What you need to know about Education Planning

CNN Money’s College Tuition Calculator estimates one year of tuition at The University of Colorado to be $10,240, and out-of-state tuition costs at $32,008 (over 210% higher than in-state fees). These numbers do not include housing, books or other educational necessities. With these additional needs taken into consideration, currently one year of in-state tuition at The University of Colorado is estimated at $26,933 or $107,632 for four years.

Future tuition fees and college costs will likely continue to rise. Money Magazine estimates that in-state tuition at a state school for a freshman enrolling in 2030 will be $44,047, with the total costs for a four year degree at more than $205,000.

These high and rising costs are demanding effective education financial plans. Two financial planning options many families utilize are:

529 College Savings Plans All states offer 529 College Savings Plans. These are tax-advantaged savings plans also known as “qualified tuition plans”. They are designed to offer tax advantages not only on the tax-free earnings if used for post high school education, but also potentially on the front-end contribution as well.

The State of Colorado has four 529 options available. The recognized tax advantages vary based on the plan selected.

As an example, if you utilize the CollegeInvest 529 College Savings Account Plan, for every dollar you invest you can deduct one dollar from your Colorado State taxable income. Don’t feel restricted to only the plans offered by your in state provider; you can invest in other state’s 529 College Savings Plans if they are more aligned with your education investment objectives.

Custodial Accounts Custodial accounts are another option if you are looking for more flexibility in how the funds can be used.  Custodial accounts do not restrict the use to post high school education.  The funds can be used for almost any type of expenditure, as long as it is for the benefit of the minor.  Saving for a car or other big expense would be a better use for a custodial account.  These funds can be used for college as well, but there are a few major differences.  The tax implications are substantially different and should be examined before making a decision.  Also, depending on your state of residence, once the minor reaches the state determined age of majority, those funds are legally the property of the minor.

These are just two of the potential options for saving for your child’s future.  It is important to weight the positives and negatives of each option.  A combination of these options may also help meet your goals.

Do you feel properly prepared for your children’s education? Call Gill Capital Partners at 800-288-3777, if you would like to learn about The Gill Capital Difference in financial education planning.

BlogJames O'Brien