Every so often, The Tennis Hacker likes to give you investment advice. This advice should be taken with a grain of salt: the Tennis Hacker's advice plus fifty cents would buy you a cup of coffee.
Let's say you have a child playing junior tennis. In a few years your junior tennis player would be headed to college. The time to start planning and saving for college is now.
As you save for college, it is wise to put the money in a stock or bond investment. Hopefully, you would receive a good return on your money.
The danger is -- as your pot of money grows -- the danger is you would have to pay a chunk of the money to taxes. To avoid the taxman, consider placing the college savings in a vehicle called a 529 plan.
The benefits of the 529 plan:
*the money grows tax-free. You pay no federal taxes on withdrawals as long as the money is used for qualified education expenses including room and board and books for college and university, including graduate school, and many technical schools.
*Flexibility to change the beneficiary. In plain English, that means if you open an account in the name of one child, you can later change it to the name of another sibling.
*Contribute as much as you want until it reaches $310,000. No restrictions based on your income. Minimal impact on the student's financial aid eligibility.
Related:
Tennis Hacker's Investment Guide for Tour Players
Tuesday, December 4, 2007
The Tennis Hacker's Investment Guide: Save for Your Child's College Expenses
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2 comments:
My idea is that it is a better plan to pay for the kids' education with present income and student loans (hopefully augmented with as much scholarship andgrant money as one can get), and spend the years leading up to this lowering your overall debt. The theory behind this is that someone will lend you money for college, but who will lend you money for retirement? Better to put the money in a 401(k) or IRA.
True pay down debt and save for retirement and then if any money is left save for child's education. It's called getting your ducks in a row.
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