Page 476 - TaxAdviser_2022

PERSONAL FINANCIAL PLANNING

to accumulate $100,000, again, assuming
The primary benefit of I bond savings for a constant return of 9.62%.
To illustrate potential savings based
education purposes is the flexibility to on annual savings goals, the table “Total
use the savings for retirement or Annual I Bond Purchases” displays the
annual purchases as column headings,
other savings goals if the funds then the possible savings total for the
are not needed for education. number of years designated below them,
also assuming a constant 9.62% interest
rate. For example, purchasing $5,000 in I
purchased in smaller increments to take Savings Goals” displays possible scenar- bonds annually for 11 years would result
advantage of the pro rata exclusion and ios using a constant 9.62% interest rate. in total savings of $98,654.
if spending needs each education year If savings start in the year of a child’s Even more could be saved if both
are uncertain. For example, if quali- birth, payments needed to achieve goals spouses purchase the maximum amount
fied expenses are $6,000 in 2022, all of are lower than if begun later. A goal of under their respective SSNs. Since
the earnings would be excluded if the $100,000 could be reached by purchas- grandparents who do not claim the child
taxpayer redeems two separate I bonds ing $2,074 in I bonds annually for 18 as a dependent are not able to claim
for $3,000 each, versus a single I bond years. This goal would not be achievable the education exclusion, they could gift
for $10,000. Partial redemptions are with fewer than six years to save since $10,000 cash to the parents, who could
not allowed. there is a limit of $15,000 of purchases a purchase the I bonds for their children’s
To illustrate how a taxpayer might year (which would require using an an- education savings. The primary benefit
determine how much to save to achieve nual tax refund of $5,000, in addition to of I bond savings for education purposes
a total education savings goal, the table purchasing $10,000 in I bonds). It would is the flexibility to use the funds for
“Annual Savings by Total Education take six years of saving $12,121 annually retirement or other savings goals if they
are not needed for education.
Total annual I bond purchases More information is available at
treasurydirect.gov, including on the
education exclusion. ■
Years to
save $2,500 $5,000 $7,500 $10,000

18 120,559 241,119 361,678 482,238 Contributors
17 107,305 214,610 321,916 429,221 Theodore J. Sarenski, CPA/PFS, CFP, is
16 95,240 190,479 285,719 380,958 a wealth manager at Capital One/United
15 84,256 168,512 252,768 337,024 Income in Syracuse, N.Y. Mr. Sarenski
14 74,257 148,515 222,772 297,029 is chairman of the AICPA Advanced
13 65,155 130,311 195,466 260,621 Personal Financial Planning Conference.
12 56,870 113,739 170,609 227,479 He is also a past chairman of the AICPA
11 49,327 98,654 147,981 197,308 Personal Financial Planning Executive
10 42,461 84,922 127,382 169,843 Committee and a former member of the
9 36,210 72,421 108,631 144,841 Tax Literacy Commission. Brianne Smith,
8 30,520 61,041 91,561 122,081 CPA/PFS/ABV, Ph.D., is the managing
7 25,341 50,681 76,022 101,363 member of Brianne C. Smith CPA, LLC;
6 20,626 41,251 61,877 82,502 a visiting assistant professor of account-
5 16,333 32,666 49,000 65,333 ing at Auburn University at Montgomery
4 12,426 24,852 37,277 49,703 in Alabama; and a member of the AICPA
3 8,869 17,738 26,607 35,475 Personal Financial Planning Executive
2 5,631 11,262 16,893 22,523 Committee. For more information about
1 2,683 5,367 8,050 10,733 this column, contact

Assumes a constant 9.62% annual return. thetaxadviser@aicpa.org.

36 September 2022 The Tax Adviser