Are you saving enough for retirement, college, or student loans? What is the best way to accomplish your goal of college/education savings? What are your options? IRA, Roth IRA, or 529 plan.
In this episode of the Finance for Physicians Podcast, Daniel Wrenne talks about how to save for your children’s or anyone’s education. The best route to take if you know you’re going to need to save money for education is a 529 plan.
- What is a 529 plan? Tax qualified, tax preferential plan created by the IRS
- Tax Benefits: Money you’ve already paid tax on can be put in 529 plan
- Pros: Ability to grow asset/have interest on asset without being taxed on growth
- Cons: Separate accounts create complexity, cost components, and tax penalties
- How much is your state’s 529 plan tax deduction worth? Depends on state
- Two Types: Most states offer advisor-sponsored or direct 529 plans
- Inflation: Don’t project whether college education costs are going up or down
- Financial Position: Are you going to actually use funding/income for education?
- Qualified Expenses: Make educated guesses of what and how much is needed
- 529 Plan: How much to save and when to withdraw for education goals/priorities