4 Simple College Planning Tips for Doctors With Kids

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College planning is challenging, and it’s no secret that it can be pricey. It may seem overwhelming, but by developing a strategy early, you’ll be ready to send your kids off with confidence. Let's take a look at college planning ideas for doctors with kids.

College planning is challenging, and it’s no secret that it can be pricey. In fact, from 2008-2021, in-state tuition prices increased by 72%. That’s not including room and board or textbooks! 

It may seem overwhelming, but by developing a strategy early, you’ll be ready to send your kids off with confidence. Let’s take a look at college planning ideas for doctors with kids.

Discuss and Set Savings Goals

You want to pay for college? It’s an incredible gift to give to your kids. To accomplish that goal, you’ll need to set expectations with yourself early. Ask yourself,

What type of education do you want to plan for and how much do you want to cover?

Perhaps you want them to go to your alma mater—a costly out-of-state private school. Doing so would likely require a different savings plan than a public in-state 4-year degree. Do you want to help them through graduate or professional should they choose to pursue it? Talk with your partner to set goals early—ideally before you start your family. 

Paying for your child’s college is a privilege, no doubt. When tackling a significant endeavor such as college, it’s important to set financial ground rules. Get clear on what you are and aren’t willing to pay for. Perhaps you’re great with covering tuition, room and board, and supplies, but they have to foot the bill for social clubs, entertainment, and travel.

Knowing what you can and can’t cover will also help you and your child create a plan to make up the difference, whether with their personal savings, scholarships, grants, or loans.  

Create boundaries that are right for you and your family. Work with your financial team to build a plan that considers your other long-term investing goals, namely retirement. Set boundaries early to streamline communication. 

Compound Growth Is On Your Side—Make The Most Of It

Remember, education costs aren’t declining, so it’s crucial to start saving for college as early as possible. While you can make up savings down the road, the earlier you save, the more likely you can take advantage of compound growth in your accounts.

Compound growth is imperative for college because the inflation rate on tuition is skyrocketing, and it may not be slowing down any time soon. To keep up with inflation on tuition, you need to utilize savings vehicles that fit your goals.

The Pros and Cons of Two Major Education Savings Vehicles

Not every education savings vehicle is created equal. While there are several out there, doctors will likely benefit from 529 plans and/or Uniform Transfer to Minor Acts (UTMA) accounts. We’ll discuss the basics of these plans, including the pros and cons.

Breaking Down a 529 Plan

A 529 College Savings Plan is an excellent choice for tax-incentivized college savings. A 529 plan is an investment account used to pay for qualified education expenses for a designated beneficiary. Some advantages to 529 plans include:

  • Investment earnings and distributions for qualified education expenses like tuition, fees, and books are tax-free. 
  • 529s are pretty flexible in that individuals can contribute to any state’s 529 plan, and the funds can be used for any qualifying public or private institution. 
  • You can reimburse yourself in the amount of a scholarship your child receives without a penalty.
  • Plans have high contribution limits: $15,000 annually per beneficiary (aligned with annual gift tax exclusion).
  • They contain a 5-year gift tax rule, which allows an individual to make a lump-sum contribution of up to 5 times the annual gift limit (i.e., an individual can contribute up to $75,000 tax-free in a lump sum in 2021)
  • If your child doesn’t use all the funds, the SECURE Act permits up to $10,000 from a 529 for student loan repayment. You can also easily update the beneficiary to another child. 

529 plans are not without faults. A few disadvantages of 529 plans include:

  • Non-qualified withdrawals are subject to income tax AND a 10% penalty.
  • Many 529 plans have menial investment options and high fees, so you’ll have to research more cost-effective 529 plans.
  • The account owner has legal control of the money in the account.

Understanding a Custodial Account

A UTMA is a brokerage account that can be used to save for college expenses. Some advantages of UTMA accounts include:

  • Investors have a lot of flexibility. You can contribute up to the gift tax limit each year ($15,000 again for an individual), and there aren’t any specific rules regarding distributions.
  • UTMAs offer many investment opportunities like stocks, bonds, ETFs, mutual funds, even commodities, property, and collectibles.
  • Most custodial accounts are more straightforward to manage and less expensive than a trust. 
  • It can create an advantageous tax situation for kids before they reach the age of maturity.  
  • You can use the money for expenses outside of school like a downpayment on a house, wedding, honeymoon, etc.

Before you run to open a UTMA, there are some disadvantages to note:

  • Tax advantages are limited: there’s no tax on the first $1,050 of investment returns, the next $1,050 is taxed at 10% and the remaining at the parents’ rate.
  • Since the minor technically owns the assets, it could negatively impact financial aid opportunities. 
  • Maturity ages vary per state, but once a beneficiary reaches age 18, 21, or 25, the money becomes the beneficiary’s property. They can spend that money on education or throw the party of the century.

When deciding which account is best for you, it depends on how much flexibility you’re after. 529 plans are limited to education expenses, while UTMAs can help towards a car, wedding, or a down payment on a house. But it’s not all or nothing—you can use a combination of the vehicles to accomplish your goals best and provide the flexibility you’re looking for.

Don’t Forget About Your Retirement Savings.

Many parents sacrifice their retirement savings for their children’s education. It’s critical to strike a balance that makes sense for you and your kids. Get clear about what you can and can’t cover, set spending allowances, etc., so that you’re still actively contributing to your retirement plan. 

We encourage clients to get on track for their own retirement first and then save for children’s education. If your children’s education is more important to you than your long-term plan, be sure that you understand the tradeoffs.

Client Case Study: Managing Competing Financial Goals

We had a Vestia client who prioritized saving for his kids over saving for his long-term plan. When we first started working with him, he saved over $1 million in 529s and UTMA accounts. The problem was that he didn’t have much put away for his retirement. 

Had it been the opposite situation with “too much” in a brokerage, we could have re-allocated—but the other way around isn’t possible. We can’t take distributions from the kids’ accounts to supplement retirement, so his plan was 5 years behind; meanwhile, his children were set for college with funds to spare. That’s the importance of recognizing your values and having an advisor on your team who can help you navigate how to inject those values into your financial plan best.

Plan For the Future With Vestia

College tuition comes with a hefty price tag, and if you don’t have a financial plan in place early on, it will be challenging to meet your goals. That’s where our team at Vestia comes in. Our team of experts will take a deep dive into your financial health and help put a plan in place to help you reach your goals while carrying out your values. Contact our team to get started today.


Investment advisory services offered through Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, and Vestia Advisors, LLC. Securities offered through Ausdal Financial Partners, Inc., 5187 Utica Ridge Rd, Davenport, IA. 52807 (563)326-2064. Member FINRA/SIPC. Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, Vestia Advisors, LLC, and Ausdal Financial Partners, Inc. are independently owned and operated.

This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.  This information is not an offer or a solicitation to buy or sell securities.  The information contained may have been compiled from third-party sources and is believed to be reliable.

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