How much did it take to fill up your gas tank this week?
$50 … $60 … $80 or more?
The price of oil is on the rise, but so are sales on electric vehicles. Last year, EV sales (as a percentage of new car sales) grew from 2.2% to 6.1%… That’s 3 million electric vehicles on the road.
California alone accounts for over 40% of all electric cars sold.
Automakers like GM, KIA and BMW are starting to catch on by adding EVs and hybrids to their lineups, rolling tax credits into their leases and even slashing prices.
I rented a KIA EV this week and … I don’t think I’m ever going back to a gas car again!
The adoption of electric vehicles could ultimately lessen the impact of rising oil prices on the U.S. economy. (As in, we probably won’t have a repeat of 2008.)
Plus one of our mega trends — blockchain — is also disrupting the auto industry…
And it could save you time at the car dealer.
🔥 Hot Topics in Today’s Video:
- In Remembrance of 9/11: I share my strongest memory of this day in our history. [1:00]
- Market News: The United Auto Workers (UAW) are gearing up to strike against Ford, GM and Stellantis. We also cover the Federal Reserve’s potential next move on interest rates, and why we’ve been bullish this year in tech. [2:15]
- Mega Trend: We predict that the future dominance of electric vehicles will reduce the impact of rising oil prices. [6:55] And when it comes to registering your car’s title, this startup company is digitalizing the process with blockchain technology. Plus an ETF to buy! [12:10]
- Crypto Corner: Remember Sam Bankman-Fried and the FTX collapse? The latest FTX and Solana (SOL) news could mean a bullish tide for the crypto market. [20:30]
Until next time,Ian King Editor, Strategic Fortunes
Choosing the Right College Fund
You’ll have to bear with me, but I have college funds on my mind. My daughter just turned three, and I’m finally getting started.
I mentioned last week that if you have to choose between funding your retirement account or funding your kid’s college fund, you should always fund your retirement plan first.
I’m sure there is an exception to this rule somewhere … though I’ve never seen it.
But let’s say your retirement planning is on track and you have extra cash to deploy or that grandma is volunteering to chip in.
What type of college fund should you open?
Understanding the ESA & the 529 Plans
There are two basic types of college funds: the Coverdell Educational Savings Account (ESA) and the 529 plan. (If you’re wealthy enough to afford something more elaborate, like a trust for your minor children, go re-read Ian King’s article above and quit reading here.)
Now, this doesn’t have to be an “either-or.” You can simultaneously do any or both of these in combination.
I’ll start with breaking down the ESA plan. The beauty of an ESA is its simplicity. It looks and feels like a Roth IRA, and you can set one up at virtually any brokerage house or bank in the country.
And like an IRA or Roth IRA, you can put virtually anything you want in the account. S&P 500 Index fund? Sure! Bet the entire account on a single small-cap stock? Well, that’s probably not your best move, but there’s nothing stopping you from doing it!
The only real downside on the ESA is that you can only put in a maximum of $2,000 per beneficiary per year, and there are income limits. Your ability to contribute starts to get phased out at a household adjusted gross income of $190,000 and disappears completely at $220,000.
If your savings goals are modest, and you make less than $190,000 as a household, then the ESA is a solid bet.
Note that you don’t get a tax deduction for the $2,000 contribution, but your returns grow tax-free and there are no taxes due when the funds are removed so long as they are used for legitimate educational expenses.
The 529 plan looks and feels a lot like a 401(k). The experience is often a little clunky, and you’re generally limited to a handful of mutual funds or target-date funds. But there are no income restrictions and no contribution limits.
Every state has at least one 529 plan, though you are not limited to the 529 offered by your state. My house is in Texas, but I contribute to the Arkansas 529 plan because I liked the investment options when I first started doing this for my oldest son 13 years ago.
Depending on the state you live in, you might get a tax break at the state level for contributions made to your state’s 529 plan. So that might be a factor to consider as you shop around.
But as was the case with the 529 plan, there is no tax break on your federal income taxes.
However, another nice aspect of the 529 is that there’s also no limit on the number of contributors. If you have a large family and 17 different aunts and uncles all want to chip in, they absolutely can.
So, which is the right college fund for your family?
If you don’t expect to contribute more than $2,000 per year, it’s hard to argue with the simplicity and ease of an ESA. But if you want to contribute more, or if you earn too much to qualify for an ESA, then the 529 is the way to go.
Of course, if you’re in doubt, there’s nothing to stop you from simply opening one of each. I’ve contributed to both over the years.
And it ensures that your children have the most options when it comes time for them to further their education.
Regards,Charles Sizemore Chief Editor, The Banyan Edge