Broker Check
(309) 797-0132
Client Access

Educational Planning

Almost from the moment your child arrives, you begin dreaming of their future and giving them the best of everything. A college education can run from $40,000 to $100,000 depending on the type of university. You need to be ready for this expense by planning and saving now. Our team can walk you through multiple options, including the following: 

529 College Savings Plans

This is a state-sponsored savings account. It allows you to invest money for qualified higher education expenses that offers tax-free growth and tax-free withdrawals. Also, there can be multiple investors for a single person.

Education Savings Accounts (ESAs)

Similar to a 529, an ESA offers many of the same benefits for savings tax-free if used for qualified higher education expenses. However, there are typically income levels that you have to meet to open this type of account. It also opens a wider array of investment opportunities.

*Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

Client Centered

Custodial Accounts

This is a financial account that a parent or guardian creates and manages on behalf of the child. Contributions may be made without gift tax implications up to a certain annual limit, but the account's earnings are subject to federal income tax annually under the "kiddie tax" rules. The child can use the funds in any manner once they become adults.

Roth IRA

While both 529 plans and Roth IRAs offer tax advantages for educational expenses, they are not entirely the same. A 529 plan is specifically designed for college savings and offers tax-free growth and withdrawals when used for qualified education expenses. A Roth IRA is primarily a retirement savings vehicle where contributions are made with after-tax dollars and qualified withdrawals are tax-free. However, the IRS and Congress determine the maximum amount you can put into an IRA each year. 

*The information herein is general and educational in nature and should not be considered legal or tax advice.  Consult an attorney or tax professional regarding your specific situation.

529 plans come with fees and expenses, and there is a risk they may lose money or underperform. Most states offer their own 529 programs, which may provide benefits exclusively for their residents. Please consider whether the state plan offers any tax or other benefits. Tax implications can vary significantly from state to state.
Tax-free withdrawals may be made for qualified education expenses. Otherwise, the deferred earnings portion may be subject to taxes and a 10% penalty.
In general, you can withdraw Roth IRA contributions at any time. However, earnings withdrawn prior to 59 1/2 would be subject to income taxes. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.
Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Have a Question? Talk With an Advisor Today.

Thank you!
Oops!