A moment of absolute peace.  The beauty of this historical church.  The sun as it speckled through intricate stained glass windows.  Attention to exquisite detail.  God’s divine presence.  I breathed in calmly.  Standing inside La Basilica de Sagrada Familia in Barcelona for the first time is ingrained in my heart. 

CRADLE CATHOLIC

I grew up a “cradle Catholic.”  Baptized as a baby girl, my parents taught me to never miss a week of mass except in cases of extreme illness.  They sacrificed financially to send me to Catholic grade school and high school.  In their eyes, it wasn’t as much a sacrifice as a path to fostering values such as responsibility, respect, and kindness towards others. 

I’ve carried the same tradition with my own children.  My two older sons attend Catholic grade school, and we have every intention of sending all three boys to Catholic high school.  After all, in St. Louis, the most common question as a young adult isn’t “Where did you grow up?”  Rather, it’s “Where did you go to high school?”  As a non-St. Louis native who spent most of my childhood in Milwaukee, I always see a little disappointment in the other person’s eyes when replying, “I didn’t attend high school here.” 

PAYING THE TUITION BILL

It’s no secret that the cost of private elementary and/or high school can be a financial burden for many families.  We frequently discuss the skyrocketing cost of college but may not appreciate that some parents pay a similar bill far earlier.  For St. Louis families who do not have the financial means to send their children to private school, the Archdiocese recently established the Today and Tomorrow Educational Foundation.

If your family doesn’t qualify for need-based aid or scholarships, how do you make this financial investment in your child’s future?  By budgeting, of course.  In addition to the tuition and mandatory fees, budget for extraneous items like: extracurricular activities, sports, uniforms, supplies, and before and after-school care.  Inquire about a multiple student discount if you have more than one child attending the same parochial elementary school.

THANK YOU, TCJA

The 2017 Tax Cuts and Jobs Act (“TCJA”) also added a special provision for parents who are saving for private education costs.  Qualified distributions from 529 plans have been expanded.  Previously, only college costs were deemed “qualified.”  Now, beginning in 2018, you can withdraw up to $10,000 annually per student for private grade and/or high school costs.

Married couples in Missouri can get a state tax deduction up to $16K annually ($8K for single tax filers) on any 529 plan contributions – not just contributions to a home-state plan.  This means, for example, that you could invest $16K this year into an Ohio 529 plan and still benefit from a Missouri tax deduction.  If you’d like, you could later withdraw $10K from the 529 plan for high school tuition and leave the other $6K to grow.  You’d pay no income tax on the withdrawal.

State 529 plans generally want to avoid having you contribute, wait a week, and then immediately withdraw the money.  Some already put parameters around the waiting period between contributions and withdrawals.  From a financial standpoint, I’d suggest waiting even if it isn’t mandatory … leaving extra time to let the initial investment grow. 

STRATEGIZE

If you want to withdraw from the 529 plan for both private elementary AND college expenses, consider establishing two different 529 plans.  Prior to TCJA being passed, “age-based” investment options were designed strictly for college savings.  As the beneficiary grew closer to age 18, the investment mix gradually became more conservative. 

If you start an account when your toddler is two years old and begin withdrawing at age six, you run the risk that the account is too aggressive in an age-based investment option.  When markets are performing well, that’s not a huge issue.  But when stock market performance is down, it is better to withdraw from safer assets such as cash and bonds.

I’d argue that you should always have an expected timeline for withdrawal before you even make the contribution.  That timeline will guide your investment decisions on a direct-sold 529 plan. 

ABLE ACCOUNTS

While we’re on the topic of 529 plans, let’s discuss ABLE accounts.  Suppose you opened and funded a 529 plan for your child or grandchild years ago.  Now you realize that your child may not be able to attend college due to disability.  529 plan assets can be rolled into ABLE accounts.

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