Best Ways to Save for Kids’ College Education: A guide for physicians
Physicians face unique financial challenges that can make saving for their kids’ college education seem overwhelming. With high debt and financial burdens, it can be difficult to balance saving for the future while paying off current expenses. However, there are strategies that doctors can use to put their kids through school without sacrificing their own financial goals.
Here are some of the best ways for physicians to save for their children’s college education:
Priority 1: Prioritize Your Own Finances
Alissa Krasner Maizes, an attorney and registered investment advisor, advises physicians to focus on their own finances before thinking about their children’s college needs. Retirement should be your first priority because there are no loans for retirement. However, there are other options for college, and you can always find ways to secure funds for your kids.
529 Plans
529 accounts are state-sponsored accounts that allow you to save money for your children’s college education. The earnings from these accounts are tax-free, and you won’t pay taxes as long as the money is used for qualified educational expenses. If this money goes unused after 15 years, you can roll it over to your beneficiary through Roth IRA contributions.
However, there are downsides to 529 plans. College costs are outpacing investment returns and inflation, and these plans are typically state-based. If your child wants to go to college out of state or if you move away from the state where your 529 originated, you may not be able to take advantage of the state income tax deduction or tax credit for previous contributions to the plan.
Indexed Universal Life Insurance
Another strategy for saving money for your children’s college education is to fund an indexed universal life insurance policy. This policy allows you to take out money you’ve invested as a loan on a tax-deferred basis, and still earn on the policy. You can do whatever you want with the money; there’s no requirement that it has to be used for education. These policies make the most sense for those planning for the longer term.
High-Yield Savings Accounts
For physician parents who start saving later, it may be a good idea to open a high-yield savings account. These accounts sound attractive because the interest rates are finally high. If your child can qualify for financial aid, these accounts can work against them. Additionally, savings accounts, even high-yield ones, don’t always keep up with inflation.
Related Facts:
– Physicians face unique financial challenges that can make saving for their kids’ college education seem overwhelming.
– Retirement should be your first priority because there are no loans for retirement.
– 529 accounts are state-sponsored accounts, and you won’t pay taxes as long as the money is used for qualified educational expenses.
– Indexed universal life insurance allows you to take out money you’ve invested and still earn on the policy.
– High-yield savings accounts may be a good idea for physician parents who start saving later.
Key Takeaways:
– Prioritize your own finances before thinking about your children’s college education.
– Consider 529 accounts, indexed universal life insurance policies, and high-yield savings accounts.
– Choose a saving strategy that aligns with your personal risk tolerance.
– Always consider the potential downsides before choosing a saving strategy.
Conclusion:
Saving for your children’s college education can be a daunting task for physicians who face unique financial challenges. However, there are many strategies that physicians can use to put their kids through school without sacrificing their own financial goals. By prioritizing your own finances and choosing a saving strategy that aligns with your personal risk tolerance, you can ensure that your children receive the education they need without going into debt.
It’s important to remember that there is no one-size-fits-all solution. Every family has their own unique financial situation, goals, and risk tolerance. Consider all the options available and choose the one that’s best for you and your family.
