If you have children, or have children you care about in your life, the coming of fall likely turns your thoughts to education expenses. College is expensive – no news there.  Of course, the best advice would be to start saving early so the money has time to grow.  However, life being what it is, it isn’t always possible to follow through on our plans.  No matter where you are in your journey -saving for or paying for- college, here are some strategies you can consider.

529 College Savings Plan– Contributions grow tax free and withdrawals for qualified education expenses are also tax-free.  College Savings Plans generally invest in mutual funds or exchanged traded funds.

PrePaid Tuition Plans– These are a type of 529 College Saving Plan and are offered by individual states.  In the state of Florida there is no annual contribution limit.  College choice is not limited to the state of Florida but can be applied to any Eligible Educational Institution.  Contributions grow tax free and withdrawals for qualified education expenses are also tax-free.  Savers purchase units or credits that can be used towards tuition and qualified expenses.

Coverdell Education Savings Accounts– Contributions made with after tax funds, earnings excluded from income for federal tax purposes when used for qualified college and K-12 expenses. Investments can include stocks, bonds, exchange -traded funds, and mutual funds.  Maximum contribution is 2000.00 per year pr beneficiary.

Custodial Accounts– These are accounts set up as a custodian for a minor.  There are no income or contribution limits. These accounts are used to invest in stocks, bonds, mutual funds, and exchange traded funds.  Funds be used for education and other expenses.  Earnings are subject to kiddie tax.

Roth IRAs– Primarily used as a retirement account but it can also be used for education expenses.  Contributions are made with after-tax dollars, so withdrawals are tax free.  Earnings can be withdrawn tax free if used for qualified education expenses or after age 59.5 Investments can include stocks, bonds, mutual funds, and exchange traded funds.

Education Savings Bonds– Series EE or Series I bond issued by the US Treasure.  Interest is earned on a tax-free basis if used for qualified education expenses.  May earn less than other investments.

Investment Accounts– Accounts that invest in stocks bonds, mutual funds.  Benefits include the potential for higher returns. Investments carry risk and there are no tax advantages specifically for education.

These are just quick summaries of the various ways to save for education expenses. Give us a call if you are interested in more detail.

The information in this article is a compilation pulled from a variety of sources.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.