Compare College Savings Planning Option Features

Compare College Savings OptionsWith consistently rising education costs, college savings planning is a necessity. But which plan is right for you? Consider your financial situation now and in the future, the age of your child when you start, and then set reasonable goals for yourself.

 

Federal Government Plan

Saving money for college can be accomplished courtesy of the US government. Your Congress sponsors the Coverdell ESA (education savings account) plan for those earning less than $110,000 (single tax filer) or $220,000 (joint tax filers) per year.

Although it has a modest annual contribution limit–$2,000 per student per year—withdrawals are tax-free if used for qualified education expenses. Qualified expenses include tuition, room, board, fees, and supplies.

You’ll also enjoy personal investment flexibility, as you can invest in stocks, bonds, mutual funds, and cash equivalents. You have no restrictions on the number of trades (buy or sell) you want to make.

 

State-sponsored Plans

529 plans allow you to begin college savings efforts while enjoying tax deductions. In some, but not all states, you’ll have two choices for these plans.

1.) Prepaid tuition plan. In 2011, 13 states offer this option. The contributions you make today are guaranteed to cover tuition costs of many colleges and universities in the future. Your annual contribution limits are a function on the state plan and the age of your young student. Your state may permit you to deduct some or all of your contributions from your tax return. However, like the Coverdell ESA plan, your withdrawals will be tax-free if you use them for qualified education expenses. Some prepaid plans also lock in future room and board expenses.

2.) Savings plan. 49 states offer 529 savings plans. You can use these plans for anyone’s benefit, not just your child. You could even start a 529 savings plan for your neighbor and contribute between $100,000 to over $300,000, depending on your state’s regulations. Your withdrawals for qualified tuition, room, board, and fees were tax-free through 2010, but will be treated as income to the student in 2011 and beyond. But, these tax rules can change, so check with your state and federal government when withdrawals are anticipated.

 

Gerber Life College Plan

This plan offers affordability, flexibility and wonderful features for college planning strategies. Among the features you’ll enjoy are the following.

• Flexibility of money uses. You can use the funds for anything. Should your child opt not to attend college, he/she can use this fund for other needs.

• Guaranteed growth. You’ll avoid interest rate or stock market volatility worries. Your quality of sleep will probably improve, too.

• Fixed monthly payments that will not increase. You choose the amount that works with your budget without concern for future premium increases. You won’t face any surprise costs down the road.

• Adult Life insurance coverage. This college plan guarantees full benefit payment, regardless of circumstances or the age of your child.

 

Except for the tax deductibility of contributions to a 529 program, the Gerber Life College Plan offers more features than any typical bank or credit union without the market risk of other investment accounts.

All of these college planning choices work well. Comparing their primary features should help you choose the option that is right for you and your child. There are few more worthy activities than saving money for your child or grandchild’s education. These budget-friendly plans help you give your favorite little person the advantage they’ll need to succeed in life.

 

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Categories: College Planning
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