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March Madness and Finding the Slam Dunk for your Child's Future

March Madness and Finding the Slam Dunk for your Child's Future

April 12, 2024

It is time for some Bracketology! The Dañosos family loves this time of the year. Each of us fills out a bracket for both the Men’s & Women’s tournament. We try to watch as many games together as possible.

Every year Columbia Threadneedle Investments puts together a bracket with all the teams and the ­­­­college costs at each school. The following numbers are based on four years out-of-state resident tuition, fees, room and board. This year, the costs range from $91,968 at BYU to $365,160 at Northwestern. Having two young children of my own it is mind-blowing to see these numbers and think that they are going to be even larger when Lena and Lio possibly enroll. The chart from JP Morgan below illustrates that the average annual tuition increase has been 5.7% since 1983. As you can see, that is substantially higher than other household expenses.


Over the last year, I have been speaking at several Fairfax County Public Schools to discuss college planning. The number one question I have been asked is what will the cost of college be when my child applies? Most families are unaware of the 5.7% number. Why is this important? It can help a family decide how much to start saving in a 529 College Savings Plan. My previous March Madness article discusses college tuition and the basics of 529s that can be found.

The second most common question is what happens if my child doesn’t attend college or we overfund a 529. You can find options to address overfunding in this video here. The video discusses the newest option of initiating a direct ROTH Conversion from a 529.

What I would like to focus on is what happens if my child doesn’t attend a traditional four-year institution. The first option is using a 529 for a community college like Northern Virginia Community College (NOVA). Not only does this option have a lower cost than a traditional four-year institution, NOVA allows a student guaranteed admissions to over 40 area colleges and universities. Names listed include Virginia state schools and private schools like George Washington University.

The second option is using a college savings plan for trade and apprenticeship programs. Apprenticeship programs allow a student a competitive wage with on-the-job education ultimately allowing them credentials and experience. Out of curiosity, I did a quick search on Apprenticeship.gov for our local area and found multiple listings that range from a pharmacy technician, human geographer apprentice, to an intelligence research analyst. I was surprised to find so many options.

The costs of college are going to continue to increase. No one knows what the future will hold but there are options out there should your child not pursue a traditional four-year institution.

If you want to find out more about college savings and the admissions process, please keep an eye out for the registration link for our May webinar. I will be joining Laura Northart at Loudoun College Counseling to discuss college planning essentials. 

 

The following numbers are based on four years out-of-state resident tuition, fees, room and board.

Men’s Bracket:

Lowest Tuition: BYU $91,968

Highest Tuition: Northwestern $365,160

Women’s Bracket:

Lowest Tuition: South Dakota State $113,016

Highest Tuition: Southern California $361,812

 

 

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. 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. Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.