By Dave Coen
Your finances don’t exist in a bubble. Every decision you make and every milestone you reach impacts your financial situation. Even within your finances, there are many different factors that affect each other, such as taxes, saving for retirement, and estate planning. That’s why college planning won’t be successful unless it’s part of a comprehensive financial plan.
When you have a financial plan that addresses every area of your life and is customized to you, you may find college planning strategies and opportunities that you didn’t see before. And the best part is, those strategies may save you more money than you think. Here are a few examples of how financial planning can reduce your college bill.
A Financial Plan Gives You Options
There are plenty of options available to you for saving for college, and none of them are inherently good or bad. How you save all depends on your overall financial picture. For example, while 529 plans might help you taxwise, they could negatively impact your financial aid eligibility. On the FAFSA, a 529 account is counted as an asset and could reduce financial aid eligibility. If you or your child has other assets that will also be counted against them, you could open a Roth IRA instead, since IRAs do not have any impact on your financial aid eligibility. The fact is, if you don’t see how all the pieces of your financial plan work together, you won’t know what decisions to make when it comes to college planning.
A Financial Plan Keeps You On Track
Just as 75% of Americans have no written financial plan, most people don’t follow a college planning process. (1) When you don’t have a plan, you just figure it out as you go, putting out fires as they come up and scrambling to stay on top of the many details, applications, and decisions.
This is one of the most important aspects of preparing for college. If you don’t have a set plan in place, you could end up paying tens of thousands of dollars more for college than necessary. Even if you’ve saved appropriately, not following a proven process could hurt your future retirement and saddle your child with loan debt. Working with professionals who know the ins and outs of college planning will provide you with timelines and structure that will make this experience as pleasant and efficient as possible.
A Financial Plan Protects Your Retirement
Imagine this scenario: You didn’t plan ahead and prepare for your child’s college education. At the last minute, you’re scrambling to find a way to help them out with the tuition bill. You see your retirement savings and think it wouldn’t hurt to take some out. After all, you can always save more later, right?
This is one of the most detrimental mistakes parents make in the college planning process. The truth is, you can’t afford to withdraw from your retirement fund. Not only will there be penalties, depending on what type of account you have, but you may never save enough to make up for the compound interest you would have earned on that money.
If you have a financial plan that covers all your bases, you won’t have to even think about using your retirement to pay for college. While this benefit of a financial plan doesn’t directly reduce your child’s college bill, it saves them from having to take care of you financially in the future.
A Financial Plan Gives You Confidence
Life is just too unpredictable for you to plan for every single outcome, but you can plan to maximize your money and make strategic decisions that could drastically reduce your college bill.
At College Planning America/SageView Advisory, we not only specialize in every aspect of college preparation, but we also help you design a financial plan that crosses every “t” and dots every “i.” A comprehensive financial plan that incorporates proactive college planning will give you confidence in your future and reduce the stress of figuring out how to pay for everything.
Our team is committed to making college more affordable for parents and students while also helping you plan for retirement. If you are ready to see how a financial plan could transform every aspect of your financial life, email me at dcoen@sageviewadvisory.com or call 800-814-8742 today!
About Dave
Dave Coen is a Financial Advisor with SageView Advisory and the CEO of College Planning America. Along with his retirement financial industry experience, he is a College Planning Specialist. He works closely with individuals and families to provide them comprehensive financial planning that addresses all elements of their financial picture. Learn more by connecting with Dave on LinkedIn.
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Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least 5 tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
Before investing in a 529 plan, the investor should consider whether the investor’s or beneficiary’s home state offers a state tax or other benefits that are available only from that state’s 529 plan.
This material is designed to provide accurate and authoritative information on the subjects covered. It is not however intended to provide specific legal, tax, or other professional advice. For specific personal assistance, the services of an appropriate professional should be sought.
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