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College Savings
Public in-state tuition today costs on average $10K and private tuition is $36K per year. However, public tuition is growing faster than private, at 3.7% vs. 2.5% CAGR over the last 30 years.
Public in-state tuition today costs on average $10K and private tuition is $36K per year. However, public tuition is growing faster than private, at 3.7% vs. 2.5% CAGR over the last 30 years.
Sending two children to college is quarter of a million dollars expense in today’s costs (and twice the cost for newborns) but it can be managed with a 529 plan and Government-sponsored financial aid.
A 529 college savings plan offers Roth-like features such as tax-free growth and distribution for qualified education expenses. Some states even provide a tax deduction for this contribution.
Blog: College Savings Plan
A 529 college savings plan offers Roth-like features such as tax-free growth and distribution for qualified education expenses. Some states even provide a tax deduction for this contribution.
Blog: College Savings Plan
Deciding how much to contribute to a 529 plan is a bit tricky, since it is difficult to forecast what types of financial aid the child will qualify for. However, the new TCJA law allows 529 funds to be used for K-12 education as well. Still, it is better to be conservative with 529 contributions.
529 Contribution: An investment plan (assume 6% CAGR) whose target is to satisfy 50% of the inflation-adjusted public in-state college costs (assuming the rest will be covered by financial aid) will need a monthly contribution of $250 until the children are in their sophomore year of college.
529 Contribution: An investment plan that targets to satisfy 50% of the college costs (assuming the rest will be covered by financial aid) will need $250 a month contribution for the life of the children until their sophomore year.
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What percent of college costs is your 529 plan projected to cover?
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What percent of college costs is your 529 plan projected to cover?
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