Education Funding Strategies

We compare vehicles like 529 plans, offering tax-free growth and withdrawals for qualified expenses (tuition, books, up to $10,000 K-12 annually). State-specific benefits include deductions (e.g., up to $10,000 in some states), with aggregate limits often exceeding $500,000. Coverdell ESAs allow $2,000 annual contributions (phased out over $220,000 MAGI), covering broader expenses like tutoring.
Risk glidepaths adjust allocations: aggressive equities early (e.g., 80% stocks for 10+ year horizons), shifting to bonds near enrollment to mitigate sequence risk. We model aid impact—529s count as parental assets (5.64% EFC rate)—and withdrawal sequencing to minimize taxes/aid penalties. For high-net-worth, trusts provide control but may trigger kiddie tax (unearned income over $2,600 taxed at parental rates).
Projections include inflation (3-5% annual college cost rise) and alternatives like UTMA/UGMA for flexibility, though they shift control at majority age. Annual reviews adapt to Secure 2.0 changes, like Roth IRA rollovers from overfunded 529s (up to $35,000 lifetime).