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Mitlin Financial Inc. - An SEC Registered Investment Advisor - College Funding

529 Plan, What is that?

 

College Savings

 

In 1996 the Small Business Job Protection Act created 529 Plans, also known as “qualified tuition plans”. This account which allows taxpayers a tax advantaged way to save for education expenses allocated for a designated beneficiary, after 22 years, may be the account that most know nothing about.

According to a recent survey by Edward Jones, only 29% of Americans are even aware that 529 plans are available as an education savings vehicle. One would think this is a scary statistic, but even more frightening is that only 13% of families used 529 plans in 2016-2017, according to a2017 Sallie Mae Report. This is quite a staggering statistic, considering the rising debt being incurred by college students.

When you think about the enormous costs of sending your children to school, which according to theCollege Board is $46,950 for the average private four-year school, you would think that more people would be using all tools available to them to save for college. The 529 savings account can be an excellent tool to begin to save for this lofty expense. The monies saved for your respective beneficiary grows tax free as long as you use it for higher education. Keep in mind that the recently passed Tax Cuts & Jobs Act has added provisions that may allow you to also use these funds for K-12 expenses. You will want to check with your individual state, as your 529 plan may not follow the new tax law.

There is a struggle for most people to balance saving for college and for retirement at the same time. This is a fine balance that needs the attention of proper planning. Although you will not be able to borrow money for retirement, you will be able to do so for college, and you will want to have a plan in place to address both. Not having money in place for your children’s education may have an impact on your retirement down the road, but at the same time, overfunding your college savings at the expense of your retirement accounts will do the same.

The key here is to have a strategy in place that will allow you to save for both. Just like we advise clients to start saving for retirement early, it works the same way for education too. The more money you save for college early on, the less money you will have to add later on because you will benefit from the concept of compounding.

Think about it; if you start working after leaving school and start funding your retirement right away, you will be in a position to lower your retirement contributions when you have children and be able to start allocating the difference to their college funds. Depending on how many children you have and what your goals are for supporting their education, you may be able to shift this strategy back by the time your child is ten years old. Getting caught with a child at the age of eighteen and having nothing allocated for college education will, in most cases, place a strain on your financial situation.

529 plans can be a vital tool in your education funding savings strategy. I think it is disheartening that this tool is not well known and very much underused. It is vital to engage a fiduciary advisor as early on in your life as you can. This relationship will provide you with an advisor that can be in a position to guide you, advise you, and see you through the planning of your life to make sure you are financially prepared for all of the events ahead of you. This will be a relationship that will guide you through the financial ups and downs of the lives of you and your family. The goal is to make sure you are aware of the options that exist and the best ways available for you and your family to save for your financial futures.

Mitlin Financial assists our clients in addressing their college funding needs. We are here to help you instill these concepts within your own family. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance in getting started on their plan today.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Financial Webinar Series: Big Business of College - Hans Hanson

Mitlin Financial Inc. presents the Big Business of College With Special Guest- National College Advisor Hans Hanson 
Originally Held April 16, 2019
 
Hans, owner of CollegeLogic will present- Get College Right, Save College Costs Featuring our Game-Changing 3 Principle Approach to Winning Admission Acceptances, Saving College Costs, Getting Desired Outcomes, For Athletes-Playing College Sports
 
Things you will take away from the webinar are:
What do you want to know before buying a house?     (Why does this matter?)
Who’s occupying the “driver’s seat” here?     (Are you sure?)
How do you go on a college visit?   (Why do you do it that way?) 

 

                   This webinar represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.
 

The Financial and Non-Financial Aspects of College Planning

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The topic of college planning has entered my home in full force. My oldest, who is currently a tenth grader, has embarked on his search for college. I know many of you think this is quite early to begin this, but being his dad is a planner I am sure it is not much of a surprise. Just like we talk about having a plan in place for your financial future to guide you, it is important for the student to have a plan in place for their educational and eventual career as well.

I have found over the years that there are two components to assisting a family through the college planning process, the financial and non-financial. Many wealth managers have a tendency to help families accumulate the assets they will potentially need for their child future education and stop there. I think it is as important to assist the family through the non-financial part too. Let’s delve a bit deeper into these two very different aspects of the college process.

The financial aspects of planning for college are fairly straightforward and include a great deal of assumptions in order to save enough for our children’s education. As a family, it is wise to determine what you plan on contributing to their education. Do you plan on paying for all their undergrad and graduate school regardless of where they attend or at what cost? Do you plan on paying the equivalent of the cost for a State university and anything above that is on your child? These will help you to determine what your expected cost will be in today’s dollars. You then will need to factor in inflation in the cost of school, the return you believe you will be able to achieve on your investments, and how long you have until they will need the money. This will lead you to discern how much you will need to save on an ongoing basis to fund that goal. Like any financial plan, it is important to revisit your goals, objectives and progress each year to make sure you are staying on course.

The non-financial aspects of college are typically a more difficult hurdle for families to overcome. In most cases, we as parents have not been in college for eighteen plus years and things have changed. How do we make sure our children are looking at, visiting, and ultimately applying the best schools for them? In my experience, people typically will spend more time researching everything they need to know surrounding a new car purchase than they will the higher education options their children are considering. Considering the education will cost anywhere between two to six times the price of the car, this needs to change. Not to mention the fact that the education your child receives will be the basis for their entire future moving forward.

We, as parents, really need to spend more time helping our young ones find the “right fit” for their education. I think it goes without saying that a university does not qualify as a “right fit” simply because they have a great football team and/or fantastic weather. My family decided that we needed assistance in this area for my son and we hired a college advisor, Hans Hanson ofCollege Logic. This has been an excellent decision for us and he has already helped our son immensely. Currently, we have a list of sixteen schools with a goal of visiting each one by the end of his sophomore year. After only a few visits, he is starting to see what he likes and does not like about the schools on his list. Through the use of the advisor we have allowed my son to take ownership of the process and have discussions with us about his findings. Ultimately, by having a plan and his advisor to walk him through the process, we feel that our son will truly find a university that is the “right fit” for him and will put him on a path for success following his college years.

College planning is an involved process that contains financial and non-financial aspects that need to be addressed for the benefit of the student. The university your child attends should be a stepping stone to their educational, vocational and financial future which needs you to dedicate time and attention to determine fit. We would be happy to speak with you regarding getting your family on the right track for higher education from both the financial and non-financial aspects. In addition, we are pleased to share our experiences with hiring a college advisor and how it has helped us with this process immensely. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.