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Published June 2001 College can be costly, so consider Section 529 plan By
Eric Cumley College costs are high — and they’re only moving higher. So if you’re a parent with young children, when should you start saving? And perhaps more importantly, how should you go about it? It’s never too soon to start saving for college. Consider the numbers: According to the College Board, the average cost for tuition, fees, room and board at a four-year private college for the 2000-2001 school year will top $22,541. For a four-year public school, the corresponding cost is $8,470 per year. If college costs rise just 4 percent a year for the next 18 years, today’s newborns will face a four-year bill of about $194,000 for an average private college and $73,000 for an average public school. Those are big numbers. But you can make them more manageable if you start saving early. And one of the better savings vehicles you have available is a Section 529 plan, named after the portion of the IRS code authorizing these special accounts. You can establish a 529 plan for your children or grandchildren. And you can choose from two variations of this plan:
Of the two arrangements, the tax-deferred savings plan is far more popular because it doesn’t restrict students to certain colleges in specific states, as the prepaid tuition plan does. In other words, you can invest in any state’s plan. Also, you’ll receive several other significant benefits, including:
The 529 plan offers some important benefits. But make sure you use your plan strictly for college. If you make a withdrawal for anything other than higher-education expenses, you may have to pay taxes and a 10 percent penalty on the earnings at your tax rate. Also, keep in mind that different state plans choose different money managers, so you might want to research the organization that’s investing your money. Eric Cumley is an Investment Representative with Edward Jones Investments located at 1201-C SE Everett Mall Way in Everett. He can be reached at 425-353-2322. Edward Jones is an NYSE-member investment firm with more than 7,500 locations nationwide. |
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© The Daily Herald Co., Everett, WA |
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