With two in college plus a soon to be 6th grader and 2nd grader, "college" funding is topic many clients ask about and I enjoy talking through.
Before we start with "college" funding, a couple of points to help frame the discussion…
- You can get a loan for a lot of things in life. You can't get a loan for retirement.
- Translation: Before you even think about setting money aside for post-high school education, you need be setting aside 15% into retirement (401(k)s, Roth IRA, etc.)
- Will “college” continue to evolve to include more options in the skilled trades? Or additional on-line learning opportunities? College is ripe for disruption given the continued accelerating costs.
Given all the above, flexibility is one feature to consider when planning for post-high school education of young ones.
Below is quick run-down of common methods used:
- 529 Plan - some tax savings and strings attached;
- Coverdell - some tax savings and strings attached;
- UGMA/UTMA - becomes property of child at age 18 or 21 based on state you live in;
- Roth IRA - contributions are accessible prior to age 59 1/2; or unrestricted access after age 59 1/2;
- Joint Account in parent(s) name(s) - no tax deduction, complete flexibility.
Here is a link for more https://www.morningstar.com/articles/823979/a-guide-to-collegesavings-options.html
Or contact us with your college funding questions via email at email@example.com or phone at 810-471-3732.