As a physician, balancing student loans, a demanding schedule, and your child’s future can feel overwhelming.
In this quick video, Ben Martinek breaks down realistic college savings strategies—from Roth IRAs to 529 plans—so you can support your child’s education without sacrificing your own financial stability.
Transcript:
College Planning Strategies for First-Generation Physicians
Hi, everyone, I’m Ben Martinek with Bona Fide Finance. If you’re a first-generation physician, you already know what it’s like to juggle a lot of responsibilities—caring for your patients, managing limited time, handling responsibilities at home, or eventually taking care of your parents.
And while we’re thinking about your parents, you might also be concerned about your own kids, like saving for college. How do you prioritize that responsibility? Here are a few tips on what we advise our clients when it comes to funding a college education.
Why Roth IRAs Are a Smart Choice for College Savings
The first option, which many people don’t commonly consider, is the Roth IRA. A Roth IRA is an individual retirement account that allows you to save money outside of employer-sponsored plans like a 401(k), 403(b), or 457.
One of the unique benefits of a Roth IRA is that you can use the money for college education costs. While the account is primarily intended for retirement, it can serve a dual purpose: saving for your future and your child’s education.
The key caveat is to ensure you don’t neglect retirement savings—your child can always take out student loans if necessary. But Roth IRAs provide flexibility and tax-free growth for both goals.
Funding College With a 529 Plan
Another popular option is a 529 plan. A 529 is specifically designed to save for college and comes with tax advantages if the funds are used for qualified education expenses.
Many clients are hesitant to fully fund a 529 because they aren’t sure how much their child will need. A common strategy is to fund about 50% of expected college costs.
The advantage of a 529 over other accounts, like a taxable brokerage account, is the potential for tax-free growth. Starting early—10, 15, or even 20 years before college—can significantly increase the value of your savings.
While there are some limitations, 529 plans remain one of the most tax-efficient ways to save for education.
Taxable Brokerage Accounts for Flexible College Savings
If you want more flexibility, a taxable brokerage account is another option. These accounts are typically held in your name or jointly with your spouse, depending on state rules.
Investment growth in a taxable account is subject to taxes, which can be sizable for high-income earners. However, using tax-efficient funds can help maximize growth. This strategy allows you to invest funds without the restrictions tied to a 529 plan or Roth IRA.
UTMA and UGMA Accounts: Gifting Money to Your Child
Lastly, you might consider UTMA (Uniform Transfers to Minors Act) or UGMA accounts. These accounts predate 529 plans and allow you to gift money directly to your child.
Once the money is in the child’s name, it grows at their tax rate, which is often lower than yours. However, you need to be aware of the “kiddie tax.” While less commonly used today, UTMAs can still be a viable way to save for college expenses.
Prioritizing College Planning Alongside Family Responsibilities
As a physician, you’re balancing patient care, your own well-being, and your family’s needs. Making thoughtful college savings decisions is part of taking care of your children’s future.
If you’d like to learn more about college planning or creating a strategy tailored to your family, reach out to Ben Martinek with Bona Fide Finance at hello@bonafidefinance.com. We would love to work with you.
Thanks so much for watching!