The investment you make in your child or grandchild’s college tuition could be one of the biggest expenses you ever have, but it also could be one of the most rewarding investments of your life. Being able to afford this invaluable learning experience often requires deliberate planning and years of diligent saving. Fortunately, FinTrust offers college planning services that will help guide you through this process in order to tax-efficiently save and invest for your child’s future with the ultimate goal of being able to confidently afford the college of their choice.
Choosing the right plan
One consideration in planning for college is determining which investment vehicle best suits your needs. One of the most common account types for this purpose is a 529 qualified tuition program. 529s are attractive due to their tax-deferred growth, tax-free withdrawals (for qualified educational purposes only), generous contribution limits, and income tax deductions (depending on your state of residence). However, there are a number of other account types that might also be appropriate for your situation, including Coverdell education savings accounts (ESAs), savings bonds, UGMA/UTMA accounts, and pre-paid tuition plans. Multiple factors should be considered when making this decision, such as what relationship you have to the student (self, parent, grandparent, etc.), if the student plans to attend an in-state school or go out of state, or the level of control you want to retain over the funds. We will work with you to evaluate the pro’s and con’s of each in order to determine which account best fits your needs.
Do you qualify for Financial Aid?
Qualifying for financial aid is of primary concern for many parents in order to minimize the financial burden that will fall on their shoulders or those of the child. There are three primary drivers of needs-based financial aid: the cost of attendance, resources available from outside sources (scholarships, for example), and the expected family contribution (EFC). Being mindful of the student’s and parent’s income levels and assets held in the child’s name versus the parent’s name is of vital importance. Assets in the student’s name have a greater impact on financial aid than those held in the name of parents. Distributions from certain accounts, such as IRAs, can have a negative impact on financial aid eligibility, so we work with parent’s to avoid such traps and maximize the chances of qualifying for assistance.
College Savings v. Retirement savings
Since resources are often limited, a common dilemma we see is deciding between saving for college and saving for retirement. Retirement saving tends to be the more crucial of these two competing goals since you cannot get grants, scholarships, or federal loans to support your lifestyle in retirement, while those funding sources are generally available to cover the cost of college. However, many parents still have a strong desire to provide at least some level of support to assist their child with the financial burden of a college education. As a result, we work with our clients to develop a plan that mindfully balances these goals in order to provide some level of college assistance in the near term while still keeping the long-term perspective of building a retirement nest egg to last throughout their lifetime.
Consult a Professional
Whether you’re looking to determine how much you need to save, what type of an account provides the most benefits, how to invest your college savings, what to do with unused 529 balances, or how to efficiently gift to loved ones, FinTrust is here to help guide you through the planning and savings options available to families who are trying to prepare for their child’s educational needs.
Jonathan E. Stano, CFP® is the Director of Financial Planning at FinTrust Investment Advisors located at the Greenville, SC office. For more information, call 864-288-2849 or e-mail firstname.lastname@example.org. The information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. The material has been prepared for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results. Securities offered through FinTrust Brokerage Services, LLC.