​Explore the different ways you can help finance the costs of higher education.

How can you help cover your child’s future college costs? Saving early (and often) may be key for most families. Here are some college savings vehicles to consider.
 
529 college savings plans. Offered by states and some educational institutions, these plans allow you to save up to $15,000 per year for your child’s college costs without having to file an I.R.S. gift tax return. A married couple can contribute up to $30,000 per year. However, an individual or couple’s annual contribution to a 529 plan cannot exceed the yearly gift tax exclusion set by the Internal Revenue Service. You may be able to front-load a 529 plan with up to $75,000 in initial contributions per plan beneficiary—up to five years of gifts in one year—without triggering gift taxes.
 
Remember, a 529 plan is a college savings play that allows individuals to save for college on a tax-advantaged basis. State tax treatment of 529 plans is only one factor to consider prior to committing to a savings plan. Also, consider the fees and expenses associated with the particular plan. Whether a state tax deduction is available will depend on your state of residence. State tax laws and treatment may vary. State tax laws may be different than federal tax laws. Earnings on non-qualified distributions will be subject to income tax and a 10% federal penalty tax.
 
If your child doesn’t want to go to college, you can change the beneficiary to another child in your family. You can even roll over distributions from a 529 plan into another 529 plan established for the same beneficiary (or another family member) without tax consequences.
 
Grandparents can also start a 529 plan or other college savings vehicle. In fact, anyone can set up a 529 plan on behalf of anyone. You can even establish one for yourself.
 
Coverdell ESAs. Single filers with modified adjusted gross incomes (MAGIs) of $95,000 or less and joint filers with MAGIs of $190,000 or less can pour up to $2,000 into these accounts annually. If your income is higher than that, phaseouts apply above those MAGI levels. Money saved and invested in a Coverdell ESA can be used for college or K-12 education expenses.
 
Contributions to Coverdell ESAs aren’t tax-deductible, but the accounts enjoy tax-deferred growth, and withdrawals are tax-free, so long as they are used for qualified education expenses. Contributions may be made until the account beneficiary turns 18. The money must be withdrawn when the beneficiary turns 30, or taxes and penalties may occur.
 
UGMA & UTMA accounts. These all-purpose savings and investment accounts are often used to save for college. They take the form of a trust. When you put money in the trust, you are making an irrevocable gift to your child. You manage the trust assets until your child reaches the age when the trust terminates (i.e., adulthood). At that point, your child can use the UGMA or UTMA funds to pay for college; however, once that age is reached, your child can also use the money to pay for anything else.
 
Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.
 
Imagine your child graduating from college, debt-free. With the right kind of college planning, that may happen. Talk to a financial professional today about these savings methods and others.

U.S. Markets
Stocks traded in a narrow range in May, with technology and other high-valuation companies under selling pressure.
The Dow Jones Industrial Average gained 1.93 percent while the Standard & Poor’s 500 Index rose 0.55% percent. The Nasdaq Composite, home for many technology and high-growth companies, dropped 1.53 percent.1
 
Solid Earnings
Stock prices moved erratically throughout May as investors digested more solid corporate earnings reports, accelerating inflation and mixed economic signals.

With 95 percent of S&P 500 constituent companies reporting, 86 percent reported positive earnings surprises. The estimated earnings growth rate was 51.9 percent, the highest rate since the first quarter of 2010.2,3
 
Inflation Story
The emerging inflation story, however, dampened investor optimism and weighed on the stock market. The latest Consumer Price Index report was particularly unsettling to investors, as consumer prices rose 0.8 percent in April 2021 and jumped by 4.2 percent year-over-year. A 6.2 percent year-over-year spike in the Producer Price Index followed, representing the most significant jump since 2010.4,5

Any acceleration in inflation fans investors' fears that the Federal Reserve will adjust its monetary policy.
Particularly hard hit during the month were technology and other high-growth stocks. Investors appeared to reduce positions on concerns that higher inflation may lead to higher interest rates, and that combination could reduce the value of future earnings.

​Sector Scorecard
The majority of industry sectors were positive in May, with gains in Communication Services (+3.60 percent), Consumer Staples (+2.79 percent), Energy (+7.58 percent), Financials (+5.92 percent), Health Care (+0.47 percent), Industrials (+2.96 percent), Materials (+5.01 percent), and Real Estate (+1.51 percent). Losses were posted in Consumer Discretionary (-2.98 percent), Technology (-3.61 percent), and Utilities (-1.34 percent).6
 
What Investors May Be Talking About in June
The inflation worries that roiled the stock market in May are likely to persist as investors try to gauge whether inflationary pressures are truly transitory, as the Fed believes, or if they will become a more permanent feature of the economic landscape.7
 
Investors may expect to keep a close eye on the Consumer Price Index, the Producer Price Index, the Personal Consumption Expenditures Index, and the wage growth component of the monthly employment report that captures job growth and the unemployment rate.
 
Recent news that some companies have hiked wages to attract workers has intensified concerns that rising wages may spark sustained inflationary pressures. Such costs typically pass on to the consumer.

​
World Markets
A pick-up in vaccination efforts in Europe led to broad global gains, with the MSCI-EAFE Index picking up 2.50 percent in May.8

European markets led the gains in overseas markets. France rose 2.83 percent, Germany added 1.88, and the United Kingdom tacked on 0.76 percent.9

Pacific Rim stocks joined the rally. Australia gained 1.93 percent while Japan edged higher, adding 0.16 percent. Argentina’s volatile Merval index jumped 20.82 percent.10

Indicators

Gross Domestic Product: The second estimate of the first quarter’s GDP growth remained unchanged at 6.4 percent.11

Employment: Employers added just 266,000 jobs in April, a figure well below expectations. The unemployment rate ticked higher to 6.1 percent.12

Retail Sales: Retail sales were flat in April, following stimulus check-funded increases in the previous month.13

Industrial Production: Industrial output rose 0.7 percent, despite a substantial decline in auto production due to a chip shortage.14

Housing: Housing starts declined 1.5 percent. Year-over-year, housing starts were 39.2 percent higher.15
Existing home sales fell 2.7 percent as rising prices and declining inventory continued to crimp sales.16
Sales of new homes dropped 5.9 percent as the median price surged by 20.1 percent from a year earlier.17

Consumer Price Index: The prices of consumer goods surged in April, jumping 0.8 percent month-over-month and posting a 4.2 percent increase over last April's prices. Strong consumer demand, supply chain kinks, and comparisons to the previous year's pandemic-induced price declines contributed to the spike in prices.18
​
Durable Goods Orders:  Durable goods orders fell 1.3 percent, registering the first monthly decline in 11 months. The shortage of semiconductor chips weighed on auto production, which contributed to April’s decline.19

​The Fed
The Federal Open Market Committee (FOMC) released the minutes of its two-day April 2021 meeting.
The minutes showed that a number of committee participants had raised the idea that—if the economy continues to make progress—it might be appropriate to adjust the pace of the Fed’s monthly bond purchase program. But for now, there was no change in the purchase program.20
“In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals,” Fed officials said in a prepared statement.21
“These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.”21

Gary G. Blom CRPC | Financial Advisor
Michael Howell MBA | Financial Advisor
Address: 3340 Tully Rd. Ste B4, Modesto, CA 95350
Website: www.blomandhowell.com
Office: (209) 857-5207 | Fax: (209) 857-5098

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

​CITATIONS:
1. The Wall Street Journal, May 31, 2021
2. FactSet.com, May 21. 2021
3. FactSet.com, May 21, 2021. The estimated, or blended, figure combines actual results for companies that have reported and estimated results for companies that have yet to report.
4. CNBC.com, May 12, 2021
5. CNBC.com, May 13, 2021
6. Sectorspdr.com, May 31, 2021
7. CNBC.com, April 28, 2021
8. MSCI.com, May 31, 2021
9. MSCI.com, May 31, 2021
10. MSCI.com, May 31, 2021
11. BEA.gov, May 27, 2021
12. The Wall Street Journal, May 7, 20201
13. The Wall Street Journal, May 14, 2021
14. MarketWatch, May 14, 2021
15. CNBC.com, May 18, 2021
16. CNBC.com, May 21, 2021
17. Reuters.com, May 27, 2021
18. The Wall Street Journal, May 13, 2021
19. FoxBusiness.com, May 27, 2021
20. CNBC.com, May 19, 2021
21. FederalReserve.gov, May 19, 2021

A deep dive into workers' expectations in retirement versus actual income sources.
 
Will your retirement dreams match your reality?
 
That's perhaps the most critical question to ask people who are currently retired. Was your retirement what you expected, or was it something else?
 
For more than 30 years, the Employee Benefit Research Institute (EBRI) has conducted the Retirement Confidence Survey, which gauges the views and attitudes of working-age and retired Americans regarding retirement and their preparations for retirement.
 
Part of the survey takes a deep dive into workers' expectations for sources of income in retirement versus retirees' actual income sources.
 
Here’s a couple of highlights of the 2021 survey.
 
Only 33% of workers expect Social Security to be a significant source of retirement income. In reality, 62% of retirees say it's a major source.
 
Further, more than 50% of workers believe that workplace retirement savings plans will be a significant source of retirement income. But the 2021 survey found that workplace plans are a major source for only 20% of retirees.
 
Surprised? We’re not. These numbers are consistent year after year. Here’s another nugget to consider: 26% of workers plan to work for pay in retirement. In reality, only 7% of retirees do.
 
For most, retirement is the “next chapter” in life. It’s critical that your finances support your retirement vision, so there are no surprises when it's your turn.
 
Let us know if there's a change in your retirement dream. We'd welcome the chance to hear what prompted the difference, and we'll be sure to make any needed adjustments in your financial strategy.