College Fund

Dec 5, 2021

A college fund that does not have the limitations or pitfalls of traditional plans. Save money for your child’s future that will provide tax-free money for their future.

Upper education, whether it be college or vocational school is every parent’s dream for their child and a milestone to be celebrated! Saving for your child’s college education is a great thing because you’re taking control of your family’s financial future. You’re giving your child choices — not only college choices but career and lifestyle choices since you will help them to graduate debt free.

What do I need to think about when planning for college? Will it be a in-state school, out-of-state school, private school? No matter the answer to this question, the ultimate question is: How is it going to be paid for?

Diving into these questions, we have to take into consideration the bad news and the good news. The bad news is that college costs are expected to double again over the next 10 years. Yikes! The good news is that most college advisors are stating that you only need to shoot for one-third expecting that the remaining two-thirds can be addressed by scholarships, financial aid and current income (i.e. your income or your student’s work-study).

Most financial advisors are saying that if you are planning for a child who is 4 years old today, the college savings goal should be $60,400 for a public, in-state college; $95,000 for a public, out-of-state college; and $118,900 for a private college. Don’t allow the numbers to over-whelm you. There are ways to break it down into achievable monthly contributions.

What college savings plans are available? Aren’t all college savings plans the same? No, they are not! Most college savings plans (i.e 529 college savings plan or Roth IRA) are tied to the mood of the market and do have tax implications. A&M Futures can help with tax-advantaged strategies that will allow you to grow your college fund with the peace of mind that your account will not go in reverse with market corrections (downturns) and when you use the funds, they can come to you tax-free when you go to use these funds. Our strategies do not have the limitations of a 529 plan or Roth IRA.

Remember that you also have a secret weapon to help with all of this. Who are the important people in my child’s life? These people, most likely, will love to be involved and help. There are so many occasions when they can: birthday parties, holidays, early school graduations and other personal milestones. Ask these people to swap out a birthday or holiday gift and give a small contribution to the college fund instead. Your child won’t know the difference and the money in the fund will last a lot longer than the toy of the moment. And with the A&M Futures’ college fund program, it is easy to make an additional contribution from time to time. What we think are small additional contributions will have a big impact!

When setting up a college fund also ask these questions:

1. Will using money from this program affect my ability to qualify for a student loan, grant?
ANSWER: No, the program values are not reported on the Free Application For Federal Student Aid (FAFSA).

2. Why would I need a A&M Futures college fund instead of a 529 plan?

ANSWER: Simple. Our strategies allow you to use the tax-free money with more flexibility. A 529 plan can only be used for “qualified expenses” per the IRS Code. Our plan can be used for any expenses.

A good example is “Can I buy a car with funds from a 529 plan?” No, because “Transportation and Travel” expenses are not “qualified expenses.” That means you cannot use a 529 plan to buy or rent a car, maintain a vehicle or pay for any other travel cost.

3. How does the money come out of the savings fund?

ANSWER: The money comes out as a tax-free loan. Because the money comes out as a loan, the fund becomes the collateral and the funds in the plan continue to grow – in a sense paying off the loan.

4. Since the money comes out as a loan, do I have to pay it back?

ANSWER: That is up to you – you can choose to pay it back and build the fund back up to use as a tax-free retirement vehicle, or you can choose not to pay it back.

Talk to one of our experts to determine the best strategy for your child’s tax-free college fund.