Saving for Their Future with 529 College Savings Plans
|by Michael Morey, Financial Advisor, RJFS|
When I ask clients about their major financial events in life, they often mention buying a home, a car, or paying for a wedding. Most people don’t initially put “paying for college” at the top of their lists. But the truth is, aside from buying a home, paying for a college education might be the biggest investment you ever make.
According to recent figures, the average cost for in-state college tuition is $25,890 per year while the average cost for an in-state private college is $52,500 per year. Now consider that annual tuition costs historically have risen anywhere from 3% to 6% per year, on average. It is projected that by the year 2027, tuition at a four year public college could cost over $40,000 per year and over $81,000 per year at a four year private school! Are you prepared to write that check
Fortunately there are solutions to help you save for the rising cost of college tuition. Similarly to retirement planning, the sooner you can start saving, the better off you’ll be in the future.
For example, a parent with a one-year-old child would need to save approximately $831 per month to fully fund a four year, in-state education for their child, based on today’s estimates. Conversely, if you put off saving for college and do not begin until the child is eight years old, you would need to save over $1,200 per month for the same college education!
The reality is that for most of us, putting aside an extra $800 per month can seem difficult or even downright impossible. But the important thing is to set aside some savings for college no matter what the amount is—and just as importantly, start saving early!
To make saving easier: Set up an automatic monthly contribution directly out of your checking or savings account. That way it becomes an automatic habit; ‘out of sight, out of mind.’ Before you know it, your small monthly contribution may compound into a sizeable amount of college savings!
One of the most commonly used college savings vehicles is a 529 savings plan. These plans allow contributions to grow tax deferred, and withdrawals are federally tax free if used for qualified expenses like tuition, room and board or books. Some states even offer tax deductions on your 529 contributions.
The Greatest Gift You Can Give
Another benefit of 529 plans is that anybody can contribute to your child’s educational savings account, including grandparents, aunts, uncles, friends and even complete strangers. This makes 529 contributions a great gift for holidays and birthdays!
To learn more about the many benefits and flexibility that a 529 college savings plan has to offer, contact us at Morey & Quinn Wealth Partners to start now. Together, we can develop a strategy to help you feel prepared to meet the increasing costs of a college education. Call us for financial planning that’s tailored to your financial priorities and unique life goals.
Let the Morey & Quinn financial advisors show you the value of a Well Planned Life.
Morey & Quinn Wealth Partners
Raymond James® LIFE WELL PLANNED.
Toll Free: 877.541.6593
11225 Davenport St, Suite 109
Omaha, NE 68154
Any opinions are those of Michael Morey, and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.
As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.