, as Clint Eastwood would say, “The good, the bad, and the ugly” of the bill and how it may affect you.  Please note that this article is not meant to be a comprehensive guide to every caveat of the law, but it does cover the high points and makes it obvious how important good financial and tax planning will be (as it was in the past and will continue to be in the future)!  First though, let’s talk about some of the things that did not change:

UNCHANGED

All of us at New England Capital Financial Advisors would like to take this opportunity to wish you and your family a happy holiday season and a very healthy safe and prosperous New Year. It is one of our greatest pleasures to exchange season's greetings and thank those whose friendship and goodwill are so highly valued.

This holiday season seems to be more enjoyable after a good year of gains in the markets.  Most markets have done well this year; stocks and bonds both in the USA and globally.  For example, the US stock market, as measured by the S&P 500, has had over 50 new record highs so far in 2017.  While some believe the US stock market is overvalued, others believe that the current valuations are supported by record earnings.   A company’s earnings may be the biggest factor in determining its value. 

In fact, for the first time in years, the world’s major economies all appear to be trending higher.  United States GDP (Gross Domestic Product) will increase at a 2.4% rate for 2017 (compared to 1.6% for 2016).  Europe and Japan seem to be turning a corner with 2017 GDP rates slightly ahead of 2016’s.  China’s growth rate in 2017 shows more stability than many expected.  At 4.5% GDP, emerging markets could have room for further growth. 

Christmas In The Village South Meriden was held on Saturday, December 2nd from 2:00 to 5:30 PM on Main St in South Meriden. The event started with a parade featuring Santa, Elves, Frosty the Snowman, Rudolph, Little Mister and Miss Hanover School, many local community organizations and marching bands.

I've noticed in several of my recent client meetings that the topic of risk is being discussed more often. I think this is a good thing. Unlike Chris Lee's article in this newsletter which discusses large, geopolitical economic risks from around the world, I want to concentrate on risks closer to home, specifically individual self-inflicted risks. 

Behavioral finance which is a relatively new field of study can help us make better decisions which allow us to reach our financial and life goals. Behavioral finance attempts to understand the biases of human behavior when it comes to money.  Imagine economist Adam Smith got together with psychoanalyst Sigmund Freud and combined their two fields of study! 

A quick review shows the economy continuing its slow but steady ascent. The economic output grew at a 3.1% annual rate in the second quarter, slightly stronger than previously thought and marking the best growth in two years according to the US commerce department. Unemployment remains low and the stock market as measured by the S&P 500 is up 12.5% year to date according to the Wall Street Journal. Also worth noting is that markets have generally been calm this year. The VIX, or volatility index listed on the Chicago Board of Options Exchange (CBOE) has mostly stayed in a very narrow range indicating little expectation of future volatility.