A Little Bit of Knowledge with David Tepp

Saving for Higher Education Part 2 – What is your savings strategy?

David Tepp CPA, PFS, MBA 

Most people want to save for their children’s education but what is the best strategy? 

There are three different savings strategies from which you can choose: 

1)         save for 100% of all education costs so that your child has no liability

Sign Up for E-News

2)         save a specific dollar amount and leave the remainder for your child, and

3)         target a specific percentage of the cost leaving the remainder for your child 

This is entirely a personal preference and while there is no entirely right or wrong answer, we encourage clients to avoid sacrificing retirement savings for education savings.  Before deciding, first ask:

What are your costs?

The current cost of college education can be easily quantified - the US Department of Education offers detailed cost information on most universities.  Here is some recent data on a few well-known universities:








Note that these are approximate costs from 2015 and if your child will not be going to school for many years, then you will need to factor the cost inflation.  The inflation rate can vary wildly, from as little as 2% to as much as 7% or more, and will have a substantial impact on your savings plan. 

529 Plans

These accounts have the virtue of tax-free earnings as long as the funds are used for qualified educational expenses.  Certain states offer tax benefits for contributions as well.  Annual contributions are subject to gift tax rules which, for 2017, are $14,000 per person.  This means that a husband and wife can each provide a gift of $14,000 to the same child each year; essentially, a $28,000 annual cap.  Consult your CPA regarding larger gifts.

529 accounts have distinct advantages but two significant drawbacks: 

1)      Use of the funds is restricted to educational expenses.  If 529 account funds are used for anything other than qualified educational expenses, the amounts will be subject to taxes and, possibly penalties. 

2)      The investment rates of return are often unimpressive due to limited investment options and account fees.

We advocate using 529 plans as an important, but perhaps not the only, savings vehicle.  To supplement 529 savings, consider utilizing a personal, taxable investment account.

Personal Investment Accounts

Investing funds using a personal or joint account offers substantial appeal. You have a nearly unlimited array of investment options so that you can maximize your returns.  Further, the funds can be used for nearly any purpose such as education, life events and unforeseen expenses.  The caveat is that returns are subject to Federal and state income taxes.  Accordingly, you should invest with great care so that you garner a desirable after-tax rate of return.

The more unsure you are about your child’s college costs, the better it is to invest in flexible, personal investment accounts.

Other considerations

Drawing down cash from your home equity or cash value life insurance are options but you may be better off leaving the equity to pay for future retirement expenses.  Certain advisors may suggest using your IRA’s for education planning but we discourage this strategy in nearly all circumstances.


Put succinctly:

#1        Establish a strategic plan as early as you can.

#2        Invest your money carefully and look for safer options as your child gets closer to their college years.

#3        The greater the uncertainty regarding the cost of education, the greater flexibility you will need from your savings plan.

#4        Monitor your savings and educational costs on a regular basis.

#5        Seek guidance from professionals as needed.

In part 3, we will shed some light on education loans, grants and scholarships!


David Tepp, President of Tepp Financial Planning is certified in Financial Planning and a licensed CPA in New York and New Jersey. He can be reached by email at dtepp@teppfp.com and by phone at 908-301-1200.  His company is located at 111 Quimby Street, Suite 1, Westfield, NJ.  For further information, please visit:  www.teppfp.com

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer.

TAP Into Another Town's News:

Sign Up for E-News


Dozens of Dogs Rescued from Squalor in Roselle, According to Authorities

June 20, 2018

ROSELLE, NJ — A Roselle man will be charged with multiple criminal offenses after more than 40 dogs were discovered living in severely unsanitary and inhumane living conditions in his home last week, according to the Union County Prosecutor’s Office and New Jersey Society for the Prevention of Cruelty to Animals (SPCA).

According to the authorities, members of those two agencies, ...

Mayor Brindle’s Update, June 19

June 20, 2018

The following are highlights from the update that Mayor Shelley Brindle gave at Tuesday night’s town council meeting.

Good evening everyone! It’s been another busy two weeks with lots of great stuff happening. These past two weeks were particularly fun because I spent lots of time with lots of kids:

-I met with Franklin third graders in Mindowaskin Park as part of their day-long ...

Upcoming Events


Thu, June 21, 7:30 PM

Mindowaskin Park, Westfield

Westfield Summer Concert Series

Arts & Entertainment


Fri, June 22, 7:00 PM

TD Bank Ballpark, Bridgewater

Somerset Patriots vs. Southern Maryland Blue ...


Fri, June 22, 7:30 PM

Crossroads, Garwood

Benefit Concert

Arts & Entertainment Giving Back

Westfield Police Blotter: Tires Slashed on Scotch Plains Ave & More

June 13, 2018

June 6, 2018 3:05 p.m.

A resident of the 200 block of sunset avenue reports being the victim of a fraud. Unknown actor(s) utilized victims credit card to purchase an appliance valued at $1,000.00. Victim did not sustain any monetary loss during this incident. 

June 6, 2018 6:50 a.m.

A resident of the 100 block of Scotch Plains Avenue reports being the victim of a criminal mischief.

State Farm Lowers Auto Rates in New Jersey

June 20, 2018

State Farm Indemnity Company will cut its rates in New Jersey. As a result, its overall personal auto rate will drop by up to 2.7%. The total state-wide expected impact for State Farm Indemnity Company by this rate decrease in New Jersey will be approximately $15.5 million.


“State Farm Indemnity Company always looks to create long-term value for its customers with the products ...

Let's Talk About Suicide

In our world today, it seems our children, no matter the town, state, education, family unit, socioeconomic background, ethnicity or religion are grappling with complex, confounding and complicated issues not even fit for a middle-aged adult. Sadly, one of these issues is suicide. With mental health gaining more attention, the stigma appears to be dissipating but when a mental health ...

Cool Ways to Save Money This Summer

As the summer temperatures rise, home cooling costs rise as well. But there are ways to help save money without sweating the heat:

To increase your cooling system’s efficiency by as much as 20%, get it checked out for summer.  A technician will clean the condenser, make sure you have the optimal amount of refrigerant, and ensure the airflow over the coil is ...

Understand the New Law for Paid Sick Leave

Paid sick leave is now the law in New Jersey.

New Jersey has passed a paid sick leave law which preempts paid sick leave ordinances adopted by several cities and towns so there is now one uniform law in this area for New Jersey employers. Here is what you need to know about the new law.

33 Homes Sold June 10 to June 17 in Westfield, Scotch Plains, Fanwood, Mountainside & Cranford

Thirty-three Homes sold from June 10 to June 17, 2018, in Westfield, Scotch Plains, Fanwood, Cranford and Mountainside.*


TOWN         ADDRESS                      STYLE    ...

Westfield 3rd Graders Receive Top Honors at Mock Trial Competition

Westfield third graders recently received top honors for three mock court cases they presented at the New Jersey Bar Foundation Law Fair.

“I am proud that, out of 84 entries submitted, our third grade students (now fourth graders) in the Gifted Program have won 1st Place, 2nd Place and Honorable Mention in the 3rd Grade category [of the Law Fair ...

Maximizing Your Portfolio’s Returns -- Beware the Taxman

The old adage in the investment world is that it is not what you make, but what you keep that counts.  Investors often overlook the ultimate deflator of portfolio returns – the taxman. An astute global asset allocation should be the number one priority for investors.  However, there are preferred ways to distribute this asset allocation over the spectrum of taxable and ...


In honor of the Lubavitcher Rebbe's (of righteous memory) 24th  Yahrtzeit (anniversary of his passing) this coming Saturday the 16th.

Excerpts from an address given by Nobel-laureate Elie Wiesel on April 7, 1992, at a congressional dinner held in Washington on the occasion of the Rebbe's 90th birthday.

Some of you are aware of my admiration, not only ...

Healthy U Spring Symposium Marks 10 Years of Community Impact

WESTFIELD, NJ — More than 100 Healthy U champions and partners from YMCAs and schools from all over the state gathered at MetLife Stadium in East Rutherford on May 18 to celebrate 10 years of community impact. Healthy U was also formally presented with the 2017 CATCH® Award for Excellence in State Health. 

CATCH (Coordinated Approach to Child Health) is the ...

Bridgewater Mall Shut Down for 2 Hours After Fight Breaks Out

June 14, 2018

BRIDGEWATER, NJ — No injuries have been reported after a fight involving a crowd of people shut down the Bridgewater Commons Mall for two hours Thursday evening.

According to a Nixle alert from the Bridgewater Township Police Department at 9 p.m., the investigation at the mall has been completed, and the mall was resuming normal business operations.

According to Somerset County ...


Eric Lieberman, 47, of Scotch Plains, passed away suddenly and unexpectedly Tuesday, May 22, 2018 ...
Read more