Best ways to save for college
What are the best ways to save for college? When you are thinking ahead and you want to save for college the main key word here is save. You will need to save money now for the future. There are a few options that financial institutions will be glad to help you set up. Here is a brief overview of what some of the savings plans for college are and how they can benefit you.
To begin with one way to save for college is called the 529, many consider this the best. This savings plan is available at most financial institutions. Many financial institutions will have their own name for the 529, but most names include a 529. This plan for college savings will differ from state to state. Each state should have a 529 plan for those that want to save for college. Each state offers at least one 529 savings or a 529 prepaid plan. Educational institutions can offer only 529 prepaid plans. But there are still some similarities in all the plans.
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The 529 save for college plan, is among the best because its money grows tax-deferred. Then when you withdraw it there is no tax on the money withdrawn if the funds are used for college. Another great option the 529 offers for those that want to save for college is that the owner or contributor to the 529 stays in control. The contributor is many times the parents and they will keep control of the savings plan and the funds that will be used for college. Anyone can contribute to a 529, family, friends, even bosses.
Another benefit for 529 savings plan is that nearly everyone is eligible to enroll. There are no age or income limits. You can put in a substantial amount or $300,000 per beneficiary. So no matter what college you are saving for you will be able to have a large amount to put towards the cost of college and it will be federally tax-free, when withdrawn. Some states also offer a state tax-free withdraw. Not all state 529 plans require you to live in the state that you get your 529 from. So check out a few different ones and see which will be best for you to save for college with a 529 savings plan.
Another one of the best ways to save for college is an educational savings account. This will not offer the same earnings as a 529, but it better than a checking account or regular savings account. The educational savings account was formerly called the Educational IRA. Most educational savings accounts will require a minimum initial deposit; most are in the $2000 range. Parents or family members can contribute and funds are tax-deferred when withdrawn. This way to save for college does have an income limit. If you are single then you can earn $95,000 to $110,000. If you are married filling joint, then you can earn $190,000 to $220,000.
Although these two ways to save are considered the best by most there are some other ways to save for college. There are federal savings bonds; the return is conservative but secure. There are mutual savings funds. These allow great flexibility, but will be taxed when withdrawn. There is also a gift to minors account. Here the gift can be given or taken at any time tax-exempt, but the beneficiary, or student takes control when they are 18-21 years old.
Choosing the best way for you to save for college will depend on your circumstances and where the college is and when the student will be going to college. The two best ways to save for college are 529 savings or prepaid plans and the educational savings account. Both of these offer great tax -free savings and the beneficiary can be changed.
