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Education Planning and Saving for College

Planning for Education

Planning for your children's education is probably one of the most important goals you will have as a parent. Additionally, a college education can be an expensive prospect, likely ranking just below your home in terms of large items you will purchase in your lifetime. That's why it's important to plan for college expenses, just as you would plan for your retirement or a home. 

Education planning involves designing an investment plan that specifically addresses the educational needs of your family. Specifically, it involves forecasting what those needs and goals will be and helping you create a strategy to satisfy those goals. 

It is important to begin saving early to reduce the initial funds required by taking advantage of the power of compounding over time. Opening up a 529 plan and taking advantage of the early start will allow your assets more time to grow.

What are 529 Plans?

Named after Section 529 of the Internal Revenue Code, a 529 Plan is an investment account used to pay for a beneficiary’s college expenses. 529 Plans have been available since 1996, but only 13% of families used them to pay for college in 2016-17, down from 16% the prior year. A family can invest in a 529 plan account without the earnings being taxed as long as the funds are used to pay for qualified expenses.*

Few of us can afford to invest the lump sum that it would take to finance a college education years down the road. The total price of paying for college can be decreased by making smart decisions. That's why many investors choose to build a college fund one month at a time, often through a regular automatic investment plan. The earlier parents start depositing money into a 529 college savings plan, the more time their money has to grow.

IIS Financial Services is partners with the NextGen 529 College Savings Plan that is offered to Maine residents. NextGen is Maine’s Section 529 plan and is administered by the Finance Authority of Maine. If the account owner or the student (beneficiary) is a Maine resident, the NextGen program offers grants that include:

  • Open an account and either receive the $500 Alfond Grant for Maine residents or contribute $25 and receive a $200 grant for babies that are not born in Maine but the account owner is a Maine Resident (think of a grandparent)
  • Starting in 2020 - Add $1,000 to the account annually: Receive $300 match per year
  • Make it easy by setting up automatic contributions from your payroll or bank account and get a $100 automated funding grant

Your Future

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Our site is filled with educational videos, articles, slideshows, and calculators designed to help you learn more. As you search our site, send me a note regarding any questions you may have about any particular investment concepts or products. We'll get back to you quickly with a thoughtful answer.

Getting a Head Start on College Savings

Getting a Head Start on College Savings

A few strategies that may help you prepare for the cost of higher education.
Estimating the Cost of College

Estimating the Cost of College

This worksheet can help you estimate the costs of a four-year college program.

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* To be eligible for favorable tax treatment afforded to any earnings portion of withdrawals from Section 529 accounts, such withdrawals must be used for qualified higher education expenses, as defined in the Internal Revenue Code. For distributions beginning in 2018, qualified higher education expenses also include limited tuition at elementary or secondary public, private, or religious schools. The earnings portion, if any, of a withdrawal not used for qualified higher education expenses is subject to federal income tax and may be subject to a 10% additional federal tax, as well as to state and local income taxes. Tax treatment of distributions for elementary and secondary school tuition may differ in some states. Please consult your tax advisor for specific advice regarding such distributions.

Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing.  This information is found in the issuer's official statement and should be read carefully before investing.

Investors should also consider whether the investor's or beneficiary's home state offers any state tax or other benefits available only from that state's 529 Plan.  Any state-based benefit should be one of many appropriately weighted factors in making an investment decision.  The investor should consult their financial or tax advisor before investing in any state's 529 Plan.