Prepare for the future with a college savings plan
College is an important part of your child’s future, but with education expenses on the rise, planning how to pay tuition can be daunting. For the 2022-2023* academic year, the total average annual cost for in-state tuition increased to $27,940. The total out-of-state students paid increased to $45,240. And students attending private colleges paid $57,570.*
Today’s families often have competing financial priorities that can lead to difficult choices. Let’s look at some of the plan features and how they can help you prepare.
Consider the benefits of a 529 plan
These state-sponsored investment programs are intended to help save for higher education. You can establish an account for anyone you want and the beneficiary can be of any age. Some key benefits of 529 plans include:
- You maintain control of the plan’s assets, and can even transfer the account to another beneficiary
- The funds are professionally managed
- Withdrawals for qualified educational expenses are federal income-tax free
- Some states offer tax advantages for local residents
- Plan assets are excluded from the contributor’s taxable estate
- Under new rules, up to $10,000 from a 529 account can be used to repay the beneficiary's student loans
- 529 plans can now be used to pay for apprenticeship programs
- Starting January 1, 2024, beneficiaries may be able to rollover up to $35,000 into a Roth IRA to mitigate tax penalties
Grandparents can make it easier for their adult children to save for retirement by helping fund the grandchildren’s college expenses. Required minimum distributions from tax-deferred retirement accounts may be a source of funds. And up to five years’ worth of the $17,000 annual gift tax exclusion (up to $85,000) per 529 plan beneficiary can be accelerated to fund the 529 without being subject to gift taxes.
College is an exciting time when your children or grandchildren are learning how to be responsible adults. With smart planning now, we can help you and your family avoid worrying about tuition bills or family debt. Contact me today to discuss whether a 529 plan is right for your family.