From 24/7 Wall St. · Ryne Mauck · · 1m 20s
Paying Grandchild's Tuition at 71
Grandparents at 71 use 3 ETFs to fund grandchild tuition without risking retirement portfolio.
In brief
Grandparents at 71 use 3 ETFs to fund grandchild tuition without risking retirement portfolio. Grandparents at 71 can fund grandchild tuition payments using three specific ETFs to avoid depleting retirement savings. Originally reported by 24/7 Wall St..
Tuition Payments from Retirement Portfolio
Every tuition check for a grandchild shrinks the same retirement portfolio that must fund the rest of retirement.
Tax Break for Grandparent Tuition Payments
Tuition payments to schools are not treated as gifts under 26 U.S.C. § 2503(e)(1) and (e)(2)(A).
Three ETFs for Tuition Payments
The iShares 1-3 Year Treasury Bond ETF (NASDAQ:SHY), SPDR Portfolio S&P 500 ETF (NYSEARCA:SPYM), and SPDR Portfolio S&P 400 Mid Cap ETF (NYSEARCA:SPMD) fund tuition payments.
SHY for Next Bill Payments
SHY tracks short-term U.S. Treasuries maturing in one to three years with a 0.15% expense ratio.
SPYM for Payments Years Out
SPYM covers payments several years out with a 0.02% expense ratio and 1.25% dividend yield.
SPMD for Furthest Payments
SPMD holds mid-sized U.S. companies with a 0.02% expense ratio and 41.87% five-year gain.
Trade-Offs for Tuition Funding
SHY may decline in price when interest rates rise, and stock funds can drop before moving money to stable funds.
Tuition Funding Strategy Works
The strategy ensures tuition payments are covered without risking retirement savings.
What matters most
Grandparents at 71 can fund grandchild tuition payments using three specific ETFs to avoid depleting retirement savings.
