Dreaming of a College Education
These days a college education can be pretty darn expensive, so saving early is not only recommended but vital in order to get your kids the education they deserve.
Charting a Path2College
According to a recent study, the average cost of tuition and fees is currently $33,480 at private colleges, $9,650 at public colleges for in-state students, and $24,930 at public universities for out-of-state students. And that’s in 2017 money. If you have a child born today, that child’s college education could easily cost six figures a year by the time they’re ready to enroll.
One great option for funding a child’s education down the road is a 529 plan a specialized savings account operated by a state or education institution to help set aside money for college. Think of it like a Roth IRA, where the earnings on your investment can grow tax-free during the life of the account.
In Georgia, you can open a Path2College 529 plan, which is doubly smart because of recent legislation that doubled the state tax deduction for families filing a join tax return for 529 plan contributions. Because of this, joint filers are eligible to deduct up to $4,000 per beneficiary, per year.
Why an IRA?
There are many kind of IRAs, with their own sets of rules and benefits, but essentially, they all boil down to the same thing: a safe place to sock away money where Uncle Sam can’t get his greedy mitts on it. All the income you throw in it – from interest, from dividends or from capital gains – gets to grow and thrive tax free.
The main difference between the two biggies – traditional and Roth IRA – comes from where you’re taxed. With a traditional IRA, you’re taxed on money you withdraw and in some cases, you can escape paying taxes on money you invest. With a Roth IRA, you pay taxes on your initial investment, but you withdraw tax-free.
Whichever way you go, it’s never a bad time to start investing for your retirement now. And if you want to do so without Uncle Sam digging through your pockets, an IRA is the way to go.