Ways to Pay for College
Working with a financial advisor on your education savings strategy can help maximize earnings so you’re contributing the proper amount and using the type of account that’s best suited for your education savings goals. Our financial advisors are experienced with different investment vehicles for education, including:
These are tax-advantaged accounts where parents can contribute after-tax dollars to save for a child’s education. Contributions grow tax-free while in the account and are tax deductible in dozens of states, including Illinois and Missouri. Money withdrawn from the account for qualified education-related expenses is tax-free as well.
UGMA or UTMA Accounts
These custodial accounts are available through the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). Both allow for the transfer of assets to a minor with the general benefit of being able to take advantage of the child’s lower tax rate. The assets do not have to be used for education specifically and may even hinder the ability to get financial aid.
These individual retirement accounts that are funded by after-tax dollars are not traditionally considered a college savings account but contributions can be withdrawn penalty-free for qualified higher education expenses. Earnings that are withdrawn will be subject to taxes.
An educational trust can be set-up with terms that indicate what assets can and cannot be used for. This can be a popular option for parents or grandparents looking to transfer assets out of their estate for tax reasons.