There are two types of savings plans specifically designed to fund education expenses: Coverdell Education Savings Accounts and 529 Savings Plans.
A Coverdell account is designed for families in a lower income bracket who do not plan to contribute more than $2000 per year to the account and will make all contributions before the child turns 18. Offering investment flexibility that is superior to the 529 plan, potentially lower costs, and tax-free treatment not just for college expenses but for a wide range of elementary and secondary school costs (K-12) as well, the Coverdell is a worthy competitor for your education-savings dollars. If your child is young enough–not yet 18 years old–and your income is low enough (the income phase-out is $95,000 to $110,000 for a single taxpayer and $190,000 to $220,000 for a married couple filing jointly), you can contribute up to $2,000 per year to a Coverdell for that child.
Unlike 529s, Coverdell assets are not revocable. The account must be established for the sole benefit of the child and the assets belong to the child, In fact, the Coverdell has a custodian–and it’s not you. The custodian is the bank or other financial institution you use to open the account, much like the way you open an IRA.
As the “responsible individual”, you decide on investments and distributions, but distributions from the account are always paid to the beneficiary and cannot come back to you. Unspent funds remaining in the account when your child reaches age 30 must be distributed at that time, subject to tax and a 10% penalty on the account growth if he or she does not have qualified education expenses in that year. Federal tax law says the beneficiary can be changed to another family member below age 30 without triggering tax or penalty.
529 Savings Plans are more flexible than Coverdells but unlike the Coverdell, funds from the account cannot be used to pay for elementary and secondary school expenses and have more limited investment options. A 529 Savings Plan, officially known as a “qualified tuition program” are state-sponsored savings plans that provide a number of tax benefits. There are two main types of 529 plans: Section 529 prepaid programs and Section 529 savings programs. The latter is more common, as currently, only 10 states offer prepaid programs.
529 savings programs work similar to a Roth IRA by investing your after-tax contributions in mutual funds or similar investments. You get a choice of investment strategies, though you’re limited to the options offered by your state. When you need to withdraw money to pay for your child’s education, you just direct the program administrator to distribute the required funds to you or your beneficiary.
529 Savings Plans are highly flexible, allowing you to change the beneficiary at any time. This means that you can change the beneficiary to a sibling if your child decides not to go to college. The plans are professionally managed by experienced investment managers and offer generous contribution limits.
Though both Coverdell and 529 plans can be used to save for college, there are a number of key differences between the two. 529 plans have much more generous contribution limits and offer a greater degree of flexibility, except when it comes to investment options. Coverdells offer much greater control and flexibility when it comes to investments but are much more restrictive when it comes to contribution limits, income level restrictions, and age restrictions.
A key difference between Coverdell and 529 Savings Plans is that there are no age limits on 529 plans. When trying to decide between Coverdell vs. 529 plans, keep in mind that the 529 allows super funding, so you have the option for 4-year gift tax averaging. Furthermore, 529 plans, unlike Coverdells, have no annual contribution limits or income restrictions on contributors, other than the gift tax limitations.
Overall, a 529 plan is a good choice for most families. These plans have few limitations, offer tax benefits, and are designed to help families pay for college, as well as elementary and secondary school tuition.
Both 529 plans and Coverdells are excellent options for families to save for college. 529 plans are more flexible, have fewer limitations, and are generally a solid option for any family. If you meet the criteria and will not be bothered by the age or contribution limitations, a Coverdell can also be a great option that allows you more freedom to choose your investments. You can also roll your Coverdell over to a new 529 plan if you find that to be a better fit. To get started, contact us by clicking here.
You may be familiar with Health Savings Accounts (HSAs) as a way to cover healthcare costs with pre-tax dollars. But this tax-efficient savings vehicle can also be used as a powerful tool for retirement savings. Because an HSA is one of the most tax-efficient savings options available, consider contributing the maximum amount to your HSA and paying for current health care expenses from other sources of money.
Not all medical insurance plans allow you to have an HSA. To use an HSA with your health insurance plan, you need to enroll in a “Qualified High Deductible Health Plan”, also known as an HSA-compatible health plan. In 2026 a high deductible plan was defined as:
Having annual deductibles of at least $1,700 for self-only coverage and $3,400 for family coverage; and maximum out-of-pocket medical costs do not exceed $8,500 for self-only coverage and $17,000 for family coverage.
You can save in an HSA if you are enrolled in an HSA-eligible health plan at work or in the private and public marketplaces. Most people think of HSAs as a way to save to cover current medical costs not covered by such plans. But if you can pay for these costs out-of-pocket, the triple tax-free nature of an HSA makes it a powerful vehicle for retirement savings.
For 2026, The IRS contribution limits for HSAs are $4,400 for individual coverage and $8,750 for family coverage. If you’re 55 or older during the tax year, you may be able to make a catch-up contribution, up to $1,000 per year. Your spouse, if age 55 or older, could also make a catch-up contribution, but will need to open their own HSA.
Many people contribute to HSAs pre-tax through payroll deductions at work, so their contributions also escape FICA taxes. As long as you are enrolled in a health plan that qualifies, you can also open an HSA outside of work and fund it with after-tax dollars, which you then may take as a tax deduction on your personal taxes. These contributions can accumulate tax-free and can be withdrawn tax-free to pay for current and future qualified medical expenses, including those in retirement. If you are no longer covered under a qualifying plan, you can’t continue to make contributions, but you can still hold the account and your previous contributions can continue to grow tax-free.
Unlike most Flexible Spending Accounts (FSAs), the money in an HSA does not have to be spent by the end of the calendar year and can remain in your account from year to year. You can earn interest or earnings on your HSA, and you can take it with you should you switch employers or retire. As mentioned at the opening of this article, because an HSA is one of the most tax-efficient savings options currently available, you may want to consider contributing the maximum allowed and paying for current health care expenses from other sources of personal savings and don’t tap into it, unless necessary.
Many save for their children’s college expenses in a specialized 529 savings account. Now think about health care. You’ll likely face a bevy of health care expenses in your future—medical procedures, hospital bills, prescription drugs, maybe even home health care or nursing home expenses. No one knows when these expenses will hit, or how much you may have to pay.
Since you will likely have to pay for large scale health care expenses sometime later in life, building a nest egg specifically designed to help cover future health care costs is a prudent move. But how much should you save?
According to the Fidelity Retiree Health Care Cost Estimate, an average individual may need $172,500 (after tax) to cover health care expenses in retirement. An average retired couple age may need approximately $345,000 (after tax) to cover health care expenses in retirement.
Although health care costs continue to rise, there are ways to get ready for medical expenses that might come in retirement. But you’ve got to save early and put those dollars to work by investing them. If you think you might need to use some of your HSA for near-term medical expenses, set aside some of your HSA in a cash account to cover them, and invest the rest for tax-free growth and to help fortify your retirement.
How do HSAs compare to other savings vehicles? The tax treatment of HSAs provides the potential for greater investment growth and greater after-tax balance accumulation than other retirement or health care savings options. Assuming you use HSA funds to pay for qualified medical expenses, you do not pay any federal taxes. That’s why it’s at the top of the list for tax-efficient investment options for your retirement.
While you can’t pay premiums for all types of health insurance coverage using HSA money, you can use HSA funds to pay for qualified medical expenses such as deductibles, copays, and coinsurance. (Not all medical expenses are considered qualified by the IRS.)
You can use your HSA to pay certain Medicare expenses, including premiums for Part A (if applicable), Part B and Part D prescription-drug coverage and Medicare Advantage, but not supplemental (Medigap) policy premiums. For retirees over age 65 who have employer-sponsored health coverage, an HSA can be used to pay your share of those costs as well.
Your HSA can also be used to cover part of the cost for a “tax-qualified” long-term care insurance policy. You can do this at any age, but the amount you can use increases as you get older.
Once you hit 65, you can use your HSA to pay for any non-qualified medical expenses (including buying a boat, for example), but you don’t get to take full advantage of the tax savings as you will be required to pay state and federal taxes on those distributions. If you are under age 65, you pay a 20% penalty on nonmedical withdrawals, and you pay ordinary income tax in addition to the penalty, so be careful!
In the event that your medical expenses are much lower than average (or you don’t live that long), you may have money in your HSA that you can pass along to your heirs. The rules are complicated so it’s best to consult an estate planning attorney. There are generally three categories to consider when determining how HSA assets are treated upon your death:
Many people prefer to name the surviving spouse as the designated beneficiary. However, if you don’t have a surviving spouse, the primary planning consideration could be tax-efficiency. In that case, consider naming as beneficiary (either your estate or beneficiary), whichever party is in the lowest tax bracket. If you name your estate as the beneficiary of your HSA, it will likely become a probate asset and it still needs to fit in with your overall estate plan. Work with your tax and estate planning professionals to determine which option is right for you.
Typically, once you turn 73, you will need to take required minimum distributions from traditional IRAs and 401(k)s, and you would have to pay taxes on those distributions. HSAs have no required minimum distribution.
There are a lot of ways to make HSAs work for you—whether you are still employed, getting ready to retire, or even retired and enrolled in Medicare. To get started, contact us by clicking here.
Wealth and prosperity are two influential concepts that have been intertwined for centuries. However, there is a fundamental misunderstanding about the relationship between wealth and prosperity. Wealth is determined by the amount of tangible assets one posseses and is a passive concept. Prosperity is about the totality of life (not just money and assets) and is an active concept. Wealth can be accumulated, but prosperity must be achieved through choice.
Once I realized this major difference between wealth and prosperity, more doors began to open for me. I could achieve prosperity simply by changing my attitude. As I changed my outlook, interesting things started to happen—things that impacted my wealth. I received job opportunities, discounts on courses I wanted to take, and even financial gifts I wasn’t expecting. So, while wealth and prosperity are different concepts because they are so linked, by changing one, you change the other. Let’s take a closer look!
A lot of people think they have wealth when they have a lot of money in their bank account. But this isn’t always true, and it isn’t the only form of wealth. Wealth also includes things like health, happiness, and a healthy social life. Wealth can also be described as anything that you can take with you when you leave this earth. Some people feel that wealth is what you have that can provide you with comfort and happiness when you find yourself in a difficult time. And what you have can provide you with respect and value in this world. Because of this, wealth is often viewed as physical or monetary. But wealth is also found in experiences, like traveling the world or learning a new skill. This is where the expression, “She has a wealth of knowledge” comes from.
Prosperity is a word that is often used to describe a different type of success in life. Some people are very wealthy while others are struggling to make ends meet. Both types of people can have prosperity in their lives. Prosperity is more than just money.
While one of the definitions of prosperous mentions economic well-being, other definitions include “flourishing” and “favorable.” If prosperous can have non-monetary meanings then it stands to reason that prosperity can too. Prosperity is not just about being wealthy, it is also about being happy, healthy, and peaceful. I like to think of prosperity as flourishing and experiencing life as your best self. This feels like such a happy way to live life.
Many people want to experience prosperity in their lives. There are so many different ways you can achieve this, and it is up to you to find the best way for you. As with any goal, it’s important to first figure out what you want then decide on a plan of action to make that goal happen.
For example, if building wealth is important to you, then you should figure out how to make money and how to invest it. If your goal is to flourish in life and experience prosperity in that way, you need to determine what makes you feel like you are flourishing. For me, this means growing and learning every day. You need to determine how this looks for you, then you can create some goals to help you achieve this state.
I have set myself some daily goals for working towards prosperity. I love learning things, so I make sure I spend at least ten minutes every day learning something. Often this is from a book, but I also have many online courses I’ve purchased over the years that I can refer to as well.
My personal finances are also important to me in creating prosperity, so I spend some time every day reviewing my income and expenses and using affirmations to help me attract more prosperity and wealth. Since the two are different, yet so intertwined, working on one often improves the other.
Since wealth and prosperity are not the same thing, let’s take a look at some affirmations for each word separately.
I make money in my sleep.
Every day my bank account balance grows.
I sell my products (or services) every day.
I am well-paid for the work I do.
Every day, I learn something new.
I am a prosperous entrepreneur.
My business provides a good living and makes me happy.
I am happy when I’m flourishing.
Notice how the affirmations have a slightly different spin depending on what you’re working on. You can edit the affirmations further, so they feel more unique to you. The goal is to feel like these affirmations are the most natural thing ever, so you use them often. One way to achieve that is to adapt them for your personality and goals (or create your own).
Journaling is one of the best ways to get clear on what it is you want in life. You can use your journal to determine what wealth and prosperity mean to you as well as start working towards your goals. To get started, turn the questions above into journal prompts. Use them to explore what wealth and prosperity mean to you and how you can achieve them in your life.
This prompt is about getting started taking action. Look at the areas in your life you wrote about where you would like to feel more wealth and prosperity. Brainstorm some specific steps you can take for achieving those levels of wealth and prosperity you’d like to achieve.
For example, if feeling more in control of your personal finances would help you feel wealthier, take one small step each day toward gaining that control. This could be checking your bank account balance, recording what you spent money on yesterday, or analyzing your expenses to see where you might be able to cut back.
Take this step even further by creating a weekly or monthly schedule of small steps you can take each day toward reaching your goals.
While prosperity and wealth are closely related, it’s possible to have one without the other. Prosperity is the state of growing and flourishing. Wealth is the state of having or possessing a lot of money or other valuable assets. There is a strong connection between wealth and prosperity, and you can definitely be wealthy and not very prosperous! The more you focus on what you want out of life when it comes to wealth and prosperity, the more you’ll have! To get started, contact us by clicking here.
Getting a fresh perspective on your finances can help you identify where a new direction may be warranted or provide assurance that you’re on the right path and working with the advisor that’s right for you. If you are working with a financial advisor, here are some questions to ask yourself.
It may seem obvious, but your advisor should be focused on you and what matters to you most. That means your advisor should take the time to fully understand your priorities, what keeps you up at night, and your reasons for investing. Only by doing that can your advisor help you choose investments that reflect your values, goals, and comfort level with risk. It all starts with having an open relationship and clear communication, so you are comfortable with your decisions and confident that your advisor is listening to you. How important is this relationship to your long-term success? Industry studies estimate that professional financial advice, coupled with assets being professionally managed, can add between 1.5% and 4% to investment returns over the long term, depending on the time period and how returns are calculated.
Of course, the way your money is invested is an important part of any long-term plan, but investments are only part of the story. In helping you decide how your money is invested, your advisor should be looking at many aspects of your financial life. After all, when it comes to planning, everything is connected. A financial plan can help you achieve long-term goals, like retirement, plan for unexpected shocks, like a job loss or a health event, and address concerns about future generations. By considering your full financial picture, your advisor can help you spot vulnerabilities in your plan and suggest steps to address them. Of course, any plan should be flexible enough to meet your changing needs and as your life evolves, so should your plan.
Working with an advisor who understands your priorities and preferences can help you grow and preserve your wealth. For instance, does your advisor help you access tax-smart investing techniques like tax-loss harvesting, deferment of capital gains, and strategic use of municipal bonds to help you keep more of what your investments earn? Over time, even a little tax savings each year has the potential to make a significant difference. And remember, these opportunities can arise throughout the year. Is your advisor on the lookout for these opportunities throughout the year or only at tax time? For many people, passing on wealth to heirs or donating to a beloved charity or cause is a crowning life achievement. It’s important to understand how your plan takes into consideration your family’s long-term needs, for the next generation and beyond. Your advisor should be a quarterback, providing guidance around your estate and charitable giving, and helping to establish your long-term legacy.
As most people know, life doesn’t always go according to plan and it’s critical to have an understanding of what could happen when you’re confronted with the unexpected. Your advisor should work with you to help you understand the types of risk involved with the way you’re invested and the impact of different market conditions on your portfolio. These kinds of conversations can help you develop a financial plan that balances your goals with your feelings about risk.
An important part of getting value from your advisor relationship is understanding what you’re paying. After all, fees can eat into returns, which over time can have a significant impact. But remember, it’s not just what you pay, but how fees are structured. Do your fees vary depending on the types of investments you own? Are there lower-cost alternatives that may offer similar returns? For example, bonds are an area where it’s important to understand what you’re paying. When you purchase individual bonds, firms generally charge a mark-up, which can vary significantly. With bond yields historically low, you’ll want to pay particular attention to transaction costs when building a bond portfolio because the mark-up can reduce your return. The same goes for other costs related to investing, such as commissions, expense ratios, and account fees. Knowing what you’re paying is critical. At Red Hawk Prosperity Partners, we have built our practice on offering the lowest fees possible while still providing the very best advice and service. If you are unsure about what your expenses are with your current advsor, contact us and we will break it down for you at no cost! To get started, contact us by clicking here.
It’s more important than ever to have a solid financial plan in place. A financial advisor provides advice and guidance to clients regarding investments, insurance, and other financial planning matters and can help clients set financial goals and make plans to achieve those goals. Perhaps most importantly, a financial advisor can help you prevent making emotionally charged decisions to buy or sell investments. According to a survey conducted in 2020 by Age Wave and Edward Jones, among those who work with a financial advisor, 84% said that doing so gave them a greater sense of comfort about their finances. According to the National Financial Educators Council, a lack of personal finance knowledge costs the average American $1,300 a year. Other studies have shown that working with a financial advisor vs. going it alone can add an additional 4% per year to your investment returns.
A fiduciary is someone who manages property or money on behalf of someone else. When you are a fiduciary, the law requires you to manage the person’s assets for their benefit—not your own!
In a fiduciary relationship, the person who must prioritize their clients’ interests over their own is called the fiduciary. The person receiving services or assistance is called the beneficiary or principal.
A fiduciary relationship can exist between friends or family members. For example, you might manage a friend’s expenses if they become ill and undergo medical treatment. But more commonly, you’ll deal with a fiduciary when working with professionals, such as lawyers and financial advisors.
Fiduciary duty is a serious obligation. If a fiduciary doesn’t fulfill their duties, it’s called a breach of fiduciary duty and the beneficiary could be entitled to damages.
Anyone can legally call themselves a financial advisor and provide financial advice, making it particularly important you know what standard the person managing your money holds themselves to.
Financial advisors who are fiduciaries must act in the best interest of their clients, offering the lowest cost financial solutions to fit their clients’ needs; but it’s important to note, not all financial advisors are fiduciaries.
Most financial advisors, even if they aren’t fiduciaries, must consider your interests when offering advice and selling investment products. This is called the suitability standard and is not the same as a fiduciary standard. Only fiduciary financial advisors are legally obligated to place your best interest over theirs. Fiduciary recommendations must carefully consider your overall financial situation (suitability), but they must also offer you the most economical solutions and products with the best performance to meet your needs (fiduciary).
Generally, financial advisors who work for brokerages and large investment firms are not fiduciaries and are only held to the lower legal suitability standard of care. These non-fiduciary advisors offer investment advice and product recommendations that are suitable for you, meaning the investment products generally fit your needs but may have higher sales charges, fees, or pay the advisor a larger commission.
Fiduciary financial advisors usually work for Registered Investment Advisory firms or are Independents and do not sell investment products or receive sales commissions.
When you hire a financial advisor, it’s important to ask if they are a fiduciary and how they make their money. This helps you identify potential conflicts of interest. Advisors are commonly paid in the following ways:
Commission-Only Financial Advisors: Commission-only advisors only make money when they sell investments or a particular financial product. Commission-only financial advisors are usually employed by broker-dealers and large investment firms and are only held to the suitability standard not a fiduciary standard.
Fee-Only Financial Advisors: Fee-only advisors only make money from client fees. These might come as flat or hourly fees or as a percentage of all the assets they manage for you. They do not earn commissions on investments, nor do they get a fee when you buy or trade securities. Because of this, fee-only financial advisors generally have fewer conflicts of interest than other advisors, but still must disclose any conflicts they do have. Fee-only financial advisors are almost always fiduciaries.
Fee-Based Financial Advisors: Fee-based advisors are hybrids and may have fees like fee-only financial advisors, but also may earn money from commissions or referral fees, like commission-only advisors. If you choose a fee-based advisor, you want to make sure they are always acting as a fiduciary. Some fee-based advisors may not act as a fiduciary when they perform certain tasks. It’s important to note that just because an advisor receives a commission for a product, doesn’t necessarily mean it’s not in your best interest. Certain products, like life insurance, are only sold on a commission-based model. It’s assumed that if you really need it, it’s in your best interest, even if the advisor is paid a commission.
Many financial advisory professionals advocate for people to use fee-only advisors because they are in the position to prioritize your financial wellness over the amount of commission they will receive from selling you a particular investment product. Obviously the choice of where and who you receive your financial advice from is a personal decision but it’s important to understand how advisors are paid when making that choice. to get started, contact us by clicking here.
