The college funding strategy that covers all scenarios
College costs are unpredictable. Your child might attend an expensive private university, choose a more affordable state school, earn scholarships, or skip college entirely. The key is building a savings strategy that works regardless of which path they choose.
The smart approach: fund roughly three years of private college expenses (currently about $210,000 total) through 529 plans, then leverage the new flexibility rules that make over-funding less risky than before.
The funding target that hedges all bets
Target: $210,000 per child (about $70,000 annually for three years)
This amount covers:
- Expensive private schools: Provides substantial funding toward total costs
- State universities: Likely covers most or all expenses
- Scholarship scenarios: Creates surplus that can benefit siblings or convert to retirement savings
- Alternative paths: Funds can support trade schools, apprenticeships, or other qualified expenses
Starting early makes this achievable—$200 monthly from birth reaches about $200,000 by age 18 assuming 6% annual growth.
The new Roth conversion game-changer
2024 legislation allows unused 529 funds to convert to Roth IRAs for your child, eliminating the biggest risk of over-funding education accounts.
Conversion rules:
- Maximum $35,000 lifetime per beneficiary
- 529 account must be open 15+ years
- Beneficiary needs earned income in conversion years
- Funds contributed in the last 5 years aren't eligible
- Annual conversions limited by IRA contribution limits
Why this matters: Unused education funds become tax-free retirement savings, supercharging your child's financial future.
Lump sum vs. dollar cost averaging
The eternal question: Should you invest a large amount upfront or contribute gradually over time?
Lump sum approach:
- Pros: Maximizes time in market, typically higher ending values, takes full advantage of compounding
- Cons: Higher short-term volatility, requires significant liquidity upfront
- Example: $30,000 invested for 18 years at 6% = $85,800
Dollar cost averaging:
- Pros: Reduces emotional risk, aligns with cash flow, helps avoid timing regret
- Cons: Delays market participation, usually results in lower ending values
- Example: $250 monthly for 10 years, growing 8 more years = $73,000
The verdict: Lump sum typically wins with 10+ year timelines, but dollar cost averaging works better if you lack upfront liquidity or need behavioral discipline.
Maximizing 529 flexibility
Change beneficiaries strategically If your older child doesn't need all their funds, transfer unused amounts to younger siblings. This keeps money in the family while maintaining tax advantages.
Coordinate with grandparents Ask grandparents to contribute to 529s instead of traditional gifts. This builds meaningful education wealth while potentially reducing their taxable estates.
Use for K-12 expenses 529s can fund up to $10,000 annually for private elementary and secondary school tuition, not just college.
Plan for multiple children You don't need equal amounts for each child. Academic interests, scholarship potential, and career paths vary significantly.
Common college savings mistakes
Starting too late The tax-free growth benefit requires time to compound. Starting when kids are in high school severely limits the advantage.
Under-funding due to flexibility fears The new Roth conversion rules make over-funding much less risky than before.
Ignoring state tax benefits Many states offer deductions for 529 contributions—free money that reduces your effective contribution cost.
Choosing poor investment options 529 plans offer various portfolios. Age-based options that become more conservative over time usually make the most sense.
Funding 529s before retirement Don't sacrifice your own retirement security for your child's education. They can borrow for college; you can't borrow for retirement.
Quick Answers: College savings questions
"Should I fully fund 529s before other investments?" No. Prioritize employer 401(k) matches and your retirement funding first, then allocate surplus to education savings.
"What if college costs keep rising faster than my savings?" The three-year private school target provides a solid foundation regardless of cost inflation, and unused funds can become retirement savings.
"Can I change my mind about lump sum vs. dollar cost averaging?" Yes. You can start with one approach and switch as circumstances change.
"What happens if my child chooses a different education path?" 529 funds now qualify for trade schools, apprenticeships, and can convert to Roth IRAs—much more flexible than before.
Can Titan help with college savings planning?
Yes. If you're a Titan client, we can:
- Model different contribution scenarios to determine optimal funding strategies for your family
- Coordinate 529 planning with your overall investment and tax strategy
- Help select appropriate 529 plans based on your state's benefits and investment options
- Adjust your education funding approach as your children's paths become clearer
The goal is building education wealth efficiently while maintaining flexibility for whatever path your children choose.
Ready to optimize your family's college savings strategy?
Talk to a Titan advisor to create an education funding plan that balances adequate preparation with financial flexibility.
About Titan
Titan is a modern Registered Investment Advisor (RIA) helping high-earning professionals navigate complex money decisions. With a dedicated advisor and access to proprietary strategies and alternative investment options, we're your go-to wealth team for everything from RSUs to retirement. Learn more at www.titan.com.
