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AGMA Winter Meeting Sets Attendance Record
McGrory Glass Sponsors Cocktail Reception
by Ed Grose, Executive Director, AGMA
 The 2005 AGMA Annual Winter Meeting will
break last year's attendance record. To date, over 64 people are
scheduled to attend. This year's meeting will take place at the Loews
Miami South Beach March 16th to March 20th. As in the past, the
leadership of Local # 252 will be joining us to discuss what is
happening in our industry over the next year. This year's cocktail reception is sponsored by McGrory Glass, thank you McGrory
Glass!! |
The schedule for the week includes meetings every morning until about noon. During our Friday meeting, Jason Copley and George Pallas from Cohen, Seglias, Pallas, Greenhall, and Furman, P.C. will discuss legal matters in construction. Another meeting will involve legislation which will have a major impact on the construction industry. After the morning meetings attendees are free to enjoy all of what South Florida has to offer.
This will be the 4th winter meeting. Each year the conference improves over the previous one. If you have not attended in the past, you may want to start attending this year. For more information on this year's conference, please call me at the AGMA Office.
Bring Balance to Your Education Planning
by Anthony J. Gambacorta, Chief Investment Officer, Preswick Capital Management
With economic uncertainty weighing on the minds of many investors,
paying for college seems like an impossible dream.
Given today's intense economic pressures, many parents view education
costs as a tradeoff between funding their children's education needs and
their own retirement. This is because parents plan on saving money for
their children to go to college, and then promptly pay their tuition in
four years. This process often leaves parents feeling cash poor, just as
they begin to focus on their own retirement.
As an alternative, parents should consider treating education costs as a
capital investment, rather than as an expense. As with
other capital investments, payment for your child's education can be
designed to match the length of time it is expected to be used.
While 529 Plans and Coverdell Savings Accounts can be excellent vehicles
for reducing taxes to pay for education, the primary goal of each plan
is to save for college as an expense. We will explore the 529 plan's
features, and compare them to an additional option: Creating a Special
Purpose Investment Account.
Special Purpose Accounts
What is a Special Purpose Investment Account? A Special Purpose
Investment account is a flexible planning concept, which recognizes the
fact that paying for a child's education and making assumptions about
your financial future fifteen to twenty years ahead of time is very
difficult. While the Account is designated to fund your child's
education, it can also be used to meet additional objectives, once the
education goal is reached.
Advantages
The Special Purpose Investment account offers families a number of
benefits. First, since the account is titled in the names of parents or
relatives, it is controlled by them. In addition, there are no strings
attached to this type of savings. They are personal funds in all
respects, to be used at the owner's discretion.
Spreading the Cost
The account can be used to repay student loans, and spread the
investment in a college education over ten to fifteen years. For
example, assume a student borrowed $125,000 to pay for college expenses.
At a 7.00% interest rate, the loan payment would be $1,451 per month for
ten years.
Also assume that $7,500 per year was saved and invested at an 8% return
in the 15 years prior beginning loan payments. For tax purposes, assume
that one-half of the return will be taxed at a capital gains rate of 15%
and one half of the return will be taxed at an ordinary income rate of
35%. Given these assumptions, the portfolio would be worth $185,044 when
the account begins to make student loan payments.
In this scenario, with payments beginning at graduation, the Special
Purpose Account would still have a balance of $94,168 after the loans
are paid in full.
This balance can be used by the parents to supplement their own
retirement or to meet other obligations. It can also be used to assist
children with a down payment on a new home, or for gifting over the
years.
Disadvantages
The Special Purpose concept is fully taxed as it is earned. As a result,
investments in the account would be negatively impacted by taxation.
529 Basics
Section 529 plans allow the contributions to grow tax-free, and if used
for "qualified education expenses" there is no tax imposed on the income
that is earned and used to pay for those expenses. These qualified
expenses include tuition, room and board, books, or personal computers
required for college.
However, if not used for qualified education expenses, the income is
taxed and a 10 percent penalty is imposed on withdrawals. The tax and
penalty rules are waived if the beneficiary dies or becomes disabled.
Advantages
The tax advantages of the 529 plan are excellent. Being able to
contribute to a plan, have the funds grow, and withdraw them tax free to
pay for expenses can be a tremendous asset.
For example, a parent saving $7,500 per year for 15 years, and earning
an 8% return, can expect to accumulate $219,932 in the 529 plan. In
addition, beneficiaries can be changed, so if one child decides not to
go to college, the account beneficiary can be changed to preserve the
tax advantages and pay for their education. The new beneficiary must be
related to the old beneficiary by blood or marriage.
Disadvantages/Risks
The primary disadvantage of the 529 plan is that you lose some
flexibility in order to gain tax advantages.
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DC #21 Training Center Inaugurates Day School
by Mike Schurr, Assistant Program Director, DC #21, Glaziers # 252 Training Coordinator
To say the training center is busy these days would be an
understatement. Day School, ACE Classes, Accreditation, and a
possible move are keeping the training staff busy. We are currently
finishing the second, of three, day school sessions with the first
year apprentices. This new format has allowed the staff to add
curriculum that was not possible in the past. Each of you will soon
begin to see a difference in the quality of apprentices because of day
school.
By now we would hope that you have seen the new 2005 ACE Calendar that
was mailed to each member of DC 21 and AGMA Member. This is the first
time we have scheduled an entire year of Health and Safety and craft
specific journeyperson classes. Blueprints, Hardware, Supervisory
Training, Labor History, and Computer Labs have been increased to 8 or
10 week classes allowing the instructors to delve deeper into each
important topic. This is all part of the training center becoming more
pro-active and less reactive. We still need your support in encouraging
your workers to take ACE classes.
In January the JATF Trustees approved a motion to proceed with acquiring
accreditation from the Council on Occupational Education. This
accreditation would allow the training center to be recognized as an
official Technical and Community College. The curriculum we currently
teach is equal to, if not greater than, most Community Colleges.
However, we currently do not receive the Federal Education Grant monies
like those institutions. By achieving this accreditation those grants
could become available to us. This could afford training opportunities
that were never thought possible.
Last, stay tuned for some exciting news about a possible new 80,000
square- state-of-the-art training center. The trustees are currently
looking into a property that would train the future generations of
Drywall Finishers, Glaziers, Painters, and Paperhangers. We hope to
report good news soon. If you have any questions, comments, suggestions
please do not hesitate to contact me the training center at
215-501-0130.
Bring Balance to Your Education Planning continued
Take note of the term "qualified education expenses". This term
only applies to College or Graduate School Expenses. So, if you are
saving for college, and your child decides not to go to college, or the
plan is overfunded, then tax is due on income earned, plus a 10%
penalty. In addition, this income is taxed as if it is ordinary earned
income, and does not benefit from more favorable capital gains treatment.
529 Plan Overfunding
In this case, let us assume that the family spent $125,000 for college,
had no other children going to college and had no other educational
expenses.
The $94,932 surplus ($219,932 less $125,000 cost) would be subject to
ordinary income tax, plus a 10% penalty when withdrawn. For illustrative
purposes, the $94,932 would be taxed at a Federal rate of 28%, plus a
10% penalty. As a result, the net amount taken out of the 529 would be
$58,858, at the end of the child's education. Therefore, it is important
that you reasonably fund the 529 plan or you will forgo capital gains
tax treatment, and potentially have to pay an additional 10% penalty on
top of ordinary income rates.
Education Savings Accounts
Coverdell Education Savings Accounts were expanded on January 1, 2002,
to allow taxpayers to contribute up to $2,000 per year, if their
adjusted gross income was $110,000 or less in the case of a single
filer, or $220,000 if filing jointly in the year in which the
contribution was made.
The primary features of the Education Savings Accounts are similar to
the 529 plan; however, there are some provisions that make them
particularly attractive.
Similarities to the 529
There is no deduction for contributions for the Coverdell. However, the
earnings can grow tax free within the account and withdrawn without
taxation, as long as the purpose is for "qualified education expenses".
These qualified expenses are much broader than just the College and
Graduate costs in the 529.
Differences
The Coverdell will terminate when the beneficiary reaches age 30, and
unlike 529s, the funds cannot come back to the donor, so once the money
is given to the child it cannot be taken back.
Key Advantages
The primary advantage of the Coverdell Education Savings Account is that
it can be used for elementary and secondary school education. While
there are a wide number of loan programs, student aid, and grants for
college, getting kids through elementary school and high school can also
be very expensive. Given the wide range of potential eduation expenses,
Coverdell Accounts can make an important contribution to a child's
elementary education.
The Best Solution?
As with most things in life, moderation appears to be the best course.
Rather than rushing out and funding a 529 plan with all of your savings,
consider a balance between the tax advantages of a 529 plan, and the
flexibility offered by a Special Purpose investment account. In
addition, the Education Savings Account can offer significant benefits
to those who expect to use funds to pay for elementary and secondary
school education.
Author: Anthony J. Gambacorta
Chief Investment Officer
Preswick Capital Management
www.preswickcapital.com
610-565-3463
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