Saving for A College Education
There’s no doubt that college has become a significant expense in recent decades.
But just like getting a head start on your retirement by starting an individual retirement account early, the same strategy works for college savings as well.
Tax-advantaged college savings plans, generally known as 529 plans, have been around for a while. And now that they have matured, there a number powerful advantages as well as options to consider when you start shopping for 529s.
Two Great Plans for Oregonians
The Central Willamette Educational IRA is a product we have built for our credit union members and it operates just like a 529 plan, with a $2,000 annual maximum contribution. Talk to us and we’ll help you get started.
The Oregon College Savings Plan is run by TIAA-CREFF as fund manager. TIAA started over a century ago with retirement plans solely focused on teachers. Now it helps nonprofits, including individuals and families in academic, research, medical, government and cultural fields.
The plan is highly rated and allows students to get in cheaply – minimum $25 initial investment. And stay in cheaply - $15 minimum payroll deduction per pay period.
529s Keep Getting Better
But one interesting fact about 529s and college savings plans in general is, many are no longer state-specific.
That means you can look for 529 plans from almost any state and pick the ones that perform best.
Remember, a 529 is structured like an IRA, but instead of saving for retirement, the goal here is funding college. The only difference is, while contributions to Traditional IRAs and 529s are tax deductible, you can withdraw your money tax free (for qualified educational expenses) from 529s.
Sites like savingsforcollege.com have college savings calculators and 529 ratings that are helpful in getting a smart start on the process.
Other 529 Advantages
We touched upon a couple already – tax free funds, not locked into your home state 529, and low contributions.
Other benefits include the fact that anyone can set up a 529 for a college student – mom, dad, aunt, grandfather. And any large gifts to the funds can be considered gift-tax deductible (check with your tax professional).
One of the best benefits is the 529 can be ‘rolled over’ to another beneficiary if need be. If one child decides not to go to school or leaves school, his or her sibling can use the balance of the 529 simply by changing the beneficiary.
And if you’re child ends up getting a scholarship, the amount of the scholarship can be refunded to you from your 529 plan contributions.
Flexibility and Choice
College savings plans have become incredibly flexible and diverse.
It pays to set up a free consultation with one of our investment advisors to talk about your goals and your concerns about setting up these plans.
Nowadays, you can choose self-directed investments, age-based portfolios, or index fund-based portfolios, depending upon your market comfort and investing knowledge.
529 plans are powerful and helpful tools and we’re here to help you get started. And if you don’t know where to start, we can help with that, too.
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