Paying for college can be really expensive but you can get a head start by planning well in advance. Since college education costs increase year after year, it’s hard to imagine coming up with the amount of the tuition needed unless you started saving from the time your child was very young. In fact the sooner you start, the better. There are a lot of options when it comes to investing for your child’s education, and one of the most flexible and convenient ways is New York’s 529 College Savings Program. It offers a wide range of investment choices, tax-free withdrawals when used for qualified college expenses, and contributions which are tax-deductible for New York State residents.
Here are some of the benefits of New York’s 529 College Savings Program Direct Plan:
- You don’t have to start with a large amount – you can initially invest as little as $25 by check, electronic bank transfer, automatic investment, payroll deduction or by moving assets from other college savings accounts.
- Qualified distributions from 529 plans are federally tax-free which means that your savings grow tax-deferred and earnings on your withdrawals are exempt from federal income tax when used for qualified higher education expenses. The New York State income tax deduction for those who utilize NY’s 529 is up to $5000 for individuals and up to $10,000 for married couples filing jointly. There are estate and gift tax benefits as well.
- The beneficiary can use the account to pay for tuition, fees, books, room and board, and supplies at any eligible post-secondary school in the US and abroad. Any U.S. citizen or resident alien with a valid Social Security or taxpayer ID can participate in the program.
- The Program is managed by Upromise Investments Inc. You can select up to five investment options per account from fifteen possible. Three of them are age-based which means that your assets are adjusted accordingly to more conservative allocations over time as your beneficiary nears college, and the rest twelve are individual portfolios which you adjust yourself according to your own investment strategies and risk tolerance.
- Currently the maximum balance is $235,000 and you can contribute on behalf of a beneficiary until the total balance of all Program accounts held for the same beneficiary reaches it.
If you start early, develop a plan, and invest wisely and regularly, you can save enough to pay for your child’s education. Before making any investment, research each alternative carefully and, if necessary, consult with a financial professional.