Scott Goodwin Thomas's Answers and Guides

Advantages compared to what? Other options are: 1) saving outright for college the earnings are taxable 2) UTMA or Uniform Transfers To Minors Act transfer the money to children and they get control at age of majority 18-21 year of age and few little benefit unless someone sues you and their money is protected 3) Life or annuities offer some tax relief but are not generally designed to handle putting money in now and then needing it back in next 20 years 4) Real Estate purchase of house near a campus on which you may send your children could be a wiser choice but lots of other issues to address 5) Prepaid college through your State which is a cousin to the marketed 529 plans is a good choice with some lock in to costs. 529 Plans are nice estate planning tool for wealthy grandparents to fund grandchildren's educational needs. One other consideration is Educational IRA with lower limits may provide more efficient and flexible solution. Why? Educational IRA address housing and other costs in more liberal fashion and also allows for private school prior to college as well. 529 will be there as effective funding if you possibly need the money for middle school or high school. If I had more information I could render and more custom answer.

Target Date is not a excuse to set and leave it alone and assume all is well. It serves the purpose for simple approach to select an allocation and then know that as the years roll on the allocation will have less stocks and more bonds and hopefully address risk along the way. There are a couple of more questions that should be raised here like, what is your time horizon? How much money do you have? Are there special cash flow needs to address like the withdrawal for auto or other items? Cash flow needs and risk will dictate potentially if you are correctly positioned and diversified for your risk and cash needs. An example of how cash flow might drive the solution is not all target date funds have the same cash flow or risk for the specific date. Higher cash flow needs may suggest higher yielding bonds or annuity or real estate investment trust or the like to be incorporated. Overall if someone has only a few thousand dollars then a target fund may be the best choice and could serve to diversify enough.

Please allow me to ask a question of all of you answering this question. Come March 1, 2012 when Bill Gross of PIMCO Total Return rolls out their ETF as mirror of PIMCO Total Return which of these should a fiduciary purchase? Oh, and do not forget your client is tax sensitive and fee sensitive. What are all advisers who call themselves fiduciaries going to do? Half the costs, no forced tax due to sell offs. I believe this one issue will be a major change in the fee vs broker and all the talk that goes with which is better. This will be a game changer.

One of the most respected sources of education is the American College www.theamericancollege.edu and it provides clear details on the designations CFP, ChFC, CLU, CAP and other programs. I am by nature more bias to my choice of ChFC over the CFP. I went through 10 courses of which 6 of these were the same materials of the CFP. The CFP is comprehensive cram course rather than ChFC with 10 separate exams each 2+ hours and 150 detailed questions. I wanted to learn and apply deeply more materials and more testing and work over a longer period of time.

The annual report is on the Social Security website http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/210 click and download it there. The latest report from the Trustees indicate 2036 to 2040 when SS fund go broke and what happens next is benefits would drop to about 75% of the previous years benefits. Realize this SS is unique retirement income stream of income: tax advantaged, inflation protection, life long income, government guarantee. I agree with Victor on political posturing in regards to threats last summer. Also consider looking at the guides on this site for more on Social Security planning.

In your research you will come across ESG which stands for Environmental Social Governance. Impact investing is another term for triple bottom line investing. Doing Social Good, Making Money for Investors and acting in sustainable ways. There are a few guides on this website you may wish to check out as well. You Tube has some good educational materials and some wacky stuff too. I posted 5 Myths of Socially responsible investing under "stewardship matters" on You Tube. The Social Investment Forum is a good resource to consider. We utilize independent screening software to assess mutual funds, money mangers and stock for 17 distinct core values and then drill down from there. There are also best of class screening and strict screens. Some investors may want screen faith issues and some it's environmental. Some care only for social causes and others want complex screens or want to see the impact of their investments locally or within a narrow area. Go check out on Google MSCI KLD 400 Index. It will surprise you this 20 year old index has done quite well. I remember 10 years ago there were only a handful of indexes dealing with ESG and now over 300 today. My first investment with a client was Calvert Social Investment Fund 1986 with no companies in South Africa- exactly what the client requested of me. Don't let advisors tell you what your values are rather look for the ones that know how to ask and deal with your specific situation.

Before I would answer I would ask a few more questions. Are these option non qualified NQ or Incentive Stock Options ISO? If NQ then not potential for tax reduction as with ISO. If it is ISO then we should talk about how to exercise and hold for long term capital gains rates. Beware there could be AMT taxes on either of these options. Run your tax planning software or call your professional tax person to run a what if to determine the impact. If you do not have the money to exercise and hold we could discuss how you might work around this to best fit your situation. It might even be possible to do what is referred in the "options world" as "pyramiding". Short answer take some of your options and usually get free or almost free loan from your employer to leverage or borrow funds based on a portion of your shares to exercise and not sell today. What this may do is provide lock in and access to free loan. Hopes of going higher and only dealing with ISO capital gain can be a beautiful thing when executed properly.