Grandparents Helping with Ever-Rising College Costs

As the cost of a college education continues to climb, many grandparents are stepping in to help. This trend is expected to accelerate as baby boomers, most of whom went to college, become grandparents and start gifting what could be trillions of dollars over the next few decades. Helping to finance a grandchild’s college education can bring great personal satisfaction and is a smart way for grandparents to pass on wealth without having to pay gift and estate taxes. So what are the best ways to accomplish this?

Outright Cash Gifts
A common way to help with college costs is to make an outright gift of cash or securities. But this method has drawbacks. If you gift the money directly to your grandchild, he or she might spend it on something other than college. Second, a gift of more than the annual federal gift tax exclusion amount ($12,000 for individual gifts, $24,000 for joint gifts) might have gift tax and generation-skipping transfer tax (GSTT) consequences (GSTT is the tax imposed on gifts made to someone who is more than one generation below you).

Another drawback to outright gifts is that the gifts become assets of the student, and the federal government treats student assets more harshly than parent assets for financial aid purposes. Students must contribute 20% of their assets each year toward college costs, compared to 5.6% for parent assets.

529 Plans
A 529 plan can be an excellent way for grandparents to contribute to a grandchild’s college education while simultaneously paring down their own estate. There are two types of 529 plans: college savings plans, which are individual investment-type accounts whose funds can be used at any accredited college in the United States or abroad, and prepaid tuition plans, which allow prepayment of tuition at today’s prices for the limited group of colleges (typically in-state public colleges) that participate in the plan. Grandparents can open a 529 account and name their grandchild as beneficiary (only one person can be listed as account owner, though), or they can contribute to an already established 529 account.

A big advantage of 529 plans is that under special rules, grandparents can make a joint lump-sum gift of up to $120,000 ($60,000 for individual gifts) to a 529 account and completely avoid federal gift tax, provided a special election is made to treat the gift as if it were made in equal installments over a five-year period and grandparents don’t make any additional gifts to their grandchild during this time.

Significantly, this money is considered removed from the grandparents’ estate, even though one grandparent can still retain control over the funds if he or she is the 529 account owner. But there are two things to keep in mind here: (1) if a grandparent contributes money, makes the special election, and then dies during the five-year period, a portion of the gift is recaptured into the estate for estate tax purposes; and (2) funds in a grandparent-owned 529 plan can still be factored in when determining Medicaid eligibility, unless these funds are specifically exempted by state law.

Of course, grandparents can contribute smaller, regular amounts to their grandchild’s 529 account instead. Contributions grow tax deferred, and withdrawals used for college expenses are completely tax free at the federal level (and often at the state level).

Another interesting feature of 529 plans is that under current law, grandparent-owned 529 accounts are excluded by the federal government’s financial aid formula–only parent-owned 529 plans count. So a grandparent-owned 529 plan won’t impact a grandchild’s chances of qualifying for aid (however, there’s no guarantee this will be the rule in the future because Congress periodically tinkers with the financial aid rules).

Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about specific 529 plans is available in each issuer’s official statement, which should be read carefully before investing.

Pay Directly to the College
Another excellent way for grandparents to help their grandchildren with college costs is to pay the college directly. Under federal law, tuition payments made directly to a college aren’t considered taxable gifts, no matter how large the payment. But this is true only for tuition–room and board, books, fees, and the like don’t qualify for this benefit. Aside from the obvious tax advantage, paying tuition directly to the college ensures that your money will be used for education. Plus, it removes the money from your estate.

Understanding the Alternative Minimum Tax (AMT)

If you aren’t already familiar with the alternative minimum tax (AMT), there’s a good chance that your family soon will be. This is because its key figures aren’t indexed for inflation. As a result, the AMT continues to snare more middle-income Americans every year. Additionally, because temporary legislative band-aids expired at the end of 2006, our nation’s economic stage is set for a dramatic rise in the number of individuals who are affected.

What is the AMT?
The AMT is essentially a separate federal income tax system with its own tax rates and set of rules which governs the recognition and timing of income and expenses. If you’re subject to the AMT, you have to calculate your taxes twice–once under the regular tax system and again under the AMT system. If your income tax liability under the AMT is greater than your liability under the regular tax system, the difference is reported as an additional tax on your federal income tax return.

Are You Subject to the AMT?
Part of the problem with the AMT is that, without doing some calculations, there’s no easy way to determine whether you’re subject to the tax. Key AMT “triggers” include the number of personal exemptions you claim, your miscellaneous itemized deductions, and your state and local tax deductions. So, for example, if you have a large family and live in a high-tax state, there’s a good possibility you might have to contend with the AMT. IRS Form 1040 instructions include a worksheet that may help you determine whether you’re subject to the AMT (an electronic version of this worksheet is also available on the IRS website), but you might need to complete IRS Form 6251 to know for sure.

AMT Adjustments
Differences between the regular and AMT calculations include:

• The standard deduction and deductions for personal exemptions are not allowed for purposes of calculating the AMT.
• Under the AMT calculation, no deduction is allowed for state and local taxes paid, or for certain miscellaneous itemized deductions.
• Under the AMT calculation, any deduction for medical expenses may also be reduced, and qualifying residence interest (e.g., mortgage or home equity loan interest) can only be deducted to the extent the loan proceeds are used to purchase, construct, or improve a principal residence.
• Special AMT treatment applies to the exercise of incentive stock options (ISOs) and to the treatment of certain depreciation deductions.

AMT Exemption Amounts
While the AMT takes away personal exemptions and a number of deductions, it substitutes a specific AMT exemption amount. The AMT exemption amount that you’re entitled to depends on your filing status and income (AMT exemption amounts are phased out for individuals with higher incomes). A patchwork of legislation since 2001 has, along with other AMT provisions, pumped up AMT exemption amounts to stave off a spike in the number of taxpayers caught in the AMT “net.” The bad news, though, is that the last legislative patch expired at the end of 2006. Unless Congress passes new legislation, 2007 AMT exemption amounts return to pre-2001 levels, and the number of taxpayers subject to AMT is expected to skyrocket.

Legislative Outlook
Several bills have been introduced in the current Congress relating to the AMT. Proposals range from another one-year patch to full repeal. The problem with repealing the AMT is that it would leave a significant revenue gap (the Joint Committee on Taxation projects that the AMT will account for almost $25 billion in revenue for the 2006 tax year). That means we’re more likely to see another short-term fix than we are to see substantive reform.

Help is Available
Owing AMT can be an unpleasant surprise. It also turns a number of traditional tax planning strategies (e.g., accelerating deductions) on their heads , so it’s a good idea to factor in the AMT before the end of the year, while there’s still time to plan. If you think you might be subject to the AMT, it’s worth sitting down to discuss your situation with a qualified tax professional. Until our federal government decides to substantially reform the current system, more American families will continue to carry this additional tax burden.

How To Handle an Inherited 401(k) Plan Account

When you inherit a 401(k) plan account, the options available to you depend on a number of factors, including the terms of the 401(k) plan and your relationship to the deceased 401(k) plan participant. In general, you’ll have four options: take an immediate distribution, disclaim all or part of the assets, leave the money in the 401(k) plan (if the plan permits), or roll the funds over to an IRA.

Should You Take the Cash?
Obviously, if you need the funds immediately, taking a lump-sum distribution from the 401(k) plan may be your only viable alternative. But you’ll have to pay ordinary income tax on the distribution (certain exclusions apply; talk to your financial professional for details).

A lump sum might also be attractive if you’re entitled to a distribution of employer stock. You may be able to pay ordinary income tax on just the participant’s basis in the stock, and defer tax on the appreciation (also called “net unrealized appreciation”) until you sell the stock in the future–at capital gain rates.

What’s a Disclaimer?
When you disclaim (i.e., refuse to accept) 401(k) assets, they pass instead to the plan participant’s contingent beneficiary, or estate if there is no contingent beneficiary. In general, you must give the plan written notice of your intent to disclaim the funds within nine months after the participant’s death. But be careful not to exercise control over the funds in the meantime (for example, by choosing a distribution option or by exercising investment control), or you may lose your ability to disclaim the funds.

A disclaimer may be an attractive option if you’re sure you won’t need the funds, and the transfer to the contingent beneficiary makes good economic and estate planning sense.

The Problem With 401(k) Plans
If you’re like most beneficiaries, your goal will be to stretch payments out as long as possible, taking full advantage of the tax deferral offered by retirement plans. This means either leaving the assets in the 401(k) plan, or rolling them over to an IRA.

For most, leaving the funds in the 401(k) plan isn’t the best choice for two reasons. First, the investment alternatives available to you in a 401(k) plan are limited to the ones selected by the employer. Second, the distribution options offered by a 401(k) plan typically aren’t as flexible as those available in an IRA. In fact, many 401(k) plans require beneficiaries to take distributions shortly after the participant’s death.

Roll the Funds Over to an IRA
Unless the 401(k) plan offers a unique investment alternative, rolling the 401(k) assets over to an IRA will usually be your best choice. IRAs offer virtually limitless investment options. And when it comes time to take distributions from the plan, IRAs offer the most flexible payment provisions. But, before deciding on a rollover, make sure you understand any fees and expenses that may apply.

If you’re a surviving spouse, you’ll have to decide between rolling the funds over to your own IRA, or to an IRA that you establish in the participant’s name, with you specified as the beneficiary (this is referred to as an “inherited IRA”).

Which Should you Choose?
In most cases, spouses are better off rolling the funds over to their own IRA. A rollover is typically appropriate only if you’re younger than 59½ and you think you’ll need the funds before you reach that age. That’s because distributions from an inherited IRA aren’t subject to the 10% early distribution penalty tax. (In contrast, distributions from your own IRA before age 59½ are subject to the 10% penalty tax unless an exception applies.)

What About Non-Spouses?
If you’re not the surviving spouse, you don’t have the option of rolling the 401(k) assets over to your own IRA. But thanks to the Pension Protection Act of 2006, you may be able to make a direct rollover of the 401(k) funds to an inherited IRA. A 401(k) plan isn’t required to offer this option, so check with your plan administrator. This new rule applies to distributions you receive after 2006.

The rules governing inherited 401(k) plan accounts are complex. A financial advisor can help you sort through the alternatives, and make the decision most appropriate for your individual circumstances.

Student Loan Rates Just Went Up Again…What Should You Do?

So you’ve racked up thousands of dollars in student loans. Graduation is barely in your rear-view mirror, and the student loan companies are contacting you weekly about your soon-to-begin repayments. And if you didn’t have enough on your mind already, we have to inform you that interest rates on variable student loan products just went up as well. Despite the increasing costs of higher education (and your burning desire to pursue graduate school) our federal government has a multi-trillion-dollar national deficit to repay…and apparently Uncle Sam’s target is our nation’s college students.

What’s New
As of July 1, 2007, the interest rate on Stafford loans in repayment increased from 7.14% to 7.22%. The interest rate on in-school, grace, or deferment status Stafford loans went from 6.54% to 6.62%. And the rate for PLUS loans jumped from 7.94% to 8.02%. These rates will be in effect through June 30, 2008. The Department of Education sets the rates once each year based on the last three-month Treasury bill auction held in May.

These new rates apply only to loans issued on or after July 1, 1998 and before July 1, 2006. For all Stafford and PLUS loans issued on or after July 1, 2006, the loans will have a fixed interest rate–6.8% for Stafford loans and 8.5% for PLUS loans.

Keep Your Promise to Repay
Student loan repayment is a serious matter, especially since it directly affects your credit score. The main thing to remember is to communicate with your lender. If you are unable to make continuous monthly payments, just pick up the phone and let them know. They understand how most recent graduates are on the lower end of the economic scale and will usually work with you to arrange a favorable payback schedule.

Don’t Let a Vacation Wreck Your Budget

With today’s busy lifestyles, many people view a nice vacation every year as an entitlement, even if it means going into massive debt to pay for it. We understand the rationale…You work so hard all year and deserve a tropical break, especially after listening all winter about the fancy vacation plans of friends, co-workers, and neighbors. Of course everyone needs a break, and we all naturally want to have fond memories of endless summer days spent romping on the beach. But how can you keep those vacation costs from spiraling out of control?

Can You Really Afford It?
First, assess honestly whether you can afford the vacation you’re thinking about. If you have to borrow most of the money to pay for it, then you probably can’t afford it. If you do borrow to pay for your trip, you might find yourself financially strapped later on if the car dies or the roof starts leaking. At the very least, you’ll inherit the stress that comes with trying to pay off that debt.

Think Outside the Vacation Box
Not being able to take a dream vacation doesn’t mean you can’t take a vacation at all. Everyone needs time away from their job and normal family responsibilities to recharge. If you just don’t have the budget for the getaway of your dreams, then think of other creative ways to spend your time off. Here are some ideas:

• Try a few long weekends instead of one or two consecutive weeks. Perhaps you can afford a couple of nights at a hotel or bed and breakfast instead of all week. Or maybe you can camp for a few nights at a state or national park, where rates are very reasonable.
• Vacation from home. Take day trips into a nearby city and visit museums, restaurants, and other attractions. Or head out to the country for a hike, swim, and picnic. Doing things out of the ordinary, like eating breakfast three times a day or setting up a tent in the living room to play games and sleep in, can be a big hit if you have kids. (Most young kids usually just like being with their parents and are to tag along for whatever you have planned.)
• Let older kids pick an activity. It might not be Disney World, but what about a trip to an amusement or water park, a day or two at the beach, an afternoon canoeing or fishing, a movie and dinner outing, or a ballgame? Instead of lamenting the fact that you can’t take an exotic vacation, focus on what you can do and enjoy the time with your family.
• Consider house swapping. If you’re willing to trade houses with other like-minded families to save on room-and-board costs, there are several websites where you can find more information.

Plan Now for Next Year (or the Year After)
It’s never too early to start thinking about next year, or the year after that. Start saving now for that future getaway by making a budget and seeing where you might be able to squeeze a few dollars. Consider opening a separate “Vacation Account” for those funds; otherwise, the money may get lost in your regular savings account and used for other purposes. Where you put your money will depend on your time horizon and other factors. A qualified financial professional can help you examine your options.

If you can contribute monthly to your vacation fund, great. If you can’t, consider adding small windfalls like your tax refund, year-end bonus, or cash from birthdays and holidays. And when it comes time to actually plan your big vacation, keep cost-cutting travel tips in mind. For example, you might consider less convenient flights or a night or two at a less fancy hotel.

Forget About the Joneses
It’s tempting to want to take grand vacations every year when everyone else seems to be doing so. But don’t fall into the trap of thinking that you or your family will somehow be scarred if you can’t. The important thing is to relax in a way that you can afford, and then enjoy that time with your family. You will have taught your children an important lesson–how to live a financially sound life, without worrying about what the Joneses are doing.

Should You Buy Rental Car Insurance?

When you rent a car, you absolutely need insurance…but that doesn’t necessarily mean you should purchase it from the rental car agency. You most likely already have adequate coverage through your regular auto insurance policy or even through your credit card company.

Purchasing insurance from the rental car agency may significantly increase the overall cost of renting a vehicle, so do your homework before you walk up to counter. Start by visiting the rental agency’s website, where you can usually preview the types of coverage you’ll be offered and read up on the terms and conditions.

Various Options
One popular type of coverage generally offered is the Collision Damage Waiver (CDW), sometimes called a Loss Damage Waiver (LDW). If you purchase this waiver, you may not be held responsible if your rental car is stolen or damaged. But you may want to decline the CDW if you own a vehicle and have comprehensive or collision coverage, because the coverages and deductibles that apply to your own vehicle generally extend to your rental vehicle. If you have any questions, call your insurance company to learn what is (and is not) covered. Also, different rules apply for business and international travel.

Next, call your credit card company. Coverage varies, but many cards offer protection (the coverage will be secondary to any insurance coverage you have). To receive protection, you generally have to decline the CDW and charge the entire rental car transaction to the credit card supplying the coverage. Make sure you understand all conditions that apply.

Evaluate Your Own Risk Tolerance and Comfort Level
The bottom line is that if you don’t have coverage through your auto insurance policy or your credit card, or you simply want the highest possible guaranteed protection, you’ll likely need to purchase it from the rental car agency. But never wait until you’re standing at the counter in front of the rental agent to decide, because if you do, it’s easy to waste a lot of money buying insurance you don’t really need.

Student Loan Repayment Tips

We know your story…you vaguely remember signing a piece of paper every year at college registration time. Now that you’ve graduated, it’s all become painfully clear–those pieces of paper were promissory notes detailing your student loan obligations. These loans aren’t going to magically disappear, and you should repay them as quickly (and easily) as possible. So whether you have a small sum or a small fortune to pay off, you need to brush up on student loan basics.

Remember the Grace Period
After you graduate, you’ll probably have a lot to think about–choosing where to live, finding a job, renting an apartment. Luckily, you don’t have to add student loans to your list, too, at least not for now. Thanks to the grace period built into most student loans, you’ll likely get anywhere from six to nine months before you need to begin repaying your loans. This time allows you to examine the various repayment options before the drudgery begins.

Understand Your Repayment Options
Gone are the days when your only repayment option consisted of fixed, equal payments spread over a 10-year term. Though this is certainly one option, it’s not the only one. Because of the increasing number of students who require student loans to finance their education, as well as the increasing amount of their debt, many lenders offer flexible repayment plans to help students manage this large financial responsibility.

• Standard repayment plan: This is the original repayment plan. With a standard plan, you generally pay a fixed amount each month for up to 10 years.

• Graduated repayment plan: With a graduated plan, your payments start out low in the early years of the loan but increase in later years (the term is still 10 years). This plan is for borrowers low current incomes (e.g., recent college graduates) who expect their incomes to increase in the future. Because of the longer repayment period, you will pay more for total interest for the loan.
• Extended repayment plan: The time you have to repay your loan is extended up to 30 years, depending on the loan amount. Your fixed monthly payment is lower than it would be under the standard plan, but again, you’ll ultimately pay more for your loan because of the interest that accumulates under the longer repayment period.
• Income-sensitive repayment plan: With an income-sensitive plan, your monthly loan payment is based on your annual income. As your income increases or decreases, so do your payments. If you’re married, your joint income is used to calculate your required monthly payment. Not every lender offers this option.
• Loan consolidation: Loan consolidation is technically not a repayment option, but it does overlap. With loan consolidation, you combine several student loans into one loan, sometimes at a lower interest rate. Thus, you can write one check each month. You need to apply for loan consolidation, and different lenders have different rules about which loans qualify for consolidation. However, with most loan consolidations, you can choose an extended repayment and/or a graduated repayment plan in addition to a standard repayment plan.

Which Option is Best?
To pick the best repayment option, you’ll need to determine the amount of discretionary income that you have to put toward your student loan each month. Of course, this requires you to make a budget and track your monthly income and expenses.

In addition to inquiring about repayment options, ask whether your lender offers any special discounts for on-time loan repayment. For example, some lenders may shave a percentage point off your interest rate if you allow them to directly debit your checking account each month. Or, they may waive some monthly payments after receiving on-time payments for a certain length of time.

Consider a Deferment, Forbearance, or Loan Cancellation if You Can’t Pay
At times, you may find it financially difficult or impossible to repay your student loan. The worst thing that you can do is bury your head in the sand and ignore your payments (and your lender) completely. The best thing that you can do is contact your lender and apply for a deferment, forbearance, or cancellation of your loan. Student loan repayment cannot be avoided…not even in bankruptcy!

• Deferment: With a deferment, your lender grants you a temporary reprieve from repaying your student loan based on a specific condition, such as unemployment, temporary disability, military service, or a return to graduate school on a full-time basis.

• Forbearance: With a forbearance, your lender grants you permission to reduce or stop your loan payments for a certain period of time at its discretion (one common reason is economic hardship).
• Cancellation: With a cancellation, your loan is permanently wiped off your list of financial obligations. It’s not easy to qualify for a cancellation, though. Situations when this may be allowed are the death or permanent total disability of the borrower, or if the borrower takes a job teaching needy populations in certain geographic areas.

These additional options are not automatic. You’ll need to fill out the appropriate application from your lender, attach any supporting documentation, and follow up to make sure that your application has been processed correctly.

Keep Track of Your Paperwork
If your idea of organization is stuffing your random assortment of student loan papers into your sock drawer, think again. Repaying your student loans is a serious matter, and you’ll need to stay on top of it. It’s important to keep accurate, accessible records. Open a file folder for each loan, and file any accompanying paperwork there, such as copies of promissory notes, coupon booklets, correspondence from your lender, deferment and/or forbearance paperwork, and notes of any phone calls.

The Student Loan Interest Deduction

On the bright side, you might be able to deduct on your federal tax return some of the student loan interest that you pay. You must have incurred the loans when you were at least a half-time student, and you can’t take the deduction if you’re claimed as a dependent on someone else’s tax return.

Paying for Graduate School

Graduate school costs can be challenging. While the bank of Mom and Dad may have helped fund an undergraduate education, students considering graduate school are more likely to be on their own financially. Unless you are independently wealthy, here are some suggestions for obtaining financial help.

Loans, Loans, Loans
According to the College Board, the average graduate student funds 69% of his or her education costs with loans. Students common borrow funds from private lenders or the federal government. Uncle Sam’s three major loan programs–all available to graduate students–are the subsidized and unsubsidized Stafford loan, the subsidized Perkins loan, and the unsubsidized PLUS loan. “Subsidized” means the government pays the accruing interest during school and deferment (loan postponement) periods. Stafford and Perkins loans are only available to students who demonstrate financial need.

In 2007, graduate students may be eligible to borrow up to $8,500 in subsidized Stafford loans, up to $12,000 in unsubsidized Stafford loans, and up to $6,000 in Perkins loans. Currently, the interest rate on new Stafford loans is fixed at 6.8% and 5% for Perkins loans. And under the PLUS loan program, graduate students can borrow up to the full cost of their education (minus any other financial aid received) at a current fixed interest rate of 8.5%. To be eligible for federal student loans, you must be attending graduate school on at least a half-time basis. Then you must file the government’s aid application, called the Free Application for Federal Student Aid. You can file it online at www.fafsa.ed.gov.

Students can also obtain loans from banks or other private lenders, though such loans typically carry higher, variable rates of interest.

Scholarships and Grants
Most scholarship and grant aid at the graduate level comes from the school itself. However, this aid is often awarded on the basis of merit rather than need. To investigate, contact the university’s financial aid office as well as the specific office of the graduate program you will be entering. Many scholarships and grants (like teaching fellowships or research grants) are awarded at the departmental level, so your chances may heavily depend on what subject area you’ll be studying.

Employer Educational Assistance
Some companies offer tuition reimbursement, which can be a great source of “free money.” But there are often strings attached, like maintaining a certain grade point average or staying with the company for a number of years. The first $5,250 of employer-provided tuition benefits is exempt from federal income tax.

Education Tax Benefits
Three federal education tax benefits might help defray your expenses in 2007:

The Lifetime Learning credit is worth up to $2,000 for tuition and fees. To qualify, your income must be below $57,000 (single) or $114,000 (married filing jointly).

The deduction for qualified higher education expenses lets you deduct $4,000 for tuition and fees if your income is below $65,000 (single) or $130,000 (married filing jointly). If your income is more than that but less than $80,000 (single) or $160,000 (married filing jointly), you can deduct $2,000. This deduction is only available for 2007, and it can’t be taken in the same year as the Lifetime credit.

The student loan interest deduction lets you deduct up to $2,500 of student loan interest each year. To qualify, your income must be below $70,000 (single) or $140,000 (married filing jointly).

Should Young Adults Stay on Parents’ Health Plans?

While the axiom “necessity is the mother of invention” usually applies to the world of tangible goods, lately it applies to the world of health-care services, too. Rapidly escalating costs are forcing governments and the private sector to get creative to reduce the number of uninsured individuals. Solutions have ranged from health savings accounts to private high-deductible health plans to calls for universal coverage. Now comes another legislative trend: States are enacting an expanded definition of “dependent” that enables young adults to stay on their parents’ health plans well into their 20s.

What’s behind this trend?
It’s a typical scenario: “Children” are covered by their parents’ health insurance while they’re full-time college students, but after graduation, the “children” often decide they can’t afford their own health coverage. Instead, any discretionary income that could be used for health insurance is swallowed up by student loans, credit card debt, car insurance, and rent.

According to a 2005 published report from the U.S. Census Bureau (the latest year for which figures are available), about 30% of young adults ages 18 to 24 are uninsured, and more than 25% of individuals ages 25 to 34 lack health-care coverage. Along with the cost factor, it’s believed that many young adults choose to forgo health insurance because of the invincibility factor–they’re in relatively good health and just don’t expect to get seriously sick or injured.

Enter the states
To help this fastest-growing group of uninsured, a handful of states have passed legislation extending the time that a child may be considered a dependent for insurance purposes. Some states already extend this age if a child has a mental or physical disability. But now, states are expanding the age definition of dependent for purposes of health-care coverage with no requirement that a child be disabled. The typical age limit is 25 (though in New Jersey, a child can now remain on his or her parents’ health plan until age 30, if certain requirements are met).

States that offer this coverage typically allow private insurers to charge higher premiums and impose other restrictions (e.g., the child must be unmarried, reside in the state, live with his or her parents). Since extended health coverage is relatively new, it remains to be seen what other tweaks states will allow private insurers to make. For the most part, though, insurers have viewed this age demographic as an attractive risk due to the overall good health of this group.

Is the extra cost worth it?
Assuming the “child” meets the requirements, keeping him or her on the family health plan after college may be a good idea. For a few hundred extra dollars per month, the parent gains peace of mind knowing the child will be covered (and the parent will be off the hook) for that skiing accident or emergency appendectomy. Otherwise, an unexpected medical crisis could put a big crimp in the child’s financial future, and most likely the parents’ too.

How to evaluate a job offer

If you’re about to graduate, or even considering changing jobs, then you’re not alone. In fact, few people today stay with one employer until retirement. You may be looking to make more money or simply seeking greater career opportunities. Or, you may be forced to look for new employment if your company restructures. Whatever the reason, you’ll eventually be faced with an important decision: When you receive an offer, should you take it? You can find the job that’s right for you by following a few sensible steps.

How does the salary offer stack up?
What if the salary you’ve been offered is less than you expected? First, find out how frequently you can expect performance reviews and/or pay increases. Expect the company to increase your salary at least annually. To fully evaluate the salary being offered, compare it with the average pay of other professionals working in the same field. You can do this by talking to others who hold similar jobs, calling a recruiter (i.e., a headhunter), doing research at your local library or on the Internet (Salary.com has a nifty Salary Wizard). The Bureau of Labor Statistics is also a good source for this information, although it may not be as up-to-date as other resources.

Bonuses and other benefits
Next, ask about bonuses, commissions, and profit-sharing plans that can increase your total income. Find out what benefits the company offers and how much of the cost you’ll bear as an employee. Do not overlook the value of good employee benefits! They can add the equivalent of thousands of dollars to your base pay. Ask to look over the benefits package available to new employees. Also, find out what opportunities exist for you to move up in the company. This includes determining what the company’s goals are and the type of employee that the company values.

Personal and professional consequences
Will you be better off financially if you take the job? Will you work a lot of overtime, and is the scheduling somewhat flexible? Must you travel extensively? Consider the related costs of taking the job, including the cost of transportation, new clothes, a cell phone, increased day-care expenses, and the cost of your partner leaving his/her job if you are required to relocate. Also, take a look at the company’s work environment. You may be getting a good salary and great benefits, but you may still be unhappy if the work environment doesn’t suit you.

Try to meet your future co-workers and see if there’s a personality match. You’ll be spending a lot close time with these folks…make sure your 40+ hours on the job will be survivable. It may also be helpful to learn a little something about the company’s key executives and to read a copy of the organization’s mission statement.

Deciding whether to accept the job offer
You’ve spent a lot of time and energy researching and evaluating a potential job, but the hardest part is yet to come: Now that you have received a job offer, you must decide whether to accept it. Review the information you’ve gathered. Think back to the interview, paying close attention to your feelings and intuition about the company, the position, and the people you came in contact with. Consider not only the salary and benefits you’ve been offered, but also the future opportunities you might expect with the company. How strong is the company financially, and is it part of a growing industry? Decide if you would be happy and excited working there. If you’re having trouble making a decision, make a list of the pros and cons. It may soon become clear whether the positives outweigh the negatives, or vice versa.

Negotiating a better offer
Sometimes you really want the job you’ve been offered, but you find the salary, benefits, or hours unfavorable. In this case, it’s time to negotiate. You may be reluctant to negotiate because you fear that the company will take back the job offer. But if you truly want the job (and simply find the offer unacceptable) you should absolutely negotiate for a better offer. Don’t just walk away from a great opportunity without trying. The first step in negotiating is to tell your potential employer specifically what it is that you want. State the amount of money you want or the exact hours you wish to work. Make it clear that if the company accepts your terms, you are willing and able to accept its offer immediately.

What happens next? It’s possible that the company will accept your counteroffer. Or, the company may reject it, because either company policy does not allow negotiation or the company is unwilling to move from its original offer. The company may make you a second offer, typically a compromise between its first offer and your counteroffer. In either case, the ball is back in your court. If you still can’t decide whether to take the job, ask for a day or two to think about it. Take your time. Accepting a new job can be a major career move.

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