Military Officer - September 2007 - (Page 15)

Three steps to reach your college ﬁnancing destination Whether you’re an anxious parent anticipating your child’s college expenses or a generous grandparent who will contribute financial help, one thing is certain: The costs of tuition, room, and board have substantially increased over time, and show no signs of slowing down. College is a major ﬁnancial commitment, like buying a house or preparing for retirement. Fortunately, there are a handful of savings vehicles to help you plan for this investment. The following three steps will help you save effectively to meet college expenses down the road. Step #1 – Choose Your Destination It may sound like an old proverb, but it’s true: to reach your destination, you must have one. A speciﬁc, realistic goal, such as: “By the time our child graduates from high school, we will have enough saved to pay in-state tuition, room, and board,” enables you to build your savings and set a timeline to achieve your goal. To determine the amount, estimate how much college will cost when your child reaches college age. Next, estimate how much you must set aside between now and then. Calculators such as those at www.moaa.org/529 are easy-to-use tools to help you do that. Step #2 – Choose the Right Vehicle to Get You There A range of savings tools exists to help you prepare for college expenses. No one savings solution ﬁts every family, so select what works best for you and consider combining different options. Here are some of the most popular: Section 529 College Savings Plans: Offering the greatest ﬂexibility, these statesponsored plans allow you to contribute after-tax dollars to an investment plan. Distributions are tax-free when used for qualiﬁed higher education expenses. You can usually reside in a different state than the one sponsoring the program in which you participate. Pre-Paid College Tuition Plans: These old-style Section 529 plans use after-tax dollars to pre-purchase tomorrow’s tuition at today’s prices. Some states allow a limited state income tax deduction for contributions. Coverdell Education Savings Accounts (ESAs): Originally known as the education IRA, ESAs limit non-deductible contributions to $2,000 annually for children age 18 and under. Money in an ESA grows tax-deferred, and withdrawals for qualiﬁed education expenses are tax-free. TIP Invest in Your Retirement First Don’t delay or minimize your retirement contributions until your child’s college expenses are covered. And don’t sacriﬁce your own security by reﬁnancing your home or borrowing against your 401(k) to pay for college. One of the best gifts you can give your children is your own ﬁnancial independence in retirement. SPECIAL SUPPLEMENT TO MILITARY OFFICER http://www.moaa.org/529

Table of Contents Feed for the Digital Edition of Military Officer - September 2007

Military Officer - September 2007 Contents From the Editor From the President Your Views MOAA Directory Rapid Fire Washington Scene Financial Forum Ask the Doctor Chapter Activities Plan for Your Future At Home in a High-Rise Lone Star Living Common Ground Insert: Community Source Cover Story: Waging War on Disease More Than Beaches MOAA Scholarship Donors Pages of History Faces of MOAA Information Exchange Advertising Index MOAA Calendar Sounding Taps MOAA Member Services Encore

Military Officer - September 2007

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