Morningstar Advisor - Summer 2008 - 11

“We’ve recently discussed with clients about buying investment real estate that can be income producing during college years. It might even double as a place for the child to live Quick Polls (167 respondents) Primary criterion when choosing a 529 plan 60.6% during college. Trying to kill a few birds with one stone: tax advantages, appreciation in value, keeping rental expenses in the family in the form of mortgage payments, income creation through renting to other students, and teaching the child to take care of an investment property. I’ve done this personally, and it is working quite nicely. The biggest obstacles are rising tuition and finding the extra dollars today to put aside for education tomorrow. Many clients would rather deal with that when the time comes.” William Horak Wealth Management Corp., Tallahassee, FL 14.5% 8.5% costs 6.7% 6.1% 3.6% other quality of in state underlying funds flexible diversity asset of allocation offerings “I suggest that college education is secondary to retirement income planning, but if that is satisfactory, I generally recommend using Roth IRAs as the primary funding vehicle given their great flexibility on withdrawals. I also have access to American Funds’ College America program here in Virginia.” Gene Kelly Bayport Financial Services, Newport News, VA Favorite 529 plan (top 10 responses). 1 2 3 4 5 6 7 8 9 Virginia CollegeAmerica 529 Savings Plan Utah Educational Savings Plan Colorado Scholars Choice College Savings Program Nevada Vanguard 529 College College Savings Plan of Maryland New York 529 College Savings Program (Direct) Michigan Education Savings Program Illinois Bright Start College Savings Program Maine NextGen College Savings Plan “I encourage clients to use Coverdell ESAs, for their flexibility of investment options. If more can be saved, I recommend adding a 529 plan or UTMA account, depending on the client’s situation. The biggest obstacle to college planning is that clients don’t view it as a priority. It seems everyone thinks their kids will get scholarships, or they have other excuses.” Gary James Precepts Wealth Management, Meridian, MS 10 Alaska T. Rowe Price College Savings Plan Savings vehicles you’ve used in your college planning 529 plans Taxable accounts Coverdells UTMA/UGMA/Trusts Roth IRAs VA/VUL/Life insurance 94.0% 60.4% 42.5% 19.1% 7.0% 7.0% “Having enough resources to fund both retirement and college is a big challenge. When we assist clients with college planning, we typically use 529 plans as a strategy first. If clients are uncertain about whether their children will go to college, or they want some money to fund nonqualified education expenses (like a car), they might use a joint account of the parents, to retain control in future use of the money. In rare cases, professional clients who will be over 59 1/2 when their kids go to college have used annuities for asset-protection reasons; if a child doesn’t go to college, the resources can used for the client’s retirement.” Luana Mobley Corral Financial Planning for Life’s Transitions, Ft. Lauderdale, FL MorningstarAdvisor.com 11
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Morningstar Advisor - Summer 2008

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