Tag: college degrees

Don’t let college costs destroy your retirement

A recent headline in Financial Advisor magazine read: Parents Say Retirement Imperiled By College Costs. The cost of raising children can be daunting. Recent reports tell us that the total cost of raising a child until they become an adult will be about $245,340. According to the USDA the biggest expense was housing, the second largest was education and child care.

Fifty-four percent of surveyed parents said they fear their retirement would be jeopardized by helping their children pay for college, according to a study by Citizens Financial Group.

About the same percentage are worried college costs will harm their overall financial stability.

The average cost of college currently ranges from $25,000 to over $50,000 per year and is rising rapidly. The cost has caused an explosion in the amount of student loans, with negative consequences for the graduates and the many who don’t graduate but still have to pay off the loans. It has also given rise to innovation in the delivery of education, including online courses that can be taken for college credit without having to move into a residential college.

Given the need for the credentials that college provides, it’s wise to use time to your advantage and begin when your child is young. The most versatile way of putting money aside for education is the “529” plan. The “529” allows the parent (or grandparent) to put money aside in a tax-deferred account and allow it to grow. When used for legitimate educational expenses the money can be taken free of tax.

For more information, contact us.

Top 10 Best Value Colleges

A column in Financial Advisor caught my eye.  For those  who have children who plan to go to college, this may be worth reading.

For clients with college bound children, a study by The Princeton Review ranks both public and private colleges and universities to determine the ones that offer the best academics at an affordable cost.

Based on criteria including academics, costs and financial aid, the study also considered the percentage of graduating seniors who borrowed from any loan program and the average debt those students had at graduation.

The following public colleges are the top 10 of 75 , with No. 1 offering the highest value.

No. 10  State University of New York at Binghamton (Binghamton University)
No. 9 Truman State University
No. 8  College of William and Mary
No. 7  University of Florida
No. 6  University of California—Los Angeles
No. 5  University of Michigan—Ann Arbor
No. 4  North Carolina State University
No. 3  University of Virginia
No. 2  New College of Florida
No. 1  The University of North Carolina at Chapel Hill

Whether you agree or disagree with these rankings, the cost of attending college has rocketing into the stratosphere and sending your children to college requires a plan well in advance of their matriculation.  A few things to keep in mind is that in-state tuition is often a fraction of the cost of sending your son or daughter out-of-state.  Setting up a college savings plan is always a good idea since it allows the college funds to grow tax-free. Taking out a college loan has become so popular that today, the college loan debt exceeds a trillion dollars.  However, college loans cannot be discharged through bankruptcy, if the student does not graduate (and many do not) the loan still needs to be paid, and college loan payments often extend for decades after the student has left school.

 

Considering 529 Plans?

Saving for college usually involves putting money aside and a popular vehicle for this is the so-called “529” plan.  Here are five things to consider when deciding on this kind of plan.

  1. Don’t overlook prepaid tuition plans.  If you are fairly certain that you know where the student will be attending college, these may reduce the uncertainty of the amount that will be available for college.  The down side is if the student elects to attend a college that does not participate in the plan, then the credits may only cover a very small portion of the tuition cost — or participants just get their money back.
  2. Beware of the strict rules for changing beneficiaries, which could cause a client to incur taxes or penalties. The new beneficiary must be a member of the family as defined by the IRS, within the same generation (or an earlier one) as the original plan beneficiary, in accordance with gift tax laws.
  3. Even if the student does receive a scholarship for any reason, the dollars in a 529 plan are not wasted. Clients have the option to withdraw from the plan the dollar amount of the scholarship. Taxes will have to be paid on the earnings, but the 10{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} penalty on non-qualified distributions is waived.
  4. The IRS allows 529 plans to be rebalanced only once per year, turning any further trades into taxable events that may incur penalties too.
  5. Consider target date funds as an alternative to choosing your own asset allocation program.

 

Funding college for grandchildren

The most popular tax advantaged plans to pay for college education ar called “529 Plans.”  They allow people to put money into tax sheltered accounts which, if they are withdrawn for educational expenses are tax free.

Grandparent-owned 529 accounts offer distinct advantages.  Grandparents concerned about estate taxes can move large sums from their estate, tax-free. They can help trim college costs for their progeny. And there’s security knowing that money in 529 plans can be redeemed, if necessary, often with a modest tax bill.

One other advantage the 529 Plan has is that the grandparent stays in control of the money in the plans to insure that it’s used for the purpose it was intended.   With the high cost of college education today, many grandparents who have the ability will be willing to put money aside for their grandchildren’s education rather than gifts of games or toys.

Is your college fund investment mix making the grade?

With college costs climbing faster than the general rate of inflation, many parents feel the pressure of saving for their children’s education.  Many parents don’t want to see their children saddled with debt when they graduate from college, but spiraling costs and “easy credit” have result in student loan debt in excess of $1 trillion.

One of the programs that allow parents (and grandparents) to save money for college is a “529 plan.”  A 529 is a tax-advantaged plan operated by a state or educational institution designed to help families set aside funds for future college costs. Created in 1996, it’s named after Section 529 of the Internal Revenue Code.

College savers typically have about 18 years if they start early to save for college.  Finding the right balance of investments in a 529 depends largely on the child’s age and your tolerance for risk.  If the child is young, the focus should be on growth and growth-an-income funds according to experts.  As the child gets older, the portfolio should become more conservative since there is less time to recover from a market downturn.

Each state sponsors its own 529 plan which differ in the investments they offer.  Some states also offer a modest tax benefit to those who contribute to 529 plans.  For more details, consult your RIA or check your state’s website  for more information.

Worst College Majors for Your Career

If you are in college, going to college or plan to pay for your children to go to college this article in Kiplinger’s is must reading.  Given the spiraling cost of college and the fact that many are graduating with thousands or even hundreds of thousands in college loans to pay off, it behooves people who don’t have a trust fund to fall back on to consider what the chances are of gainful employment with these degrees.

10. English
9. Sociology
8. Drama and Theater Arts
7. Liberal Arts
6. Studio Arts
5. Graphic Design
4. Philosophy and Religious Studies
3. Film and Photography
2. Fine Arts
1. Anthropology

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