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West Bloomfield, MI
12/17
1999
A6-
e
Paul Hack advises one of his
clients, Dr. Martin Charles.
ALAN ABRAMS
Special to the Jewish News
S
o now you finally are a proud
grandparent, and you want
to set aside some money
towards the education of
your grandchild.
Ideally, say local investment advis-
ers, both your grandchild and your
investment for their education should
reach maturity at the same time.
Why? "Because you have to look at
the time horizon," says Paul Hack, a
certified investment management con-
sultant with Raymond James &
Associates, formerly Roney &
Company, in Farmington Hills.
"If it is a new grandchild, then
their first year of college is 18 years
away and their last year of college may
be 21 years away. That's a long
enough time frame to make long-term
investments.
"The stock market is cyclical. You
never know if you're coming in on the
top or the bottom," said Hack.
"Cycles last three to five years, trough
to trough. If you don't have a three-
to-five year time frame, you shouldn't
be in the market.
"But for a newborn, that's four to
five cycles. Historically, the stock mar-
ket has outperformed fixed income
CDs and bonds. But the time frame
determines the type of investment you
can make," said Hack.
But what if you come into money
all of a sudden, and your grandchild is
already 17? Then Hack suggests you
are better off investing in a series of
CDs. But he stresses you follow that
route only if you have one to four
years to cover your grandchild's edu-
cation, and you do not have the luxu-
ry of time.
Another factor to consider are the
tax laws. You do not have to file a gift
tax return if you give $10,000 or less
per year. And that's just for one per-
son. Each grandparent can give
$10,000.
However, Hack cautions there still
could be tax ramifications if the child
is under 14. Then, income is taxed at
the custodial rate. "People need to
look into the tax ramifications of their
investment. The parent may be in the