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College Planning,[object Object],Saving For a College Education ,[object Object]
Saving for College – Fitting College Savings into Your Budget,[object Object],Your Money,[object Object]
Saving for College – The Cost of College Now,[object Object],Source: The College Board’s  Trends in College Pricing report,[object Object],Cost figures include tuition, fees, room and board, books, transportation, and personal expenses,[object Object]
Saving for College – The Cost of College in the Future,[object Object],Projected cost of college in future based on annual 5% college inflation rate,[object Object]
Saving for College – How Are You Going to Pay?,[object Object],Gifts from ,[object Object],grandparents,[object Object],Other ,[object Object],borrowing ,[object Object],options,[object Object],Creative ,[object Object],cost cutting,[object Object],measures,[object Object],Your college ,[object Object],savings,[object Object],Your income ,[object Object],in  the,[object Object],college years,[object Object],Financial aid,[object Object]
Financial Aid – How Is Need Determined?,[object Object],Forms of financial aid:,[object Object],Loan,[object Object],Grant,[object Object],Scholarship,[object Object],Work-study job,[object Object],Income, assets,family information,[object Object],Federal or institutionalmethodology,[object Object],Expected familycontribution (EFC),[object Object],Cost of college less EFCequals financial need,[object Object]
Financial Aid – Parent vs. Child Assets,[object Object],Parent,[object Object],Child,[object Object],5.6% of assets,[object Object],20% of assets,[object Object],$10,000 in savings account = $560 expected contribution,[object Object],$10,000 in savings account = $2,000 expected contribution,[object Object]
Financial Aid – How Much Should You Rely on Aid?,[object Object],Don’t rely too heavily on financial aid ,[object Object],Student loans make up the largest percentage of the typical aid package,[object Object],Rule of thumb on the potential percentage of expenses covered:    Loans–up to 50% Grants/scholarships–up to 15%Work-study jobs–varies,[object Object]
Setting a Savings Goal,[object Object],Figures are based on an average after-tax return of 6%,[object Object]
College Savings Options ,[object Object],529 plans,[object Object],Coverdell education savings accounts,[object Object],U.S. savings bonds,[object Object],UGMA/UTMA custodial accounts,[object Object],Mutual funds, stocks,[object Object]
College Savings Options – Taxable vs. Tax-Exempt Investments,[object Object],Tax exempt,[object Object],$33,799,[object Object],Taxable,[object Object],$24,232,[object Object],Difference ,[object Object],$9,567,[object Object],This chart shows the impact of federal income tax on your investments, based on a $10,000 initial investment, 7% annual return, and 28% tax bracket. This is a hypothetical example and is not intended to reflect the actual performance of any specific investment, nor is it an estimate or guarantee of future value. The lower maximum tax rates on capital gains and qualified dividends would make the taxable investment more favorable than is shown in this chart. Investors should consider their personal investment horizons and income tax brackets  ,[object Object]
College Savings Options – 529 Plans,[object Object],Q.  What is a 529 plan?,[object Object],A.   A 529 plan is a tax-advantaged college savings vehicle.  529 plans are sponsored by states, and less commonly colleges, but they must adhere to federal law.,[object Object]
College Savings Options – 529 Plans,[object Object]
College Savings Options – 529 Plans,[object Object], Advantages ,[object Object],Anyone can open an account ,[object Object],High maximum contribution limits,[object Object],You control the account assets ,[object Object],Professional money management,[object Object],Federal tax-free earnings,[object Object]
College Savings Options – 529 Plans,[object Object],529 plans offer estate planning advantage — accelerated gifting,[object Object],$65,000 (individual) or $130,000 (couple) lump-sum gift,[object Object],No gift tax owed,[object Object],Gift must be treated as series of five equal gifts,[object Object],You can’t make any other gifts to that beneficiary in the five-year period ,[object Object],You retain control of the account assets,[object Object]
College Savings Options – 529 Plans,[object Object],Disadvantages,[object Object],Returns may not keep pace with college inflation,[object Object],Must choose from plan portfolios ,[object Object],Varying flexibility on changing investment choices,[object Object],College ,[object Object],savings,[object Object],plans,[object Object],Prepaid ,[object Object],tuition ,[object Object],plans,[object Object],[object Object]
Possible difficulty providing guaranteed returns
Withdrawals not used for college subject to income tax and penalty
Fees and expenses with each type of planBoth,[object Object]
College Savings Options – Coverdell ESAs,[object Object],Tax-advantaged savings vehicle with maximum contribution of $2,000 per year,[object Object],For elementary, secondary, and college expenses,[object Object],Complete investment control,[object Object],Federal tax-free earnings ,[object Object],Available only to people below certain income levels,[object Object],Withdrawals used for non-educational purposes subject to income tax and penalty,[object Object]
College Savings Options –Coverdell ESAs,[object Object],You might be interested in opening a Coverdell account if:,[object Object],You have less than $2,000 to invest in a year,[object Object],You want complete investment control,[object Object],You want to use the money for elementary or secondary school,[object Object],You meet the income limits,[object Object]
College Savings Options – U.S.Savings Bonds—Series EE and I,[object Object],Interest exempt from federal tax if income limits met,[object Object],Interest always exempt from state tax ,[object Object],Principal guaranteed,[object Object],Series I bonds offer inflation protection,[object Object],Flexibility,[object Object],Easy to purchase --available in denominations from $50 to $10,000,[object Object]
College Savings Options – UTMA/UGMA custodial accounts,[object Object],Provides some opportunity for tax savings,[object Object],You typically manage the account,[object Object],Assets held in child’s name—can be used to pay for college,[object Object],You have complete investment control,[object Object],Gifts are irrevocable,[object Object],Custodianship ends and child gains control of remaining assets at age 18 or 21,[object Object]
College Savings Options – UGMA/UTMA custodial accounts,[object Object]
College Savings Options –         Mutual Funds & Stocks,[object Object],No tax advantages specific to education,[object Object],Example: $10,000 investment earning average of 7% per year  for 18 years would equal $24,232 in a taxable mutual fund but $33,799 in a tax free 529 plan or Coverdell account,[object Object],Difference of $ 9,567,[object Object]
College Savings Options – Which Options Are Right For You?,[object Object]
College Savings Options – Hypothetical Family,[object Object],Mary and Joe, 42 years old,[object Object],Two children, 7 and 5,[object Object],Combined income of $125,000,[object Object],$16,000 windfall  ,[object Object],Would like to make monthly contributions to a college fund,[object Object]
College Savings Options – Hypothetical Family,[object Object],,[object Object],529 plan: automatic monthly contributions ,[object Object],Coverdell ESA: meet income limits, buy stocks ,[object Object],U.S. savings bonds: don’t meet income limits,[object Object],Custodial account: gift appreciated assets,[object Object],,[object Object],,[object Object],,[object Object]
Saving for College and Retirement,[object Object],It’s a balancing act, but you should save for retirement now too because...,[object Object],No loans, grants, or work-study programs for retirement ,[object Object],Miss out on years of tax-deferred growth, hard to catch up later,[object Object],Err on the side of saving for retirement,[object Object],Dip into your retirement accounts as a last resort,[object Object]

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