How often do we hear or use the phrase, “where does the time go?” Before we know it, years have passed in what feels like the “blink of an eye.” This seems to be a common phrase for all adults, but especially parents.
Do you have a son or daughter? Have you thought about college funding options? If not, perhaps it’s time to start preparing for the future. It is never too early — or too late — to start saving for your children. In Michigan, the cost of college rises approximately 6 percent to 8 percent each year.
One option among many programs offered is the 529 college savings plan. The plan allows the account value to reach a maximum amount of $360,000. One of the most worthwhile advantages of the 529 is the unique tax benefit. The accumulation of contributions to the savings plan is tax deferred. Qualified withdrawals, if used for higher education expenses, are exempt from federal taxes.
Another option is a 770 account. With this option, there is no maximum contribution limit. The account holder has tax-free access to the guaranteed cash value of the account for any purpose. Applicants and/or owners have to qualify for this plan. In addition, if there is an untimely death of the account owner, the funding will continue to pay for the child’s education.
An additional savings option is a Roth IRA. This is a very unique choice because the money contributed can be accessed for post-secondary expenses, or for retirement income, without being subjected to tax penalties. Although there are contribution limits, determined by the age of the donor, having a Roth IRA offers added flexibility.