As a parent or grandparent, you’re probably considering how to balance paying for college while planning for your retirement. Many families use some combination of savings, investments, borrowing, and financial aid (if available).
There are options for financing college, but Wells Fargo Advisors Financial Network believes saving for retirement should be the higher priority for many investors.
If your employer offers a 401(k) plan, consider putting your savings there first, especially if there is a company match. After that, contribute to your child’s education account.
As you can imagine, the sooner you start saving for your child’s or grandchild’s education, the more money you may have later.
One popular way to save is the 529 college savings plan. These are tax-advantaged accounts administered by states and institutions. Parents, grandparents, relatives, and friends can contribute.
Other college savings accounts include custodial accounts in the child’s name and Coverdell Education Savings Accounts.
Please consider the investment objectives, risk, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your Financial Advisor. Read it carefully before you invest.
Qualified Coverdell Education Savings Account distributions are not subject to state and local taxation in most states.
Setting up an educational trust fund designed for your child’s education is also an option. When a grandparent or benefactor establishes an education trust, the terms of the trust can be specified. This can include who controls the money, how it will be used, and for whom the trust benefits.
It’s a good idea for grandparents to involve parents when it comes to helping with college savings. How they choose to save could impact any potential financial aid the child may receive.
Other investment sources may help pay for college, and keep you from tapping your retirement savings. Those may include stocks, bonds, and mutual funds.
As you plan for the future, keep in mind the three C’s of college funding: consistency, communication, and compromise.
Planning for retirement, managing your investment portfolio, and funding a college education is a balancing act. The trick is to plan ahead.
We can help you come up with a plan that considers all aspects.