Consulting with a Tucson financial advisor can help you plan your retirement savings as well as college savings for your children. However, it’s important to remember that saving for your own retirement is more important, as your children will have more sources for college money than may have. At the same time, there are ways for you to help support your child’s college education without dipping into your retirement savings.
Start saving soon.
Even modest savings early on can make a dramatic impact if you allow time for growth. For example, investing just $100 a month for 18 years can result in $48,000 in investment savings with an 8% average annual return. In addition, you don’t need to save to cover the entire four-year cost of college education. Accessing federal, state and private grants can help you bridge the gap between your savings and your child’s future tuition bills.
Look for tax breaks.
The American Opportunity Tax Credit and the Lifetime Learning Credit are two federal tax credits available to families in your situation while you pay tuition. However, you can’t claim the tuition and fees as a tax deduction in the same taxable year that you claim either federal tax credits. Additionally, if anyone else in your family claims these two federal tax credit options, you cannot claim the tuition and fees tax deduction.
Consider a 529 savings plan.
A great way to save for college and obtain tax breaks is by adopting a 529 savings plan. These qualified withdrawals are free of federal tax and most plans will allow you to save more than $200,000 per beneficiary. This means you can start a 529 regardless of your beneficiary’s age or your current income level. You could also invest in mutual funds, which places a profession in charge of your savings.
Call (520) 408-7777 to schedule a consultation with Financial Directions, LLC in Tucson. We are an independent registered investment advisor, registered with the Securities Exchange Commission since 1999. As such, we are mandated to put our clients’ best interests first when it comes to Tucson retirement planning.
