Athletic Scholarships – I Want One!

I admit it; I’m an Olympics junkie.  Winter, summer, doesn’t matter, I love watching the games. This past week as I’ve watched the Olympic trials I’ve heard the commentators talk about how many of the athletes were on college scholarships. What are the odds of getting an athletic scholarship?  Turns out, they are pretty long.

Athletic scholarships, especially the coveted full ride, are rare. In 2011, there were 19.7 million college students, according to the National Center for Education Statistics.  According to the National Collegiate Athletic Association (NCAA) website, $2 billion is provided annually to 126,000 student athletes at its Division I and II schools.  Division III schools technically can’t award athletic scholarships though they do offer athletes merit or leadership scholarships. The National Association of Intercollegiate Athletics provides $450,000 annually to 60,000 student athletes.  Very few of the scholarships are full rides; most are divided among several athletes to subsidize tuition, books, or fees.

If you put all those numbers together, less than 1% of those students are attending college on athletic scholarships.  If you have that one-in-a-hundred child who has the right combination of ability, drive, and passion, there’s a chance he or she can earn a partial scholarship but you need to have a plan for covering the rest of the cost of college. Here are some suggestions:

  1. When your child is young, establish a college fund using a 529 plan and set up monthly automatic payments to it.  Even if the amounts are small, say $50 per month to start, the most important thing is to start.  For Colorado, www.collegeinvest.org is the place to begin.
  2. Control your spending on those sports activities.  Between clinics and off-season camps, private coaching, gear, and travel tournaments you can easily spend thousands per year for your child.   Take advantage of your team’s fundraising opportunities to keep those costs down.  I promise I’ll buy Butter Braids, pies, coupon books or tickets to spaghetti dinners if your athlete asks me.  Share travel expenses, make it as efficient as you can.  And, sometimes, say no.
  3. Maximize your own retirement funding.  Contributions you make to a Roth IRA can be withdrawn free of tax to pay for college if needed. But don’t sacrifice your own retirement for your child’s sports.
  4. Focus on academics.  In college recruiting, a great student who is a really good athlete stands a better chance of being awarded a scholarship than a great athlete who is a marginal student.
  5. Make sure that it’s your child who wants to play sports in college, not you.  It can be tremendously rewarding but it is a lot of work and a lot of pressure.

Later this month when the London Olympics begin, I hope you enjoy watching. If your child is inspired to train for the 2020 games or beyond, that’s great. Just make sure to tuck funds aside for college, too.

New Healthcare Tax – Tell Me Doc, Is it Going to Hurt?

Last week the U.S. Supreme Court upheld the constitutionality of President Obama’s healthcare reform legislation which means we’ll see a couple new taxes take effect in 2013.  Overall, I think the impact of these taxes is small, though we’ll want to manage them as best we can.

The first tax is an increase of the Medicare tax .9% on earned income above $200,000 for individuals or $250,000 for married couples.  As an example, let’s say one spouse earns $200,000 and the other earns $150,000 for total earnings of $350,000.    The couple will owe $900.

The second tax is on investment income and, again, targets high-earners.  It is a 3.8% tax on investment income above the $200,000/$250,000 threshold. It includes capital gains, royalties, interest, rents, and other nonwage income.  It doesn’t include life insurance proceeds, IRA distributions, pensions, or Social Security income.  If, for example, an individual taxpayer earns $210,000 and has $10,000 in long term capital gains, the taxpayer will owe $380 of additional tax.

Details and final guidance from the Internal Revenue Service won’t be available until later this year but it’s important to note that there are two other tax changes happening that will have a far bigger impact.  The first is the scheduled expiration of the Bush tax cuts.  If the cuts expire, everyone’s taxes will increase, not just those of high-earners.  Dividends will be taxed at ordinary income rates; long term capital gains will be taxed at 20%.  The second is the scheduled expiration of the estate tax cuts.  Unless new legislation is enacted, in 2013 estates above $1M will be taxed at 55%.  Ouch!

On the bright side, there’s a lot of good stuff in the healthcare reform.  Keeping adult dependents on family policies up to age 26 already is helping millions of parents sleep better at night.  Beginning 2014, insurers can no longer drop an individual if he or she becomes sick, can’t refuse coverage for pre-existing conditions, and can’t set annual or lifetime limits on care.  And as states set up insurance exchanges we may finally have an affordable health care option for early retirees.

As the year progresses, we’ll work together to take the appropriate steps to minimize your tax obligation wherever we can.  If you have specific questions on these new taxes please don’t hesitate to email or call.

Moving Forward on Your Own – Kathleen Rehl

Moving Forward on Your Own – Workshop for Widows & Those Who Care

Saturday, August 4, 2012 from 2:00–4:00 PM
at the First Evangelical Lutheran Church of Longmont

803 Third Avenue, Longmont CO  80501

Light refreshments available at 2:00 PM

There is no charge to attendees, but advance registration is required.
Call 1-800-579-9496 or email Bob.Kuehner@lfsrm.org

Join us for a special presentation by Kathleen M. Rehl, Ph.D., CFP®, award winning author and speaker. She presents practical information in an engaging and entertaining manner, along with issues of the heart. The workshop is open to all . . . although it’s especially designed for women. So, bring your gal friends for an enjoyable afternoon out together.

Disaster Preparedness

So far this year over 600 families have lost their homes to wildfires here in Colorado.  When disaster strikes, whether it a hailstorm, tornado, hurricane, earthquake, or wildfire, the process of filing insurance claims and rebuilding can be lengthy and frustrating. With good records claims are processed more quickly and with higher payouts than without.  During our Insurance Review, we discuss the importance of documenting your possessions and I thought now was a good time for a reminder.

If you haven’t any records of your possessions, please take time this evening to take digital photos or video of what you own.  Just 30 minutes – that’s all I’m asking! Walk through your home, room by room, and take a picture of everything you see.  Open drawers and closets to photograph items that are out of sight. You can also probably skip taking pictures of items in your house that are not of much value; for instance, teenagers. (I’m joking, we know they are priceless).  Don’t forget the garage and the deck.  Make a copy of the photos or video and store it in a safe deposit box or somewhere safely offsite.

If you have recently made photographic records, great! Now, I encourage you to take the next step – a written home inventory.  Create a spreadsheet and, room by room, list each item, its purchase date and cost. Start at the top of the house and work your way down. Store a copy of this offsite with the photographic records.  And, if you never need to file a claim, consider yourself fortunate!

Lastly, make sure your homeowner’s policy is for guaranteed replacement cost, rather than actual cash value.  It will cost 10-15% more but it’s well worth it.