Education costs continue to rise faster than inflation. A four-year degree at a private university now averages over $240,000 — and that number will be higher by the time today's toddlers enroll. The good news: with early planning and the right savings vehicles, funding education does not have to derail your other financial goals.
529 Plans
The 529 plan remains the most powerful education savings tool available. Contributions grow tax-free, withdrawals for qualified education expenses are tax-free, and many states offer a state income tax deduction for contributions. Illinois offers a deduction of up to $20,000 per couple ($10,000 per individual) for contributions to the Bright Start 529 plan.
We help you select the right 529 plan, choose an age-appropriate investment allocation, and integrate your contributions into your broader cash flow and tax plan. For clients with the means to do so, we also analyze 529 superfunding — contributing up to five years of annual exclusion gifts ($90,000 per beneficiary in 2026) in a single year to maximize tax-free growth.
Beyond 529 Plans
While 529 plans are the foundation of most education funding strategies, they are not the only option:
- Coverdell Education Savings Accounts — More flexible investment options and qualified for K-12 expenses, but with lower contribution limits
- UTMA/UGMA custodial accounts — No contribution limits and no restriction on use, but less tax-efficient and the assets become the child's at age of majority
- Roth IRA contributions — Contributions (not earnings) can be withdrawn penalty-free for education, though this should be weighed against retirement needs
- Cash flow planning — For high-income families, paying from current income during college years may be more efficient than prefunding
Balancing College and Retirement
We often tell clients: your children can borrow for college, but you cannot borrow for retirement. Our planning process models both goals simultaneously, ensuring that education funding does not come at the expense of your retirement security. We help you find the right balance — and the right amount — for your family.
