Parent Traps: Wise investments to help liberate you from agonizing over the (rising) cost of college

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By Mia Bolaris-Forget

There’s an old adage that states: “Little kids, little problems, big kids, big problems”, and among these: the cost of your child’s education. In the recent decades more and more high school grads have opted for a higher education, and because of the over-saturation of young adults entering the workforce and increased competition, most are choosing courses leading to advanced degrees. Yet, this search for “enlightenment” (unless they are riding on a hard-earned scholarship) is probably at YOUR expense. In pursuit of their dreams, children are staying home, in school, and unemployed longer, yet the cost of educating our youth for financial and person independence and freedom keeps going up.
Experts encourage parents serious about investing in their child’s scholastics, to also get serious about making some intelligent investments.

1. Coverdell Education Savings: Formerly known as The Education IRA grants single taxpayers with an adjusted gross income of up to $95,000 (or up to $150,000 for couples filing jointly) to set aside up to $2000 per year for each child under 18. “Investors” can include parents, grandparents, friends, etc; and while the contribution (itself) is not tax deductible, withdrawals used toward education won’t be taxed.

2. Roth IRAs: Generally a retirement fund, Roth IRAs may also be used for educational purposes. Single filers earning up to $95,000 (or joint filers with earnings of up to $150,000) are entitled to a $3000 yearly investment. Investors over 50 are afforded an increased investment of up to $3,500. All withdrawals are tax and penalty free, while remaining monies (invested) continue to grow at the designated interest rate. Additionally, investments withdrawn after 59 ½ years of age (if you’ve owned the account for at least 5 years) are also exempt from taxation.

3. 529 Plans: Offer a variety of options to suit almost every taste. You can choose between a prepaid, standard savings, or and independent plan. Investing in an independent plan entitles you to an apportioned percentage of credit toward future costs at over 200 participating schools. There are no restrictions to how much you can contribute and you are allowed an investment of up to $200,000 per child. However, monies may only be allocated toward education and related materials and not toward room and board or other amenities, and they can only be allocated to undergraduate studies. Additionally, you must retain the certificate for three years before cashing it in. Contributions are not deductible but withdrawals are also not taxable. For more information log onto www.independent529plan.org.

4. Government Bonds: Consider either a Series l or a Series EE for the least “taxing” investment. In fact both series offer single taxpayers with an income under $59,859 (or married taxpayers filing jointly with an income of $89,750) the option of using the capital gains as a tax-free way to pay for college/university.

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