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Getting Personal: Saving for grandchildren, retirement or a wedding?
Getting Personal
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This week, we find out how much money a grandmother can give to her grandson for college, without receiving a tax liability and whether or not it is a good idea for to cash out an old 401(k) to pay for a wedding.
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i want to comment about the woman who wants to short sell her parents house to someone at a low-ball price that's well below what a realtor said it was worth.... why wasn't a comment made as to why this woman thinks she should be able to do it? her parents made the bad decision to buy and now she want the bank to eat the loss through a short sale.... but she don't want them to just eat the loss on what she could sell it for, she wants the bank to take an even bigger loss because she would like to sell it to this person at this price. what gives her the right to even suggest she coudl do that. not that i'm an advocate for the banks, but why should they take this hit? i've been on the buying side of a similar situation where a house was going through a short sale and even before we could put on offer on it, it had a low-ball offer already sent to the bank for review (it was listed and immediately the low-ball offer was submitted). this offer was well below the value of the house and we would've offered much, much more for it (~20%). where do these realtors and "sellers" get the nerve to try to pull a fast one on the banks? who's looking out for the banks (and investors like you and me) to ensure they're getting a fair deal in these situations?
Another addition to Ben Gilbert's excellent comment about the grandmother contributing to the child's education: They have another option. A person can pay for someone else's education (or medical) expenses with no gift tax consequences if they pay the institution directly - no worries about the $13K limit. Of course, getting the money in to a tax-advantaged place, such as a 529 plan, can be a great idea, especially if the education is a long way off. But, if grandma wants to fund education, it's not the only way.
I thought the response of Tess and David Lazarus was clumsy and self-contradictory. As journalists they should have been aware that there are lots of poor people in America who have zero savings. The best response finally came out of the mouth of David Lazarus when he said that the intended audience of the show was people who have money. Poor people obviously should find another show to listen to.
I wanted to comment on Tess and David's response to the question from a Eugene, Oregon woman who asked how best for her mother-in-law to give $20,000 to her grandson to help with future college expenses. While their response was on the right track, it is important to note that the annual $13,000 limit would apply whether the gift is in cash OR as a contribution to a 529 plan (David says "[grandma] can put as much as she wants annually into the 529 plan"). So long as grandma gives the $9,000 she currently has in 2011 and the other $11,000 in 2012, she will be within the annual limits either way.
Where she gives a direct gift or contributes to a 529 does make a difference is in regard to state taxes. If grandma lives in Oregon, she can deduct $2,090 ($4,180 if she is married and files jointly) from her state income tax if she contributes that amount to the Oregon 529 plan. However, if she lives in California or Washington (which don't allow a deduction for contributions), it may make sense to give mom and dad the money so they can claim the deduction on their own tax return. To maximize the tax deduction, the gift can be split over two years and both families can claim the maximum state tax deduction even if the grandson is the sole beneficiary.
Just a slight clarification to your usually very thorough and accurate personal finance show. Thanks for raising awareness and helping educate so many people on the sometimes difficult issue of personal finance.
I want to support what Tess and David are saying about saving for emergencies.
I think there are always ways to save. Look at what you have bought new in the last year.
My wife and I are in our mid 50’s and make 30,000 a year. I put 7% in my 401k and she puts more in IRAs every year. My 28 year old daughter lives in another city, has health problems, makes less then 15,000 a year and she saves, so that tells me anyone can.
Examine your life style. We have all we need, enjoy life, have great friends and neighbors and really feel that we can do anything we want. We have no debt and intend to keep it that way.
After listening to the fellow with 401k and the upcoming wedding, it got me wondering about getting into 401k. I currently work part time at a department store and they no longer match 401k fund. Should I get into it? If possible I would like to put as much as 75% in, about $600 a month. I have my side business which can feed me. Much appreciated, Thanks.
The hosts said they were 'chagrined' to find out that lots of people don't have the wherewithal to set aside $2000 for an emergency fund. Being chagrined involves at least a bit of shame. Were they chagrined at their lack of awareness about this? This wasn't made clear. I also have to say that they blew it at the end when Tess said that even five to ten dollars a month is better than nothing, and the other said 'savings can be found'. This, after they read a letter from someone who uses a food shelf. The thing is, for LOTS of people, savings CAN'T be found. These are not the target audience of Marketplace, but they're out there, doing the best they can (I know lots of them, and have been one at times). The closing statements implied -- even stronger than that, they pretty clearly said -- that everyone can find a way to save, if only they tried a little harder. That not only missed the point of what I thought they were intending to say; it was downright insulting.
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