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1. Pay off Debt
2. Funeral expense
3. Replace income
4. Estate Preservation
5. Business Continuation
2. Funeral expense
3. Replace income
4. Estate Preservation
5. Business Continuation
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College costs keep climbing
It's important to start a college fund as soon as possible, because next to
buying a home, a college education might be the biggest purchase you
ever make. According to the College Board, for the 2009/2010 school
year, the average cost of one year at a four-year public college is
$19,388, while the average cost for one year at a four-year private
college is $39,028.
Though no one can predict exactly what college might cost in 5, 10, or 15 years, annual price increases in the range of 5 to
8% would certainly be in keeping with historical trends. The following chart can give you an idea of what future costs might be,
based on the most recent cost data from the College Board (the most recent cost figures available) and an assumed annual
college inflation rate of 5%.
Tip: Even though college costs are high, don't worry about saving 100% of the
total costs. Many families save only a portion of the projected costs--a good rule
of thumb is 50%--and then use this as a "down payment" on the college tab, similar
to the down payment on a home.
Focus on your savings
The more you save now, the better off you'll likely be later. A good plan is to start
with whatever amount you can afford, and add to it over the years with raises,
bonuses, tax refunds, unexpected windfalls, and the like. If you invest regularly
over time, you may be surprised at how much you can accumulate in your child's college fund.
College savings options--look for tax advantages
You're ready to start saving, but where should you put your money? There are several college savings options, but to come
out ahead in the college savings game, you should opt for tax-advantaged strategies whenever possible.
529 plans
529 plans are one of the most popular tax-advantaged college savings options. They include both college savings plans and
prepaid tuition plans. With either type of plan, your contributions grow tax deferred and earnings are tax free at the federal
level if the money is used for qualified college expenses. States may also offer their own tax advantages.
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before
investing. More information about specific 529 plans is available in each issuer's official statement, which should be read
carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with
favorable state tax benefits.
With a college savings plan, you open an individual investment account and select one or more of the plan's mutual fund
portfolios for your contributions. With a prepaid tuition plan, you purchase tuition credits at today's prices for use at specific
colleges in the future--there's no individual investment component. With either type of plan, participation isn't restricted by
income, and the lifetime contribution limits are high, especially for college savings plans.
Coverdell education savings accounts
A Coverdell account is a tax-advantaged education savings vehicle that lets you contribute up to $2,000 per year. Your
contributions grow tax deferred and earnings are tax free at the federal level (and most states follow the federal tax treatment)
if the money is used for the beneficiary's qualified elementary, secondary, or college expenses. You have complete control
over the investments you hold in the account, but there are income restrictions on who can participate.
U.S. savings bonds
The interest earned on Series EE and Series I saving bonds is exempt from federal income tax if the bond proceeds are used
for qualified college expenses. These bonds earn a guaranteed, modest rate of return, and they are easily purchased at most
financial institutions or online at www.treasurydirect.gov. However, to qualify for tax-free interest, you must meet income limits
and other criteria.
UGMA/UTMA custodial accounts
An UGMA/UTMA custodial account is a way for your child to hold assets in his or her own name with you (or another individual)
acting as custodian. Assets in the account can then be used to pay for college. All contributions to the account are
irrevocable, and your child will gain control of the account when he or she turns 18 or 21 (depending on state rules). Earnings
and capital gains generated by assets in the account are taxed to the child each year.
Under the kiddie tax rules, for children under age 19, and for full-time students under age 24 who don't earn more than
one-half of their support, the first $950 of earned income is tax free, the next $950 is taxed at the child's rate, and anything
over $1,900 (in 2010) is taxed at your rate.
A last word on financial aid
Many families rely on some form of financial aid to pay for college. Loans and work-study jobs must be repaid (either through
monetary or work obligations), while grants and scholarships do not.
Most financial aid is based on need, which the federal government and colleges determine primarily by your income, but also
by your assets and personal information reported on your aid applications. In recent years, merit aid has been making a
comeback, so this can be good news if your child has a special talent or skill.
The bottom line, though, is don't rely too heavily on financial aid. Although it can certainly help cover college costs, student
loans make up the largest percentage of the typical aid package. Generally, plan on financial aid covering the following
percentage of expenses: loans--up to 50%, grants and scholarships--up to 15%, work-study--varies. The lesson: the more you
focus on your savings now, the less you may need to worry about later.
The Insurance Suite offers a Complimentary College Funding Review, where we will sit down with you and find additional
funding solutions for your college bound children. For more information, fill out the form below.
There's no denying the benefits of a college education: the ability to compete in today's competitive job
market, increased earning power, and expanded horizons. But these advantages come at a price--college
is expensive. And yet, year after year, thousands of students graduate from college. So, how do they do it?
Many families finance a college education with help from student loans and other types of financial aid,
private loans, current income, gifts from grandparents, and other creative cost-cutting measures. But
savings are the cornerstone of any successful college financing plan.
market, increased earning power, and expanded horizons. But these advantages come at a price--college
is expensive. And yet, year after year, thousands of students graduate from college. So, how do they do it?
Many families finance a college education with help from student loans and other types of financial aid,
private loans, current income, gifts from grandparents, and other creative cost-cutting measures. But
savings are the cornerstone of any successful college financing plan.
| Year 4-yr public 4-yr private 2009/10 $19,388 $39,028 2010/11 $20,357 $40,979 2011/12 $21,375 $43,028 2012/13 $22,444 $45,180 2013/14 $23,566 $47.439 2014/15 $24,745 $49,811 2015/16 $25,982 $52,301 2016/17 $27,280 $54,916 2017/18 $28,645 $57,662 2018/19 $30,077 $60,545 2019/20 $31,581 $63,572 |
| College Tuition Costs Are Climbing! Lower Insurance Premiums = Additional College Funds Get a Free Comparison Quote From The Insurance Suite Today!!! |
College Funding
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