Start Planning for the Future Today:
Set Up a 529 College Savings Plan For Someone You Love
(ARA) - One of the greatest financial worries of most
American families has always been, “will we have enough money to live
comfortably during retirement?” Families with children are also worried
about whether they’ll be able to afford to send their kids to college.
According to Trends in College Pricing -- a survey of over 3,200 U.S.
post-secondary institutions conducted in 2002 -- when a child born in
2003 is ready for college, a four year degree at a public in-state
institution will cost $83,169. Four year degrees at public out-of-state
and private colleges will cost significantly more, $136,387 and
$217,644 respectively. These figures account for a 5 percent college
inflation rate.
“After the shock from seeing those numbers for the first time wears
off, parents start looking into their options,” says John Walters,
executive vice president for The Hartford’s Investment Products
Division. “Some will choose to put away money in a savings account
every month, others in CDs or mutual funds, but they’re really doing
themselves a disservice. All of those options are taxable investments
and as a result, don’t maximize earning potential.”
If you’re looking for a college savings plan where your money will grow
tax deferred,(1) there are two options out there: the federal
government authorized Coverdell Education Savings Account and the 529
College Savings Plans, sponsored by each of the 50 states and certain
private institutions.
Coverdell accounts allow you to put away up to $2,000 per year per
beneficiary for education related expenses, but they are very limiting.
You can have more than one Coverdell set up, but have to keep track of
how much you put into each account per year. If you exceed the $2,000
maximum for all accounts, you will face tax consequences; and you can
only contribute until the beneficiary is 18.
People who invest in 529 plans have more flexibility. The plans can be
opened for anyone considering going to college, including children,
relatives and parents. You can even set up an account for yourself.
These college savings plans usually require only modest amounts to
open; and you can add any sum up to the maximum that each plan
authorized. Furthermore, you can gift up to $55,000 to a beneficiary
once every 5 years without incurring a federal gift tax. (2)
All 50 states have passed legislation authorizing 529 plans, and most
have a college savings plan and/or prepaid plan in operation. “The nice
thing about 529s is you don’t have to live in or go to school in the
state that is sponsoring your plan,” says Walters.
Hartford Life Insurance Company administers the SMART529 plans offered
by the state of West Virginia. Thousands of people from all 50 states
have enrolled in SMART529. The plan offers investors access to dozens
of investment options, including individual fund options, static
portfolios and age-based portfolios. It also offers net asset value
transfers, meaning transfers from other 529 plans or Coverdell accounts
can be made without an upfront sales charge.
For more information about SMART529 products, visit your financial
advisor. If you want to get a better idea of how much college will cost
when your child is ready to go, there’s an online calculator on the
Hartford Investor’s Web site. Log onto www.hartfordinvestor.com. Under
“Education Center” on the left hand side of your screen, click on the
link that says “calculators,” then scroll down to the link that says
SMART 529 college savings calculator.
Courtesy of ARA Content
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