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The Best Way To Save For College Is A 529 Plan

Posted on Apr 10, 2019 with 1 comment

Apr 10, 2019

Are you going to start a family. In the process of getting the babies nursery ready, lining up maternity leave, figuring out childcare plans, as well as making decisions relating to the birth itself, there's something else you need to be thinking of. Just how do you intend on saving for college?

According to George Ihnot, President of Family Financial Advisers, the correct time for folks to plan for college cost savings is "immediately or as early as practical-- even right after your kid is born."

"Investing for college is the hardest type of investing, given that you have a short time span and a certain draw period," Ihnot says. "It's not like retiring, where you can adjust it. If you're not prepared for retired life, you can wait. You do not have that luxury with college."

Now that you know you're require to start right away, how much do you need to set aside?

"The rising price of university in times past has actually been well in excess of normal inflation, typically 6-7%," Ihnot says.

He suggests that you take the present cost of an exclusive 4-year college and multiply it by 5. That's the amount of cash you'll wish to have on hand. Since you understand just how much you need, the question is, what's the best type of account in which to save it?

A 529 Plan Can Help You Save For College

Depending on the state in which you reside, a 529 College Savings Plan is likely going to be your best option for tax-incentive college savings. Ihnot says that you can think of these accounts like Roth IRAs. As your kid nears matriculation, you can start to move assets from more volatile assets, like equities (stocks), to more stable assets, like bonds.

Some states grant tax breaks on contributions to 529 plans and others do not. A couple of states will even allow you take a tax deduction even if you contribute to another state's 529 plan. If you happen to live in a state without income tax or someplace that does not have a 529 plan, you still have alternatives.

"It does not matter what state you reside in, you can put money in every state's 529 plan," Ihnot claims. "And it does not matter what state you save into. You can send your kid to college and university in any state. The general guideline is that if your state charges income tax and there is an advantage for a contributing to a 529 plan, then you're better off contributing to your state's 529 plan."

"the correct time for folks to plan for college cost savings is "immediately or as early as practical-- even right after your kid is born.", George Ihnot, President of Family Financial Advisers

529 plans provide parents who are saving for college and university the benefits of tax-deferred growth and tax-free spending for Qualified Higher Education Expenses (QHEE). Some K-12 tuition is also considered QHEE. A word of caution: Colleges and universities must be accredited so as for tuition to be considered QHEE.

Even More Reasons to Use a 529 Plan

The majority of 529 plans come with a balance limit that varies from one state to another. Normally, it's around $250,000, Ihnot claims.

529 plans also provide you extra property protection in situations such as bankruptcy or a lawsuits.

"In many cases, there's a greater degree of asset protection than an individual or a joint account," Ihnot claims. "There's a public interest in your children being educated."

There's also a great deal of misinformation encompassing the amount that parents can contribute the 529 plans. Many believe that the contributions comprise gifts in the eyes of the IRS and are as a result capped at $12,000. This, however is not the case. Ihnot explains that each parent can contribute as much as $15,000 per kid annually, and more with some additional paperwork.


Funding Options for Parents Starting Late When Saving For College

Posted on Apr 7, 2019 with No comments

Apr 7, 2019

The school year is going well across the nation, which suggests millions of families in the past year are focusing on how they will pay for school next year. As costs continue to escalate, however, many are stressed they'll never manage to save enough.

In 2017, the typical price of tuition, room and board at a four-year public school was greater than $36,000, a greater than $1,000 rise from 2016-2017. For private colleges, the charge is a lot more pricey, with the price tag close to $47,000. Add that up over the course of four years-- or more-- and it's no wonder that parents are on edge.

Without question, the soundest advice when it comes to investing savings for higher education is to begin early, however there are numerous Americans that, for what ever reason, have not had the ability to do that. If that's you, not all hope is lost because there are strategies to catch up or compensate.

Consider the following:

529 plans. One of the most popular college-funding vehicle is the 529 plan, which are typically structured like a retirement savings program, except the money can be used much sooner and is exclusively meant to pay for qualified education expenses. Pre-paid plans allow you to secure tuition credits at current rates at participating colleges.

Earnings grow tax-free and withdrawals are not subject to federal income taxes, while most states allow you to deduct plan payments. Unlike 401(k)s and individual retirement accounts, additions to 529 plans are not tax deductible at the federal level.

While many people think it's too late to invest in a 529 plan when an individual is in high school, such strategies are an ideal instrument for households that are behind.

For one, it's not ever too late to begin saving. Two, there are no contribution limitations, allowing households entering their peak earning years just like their kids become teens-- which is very typical-- a way to make large lump-sum contributions that can generate returns. Three, you can continue to make the payments until the student graduates, indicating the benefits will last longer than most realize.

Choose the optimal fit. When young people begin to think about which school is the most suitable fit for them, they typically look at an assortment of factors, including where their buddies are going, which school is furthest from home or even which one has the greatest football team. However, from a planning viewpoint, figuring out "fit" indicates something else, frequently requiring a thoughtful conversation between parents and children.


3 Non-Tuition Costs You Should Be Ready for in College

Posted on Apr 2, 2019 with No comments

Apr 2, 2019

As you prepare to take on the financial burden of a college education, your financial planning may be centered around tuition expenses. If you are like many others, you may also include room and board in your budgeting efforts.

However, numerous other expenses also impact the total cost of a college education. While these other miscellaneous expenses are not usually as significant as tuition costs, they can be sizable. More than that, the cumulative impact of numerous smaller expenses that have been overlooked with your financial planning can result in substantial and unnecessary stress. These are some of the non-tuition college expenses to prepare for.

Miscellaneous Education-Related Expenses

Simply paying your tuition bill is unfortunately not sufficient. Numerous other education-related expenses crop up each semester. For example, you will need school supplies for each class as well as a laptop, a printer and its supplies, a special calculator for math courses and more.

Some classes require you to visit various establishments in order to complete required assignments, which may result in extra expenses. You may also have costs related to enrichment opportunities and extracurricular activities. In addition to allocating funds for school supplies, consider maintaining a miscellaneous fund to cover other education-related expenses that may crop up.

Travel Expenses

If you are attending a school far from home, periodic travel may be required. In many instances, a college student will return home in between semesters and for holidays. This may be required for the time period when dorms are closed each year, so the expense must be accounted for in a budget. You may avoid this expense by living off-campus with a 12-month lease.

Emergency Costs

Young adults are still learning the ropes, and they may make a few unfortunate mistakes from time to time. Emergency costs may be related to injury accidents, severe illnesses and even legal expenses. Buying an excellent health insurance policy can offset many medical expenses.

However, you also may need ample funds in savings to pay for lawyer fees, lawsuit settlement funding and other expenses. Your savings account balance should be sufficient to cover the cost of insurance deductibles, unplanned vehicle expenses and more.

Having money available can also save a significant amount of time by letting you avoid having to search for answers about insurance, the pros and cons of pre-settlement lawsuit funding, and other time intensive things.

College is stressful enough without contending with financial woes. As challenging as it is to pay college tuition as well as room and board, additional expenses must also be taken into account. By preparing for these additional expenses in various ways, you can more easily navigate through your college years and reduce the risk of running out of cash before obtaining your degree.


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