Saving for Education: 529 Plans
The cost of college tuition has skyrocketed over the past few decades to the tune of nearly double the rate of inflation. These costs have been inflating annually at a rate of nearly 8%, so costs double every nine years. The current cost of a public university averages around $9,970 per year for in-state residents and jumps to $25,620 for out-of-state residents.
To help combat these costs, you are encouraged to start saving early to fund a child’s education. A 529 plan lets you contribute after-tax dollars to an account tied to a specific beneficiary. The beneficiary is then allowed to make tax free withdrawals to pay for qualified higher educational expenses. Covered expenses include those incurred at the majority of colleges, vocational schools or other post-secondary educational institutions. Everything from tuition, books, computers and related equipment, to room and board is covered. The new tax plan extended 529s to cover up to $10,000 annually for elementary and secondary public, private or religious schools.
Each state offers their own unique 529 plan. The fees, investment options, tax benefits and other details of the plans vary from state to state. We help our clients choose plans suitable for their situation. We have software that allows us to analyze everything from the different investment options offered to projecting how close you are to meeting your funding goals.
We have many clients who use 529 plans for their children or grandchildren. One good example would be a client who has two middle school aged boys. She and her husband have been annually contributing approximately a couple thousand dollars to each 529 plan. These investments have seen a solid return. The parents should have college expenses completely covered by the time these arise. Graduating from college debt free will allow these boys to start off their careers with their best feet forward.