For the Week of October 3, 2016
WEEKLY FOCUS
Parent, Child Assets and College Funding
If you have college-bound children or grandchildren, your financial planning should probably include an
evaluation of the amount of aid for which they may qualify. Then determine which avenues for funding
the shortfall, best fit your family’s situation.
To begin, it’s helpful to know what assets impact a student’s eligibility for financial aid. Under the Free
Application for Federal Student Aid (FAFSA) guidelines, the following parental assets don’t affect these
calculations: equity in a primary home, qualified retirement accounts, qualified and nonqualified
annuities, pension plans and cash value in life insurance.
Parental assets that will count include: stocks, mutual funds and certificates of deposit not in a qualified
retirement account; savings accounts; property equity that is not a primary residence; 529 college plans
and Coverdell Education Savings Accounts. Custodial trusts in the child’s name, such as UGMA or
UTMA accounts, are considered the child’s assets.
This is important because the FAFSA weights the student’s own financial resources heavier than their
parents’ wealth. The federal formula currently assesses relevant parental capital at a maximum of 5.64
percent and the child’s assets at 20 percent. This means the amount of need-based aid drops by the
combined percentages of the parents’ and child’s financial worth.
Two-hundred-and-sixty private colleges and universities, including highly selective Ivy League schools,
require an additional financial aid application, the CSS/Financial Aid PROFILE®. The PROFILE involves
a deeper survey of family finances, uses a different formula for determining eligibility and assesses
parental assets at 5 percent and children’s assets at 25 percent. Supplemental questions and the exact
formula used may vary from school to school. For example, some schools ignore the family home’s
equity, while others include its full value. Since this could significantly affect aid eligibility, it may be wise
to ask potential schools how they handle home equity.
College planning can be daunting and complicated. We can help you look for practical tactics for
sending your student to college while avoiding burdensome loans or lost retirement funds.
FINANCIAL FACTS
One Percenter — It took at least $465,626 of adjusted gross income during tax year 2014 (i.e., the
most recent year that tax data has been collected) to rank in the top 1 percent of wage earners (source:
Internal Revenue Service, BTN Research).
Need to Change This — The top marginal corporate tax rate in the United States is the third highest
out of 188 countries. Only the United Arab Emirates and Puerto Rico have a higher top marginal
corporate tax rate (source: Tax Foundation, BTN Research).
We Will See — Federal Open Market Committee (FOMC) data that was released following its Sept. 21
meeting indicates the Federal Reserve expects its target rate for short-term interest rates will be 1.5
percentage points higher by Dec. 31, 2018, i.e., suggesting six separate increases one-quarter of a
percentage point each (source: FOMC, BTN Research).
Page 2 of 2
THE MARKETS
U.S. stocks rose Friday; the S&P financial sector had its best day in two months; and the three major
indexes enjoyed a third week of gains. Circulating rumors predicting Deutsche Bank will obtain a better
deal from the U.S. Department of Justice regarding charges the bank sold toxic mortgage bonds appear
to have contributed a positive impact. For the week, the Dow rose 0.26 percent to close at 18,308.15.
The S&P gained 0.20 percent to finish at 2,168.27, and the NASDAQ climbed 0.12 percent to end the
week at 5,312.00.
Returns Through 09/30/16
1 Week
YTD
1 Year
3 Year
5 Year
Dow Jones Industrials (TR)
0.26
7.21
15.46
9.23
13.77
NASDAQ Composite (PR)
0.12
6.08
14.97
12.09
17.07
S&P 500 (TR)
0.20
7.84
15.43
11.16
16.37
Barclays US Agg Bond (TR)
0.06
5.80
5.19
4.03
3.08
MSCI EAFE (TR)
-0.68
1.73
6.52
0.48
7.39
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be
invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays
US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an
investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which
is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of
interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S.
dollars.
Securities offered through Securities America, Inc., Member FINRA/SIPC
Michael J. LoNano, CFP & Uno Nieeban, CFP; Registered Representatives.
Advisory Services offered through LoNano Financial Advisors, Inc.
Securities America, Inc. and LoNano Financial Advisors, Inc. are unaffiliated.
LoNano Financial Advisors, Inc.
529 College Road, Suite A, Greensboro, NC 27410
(336) 854-4458
Fax (336) 854-1808
www.LoNano.com
“Wisdom, Experience & Insight”
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial
Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common
stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index
(MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market
structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of
U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years.
Written by Securities America. SAI# 1608507.1