College Planning – 529 Plans, Financial Aid,
And Outside-Of-The-Box Thinking…
If you’ve asked a financial planner about the best ways to save for your child’s education, you have probably been pointed to 529 college savings plans. Why? Because once funded (in a non-deductible manner), the funds can grow tax free and can be removed tax free for college expenses.
As a general statement, there is nothing wrong with 529 plans. Tax-free growth and tax-free withdrawals are two terrific aspects to any wealth-building tool. However, as millions of people found out, when the stock market crashed 46% like it did from 2000-2002 and 59% like it did from 2007-March of 2009, the money in your 529 plan goes down accordingly (if the money was in mutual funds, which is typical).
Depending on the age of your child or grandchild, there are other alternative tax-free wealth-building tools you can use that do not have the same risks associated with 529 plans and have other benefits such as self completion. What is self completion? It means that, if a parent happens to die before a child goes to or completes college, the plan will self complete and funding will be available even though the parent is no longer around.
For more information on the various ways to fund for your child or grandchild’s college education, please e-mail firstname.lastname@example.org.
Many high school students will apply for financial aid. It sounds easy, but many times it is not. The statistics show that the majority of financial aid forms that are submitted are not filled out correctly (which hurts a student’s ability to receive aid).
Be careful. There are many scammers pitching themselves as college planners. They will charge significant fees to help your child qualify for financial aid. Some will talk about shifting a parent’s assets into “non-countable” assets in order to help a child qualify for aid. Many times, however, this does not work; and the parents do not find out until after the fee has been paid that the assets they really didn’t want to reposition have been moved and until after the child has had his/her aid denied.
If you would like help assessing the real likelihood that your child or children will qualify for financial assistance for college, please contact our office to set up an appointment (email@example.com).