If current trends continue, four years of college tuition, room, and board will run well into six figures at even a relatively affordable public institution.
At D.K. Brede Investment Management, we’ll work with you to help you understand all your options and how they’ll impact your ability to effectively finance college tuition in the years ahead. We offer investment portfolios customized for your specific situation and review the plans periodically to ensure that the plan is on track to meet your student’s needs by the time they reach college.
Here are some of the tax-advantaged education savings plans that you can use, so your loved ones can enjoy all the benefits that a quality education provides:
529 Plans (Qualified Tuition Programs)
529 plan accounts allow for mutual fund investment within a tax-free account. Qualified distributions to pay for college tuition, board, or supplies are also tax free. One of the most compelling aspects of the 529 plan is the owner's ability to maintain control throughout the life of the account.
The fees, expenses, and features of 529 plans can vary from state to state. By investing in a plan outside your state of residence, you may lose any state tax benefits. In order to be federally tax-free, earnings must be used to pay for qualified higher education expenses.
Custodial Accounts (UGMA/UTMA)
The UGMA/UTMA is traditionally set up as a way to gift both cash and securities to a minor without the use of a formal trust. The owner can make any transaction within the account that he or she sees or understands to be in the beneficiary's interest. No restrictions will be placed upon what is purchased for the child, other than that the money withdrawn must be used for the child's needs.
The Coverdell Education Savings Account (ESA) operates in a similar fashion to an IRA. All contributions to a Coverdell ESA are nondeductible, but they grow tax free assuming the proceeds are withdrawn for qualifying reasons. From an investment standpoint, Coverdell ESAs are very flexible in terms of what investment vehicles may be used.