Friday, April 5, 2013

Funding your Childs Education - Never too early to start

With the costs for college education soaring each year it's never too early to get a head start on setting aside funds for your child (ren) s education. 

I did a future College Cost search for my Son. Anticipating that he will be going to an average 4 year University in 17 years. These were my results. 

College Cost Projection for 2030-2033
(assumes a 6% inflation rate)
YearToday's DollarsFuture Dollars
Total cost$158,000$465,304

Staggering Right!?! You can do your own calculations here

By understanding this, you know that you need to start saving now for your child's education. There are some really good options available. 529's are my preferred choice and recommendation. I am going to go over the Kansas 529 option today, and will follow up with Missouri's' in another post. 

Kansas State 529 {Learning Quest}

529 College Savings Plans At-a-Glance
What is a 529 plan?It is a program that:
  • Is designed to help families invest for higher education
  • Offers state and federal tax advantages
  • Gives the account owner control over how and when the assets are used
  • Is generally sponsored by a state (Learning Quest is sponsored by Kansas)
What are the tax benefits?There are several tax benefits:
  • Earnings grow tax-deferred from federal and state taxes1
  • Withdrawals for qualified education expenses are tax free1, 2
  • There is no federal gift tax on contributions per beneficiary up to $70,000 ($140,000 for spousal gifts) in a single year; generally, contributions to an account are removed from your taxable estate.
  • Some states offer tax benefits; Kansas taxpayers may invest in any state-sponsored 529 plan and receive a Kansas adjusted gross income deduction for their contributions. This deduction applies to contributions of up to $3,000 per beneficiary, per year ($6,000 if married, filing jointly).
Where can 529 plan assets be used?Any eligible higher education institution in the U.S. and abroad2:
  • 2- or 4-year public or private colleges and universities
  • Graduate schools
  • Vocational/technical schools
What can 529 assets be used for?Qualified withdrawals include:
  • Tuition
  • Required fees, books, and equipment
  • Certain room and board costs
Who can open an account?Almost anyone can open a 529 plan account:
  • There is no income level and no maximum age limit
  • Any U.S. citizen or resident alien, 18 or older, with a permanent U.S. address
  • Parents, grandparents, other family members, or friends
  • An adult learner for his or her own retraining or ongoing education
Who controls the assets and withdrawals?There is generally an account owner and a beneficiary (the student for whom the account is set up); the account owner maintains control of the account, including:
  • Making withdrawals
  • Making any changes to the beneficiary or the investment
  • Choosing where and when the assets are used
How does a 529 plan account work?The account owner invests in the portfolio(s) of their choice that are offered by the plan, selecting investments that are appropriate for their risk tolerance and the amount of time that they have until the student will be attending college.

There are fees associated with having an advised plan. See Total Portfolio Fee

Here are the fees associated with a Direct-Sold Plan

Kansas taxpayers may invest in any state-sponsored 529 plan and receive a Kansas adjusted gross income deduction for their contributions. This deduction applies to contributions of up to $3,000 per beneficiary, per year ($6,000 if married, filing jointly)

So the first thing you will need to decide is if you want someone else to manage your portfolio and pay associated fees, or manage the funds yourself and choose which portfolios to distribute your funds. 

For Direct-sold {you are the manager of the account} there are Age Based Funds available that move your funds into lower risk funds as your child hits age milestones. 

Once you have decided on a plan type, you will need to select how aggressive you intend to be with the funds, and which portfolio you want to allocate your funds to. Most Financial Advisors recommend the more time that you have before the child attends reaches College Age, the more aggressive you should be. I would suggest speaking directly with a Learning Quest Specialist (free of charge)  at 1-800-579-2203 Weekdays, 8 a.m. to 5 p.m. Central Time 

Low Minimum Investment Amounts
For Kansas Residents, you only need $100 to open an account by check. If you opt for Direct Deposit Automatic payments from your bank account, you only need $25.00 to open an account (Kansas Residents).

You are ready to ENROLL

Some great reason to consider the Learning Quest Account. 
  • Tax Advantages - both State and Federal
  • Low Enrollment investment
  • Does not have to be used in a Kansas College or University to be eligible
  • This plan has a Matching K.I.D.S grant available for qualifying accounts up to $600.00 per year. 

I am not a financial advisor or associated with Learning Quest in any way. All information is based on my own experiences and reading of account information  readily available online and will not be held liable for any funds lost in the market. 

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