Have you ever considered that saving for college is different than saving for your long-term retirement?
Let’s start with the fact that, when saving for college, you’re saving for a specific year (the year of high school graduation). When you’re saving for retirement, it’s more likely you’re saving based on the amount of financial accumulation you want to have. Think of it this way; if you plan to retire but the market’s down you can keep working a bit longer. Try telling an eager teenager they have to wait a couple years before heading to college.
Next up, keep in mind the amount of time you have to build that college-savings fund is much shorter than the time available to save for retirement. Typically the time from birth to college entrance is 18 years, conversely, heading into retirement could span 40 years or more.
One investment strategy to consider, according to a Morningstar article is, “A college portfolio’s asset allocation should begin downshifting into cash and bonds when the child is in grade school, and the portfolio should be dominated by bonds by the time the child is in high school. That’s because an equity-heavy college fund that encounters a bear market in the years leading up to college could incur losses that it couldn’t recoup during the student’s time horizon.”
Now, we aren’t saying this is the blanket answer when saving for college. Every situation is different and you need to build your strategy with the help of a financial professional.
Another common savings approach is the 529 college savings program. These “age-based options aim to provide age-appropriate asset mixes that gradually become more conservative over time.”1 In addition to the “set-it-and-forget-it” mentality that a 529 provides, you will typically discover several tax advantages. Contributions are made from after tax dollars, earnings accumulate on a tax-deferred basis, and the qualified distributions are tax-free.
“The cost of college in the US from 1982 to 2018 has only gone up,”2 leaving many wondering how they will afford their child’s education when the bill comes due. With the average student loan debt in the US at $37,013 according to the Department of Education,2 you’ll want to create a smart financial strategy when your child is still very young.
Financial planning spans a variety of needs and having a fiduciary available to walk you through each situation is important. If you’re wondering about saving for your child’s education or have any other financial planning questions, please call us today at (540) 720-5656.
Amy Anderson joined the ILG Financial team in 2023 as the client relations coordinator. Her responsibilities include scheduling of appointments, annual check-up notifications, and annuity and required minimum distribution assistance. She is a graduate of Harding University with a degree in Computer Information Systems. Amy and her husband have two children and she enjoys reading, crocheting, music and spending time with her family.
Chase Lopez joined the ILG Financial team in 2020 as an advisor. Chase is a 2016 James Madison University graduate with a degree in management. Chase has been trained under the tutelage of Dave Lopez, who is not only the founder and managing member of ILG Financial, but also is Chase’s uncle and godfather. He also enjoys working alongside his cousin, Megan, who is Dave’s daughter. Chase, as a fiduciary, believes in putting his clients interests first, and building out plans for his clients where they can have a happy and fruitful retirement. He married his beautiful wife in February 2022 and both use most of their free time chasing around their little pup, Aurora.
Jessica Carson joined the ILG Financial team in 2018 as an agent. Jessica and her husband have four children, two dogs, 3 barn cats, 5 chickens, and three parakeets. She indeed loves her children and pets! When not at work, Jessica enjoys playing the piano and cello as well as traveling and spending time outside with her family, hiking, fishing, and boating.
Terri Center joined the ILG Financial team in 2019 as client services manager. She handles client records, application processing, and gathering information to provide a professional and friendly experience with all of our clients. Terri is a graduate of Oakland University. She is married and has two children. She enjoys hiking, family time, and puzzle challenging video games. She also likes to share her creativity in her canvas paintings and sewing projects.
Megan Jones joined the ILG Financial team in 2020 as marketing director. Megan and her husband live in Fredericksburg, VA with their German Short Haired Pointer, Gus. Megan is a graduate of Longwood University and holds a degree in communications. Megan is the oldest of Dave Lopez’s three children and not only enjoys working alongside her father, but also with her cousin, Chase, who joined the ILG Financial team in 2020 as an advisor. When not at work, Megan enjoys sitting on the back porch with family and friends enjoying food and music.