College Savings

Parents and grandparents often benefit from having an experienced financial advisor to help them save for college and navigate the college years.  Saving and investing in the younger years and planning for financial aid and the various tax benefits available to families in the college years can be dizzying. Contact us for a free consultation today.

Saving for college has come a long way in the recent past.  Not so long ago all we had at our disposal were custodial accounts and savings bonds.  And gains in those accounts were often taxed and counted against families in terms of financial aid eligibility. 529 College Savings Plan is a state-sponsored tuition program designed to provide tax incentives to encourage families to save for the high cost of a college education

For years the 529 plans were pitched as the ultimate college-savings vehicle, but their limitations were thrown into sharp relief during the financial crisis. Having a financial advisor is more important in today's world where managing risk has become one of the biggest financial challenges we will face.

Other Options to Consider:

  • Coverdell ESA accounts.

    • The extension of the Bush-era tax rates maintains investors' ability to contribute up to $2,000 a year into these accounts. A Coverdell ESA is a custodial account created for the purpose of paying the qualified education expenses of the designated beneficiary of the account. The expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses.  Contributions to a Coverdell ESA are not tax deductible, but amounts deposited in the account grow tax free until distributed. Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year.

  • Retirement accounts.

    • For families who want to keep their options open, funding a Roth IRA can allow for more flexibility, in my opinion. If the child gets a scholarship or decides not to go to college, the money can be used for retirement. What's more, retirement assets generally aren't included in financial-aid calculations. And since the contributions are funded with after-tax dollars; qualified distributions from a ROTH IRA are not taxed. Be sure to consult your tax advisor as non-qualified distributions may result in taxes/penalties as early distributions.

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