My sister and brother in law just had a child. So, instead of heading to eRollover to check out the college funding data, they called me instead about 529 College Savings Plans. After chastising them for not thinking of my website, I briefly explained how it works, and why a 529 Plan is the best route to go these days.
College Education and Expenses are Daunting
The prospect of paying for a college education for yourself or your children is a daunting consideration. Continually rising costs mean people should carefully research grants and scholarships and consider saving money in a tax-free savings plan, such as the 529 College Choice Savings Plan.
It is a fact that the cost of sending your child to college is rising at a greater rate than other things. Not to mention, your investments probably aren’t doing so great right now due to the economic slowdown. Many wonder what to do. This question can be answered by looking at what stage of life your future college student now is in.
If you have a young child, begin by putting money into a 529 college savings plan. This money will grow tax-free, and as long as the money is used for qualified college expenses, it will come out tax-free, too.
How are 529 Plans Invested?
If you're a year or more away from having to pay college costs, the 529 college savings plan still is probably the best route to go. This plan has various enrollment date portfolios that range from a blended mix of funds proportionately allocated from a conservative cash and bond position to an aggressive all equity/ stock position.
For example, if the student is entering college 10 years from now, you could allocate contributions to the moderately aggressive Enrollment 2019 Portfolio. Likewise, if college entry is next year, the conservative Enrollment 2010 Portfolio should be the considered funding vehicle. Plus, households that contribute to the 529 College Choice Savings Plan receive a 20 percent tax credit on up to $5,000 of annual contributions. Because there are many variables that may affect a college fundraising effort, a financial and tax adviser should be consulted.
You don't have to use a 529 Plan for your Children's College Expenses
Keep in mind, another benefit of a 529 Plan is that it is not “use it or loose it” money. If your child turns out to not the college type, then these funds can either be transferred to another sibling. Or, lets say that you have money left over after the proud graduate has gone into the working world. You can even get more creative.
Consider going back to school yourself. Or, that culinary class in Venice, Italy lasts for 6 weeks, and you have do have room and board as well……don’t you?
