Are you trying to save for both your retirement and a child’s college education?
It isn’t easy, especially given the average cost of tuition and fees:
Get your needs in order
Retirement savings should be your number one priority. After all, a child who reaches college age can apply for loans, grants, and scholarships, but only you will fund your retirement.
To estimate projected college costs, you can start with a comprehensive college savings calculator that will guide you and include all of the costs associated with college.
When you are ready to make college savings a priority, you have a number of approaches to consider.
1. Encourage gift savings
Why do it all by yourself? To get to your college savings goal faster, you may want to encourage family and friends to chip in, too! Instead of giving a child toys or gifts, relatives and friends can contribute amounts to whatever educational savings plan account you open.
2. A 529 plan
Every state offers a 529 plan. When you set up a 529 plan account, you designate a beneficiary whose education expenses will be paid using the money in the account. The beneficiary can be anyone, including you. Withdrawals may be free of state as well as federal income tax.
3. A Coverdell education savings account (“ESA”)
ESAs offer tax-deferred growth and tax-free withdrawals when you use the money to pay for qualified educational expenses.
Don’t forget about your retirement!
While you may view college as an investment in a child’s future, you don’t want to short-change your retirement, either. Visit abaretirement.com and try out the myOrangeMoney calculator. It is an educational, interactive online experience that shows you where you are on your retirement savings journey.
