This past year my wife and I adopted a little baby boy. In this same amount of time I realized two things. First, was just how much more my life could be fulfilled. Second, I realized I have to start saving for college! A few investing mantras came to mind: "Start early!", "Take advantage of the time value of money" and most important, "Buy low and sell high". With the cost of higher education growing at an average rate of 6%, a public university education could be over $200,000.00, so I better get started.
529 Plans are a very good option because they work similar to a normal 401k, where you have a fund manager who provides possibilities to invest. If you do not have the time to pick investments yourself they often have models to use also, which are extremely helpful. Another similarity to the 401k is that you are locked into the investments that are in your specific 529 Plan with that manager. This isn't a bad thing and it is great if you have a good money manager in charge of your plan. However, using the 529 Plan option, you do not have the whole market to work with.
Education Savings Accounts (ESA's) are another great option that you can take advantage of. I found that Scottrade has one as I am sure most trading platforms do. Each year you are able to contribute up to $2,000 in an ESA, which will grow tax free until you need to take the money out for educational needs. Keep in mind, there will be a penalty if you take distributions from tax free growth and do not use it for education. So the goal of the money you invest in this plan is to use it for educational purposes.
We know the 529 Plan has its own investment options, so lets talk about of using your ESA contribution of $2000 for this year to purchase WDRP shares. Right now, the current WDRP price per share (pps) is .017, you would be able to purchase a little more than 115,000 shares. If WDRP went up to .05, which I think is very possible, your money would then be $5,750. If in the next few months WDRP announces that they have a Microwave Tankless Water Heater (MTWH) to sell and we start seeing production, this could go to .30 pps very quickly. That would be $34,500. If in the next year or two WDRP is selling the water heater internationally and also coming out with any other products and uses for this technology, then this could be 1 to 2 dollars. In that scenario your $2,000 investment would have quite a head start in paying for your child's education.
For my son's ESA I put $2000 in and bought 289,300 shares at $.005, for just over $1,400.00 and then two other positions that are more conservative. With the pps at .017 his Wanderport holding is worth $4,918.00. Already some nice growth.
Keep in mind both ESA and the 529 Plans can be used for any kind of education. Not only university, but pre-schools up through university or trade schools are acceptable ways to use this money and not pay a penalty.
One idea I like and hopefully will be able to take advantage of is to buy a house in the area your child goes to school, then when you pay for the Room & Board, it is a check you are writing to you!
There are rules and restrictions using the money for non education needs which penalize the distribution by around 10%, so you will want to be sure you are using the money correctly for education.
Both ESA and 529 Plans are transferable if the child designated doesn't use all or any of the money. I believe an ESA has some different, more stringent age restrictions for transferal than a 529 plan, so you should educate your self on the differences and choose the one that fits your needs best.
It is never too late to start saving for education. Good luck!
Because of the possibilities of share price growth, I believe you could save a lot of money towards your child's education with this idea. I am not your financial advisor, and this general discussion is not meant to be investment advice. Use this information to talk with a professional advisor who knows your financial situation and can give you specific advice based on that.
Tuesday, August 28, 2012
Friday, August 24, 2012
Should I Buy WDRP in a Cash Acct., IRA or Roth IRA
I am reposting this exerpt from September of last year. You cannot start tax planning too soon and as of right now, there is a lot of uncertainty as to what the tax situation will be like next year. Keep in mind, I am not a tax advisor. Do not make decisions based solely on my writings. Please do your own due diligence. I hope this helps.
Originally written September of 2011, modified slightly for August 2012:
We have no idea where the price per share (pps) of Wanderport Corp. (WDRP) is going to go. In my opinion, it will not be at .02 for long. From the rumblings out of Investor Relations, we have a working unit and the efficiency numbers could be released soon with a marketing campaign to follow. Last year the stock reached an all time high of around .07 cents pps, so if we get the right news the pps could go up to 07-10 cents quickly. From there, over the next year or two, if Wanderport introduces their many different products and turns into a bonafied manufacturer of appliances to the mass public, we have no idea how high the pps will go. My reason for bringing this up is that I believe there is an opportunity for a lot of money to be made, which definitely calls for tax planning with your tax advisor. How long you own your shares and what kind of account you hold them in are two important things to think about.
Ask yourself, how you want to be taxed upon selling your shares?
Long Term and Short Term Capital Gains in a cash (taxable) account are determined by how long you owned the shares before you sold them. Should you sell within a year of buying the stock you will pay short term capital gains, which are your normal tax rate. If you hold this for over a year then the long term capital gains rate is 15%. (in 2013 that long term rate goes up to 20%) That one is pretty easy.
Deciding what kind of account you hold your shares in is important:
If you buy the shares in a Roth IRA you have used money that is already taxed. The benefit is that when you are 59 1/2, you get to take distributions out tax free. (If you are under 50, your Roth IRA contribution is lower than if you are over age 50. So check with your accountant or financial advisor to make sure what is right for you.) If you do this, don't plan on taking a distribution from this account until you are at least 59 1/2. An example of this would be: Buy 75,000 shares, at .02 cents per share this would be a Roth IRA contribution of $1500. If in the future this share price went from three cents (.02) to fifty cents (.50) your $1500 or 75,000 shares would now be $37,500.00. You would now have $36,000in gains which would be a tax free distribution at the proper age (59 1/2).
If you have been buying these shares in a Traditional IRA, you have the option of converting that Traditional IRA to a Roth IRA (Roth Conversion). Your Traditional IRA money has not been taxed yet. Whether you have your own Traditional IRA or you rolled over money from a 401k from a past employer, this money was put into the account tax free, and it grows tax free. However, when you reach 59 1/2 and can start distributions, this money will be taxed at the proper tax rate for your income level.
Should you do the Roth Conversion, your $1500 contribution from our last example, would be taxed this year at your current tax rate. (to be figured in your taxes at the end of the year) Let's use a tax rate of 33% to make it easy. That would be $500 dollars in taxes you would pay now. No matter what the share price goes to this year, you pay the taxes on the amount your account was worth when you did the conversion, or again, for our example $500. Now, lets imagine everything goes great with the company and the share price goes to fifty cents. Your Seventy Five Thousand shares would now be worth $37,500.00. Having done the conversion, you would have paid taxes on the original contribution $1,500, which was $500 and you can now take the money out tax free upon retirement. If your money was in a traditional IRA and we used the same situation, the tax on your $36,000.00 in gains at a generic 14% tax rate would be taxed around $5,040.00. In this hypothetical situation, you would save about $4,540.00 by Converting your Traditional IRA to a Roth.
Because of the possibilities of share price growth, I believe you could save a lot of money with the proper tax knowledge. I am not a tax advisor, and this general discussion is not meant to be tax advice. Use this information to talk with a professional tax advisor who knows your financial situation and can give you specific tax advice based on that.
Originally written September of 2011, modified slightly for August 2012:
We have no idea where the price per share (pps) of Wanderport Corp. (WDRP) is going to go. In my opinion, it will not be at .02 for long. From the rumblings out of Investor Relations, we have a working unit and the efficiency numbers could be released soon with a marketing campaign to follow. Last year the stock reached an all time high of around .07 cents pps, so if we get the right news the pps could go up to 07-10 cents quickly. From there, over the next year or two, if Wanderport introduces their many different products and turns into a bonafied manufacturer of appliances to the mass public, we have no idea how high the pps will go. My reason for bringing this up is that I believe there is an opportunity for a lot of money to be made, which definitely calls for tax planning with your tax advisor. How long you own your shares and what kind of account you hold them in are two important things to think about.
Ask yourself, how you want to be taxed upon selling your shares?
Long Term and Short Term Capital Gains in a cash (taxable) account are determined by how long you owned the shares before you sold them. Should you sell within a year of buying the stock you will pay short term capital gains, which are your normal tax rate. If you hold this for over a year then the long term capital gains rate is 15%. (in 2013 that long term rate goes up to 20%) That one is pretty easy.
Deciding what kind of account you hold your shares in is important:
If you buy the shares in a Roth IRA you have used money that is already taxed. The benefit is that when you are 59 1/2, you get to take distributions out tax free. (If you are under 50, your Roth IRA contribution is lower than if you are over age 50. So check with your accountant or financial advisor to make sure what is right for you.) If you do this, don't plan on taking a distribution from this account until you are at least 59 1/2. An example of this would be: Buy 75,000 shares, at .02 cents per share this would be a Roth IRA contribution of $1500. If in the future this share price went from three cents (.02) to fifty cents (.50) your $1500 or 75,000 shares would now be $37,500.00. You would now have $36,000in gains which would be a tax free distribution at the proper age (59 1/2).
If you have been buying these shares in a Traditional IRA, you have the option of converting that Traditional IRA to a Roth IRA (Roth Conversion). Your Traditional IRA money has not been taxed yet. Whether you have your own Traditional IRA or you rolled over money from a 401k from a past employer, this money was put into the account tax free, and it grows tax free. However, when you reach 59 1/2 and can start distributions, this money will be taxed at the proper tax rate for your income level.
Should you do the Roth Conversion, your $1500 contribution from our last example, would be taxed this year at your current tax rate. (to be figured in your taxes at the end of the year) Let's use a tax rate of 33% to make it easy. That would be $500 dollars in taxes you would pay now. No matter what the share price goes to this year, you pay the taxes on the amount your account was worth when you did the conversion, or again, for our example $500. Now, lets imagine everything goes great with the company and the share price goes to fifty cents. Your Seventy Five Thousand shares would now be worth $37,500.00. Having done the conversion, you would have paid taxes on the original contribution $1,500, which was $500 and you can now take the money out tax free upon retirement. If your money was in a traditional IRA and we used the same situation, the tax on your $36,000.00 in gains at a generic 14% tax rate would be taxed around $5,040.00. In this hypothetical situation, you would save about $4,540.00 by Converting your Traditional IRA to a Roth.
Because of the possibilities of share price growth, I believe you could save a lot of money with the proper tax knowledge. I am not a tax advisor, and this general discussion is not meant to be tax advice. Use this information to talk with a professional tax advisor who knows your financial situation and can give you specific tax advice based on that.
Wednesday, August 15, 2012
Wanderport Joins Social Media, Facebook and Twitter
You can follow Wanderport on Facebook and Twitter now.
Get updates and ask questions on Facebook and find out what happens, when it happens, with Twitter!
Get updates and ask questions on Facebook and find out what happens, when it happens, with Twitter!
Follow Wanderport on Facebook at: facebook.com/wanderportcorporation
Follow Wanderport on Twitter at: Wanderport@wanderportcorp
Subscribe to:
Posts (Atom)