Investment Advice and Financial Aid Services
Section 529 College Savings Plans,
Education Savings Accounts, Taxable
are right for you?
How will they affect your college financial
What combination of these investments will have the greatest
impact in reducing your
bill as a result of the new tax law?
Which state's 529 Savings Plan is most advantageous?
Will you be able to use the education tax credit
and the new above-the-line deduction
have a 529 Plan or an Education Savings Account (ESA)?
Is your income too high or do you have too much in assets
to qualify for college
A financial advisor
who understands these various college funding options,
their tax benefits, and their affect on financial aid,
can answer these questions and help you choose which of
these options are right for you.
Lifetime Financial Planning, managed by Dean Knepper, CPA, CFP®,
Registered Investment Advisor Representative and member of The National Financial
Aid Practitioners Alliance, has the experience and expertise to guide you though
the planning process.
Dean's name has appeared frequently in the media giving
advise on college planning including:
Loudoun Family Magazine
FAMILY FINANCE: Saving for
How families can plan for their children’s higher
By Kevin Self, Editor
Sending children to college can be one of the most financially
challenging times for a family. Parents want the best for
their children, but the cost of living—let alone
higher education—is not getting cheaper. For a child
born today, a four-year, Virginia state college education
is estimated to cost over $40,000 per year. Loudoun Family
Magazine spoke with Dean Knepper, a local
financial expert and the founding principal of Lifetime
Financial Planning, based in Leesburg. Knepper,
a CERTIFIED PUBLIC ACCOUNTANT and CERTIFIED FINANCIAL PLANNER™ professional,
answers questions concerning the best ways for families
to save money for college and gives practical advice on
how to get started now on your children’s college
U.S. News & World Report
September 8, 2003
Save Now So You Can Pay Later
By Paul J. Lim and James M. Pethokoukis
As tuitions escalate, parents are finding themselves more
and more stretched to pay for their children's college
educations. Luckily, there are a number of terrific savings
vehicles to help. (It should go without saying, of course,
that the earlier you begin to stash your cash, the easier
the task will be.) U.S. News consulted financial experts
to get the skinny on the plan best suited for your situation:
...COVERDELL EDUCATION SAVINGS ACCOUNT
Parents can contribute up to $2,000 a year to a Coverdell
ESA. Earnings grow free of federal income tax and can be
used to pay for qualified education-related expenses--including
items like computers--from kindergarten through college.
Who benefits: "A couple whose child is likely to
go to college and who is expected to be ineligible for
financial aid," says Dean Knepper of Lifetime
Financial Planning a fee only financial planner
in Leesburg, Virginia. Contributions can be made by married
taxpayers with adjusted gross incomes as high as $220,000
and by single taxpayers with incomes as high as $110,000.
Parents also retain [some] control over the assets [until
the child is 30 years old]. For example, the parents can
change the beneficiary to another family member if they
First introduced in 1998, Roth IRAs have been a favorite
of savers, thanks to the tax-free growth of earnings. Like
traditional IRAs, contributions are currently limited to
$3,000 per year ($3,500 if you're age 50 or older). However,
there is no mandatory withdrawal age.
Who benefits: Parents who establish individual Roth IRAs
for themselves will benefit the most since the money is
held in their personal account. If the money is not needed
for college expenses or the child skips college, a parent
can use the money for retirement. "So Roths are most
beneficial to someone who would not otherwise contribute
to a Roth except to save for college," says Knepper. "For
anyone saving for retirement, I would recommend using the
Roth for that purpose and use a 529 plan, which has the
same tax-free advantage, to save for college."
Three Families, Three Smart
Ways to Save for College
It's never too early - or too late - to begin saving
for your child's education. Financial experts show three
families, at three different stages of life, how to make
the most of their assets.
By Walecia Konrad
...The family: Mike, 37 a financial executive,
Jean, 39, a stay-at-home mom, Mickey, 10, Kathleen, 6,
and Maggie, 2. They live in New Jersey. The financial
picture: Household income: between $120,000 and
$130,000 a year, depending on Mike's bonus. ...Retirement
savings: Mike contributes 7% to 8% of his salary to his
company's 401(k). Looking ahead: ...Once
the youngest child is in school full-time, Jean may return
to work part-time.
What they've done so far: Until two years
ago , the sum total of their college fund was about $1,000.
...Home renovations, family visits and presents ...and
the general expenses of raising kids had easily consumed
the bulk of Mike's paychecks until he landed his current
position. "It seemed like we never had any extra money," says
Jean. The birth of their youngest child was the wake-up
call. "Suddenly Mike and I knew we had to get serious
if we were ever going to put three kids through college," she
The couple has saved $10,000 from Mike's bonuses and tax
refunds over the past couple of years in an account earmarked
for college investing. Mike and Jean would like to put
that money into a 529 savings plan, but the rocky market
over the past two years has stopped them form taking the
What the experts suggest: First things
first. "Mike should contribute the maximum allowed
to his 401(k) account, which is $12,000 this year," says Dean
Knepper, a Leesburg, Virginia - based CERTIFIED
PUBLIC ACCOUNTANT and fee-only CERTIFIED FINANCIAL PLANNER™ professional specializing
in college planning. "You should always contribute
the most to your retirement fund first because you can
borrow for college tuition later. If your retirement funds
do well, you can help your children down the road." What's
more, retirement accounts are not considered part of the
parents' assets when they apply for financial aid, so maxing
out a 401(k) account serves as a shelter of sorts. In addition,
... both Mike and Jean should also consider opening a Roth
IRA account and each contributing the $3,000 maximum.
...Mike and Jean need to take the investing plunge now.
They should consider putting their $10,000 college stash
in a 529 account for their children, suggests Knepper. New
Jersey's plan does not offer a tax break for residents,
so Mike and Jean may want to choose another state's plan
with lower fees and more options. ...As a result, Mike
and Jean may want to look closely at the plan offered by
Utah. It has low fees and a range of index funds that can
work well for college savings, says Knepper. Balancing
stock index funds with bond index funds will reduce risk
and help build a portfolio that works well for all three
of their children, despite their range in age.
How they can save more: With Mike's increased
income, the couple should continue stashing his bonus money
in their college accounts, says Knepper. In addition, they
may want to return to the budget they lived on when Mike
was making less and see if they can save the difference
each month. And if Jean returns to work part-time in a
few years, she can put her earnings into a college account.
Choices for College Funding
LFP can provide specific investment recommendations to fund
college costs taking into account your time horizon and risk
tolerance, the investment's tax efficiency and management
fees, and the possible impact the recommendations have on
college financial aid eligibility.
Section 529 College
Starting in 2002 distribution of earnings from Section 529
Saving Plans, used for qualified education expenses, are exempt
from federal taxation and are also exempt from taxation by
most states, even if you use a plan outside of the state you
live in. We can help you determine if, and which one of these
state plans is right for you.
These various state plans offer investments in different
mutual fund families and have different options in allocating
contributed funds between stocks, bonds and cash. The determination
of which state's plan best fits your needs requires an analysis
of your risk tolerance, investment time horizon, other available
investments and your tax situation.
Beginning in 2002, the annual contribution limit is increased
to $2,000 and the money can be used for elementary and secondary
schools. The phase-out limit has been increased to $190,000
- $220,000 of
adjusted gross income for married filing joint ($95,000 -
$110,000 for all other filers). The contributions can now
following year, similar
to regular IRAs. These IRAs can be used in combination with
or instead of 529 Savings Plans, but contributions are not
deductible from taxable state income as are some 529 Plan
Taxable investments offer more flexibility
than the other funding options. If the child ends up not going
to college there are no penalties and appreciation on the
investments are taxed at the favorable capital gain rate.
Funds are also available to cover unexpected costs that may
arise prior to college.
Strategies for College Funding
LFP can analyze your tax situation to determine which funding
options will provide the most after tax dollars to fund college
costs. This is done in conjunction with any college financial
aid that may be available. Some tax savings strategies, if
not viewed in conjunction with financial aid may end up increasing
the cost of college by making the student ineligible for financial
Tax Credits and Deductions
The HOPE and Lifetime Learning Credits for qualified college
expenses are still available under the new tax law. The same
student can use the credits, 529 Savings Plans and Education
Savings Accounts (Education IRA), but not for the same expense.
The new law allows an above-the-line deduction for education
expenses. You do not have to itemize in order to take the
deduction. To qualify, income cannot exceed $130,000 for married-joint
filers and $65,000 for all other taxpayers. The deduction
is $3,000 for 2002-2003 and $4,000 for 2004-2005. Also, for
2004-2005, taxpayers whose incomes exceed the limits, but
do not exceed $80,000 ($160,000 for joint filers), may deduct
up to $2,000.
LFP provides comprehensive college financial
aid planning including
A thorough analysis of the factors that impact your aid eligibility
recommendations to ensure that the student is demonstrating
as much financial need
as legally possible.
A calculation of your "Expected Family Contribution."
Knowing how much your out-of-
pocket costs will be before you go through the application
process could save you
considerable time, money and frustration.
An estimation of your income taxes. Waiting to file your financial
aid form until after
you receive your tax return may cause you to miss aid deadlines.
Sound advice on how to effectively finance the portion of
college costs not subsidized
by financial aid.
A historical aid profile of each school to which your child
Expert preparation of the necessary financial aid forms. Forms
or sent in too late may disqualify, reduce or delay your aid.
Tips on evaluating and negotiating the financial aid packages
Call us today at (703) 779-0515 or inquire
to find out more about how an hourly fee-only college financial
aid advisor at Lifetime Financial Planning can help you maximize
your eligibility for financial aid.
to College Financial Information
|College Financial Aid
Student Financial Aid (Ed.gov)
College Board-Financial Aid Services (CollegeBoard.com)
Is Possible (CollegeisPossible.com)
|College Financial Education
Plain TalkŪ Library (Vanguard.com)
529 College Savings Plans (SavingforCollege.com)
Savings Plans Network (CollegeSavings.org)
Savings, Debt, Investments, Retirement, Insurance (ChoosetoSave.com)
Financial Aid (CollegeBoard.com)
Tax Estimator (Intuit.com)
Knepper, CPA, CERTIFIED FINANCIAL PLANNER™ professional
2201 Cooperative Way, Suite 600, Herndon,
208 South King Street, Suite 201, Leesburg,
Phone: (703) 779-0515 - Fax: (703) 779-7815 - E-mail: firstname.lastname@example.org
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