(GCC: Taxes and college tuition are 2 of the greatest expenses parents will face. But what if there was a tax hack that could reduce the cost of both? Today’s guest post shares the details… Read on!)
Hi Go Curry Cracker readers! I’m Kim from The Frugal Engineers. We are a family of three retiring in our thirties in Wyoming, and I’m here to talk tax hacking for college!
Over the last nine years of running our own engineering businesses, we’ve been tracking various tax optimization strategies. One of our favorite tax hacks is using our health savings account for college funds. By lowering our tax burden and maximizing our eligibility for college financial aid, we’re able to retire earlier and enjoy more time with our daughter. This post details part of our overall strategy for college planning in early retirement.
We max out our health savings account (HSA) each year that we’re eligible based on our health insurance. For a family of three in 2019 with a qualifying high deductible health insurance plan, that’s $7,000 a year. We pay cash for any medical, dental and vision expenses that we incur right now and save the receipts for reimbursement during the college years.
In fact, I refer to medical receipts as “future college tuition vouchers” in our house.
Since having a kid of our own I have often found myself in the company of other parents. And let me tell you, there is nothing in this world parents want to talk about more than the latest exploits of Little Johnny or Young Suzie.
“Oh man, you do NOT want to know what I found in Johnny’s diaper!” (you’re right)
“Oh my gawd, Suzie said the cutest thing today! Let me tell you all about it.” (that’s, uh… really cute)
And my personal favorite:
“Yeah this kid is wicked smart… probably gets it from his old man, hehe. So anyway, I opened up a 529 plan for him last week. We even did that thing where you contribute 5 years’ worth all at once. You knew you could do that, right?”
Me: “Yeah, uh.. Jr doesn’t have a 529.. And we have no plans to start one.”
The University of Washington (Winnie’s Alma Mater)
With a child on the way, we have lots to think about. What to name him/her, how to get all the proper nutrients, natural birth vs. C-section, and how to pay for college
It might be a little early to be thinking about college, but that is the point of biggest concern shared in comments on the blog and on reddit about our estimate for the cost of raising a child. In general, people are concerned that I am too optimistic about stock returns and not pessimistic enough about the rate of growth in tuition
