Funding College & Taxes
Whether you have children in college, about to enter college, or enrollment is still year away, the amount it takes to pay for one child’s college education may shock you. We are now at the point where many are asking whether or not the cost justifies the end result. This is especially true for careers that are traditionally low paying with low annual salary increases (i.e. school teacher, social worker, etc.).
The College Board released the 2015/2016 average costs:
Many of you with children in private colleges and universities will immediately notice the average costs for private colleges looks low. Remember this is the average where many of the more exclusive schools can cost $75,000 per year or more.
From a different perspective, let’s consider what you have to EARN to net the $47,831 for one year’s tuition, fees, room and board. The first consideration is your tax brackets including income tax rates, Social Security taxes and Medicare taxes. A marginal tax of 25% is also paying 7.65% in FICA and Medicare. That translates into $71,019 of earned income to net $47,831. For those in the top tax bracket, the number jumps to $86,338. Now multiply those numbers by four or five years your child spends in obtaining a bachelor’s degree. Do I have your attention yet?
There are various alternatives for investment such as pre-paid tuition plans, Section 529 educational investment plans offering tax-free investment gains, strategies for employing children for parents owning their own business, long-term investment strategies for maximizing grant and scholarship assistance and many more considerations.
Unfortunately, most parents either fail to develop a long-term strategy or just sock money away as best they can and hope for the best. Others simply avoid thinking about these issues until they can no longer ignore them. Let us help you create a strategic plan to proactively plan for your child’s education and future.