easy · Certified Financial Planner Risk Management
Sarah Pfeiffer is a single parent who wants to save for her daughter's college education, which begins in 12 years. She has no disability insurance, an emergency fund covering only one month of expenses, and 5,000 in high-interest credit card debt. Sarah wants to open a 529 plan today with a $2,000 tax refund.
What is the planner's best recommendation?
- Split the refund between the 529 plan and a short-term disability policy.
- Invest the $2,000 in a Roth IRA to maintain flexibility for both retirement and education.
- Direct the 2,000 toward the credit card debt and building the emergency reserve.
- Open the 529 plan immediately to take advantage of 12 years of tax-free growth.
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