Helping a child or grandchild with their education is one of life’s real joys — and a meaningful part of many folks’ financial plans. But with the cost of college always going up, it’s smart to start planning early.
There are plenty of ways to save that can also come with tax benefits. TFCU Financial Advisors is here to walk you through your options, help make sense of the rules, and find an approach that fits your goals — whether you’re looking at 529 plans or other tools. And if your student ends up earning a scholarship, we can help you figure out what to do with any leftover funds.
529 college savings plan
When you invest in potential, you’ll do more than help make the dream of education possible for a student in your life. You could provide the inspiration for a legacy of higher learning that’s passed on for generations to come. What’s more, the funds you contribute have the ability to grow tax-deferred, and eventually be withdrawn, tax-free.*
Working together, we choose the investment strategy that is right for you and your student, keeping in mind that generous contribution limits do exist, regardless of income level.
*Certain conditions may apply. Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you usewithdrawals for eligible education expenses, such as tuition and room and board. However, if you withdraw money from a 529 plan and do not use it on an eligible education expense, you generally will be subject to income tax and an additional 10% federal tax penalty on earnings. Investors should consider before investing, whether the investor’s or the designated beneficiary’s home state offers state tax or other benefits only available for investments in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. 529 plans offered outside their resident state may not provide the same tax benefits as those offered within their state.
UGMA / UTMA custodial accounts
While UGMA and UTMA accounts aren’t just for college savings, they can still be a useful way to set money aside for a child’s future. They offer flexibility with investments, some tax perks, and a way to transfer assets without setting up a costly trust.
That said, it’s important to know that once the money’s in, it’s in for good—and when your child reaches age 18 to 21 (depending on your state), they’ll have full control of the account. We’re here to help you sort through the pros and cons, and find a solution that fits your goals and comfort level.
Saving for K-12 education with a 529 plan
Learn more about using 529 plans for more than just college savings.
