College Savings Options
Prepare for Your Child’s Future
Investing in your child’s education is one of the most significant commitments you can make. With the rising costs of tuition and related expenses, strategic planning is essential. At Capstone RIA, we can help you craft a personalized education funding strategy to help you achieve your family’s educational goals.
Understanding Education Funding Options
Navigating the landscape of education funding can be complex. Below we will discuss a few college education funding options.
Roth and Traditional IRAs for College Savings
While IRAs are traditionally used for retirement, they can also be a strategic way to fund higher education expenses.
Roth IRA FBO (For the Benefit Of) Your Child
Roth IRA: Contributions to a Roth IRA are made with after-tax dollars, allowing your investments to grow tax-free. When it comes time for college, contributions (but not earnings) can be withdrawn at any time without penalty. Additionally, if used for qualified education expenses, earnings can also be withdrawn without the 10% early withdrawal penalty (though income tax may still apply).
A Roth IRA for your child can be an effective education savings tool. If your child has earned income, you can contribute to a Roth IRA in their name, allowing for tax-free growth and withdrawals. While Roth IRAs are traditionally used for retirement, contributions (but not earnings) can be withdrawn at any time without penalty. Additionally, earnings can be withdrawn tax- and penalty-free for qualified education expenses after five years, making this a flexible education funding strategy.
Traditional IRA: Contributions may be tax-deductible, and while withdrawals before age 59 ½ are typically subject to penalties, an exception is made for qualified higher education expenses. However, withdrawals will still be subject to income tax.
Using IRAs for college savings is ideal for those who also want to maintain flexibility for retirement planning, as funds can be used for multiple purposes.
Other College Savings Options
While IRAs offer flexibility, several other education-specific accounts may be better suited for dedicated college savings.
How Our Team Can Assist You
At Capstone RIA, we offer a comprehensive approach to education funding:
Take the First Step
Choosing the right college savings plan depends on your family’s financial goals, tax situation, and need for flexibility. At Capstone Wealth Advisors, we work with you to develop a personalized strategy that balances education savings with your broader financial picture. Whether you’re looking for tax-efficient growth, investment flexibility, or a structured education savings plan, our team is here to guide you every step of the way.
Planning for education is a journey, and starting early can make a significant difference. Partner with our team to create a robust education funding strategy that could ensure your child has the opportunities they deserve.
Together, we can build a plan that invests in your child’s future.
