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Investing in the Future

This article presents information on the cost of a college education and how a 529 plan may be a helpful savings vehicle.

Parents generally don’t have to be convinced of the value of a college education for their children. Studies show that college graduates not only earn more but are healthier, more satisfied with their jobs, and more likely to remain employed during tough economic times. 1

But paying for college becomes more challenging every year. Over the last decade, undergraduate in-state tuition and fees at four-year public colleges and universities rose at a 5.6% average annual rate above the rate of general inflation. For the 2011–12 academic year, the average cost of tuition, fees, room, and board reached $17,131. 2

Private institutions are even more expensive, although their costs are rising at a somewhat slower pace. For the 2011–12 academic year, the average cost for tuition, fees, room, and board was $38,589 at nonprofit four-year colleges and universities. 3

A Tax-Advantaged Savings Plan

As with saving for retirement, the key to saving for a college education is to develop a strategy and make regular contributions. One helpful savings vehicle is a Section 529 plan — a state-sponsored or college-sponsored program designed to help families save for future higher-education costs. Each plan has its own rules and restrictions, which can change at any time.

The money in a 529 savings plan accumulates on a tax-deferred basis and can be withdrawn free of federal income tax as long as it is used for qualified education expenses at accredited post-secondary schools, such as colleges, universities, community colleges, and certain technical schools. Qualified expenses include tuition, fees, room and board, books, and other supplies. Section 529 plans feature high contribution limits (set by each state), and there are no income restrictions for donors.

As with other investments, there are generally fees and expenses associated with participation in a 529 savings plan. There is also the risk that the investments may lose money or not perform well enough to cover college costs as anticipated. The tax implications of a 529 plan should be discussed with your legal and/or tax advisors because they can vary significantly from state to state. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents and taxpayers.

A college education could be an important investment in the future. If you anticipate paying for college, you might develop your savings strategy sooner rather than later.

Before investing in a 529 plan, please consider the investment objectives, risks, charges, and expenses carefully. The official disclosure statements and applicable prospectuses — which contain this and other information about the investment options, underlying investments, and the investment company — can be obtained from your financial professional. You should read this material carefully before investing.

We welcome your comments and are happy to talk with you about any questions or concerns you might have.

Time is your best friend when investing for your future — start today!

JON TEN HAAGEN, CFP, RPC
Founder and CEO
Ten Haagen Financial Group
191 New York Avenue
Huntington, NY 11743
631-425-1966
516-658-2827
jonlth@tenhaagen.com
www.tenhaagen.com

1–3) The College Board, 2010–2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2012 Emerald Connect, Inc.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

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