Tyler Lank - Financial Planner

Making The Most Of College Savings 🧑‍🎓💰

Parents looking at college expenses in the future are already prioritizing the need to save as they seek to reduce the debt burden for their children or themselves.

For families with children preparing to enter college in the near term, the next challenge is how to spend down those savings in an efficient manner while considering financial aid implications, minimizing taxes, and even reducing investment risk.

With a range of savings vehicles and debt options available to help pay for college, it can be a complicated decision when determining which accounts or strategies to utilize and when to make withdrawals.

The average tuition for students in 2023 was $28,840 for public institutions and $60,420 for private institutions. Education costs are rising every year and so it is imperative to have an efficient college savings & distribution plan in place.

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What is Dollar Cost Averaging?

Dollar-cost averaging (DCA) is an easy way to even out market fluctuations by automatically investing a set amount over a determined period of time, regardless of changing prices.

Think of DCA as a disciplined and consistent approach to investing. You invest a specific dollar amount at regular intervals, usually monthly. Because unit prices fluctuate and your investment dollars remain constant, at times the price you pay will be higher than the average price, and at other times it will be lower.

Why Dollar Cost Average?

When you invest a consistent amount over time, you’ll potentially be able to buy more shares when the price is low and fewer shares when the price is high. In a fluctuating market, this means that your average cost per share over a period of time may be lower than
the price per share on a specific date during that period.

How You May Pay Less per Share in a Volatile Market

Consider the following hypothetical example. An investor invests $1,200 in an investment portfolio on January 1. Another investor, using the DCA principle, invests $100 in the same portfolio on the first trading day of each month for 12 months. Over time, the DCA investor purchases more shares at a lower average price.

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When you change jobs, it can be for any number of reasons.

Regardless of what triggers a job change, such an event creates a perfect opportunity to reevaluate your long-term financial plan. After all, this is one of the few times — aside from actual retirement — that you will be faced with making decisions about what to do with the money you have been saving in your 401(k) plan.

Reviewing your situation at this transitional time can help you feel better about your new job, and get you refocused on your long-term savings plan.

When you leave an employer, you are likely to have several options. You may:

▪️ Stay invested in your previous employer’s plan if your balance meets the plan’s minimum

▪️ Invest your assets in the new employer’s plan

▪️ Take your distribution in cash

▪️ Roll over assets to an IRA

All of these options come with their own unique benefits and drawbacks.

Schedule a complimentary consultation so we can discover which option is best for you.

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