Are You Maximizing Savings for Your Child’s Education?

October 13, 2014
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     With schools now in full swing, funding education has probably crossed your mind this fall. HFG Wealth Management believes 529 plans are an excellent way parents and grandparents can save for college, similar to the way 401(k) plans help you save for retirement. Americans are pouring billions of dollars into 529 plans, and contributions are expected to increase dramatically in the coming decade. In this short period, 529 plans have emerged as one of the top ways to save for college.

     “Investing in 529 Plans proves to be a powerful tool for funding education while maintaining flexibility and providing generous tax benefits,” says Jordan Nightingale, CFP® at HFG Wealth Management.

Here are some ideas on funding a college education:

  1. Fight for every penny. Financial aid is based on a federal government formula that calculates your family income, assets, family size, number of children in college, and other factors. There’s also an estimate called the Expected Family Contribution (EFC), which is the portion of the college bill the family is expected to cover. You’ll want to know how the EFC is calculated. Depending on your family’s asset level, you should consult with your advisor to ensure that each asset is titled accordingly to receive the most favorable treatment as assets in the college students’ name are weighted more heavily than assets that are in the parent’s name.
  2. Go for public loans. If there’s a gap between what a college is offering and what you can afford, you might consider a student loan—but the right kind. Federal Perkins Loans, Stafford Loans, and Federal Direct Loans offer interest rates and payment terms more favorable than private student loans, for instance.
  3. Timing is everything. To avoid an “inflated” income on a FAFSA or CSSP form, don’t sell any stock or real estate during a year you’re applying for financial aid, if possible.
  4. Tax benefits. Eligible taxpayers are permitted to deduct a certain amount of student loan interest. Taxpayers may take this deduction if the interest is eligible from a qualified educational institution and the purpose was education and if their modified adjusted gross income is less than $75,000 for a single taxpayer and $155,000 for married filing jointly. Furthermore, while making 529 contributions won’t trigger a tax deduction now, the growth will be tax free as long as the distribution is “qualified.”
  5. 529 Plan Selection. You’ll want to evaluate several 529 Plans before deciding which one to establish as the investment choices and administration fees can vary substantially.
    The following are a few 529 plans that we have recommend:

    1. Utah Educational Savings Plan (UESP)
    2. The Vanguard 529 Plan
    3. iShares 529 Plan

     There is an array of financial opportunities and responsibilities throughout your life. With our guidance and a disciplined approach to wealth management, we will build a solid plan and a lasting partnership to help you and your family, realize your distinct vision for the future. 529 Plans can be a wonderful way to prepare in advance for education and a way to invest in a child or grandchild’s future. Please visit www.hfgwm.com for more information.

Blog Disclosure
Examples are hypothetical in nature and are for illustrative purposes only. HFG Wealth Management, LLC (“HFG”) is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The views expressed by the author are the author’s alone and do not necessarily represent the views of HFG or its affiliates. The information contained in any third-party resource cited herein, including but not limited to other blogs, websites or articles, is not owned or controlled by HFG, and HFG does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by HFG of third party or any of its content or use of its content. The standard information provided in this article is for general educational purposes only and should not be construed as, or used as a substitute for, financial, investment, or other professional advice. If you have questions regarding your financial situation you should consult your financial planner, investment advisor, attorney or other professional. A copy of HFG’s current ADV Part 2A discussing HFG’s investment advisory and financial planning services and fees is available for review upon request or at www.adviserinfo.sec.gov.

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