Are You Ready For College…Again?

college-clip-art-1326986427_college_clip_artGrowing family? Do you have increased anxiety over saving for your children’s future education? Take a deep breath!

There are plenty of options available to you now to ease these anxieties. One option is a 529 plan, also known as qualified tuition program. A 529 plan is an educational savings option operated by either a state or educational institution that provides for a structured way to save for future higher education costs.

There are two types of 529 plans to choose from.

The first type is the prepaid tuition plan. This type of plan allows parents to purchase college credits at slightly above market prices today and cash them in when their child goes off to school. With the ever increasing cost of tuition this option seems great; however, experts are concerned with the outlook of these plans. In the past decade or so many prepaid plans have closed entirely. It is feared that prepaid plans will be a thing of the past in the coming years.

Therefore the second type of 529 plans may be a better option, a college savings investment plan. Much of the funds contributed are held in mutual funds and managed by well established financial companies. As with any investment fund, there are risks involved in this type of plan. You can customize the investment plan to best fit your risk tolerance. Perhaps while your children are very young you can invest in riskier plans that generally result in higher returns and as your child reaches college age the funds can be moved to a more conservative option.

When considering which 529 plan to invest in, there are many things to consider. First, it is a good idea to look at plan performance and associated fees. Most plans will have maintenance and investment fees. Generally, funds with higher fees have greater participation by the management of the funds. Thus one would expect higher returns for funds with these higher fees.

Secondly, it is important to see if there are limitations on the type of educational institution the plan will qualify for. Eligible institutions typically include most accredited colleges and graduate schools as well as professional or trade schools. Some plans may limit withdrawals to in-state institutions only. So, do your research!

Finally you should know what expenses the withdrawals will cover. These expenses are known as “qualified expenses” and typically include tuition, fees, books, room and board.

Saving early for a child’s education is one of the most important decisions a parent can make, however it does not have to be a stressful one. Contact our office for a consultation regarding these 529 plans and start saving towards your child’s future!

This entry was posted in Blog, Featured on Homepage, Tax Planning and tagged , , , , , , , , , , , , . Bookmark the permalink.