It is never too early or too late to plan for your child’s education. If you’re looking for smart ways to invest in your child’s educational future, there are several effective savings vehicles that can help you make more of the money you save now to achieve this goal.
A 529 college savings plan, also called a Qualified Tuition Program, is a state-sponsored savings plan designed to cover the costs of a college education. After investing post-tax funds into the plan, you can then withdraw the principal and earnings tax-free to pay for tuition, books, and other educational expenses. Each state has its own version of the 529 plan, with varying contribution limits, annual fees, and operating costs. However, you do not need to invest in a 529 plan in your state of residence or even the state in which your child plans to attend college; you can also switch 529 plans in the future.
Roth IRAs are typically utilized as tax-advantaged retirement savings plans; however, a Roth IRA can also serve as your child’s college savings plan. While Roth IRAs typically place stringent requirements on withdrawing money without penalty before the age of 59.5, you are allowed to remove your principle penalty- and tax-free. Roth IRAs do have annual contribution caps that may be lower than the limits set on a 529 plan, but unlike a specific college savings plan, your Roth investments can be used for other purposes if your child does not attend college.
Are you looking for ways to plan for your child’s college education or finance your own retirement in Tucson? At Financial Directions, LLC, our experienced financial planners can help you assess your current and future costs to make the most of your investments today and in the future. Please click through our website or give us a call at (520) 408-7777 to learn more about the power of intelligent investing.