If you are a proud parent or are related to someone who is, then your mind is never far from imagining the glowing future for that child. When considering how to get there, however, dreams can sometimes crash upon the shores of reality. Consider, for example, that the cost of college tuition has been increasing much faster than the consumer price index or, most likely, the return on your investments. Did you know, that the cost of a four year public college education is forecast to increase from $32,000 in 2000 to $85,000 in 2020? Worse yet, the cost of a four year private college education is forecast to increase from $85,000 in 2000 to $226,000 in 2020!

More than ever before, paying for college will encompass parents’ savings, assistance from other family members and choosing the right investment vehicle, well ahead of time. Fortunately, there are some highly effective vehicles for college saving that allow you to use the power of tax deferral and compound growth to accelerate your results. Principal among these is the “529” plan- a mechanism that was enacted by Congress in 1996 to help fund college savings. Still not very well known by the general public, 529 plans allow you to contribute significant amounts of money that are allowed to grow tax free. When the student later withdraws the funds for qualified educational purposes they are not subject to federal income tax. Best of all, the account owner retains control over the disbursements from the account even though, from an income tax point of view, the funds no longer remain in their estate (an important point when considering potential estate taxes). With the ability to change beneficiaries (including removed relatives such as cousins), 529 plans offer a tremendous improvement over previously available college savings instruments.

Whether 529 plans or some other tax advantaged investment, such as whole life insurance, is right for your college savings strategy depends on a wide variety of factors. Your best advice is to discuss your goals and needs with a financial planning professional. At SAMG, we perform a comprehensive Financial Profile ™ of our clients to show them exactly how likely they are to achieve their desired college saving goal by adopting different savings and investment goals.  By mapping out  projections of different financial strategies, we ensure that our clients’ dreams of college education safely reach their destination.