GradSave

Initial Investment:December 2012
Lead Partner:Lister Delgado

Founded in 2011, GradSave is the leading online college savings registry. Providing a safe, secure and easy to use college savings registry, the Company makes it easy to give the gift of education. GradSave helps parents, family and friends save for a child’s future education by providing a platform to track and receive contributions that can be linked to any 529 college savings account.

 

Recent posts from the GradSave blog


This week, President Obama unveiled an ambitious set of proposals aimed at benefiting middle class families. You may have heard that one of his proposals is to make community college free for two years. What you may not have heard is that one of the ways he proposes to fund his plan is by taking away the federal tax exemption on 529 plan gains, essentially rolling back 529 plans to their pre-2001 rules. We all know the main benefit of 529 plans today. Gains in the account are federal tax-free when used for qualified higher education expenses. But prior to 2001, 529 plan beneficiaries had to pay income tax on the gains. So if this proposal has you worried about your 529 plan, or wondering if you should open a new one, here’s what you need to know. Proposed Tax Change:  The Facts Currently, all gains within your 529 plan grow tax-deferred and are then tax-free when used for higher education expenses. The proposal would still allow your contributions to grow-tax deferred, but the gains portion of distributions (the principal portion is never taxed) would be subject to normal income taxes at the beneficiary’s tax rate. That may not sound too bad, but this sort of income could be subject to the kiddie tax. If the beneficiary is under 24 (assuming he/she is a full-time student), the first $1,050 of income from a 529 plan will not be taxed. All income up to $2,100 will be taxed at the child’s rate. Any income over this threshold is taxed as income at the parent’s highest tax rate. Current Account Owners Take a deep breath. This proposal would not be retroactive, meaning that any gains from current contributions would remain tax-free when used for college. However, any gains from new contributions would be subject to income tax when withdrawn. State Tax Incentives Currently, 34 states and the District of Columbia offer some sort of tax incentive for contributions to 529 plans, whether it be a credit or a deduction. These benefits will remain unchanged. However, these incentives were instituted to encourage participation within these plans, so there’s no way to tell how the states will react if said proposal becomes law. Proposal Opposition The GOP, which controls both the House and Senate, has already come out in heavy opposition of this proposal. In fact, there is already much legislation on the floor to expand the benefits of 529 plans. All signs point to this proposal staying just that, a proposal, and nothing more. Make Your Voice Heard Although this proposal may never gain any traction, we still need to voice our opinions. It affects all families who hope their children will one day attend college. I encourage everyone - students, parents, and grandparents - to speak out against the proposal and voice their concerns by visiting no529tax.org and joining the Twitter discussion using #no529tax. About the Author: Matthew Toner Matthew has a passion for helping people to manage, preserve and grow their money, and he shares that passion with our clients every day. Feel free to ask him any questions you might have by sending him an email at matt@gradsave....
Posted: January 23, 2015
Is your financial advisor always required to put your interests first? The answer may surprise you. Let’s take a deeper look at how Broker-Dealers and Registered Investment Advisors (RIAs) operate and are regulated. The differences between the two, while subtle, can have a profound impact on investors. Oversight First, brokers are overseen by the Securities and Exchange Commission (SEC) and usually belong to the Financial Industry Regulatory Authority (FINRA). RIAs are registered and regulated by either the SEC or their state financial regulatory agency. Which one depends on how much assets under management it has or how many clients it has. Legal oversight differs between the two as well. Most brokerage activity falls under the Securities Exchange Act of 1934 while RIAs operate under the Investment Advisers Act of 1940. Neither one of these has too much affect on the average client. It’s only when a lawsuit arises that this becomes a concern.   Compensation According to Merriam-Webster, a broker is a person who helps other people to buy and sell property (such as stocks or houses). At the end of the day, a broker is an intermediary selling you a product. Whether it be mutual funds, retirement vehicles or college savings plans, he/she makes money on commission. For example, when your financial advisor (if he works at a broker-dealer like Merrill Lynch) places you into a blend of mutual funds for your retirement, he/she makes a commission from what are known as loads or sales charges. These charges usually hover around the 5% area. For example, if a broker were to place $10,000 of yours in a fund with a 5% sales charge, they would receive $500 in commission. So, only $9500 of yours actually gets invested. RIAs on the other hand, receive fee-based compensation for their advice. Whether it’s as a percentage of total assets under management, an hourly rate or a fixed fee, they are compensated by you, not the investment product. We can see here how this dichotomy can affect an investor’s wallet. And it’s not to say that one compensation structure is better than the other. Some might have an idea of the investments they want and would rather have short-term guidance. For example, if you were to rollover an IRA, you might be willing to pay someone one time in the form of commission for advice on which investments to select. Other investors may want an ongoing relationship and account oversight. They would also want to know just how much they are paying for that service. In this case, the RIA model is a better fit. Standards of Care This is by far the more important aspect when it comes to RIAs and brokers. Unfortunately, it’s the least understood as well. Brokers are held to a “fair dealing” standard meaning they only have to recommend “suitable” investments to their clients. RIAs, however, are subject to a “fiduciary” standard of care meaning that all of their investment recommendations must be in the best interest of the client. You might be telling yourself that this does not make much difference, so let’s look at it another way. Let’s say you’re in the market for a car. When you walk into a car dealership, what is a car salesman going to try and do? He will try to put you into one of the cars on his company’s lot, where he makes a commission. And it could be the case that almost every car on that lot is suitable for you. It will serve it’s purpose as a car. But what if you paid someone qualified to do the research for you to find the very best car for your needs? That person doesn’t care if you end up with car brand A or car brand B. He or she is giving you unbiased advice because they have no dog in the fight. Another way to think about it would be changing the way an established system works. Imagine if you (or your insurance) didn’t pay your doctor. Going to the doctor was free. However, the doctor made all of his or her money from pharmaceutical companies when they hand our prescriptions. Yes, you might be glad you’re saving yourself on doctors visits and the medicine could be ‘suitable’ for your condition, but are you really sure that it’s in your best interest? At the end of the day, a client must choose the scheme that best fits them. There is no way to say that one is definitely better than the other. At GradSave, we do believe the RIA model is best suited for those seeking college savings guidance. It’s how we are able to provide them expert advice that is always unbiased. And we are always transparent with our fees. A one-time fee of $99 is all you’ll ever pay. So, if you’re in the market for college savings advice that is always in your best interest, come to GradSave and get started. About the Author: Matthew Toner Matthew has a passion for helping people to manage, preserve and grow their money, and he shares that passion with our clients every day. Feel free to ask him any questions you might have by sending him an email at matt@gradsave....
Posted: January 16, 2015
After a blowout and a nail biter, the College Football National Championship is finally set.  Oregon took advantage of multiple Florida State turnovers in a rout. In just over a 12-minute span the score went from 25-20 to 59-20, showing the world that Oregon is no fluke. Ohio State rode the hot hand of their 3rd string quarterback in an instant classic. Alabama put up 35 points and at one point led 21-6, but in the end, shaky defense and 3 turnovers by quarterback Blake Sims was too much to overcome. On January 12, The University of Oregon will face off against Ohio State University in the finale of the first ever college football playoff. It’s a classic case of old school powerhouse versus the new kid on the block.  I will definitely be tuning in. The College Savings Playoff shook out much in the same way. Mutual Funds took down UGMA/UTMAs with ease thanks to a larger range of investment options and the ability for the owners to retain ownership of their funds. 529 Plans duked it out, eventually winning due to Coverdell’s income phase-outs and lower contribution limits. Mutual Funds and 529 Plans will battle each other to be the champion of the first ever College Savings Playoff. Once again, we have an age-old powerhouse going up against the new kid on the block. Let’s look at a preview of the matchup. It seems to be a pretty even matchup and it will surely be a good battle. Both sides have attributes in their favor, but when it comes down to saving for college, who is truly better? Check back next week after the College Football National Championship to see the winner. As for the Oregon - Ohio State game, I’ll go ahead and make a prediction. I think Urban Meyer is a fantastic coach. He’s a huge reason why I was able to celebrate two national titles while in undergrad. But this Oregon team is just too good. People talk about how fast and in-sync their offense is, but they completely forget about their defense. There was nonstop pressure coming Florida State’s way last week. In the end, I think Oregon is too much for Ohio State to handle. Oregon wins 41-31. About the Author: Matthew Toner Matthew has a passion for helping people to manage, preserve and grow their money, and he shares that passion with our clients every day. Feel free to ask him any questions you might have by sending him an email at matt@gradsave....
Posted: January 12, 2015
Those of you who follow college football know this year marks a historic point in the sport. The first ever college football playoff is upon us. The University of Alabama, Florida State University, the University of Oregon and Ohio State University will compete for the 2015 National Championship. Here’s how the bracket shook out. Alabama plays Ohio State, Oregon plays Florida State, and the winners of each game will duke it out for the national championship. You couldn’t ask for a better bracket for the first ever playoff (well, unless you’re a Florida Gator like myself). Three institutional football names and a new powerhouse  looking to prove it belongs are set to give us one heck of a ride. But as always, there can be only one champion. But it got me thinking, what would a playoff look like between college savings vehicles. Let’s set up the bracket and go over the similarities with their football counterparts. Mutual Funds vs. UGMA/UTMA, 529 Plans vs. Coverdell ESA, with the winners battling for the championship. The Contenders Mutual Funds (Alabama) An age-old powerhouse.  Year in and year out you can count on these guys being contenders. Always doing their best to try and beat the market. Of course they have their down periods. The great recession in 2008 was no good for mutual funds. And Alabama was on the verge of irrelevancy before Nick Saban came in to turn the program around. But the University of Alabama can rub some people the wrong way (as can Nick Saban). So what rubs people the wrong way when it comes to saving for college through mutual funds? Gains in the account will be taxed at the owner’s capital gains rate. Additionally, income from these investments can have a detrimental impact on the student’s financial aid package. Either way, consistency is key, and mutual funds usually don’t disappoint. 529 Plans (Oregon) The up and comers. Much like Oregon, 529 Plans came out of nowhere, and not everyone knows about their rise to power. Oregon’s rise to the top is founded in taking the best athletes and turning them into football players. 529 Plans are rooted in taking the best traditional investments and turning them into college savings vehicles. 529s package stocks, bonds and mutual funds with potential tax credits/deductions, minimal financial aid impact, flexibility and tax-free gains to set the bar high when it comes to college savings. Money removed from the account for non-educational expenses will subject your gains to income tax and a 10% penalty, but the benefits greatly outweigh this penalty, making them a contender that is here to stay for the long haul. UGMA/UTMAs (Ohio State) Ohio State is one of those schools where fandom is passed down from generation to generation. If your parents are Buckeye fans, there’s a good chance you’ve worn a scarlet and grey onesie as a child. In the same light, UGMAs were created for transferring securities ownership from one generation to the next. On the downside, Ohio State has been limited by NCAA sanctions recently. UGMAs have their downsides as well. Their gains are limited by taxation. Any income earned over $2,000 is taxed at the parent’s rate. Additionally, the child may use the money as they see fit (on things other than college) once they turn of age (usually 18). Coverdell ESAs (Florida State) Both the team and investment are solid all around. Florida State is obviously trying to win back-to-back championships with a complete team; offense, defense, and special teams. Coverdells have a great offense with tax-free gains when used for education costs and a great defense in protecting financial aid with a minimal impact. Their special teams?  Coverdells can also be used to cover K-12 expenses as well as higher education. But not every team is without its faults (except possibly for the 2001 Miami Hurricanes). Coverdell ESAs have a contribution limit of $2,000 per year from all sources, making it difficult for some parents to save the amount they like. Also, some families are excluded from using these due to income phase-outs (currently at $110,00 for single filers and $220,000 for joint). So it looks like both brackets are set. It’s sure to be an epic battle between deserving champions. But in the end, only one team will be left standing. Come back to our blog after the first round of games to see the updated College Savings Vehicle Playoff. We too will crown a final champion! About the Author: Matthew Toner Matthew has a passion for helping people to manage, preserve and grow their money, and he shares that passion with our clients every day. Feel free to ask him any questions you might have by sending him an email at matt@gradsave....
Posted: December 31, 2014
After passing in both the House and Senate, President Obama signed into law the Achieving a Better Life Experience (‘ABLE’) Act. The Act is designed to help those with disabilities save for affiliated expenses. Currently, a disabled individual cannot amass more than $2,000 in assets or earn over $680 a month without forfeiting their eligibility for crucial government benefits.  With the passage of the law, individuals will be able to open special accounts modeled after 529 Plans and save up to $100,000 without risking eligibility for Social Security and other government programs. Additionally, they can keep their Medicaid coverage no matter how much money is accrued. Although contributions are maxed at $14,000 a year from all sources, gains in the account grow tax deferred and are eventually tax-free when used on qualifying expenses. These include costs associated with education, health care, financial management, transportation, legal fees, prevention and wellness, personal support services and housing. The passing of this law affects more than disabled individuals. Currently, college savers who use 529s can only change their investment portfolio within their plan once a calendar year. The passing of the ABLE Act bumps that up to 2 changes a year beginning in 2015. This affords those more hands-on investors with the added flexibility they’ve been seeking. While timing the market can be difficult, it’s important to do a regular check-up of your plan with your financial professional to assure your current portfolio is aligned with your goals. If you feel your current allocation is too conservative or too aggressive, use one of your investment changes. If it doesn’t work out, you’ll be able to revert back to your original allocation thanks to the passing of the ABLE Act. About the Author: Matthew Toner Matthew has a passion for helping people to manage, preserve and grow their money, and he shares that passion with our clients every day. Feel free to ask him any questions you might have by sending him an email at matt@gradsave....
Posted: December 23, 2014

GradSave in the news


This Harvard Alum Wants To Disrupt The College Savings Industry

If you speak with Marcos Cordero, the co-founder & CEO of Miami-based Gradvisor, he’ll share with you two troubling statistics about college savings. First, 80% of parents don’t know what a 529 plan is, and second, 60% of those saving for college don’t use a 529 plan. That didn’t sit well with the former engineer …

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The Latest Corporate Benefit: the 529 Plan

More and more companies are adding 529 plans to workplace-benefits packages to help employees save money for college, The Wall Street Journal reports. “The goal is to make saving for college akin to saving for retirement by providing some of the same incentives that encourage workers to contribute to 401(k) accounts.” While such a perk …

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529 Day Campaign Aims to Raise Awareness for #1 Financial Concern

Savingforcollege.com has launched the “529 Reasons to Open a 529 Plan” plan which will promote saving for college. To boost awareness, Savingforcollege.com is running a $1,529 cash scholarship sweepstakes. To enter, visitors to the website can submit their own reason to open a 529 plan. They are also hosting a 1-hour free webinar with more information. …

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Can Financial Aid Determine Your Fate?

GradSave Founder and CEO Marcos Cordero examines whether financial aid is an indicator of educational performance in an article for The Huffington Post. Cordero also provides advice and calculation tools to better plan and understand the net cost of college expenses. Cordero’s GradSave aims to simplify the college savings process by finding and making it …

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Crowd Funding College: Gradsave Hopes To Help Paralyzed Parents With Savings – Forbes

  Forbes staff writer, Meghan Casserly, takes a look at GradSave and founder Marcos Cordero as they seek to help parents save for college via crowd funding. As the cost of college education continues to rise, GradSave aims to make saving for college simple, with a combination of education and online tools that accept gifts …

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