Education Savings Plans
There are many ways for families to save money for college tuition. The most important factor to take into consideration when developing a plan is to determine what you think the expect cost will be for college. If you think that your child will go to Harvard, the cost will be significantly more than if they go to a state or local University.
If you can determine the cost of education at a specific College or University today, you can calculate future cost by adding inflation to the current cost over the number of years before your child is ready to attend that school.
Once you have determined the amount needed for College you need to find and investment vehicles that will provide you with the best return to achieve that goal.
One important factor to consider in choosing which plan is best is the tax implications. If you can find a plan that allows you to grow your savings tax deferred then you will see a significant difference in the growth of that plan.
Most states offer a tax-advantage savings plan, known as a 529 plan.
A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. As long as the plan satisfies a few basic requirements, the federal tax law provides special tax benefits to you, the plan participant.
529 plans are usually categorized as either prepaid or savings, although some have elements of both. Every state now has at least one 529 plan available. It’s up to each state to decide whether it will offer a 529 plan (or possibly more than one), and what it will look like. Educational institutions can offer a 529 prepaid plan but not a 529 savings plan (the private-college Independent 529 Plan is the only institution-sponsored 529 plan thus far).
When reviewing each states plan it is important to know the performance of that plan. Not all plans perform the same way and you want to find a plan that provides you with the best return.
There are several other options that you have when it comes to savings for college. We will make sure that you fully understand all of the options and benefits from one plan to the next.