An Encore Education for Your Encore Career

An Encore Education for Your Encore Career

By Richard J. Polimeni, Director of Education Savings Programs for Bank of America Merrill Lynch

Posted on October 10, 2016

A second career may require re-educating yourself.

College campuses are getting more age diverse. According to the U.S. Census Bureau, over 1.3 million Americans aged 45 and older were enrolled in college undergraduate and graduate schools in 2012. ¹ These students are not going back to study Voltaire. Rather they have a practical goal in mind: getting a degree and growing their skills as they transition to second careers.

And to get that college degree can be quite expensive… According to the College Board, tuition and fees at private four-year schools rose 3.8% to $30,094 for the 2013-2014 academic year. ² Tuition costs are just the beginning. Returning to school could require a leave of absence from work; plus the cost of transportation and books add up.

Finding the Money

If you’re one of the millions of Americans considering an encore education for your encore career, you may be wondering where you’ll find the money to pay for your degree without sacrificing your other financial goals. Inevitably, returning to school will involve some costs and tradeoffs. You may have to adjust your priorities and find places to cut expenses. If the program or specialty you are pursuing involves a large financial commitment, you may also want to explore one of the following three funding options:

• A 529 college savings plan. These college savings plans are not just for college-bound teens. A 529 college savings plan can be started to support your own continuing education goals. In fact, if there’s money left over from the 529 college savings plan you created for a child after they’ve graduated, you can change the beneficiary to yourself.

If you’re planning to enroll in school in the next year or two, starting a 529 college savings plan for yourself may not make sense. However for those with a few years of lead time, it is worth considering. The main advantage of a 529 college savings plan is that any money you contribute has the potential to grow tax free. Also, assuming you use it to pay for tuition or other eligible higher education expenses, your withdrawals are tax-free as well. ³

• A home equity line of credit. You can use all or part of the line of credit—and pay interest only on the amount you borrow. Interest on such lines of credit may be tax deductible, and they are typically available with no annual fees or penalties for prepayment.

Leveraging your investments. Some of your investments can be liquidated to cover your tuition. However, doing so may create a tax liability and put a dent in your overall investment strategy. There is an alternative offered by some financial institutions called a secured line of credit. Similar to the way you can use the equity in your home as collateral when you take out a home equity line of credit, your investments can be used as collateral to establish a flexible line of credit. These accounts provide access to money as you need it and typically don’t have maintenance or application fees. However, lines of credit that leverage your investments as collateral do entail risks, which you should discuss with your financial advisor before making a decision.

Each of these choices has advantages and disadvantages. You should review them with your financial advisor and/or your tax advisor as you look for ways to help you meet your new educational and career goals.

For more information, contact The Menashe Morley Group in the Rancho Santa Fe office at 858-381-8113. The Menashe Morley Group, serving the community for over 30 years: David Menashe is a Senior Vice President and Wealth Management Advisor, Bruce Morley CRPC is a First Vice President and Wealth Management Advisor and John Naviaux CPWA is a Vice President and Wealth Management Advisor for Merrill Lynch, Pierce, Fenner & Smith Incorporated. Before you invest in a Section 529 plan, request the plan’s official statement and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the 529 plan, which you should consider carefully before investing. You should also consider whether your home state or your beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s 529 plan.

The investments or strategies presented do not take into account the investment objectives or financial needs of particular investors. It is important that you consider this information in the context of your personal risk tolerance and investment goals. Borrowing against securities has risks. Individual requirements, portfolio composition, and risk tolerance, as well as capital gains taxes, portfolio performance expectations and investment time horizon, should be considered. The firm can sell your securities or other assets without contacting you. All loans and collateral are subject to credit approval. Always consult with your independent attorney, tax advisor, investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax, or estate planning strategy. Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) a registered broker-dealer, Member SIPC and other subsidiaries of Bank of America Corporation (“BofA Corp”). Investment products: Are Not FDIC Insured, Are Not Bank Guaranteed, and May Lose Value.
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¹ U.S. Census Bureau, U.S. Summary: 2012, Census US Profile

² CollegeBoard, Trends in College Pricing 2013.

³ To be eligible for favorable tax treatment afforded to any earnings, portion of withdrawals from Section 529 accounts, such as withdrawals must be used for qualified higher education expenses as defined in the Internal Revenue Code. Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax as well as state and local income taxes.

Photo Caption: Menashe Morley Group

Photo Credit: Photo by Jennifer Nelson