RSS Facebook Twitter LinkedIn

Featured Advisor

Asset Preservation Advisors


State: GA

APA’s philosophy is to work closely with our clients to develop an in-depth understanding of their unique needs and objectives. We then customize a municipal bond portfolio that best meets their specific goals and needs. APA manages high quality municipal bond portfolios in four strategies: Short-Term, Intermediate-Term, High Income, and Taxable.

Click to see the full profile

Share |

Investment Strategies for College Costs

Learn more about popular investments strategies to cover the rising costs of college.

| BY Katherine Dordick

College costs can be formidable for even one child, making investment strategies that take educational expenses into account essential for individuals who would like to cover the cost of education for their children and grandchildren.

About 12 percent of grandparents and 34 percent of parents plan to contribute to the college expenses of a child or grandchild, according to a recent Millionaire Corner survey that underlines the importance of investment strategies for educational expenses.

Without a well-planned investment strategy, these education costs can contribute significantly to personal debt levels, according to the same Millionaire Corner study.  Twenty-eight percent of individuals surveyed list education costs as a source of personal debt.

One of the easiest investment strategies for education is a 529 savings plan.  The plans are operated by either the state or specific educational institutions to assist families in saving for college expenses.  Where did the number 529 come from?  It comes from Section 529 in the IRS code, which allows for these savings vehicles.

The 529 plan offers a few distinct advantages, and can be used as one of several college-savings investment strategies.  Many states offer tax breaks for contributions to an individual’s own states 529 plan.  It is important to research the potential tax benefits of the 529 in each state, including your own, when making the decision on which 529 plan to use.  Keeping control of the assets is another advantage.  The named beneficiary, the student, has no rights to the funds at all.  Compared to trusts established through the Uniform Gifts to Minors Act and The Uniform Transfers to Minors Act (UGMA/UTMA), this allows for a much higher degree of control over the assets.  (Learn about other advantages of 529 plans in our related story, How Can I Pay for College? 529 Plans Are Increasingly Popular.)

 One common misconception of 529 plans is that they must be used in the state that they are held.  Most plans allow the funds to be used at the college of your choice, regardless of residency.  (There are certain rules regarding which institutions are eligible under the rules of the 529.)

Many parents and grandparents have the desire to fund all or a portion of a child or grandchild’s education and this can be accomplished through systematic investment strategies that include an educational savings component. (A  529 college savings plan can support the tax-advantaged investment strategies of high net worth investors. See our related story.)