When Kelly Davidson decided she wanted to transition from a career as a high school teacher, she knew she’d have to go back to school to achieve her goal — and it would be costly. She also knew pursuing a graduate degree would potentially impact her ability to save for retirement, so she met with her financial advisor to develop a strategy that would help her to return to school in five years.

With time being a key factor, the advisor suggested a 529 College Savings Plan — named after the section of the IRS code authorizing their creation. It would be the best way to meet Davidson’s education-funding goals.

Using the proceeds from a settlement, Davidson set up a 529 plan for herself and systematically invested in it.

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With the five-year plan well under way, Davidson ran into something unexpected. Right before she was to return to school, her husband, an executive at a multi-national corporation, received a lucrative job offer in London. Unfortunately, Davidson’s teaching qualifications were not easily transferable, so even if she wanted to continue in her job, she had to take additional certification courses in England.

But, by saving for her graduate degree in a 529 account, Davidson could use the funds at any accredited university in the world. In her case, Davidson decided to forgo the additional teachers’ certification courses and is now pursing an MBA at the London Business School. And she’s using her 529 plan assets to pay tuition and related expenses.

In today’s rapidly globalizing economy, Davidson’s situation is not unique. Each year, thousands of American students either participate in study abroad programs, or enroll full-time in colleges and universities outside of the United States. According to a January 2008 poll by CollegeBoard.com of college-bound students, 55 percent indicated they are at least fairly certain they will participate in a study abroad program, and another 26 percent indicated a strong desire to study abroad.

More than 4,000 foreign higher education institutions are eligible under rules permitting federal tax-free withdrawals from a 529 plan. A list of eligible foreign institutions is available on the Free Application for Federal Student Aid (FAFSA) website: www.fafsa.ed.gov/FOTWWebApp/FSLookupServlet.

A 529 savings plan is one of the best tax-advantaged ways to save for higher education — whether you plan to study in the United States or abroad. Most plans offer several asset allocation options, and allow you to contribute via lump sum or through a systematic investment plan such as a payroll deduction. You should consider investing in a 529 plan if you are:

• A parent concerned about the rising costs of college.

• A grandparent who wants to help save for your grandchildren’s future education expenses.

• A retiree who would like to develop an existing hobby into a serious, full-time interest.

• An “empty nester” who is still active in the workforce, but needs to return to school to remain competitive.

• A professional who is considering going back to school to pursue a second degree, change careers, or to enhance your professional skills.

• An adult who wants to help a child in your life — a niece, nephew, or godchild — save for future college expenses.

As more higher education institutions implement international programs to address the growing demand, opportunities to study abroad are more available than they were twenty years ago. If you already have an education plan, consider whether studying abroad is an option you’d like to pursue in the future. If you need help developing an education plan, a financial advisor can help you get started, and can even customize a proposal based on projected costs at the schools you’re considering.

Whether you plan to study stateside or beyond the country’s borders, one thing is certain: college costs are on the rise, so it’s important to start early. The world is your oyster; take advantage of all it has to offer.

Contact W. David Fay, second vice president of wealth management at Citi Smith Barney, at  ww.fa.smithbarney.com/davidfay or (502) 745-7069. His office is at 5255 E. Williams Circle.