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Funding Options for Parents Starting Late When Saving For College

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.


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