It is true that saving up can be very beneficial in getting your child a quality education. But because most parents take this investment seriously a number of myths and misconceptions have emerged over the years.
There is so much wrong information that parents may just be conned into taking the wrong saving decisions for their children. However, the best way to avoid any such discrepancies is to read up on it before you plunge into any plan or investment for your Childs future.
Sacrificing your retirement plans
Most parents will gladly choose their child’s education over a nice retirement plan. But carefully evaluating your options for both purposes can help you reach a practical solution. While this is a popular belief that retirement plans taking a back seat in your priorities may be beneficial for your child, it may not always be the case. While evaluating your options it is necessary to understand that you can easily get a loan for educational purposes but there is no such thing as a retirement loan.
It is a popular belief that if the child decides not to attend college you will lose all the funds. This is not the case there are a few loopholes you can look through, such as transferring the beneficiary to another child who is attending college. These funds can also finance community college or vocational school; these funds can be saved for a future grandchild as well.
This is a lingering problem for parents whose child is a brilliant sports player or may end up with the fully paid ride. You will not lose the complete amount. This is what happens you can withdraw from 529 plans and just pay an income tax of 10% as a penalty on the earning of the principal amount.
Investment only in your home state
You can actually choose between any states 529 plan. But do your research, as of now almost 35 states are offering tax credit or deductions for 529 plan savings. While most states will require you to invest in your own home state, you can still choose from different state plans if your home state poses no restriction.
College where the plan is
Your child does not have to choose a college in the state where your 529 plan is set up. This entails a few international schools, community colleges, and trade schools as well. You can double check the sections of the 529 plan with federal school code lookup.
College saving plans are only for youngsters
You do not have to be a certain age to start a college savings plan.
No financial aid
It is a common belief that you won’t get financial aid if your child has a college savings plan. If the plan is owned by the student, parents will receive financial aid and priority treatment at FAFSA.
Colleges saving plans do not require a specific income bracket, especially 529 plans.
It is commonly believed that there is no way around tax deductions. But this is not true you need to file a report regarding your contributions to the 529 plan. This is the proper way of gaining the benefit of tax breaks.
When you are withdrawing funds for college be sure of the required amount, if the amount is much higher than needed you may end up paying taxes on it.
With these popular myths busted, you can find ways to initiate a funding program that allows others to contribute to the education of your child. You can set up a profile on thegiftofeducation.com to receive funds as gifts or your baby’s future.