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College Savings
- 1. Investing for College BYJAKE BREKELBAUM
- 2. Price of College College prices have been increasing exponentially Forecasted to continue to increase at around 6-8% per year Today 18 years from now Private College $134,600 $323,900 Public University (In State) $39,400 $94,800 Projected 4-year Tuition and Fees Source: http://www.savingforcollege.com/tutorial101/the_real_cost_of_higher_education.php Tuition Inflation
- 3. Long-Term Savings Plans Best to start early…really early Make regular contributions Every bit counts Put gifts towards account
- 4. Plan Options 529College Savings Plan Coverdell Educations Savings Account UGMA and UTMA Prepaid Tuition Plans
- 5. Plan Features Formost plans… Income from the fund is tax exempt You have the option to transfer the fund to another beneficiary There are low financial aid impacts
- 6. 529 Plans Largelifetime contributions No limit on yearly contributions Monthly minimums: $25 Age-based plans State tax deductions Low financial aid impact
- 7. Income limits– max $220,000 per household Yearly contribution limits - $2,000 You control your own investments Often have lower fees than 529 plans Can be used for K-12 expenses as well
- 8. UGMA and UTMA Minors cannot own equity or bonds in most states Provides a way around this Fewer Income tax breaks Kiddie tax No restrictions on how the child uses the fund High financial aid impact
- 9. Prepaid Tuition Plans You essentially pay the tuition price today Sources State Individual Universities Private College 529 Plan State tax deductions Drawbacks No flexibility (plan beneficiary can change) Not as guaranteed as advertised Do some thorough research
- 10. Who’s Eligible? Tax Benefits Investment Control RiskTransferable Qualified Withdrawals Financial Aid Impact 529 Plans No Restrictions State tax deductions up to $20,000; Withdrawals tax free Set options; you can choose risk level Market risk based on diversified selections of plan Yes All undergrad and post-grad expenses Low Coverdell $220,000 max yearly household income Complete income tax break You control Market risk based on your selections Yes All K-12, undergrad, and post-grad expenses Low UGMA and UTMA No Restrictions Income tax breaks only up to $1000 You control Market risk based on your selections No No limitations 20-25% of value Prepaid Tuition Plans No Restrictions State tax deductions up to $20,000; Withdrawals tax free Lump sum invested by fund manager No market risk; fund failure is possible Yes Select college tuition Low
- 11. Savant’s Approach Savantfavors 529 plans Heavy focus on fees associated with the plan 529 Plan Calculation Test
- 15. Back to mySituation Currently hold a UTMA plan Possible financial aid consequences All stocks and mutual funds Could switch to Coverdell Roth IRA loophole You can take money out of a Roth IRA for education
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- 17. Sources Big thanksto Hannah Collman! http://www.finaid.org/savings/ugma.phtml http://www.savingforcollege.com/tutorial101/the_real_cost_of_higher_education.php http://www.bankrate.com/finance/college-finance/pros-and-cons-of-prepaid-tuition-plans-1.aspx http://money.usnews.com/money/personal-finance/mutual-funds/articles/2014/11/24/8-common-misconceptions-about-529-plans http://www.petersons.com/college-search/529-plan-pros-cons.aspx http://www.usnews.com/education/best-colleges/paying-for-college/articles/2012/07/18/4-steps-for-choosing-age-based-529-plans http://www.usnews.com/education/best-colleges/paying-for-college/articles/2012/11/21/understand-the-federal-tax-benefits-of-529-plans https://www.brightstartsavings.com/OFI529/PN/generated/en_us/PrimaryNavigation_07-07-08-134327.xml http://www.savingforcollege.com/529_plan_details/index.php?state_id=14&page=plans_by_state http://money.cnn.com/pf/money-essentials-college-savings/ http://money.cnn.com/pf/money-essentials-maximize-college-savings/ http://www.fool.com/personal-finance/saving/dont-save-for-college-invest.aspx https://www.collegeinvest.org/tools-resources/faqs