College is expensive . Costs can include tuition , books , room and board , and travel . In many cases , the price tag of a four-year degree can exceed six figures and the costs continue to grow each year . While actual costs will depend on the selected school , many families rely on a combination of savings , loans , grants , and scholarships to pay the tab . Whichever sources of funding you choose , there are important considerations to keep in mind as you plan for the expense of higher learning . Here are a few …

Time is your friend . The sooner you start saving for any long-term goal , the better . Save when your child is young to give your education nest egg time to grow . There are a range of tools available to help you save for future college expenses .

• A 529 plan is specially designed to pay for higher education costs . Contributions to the 529 plan are made on an after-tax basis and grow tax free . And the 529 contributions may be eligible for a state income tax deduction or tax credit . The principal portion of a 529 plan distribution isn ’ t subject to federal taxes . Additionally , the earnings portion of a 529 plan distribution isn ’ t subject to federal taxes , and , in most cases , state taxes as long as the distribution is used for the beneficiary ’ s eligible K-12 or postsecondary education expenses . The 529 plan can be used for things such as tuition , books , and room and board for the beneficiary . ¹

• A Coverdell Education Savings Account ( CESA ) offers tax-advantaged saving . Income eligibility and contribution levels are lower than a 529 plan .

• A Custodial UGMA / UTMA Account enables unlimited investing on behalf of a minor . Assets in the account can be used for anything . Earnings may be subject to taxes , and parents lose control of the account when the child reaches maturity .

• A Prepaid Tuition Plan locks in tuition at current rates and is available for a short list of state schools . You can fund the plan with installment payments .

• Savings Account – If none of the special college savings routes fit your game plan , then a regular savings account can work too . Any amount saved will be a benefit to the student in knocking down the costs of secondary education .

Understanding FAFSA ®. Your Expected Family Contribution ( EFC ) is calculated after you submit the Free Application for Federal Student Aid ( FAFSA ). Your EFC reduces the amount of eligible federal funding assistance

This Industry Insight was written by Jonathan D . Martin .

Jonathan D . Martin is a financial advisor with Ameriprise Financial Services , LLC , in Bethel Park , PA . He specializes in financial planning and asset management strategies . Contact Jonathan ’ s office at 412.831.6240 extension 202 , located at 88 Fort Couch Road , Suite 210 , Pittsburgh , PA 15241 , or visit his website at ameripriseadvisors . com / jonathan . d . martin . Jonathan is licensed / registered to do business with U . S . residents only in the states of PA , DC , HI , TX , OH , WV , AZ , CA , FL , IL , IN , NC , NJ , SC and VA .

Ameriprise Financial and its affiliates do not offer tax or legal advice . Consumers should consult with their tax advisor or attorney regarding their specific situation .

Investment advisory products and services are made available through Ameriprise Financial Services , LLC , a registered investment adviser .

Investment products are not insured by the FDIC , NCUA or any federal agency , are not deposits or obligations of , or guaranteed by any financial institution , and involve investment risks including possible loss of principal and fluctuation in value .

Meet your future with confidence .

Jonathan D . Martin Financial Advisor

412.831.6240 x202 88 Fort Couch Rd Pittsburgh , PA 15241 jonathan . d . martin @ ampf . com ameripriseadvisors . com / jonathan . d . martin your student can receive . If you are unable to meet your EFC , you or your student may need to look to other sources of funding to fill the gap . To understand more or to access the FAFSA form , visit studentaid . gov .

Students can contribute , too . Young adults who carry some of the financial burden of their degree may be more prudent about their college choice . They might be more motivated to start out at a community college or live at home and work part time while attending college if it means taking on less debt .

Your future comes first . Most financial experts recommend that parents put their retirement goals ahead of their children ’ s college costs . Students have a lifetime ahead of them to pay back school loans . And parents can continue to help their children throughout their post-college lives . It ’ s important to have a game plan , and if helpful , consult a qualified financial advisor who can assist you in creating a financial plan designed to meet your family ’ s priorities .

Earnings on nonqualified withdrawals are subject to federal income tax and may be subject to a 10 % federal penalty tax , as well as state and local income taxes . The availability of tax or other benefits may be contingent on meeting other requirements .

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IN Bethel Park Spring 2023 | Page 13

YOUR FINANCES

SAVING FOR COLLEGE : What You Need To Know

Meet your future with confidence .