You want the best for your child, so why not give them the opportunity to attend higher education once they graduate high school? At Cape Cod Wealth Strategies & Insurance Services, LLC, our goal is to make sure that you have the right financial strategies in place to be able to send your child off to college. Education funding comes in many different forms, but one of the most popular choices is a 529 Plan.
What is a 529 Plan?
This financial plan was designed specifically for contributors to put money towards the recipient's education and is a tax-advantaged savings plan. Also known as qualified tuition plans, 529 plans are usually sponsored by educational institutions or the state. Our financial planning company on Cape Cod can provide you with a list of educational institutions that honor the 529 Plan. If your child is leaning towards attending college in-state, Massachusetts also honors this education funding plan which offers federal tax benefits and in-state tax deductions as you continue to save.
There are two types of 529 Plans: Prepaid tuition plans and education savings plans. At Cape Cod Wealth Strategies & Insurance Services, LLC, we help our clients set up education savings plans, but we will also discuss the difference between the two.
Prepaid Tuition Plans
This type of education plan lets the contributor or account holder purchase credits at colleges that offer these prepaid tuition plans. The universities will usually be public or in-state. If you decide to opt for the prepaid tuition plan, then all tuition and mandatory fee prices will be locked in to what they currently are, which means by the time your child goes to college (and if tuition has gone up since) you will only be paying for the set tuition from when you started the prepaid plan. However, one downside to the prepaid tuition plan is that these funds are unable to pay for room, board, books or meal plans. Another pitfall of a prepaid tuition plan is that if your child decides not to attend a particupating college, then the funds may pay less at a non-participating college.
Education Savings Plans
Over the past few decades, we have seen education savings plans become the norm mostly due to the fact that they are more flexible is terms of what the funds can cover. Education savings plans allow the contributor or account holder to open a savings investment account which will be accessible by the time the child is ready to attend college. This type of investment covers tuition, mandatory fees, room, board, and other college-related expenses such as books and meal plans. The best part about this type of 529 Plan is that withdrawals can be made for any college, even some universities outside of the US.
Our financial advisors on Cape Cod will help you choose among a variety of different investment strategies to create your education savings plan. These options can include mutual funds, exchange-traded funds and can either be age-based portfolios or static fund portfolios. While all education savings plans are sponsored by state governments, it is still important to understand any fees and expenses related to having a 529 Plan. Cape Cod Wealth Strategies & Insurance Services, LLC can help you better understand these fees and how best to minimize them. We want to make sure your child's college fund contribution goals are met; give us a call today at (508) 776-1168 so we can discuss your needs for education planning.