College Board Releases New College Cost Numbers

The cost of college is often a subject of interest for many of my clients. Not only are they concerned with the expense of the colleges their children want to attend (or are already attending) and how the cost will affect their finances, but what options they have in paying for it.

Every October, the College Board releases its Trends in College Pricing report that highlights college cost increases and trends. While costs can vary significantly by region and individual college, the College Board publishes average cost figures, which are based on its survey of 3,500 colleges across the country.

Here are highlights from its latest report:

· At four-year public colleges for in-state students, tuition, fees, and room and board increased by 5.9% from last year, with the total cost for 2009/2010 averaging $19,388;
· At four-year public colleges for out-of-state students, tuition, fees, and room and board increased by 6.0% from last year, with the total cost for 2009/2010 averaging $30,196; and
· At four-year private colleges, tuition, fees, and room and board increased by 4.3% from last year, with the total cost for 2009/2010 averaging $39,028.

“Total average cost” includes tuition and fees, room and board, books and supplies, transportation, and a small amount for miscellaneous expenses.

The College Board is quick to point out that the average "sticker price" cost figure is not necessarily representative of what most students pay. That's because almost two-thirds of undergraduate students receive grants that reduce the actual price of college. The largest provider of grant aid is individual colleges, followed by the federal government, private sources and employers, and state governments.

For the 2009/2010 year, the College Board estimates that students at public colleges will receive an average of $5,400 in grant aid from all sources and federal tax benefits, and students at private colleges will receive an average of $14,400 in grant aid from all sources and federal tax benefits. Federal tax benefits include the American Opportunity tax credit (formerly called the Hope credit), the Lifetime Learning tax credit, and the deduction for qualified higher education expenses.


If you have any questions or would like help in planning for higher education, please call the Mandalay offices at 713-667-4026 to set up an appointment.

To read the Trends in College Pricing report, visit www.trends-collegeboard.com.

Every year, the College Board also releases a sister report to Trends in College Pricing, called Trends in Student Aid, that examines student financial aid in more detail. To read this report, visit www.trends-collegeboard.com.

Is There a Conversion in Your Future?

In 2010, previous restrictions on converting traditional IRAs to Roth IRAs will be permanently removed. Anyone who wants to do a Roth conversion may. In addition, the government is going to give a tax deferment on any conversions done in 2010.

For conversions occurring in 2010, 50% or the resulting income will be recognized in 2011 and 50% in 2012. In effect, you will have an interest free loan from the government from the date of conversion to until you have to pay the tax – as late as April 15, 2013.

That said, keep in mind that if income tax rates go up, you could end up paying a lot more tax than planned. I believe it’s likely that the top two tax rates will be higher during these tax years. Alternatively, you may choose to include all the income on your 2010 return to be taxed at the rate in effect for 2010.

In my opinion, a Roth conversion can be a very beneficial strategy for some investors. There are specific circumstances which make it beneficial, and we should discuss and consider if a Roth conversion is a good planning opportunity for you.

A Longer Rebound than Normal?

Looking back at the past nine recessions, there has been a definite correlation between the depth of recession and the strength of subsequent recovery. Considering the pent-up demand created because of the extent to which businesses cut back on production, inventories and payroll during a downturn, the reverse response during the eventual recovery is understandable.

For example, following severe slumps in 1973-75 and 1981-82, real GDP grew 6.2% and 7.7% respectively. Recently the average forecast of 52 economists – surveyed by Blue Chip Economic Indicators – call for growth in real GDP of 2.7% over the next four quarters. During the same nine previous recessions, real GDP has never required more than three quarters to regain its peak level prior to the downturn. Can history not predict the strength of our next recovery?

If not, the lingering credit crisis may be a major factor as households may need longer to reduce debt and save more before increasing spending, limiting the business sector’s recovery.

So far, surprisingly positive data in recent weeks supports the historical, upbeat recovery scenario. Only time will tell!

(Source: Business Week, 12 Oct 2009)

Build America Bonds vs. Munis

Bloomberg reported that the Bond Buyer 20 General Obligation Bond Index(1), a measure of how much it costs state and localities to borrow money, is poised to test its recent record low of 4.03% reached in December 2006.

Muni analysts attribute the drop in yields to strong demand from bond funds faced with a shrinking supply of tax-exempt securities. The reason for the shrinking supply is that almost $35 billion in new issues never came to a market because states and localities decided to sell taxable Build America bonds. The interest cost of Build America Bonds is subsidized by the U.S. government reducing borrowing cost below tax-exempt levels.

What does this mean to Mandalay clients? It could mean new purchases of munis may take longer to place and, of course, the expectation of lower yields.

One last thing; the U.S. government subsidy program is not scheduled to expire until December 31, 2010. What may be good for the economy and municipalities isn’t necessarily good for muni investors.

(1) Index of 20 municipal issuers rated Aa2 would pay to borrow money for 20 years.

FIVE STAR WEALTH MANAGER “BEST IN CLIENT SATISFACTION”

TEXAS MONTHLY NAMES LOCAL FINANCIAL ADVISOR
TO FIVE STAR WEALTH MANAGER “BEST IN CLIENT SATISFACTION” LIST

HOUSTON (Sept. 3, 2009) – Mandalay Financial, a Houston-area financial planning firm, today announced that advisor Michael Kuznicki has been named to Texas Monthly’s “The FIVE STAR: Best in Client Satisfaction Wealth Manager” award list for 2009. The list of FIVE STAR Wealth Managers is an elite group of wealth management professionals, representing less than two percent of all the wealth managers in the Houston area.

“Forming a connection with my clients by understanding their goals and helping them reach their peak potential in life and wealth is my number one priority. It’s an honor to know clients and peers appreciate my dedication to the profession,” said Michael Kuznicki, founder and president of Mandalay Financial.

Developed by Crescendo Business Services, an Egan, Minnesota-based independent firm, the FIVE STAR award was created to assist consumers in selecting a wealth manager who provides exceptional client satisfaction as indicated by other consumers and industry peers.

As part of the selection process, Crescendo surveyed more than 95,000 high net-worth consumers in the Houston area and subscribers of Texas Monthly. An additional 5,739 surveys were sent to leaders of financial service companies.

Respondents were asked to evaluate only wealth managers they knew through personal experience, providing input based upon nine criteria: customer service, integrity, knowledge/expertise, communication, value for fee charged, meetings of financial objectives, post-sale service, quality of recommendations and overall satisfaction. Crescendo then carefully scored each wealth manager, reviewing candidates by a blue ribbon panel comprised of knowledgeable individuals from within the financial services industry.

ABOUT MANDALAY FINANCIAL, L.L.C.
Founded in 1999, Mandalay Financial is a premier, independent wealth management firm. Providing comprehensive wealth management to a variety of clients, the firm strives for excellence in the quality of advice and services while maintaining a fiduciary standard of care.

Mandalay Financial is located at 6750 West Loop South, Suite 995 in Bellaire, Texas. For more information, please visit us on the web at http://www.mandalayfinancial.com/. Investment Advisory Services offered through Mandalay Financial, LLC. Securities offered through Resource Horizons Group, L.L.C. Member FINRA, SIPC, Telephone 770-319-1970