While philanthropy appears to be simple — you identify the organizations and causes you want to support, determine what you can afford to give, and donate — professionals who specialize in the field can take your giving to the next level. 

Here are five ways that financial advisors and professionals with philanthropic expertise add value. 

1. They can maximize your philanthropy. 

The rules, regulations, and tax codes related to charitable giving are anything but simple. And, because these can vary at the state level, advisors who understand the ins and outs of your particular situation can help you maximize your philanthropy. 

For example, the Tax Cuts and Jobs Act of 2018 changed the allowable standard deduction and charitable giving deductions. Because the bill represented a significant overhaul of the 1986 tax code, it’s not surprising that many of its features were oversimplified in reports, with some observers suggesting that charitable donations were no longer tax deductible. In reality, the bill increased allowable deductions at certain levels. 

There are also strategies such as “bunching” that an informed advisor can help you understand and utilize, if appropriate — all of which can help you increase the impact of your giving. 

2. They can help you define your goals. 

Advisors who counsel clients on philanthropy follow the same process as any financial advisor. 

They begin by gaining an understanding of your overall goals and objectives. 

• What are your priorities in giving? 
• How do you want your giving to change over time? 
• What do you want your philanthropic legacy to be? 

Thinking of charitable giving strategically and in the long-term helps you define your goals in a way that annual giving does not. Equally important, your advisor works with you to develop and implement a giving plan to realize those goals. 

3. They are connected to the charitable community. 

Advisors who specialize in giving are connected to the charitable community. Many advise nonprofit organizations on financial matters, so they can be valuable resources in directing you to effective organizations that align with your interests. 

They will also be familiar with like-minded donors who can broaden your community network. 

4. They can incorporate giving into your larger financial planning. 

Advisors with expertise in philanthropy can help you incorporate giving into your overall financial planning. 

Do you want to keep giving during your retirement? Do you want to include philanthropy in your business exit planning, estate planning, or legacy planning? 

For help with these and other questions, you’ll want to work with an advisor who understands how to translate your goals into realities. 

5. They can support your big ideas. 

If you’re in the fortunate position to set up a family foundation, you will definitely need the skills of an advisor with experience in long-term charitable planning. 

Family foundations not only leave a personal and family legacy — often in perpetuity — but also bring your family together during the planning and implementation phases. This creates a life-long-and-beyond connection that spans current and future generations. 

Whatever your philanthropic vision, a financial advisor or professional with specialized education and experience can make a difference in how you make a difference. 

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

While few of us are in that position, there’s no reason to exclude charitable giving from our estate planning. And yet, many of us are doing just that. Although 60% of U.S. households donate to charity every year, 86% of charitable donations made at death come from the wealthiest 1.4%. Put another way: we give during our lifetime, but we don’t think to give as part of our legacy. 

There are reasons for this disconnect. To begin with, we don’t like to think about death, so a surprising number of us avoid estate planning completely. Caring.com’s 2020 Estate Planning and Wills Study found that the number of adult Americans who have a will or estate plan has dropped 25% since 2017, and procrastination and avoidance are likely contributors to that trend. 

Here are some insights on how to make sure you include your philanthropic inclinations in your estate planning. 

1. You are passing on your values, not just your money 

Consider this definition of legacy: “something that someone has achieved that continues to exist after they stop working or die.” 

That perspective changes the entire conversation around legacy giving. It shifts estate planning from a somber realization of the end of life to a positive way to leave lasting memories behind. 

What charities do you support now? What organizations and causes do you think will be most important and impactful for the people you care about — your children, their children, your loved ones? 

Asking and answering those questions can give you real insight into who you are and what you value, regardless of how much money you have. 

2. Your support will encourage others to give 

Charitable legacy planning can provide the organizations you care about with additional support, similar to challenge grants during fundraising drives. Nonprofits have created legacy societies to recognize, celebrate, and publicize the names of individuals who included their organizations in their estate planning. Your support becomes a public declaration of your belief in an organization’s mission and vision, and can inspire others to take action. 

Legacy societies also connect you to like-minded people and allow you to appreciate the impact of your philanthropy. For example, the Kennedy Center Legacy Society, whose mission is “to promote dignity, empowerment, and opportunity for all individuals with disabilities and special needs,” lists its members on its website and publications and invites supporters to an annual endowment event. Legacy planning can enrich your life now. 

Studies also show that people who are intentional about charitable legacy planning give, on average, three times the amount they’ve contributed throughout their lifetime, making it one of the most impactful decisions you can make. 

3. Charitable legacy planning brings families together 

Include your family early on in your charitable legacy planning discussions. That will avoid any future surprises and, more importantly, reinforce your belief in the importance of private giving. 

These discussions can also bring us closer together. As family units become increasingly diverse and nontraditional, we can't assume that our current priorities and future intentions are understood by all. 

Sharing your thoughts and motivations about your legacy plans can open rich avenues of dialogue. Use sources like Charity Navigator to ensure that the organizations you are considering have a track record of maximizing gifts. 

4. Legacy planning can be simple 

You don’t need fancy legal or financial instruments to include charitable giving in your estate planning. Unless you have complicated and extended assets, your contribution can be made through traditional means, including: 

• Wills 
• Trusts 
• Retirement funds 
• Life insurance policies 
• Physical assets 

There are tax implications that can maximize the gifts you leave for all of your beneficiaries. For example, assets from an IRA or 401(k) plan are subject to income tax when bequeathed to an individual, but are tax-exempt when left to a 501(c)(3) charity. Engaging legal and financial professionals who have the credentials and experience in estate planning is often the best way to understand which options are best for you, your family, and the causes you care about. 

Why not maximize the impact you can have, now and in the future? 

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

You should:

1. Give $10 each to 10 different charities.
2. Give $25 each to 4 different charities.
3. Give $100 to one charity. 

If you want to maximize the social impact of your charitable giving, what’s the best approach? 

Let’s start by understanding what motivates you to give. As reported in Psychology Today, a recent study revealed five major reasons why people donate to charities: 

• Trust. You are more likely to donate to organizations you trust.
• Altruism. We believe it’s our responsibility to care for others in need.
• Social. You have a direct connection to the organization you support. E.g., you support research to cure a disease that afflicts a family member, or you buy Girl Scout cookies from a neighbor’s child.
• Taxes. You can do well and good at the same time.
• Egoism. Giving makes us feel good about ourselves. 

When choosing your giving strategy, take your motivations into account. With that in mind, here are the pros and cons of each strategy. 

If you give $10 each to 10 charities 

The pros. You can support the many organizations whose mission you believe in. You limit the times you decline a request from a family member or close friend to support a cause that’s important to them. You can take comfort in the fact that many deserving charities need support, and that no amount is too small to make a difference. 

The cons. Every donation you make is subject to some kind of transactional fee — unavoidable administrative costs from your charity’s financial institution. The fee is the same regardless of donation size, so your 10 gifts will incur 10 times the fees of one gift. 

The “head and heart” takeaway: 

The rationale for spreading your money across multiple organizations is understandable. The world’s problems are complex, no single issue is clearly more pressing than any other, and every little bit helps. You also expand your social network in positive ways. 

But from a pure numbers perspective, giving to more charities dilutes the amount of your gift that goes to the organization’s actual work. From a business sense, the more organizations you support, the higher your charitable overhead. 

If you give $25 each to 4 charities 

The pros. You can balance your support of multiple organizations with the knowledge that you’re giving more to each one. Hopefully, that translates to your gift having a more significant impact on the causes you believe in. 

The cons. Although your overhead costs are less than the example above, they’re still higher than if your giving was even more focused. And you’ve sacrificed the ability to support more organizations that you view as worthy, increasing the likelihood that you’ll have to decline some requests. 

The “head and heart” takeaway: 

This is a “compromise” choice. It makes sense to weigh your interest in many causes with a desire to increase the potential impact each gift can make with the costs associated with each donation you make. 

If you give $100 to one charity 

The pros. By focusing on a single cause and organization, you’re maximizing the impact your giving can have. By giving more, you may be considered a “major donor” and have opportunities for increased involvement with the organization. You also reduce the amount of your philanthropy that is consumed by administrative fees. 

The cons. Following the “all-your-eggs-in-one-basket” approach means that you’ve limited the causes you can support. You will likely need to say no to organizations who need your support and whose mission you believe in. 

The “head and heart” takeaway: 

Giving to a single charity appears to make the most sense from a strict dollars-and-cents perspective. It provides an organization with the most financial support and minimizes the amount of your giving that covers banking fees. At the same time, if the organization you support is not as effective as you think it is, the impact of your giving won’t be as significant as you had hoped. 

Tips for whichever approach you take 

It’s tempting to think of charitable giving the way we think of a stock portfolio, and try to spread risk and reward across a range of “holdings.” But charitable giving isn’t about maximizing wealth, it’s about making a difference (and, yes, feeling good about ourselves in the process). 

Here are some things to keep in mind, regardless of your preferred approach to giving:

• Develop a plan. Many people give to charity throughout the year and only understand the sum total of their contributions when it’s tax time. A more intentional approach to giving can help you focus your efforts and maximize the impact of your contributions.
• Consider giving circles. If you’re committed to supporting multiple causes with maximum impact, consider joining a giving circle, a group of like-minded people who pool their resources and collectively decide what organizations to support. Giving circles can also provide volunteer opportunities, which enhances the involvement you’ll have with the causes you support.
• Check on the organization’s effectiveness. Just because an organization is doing work you think is important doesn’t mean they’re doing it well. Ask for performance reports and check online ratings. At the same time, heed this warning from Freakonomics: the percentage of money an organization spends on administrative costs is not the single, most important indicator of effectiveness. Instead, focus on outcomes: are they moving the needle on the issue they’re tackling?
• Engage a professional. As your commitment to philanthropy grows, consider working with a financial advisor who specializes in the field. They can help you develop a long-term plan that best matches your financial means with your charitable goals. But the single most important takeaway? Keep giving and know that you are doing good. 

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

However, homeownership is a big decision, and owning two properties is (at least) twice as complicated as owning one. That’s why you need to understand what’s involved, the resources you’ll need, and how the decision may impact your financial future. 

There are three main types of second homes: 

• Vacation and weekend getaways
• Rental properties
• A house where you plan to retire 

These categories can overlap: You may vacation in the house where you’ll retire or rent out your vacation home. Whatever your plan is, your intended use should play a significant role in your decision-making. 

There are unique considerations for each type of second home, as well as questions you will need to answer that are common to all three. 

The vacation getaway 

If your dream is to own a vacation home, you may already have a location in mind. Chances are it’s in an area where people vacation! It’s not surprising that half of all second homes are in eight states, and that the top state — Florida — accounts for 15% of the total. 

From a financial perspective, this is good and bad. Real estate in highly desirable areas is expensive, which could price you out of the market. On the flip side, if you can afford it, owning property in a vacation hot-spot increases the likelihood that your house will hold its value, if not appreciate. 

Be honest about how many weeks you’ll be in the house in any given year. Does the time justify the expense, or would you be better off renting? If you plan to rent it out when you’re not there, is there a market in the off-season? Will you maintain the property yourself? How far away is it from your permanent residence? 

If you’re not familiar with the area, spend a few vacations renting before you even consider buying, including in the off-season. You may discover this is more of a fling than a long-term relationship. 

And remember that owning this home may cut down on your ability to vacation elsewhere — an important consideration if you’re someone who likes to travel. 

The investment property 

If you’ve seen TV shows about flipping houses or investing in real estate, you know that it’s easy money, right? 

The truth is, while it’s possible to make money in real estate, it’s anything but easy. 

First, you’ll need to assess the rental market in the location you’re considering. What is the demand for the type of property you can afford? Are the rental rates sufficient to cover your costs, which include not only your mortgage but also taxes, association fees, utilities, and homeowner’s insurance? Factor in these costs before you buy. 

Understand what it means to be a landlord. Not only are you on call 24/7 when the roof leaks or the furnace breaks down, but it’s also your responsibility to find reliable tenants, hopefully with little downtime between rentals. Learn about landlord/tenant rights, which differ by state. You could choose to hand those duties over to a management company, but that will cut into what may be a slim profit margin. 

On the positive side, there are tax advantages for real estate investors that can play into your favor. Remember that tax laws change and are complicated and getting professional guidance may pay off in maximizing your benefits and avoiding problems. 

Finally, decide what kind of “investment” you are after: Will your profit come from buying and selling often, or will you hold on to a property long-term for a regular, monthly income stream? 

The retirement property 

Maybe you’re starting to think about retirement and you’d like to spend those years in a new place. Are there advantages to buying a retirement home while you’re still working? 

The short answer: yes. You’ll have an easier time getting approved — and securing the best rate — while you’re still drawing an income. The Equal Credit Opportunity Act makes it illegal for lenders to discriminate against retirees, but they can consider your income. 

Purchasing your retirement home while you’re still working also gives you the chance to get to know the area better. And you won’t have to dip into your retirement funds for upgrades and maintenance. Depending on when you buy it, you’ll build equity in your second home that could come in handy later or turn into an asset for your children. 

Some advisors recommend buying your retirement home only when you’ve paid off your existing mortgage. That’s undoubtedly the best scenario. If the option is to carry two mortgages, be sure that’s a cost you can absorb. You don’t want to impact your financial plan negatively, especially your retirement savings. What good is a great retirement home if you don’t have the money to enjoy it? 

As with vacation homes, know the location. After all, this is where you’ll spend many years, with a lot of free time. If it’s a place you regularly visit in summer, experience it in winter. You don’t want to be surprised when it’s too late to do anything about it. 

And common to all three 

Here are some things you need to consider, regardless of how you’ll use your second home: 

• It may be more difficult to qualify. Lenders will look at your debt-to-income ratio: the ratio of your debts compared to your income. Most lenders require a DTI of 36% or lower, so determine if your mortgage payments put you over that threshold.
• Lending rates will be higher. This is especially true for investment properties, with the assumption that the transaction includes higher risk: It’s easier for borrowers to walk away from a failed business venture than it is from their own homes.
• You’ll need furniture and housewares. Enough said, but a cost that many people don’t factor in.
• Houses need regular maintenance. As an existing homeowner, you already know this. But you may not know what it’s like to care for a property that you don’t live in, that may be hours away, and that other people are living in. 

As you dig deeper into the details of second homeownership, don’t lose sight of your original dream. If the numbers add up, a second home can provide decades of family gathering memories, additional income, or a place to enjoy your well-deserved retirement. The more you know now, the better the chances that your dream will become a reality. 

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

However, with the average American holding more than 12 jobs before the age of 52, you’re unlikely to have just one 401(k) during your career — and that can leave you unsure of what to do. 

In order to make good choices with older 401(k)s, you first need to understand that every dollar you put into a 401(k) is your money. The plan may be attached to an employer, but they cannot remove or interfere with any money you’ve contributed. Some employers make matching contributions that they are allowed to take back if you leave your job before being fully vested (i.e., you weren’t at the company long enough), but your contributions belong solely to you. 

So, what should you do with the money that’s sitting in an old 401(k)? There are several options: 

Roll it Over 

For many people, moving the money from an old 401(k) to a new investment account is the best choice because it gives you more control over your money and limits the number of accounts you have to manage. If you want to roll over a 401(k), there are two options that allow you to avoid any taxes or penalties. 

First, you can simply roll an old 401(k) into the one attached to your current employer. Not all employers permit this but, if yours does, the process is fairly simple and your employer may even help you out. Just make sure you opt for a direct rollover. The money should move from one 401(k) to the other without passing through you. 

Your second option is to roll the money into an IRA. This is also a simple process. You’ll choose a financial provider, open a rollover IRA, and ask your old 401(k) for a direct rollover. 

So, which choice is right for you? That depends. If you really like the investment options provided by your new employer and want to manage as few accounts as possible, rolling an old 401(k) into a new one makes a lot of sense. However, if you prefer the wider range of investment options offered by most IRAs and don’t want to end up with yet another old 401(k) should you leave your current job, you’ll likely be happier moving your money into an IRA. 

One thing to remember is that, while you can take a loan out of a 401(k), you can’t take a loan from most IRAs. So, if you think you may need to borrow from your retirement savings, keeping your money in a 401(k) will offer more options. 

Do Nothing 

You don’t have to do anything with an old 401(k) if you don’t want to. You can let the money sit there until you reach 70½, at which point you must start taking annual required minimum distributions. 

The problem with not doing anything is that you’ll have little to no control. You won’t be able to add money to the plan and, if you need to withdraw from it, your options could be limited. It’s also difficult to manage the investment strategies of multiple 401(k)s, particularly when you no longer have regular, employer-granted opportunities to adjust your plan. 

That said, keeping the money in an old 401(k) is far preferable to cashing out. By doing nothing, your money can still grow tax-deferred and will be available for your retirement. 

Donate to Charity 

If you don’t think you’ll need the money in a 401(k), you can withdraw it, pay the taxes and penalties, and give the money to charity. However, if you want to maximize the gift, you should include the donation in an estate plan. By donating your 401(k) upon your death, the money will transfer tax-free, providing the charity with more funds overall. 

Try Not to Cash Out 

You always retain the right to convert money that’s in a 401(k) into cash. However, it’s a poor strategy unless you’re of retirement age or need the money for an emergency and have no other options. 

The problem with withdrawing early from a 401(k) is that you’ll have to pay income taxes on the entire amount you withdraw and you’ll likely face an early withdrawal penalty of as much as 10%. If you’re 59½ years old, you can avoid the penalty, but you’ll still owe the taxes immediately. Of all the ways to handle a 401(k), cashing out is the worst financial option. 

How you handle an old 401(k) is up to you and your personal needs and preferences. The important thing is that you make your decision based on good information. Your retirement is too important to ignore. 

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

While a lot has been studied and written about raising a child, we know less about the dynamic between adult children and their aging parents. At what point does the traditional caregiver role switch from parent to child? That question becomes even more critical when one parent dies. 

The major issues that adult children and aging parents need to confront have one thing in common: finances. From physical health to aging in place to declining cognition, how to help parents live out their final years with dignity is tied to their financial resources. 

How can you ensure that your parents’ financial health is sound? What protections and support can you put in place without overstepping boundaries? What resources are available to you and them to have productive discussions about issues of aging in place, wills, and related topics? 

Here are five steps that can help you navigate this challenging, but ultimately rewarding, responsibility. 

1. First, talk with other family members 

Start by talking with siblings and close relatives. If you don’t have those connections, there may be someone who knows you and your parents, maybe a neighbor or family friend, who can fill the role. 

Figure out the best way to begin the parental discussion, including who the best spokesperson is. It doesn’t have to be all of the children. It may be best to limit the initial dialogue to one person to avoid a sense of “ganging up.” 

And have the talk early—earlier than you think you need to. 

Studies indicate that the ability to make complex decisions like those involved in financial planning starts to diminish after age 60. Michael Finke, professor of Wealth Management and program director of the Wealth Management Certified Professional® (WMCP®) program at The American College of Financial Services, studies the relationship between cognitive decline and financial decision-making. 

As Finke told Kiplinger, “Often, by the time parents have lost their ability to make sound financial choices, they’ve also lost the ability to evaluate who they can and can’t trust.” That can open the door for ill-intentioned family members or outsiders posing as financial advisors. 

2. Provide help, not control 

It’s possible, and perhaps likely, that your parent or parents won’t see any need for your advice, at least not initially. So don’t give advice or try and take control — offer help instead. 

If your parents are still doing in-person banking, offer to drive them and take them out to lunch — an unforced way to meet their banker and transition to money talk afterward. If paying bills is becoming a chore, either because of vision challenges or forgetfulness, volunteer to step in. (And if you have a child who is old enough to take this on, even better). 

Another tactic: give the gift of technology, a tablet or laptop that they’ll need help to set up and learn. What begins as a great way to create and share photos of the grandchildren can transition to viewing their portfolio online and managing their bills. 

Gradually, you’ll become a natural part of the financial management “team.” 

3. Set up efficient systems 

With your foot in the door, you’ll get a better sense of what you’ll need to do next and how much responsibility you’ll need to take on. Simple observation can help: if you notice unpaid bills and collection notices on the kitchen counter, it’s time to become more involved. 

Set up automatic payments for essential ongoing services; credit card and bank statements can give you an idea of what these are and which may be redundant and/or unnecessary. Consolidate multiple accounts. As part of a volunteer spring cleaning, make sure you know where documents like wills and life insurance policies are located (and don’t forget the lockbox key). 

Finally, make sure that your parents are receiving every benefit they’re entitled to, from employer benefits to Medicare. 

4. Anticipate what’s next 

At some point, and depending on your parents’ health, you’ll need to assess the potential for long-term care. Check out options when there’s no immediate medical emergency to deal with, and include your parents in the process if they’re open to the possibility. 

You will also want to obtain a durable power of attorney, which gives you a broad range of responsibilities such as paying bills, managing assets, and filing taxes. A durable power of attorney remains in place even if your parents become incapacitated, and avoids the delay of going to court to be appointed the legal guardian. 

5. Enlist the help of a financial advisor 

If involvement in your parents’ financial affairs is problematic, enlisting the help of a neutral, outside expert may be best for you. Given the complexity of financial management, the amount of time it takes, and the emotional toll involved, it may be the preferred course of action, regardless. A credentialed advisor can provide your parents and you with the financial peace of mind that only comes with professional experience. 

While you’re at it, start thinking about your retirement years so your children won’t go through the same experience you have. If you’ve found a good financial advisor for your parents, they might be a good fit for you too. 

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

While our concerns will depend mainly on our individual situation — our age, job security, financial situation, and family obligations to name a few — here are some common areas to consider when we’re forced to manage finances in uncertain times. 

Check in on Your Monthly Budget

Before you can judge the effect on your monthly budget, you’ll need a monthly budget. If you have one, great. If not, this is the perfect time to create one. 

If you have a budget: 

• Evaluate your spending habits. Even if your personal situation is secure — job, health, savings, and long-term planning — things outside your control are volatile. Now’s the time to cancel that monthly subscription service you never use or the landline phone you don’t need. Eliminate any credit card debt to free up money in the future.
• Assess your emergency fund. Experts say that, ideally, we should have anywhere from three to nine months stored away in an easy-to-access emergency fund — money in a savings account that you could live on if your income suddenly stopped. If you have an emergency fund, check on the balance. If not, take the money you saved from your monthly budget-cutting and start one.

If you don’t have a budget: 

• Start one. Keep it simple but comprehensive. Include all of your expenses and income. Monthly credit card statements come in handy here.
• Evaluate your spending habits. See above. If you’re new to the budgeting world, you’ll likely be surprised at some of what you’re spending.
• Start an emergency fund. If you didn’t have a budget, it’s unlikely you had an emergency fund. That’s okay — start one now. If you can set aside $25 a week, you’ll have more than $1,300 in the fund by this time next year. 

If your job is secure and you have adequate health insurance for you and your family, you won’t have to adjust your habits radically. 

But remember: leaking roofs and faulty transmissions have their own timelines. If you’re faced with an unexpected major expense, you may need to use your credit card as a fallback option. 

The Impact on Your Investment Strategy 

One of the biggest shocks from occurrences like the coronavirus is the instability they cause in the markets. Markets don’t like uncertainty, and large-scale buying and selling is more the result of panic than strategy. 

The best advice? Do nothing at the outset. 

That doesn’t mean that you shouldn’t reassess your investment strategy periodically. If you’re retired or near retirement age, you’re counting on your savings. Hopefully, your investments have shifted to a lower risk balance over time, which will enable you to weather the current storm. 

And while you may be tempted to sell stocks as prices drop, remember that the market has always bounced back (see below). Also, remember the tried-and-true adage: buy low and sell high. If you need immediate cash, it’s better to draw from bonds and give your stocks a chance to rebound. 

If you’re a ways from retirement, stick with your plan. And stop looking at your portfolio every day. 

Remember That We’ve Been Here Before

In the middle of a global crisis, it’s easy to think that we’re in uncharted territory. No doubt there are unique aspects to what’s happening, but we’ve faced the unknown before. And we not only survived, we came back stronger. 

Beginning with HIV/AIDS in 1981, there have been 12 epidemics that have impacted the markets, including SARS, H1N1, and Ebola. The impact of these outbreaks on market drawdowns averaged less than 2 months, with the exception of AIDS (5.1 months). 

Although epidemics can spur market corrections, their impacts are finite. That said, it’s difficult, if not impossible, to predict exactly how long it will take the market to recover when we’re still dealing with a pandemic. That’s why a steady, calm, and patient financial course is best. 

How to Move Forward 

It’s difficult to be a rational, calm investor in turbulent times. The best way to become one is to have a strong plan in place before the next roller-coaster ride comes along and stick with it. 

Because the ups-and-downs and complexities of investing can be overwhelming even in the best of times, consider working with a financial advisor who is trained in retirement income planning or wealth management planning, which means they will have the expertise to help you weather the storm with confidence. In the end, that may be your surest route to a smoother ride. 

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

At the same time, college is expensive. Here’s the average cost of tuition and fees in the 2019 — 2020 school year, as reported in the U.S. News annual survey: 

For private colleges: $41,426 

For public colleges: 

• In-state residents: $11,260
• Out-of-state residents: $27,120 

Those costs don’t cover room and board. Also, consider that tuition tends to rise every year, with increases between four and 10%. Depending on your child’s age, you may be looking at a cost that’s considerably higher than what parents face today. 

Given everything that’s at stake — your child’s future and your financial stability — it makes sense to understand all of your options to pay for college. 

529 Plans 

529 plans, or “qualified tuition plans,” are savings plans sponsored by states, state agencies, and educational institutions. These plans offer tax-advantaged savings for educational expenses and come in two categories:

• Prepaid tuition plans. These plans enable you to purchase credits at public colleges and universities at current prices. The money can only be used for tuition and fees, not room and board, and most have state residency requirements. You receive the full value of the benefit only if your child attends the participating institution. Otherwise, you will only receive a portion of the benefits you paid.
• Education savings plans. These plans can generally be used to cover expenses at any college or university, including some foreign institutions. These savings can also be applied to room and board. Also, under the revised 2017 tax code, education savings plans can be used for private elementary and high school tuition for up to $10,000.
• Private plans. This is a prepaid tuition plan for approximately 300 participating private colleges and universities. 

529 plans offer a range of tax benefits. The compound savings are tax-free, and some states offer tax deductions and matching contribution incentives. However, some fees may apply to 529 plans, such as account applications and maintenance fees. 

The College Savings Plan Network provides links to all state 529 plans.

Grants 

The federal government, state governments, and colleges and universities provide grants based on financial need. Unlike loans, grants don’t have to be repaid. 

To qualify for a grant, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA) form. Colleges and universities also use this information to determine what need-based aid your child may be eligible for, including institutional scholarships.

Loans

Families turn to loans to finance approximately 20% of the cost of college. Educational loans are available from the government and from private lenders. Federal loans include more protection and better rates, so consider those first. Again, you’ll need to fill out the FAFSA to qualify. 

Students can take out federal loans, with first-year undergraduates able to borrow up to $5,500 and an additional $1,000 for every subsequent year. Direct PLUS loans are targeted to parents. While these loans come with a higher interest rate than student loans, the amount you can borrow is determined by the college and is intended to cover the full cost of attendance, minus any scholarships your child may be offered.

$2,500 Tax Credit 

The American Opportunity Tax Credit is a benefit for parents whose adjusted gross income is less than $90,000, or $180,000 if filing jointly. You can reduce your taxes after paying tuition, fees, books, room, and board by up to $2,500 a year per child.

Other Options

You may want to consider other savings and funding options, including:

• Roth IRAs
• Traditional IRAs
• FDIC-insured savings accounts
• A home equity line of credit 

Whatever option, or combination of options, you choose, it’s best to start as early as possible. And know that you’ll seldom pay the college’s advertised “sticker price.” According to the College Board, undergraduate students in 2018-19 received an average of $15,210 in aid. 

To maximize your savings and ensure you’ve got the best possible plan in place, consider working with a financial advisor who specializes in long-term planning. Your child’s future is worth it.

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.