OUR THOUGHTS ON:

College Savings Strategies

Wealth Management

By Kyle Zeller

I am often asked by clients if and how they should save for their children’s education and what vehicles they should use to do so.  While a 529 plan is an easy answer, there are other ways of saving to consider.  A Roth IRA can be used for this purpose since all contributions to the Roth IRA can be withdrawn at any time, tax-free.  The earnings in the Roth account are subject to tax,  but the 10% penalty is waived when used for qualified college expenses.  Also, if children decide not go to college, the money can simply be left in the Roth IRA for your own retirement account as opposed to paying the tax and penalty on earnings from a 529 account when not used for college.  Coverdell accounts, zero coupon bonds and brokerage accounts can also make sense for families with different needs and strategies.  When saving for college, it is best to explore all options, because the 529 plan is not always the best fit.

Finally, as a reminder to all parents, please keep in mind there are also these things out there called Student Loans….but there is no such thing as a Retirement Loan program. You are not doing your kids any favors by sacrificing your 401(k) to fund their college tuition and expenses, since they may have to support you some day.  Keep the big picture in mind when beginning these types of savings plans.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice.  Please note that individual situations can vary.  Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2014 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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