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Education Planning

The cost of a college education increases every year. The earlier you start saving, the less it will cost you in the end. Parents have several options when it comes to saving for their child’s education including traditional savings accounts and investment accounts. Educational savings accounts (ESAs), however, are designed specifically for education planning and offer added benefits. At James T. Borello & Co., our consultants are experienced in working with the various savings vehicles for education as well as traditional investment accounts. We examine your current financial situation and your long-term savings objectives to craft an investing strategy that works for you.

Types of Educational Savings Accounts

There are three main types of tax-advantaged ESAs. They include:

  • Coverdell Education Savings Accounts—These accounts allow for a maximum of $2,000 per child, per year in contributions. Funds grow tax-free if they are withdrawn for use for qualified K-12 or college expenses. This account is subject to income restrictions, however, and it is not available to single filers making over $95,000 in modified adjusted gross income ($190,000 for joint filers).
  • 529 Prepaid Tuition Plans—These plans hedge against tuition increases from inflation by allowing parents to pay for future tuition to in-state public colleges at today’s rates. If your child chooses to attend a private or out-of-state college, the plan will usually pay out what it would have paid for in-state public tuition.
  • 529 College Savings Plans—These plans offer greater flexibility than prepaid tuition plans, and parents can contribute up to $13,000 per child, per year, tax-free. Parents can save up to $366,000 in a 529 plan depending on the state. These plans are optimal when saving for more expensive tuition costs and have some favorable gift contribution rules.

Choosing how to save for your child’s education can be challenging given the different options and benefits. Contact us to speak with an experience financial consultant who can provide guidance based on your unique circumstances and objectives.