How does this author and adviser help executives and entrepreneurs in the college financial planning process?
This article features an interview with Michael Haber, JD, CFP®, Vice President & Senior Wealth Advisor and a Principal at The Colony Group. Michael works closely with executives, entrepreneurs and their families in providing comprehensive wealth management services, including investment management, financial planning & estate planning.
Building upon his experience in working with his clients, he is the co-author of a newly published book titled, “Personal Financial Planning for Executives and Entrepreneurs: The Path to Financial Peace of Mind.” Previously, he was a practicing attorney, received his J.D. from Benjamin N. Cardozo School of Law and his B.A. from Emory University. You can learn more about Michael at the website of https://www.thecolonygroup.com/. Last but not least, thank you Michael for your time, insight and support in working with me on the article. Please read the questions and answers to learn about his perspective on college financial planning, and I hope that the article provides you with an opportunity to learn more from your peers.
Question 1 (Paul Curley, Editor of the 529 Dash): Fellow Emory College graduate, how did you first get started with your newly released book?
Answer 1 (Michael Haber, JD, CFP®, Vice President & Senior Wealth Advisor at The Colony Group): We wrote as a team amongst ten partners at The Colony Group. Everyone contributed in different ways. We’re a naturally curious group, and we’re very committed to lifelong learning. It’s one of our core tenets, and we know this stuff. At the same time in looking around, there really isn’t a book dedicated to planning for executives and entrepreneurs in our form, which is both narrative and instructional. So, seeing that no one’s ever done this before and then realizing that there were ten people with financial expertise in our firm who could all join forces and work on this together, we had a meeting and it just took off in a straight line. We brought in a little bit of editorial help just to tie everything together, and found it to be a pretty enjoyable process. It’s something I could see us doing again soon.
Question 2: Based on your experience, what are some of the best practices for helping clients in the college financial planning process?
Answer 2: Number one, like with anything that’s important, it’s essential to be thoughtful. So, particularly in our book and for a lot of our clients, there are people who have already done a lot of the things right who are now concerned about not doing the wrong things and messing it all up. So, they have a lot of decisions to make.
Being thoughtful is important. Whether you’re saving or not saving for college, that’s generally a decision. Some of the executives we work with want to pay for college entirely. Some folks we work with are around our age, let’s say approaching or eclipsing 40, even if they’re making over a million dollars a year, might still be paying down student loan debt and want their kids to have the same kind of skin in the game. And so, they’re not planning to pay the full freight, or they’ll help the kids get loans and then help pay them back after college graduation. These are all equally valid choices. It’s really about what brings meaning and peace of mind to the client. But it’s important to be thoughtful, and make sure one of these outcomes isn’t happening by accident. You have to understand how much you want to pay, how much you can pay, how much you’ll need to save, and what your available resources are. Clients sometimes say to us, “well I know my mom or dad might be planning to help,” but they don’t want to talk to mom and dad about what that looks like or how it might affect things. It’s important to really take a clear-eyed inventory of your resources and ability to save. Continuing on best practices, whether working with an advisor or not, you have to understand the state specific issues, what the state tax benefit might be, what the maximum balance of the 529 plan is. A lot of executives and entrepreneurs have lumpier salaries in that they are not necessarily making the same income every year. If they have young kids and they’ve had larger windfalls, we often talk to them about making lump sum contributions and the ability to contribute five years’ worth of gift exclusions in one year. With two parents splitting gifts, that amounts to $150,000 that could potentially be funded into a 529 plan at one time. It’s then included as five $30,000 gifts spread over each of five years.
I would say just two things in parting. One is that college is not the only thing you’re saving for, and so you do have to be mindful of all of your other goals including financial independence, something we talk a lot about in our book. Second, decide on a strategy and stick to the strategy. If you have to adjust the tactics, that’s okay but really try to think long term and then stick with it. To some degree, if you’re planning on saving linearly, setting it and not forgetting it is a good way to go.
Question 3: How often do you see college financial planning incorporated into legacy planning and estate planning?
Answer 3: I hear that question as much from grandparents as from the parents who are just focused on getting to the finish line. When we’re working with, let’s say wealthier grandparents who have a few kids and a few grandchildren, they’re thinking about the best way to provide for their grandchildren, whether that’s in a 529 plan or annual exclusion trusts or just plain old provisions in a will or revocable trust. They want to make sure that education will be paid for should they not be there. At the same time, 529s pass outside of their estates but they still retain some degree of control during their lifetimes.
Question 4: How can 529 product providers and distributors make it easier or more beneficial to save and save efficiently from your perspective?
Answer 4: From a policy and tax standpoint, I don’t have a huge item on my wish list. I’m more focused on the buy-side than the sell-side of this problem. I know everything’s always going to change, and that is why I’m always advising clients to stick with a strategy but be willing to adjust their tactics. The policy proposal that you raised earlier (on the potential of rolling over 529 assets to Roth IRAs) is certainly intriguing. I’d be interested in reading more about that, and can definitely see how that would work into planning relationships.
The real value in the 529 beside the tax deferrals and deductions, is the mechanism to save consistently over time. There is a strong behavioral component to working specifically with 529s. I do think a lot of states are doing a pretty good job now. There is competition and I certainly think we’re doing a lot better than we were a few years ago. You see states are advertising heavily. If you check out one state’s 529 online and navigate away, you’re getting popup ads for that state’s 529 for the next two weeks. I’m sure that happens to you a lot. But many states are doing quite well in terms of providing tax breaks, offering free online tools, making sure that you can do payroll or automatic monthly contributions, keeping fees down and advertising those enhancements. Rather than making investment options more exotic, simpler is often better. For most families, their savings rate will be the key in determining how much they have in the end.
It has also been my experience that college admissions officers and financial aid people will take calls and help out when they have time. So, whether you have the resources at your high school, or at local colleges or schools your kids plan on applying to, you have to be proactive in getting the information. I think in the system today the onus is on the participants and savers to empower themselves.
Question 5: Where can readers go to learn more?
Answer 5: Beyond my book of Personal Financial Planning for Executives and Entrepreneurs: The Path to Financial Peace of Mind, go to your state plan’s 529 website and do some reading there. There’s usually online tools and calculators. Of course, talk to your accountant and your financial adviser. The College Board also has some great resources.
To learn more about my firm, and to contact me directly with any financial questions, visit The Colony Group.
Editor’s Final Note: Thank you Michael for your time and insight in working with me on the article, and much appreciated. Also, I would like to provide a special thank you to the readers of the article for learning from your peers, for your support and your engagement.