Education Planning
A college education is expensive – and prices for tuition and living expenses are only getting higher. Families with children might consider planning how to finance an education as early as possible, so as to take advantage of tax and investment opportunities and contribute to pre-paid tuition rates.
Many states and educational institutions offer a 529 Qualified Tuition Plan (529) to help finance a college education. The specifics vary between states and institutions: some guarantee a minimum rate of return, others may offer matching grants. Depending on the state, there may even be the ability to deduct 529 contributions from state income tax returns. 529 plans are eligible for federal and state tax deferral of compounding income and growth, if contributions are used for eligible college expenses. Even if your state does not offer a 529 plan, many allow non-residents to contribute to their plans, and private plans are available.
Pre-paid tuition plans involve purchasing units or credits at participating educational institutions that can applied to tuition and, in some cases, living expenses. A pre-paid tuition plan generally is offered by the state, may have residency requirements, and has a guarantee. A pre-paid tuition plan should not be confused with a 529 plan which establishes an account for a student that can be used to pay eligible college expenses, and allow contributors to choose among several investment options.
It is important to carefully consider how to invest in a 529 plan, since it can impact a student’s eligibility to participate in need-based financial aid programs. A financial planner may be able to help balance assets held in college savings plans against financial aid requirements. Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
Working together, we can examine college investment options to build a customized portfolio that takes into consideration your financial goals, tolerance to risk and time horizon.
