Question for the Money Doctors
Question submitted on Jan 30, 2016.
QuestionI have two kids 4 and 5 y/o, they each have 20K in a regular savings account. where do I put the money to save for collage?
Consider opening 529 accounts for each child. The 529 College Savings Plan is an investment vehicle that allows funds to grow tax-free. When it comes time to pay for college, the withdrawals are also exempt from tax, provided they are for qualified education expenses.
Many states offer tax credits or deductions on contributions if you want to continue adding to the accounts.
When determining financial aid, a 529 account is considered a parental asset and therefore weighted less heavily in the aid calculation.
If you need to withdraw money for reasons other than qualified education expenses, tax and a 10% penalty will be assessed on the account earnings.
Almost every state has their own 529 savings program, but you are not limited to enrolling in your home-state’s plan. Evaluate your home state tax benefits and plan compared with other states to determine what might work best for you and your family. If you need assistance, seek the counsel of an advisor with expertise in education planning.
For additional information visit http://www.360financialliteracy.org/