Answers in College Planning

Top private colleges and universities can cost over $200,000 over 4 years, and these costs are only going up over time. How much money should you save?
1 vote
Given the stated intent of expecting the UGMAs be used for college, I agree with Andy's point about considering a 529 UGMA. Your oldest is 18 so the benefit of future investment gains growing tax-free and if used for college remaining tax-free may be ...(more)
2 votes
Another thing to factor into your decision...Many states allow for deductions against state income tax for contributions to their (state sponsored) 529 plan. Depending on your state and its income tax rate, this could add to the value of a 529 plan versus ...(more)
4 votes
Andy Tilp, CFP® Level 16
Michael, Robert and Craig made some good points. Just to reiterate regarding the retitling of the account. The money in the account will legally become your son’s and he can use it for whatever purpose he so chooses. (This is why UGMAs are sometimes called ...(more)
4 votes
Michael, An UGMA account is a Uniform Gift to Minor Account that provided the parent with control over the funds until the child reaches age 18. Then they can access the funds and spend the funds as the child wants, no parental controls. Yes when the ...(more)
2 votes
The answer to this question is simple. Assuming that the college investment you are making is the same in amount and timing of investment, in a 529 account versus a personal account, the benefit of the 529 accounts "Tax free" status on all 529 account ...(more)
1 vote
Adi Benyishay Level 13
The simplest way to look at it is – Taxable (capital gain & dividends) as you go along, or tax free as long as it is used for education. Therefore, to calculate the equivalent total return of a taxable account use the 529 return and add to it your ...(more)
1 vote
All the answers are great but beware of losing the forrest for the trees. The important issue is investing enough and in the right strategy to have enough to meet your goals. Just make sure that you dont let the registration decision hold up implementation ...(more)
0 votes
Another consideration is whether your state allows a state tax deduction for contributions. Consider two scenarios: 1) If your state allows deduction and your accounts are currently held with home state, be aware the state may reclaim past deduction ...(more)
4 votes
I favor holding the assets in the parent's name in a 529 savings plan. This has multiple advantages: 1) retain control of assets after child turns 18 (in case they don't want to use for school) 2) parental assets counted at lower % toward expected ...(more)
1 vote
Absolutely! You have the right to appeal and discuss the findings with the financial aid officer. Your case may be strengthened by mitigating circumstances in your income or asset situation (change in job status since the base year income used for calculating ...(more)
2 votes
In my college financial planning practice, I come across this sort of question very often. Generally, funds held in the student's name are assessed at a greater rate than your funds. There's a bit of a loophole for 529 accounts owned by the parent with ...(more)
5 votes
Philip, I agree with Donald. There is room to negotiate with the Financial Aid Officer at School 1. As noted by Donald, be prepared to discuss the other aid packages. While the school obviously can decline to adjust its standing package, asking the school ...(more)
5 votes
Don Level 19
Philip, the answer is YES they certainly do reconsider. Some amount of aid is kept in reserve to enhance offers for kids schools really want. Write a letter and follow up with a call to the financial aid office indicating that the school is your child's ...(more)
5 votes
Amos, The system sees it this way. -The child is your dependent and therefore you are responsible for the childs financial obligations. - Whatever funds are in the students name will be consider available to support the cost incurred and then they look ...(more)
5 votes
Hello Amos, This is a really tough area and there are pros and cons to both arguments. Education IRA's are tax free for education - but limit the amounts that you can put in quite a bit. 529 plans are also tax free for eduation - but are quite often ...(more)
7 votes
There may be a few possible drawbacks; you'll have to make that determination. (1) At age 21, the child controls the funds, so it's possible the child could skip college and use the funds for other purposes - buy a car, etc. At any rate, they'll be ...(more)
4 votes
Norma, Here are some options: -Assign another "beneficiary" to the balance of the account. Examp; another child, first cousin of your child, any other immediate member of your family[Husban/Wife]. Maintain the assets in the account and assign to a future ...(more)
4 votes
Jim is spot on. You can withdrawl amounts equal to the scholarship without the penalty, just the tax on the growth. If you deposited $100k and it is now worth $150k, one third of your distribution would be taxable gain and not subject to the penalty. ...(more)
3 votes
Jim Blankenship Level 17
Norma, During the years that your daughter receives the scholarship, you are allowed to remove offsetting amounts from the 529 plan without penalty. You will still have to pay income tax on the growth of the funds (above and beyond the contributions), ...(more)
2 votes
Technically, any money you withdraw from a 529 plan that is not used for higher education is subject to both income tax and a penalty. You can transfer the account to a sibling or cousin - or just hold it and let it keep growing tax deferred. Down the ...(more)
4 votes
Excellent answer! I will add one strategy we use for business owners and that is to fund a ROTH for each of the kids, regardless of your income, you can put your kids on the payroll and then move that money to a ROTH, other than the tax free growth and ...(more)
2 votes
Yes. Tax law allows you to transfer one plan to another plan without tax consequences. However, you can only do this once in any 12 month period. Transferring to lower cost plans and funds is a good reason. Work with your current plan to effect the transfer ...(more)
5 votes
I think the answers from Carolyn, Carol, and Neal are all excellent and provide some great tips. Let me take a different spin as the parent of one college grad (2010) and two current college students. Our experience has shown us a couple of things. First ...(more)
10 votes
Carolyn Taylor Level 15
Young families face a huge challenge to save enough to pay for their children’s higher education expenses. College is expensive and will become even more so in the future. When it comes to qualifying for financial aid many families have too much income, ...(more)
6 votes
We recommend that you save 2 years of state university room, board and tuition in a 529 plan. That gives you tax free growth, and a lot of flexibility. www.Savingforcollege.com is a great website to help you understand 529 plans, the benefits and which ...(more)
7 votes
There are so many factors to determine if you are saving "enough-" type and cost of projected college of attendence (state, community, Ivy League, etc), interest rate factors on investments, age of children, how many years to attend, etc. The best recommendation ...(more)
6 votes
Advantages compared to what? Other options are: 1) saving outright for college the earnings are taxable 2) UTMA or Uniform Transfers To Minors Act transfer the money to children and they get control at age of majority 18-21 year of age and few little ...(more)
7 votes
Michael, Upon your son turning 18, the UGMA account can be retitled into an account with his name and the assets transferred to that account. There will be tax implications if there are securities held in the account and they are sold or redeemed. Please ...(more)
0 votes
Every 529 plan is different. Work directly with your financial advsior
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