Develop a College Investment Plan

College tuition, fees, and associated expenses (like housing) have risen at a rate that’s outpaced inflation. It’s a realistic possibility that education could be even more expensive by the time your child is ready for college. It’s a good idea to get a picture of college expenses now so you know how aggressively you’ll need to save.

Determine the costs.

The Janus Henderson College Planner can help provide a snapshot of college costs specific to your chosen institution. Even if you're not quite sure where your student will be attending, you can estimate general costs for in-state and out-of-state tuition and room and board for each state.

Determine funding options.

When funding an education strategy, consider all sources of potential savings such as your student contributing via work savings, or gifts from family members. Also keep in mind that scholarships, work-study opportunities and loans are options to help fund higher education.

Estimate college costs for your state.

JANUS HENDERSON COLLEGE PLANNER

Working backward from your goal will simplify your approach.

Knowing how much money you'll need and when you'll need it will drive decisions today and tomorrow. A specific goal helps you define your:

• Time horizon: How long will you keep your money in the investment? If it's college you're saving for, consider how many more years you can invest before you will need to start paying for tuition. Tailor your investment mix based on this schedule.
• Risk tolerance: How you invest should be influenced by how much risk you are willing to take. Understanding your risk tolerance helps define which investments will be best. The asset allocation planner can help you discover your risk tolerance.
• Investment vehicle: Finding the right type of account that matches your strategy is critical. You have many options, including tax-deferred education savings accounts, custodial accounts and even retirement accounts that can be used for certain educational expenses.

Janus Henderson offers two primary investment accounts for education savings:

Coverdell Education Savings Account (ESA)

For Education and College Expenses

• A parent or guardian can open an account for a child under age 18.
• Earnings accumulated on contributions grow tax-deferred.
• Maximum annual contributions are set at $2,000.
• Once the minor turns 18, ESA contributions are generally no longer permitted and assets usually must be distributed by age 30.
• The student's Social Security number is needed, so it can't be established before a child's birth.
• Qualified withdrawals used for tuition, books and education costs can be federally tax-free.
• Withdrawals can be used for both pre-college and college qualified education expenses.
• These assets may affect financial aid eligibility.

Learn more about the Coverdell Education Savings Account.

Custodial Account

For education and more

• Account can be opened for a child under 18 years of age.
• Can be used at anytime and for the benefit of the child beyond the normal cost of providing for him or her.
• There are no contribution maximums, but gifts to this type of account are considered irrevocable.
• An adult, which could be a relative, must be named custodian and make account decisions until the child is of age.
• Not a tax-deferred account and withdrawals can be made at any time without IRS penalties. Taxation of earnings from the account will depend on the minor's tax status, income and age.
• Once the minor reaches legal termination age (Usually age 18 or 21 and varies by state), they can take control.
• These assets may affect financial aid eligibility.

Learn more about the Custodial Account.

Other Accounts

Outside of designated child accounts, consider personal or retirement accounts for more ways to maximize your college savings.