Speaker 1 00:00:08 What's up, everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel Raimi. Join me as we dig into what it looks like for physicians to begin using their finances as a tool to live better lives. You can learn more about our
[email protected] let's. Jump into today's episode, what's up, everyone. Hope you're having a great day. I'm, uh, I'm excited to talk today about a topic it's kind of come up a lot lately. And, uh, conversations is they've also recently changed some of the rules on how this stuff works and the topic is how to save for your children's or really anyone's education. So I wanted to talk about, you know, some of the best avenues to do that and talk a little bit about how those work like the pros and cons of those. And then, um, talk about some of the tax tax benefits associated and ultimately help you start to think about or hone in on what the best way is to accomplish that goal of saving for your children or anyone's really education.
Speaker 1 00:01:14 So we'll jump into that and get this, get this going. Okay. So we're going to talk about college savings today and really education savings in general probably is a better way of putting that. Um, there's been some, uh, tax law changes that have, uh, actually improved the tax benefits of saving for education, especially before college. So, um, so we'll talk about that as well. So before we get into that, and maybe we should, maybe you get starting point is like, what are the basic vehicles to use? And I think this is more straightforward, really. There's only, well, there's a few different choices, but like 99% of the time, the best route, if you know, you're going to need to save money for education is a 5 29 plan. So really all that is, is it's just kinda like a, um, you know, like a tax qualified tax preferential plan, the Doris created through rules that allows you to say for that given goal in a tax favorable manner.
Speaker 1 00:02:25 So it's kinda like an IRA is for retirement or Roth. IRA is for retirement. It's more like a Roth IRA is for retirement, especially when you hear the tax benefits side of it. You'll you'll get it, but it's, uh, so basically a 5 29 plan, that's typically the best route to save for education. If you know, you're going to save for those qualified expenses and it is a tax preferential or tax beneficial way to save for that. If you know, you're going to use it for that. So, um, what is the big, so let's talk about the benefits of, of using a 5 29 plan. And then we'll talk about the downsides in a second. So benefits as already mentioned, there's tax benefits. So how does the tax work, the tax benefit? Uh, so when you put money into a 5 29 plan, it is gonna be after tax dollars.
Speaker 1 00:03:19 So money you've already paid tax on. So like for example, you could take money from your savings account or checking account, which has already been taxed and put it into your 5 29 plan. So there's no, and there's no tax benefit on the front end, at least federal tax benefit. And so there's the tax benefits all come on the backend of the 5 29. So once you put it in, though that as it grows, hopefully it's growing as it grows. There's no tax on the growth. And ultimately when you take it out for as long as you're using it for qualified education, it's, tax-free coming out. So basically the tax benefit of the 5 29 is your, it gives you the ability to grow an asset or have interest on an asset without being taxed on the growth. Whereas normally if you just invest as it grows, you'll eventually have to pay tax on that growth component.
Speaker 1 00:04:15 So that's the whole tax benefit is on, uh, the growth of the asset. And ultimately when you take it out the tax-free aspect, so it allows you to avoid tax on that growth. Uh, that's, that's the number one benefit to a 5 29. And really when you compare it to other things, that's, that's really the only benefit. Um, you know, but it is a big one. So what are the downsides? So the downsides, the big downside is kind of along the same lines is you, well, I guess there's a little downside in that you have to set up a separate account, whereas if you just invested everything in one account that would be simpler. So there's a little bit of a downside because you have to create a separate account, um, and typically your create a separate account for each beneficiary or person that ultimately it's being safe for.
Speaker 1 00:05:01 Um, so that adds a little complexity. That's, that's the downside also, uh, another downside is if you don't use it for education, there's some tax costs or penalty costs. So it basically negates the benefit if you don't use it for education or qualified education expenses. And so that's, that's definitely a big, uh, downside essentially like makes it, you end up, like if you're going to not use it for education, you know, you definitely don't want to do it because you would be better off just investing in a normal account. Um, so really, and those are the big downsides. There's a few other little things here and there there's some, uh, cost components potentially, but you can there's ways to avoid those. So at the end of the day, this 5 29 avenue, it's really about taxes because if taxes were not in play, I mean, there'd be no point for five to 5 29, but, uh, you know, if you're in a high tax bracket or you're going to be in a high tax bracket, uh, it's pretty impactful to avoid, uh, if possible taxes on interest it's going to be, there's going to be a lot of benefits with that, especially the longer out we're looking.
Speaker 1 00:06:12 So if you're, for example, if your child is, um, you know, a senior in high school and you're like, oh, I got to save for college for freshman year of college. Uh, there's not a lot of benefit in the 5 29 because it's like, how much can it grow in one year? Not much, you know, so that's just one year of interest and you have to be, you're typically not going to expect a lot of interest in one year, uh, just cause you can't take a lot of risk. And so, whereas if you have a newborn and you're like, uh, I need to save for my child's undergraduate costs, which is 19 20, 21 years out. That's a huge, that's where the big benefits come and that's where it's most beneficial. Uh, so that's a lot of these benefits come from the taxes. That's, that's the main thing to, to take in.
Speaker 1 00:06:59 So state there's some state tax benefits as well that are sometimes, uh, an, an option I'll link to a really good breakdown of, um, it's from saving for college.com, but there's a really good breakdown. They have a visual breakdown of like what, how the tax benefits break down by state. So it totally depends on the state, but it's all about state income tax benefits. So for example, I live in Kentucky, in Kentucky, it doesn't, there's no state income tax benefits, so it doesn't matter which, uh, it doesn't matter how much I find it. It's basically irrelevant for my state income taxes. So, you know, that's straightforward. Whereas the best state that out there really is Indiana. So Indiana has a very, uh, has like a nice credit, um, tax credit funding, five 20 nines. Um, so, but relative to other states, I would say Indiana is probably the, one of the best, if not the best state income tax, uh, benefit.
Speaker 1 00:08:02 But, uh, it varies by state. So California, for example, is like Kentucky. There's no deductions in states that have no income tax like Texas, Florida, Tennessee. You know, there's no benefit there obviously because there's no state income tax to have benefits on in the first place. So I would say like, you check out the website, you'll see most states with state income tax, have some sort of benefit, but they vary quite a bit by state. So it's important to check out your state's specific benefits. First, also some states require you in order to get those benefits, they require that you use your state specific 5 29 plan. So that's another thing with five 20 nines. Each state will have its own like sponsored five to nine program. Um, all that really is, is they've partnered with a, an investment company and they, um, you know, they have like the state sponsored plan through that investment company in Kentucky.
Speaker 1 00:08:59 For example, I think it's Tia Cref. We don't really ever recommend them or use them in our planning firm, mainly because there's no state tax benefit in Kentucky. So therefore it doesn't matter if we use Kentucky or any other state. So it's kind of like w in Kentucky, if you live in Kentucky, it's like, well, let's just pick the best out of all the states, uh, the best five to nine out of all the states. So some of the really good 5 29 is like, Utah's, it was one of our favorite 5 29 plans. Arizona has pretty good ones. All the fidelity plans are pretty good. They have like five or six states that they do five to nine plans on. And the VA some of the plans that have Vanguard are pretty good as well, but that is sometimes negated if you have state income tax benefits.
Speaker 1 00:09:43 So that was Kentucky. I was just talking about, on the other hand, I think Indiana requires, we were talking about Indiana a second ago, Indiana, I believe requires you to use their state specific plan in order to get those state income tax benefits. So if you're in Indiana, it's like use the Indiana plan. Otherwise you're not going to get that very, uh, generous state income tax benefit. On the other hand, Arizona, for example, they don't require you to use the, um, Arizona state specific plan to get the tax benefit. So it's kind of like, you know, so you're, you end up in the same spot as you would be if you lived in Kentucky and Arizona, cause it's like pick the best state cause it doesn't affect the tax benefits, at least in Arizona. So, um, side note on that, always check the rules and, you know, talk to your accountant, get tax advice on this, these change too.
Speaker 1 00:10:37 So, um, keep an eye on it. Um, it's important to keep tabs on that. A common question that comes up as well. If I use the Kentucky 5 29 or the Arizona 5 29 or whatever does that mean, my kid has to go to college there. So the answer is no, it doesn't matter which state you use. It's, they're all kind of like the same. It's really just about state tax benefits or state state sponsored the way they set it up originally is that states would sponsor it. So it just became like a state run thing, but then all of the states are like, you know, flexible as to which college it ultimately is used for. So that's really a non issue, but definitely check out this, uh, as a, you know, as a good breakdown of what state specific benefits are. So in Indiana, for example, which is the best state, it's like, there's that added carrot.
Speaker 1 00:11:25 It's like even more beneficial to use a 5 29 in Indiana versus like Kentucky or Texas or Tennessee. It's kinda like, you know, less beneficial than the average state to use the 5 29 plan, but either way you get those federal tax benefits, which as we just discussed, come on the backend tax-free growth over time. So going back to the downsides, I got off on a tangent there, but some of the downsides, I mentioned that you have to use it for qualified to educate a education expenses. And if you don't, you get penalized and taxed on that. So really what it comes down to is like the question that always comes up is like, how much am I going to use for education? So like nobody knows or, I mean, it's hard to, and usually impossible to get this exact as far as like what my future costs is going to be for education.
Speaker 1 00:12:16 Uh, but you can start to like estimate or make good educated, educated guesses. And, uh, we'll talk a little bit more about that, but the key to all this is like trying to kind of hone in on what your future education costs might be and starting to think about, you know, should I, or can I, or is it beneficial to start saving for that? Now, another thing that's important to understand with 5 29 plans are that there's two different types of 5 29 plans. And this is like a subset of each state. So most states have two different types of 5, 29 plans. They have advisor sponsored plans or direct sponsor direct plans, and that's typically what they call it. So a direct plan is kind of like no advisor is getting paid. There's no compensation built into it for an advisor to get paid, basically. Um, so an advisor plan is like they build in compensation commission basically for that allows the advisor to get paid.
Speaker 1 00:13:15 So I would always say when in doubt, go with the direct plan and that's what we recommend in our planning firm. Um, we don't accept commissions anyway. So it's like, you know, and that's part of the reason we don't is so it's, it's irrelevant to us financially and it's always better for you to go with the direct plan. So that's always what we're going to recommend now, I guess there is a case where you would want to use an advisor plan, but a direct plan will always be comparatively less cost for you. So that's, that's a key and sometimes it's big time, less cost the advisor plans. There's typically some different varying compensation or, you know, varying expense structures. So that gets a little complicated, but really for the second today, main thing to know is direct plans are much typically lower costs. Um, and then even the states between the states, like say Kentucky's direct 5 29 plan versus like Utah's five direct 5 29 plan Utah.
Speaker 1 00:14:08 Utah's a direct 5 29 plan is quite a bit less expensive than Kentucky's direct 5 29 plan. So that's, you know, even between the states, there's quite a bit of a cost variance in the cost become pretty important, especially over long periods of time. Um, so that's definitely something to pay attention to. Now, if you're working with us, like if you're a planning client, we, you know, kind of look at all this for you, you don't really need to worry about, uh, analyzing different state's 5 29 plans. We're going to kind of keep tabs on those sorts of things and, um, you know, try to minimize costs and maximize tax benefits. But if you're doing it yourself, you definitely need to keep an eye on that. That's important and it could be, can be substantial. So 5 29 plan qualified expenses. That's always a good question. Before I jump into that one other side note I wanted to mention is that there's also some states offer prepaid tuition plans.
Speaker 1 00:15:03 So that's like a little bit different flavor of saving for college and different states. Have it varies by different states as to how it works and how much features it offers and how guaranteed it is. But basically it's like a kind of a guaranteed way state guaranteed way typically to fund college, they, they give you like a set monthly amount or lump sum amount that you give them. And then they offer to guarantee to fund the state tuition costs or sometimes tuition room and board. So I know like for example, Florida has several options for prepaid tuition plans. This can work well. Um, if you want like a really super safe, like no risk option or low risk, I guess, option the investment, the responsibility, uh, or the risk of the investments, you're kind of like offsetting that to the state. Um, and so you're going to not be realizing the volatility.
Speaker 1 00:15:58 It's going to be, you know, set benefit that happens independent of how, you know, stocks and bonds do. So that's the benefit is it's kind of like more of a set structure and it's a set price and you can kind of just set it up and fund it and it's covered. And you're good. Uh, the big downside is you are, you know, especially if you have time, um, you don't, you aren't able to like customize it. So you might, um, you know, benefit from, or want to dial the risk up or take the risk yourself. And you're comfortable doing that. Or you have someone like us helping you. Um, in that case, you know, you're typically going to have higher expected returns when you invest yourself and you're able to like dial up the stock percentage, for example. And so when you compare that, um, you know, that can typically be a better, uh, return or bang for your buck.
Speaker 1 00:16:50 Um, also a lot of it has to do with inflation because, um, the state plans lock in or kind of like, uh, I guess they're kind of a form of inflation protection. They're essentially giving you a set price and saying it will cover costs of college. And that is even if they inflate quite a bit. So I imagine those plans were a really good deal from like, like the last maybe ending in like the mid two thousands, like 2010 or something say you funded it from 1990 to 2000 or 1995 to 2010 or something like that. I imagine that would have been a really good deal, you know, for really anyone mainly because inflation of college costs, education costs was going up. And so when that's occurring, you know, that's an added benefit to using one of these state sponsored plans on the flip side, if inflation's going down for education specifically, then it can be kind of like an additional downside.
Speaker 1 00:17:58 So I don't expect you, you should not be projecting inflation. I mean, who knows what inflation is going to do? I think the main thing should be more like, do you want to take on the investment risks yourself? Or do you like the idea of like the, you know, more guaranteed, uh, safer route of just saying what's my cost going to be today or, you know, monthly, and then let's just check it off the checklist and be done with it. So I would lean more on that as a benefit or as a reason for doing this. And typically a lot of times the state plan state sponsored plans will allow you to go to different, uh, different states too. So that, but check on your specific plan, if you, if you have any interest in those. So that's kind of a different avenue only for it's typically only for college or undergrad.
Speaker 1 00:18:41 So another thing that I, I, I hadn't mentioned yet, as far as, you know, how those five to nine is work and I've kind of hit on this or implied, this is how it works, but I want to make sure and clarify this too, with the 5 29 plans, the way it's going to work is you put the money in there and then you have to select where it's invested. So it's, it's really just a lot like a 401k, if you've ever had one of those, they give you like a menu of like 20 or 30 or 10, or, you know, a menu of investment choices. And then it's your responsibility to select those. Or if you're working with us, we're going to help you select those, but you get the menu and you get to pick between them. And it's going to be like, you know, XYZ stock fund or, you know, this bond fund or, you know, this automatically allocated age-based fund, or those are examples of the types of things you see.
Speaker 1 00:19:33 Sometimes they have like autopilot funds that are kind of nice. So anyway, you have get to choose between the menu. Um, as opposed to, like, I was talking about the, uh, prepaid or pre, uh, prepaid college plans, they're going to have no menu. It's just like, here's the cost and it's covered. So that's, that's a big difference. So the big question with this is, are you gonna use it for education? That's really what it comes down to. So some, you know, sometimes people will say, okay, well, my parents didn't help me with my education. So like I learned a lot from that. So I don't think I want to help my children with education because I feel like that will inhibit them or, you know, I want them to, um, most people gravitate towards wanting for their kids, what they experienced and they kind of lean, I guess you have biased towards thinking that whatever you had was the best, um, that's how everybody is.
Speaker 1 00:20:35 But, uh, so that's a lot of people are, or some people not a lot. I mean, I would say like half of people are like, you know, in that camp, it's like, my parents didn't pay for it, so I'm not gonna pay for it. And that's fine. I mean, that's your thing. It's kind of, that's more completely more of a personal preference, but the one thing I would say for you guys, most of this audience is going to have, you know, higher than average income. A lot of you will have, you know, very high income. So the important thing to know about that situation is it's a different college. The way college funding works, um, is it it's really a means based system. Um, I talked about it in the show, um, where we talked about college funding, several episodes back. So you can check that out for details, but basically education, every university or college, uh, is going to have some sort of like means testing or income-based factor in it.
Speaker 1 00:21:30 And so if you Google like the price of a Vanderbilt, you're going to see like the sticker price. It's like, that's what it's like buying cars, you see the sticker price, but what happens is when you actually go to apply or get through to go through the process, they're going to give you a actual price you would pay. And a lot of it is based on your financial situation. Now there is some potential component based on your academic level, but a good portion of it is based on your financial position. So if you're in a really good financial position, you're not going to get any means or financial benefits there's is you're basically gonna be much more likely to pay the full sticker price. And why that's important is because it becomes basically it becomes difficult for your child to even pay for it in the first place.
Speaker 1 00:22:21 Now you can still do like what you were saying, what I was saying with, you know, your parents took care of didn't take care of your education. So you're going to let your child take care of it themselves. You can still do that, but the problem is education costs have gotten higher. So it really limits the schools you can look at and you have to be aware of that. You know, it has to be literally a school that they can afford through earning income. They can get some student loans in undergrad, but that, that caps out pretty quick. So most of the time you're there not the student I'm talking about, can't get enough loans to fund it because the school assumes the parents going to take care of the risks. So basically what it comes down to, if you're high income, most likely, you know, the school is gonna assume you're gonna be able to pay for the sticker price, full sticker price.
Speaker 1 00:23:07 And they're going to assume also that you're gonna find a way to pay for it, either through getting your own loans as a parent or, you know, ponying up the cash. Um, and they're not going to assume the child is going to pay for much of it. So it becomes like a sticky spot, even if you wanted to go that route. So I've talked to people that are like it there, and their kids are going to college and they're like, I really wanted them to pay for it, but like, they don't have a way of paying for it. Literally it's like they can't get student loans, they don't have time and they don't have the ability to earn enough to cover it. So that's something to be aware of when you're talking, talking about whether or not to fund education. So it's important to think about that.
Speaker 1 00:23:46 Uh, you know, the, your ideal future, what it looks like. And ideally you think, you know, furthest out first and then kind of work backwards. So what is, what are qualified expenses? It all comes down to that. It's like, if you, if we could predict the future and we knew exactly what you were gonna, uh, need for education, that would be straightforward. We could just say, put exactly what you need in 5 29 plans or college funds for. And so that we're a hundred percent funded for exactly what you know, you're going to eventually spend. And then you're done. That's easy, but that's not how it works. So first of all, you don't know what you're going to ultimately spend. You might have an idea, but you don't know for sure. Second of all, we don't know how education costs are going to change. Only exception is if you use a prepaid plan, like I talked about that kind of like cuts that out of the equation, but if you, um, so you have to look at it each year and kind of make educated guesses.
Speaker 1 00:24:40 For example, college costs actually have been going, they haven't been going down, but the inflation rate has been decreasing lately, which is like one of the only things that's had a decreasing inflation rate lately, but it's kind of funny. It's like backwards college education, inflation rates have been, you know, slowly going down lately. Um, which is an interesting trend. Uh, it hadn't happened like that in a while, but that's, that's the trend right now. So that's a factor. And, and like I said, and which, what you ultimately decide to fund or what school they choose, or how many years or all that stuff, or grad school, that's all fact that, you know, a factor in this. So if you knew you, whatever, you know, you're going to spend great. That's where college plans work, whatever you don't spend, it's not great. It's better to use something else.
Speaker 1 00:25:25 So what are you going to, so what are, how do you, what do you do with that? So a lot of people say, okay, well, I don't know what we're going to spend. So like, I'm just not going to use this 5 29 plan because I'm not sure I'd rather use something that's more flexible. What I would say is it doesn't have to be like the extreme one extreme or the other. You can meet somewhere in the middle. So for example, uh, let's say you have five kids and you plan to fund all of their undergraduate costs, tuition room, and board. And you're like probably going to be like an average state school costs and then no, no private school, you're going public school up to that point. So that scenario it's like, if you're planning to fund five kids, undergraduate costs, it's PR I would say it's fairly likely to it's at least you're at least going to be writing some checks.
Speaker 1 00:26:17 Like, even if you have brilliant kids, like, uh, or AF awesome athletes or whatever, you know, maybe one or two of them get scholarships or full rides or whatever, but like, odds are like, at least a few of them are going to need some help. So maybe in that scenario, you kind of think on the higher end of the percentage. So maybe it's like you fund 75% of expected costs. If you want to play it safe, 75% of expected future costs for that under undergraduate costs. But, but maybe you don't want to do a hundred percent yet because you're just not sure. And you don't want to, overfund it. On the other hand, let's say you have one child and you're like, I don't even know if they're going to go to school for, for undergrad. And if they do, like, who knows. And, um, I don't even know if I want to help them with education or not, or so then that's a completely different situation and they're not going to go to private school before then.
Speaker 1 00:27:11 It's like, well, there could, I could totally see a scenario where you literally write no checks for education. And so in that situation, you might not want to use the 5 29, or if you do, maybe you do like, so like maybe 10% of the most likely scenario. So if you, if they do go to college, maybe you would fund four years of tuition room and board. So let's figure out what you would need to save, to be on track for like 10 or 25% or something like modest so that you're not like putting too much towards it. And then over time, as you know, more, you get more certainty, you can kind of dial that percentage up potentially or dial, dial it down to. So those are kind of some strategies to think about. Another common question that comes up is, you know, what, if you are also going to be funding private school before college nowadays, that's a big, that's the big tax change that's happened lately is they have now allowed you to use up to 10,000 per year per child of your 5 29 funds for, you know, pre college education expenses.
Speaker 1 00:28:10 So if you're paying tuition on, now, you can use up to 10,000 per year from a 5 29 to pay for that. So then the question is, well, should I be using my 5 29 for my private school costs? And it always depends. I mean, that's what we typically say, but you know, we'll talk through that a little bit. So ideally, I mean, ideally yes is the answer, but I would think of it from the standpoint of member, I was talking about the tax benefits. So the best tax benefits come when you let it sit there and grow as much as possible for as long as possible. So the best tax benefits come from that last dollar that you spend on education. So if you're thinking about your child, it's like, okay, let's say they're in private school now, you know, they're, they got 10 more years of private school or something.
Speaker 1 00:28:57 And then they do undergraduate for four years. So, you know, you got 14 years left of written checks, ideally with the 5 29, at least you're, you're starting, you're using it, or you're, you're marking it for that last dollar you spend at the fourth year of undergraduate costs because that's where the biggest tax bang for your buck get. That's where you get the max tax benefits by just letting it sit there and then taking it out on the backend. You can also take more risk with it. If it's a long-term investment, you're, you should be, you know, you typically are more comfortable or you, you, you know, you should be able to take more risk, uh, given that it's a long time horizon, you can kind of way or a ride the ups and downs. And so there's, there's much more benefits to, you know, backloading it basically.
Speaker 1 00:29:42 So start there work backwards. So get that last dollar funded and then start to work backwards. So maybe you have a a hundred percent of undergraduate already funded. So like, let's say your five to nine is on track to fund a hundred percent of under undergraduate costs. So then it's like, okay, if you're doing private school, maybe you think about funding senior year, a hundred percent, and then maybe junior year and then work backwards. So ideally, you know, if you're a good saver, you have plenty of assets, you know, ideally you get in a position where the 5 29 is, you know, covering all the years. Um, and you're basically at that point where you're taking it out to fund the current year, but as long as you're like a hundred percent funded, you know, starting with the later years first and working backwards, I mean, that's the biggest, that's the biggest thing is, you know, and then that'll allow you to max out maximize those tax benefits.
Speaker 1 00:30:34 So that that's, uh, if you do, if you do, are planning to do the private school thing or are actively doing private school, definitely want to think about that strategy before you start just taking money out of the five to nine. So the, you know, if, if you're onboard with the whole concept with the 5 29, and you're like, you know, this kind of thing makes sense. You know, typically then it's like, okay, how do I really run the numbers for my situation? Uh, so if you work with us, we're gonna, that's. One of the things we'll do is we'll tell you kind of recommended amounts or we'll help kind of run the scenarios and give you the choices in terms of what we know you can fund. So in a ideal world, if you have plenty of money, you just lumped some fund at all right now and you know exactly what it's going to be, but nobody's there.
Speaker 1 00:31:16 I mean, that's rare. So most people are like, okay, can I w I want to do it monthly? So how much should I be saving monthly to be on track? So what you, like I said, if you're working with us, we'll tell you the monthly number, basically, to get you and we'll show you what it translates to percentage wise, funding, whatever goal your, your goal is. If you're doing it yourself, there's plenty of calculators online. You can run the calculators, run the calculator for, you know, whatever most likely school for undergraduate and run the calculator for what you would need to save monthly, to be on track based, and then incorporate what you already have. And then if you're doing private school before, then add that into the mix. Um, and then all you're doing is backing into what that monthly number needs to be, uh, based on, you know, reasonable investment assumptions that will allow you to be having the necessary funds so that you're able to withdraw each year.
Speaker 1 00:32:12 You need the money. So there's like I said, there's lots of calculators online that can help, um, you know, run those numbers. But, uh, the thing we already talked about is that in reality, the tricky part is, um, or the additional part is like, well, what is the coal that I'm actually saving for it? That's hard to pinpoint. So you can use some of those strategy strategies that talked about is like, you don't have to fund a hundred percent. You can kind of start at 50%. Um, but the key, you know, the, I'd say the, if we're, if we're going to boil it down to what's most important here, I think the biggest thing is starting with like your goals and priorities first and values. And so what's most important. I've seen both ends of the spectrum. I've seen it where people are probably getting too aggressive with education savings, and they haven't really thought through the big picture.
Speaker 1 00:33:03 And it's like, well, you're saving, you're saving great for college, but like, you're not going to ever retire. And maybe it's now, if that's, if you don't plan to retire, then that's all good. But like most people have some other things that they value equal or higher than saving for college. So it's important to look at what are the other things and kind of weigh this in and say, okay, maybe you have student loans and they like keep you up at night. And they like, you know, you're like, I want to get rid of those as fast as possible. Um, in that situation, it's like, well, just hang, wait on the college funding. That's all good. Knock out the thing that's like gonna give you the most non, these are like the nonfinancial benefits, but you know, you sleep better at night. That's priceless focus on that first and that's all good, but it's important to, you know, weigh those priorities and look at the values and try to, you know, work this into the mix and based on what that, where it falls and what your resources are, that's where you start to apply action steps for your situation.
Speaker 1 00:34:07 And you can kind of start to, and that, and that'll help you to feel on track if you're doing it that way, because you're, you're not gonna wonder, like, you know, am I saving enough for retirement? Am I saving it for college? What about this vacation home that I want to do? Or what about the student loans? Or you'll you'll know that it's, it's on, on track with your priorities. So when in doubt though, um, you know, if you're most likely going to be writing checks for college for the future, you know, you can always start small. Um, especially if you're not ready to fully fund this a lot of times, you know, we see people just take like a small step, so you can always set up like a five to nine for your children or whoever you want to save for. That's the other thing I forgot to mention.
Speaker 1 00:34:54 You can use these 5, 2, 2, 9 plans for non doesn't have to be your children. So you can say for other individuals through 5 29, but when in doubt you can just start small. So a lot of states have really low minimums. So, you know, you could start putting 25 or 50 bucks a month, maybe into it to take like a small step. And then each year, if it is still a higher priority, you just dial it up over time. Especially if you're in training, that's like a small step in, if you're in training, it's going to be difficult to fully fund it in most cases. So, you know, you could, at least, if you want to get on, get started, you could at least do like a tiny, you know, or a small step. You maybe like 25 bucks a month, something that's not going to really affect you too much.
Speaker 1 00:35:40 And then that way you can still focus on some of the other things that are higher priorities. But when in doubt, I would say start small and kind of dial up over time. So that is a, that's kind of the rundown there. Um, I'm gonna I'll link to some, um, to that, uh, resource that I think it's helpful breaking down the different states tax benefits. And, uh, also I'll link to our college, uh, funding discussion, uh, episode, but definitely reach out if you have like more specific questions around how this works and either get back to your, cover it in a future episode and go from there. All right. Well, I hope this has been helpful and, um, hope you have a great day. We'll look forward to talking again next week as always, thank you so much for joining us today. If you found this valuable, please give us a review on iTunes and share with a friend.
Speaker 1 00:36:30 Also check out our
[email protected] for all sorts of additional content. See you next time. Finance for physicians is not an investment tax legal or financial advisor. All content included in this podcast is for informational purposes only and should not be considered financial tax or legal advice. Material presented is believed to be from reliable sources and no representations are made by finance for physicians as to another party's informational accuracy or completeness, all information or ideas provided should be discussed in detail with an advisor accountant or legal counsel prior to the implementation. You don't have an advisor or would like a second opinion. Feel free to check out our website for recommended advisors.
