SHEARWATER CAPITAL

For physicians with children, saving for college is often a key financial goal. With education costs rising faster than inflation, it is important to start early and use tax-advantaged strategies that maximize the impact of every dollar saved.

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The most popular vehicle is the 529 plan, which allows investments to grow tax-free and for tax-free withdrawals when used for qualified education expenses such as tuition, books, computers, and room and board. Many states also provide tax deductions or credits for contributions.

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In addition to 529s, there are alternative approaches that may fit certain situations:

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• Roth IRAs (for parents or teens): While designed for retirement, Roth IRAs can also be tapped for education expenses without penalty. For parents, this provides flexibility to balance saving for retirement and your children’s college education. Alternatively, opening a Roth IRA for your teenaged child with earned income (such as from a summer job) can be a powerful tool to teach them about investing and the unique advantages of Roth accounts.

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• Custodial Accounts (UGMA/UTMA): Assets are held in the child’s name and can be used for any purpose, not just education. However, they may reduce financial aid eligibility and the child gains control of the assets at the age of majority.

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• Taxable Investment Accounts: In some cases, if flexibility is a priority, building a dedicated taxable account for education savings may be a practical option.

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We work with physicians to evaluate the right combination of tools, ensuring college savings align with family priorities and long-term financial independence.