Earlier this week, I published a post about how 529 Plans are not necessarily the best way to save and invest in college. Today, I’d like to share with you 8 key insider investment strategies that will help you make the right decision in addition to consulting with a certified college planner.

The 8 key insider tips on exactly how you can prepare to start saving strategically:

1.         U.S. Series EE bonds are tax-deferred or tax-free (when used to pay qualified education expenses), low-risk investments that can be used as part of the long-term college financial aid plan.

2.         Zero coupon bonds are currently taxed investments that lock in the current rate of interest and a specific amount on maturity.  They can be used as part of the long-term college financial plan.

3.         Municipal bonds are tax-free, low-risk investments that lock in the interest rate.  They can be used as part of the long-term college financial plan.

4.         Mutual funds are growth orientated long-term investments that allow for the switching of investments without incurring sales charges.  They can be used part of the long-term college financial plan.

5.         QTPs are tax-deferred, and possibly tax-free, accounts that are used to pay for tuition, fees, and room and board at the colleges specified in the investment contract.  The gifts to these accounts can be spread over five years, which allows for large one-time gifts to these programs.  Since the owner of the account can switch beneficiaries, the owner can maintain some control over the funds.

6.         A Roth IRA is a long-term investment that grows tax-deferred.  The withdrawals made from these accounts after age 59½ are tax and penalty-free.  The non-deductible original contributions may be withdrawn tax-free for any use.  In addition, there will be no 10% early withdrawal penalty on withdrawals made before age 59½ that are used to pay qualified college expenses.

7.         Traditional IRAs may be tax-deferred long-term investments.  They can be withdrawn penalty-free (10% penalty for withdrawal before age 59½) to pay qualified college expenses.  The contributions to these accounts are tax deductible.

8.         Real estate is a long-term growth-oriented investment whose appreciation in value grows tax-deferred and will be taxed at the favorable capital gains rate when sold.  If the real estate is rented, it may generate significant tax losses (through depreciation).

These investment vehicles all have pros and cons and I must add that it is extremely important that families work with a certified college planning specialist and not just a financial planner as the higher education rules need to be considered in order to get financial aid. For example, certain assets/investments disqualify families in financial aid and every family is unique. Most financial advisors use a cookie cutter approach to saving for college versus understanding the student’s college dreams, how the colleges view their assets, and how much the family can truly afford for college.

College Planning Expert Brian Safdari is a strategist and America’s leading authority when it comes to maximizing college acceptances, reducing out-of-pocket costs as well as assisting you and your family to successfully navigate through the higher education system. His own story has compelled him to help others in maximizing their education and minimizing the cost. For more on Brian and how The College Planning Experts can help you: sign-up for a FREE workshop nearest you or contact us.