Tag Archives: Cahaba Wealth Management

Navigating the College Affordability Crisis using 529 Plans

9/2025

By Special Contributer, David Cicero, Ph.D.

Here’s a sobering statistic for you: college tuition has increased 1,200% since 1980! Inflation over that same time-period has been just under 400%, so attending college comes at a great premium these days. According to the Education Data Initiative, it currently costs an average of $27,000 to finance a year of education at an in-state University. Assuming the cost of college continues to increase at a rate of 4% annually leads to an expected cost for one year at an in-state public school 18 years from now of $55,000.

As a result of the rapid increase in the cost of education, the average new college graduate carries over $37,000 in debt. Worse yet, many individuals who could benefit from college simply do not enroll due to the high sticker price or end up missing out on schools that would have served them best. The evidence that a college education is worth the cost continues to be compelling. In 2023, college grads earn a 62% premium over high school graduates, which is up substantially from the 40% premium earned by college grads in 1990. There are good reasons to think that this premium will persist moving forward into the Age of AI as many high paying jobs will continue to require sophisticated workers.

Given the returns to higher education, it is essential that families plan wisely for their children’s college expenses. The best way to give young people a leg up when they hit the work force is to help them enter their professional lives with little to no debt that could hold them back financially and cause them to make sub-optimal career decisions.

The good news is that U.S. policymakers have provided an excellent means of saving for the rising cost of a college education – the tax-advantaged 529 education savings plans. Families can fund 529 plans with significant after-tax dollars each year ($19,000 per person/per year, $38,000 if a mom and dad each fund), and the earnings grow tax-free until they are withdrawn for qualified education-related expenses. You can even “super-fund” a plan by contributing up to $95,000/$190,000 all at once, but the excess above the annual gift limit would not be considered outside of the estate. The tax benefits are similar to those available under Roth IRA accounts, but there are no income limits for making contributions and the funds can be withdrawn without penalty at any age if they are used for qualified education expenses (which include many expenses beyond tuition as well as $10,000 of cost associated with K-12 or vocational education). The attractiveness of these plans was enhanced further in 2022 with new laws that allow up to $35,000 to be rolled into tax-free Roth IRAs for any beneficiaries that do not end up needing the funds for educational purposes.

Due to the power of compounding returns, we recommend prioritizing funding 529 plans when their children are young and consistently adding to these accounts over time. Here is a simple example. Assuming you can earn 6.5% annually on 529 plan balances, you can accumulate $100,000 for your child’s college education expenses at age 18 by contributing about $245/month from the time they are born. Wait until they turn 10 to start saving, and it will cost you $800/month to accumulate the same amount. If you start at the child’s birth, that $100,000 of college funds will cost you a total of $53,000 compared to $77,000 if you wait until age 10. Although $100,000 is unlikely to cover the full cost of college education in the future, having this amount set aside can make the full financial burden far more manageable. If you don’t like the idea of filling the funding gap down the road, doubling the numbers above can lead to $200,000 for college expenses. There is simply no better way to save for your child’s future education. To top it off, most states provide some level of tax deduction for contributions made.

But new research by economists at the University of Chicago shows that we are often not that wise, even when the calculus is clear. By analyzing over 900,000 529 accounts, Briscece, list, and Liu, show that many families fail to reap the benefits of this amazing vehicle for education savings. The reasons are mostly behavioral. For example, 61% of families that could afford to save enough in 529 plans to cover half of their children’s college costs fail to do so simply because they have the mistaken belief that their savings would be meaningless. They just do not understand the magnitude of the benefits that consistently stashing manageable sums into tax-advantaged accounts can have on their children’s (and their own) future. Not surprisingly, parents that score poorly on financial literacy tests are most likely to miss out on this opportunity. Although 79% of 529 account holders score high for financial literacy, only 32% of non-participating parents score similarly. The result is that due mostly to a lack of financial wisdom, many families miss out on one of the best opportunities available to help their children secure a bright future.

A competent financial advisor can help you navigate these issues and make sound financial decisions. It is easy to put vague questions about the potential cost of your children’s distant education on the backburner as you deal with more concrete financial issues in the present. But waiting is costly because you miss out on the magic of compounding returns in tax-favored 529 accounts. By starting early and saving with discipline, you will find that the overall cost of a high-quality education can be manageable. By minimizing the financial stress that can accompany dropping your kids off at college – which, believe me, comes faster than you think! – consistently putting even small sums into 529 plans will contribute to your family’s future joy and financial well-being.

Source:

Briscese, G., List, J., and Liu, S., 2025, Navigating the College Affordability Crisis: Insights from College Savings Accounts, National Bureau of Economic Research working paper 34126 (https://www.nber.org/papers/w3412).

David Cicero, Ph.D. is a Bray Distinguised Professor of Finance at Auburn University, https://harbert.auburn.edu/directory/david-cicero.html

Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.

Cahaba Wealth Management Congratulates Charlotte Disley on Earning the CFP® Designation

8/2025

Charlotte Disley, CFP®

Cahaba Wealth Management is proud to announce that Charlotte Disley has officially earned the designation of CERTIFIED FINANCIAL PLANNER™ (CFP®) professional.

Charlotte joined our Atlanta office in 2022 and now serves as an Associate Advisor, where she is dedicated to helping clients build confidence through personalized financial planning and clear, practical guidance. Achieving the CFP® designation reflects her commitment to professional excellence and to serving clients with the highest standard of care.

We are honored to celebrate Charlotte’s accomplishment and look forward to her continued contributions as a CFP® professional at Cahaba Wealth Management. Congratulations, Charlotte!


Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.

Recognition Rooted in Service: Cahaba Wealth Named a Top RIA in 2025

7/2025

Cahaba Wealth Management is proud to announce that we have been named one of America’s Top Registered Investment Advisors (RIAs) by Financial Advisor magazine, ranking #204 on the 2025 list. This recognition marks an exciting milestone for our firm and is a reflection of the trust our clients place in us — and the care with which we strive to serve them every day.

At Cahaba, we view financial advice as a service, not a product. Our mission is to serve families and institutions by providing customized financial planning and investment management. Every member of our team plays a role in delivering that mission with empathy, integrity, and a commitment to helping our clients make thoughtful decisions at every stage of life.

This recognition also highlights the strength of the relationships we’ve built with our clients. Our growth has been largely fueled by referrals and lasting connections, and we’re proud to have earned the confidence of families and individuals who trust us to help them navigate life’s most important financial decisions.

As we celebrate this milestone, we remain focused on what matters most: serving our clients with the same level of dedication, clarity, and care that brought us here.

We want to extend our heartfelt thanks to our incredible clients and team members for being part of this journey. We couldn’t have achieved this without you!


Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.