First, let's consider current yearly tuition and fees [https://bigfuture.collegeboard.org/pay-for-college/college-costs/college-costs-faqs]:
- Public Two-Year College for in-state students ~ $3,131
- Public Four-Year College for in-state students ~ $8,655
- Public Four-Year College for out-of-state students ~ $21,706
- Private Four-Year College ~ $29,056
The above figures don’t factor in expenses including food, housing, supplies, transportation and of course, books!
Next, consider that college costs have risen by 6-7% on average, per year (http://www.collegesavings.org/collegeCostCalculator.aspx). So, for an age 5 child, the average annual cost at age 18 would be almost $22,000 per year (public four-year college for in-state students). Visit www.collegesavings.org.
In general, the 529 Plan, known as the Qualified Tuition Program (QTP) allows for pre-payment of the qualified higher educational expenses, at current rates, to a specific college or university in anticipation of the child attending that institution. The 529 Plan is college savings plan wherein contributions are invested into mutual funds or other investments available within the plan. Options can be from conservative to aggressive, and can also be age-based. Your account value will go up or down in value based on the performance of the particular option you select. Though plans vary slightly by state, the 529 investment can be used for the benefit of the designated child for any U.S. college or university. Use of the 529 plan for qualified college expenses is not restricted to the state where the 529 plan is held, but do consult your tax professional regarding state-specific tax treatment of 529 plans.
Furthermore, though contributions to a 529 plan are not tax-deductible in New Jersey, all of the growth is tax-deferred. And, as long as the investment is used for qualified higher education expenses, no income or gains tax is paid on the gains. In addition, if the funds are not used for the designated child, the beneficial recipient can be changed. Again, be sure to ask your own tax professional about the taxation of 529 plans.
Qualified higher education expenses include tuition, fees, books, technology, and reasonable housing for students enrolled at least half time.
Securities (including 529 Plans) are not a deposit of any bank, are not FDIC insured, are not guaranteed by any bank or savings institution, may go down in value, and are subject to investment risk, including possible loss of principal invested.
This article is provided for general information by Eleonora Anastasia Sciopu. Eleonora Anastasia Sciopu offers securities through AXA Advisors, LLC (member FINRA, SIPC) 1633 Broadway, 3rd Floor, New York, NY 10019, offers investment advisory products and services through AXA Advisors, LLC, an SEC-registered investment advisors, and offers annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC. Equal Opportunity Employer – M/F/D/V. AXA Advisors and its affiliates and associates do not provide tax, accounting or legal advice or services. AGE-101429(03/15)(exp.03/17)