Lets take a look at our many options so we can create a solid plan for our kids education.
(Theres hardly anyroom for funmuch less textbooks and tuition.)
I dont mean to scare you.
Im terribly concerned myself.
Lets take a brutal look together at theWorlds Simplest College Cost Calculator.
Wondering where the other two thirds comes from?
You have several options.
Many states also offer tax credits for your contributions.
Besides self-directed 529 plans, theres another key in of 529 plan:prepaid tuition plans.
As the name suggests, you pay ahead for tuition to lock in current rates.
ThePrivate College 529 Planis a national prepaid plan covering over 270 private colleges and universities in eleven states.
Duke, Princeton, MIT, and Stanford are among the participating colleges in the Private College 529 plan.
What if your child doesnt go to one of these colleges or to college at all?
Compare 529 plansover at Morningstar.
Coverdell Educational Savings Accounts
A Coverdell ESA is another tax-advantaged education savings account.
That gives you more flexibility.
you’re free to have a 529 and a Coverdell at the same time.
On the downside, Coverdells have several limits.
Savings for college has a good comparison ofCoverdell ESAs versus 529 Plans here.
You also have more investment options than with 529 plans.
There are downsides, though.
(But, hey, its still more money in your retirement fund!)
Pay off high-interest debt.
Build up six-month emergency reserve.
Save in a 529 college savings plan up to at least one-third of your expected college costs.
Put money in a Roth IRA (if you qualify)
Save in a 529 college savings plan.
Youll notice that the first three steps are the same for both scenarios.
The main difference is whether or not you could get a state tax benefit for the 529 plan.
If so, prioritize that; otherwise, choose the Roth over the 529.
Good luck planning for it!
Photos byBloomua(Shutterstock),leosapiens(Shutterstock).
