Resource Guide: College Savings Plans

5:44 PM, Mar 12, 2013   |    comments
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Edward R Jones Atlanta

Coverdell Education Savings Account
Similar to a 529 plan, a Coverdell is an account that allows your earnings to grow tax deferred. If you use the money to pay for qualified education expenses, your withdrawals are tax-free.

Custodial Account
Custodial accounts are often used to save money for future college costs. A custodial account is designed to allow an adult(s) to make irrevocable gifts to a minor(s) in the form of cash or securities.

Zero Coupon Bonds
Zero coupon bonds are purchased at a discount to their face value but don't have regular interest payments. When the bonds mature, however, you receive the full face value. The longer the maturity, the greater discount you receive.

Insurance Protection
Consider life insurance as an option. You can take out a loan against the value of an insurance policy to pay for education expenses.

Georgia (GA) 529 College Savings Plans

The Georgia Path2College 529 plan is managed by TIAA-CREF Tuition Financing, Inc., and offers two age-based options, two static options, and a guaranteed option.

PATH2COLLEGE 529 - Offered by the State of Georgia

There are investment options involving the 529 Plans: Managed Allocation, Aggressive Managed , Allocation, 100% Equity, Balanced Fund, 100% Fixed-Income, Money Market, Guaranteed

Reducing Your Out of Pocket College Costs
By Steve Dombrower, CFA
Vice President, College Savings Plans
OppenheimerFunds, Inc., Program Manager for Numerous 529 Plans

The Loan Based Strategy
In this case, Mr. & Mrs. Murphy decided they wouldn't be able to put a dent in what college was going to cost for their three year old son. To that end, they didn't save. They received approximately twenty five percent of the cost in financial aid and financed the remaining $75,000 with loans. Based on the Sallie Mae Loan Calculator, that $75,000 loan will end up costing the Murphys a total of $117,599 including interest.

The Savings Based Strategy
Mr. & Mrs. Smith took the advice to start early and save often. When Susie was only three years old they opened a 529 Savings Plan with the goal of being able to fund forty percent of Susie's education, or $40,000 by the time she turned 18. To pursue this goal, they opened a 529 Savings Plan with an automated investment program, investing $150 a month until Susie turned 18.2 Over that fifteen year period, the Smiths invested a total of $27,000, which at an assumed annual rate of return of 5% ended up being worth $40,000.3

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