January, 2013 Michael Bergines | President, CoPilot Financial

Your Financial Flight PlanInvesting for Your Child’s College Education

Define• Smart college funding

Explain• The pros and cons of different methods of investing for

college

Inspire • Your next steps toward completing a financial plan that

will help you pay for higher education

Goals for Today

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I understand where you’re coming from . . .

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• Costs have risen 498% since 1985

• College debt now exceeds credit card debt – over $1 TRILLION!

• Higher education may be your biggest outlay of money - ever

• College funding can no longer be considered in isolation

“How do I save for this and retirement?”

The College Crisis

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1985 2001

Overall Consumer Prices

College Education Inflation Rate

115%

498%

2011

• Is higher education right for your child? It’s still a great investment (for certain people)

• There are many paths to a 4-year degree

• How much should you pay for (if any)? How much should your child pay (if any)? Undergrad? Grad school?

• Think long term - Do you know how paying for college might affect other family members? Might effect your retirement?

A Family Decision

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Benefits of Developing a Financial Plan for College

• Get out ahead of “education inflation”

• Manage your child’s education debt level

• Keep your children focused on school instead of bills

• Teach your children about financial decision making

• Share your values with your children

• Protect your retirement and set your financial priorities

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Preparing for Takeoff Preparing for Takeoff

• Start where you want to finish

– Work backward to determine how you’ll get there

• Assess your situation

– Age of children

– Years to retirement

– Retirement lifestyle

– Current savings/investments

– Other financial priorities

– Time and/or desire to pursue scholarships

Step One: Define Your Destination

“The first step to getting the things that you want

out of life: Decide what you want.”

– Ben Stein

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Step Two: Identify Your Travel Companions

• Grandparents and other family members

• Child’s contributions

• Scholarships/Grants

• Your contribution - education investment vehicles

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Step Three: Prepare for Turbulence

Things you can’t manage

• Fluctuating investment growth rates

• Fluctuating rates of education inflation

Things you CAN manage

• Qualifying for financial aid and access to scholarships

• Family spending and debt levels

• A thoughtful, customized strategy for you and your family

Step Four: Select Your EquipmentWhich investment vehicles will get you where you want to go?

529 Plans - Tax-advantaged investment specifically for higher education expenses

UGMA/UTMA - Account that holds assets for a minor, allowing estate tax and some investment tax benefits

Standard Investing - Investments in market and non-market investments - stocks, bonds, real estate, etc.

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529 Plans

Pros Cons

No tax on growth or distribution for school-related expenses

Penalties for non-school related distributions

You maintain control of the assets

Fees and quality of investment returns vary by state

Considered child’s assets for financial-aid purposes

Multiple 529s needed for families with multiple students in college

Anyone can contribute – contributions considered gifts for tax purposes

Investments may be changed only 1x per year

State income tax deduction in some states

Can accept only cash

Transferable to any student

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529 Plans | UG

MA/U

TMA | Standard

Are 529 Plans Right for You?

Act if:

•You’re investing early in your child’s life

•You expect relatives to contribute

•You want to maximize chances to qualify for financial aid

•You prefer to maintain control over assets

Avoid if:

•Your child may not need the entire amount for college (or may not attend)

•You want to adjust investments more than 1x per year

•You are interested in using non-market assets to fund your child’s education 11

529 Plans | UG

MA/U

TMA | Standard

UGMA/UTMA

Pros Cons

Proceeds can be used for more than educational expenses

Donor has no control over money after student turns 18

A portion of investment earnings and gains are taxed at the minor’s tax rate

Irrevocable gift – cannot change beneficiary

No restrictions on investment amounts

Contributions are not part of the donor’s estate (unless the donor is the custodian)

Considered child’s asset for financial-aid purposes

Donations treated as gifts for tax purposes

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529 Plans | UG

MA/U

TMA | Standard

Is UGMA/UGTA Right for You? Act if:

•You’re investing early in your child’s life

•You may use funds for a private secondary school or other expenses for your child

•You’d like to reduce the size of your estate

•You’d like your child to have flexibility for how money is used

Avoid if:

•You want to control the investments after your child turns 18

•You would like flexibility to change the beneficiary

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529 Plans | UG

MA/U

TMA | Standard

Standard Investing

Pros Cons

Breadth of investment options – any asset can be used

Considered parental assets for financial-aid purposes

Management flexibilityTaxed as short- and long-term gains

Proceeds can be used for any purpose

Maintain control of assets

No limits on how much you can invest

Can give to multiple recipients in the same year

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529 Plans | UG

MA/U

TMA | Standard

Is Standard Investing Right for You? Act if:

• Investment choice is important to you

• You enjoy managing your money

• You would like to have flexibility with how proceeds are used

• You would like to use non-market investments

Avoid if:

• You are planning to invest while your child is young

• You want to minimize the tax impact on any investment

• You want to maximize your chances to receive financial aid

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529 Plans | UG

MA/U

TMA | Standard

Step Five: Choose Your CoPilot

• They help create and execute a flight plan to get you to your destination

• They realize that each route to a destination may be different or have to change

• They are there to assist you, not to fly the plane

• They provide proactive, periodic communication on flight status

• They are there from take off to landing

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Starting Your Journey

1 About CoPilot Financial

Our Vision •Help young families to build fulfilling, financially stable lives

•Help our clients sleep well, live better, and dream bigger

Our Beliefs•Everyone should have access to a quality financial partner & affordable advice

•Financial professionals should operate with transparency and simplicity

•A comprehensive financial plan should drive investment and financial life decisions

•Advisor compensation should be fee-only to ensure total client alignmentFlight Plan | CoPilot Map | CoPilot GPS | CoPilot 360 Investment Advice

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Financial Navigation for Your Family

1 Summary

• College funding could one of the biggest expenditures you will ever make

• Use it as a family teaching and communication moment

• Have a point-of-view and a strategy

• Start early – preserve your retirement and your child’s potential future

• Choose your investment vehicles that fit your strategy

• 529s, UGMA/UGTA, Standard Investing

• Consider enlisting a professional to provide holistic (not just investment) support

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1 Questions?

Mike Bergines

mike@copilotfinancial.com

www.copilotfinancial.com

1-888-987-4568

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Please let us know if you would like to chat informally about your personal situation